What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-29 compared with 2021-03-29 · 1192 added, 1217 removed, 170 unchanged (93% of the section changed)

Statements and Supplementary Data.

Financial Statements and Supplementary Data.

TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID 2738 ) F-2

Balance Sheets as of December 31, 2021 and 2020 F-3

Statements of Operations and Comprehensive Loss for the years ended December 31, 2021 and 2020 F-4

Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2021 and 2020 F-5

Statements of Cash Flows for the years ended December 31, 2021 and 2020 F-6

Notes to Financial Statements F-7

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Sheets as of December 31, 2020 and 2019

of Operations and Comprehensive Loss for the years ended December 31, 2020 and 2019

of Changes in Stockholders’

Equity (Deficit) for the years ended December 31, 2020 and 2019

of Cash Flows for the years ended December 31, 2020 and 2019

to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

2 unchanged sentences

have audited the accompanying balance sheets of SenesTech, Inc.

(the Company) as of December 31, 2020 and 2019, and the related

statements of operations and comprehensive loss, stockholders’

equity (deficit), and cash flows for each of the years in

the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financial statements).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December

31, 2020, in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the

(the Company) as of December 31, 2021 and 2020, and the related statements

of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period

ended December 31, 2021, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the

results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with

accounting principles generally accepted in the United States of America.

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 1 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises

substantial doubt about its ability to continue as a going concern.

Management’s plans regarding those matters are also described in

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were

communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by

communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or

disclosures to which they relate.

discussed in Note 9 and 10 to the financial statements, the Company had complex equity transactions due to a warrant inducement

and ratchet provisions related to the execution of a warrant transaction.

management’s evaluation of these transactions can be complex due to the unusual nature of these transactions.

evaluate the appropriateness of the equity transactions, we examined and evaluated the financial information that was the initial

cause along with management’s evaluations and management’s disclosure on the equity transactions.

discussed in Note 2 to the financial statements, the Company evaluated inventory for potential allowance.

management’s evaluation of the inventory can be a significant judgment given the fact that the Company uses management estimates

in evaluating the ability to recuperate the costs involved in acquiring these assets.

evaluate the appropriateness of the inventory allowance, we examined and evaluate the financial information that was the initial

cost along with management’s plans, management’s evaluation for reserve and management’s disclosure on inventory.

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency,

which raises substantial doubt about its ability to continue as a going concern.

Management's plans regarding those matters are

also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

discussed in Note 1 to the financial statements, the Company had a going concern due to a continual net loss, stockholders’ deficiency

and cash used in operations.

management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates

on future revenues and expenses which are not able to be substantiated.

evaluate the appropriateness of the going concern, we examined and evaluate the financial information that was the initial cause along

with management’s plans to mitigate the going concern and management’s disclosure on going concern.

M&K CPAS, PLLC

have served as the Company’s auditor since 2017.

BALANCE SHEETS

We have served as the Company’s auditor since 2017.

March 29, 2022

thousands, except shares and per share data)

receivable trade, net

receivable-other

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’ EQUITY

Current liabilities:

lease liability

and contingencies (See note 12)

Stockholders’

stock, $0.001 par value, 100,000,000 shares authorized, 5,099,512 and 1,414,671 shares issued and outstanding at December

31, 2020 and December 31, 2019, respectively

paid-in capital

stockholders’

liabilities and stockholders’

accompanying notes are an integral part of these financial statements.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Short-term debt

Accounts payable

Accrued expenses

Total current liabilities

Long-term debt, net

Operating lease liability

Total liabilities

Commitments and contingencies (See note 13)

Stockholders’ equity:

Common stock, $ 0.001 par value, 100,000,000 shares authorized, 12,207,283 and 5,099,512 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these financial statements.

OF OPERATIONS AND COMPREHENSIVE LOSS

thousands, except shares and per share data)

and development

general and administrative

For the Years

Ended December 31,

Grant revenue

Total revenue

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

Interest income

Interest expense

Payroll Protection Program loan forgiveness

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

accompanying notes are an integral part of these financial statements.

OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

thousands, except shares and per share data)

The Years Ended December 31, 2019 and 2020

Stockholders’

For The Years Ended December 31, 2020 and 2021

Stockholders’

Equity (Deficit)

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

loss for the year ended December 31, 2019

December 31, 2019

of common stock for services

of common stock upon cashless exercise of warrants

of common stock upon exercise of warrants, net

of common stock, sold for cash, net

antidilution price protection adjustment

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

loss for the year ended December 31, 2020

December 31, 2020

Balance, December 31, 2019

Stock based compensation

Issuance of common stock, sold for cash, net

Issuance of common stock upon exercise of warrants, net

Issuance of common stock upon cashless exercise of warrants

Issuance costs of common stock for services

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

Warrant antidilution price protection adjustment

Net loss for the year ended December 31, 2020

Balance, December 31, 2020

$ ( 104,240 )

Stock based compensation

Issuance costs of common stock for service

Issuance of common stock, sold for cash, net

Issuance of common stock upon exercise of warrants

Shares forfeited for payment of employee withholding taxes related to share based awards

Net loss for the year ended December 31, 2021

Balance, December 31, 2021

$ ( 112,508 )

accompanying notes are an integral part of these financial statements.

STATEMENTS OF CASH FLOWS

For the Years Ended

OF CASH FLOWS

For the Years

Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

Stock-based compensation

Bad debt expense

(Gain) loss on sale of equipment

Paycheck Protection Program loan forgiveness

Gain on sale of equipment

(Increase) decrease in current assets:

5 unchanged sentences

Accrued expenses

Deferred rent

Net cash used in operating activities

2 unchanged sentences

Purchase of property and equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issuance of common stock, net

Proceeds from the issuance of notes payable-Payroll Protection Program

Proceeds from the issuance of notes payable

Repayments of notes payable

1 unchanged sentence

Proceeds from the exercise of warrants

Payment of employee withholding taxes relating to share-based awards

Payment of employee withholding taxes related to share based awards

Net cash provided by financing activities

6 unchanged sentences

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock warrant revaluation

Forgiveness of accrual in warrant exercise

Deemed dividend

Common stock issued on accrued bonus

accompanying notes are an integral part of these financial statements.

1 unchanged sentence

thousands, except share and per share data)

and Description of Business

(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.

Organization and Description of Business

(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.

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.

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.

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

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”),

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.

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.

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

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.

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.

believe 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,

we must obtain registration from the various state regulatory agencies prior to selling in each state.

To date, we have received registration

for ContraPest in all 50 states and the District of Columbia, 48 of which have approved the removal of the Restricted Use designation.

In addition to product registration, the EPA also approves all labeling

(the container label, instructional inserts, and the Safety Data Sheet (SDS)) of ContraPest.

Generally, states accept the EPA approved

ContraPest’s labeling was submitted to states at initial registration and is resubmitted during state scheduled reregistration

or for any significant labeling change requiring EPA approval.

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.

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 additional 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.

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 THE FINANCIAL STATEMENTS

thousands, except share and per share data)

and Description of Business –

our audited financial statements for the year ended December 31, 2020 were prepared under the assumption that we would continue

our operations as a going concern, the report of our independent registered public accounting firm that accompanies our financial

statements for the year ended December 31, 2020 contains a going concern qualification in which such firm expressed substantial

doubt about our ability to continue as a going concern, based on the financial statements at that time.

Specifically, as noted

above, we have incurred operating losses since our inception, and we expect to continue to incur significant expenses and operating

losses for the foreseeable future.

These prior losses and expected future losses have had, and will continue to have, an adverse

effect on our financial condition.

If we cannot continue as a going concern, our stockholders would likely lose most or all of

their investment in us.

Organization and Description of Business – (continued)

our audited financial statements for the years ended December 31, 2021 and December 31, 2020 were prepared under the assumption that

we would continue our operations as a going concern, the report of our independent registered public accounting firm that accompanies

our financial statements for the years ended December 31, 2021 and December 31, 2020 contains a going concern qualification in which

such firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time.

Specifically, as noted above, we have incurred operating losses since our inception, and we expect to continue to incur significant expenses

and operating losses for the foreseeable future.

These prior losses and expected future losses have had, and will continue to have, an

adverse effect on our financial condition.

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 9 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.

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.

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 9 Common

Stock Warrants and Common Stock Warrant Liability 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.

December 31, 2021, we had received net proceeds of $ 84.3 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 $0.9

million in net product sales.

At December 31, 2020, we had an accumulated deficit of $104.2 million and cash and cash equivalents

of $3.6 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 14 - Subsequent Events, we entered into a security private placement agreement on February 2, 2021,

which resulted in gross proceeds to the Company of approximately $10.00 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:

and issuance of convertible and other promissory notes, an aggregate of $ 1.7 million from licensing fees and an aggregate of $ 1.5 million

in net product sales.

At December 31, 2021, we had an accumulated deficit of $ 112.5 million and cash and cash equivalents of $ 9.3 million.

discussed in Note 8 - Borrowings on April 15, 2020, we received cash proceeds of $ 645,700 from the Paycheck Protection Program (“PPP”)

of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

We used the proceeds from the PPP loan to retain employees,

maintain payroll and make lease, interest and utility payments.

This loan was fully forgiven, under terms of the PPP, on June 14, 2021.

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

(i) successful commercialization of ContraPest

2 unchanged sentences

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;

(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.

upon our current operating plan, we expect that cash and cash equivalents at December 31, 2020, in combination with the security

private placement on February 2, 2021, 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 taken and will continue to take actions to reduce our

operating expenses and to 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 financing.

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.

Company one major customer that accounted for approximately 15% and $44 of sales for the year ended December 31, 2020 and two

customers that accounted for approximately 12% and 20% and $17 and $28 of sales for the year ended December 31, 2019.

expects to maintain these relationships with these customers.

(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.

upon our current operating plan, we expect that cash and cash equivalents at December 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, including within the next

12 months, 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 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.

did not have any customers that accounted for 10 % or more of sales for the year ended December 31, 2021.

We did have one major customer

that accounted for approximately $ 44 , or 15 % of sales, for the year ended December 31, 2020.

We expect to maintain the relationships with

these customers.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Significant Accounting Policies

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.

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 our 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 year presentation.

These reclassifications had no impact on

net earnings, financial position or cash flows.

These reclassifications had no impact on net earnings,

financial position or cash flows.

and Cash Equivalents

Company considers money market fund investments to be cash equivalents.

The Company had cash equivalents in the form of money

market fund investment of $1,500 and $1,766 at December 31, 2020 and December 31, 2019, respectively, included in cash as reported.

consider money market fund investments to be cash equivalents.

We had cash equivalents in the form of money market fund investment of

$ 8,800 and $ 1,500 at December 31, 2021 and December 31, 2020, respectively, included in cash as reported.

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 $0 and less than $123 at December 31, 2020 and at December 31, 2019, respectively.

Receivable-Other

receivable-other at December 31, 2019 consist primarily of receivables related to insurance reimbursements due the Company.

We provide 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.

We did not have any allowance for doubtful trade receivables

at December 31, 2021 or at December 31, 2020.

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.

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.

for obsolete inventory consist of reserves primarily related to obsolete product containers and delivery systems.

of inventory are:

net inventory

Raw materials

Work in progress

Finished goods

Total inventory

Reserve for obsolete

Total net inventory

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Significant Accounting Policies –

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.

Summary of Significant Accounting Policies – (continued)

expenses consist primarily of payments made for director and officer insurance, marketing services, rent, legal and inventory purchase

deposits and seminar/trade show fees to be expensed in the current year.

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.

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

Company incurs maintenance costs on its major equipment.

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

The Company incurs maintenance

costs on its major equipment.

Repair and maintenance costs 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;

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.

We have not recorded an impairment of long-lived

assets since our inception.

January 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers

(“ASC 606”) .

Under ASC 606, we recognize 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.

(4) allocate the transaction price to each performance obligation in

the contract;

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

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

We recognize other

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

service contract.

derive 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

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 the 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.

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, as well as manufacturing costs associated with process improvement and other research.

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

awards, consisting of stock options and restricted stock units expected to be settled in shares of our 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.

We expense the grant date fair value of our stock-based awards on a straight-line

basis over their respective vesting periods.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Significant Accounting Policies –

stock-based compensation expense recorded for the twelve months ended December 31, 2020 and 2019, is as follows:

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 December 31, 2020 or December 31, 2019 and as such, no interest or penalties were recorded in income tax expense.

Summary of Significant Accounting Policies – (continued)

stock-based compensation expense recorded for the 12 months ended December 31, 2021 and 2020, is as follows:

Research and development

General and administrative

Total stock-based compensation expense

Note 11 – Stock-Based Compensation for additional discussion on stock-based compensation.

account 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.

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

record net deferred tax assets to the extent we believe 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,

we consider 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.

We currently maintain a full valuation allowance against

its deferred tax assets.

apply 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 our evaluation, we have concluded

there are no significant uncertain tax positions requiring recognition in our financial statements.

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

There are no uncertain tax positions as

of December 31, 2021 or December 31, 2020 and as such, no interest or penalties were recorded in income tax expense.

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.

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, restricted stock units

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 years ended December 31, 2020 and 2019.

Therefore, basic and diluted loss per share attributable to common stockholders was

the same for all periods presented.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

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

February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”).

This standard amends various aspects of

existing accounting guidance for leases, including the recognition of a right-of-use asset and a lease liability on the balance

sheet for all leases with terms longer than 12 months.

Leases will be classified as either finance or operating, with classification

affecting the pattern of expense recognition in the income statement.

This standard also introduces new disclosure requirements

for leasing arrangements.

ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods

within those fiscal years for public business entities.

Early adoption was permitted, and the new standard had been adopted using

a modified retrospective approach and provides for certain practical expedients.

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 consolidated 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.

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

Comparative 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 consolidated

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 consolidated balance sheet for leases, primarily related to operating leases

on rented office properties, that existed as of the January 1, 2019, adoption date.

December 31, 2020, the balance in Right to Use Asset-Long Term and Lease Liability-Long Term was $665 and ($671) 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.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Significant Accounting Policies –

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.

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 consolidated balance sheet.

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

Note 13, Commitments and Contingencies, for future minimum lease payments and maturities.

August 2018, the FASB issued ASU 2018-15 Accounting for Implementation Costs Related to Cloud Computing or Hosting Arrangements .

This standard provides 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.

The Company adopted the provisions of ASU 2018-15 Accounting for Implementation Costs Related to Cloud

Computing or Hosting Arrangements effective for annual periods beginning after December 15, 2019, including interim periods

within those annual periods.

There was no impact on our financial position, results of operations and statement of cash flows

upon adoption of this guidance.

Standards Issued but Not Yet Adopted

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 consolidated interim financial statements.

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.

valued 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 THE FINANCIAL STATEMENTS

thousands, except share and per share data)

- 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:

Prices and other relevant information generated by market transactions involving identical or comparable assets

or liabilities.

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, restricted stock units 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 years ended December 31, 2021

Therefore, basic and diluted loss per share attributable to common stockholders was the same for all periods presented.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Summary of Significant Accounting Policies – (continued)

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 unit

Common stock options

Accounting Standards Issued but Not Yet

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 condensed consolidated

financial statements.

Fair Value Measurements

We 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.

We valued 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.

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 market

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.

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

Assets and liabilities measured at fair value are based on one or more

of the following three valuation techniques:

Market approach:

Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Cost approach:

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

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 were classified as Level 3 because there was limited activity or less transparency

around the inputs to valuation.

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.

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 December 31, 2020 and therefore, did not record a reserve for uncollectable accounts at December 31, 2020.

The Company does

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

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Prepaid expenses

expenses consist of the following:

officer and other insurance

programs and conferences

service retainer

service deposits

software licenses and other

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.

Our common stock warrant liabilities were classified as Level 3 because

there was limited activity or less transparency around the inputs to valuation.

Financial Instruments Not Carried at Fair Value

The carrying amounts of our financial instruments, including accounts

payable and accrued liabilities, approximate fair value due to their short maturities.

The estimated fair value of the long-term debt,

not recorded at fair value, are recorded at cost or amortized cost, which was deemed to estimate fair value.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

We are potentially subject to concentrations of credit risk in our

accounts receivable.

Credit risk with respect to receivables is limited due to the number of companies comprising our customer base.

we did identify a potentially uncollectable account 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.

At December 31, 2021, we did have two customers

that accounted for 33 % of total receivables.

We deemed these accounts fully collectable.

We did not have any potentially uncollectable

accounts at December 31, 2021 and therefore, did not record a reserve for uncollectable accounts at December 31, 2021.

We do not require

collateral or other securities to support its accounts receivable.

Prepaid expenses

and Equipment

and equipment, net consist of the following:

and development equipment

and computer equipment

accumulated depreciation and amortization

Prepaid expenses consisted of the following:

Director, officer and other insurance

Marketing programs and conferences

Legal retainer

Professional service retainer

Engineering, software licenses and other

Total prepaid expenses

Property and Equipment

Property and equipment, net consisted of the following:

Research and development equipment

Office and computer equipment

Furniture and fixtures

Leasehold improvements

Construction in progress

Less accumulated depreciation and amortization

Total property and equipment

of lease term or estimated useful life

the years ended December 31, 2020 and December 31, 2019, the Company received net proceeds of $47 and $0 in the sale of research

and development equipment and office and computer equipment, respectively, resulting in gains on the sale of these assets

of $21 and $0 for the years ended December 31, 2020 and December 31, 2019, respectively.

and amortization expense was approximately $288 and $413 for the year ended December 31, 2020 and 2019, respectively.

Accrued Expenses

expenses consist of the following:

Compensation,

severance and related benefits

property and franchise tax

the years ended December 31, 2021 and December 31, 2020, we received net proceeds of $ 1 and $ 47 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 $ 21 for the years

ended December 31, 2021 and December 31, 2020, respectively.

Depreciation and amortization expense was approximately $ 303 and $ 288

for the years ended December 31, 2021 and 2020, respectively.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Accrued Expenses

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

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

portion of long-term debt

Accrued expenses consisted of the following:

Compensation, severance and related benefits

Legal services

Product warranty

Personal property and franchise tax

Total accrued expenses

A summary of our borrowings, including finance lease obligations, was

At December 31,

Short-term debt:

lease obligations

unsecured promissory notes

Current portion of long-term debt

Total short-term debt

Long-term debt:

Lease Obligations

lease obligations at December 31, 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%

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.

Warrants and Common Stock Warrant Liability

table summarizes the common stock warrant activity as of December 31, 2020 as follows:

December 31, 2018

December 31, 2019

December 31, 2020

Finance lease obligations

Other unsecured promissory notes

current portion of long-term debt

Total long-term debt

Finance Lease Obligations

Finance lease obligations at December 31, 2021

was for manufacturing equipment leased through ENGS Commercial Finance Co.

This finance lease expires on April 18, 2022 and carries an

interest rate of 11.4 %.

Other Promissory Notes

Also included in the table above is a note payable

to Fidelity Capital for the financing of a computing fixed asset.

This note expires on July 1, 2022 and carries interest rate of 13.3 %.

On June 18, 2021, we received notification from

BMO Harris Bank National Association as the lender in a promissory note pursuant to the PPP under the CARES Act, that a loan to us under

this program in the amount of $ 645,700 was forgiven in full under the terms of the program.

The forgiveness of this note and related interest

was recorded as other income on the Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Common Stock Warrants and Common Stock Warrant Liability

The table below summarizes common stock warrant activity for the years

ended December 31, 2021and December 31, 2020, by warrant type.l

2016 and prior

Various-2020/2021

November 21, 2017

Stock Offering Warrants

Common Stock Offering Warrants

November 21, 2022

Manager Warrants

Offering Warrants

Manager Warrants

Direct Offering

Manager Warrants

Direct Offering

Manager Warrants

Direct Offering

November 21, 2017

Dealer Manager Warrants

November 21, 2022

June 20, 2018

Warrant Reissue

December 20, 2023

August 13, 2018

Rights Offering Warrants

July 25, 2023

August 13, 2018

Dealer Manager Warrants

August 13, 2023

July 16, 2019

Dealer Manager Warrants

July 11, 2024

January 28, 2020

Registered Direct Offering

July 28, 2025

January 28, 2020

Dealer Manager Warrants

July 28, 2025

March 6, 2020

Registered Direct Offering

September 8, 2025

March 6, 2020

Dealer Manager Warrants

March 4, 2025

April 21, 2020

Dealer Manager Warrants

April 21, 2025

April 24, 2020

Registered Direct Offering

April 24, 2025

( 1,524,308 )

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

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.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Warrants and Common Stock Warrant Liability –

of December 31, 2020, we had 2,582,697 shares of common stock issuable upon exercise of outstanding common stock warrants, at

a weighted-average exercise price of $5.11 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:

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.

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

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

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Common Stock Warrants and Common Stock Warrant Liability – (continued)

As of December 31, 2021, we had 4,531,447 shares of common stock issuable

upon exercise of outstanding common stock warrants, at a weighted-average exercise price of $ 4.00 per share.

On November 21, 2017, we issued a total of 232,875 detachable common

stock warrants issued with the second public offering of 293,000 shares of our common stock at $ 20.00 per share.

The common stock warrant

is exercisable until five years from the date of grant.

Our common stock and detachable warrants exist independently as separate securities.

As such, we 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:

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

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;

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, we 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 %;

term 2.71 years;

remaining term 2.82 years;

dividend yield of 0 % and risk-free interest rate

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, we 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

remaining term 2.71 years;

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

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:

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, we 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

company volatility of 96.5 %;

remaining term 2.08 years;

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

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

On June 20, 2018, we 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 we 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, we 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:

We 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

remaining term 5 years;

comparable company volatility of 72.6 %;

term 5 years;

dividend 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.

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:

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 our common stock, we issued 267,853 warrants to purchase shares of our common stock at an exercise price of $ 23.00 per share.

We 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 ;

1 unchanged sentence

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

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

In connection with the closing of the Rights Offering, we 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.

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 ;

1 unchanged sentence

remaining term 5 years;

dividend yield of 0% and

risk-free interest rate of 2.77%.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

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

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

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Common Stock Warrants and Common Stock Warrant Liability – (continued)

Common Stock Warrant Issued to Underwriter of Common Stock Offering

In July 2019, we 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.

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:

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

We 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 ;

comparable company

volatility of 133.3%;

company volatility of 133.3 %;

remaining term 5 years;

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

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:

Common Stock Warrants Issued in January

and March 2020 Private Placements

In January and March 2020, in separate private placements concurrent

with registered direct offerings (collectively, the “2020 Registered Direct Offerings”) of shares of our common stock, we

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.

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

Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on January 28, 2020 and our Current

Report on Form 8-K filed with the SEC 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 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 ;

1 unchanged sentence

remaining term 5 years;

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

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:

dividend yield of 0 %

and risk-free interest rate of 1.53 %.

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 8, 2025.

We 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

common stock price of $ 2.35 ;

1 unchanged sentence

remaining term 5.5 years;

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

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 THE FINANCIAL STATEMENTS

thousands, except share and per share data)

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 THE FINANCIAL STATEMENTS

thousands, except share and per share data)

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.

dividend yield of 0 % and risk-free

interest rate of 0.39 %.

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 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;

or (c) upon the issuance of any shares of capital stock by reclassification of shares of the common stock.

In the event that we declare or make any dividend or other distribution

of our assets to holders of our 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;

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 us 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 we grant, issue, or sell any securities pro rata to all

of the record holders of our 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.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Common Stock Warrants and Common Stock Warrant Liability – (continued)

After 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.

Limitations 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

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, we 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 .

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.

333-236302) initially filed with the SEC on

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

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:

common stock price of $2.40;

We 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:

price of $ 2.40 ;

comparable company volatility of 87.9 %;

term 5 years;

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

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:

common stock price of $7.90;

comparable company

volatility of 73.8%;

remaining term 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 price of $2.35;

comparable company

volatility of 74.8%;

remaining term 5.5 years;

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

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.

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 our common stock in January and March 2020, we 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

1 unchanged sentence

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

$167 using a Black Scholes model based on the following significant inputs:

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.

We 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

comparable company volatility of 73.8 %;

remaining term 5 years;

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

Stock Warrants Issued in October 2020 Private Warrant Inducement

October 2020, in connection with an inducement agreement with an existing accredited investor to exercise 1,700,680 outstanding

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 $1.47;

dividend yield of 0 % and risk-free interest

rate of 1.53 %.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Common Stock Warrants and Common Stock Warrant Liability – (continued)

We 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:

stock price of $ 2.35 ;

comparable company volatility of 74.8 %;

remaining term 5.5 years;

dividend yield of 0% and risk-free

interest rate of 0.18%.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Warrants and Common Stock Warrant Liability –

Stock Warrants Issued to Placement Agent in October 2020 Inducement Offering

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.

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

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 per share.

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;

dividend yield of 0 % and risk-free interest rate

In connection with the public offering of 145,586

Class A Units and 1,428,722 Class B Units on April 24, 2020, we 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.

We 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:

stock price of $ 2.40 ;

comparable company volatility of 87.9 %;

remaining term 5.5 years;

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 price of $12.00;

dividend yield of 0 % and risk-free interest rate

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 to purchase an equal number of shares of our common stock, we

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

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 .

We 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

comparable company volatility of 96.5 %;

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 October 2020 Inducement Offering

In connection with the private warrant inducement in October 2020 of

1,700,680 shares of our common warrants, we issued to H.C.

Wainwright & 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 per share.

We 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

comparable company volatility of 96.5 %;

1 unchanged sentence

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.

October 26, 2020, in connection with the private warrant inducement with an existing accredited investor to exercise 1,700,680

outstanding warrants (“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.

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 inputs:

On October 26, 2020:

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Common Stock Warrants and Common Stock Warrant Liability – (continued)

Common Stock Warrants Issued in February 2021 Private Placement

In February 2021, in connection with a private

placement agreement with certain institutional and accredited investors, we 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 our outstanding shares of common stock immediately after exercise, except that upon at least 61 days’ prior notice from

the holder to us, 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.

We 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:

common stock price of $ 1.93 ;

comparable company volatility

remaining term 5.5 years;

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

Common Stock Warrants Issued to Placement

Agent in February 2021 Private Placement Agreement

In connection with the private placement in February

2021, we 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.

We 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 ;

comparable company volatility

remaining term 5.5 years;

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, we consummated a registered

direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of our common stock, par value $ 0.001

per share at a purchase price of $ 2.00 per share for gross proceeds to us of approximately $ 3.95 million, before deducting fees payable

to the placement agent and other estimated offering expenses payable by us.

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 our shelf registration statement on Form S-3 (File No.

In connection with the registered direct offering in March 2021, we

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.

We 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 ;

company volatility of 100.8 %;

1 unchanged sentence

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

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

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

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Common Stock Warrants and Common Stock Warrant Liability – (continued)

Deemed Dividend Adjustment-Warrant Modified

Terms Revaluation

On March 3, 2020, we 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 outstanding warrants (“Original Warrants”), we 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, we 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 inputs:

On October 26, 2020:

common stock price

comparable company volatility of 96.5 %;

remaining term 4.5 -4.

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

Stockholders’ Deficit

Capital Stock

We organized under the laws of the state of Nevada on July 27, 2004

and subsequently reincorporated under the laws of the state of Delaware on November 10, 2015.

In connection with the reincorporation,

as approved by the stockholders, we changed our authorized capital stock to consist of (i) 100 million shares of common stock, $0.001

par value, and (ii) 2 million shares of preferred stock, $0.001 par value, designated as Series A convertible preferred stock.

2015, we amended our Certificate of Incorporation to change our 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 5,099,512 and 1,414,671 shares of common stock issued and outstanding as of December 31, 2020 and December 31, 2019,

respectively.

the year ended December 31, 2020, the Company issued 3,684,841 shares of common stock as follows:

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;

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

aggregate of 1,700,680 shares in connection with an inducement offering exercise of warrants,

generating net proceeds to the Company in October 2020 of approximately $2,600, as further

described below;

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

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);

Prior to November 10, 2015, our authorized capital stock consisted

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

We had 12,207,283 and 5,099,512 shares of common stock issued and outstanding

as of December 31, 2021 and December 31, 2020, respectively.

During the year ended December 31, 2021, we issued 7,107,771 shares

of common stock as follows:

aggregate of 4,188,854 shares in connection with a private placement offering and exercise of pre-funded warrants issued in connection

with the offering, generating net proceeds to us in February 2021 of approximately $ 8,898 , as further described below;

aggregate of 1,975,000 shares in connection with a registered direct offering generating net proceeds to us in March 2021 of approximately

$ 3,523 , as further described below;

aggregate of 922,966 shares in connection with the exercise of common stock warrants in March, June, July and October, 2021, generating

net proceeds to us of approximately $ 1,250 , as further described below;

aggregate of 20,951 shares for service as a result of the vesting of restricted stock units.

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

October 26, 2020, the Company closed a private warrant inducement agreement with an existing accredited investor to exercise certain

outstanding warrants to purchase an aggregate of 1,700,680 shares of the Company’s common stock at an exercise price per

share of $1.725 (the “Original Warrants”).

The Original Warrants were 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 THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Stockholders’

Deficit –

shares of common stock issuable upon exercise of the Original Warrants issued on March 6, 2020 are registered for resale pursuant

to an effective registration statement on Form S-3 (File No.

333-237563) and all 176,372 shares of common stock issuable upon

exercise of the Original Warrants issued on April 24, 2020 are registered for resale pursuant to an effective registration statement

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Stockholders’

Deficit – (continued)

Public Offerings and Registered Direct Offerings

On February 2, 2021, we consummated a private

placement with certain institutional and accredited investors and issued an aggregate of 3,968,854 shares of our 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.

March 29, 2021, all 420,000 pre-funded shares had been distributed.

In connection with the offering, we issued the placement agent warrants

to purchase up to 329,164 shares of common stock with an exercise price of $2.8481 per share.

On March 23, 2021, we consummated a registered

direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of our common stock, par value $0.001

per share at a purchase price of $2.00 per share for gross proceeds to us 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 our shelf registration statement

on Form S-3 (File No.

The net proceeds to the Company from the Exercise were approximately $2.6 million, after deducting

placement agent fees and offering expenses.

consideration for the immediate exercise of the Original Warrants for cash, the exercising holder will receive a new unregistered

warrant to purchase up to an aggregate of 1,700,680 shares of common stock (the “New Warrant”) in a private placement

pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

The New Warrant will

have an exercise price of $1.725 per share, with an exercise period of five and one-half years from the date of issuance.

connection with the agreement, the Company agreed to issue the placement agent warrants to purchase up to 85,034 shares of common

stock (the “Placement Agent Warrants”).

The Placement Agent Warrants have substantially the same terms as the Warrants,

except that the exercise price is $2.156 per share.

The Placement Agent Warrants, and the shares of issuable upon exercise thereof,

will be issued in reliance on the exemption from registration provided in Section 4(a)(2) under of the Securities Act of 1933,

as amended (“Securities Act”) and Regulation D promulgated thereunder.

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.

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.

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.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

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.

In addition, 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.

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 December 31, 2020, the Company had 430,622 shares of common stock available for issuance under the 2018 Plan.

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 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 year ended December 31, 2020 were as follows:

Expected dividend

Expected term

interest rate

weighted average grant date fair value of options granted during the year ended December 31, 2020 was $1.37 per share, as per

the table below.

weighted-average assumptions used in the Black-Scholes option-pricing model used to calculate the fair value of options granted

during the year ended December 31, 2019, were as follows:

dividend yield

term (in years)

interest rate

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.

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, June 22, 2021, July 15, 2021

and October 7, 2021, we issued an aggregate of 700, 680, 499, 5,616 and 16,171 shares of commons stock for the exercise of certain warrants,

respectively.

The net proceeds to us for these exercises was $1,250.

Stock-Based Compensation

On June 12, 2018, our stockholders approved the 2018 Equity Incentive

Plan (the “2018 Plan”) to replace our 2015 Equity Incentive Plan (the “2015 Plan”).

On July 8, 2020, our 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.

In addition, 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.

On June 24, 2021, our 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 3,000,000 shares.

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.

As of December 31, 2021, we had 2,838,100 shares

of common stock available for issuance under the 2018 Plan.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Stock-based Compensation – (continued)

Stock Options

We measure 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 us to make certain estimates and assumptions, including assumptions related to the expected price volatility

of our stock, the period during which the options will be outstanding, the rate of return on risk-free investments, and the expected dividend

yield for our stock.

The weighted-average assumptions used in the Black-Scholes option-pricing

model used to calculate the fair value of options granted during the year ended December 31, 2021 were as follows:

Expected volatility

Expected dividend yield

Expected term (in years)

Risk-free interest rate

The weighted average grant date fair value of options granted during

the year ended December 31, 2021 was $ 0.97 per share, as per the table below.

The weighted-average assumptions used in the Black-Scholes option-pricing

model used to calculate the fair value of options granted during the year ended December 31, 2020, were as follows:

Expected volatility

Expected dividend yield

Expected term (in years)

Risk-free interest rate

Due to our 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 we do 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 our 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.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Compensation –

summarizes the stock option activity, for both the 2018 and 2015 Plans, for the periods indicated as follows:

at December 31, 2018

at December 31, 2019

at December 31, 2020

aggregate intrinsic value on the table was calculated based on the difference between the estimated fair value of the Company’s

stock and the exercise price of the underlying option.

The estimated stock values used in the calculation was $1.73 and $11.00

per share for each of the years ended December 31, 2020 and 2019, respectively.

average grant date fair value of options granted to employees for the year ended December 31, 2020 was $1.37 per share.

31, 2020, the total compensation cost related to non-vested options not yet recognized was $850, which will be recognized over

a weighted average period of 27 months, assuming the grantees complete their service period required for vesting.

The following

table summarizes restricted stock unit activity for the years ended December 31, 2020 and 2019:

dividend assumption is based on our history and expectation of dividend payouts.

We have not paid and do not intend to pay dividends.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Stock-based Compensation – (continued)

The table summarizes the stock option activity for the periods indicated

Outstanding at December 31, 2019

Outstanding at December 31, 2020

Outstanding at December 31, 2021

Exercisable at December 31, 2021

aggregate intrinsic value on the table was calculated based on the difference between the estimated fair value of our stock and the exercise

price of the underlying option.

The estimated stock values used in the calculation was $ 0.98 and $ 1.73 per share for each of the years

ended December 31, 2021 and 2020, respectively.

The weighted average grant date fair value of options granted to employees

for the year ended December 31, 2021 was $ 0.97 per share.

At December 31, 2021, the total compensation cost related to non-vested

options not yet recognized was $ 581 , which will be recognized over a weighted average period of 27 months, assuming the grantees complete

their service period required for vesting.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the

years ended December 31, 2021 and 2020:

Weighted Average

Grant Date Fair Value Per Unit

as of December 31, 2018

as of December 31, 2019

as of December 31, 2020

restricted stock units were granted on February 14, 2019 with a weighted average grant date fair value of $17.09.

3,877 restricted

stock units were granted on June 18, 2019 with a weighted average grant date fair value of $28.40.

2,000 restricted stock

units were granted on June 30, 2019 with a weighted average grant date fair value of $36.00.

Outstanding as of December 31, 2019

Outstanding as of December 31, 2020

Outstanding as of December 31, 2021

restricted stock units were granted on July 23, 2020 with a weighted average grant date fair value of $1.97.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Compensation –

The stock-based

compensation expense was recorded as follows:

Ended December 31,

and development

and administrative

stock-based compensation expense

The allocation

between research and development and general and administrative expense was based on the department and services performed by

the employee or non-employee.

The components

of the pretax loss from operations for the years ended December 31, 2020 and 2019 are as follows (in thousands)

Ended December 31,

loss from operations

The provision

for income taxes from continuing operations for the years ended December 31, 2020 and 2019 are as follows:

Ended December 31,

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Stock-based Compensation – (continued)

The stock-based compensation expense was recorded as follows:

Research and development

General and administrative

Total stock-based compensation expense

The allocation between research and development and general and administrative

expense was based on the department and services performed by the employee or non-employee.

The components of the pretax loss from operations for the years ended

December 31, 2021 and 2020 are as follows (in thousands):

Pretax loss from operations

The provision for income taxes from continuing operations for the years

ended December 31, 2021 and 2020 are as follows:

Total current

Total deferred

Total income tax expense (benefit)

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Income Taxes – (continued)

Tax Rate Reconciliation

A reconciliation of income taxes to the amount computed by applying

the statutory federal income tax rate to the net loss is summarized as follows :

Income tax benefit at statutory rates

State income tax, net of federal benefit

Permanent items

Stock-based compensation

PPP loan forgiveness

Change in rate

Stock compensation DTA adjustment

Change in valuation allowance

RTP and other

Income tax expense (benefit)

Rate Reconciliation

A reconciliation

of income taxes to the amount computed by applying the statutory federal income tax rate to the net loss is summarized as follows

(in thousands):

Ended December 31,

tax benefit at statutory rates

income tax, net of federal benefit

Rate Adjustment –

Compensation DTA Adjustment

in Valuation Allowance

tax expense (benefit)

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Taxes –

components of the Company’s deferred tax assets as of December 31, 2020 and 2019 are shown below.

allowance has been recognized to offset the net deferred tax assets as realization of such deferred tax assets have not met the

more likely than not threshold.

and State Net Operating Loss Carryovers

Based Compensation

Accruals and Other

Significant components of our deferred tax assets as of December 31,

2021 and 2020 are shown below.

A valuation allowance has been recognized to offset the net deferred

tax assets as realization of such deferred tax assets have not met the more likely than not threshold.

Deferred tax assets:

Allowance for deferred tax assets

tax assets, net of valuation allowance

tax liabilities:

ASC 842 leases

Federal and state net operating loss carryovers

Stock-Based Compensation

Compensation accruals and other

Total deferred tax assets

Valuation allowance for deferred tax assets

Deferred tax assets, net of valuation allowance

Deferred tax liabilities:

31, 2020, the Company has federal and state net operating loss carryforwards of approximately $69.5 million and $56.1 million,

respectively, not considering the IRC Section 382 annual limitation discussed below.

The federal loss carryforwards begin to expire

in 2029, unless previously utilized.

In addition, the Company has approximately $25.1 million of the total $69.5 million of net

operating losses that do not expire, as these losses were generated after the law change introduced as part of the Tax Cuts and

Additionally,

the utilization of the net operating loss carryforwards could be subject to an annual limitation under Section 382 and 383 of

the Internal Revenue Code of 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 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 occur, the Company’s

net operating losses could be limited.

The following

table summarizes the activity related to the Company’s gross unrecognized tax benefits at the beginning and end of the years

ended December 31, 2020 and 2019 (in thousands):

Ended December 31,

unrecognized tax benefits at the beginning of the year

related to current year positions

related to prior year positions

of unrecognized tax benefits

unrecognized tax benefits at the end of the year

of the unrecognized tax benefits would affect the Company’s annual effective tax rate.

Company does not expect a significant change in unrecognized tax benefits over the next 12 months.

Company files income tax returns in the United States and Arizona with general statutes of limitations of 3 and 4 years, respectively.

Due to net operating losses incurred, the Company’s tax returns from inception to date are subject to examination by taxing

The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component

of income tax expense.

As of December 31, 2020, the Company had no interest or penalties accrued for uncertain tax positions.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

Taxes –

March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The Cares Act is

an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund

a nationwide effort to curtail the effect of COVID-19.

While the CARES Act provides sweeping tax changes in response to the COVID-19

pandemic, some of the more significant provisions which are expected to impact the Company’s financial statements include

removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses

to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously

enacted Tax Cuts and Jobs Act.

The Company has concluded that the CARES Act did not have a material impact on its financial position,

results of operations, or cash flows.

December 27, 2020, the United States enacted the Consolidated Appropriations Act which extended many of the benefits of the CARES

Act that were scheduled to expire.

The Company is evaluating the impact of the Consolidated Appropriations Act on its consolidated

financial statements and related disclosures, but does not anticipate the impact to be material.

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 July

At December 31, 2020, the gross amount of office and computer equipment, and research equipment and the related accumulated

amortization recorded under the finance leases was $478 and $356, respectively.

February 2012, the Company entered into an operating lease for its then corporate headquarters in Flagstaff, Arizona.

was originally due to expire in January 2015.

In December 2013, the Company amended its lease to expand into the remaining area

in the building and extended the term to December 31, 2019.

In February 2014, the Company further amended the lease to expand

into an adjacent building.

The lease requires escalating rental payments over the lease term.

Minimum rental payments under the

operating lease are recognized on a straight-line basis over the term of the lease and accordingly, the Company records the difference

between the cash rent payments and the recognition of rent expense as a deferred rent liability.

The lease was guaranteed by the

former President of the Company.

In December 2019, we extended the current lease for only our manufacturing facilities are located

in Flagstaff, Arizona, occupying a total of 7,632 square feet of space.

The lease for our manufacturing facilities expired in

December 2020.

November 16, 2016, we leased an additional 1,954 square feet of research and development space, also in Flagstaff.

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 notice.

The Company provided

a 30-day cancellation notice effective February 2020.

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.

ASC 842 assets

Total deferred tax liabilities

At December 31, 2021, we had federal and state net operating loss carryforwards

of approximately $ 77.2 million and $ 63.7 million, respectively, not considering the IRC Section 382 annual limitation discussed below.

The federal loss carryforwards begin to expire in 2029 , unless previously utilized.

In addition, we had approximately $ 32.7 million of

the total $ 77.2 million of net operating losses that do not expire, as these losses were generated after the law change introduced as

part of the Tax Cuts and Jobs Act.

The state net operating losses expire if not utilized by 2041.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Income Taxes – (continued)

Additionally, the utilization of the net operating loss carryforwards

could be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 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 percentage points over a three-year period.

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 occur, our net operating losses could be limited.

The following table summarizes the activity related to our gross unrecognized

tax benefits at the beginning and end of the years ended December 31, 2021 and 2020 (in thousands):

Gross unrecognized tax benefits at the beginning of the year

Increases related to current year positions

Increases related to prior year positions

Decreases related to prior year positions

Expiration of unrecognized tax benefits

Gross unrecognized tax benefits at the end of the year

None of the unrecognized tax benefits would affect our annual effective

We do not expect a significant change in unrecognized tax benefits

over the next 12 months.

We file income tax returns in the United States and Arizona with general

statutes of limitations of three and four years, respectively.

Due to net operating losses incurred, our tax returns from inception to

date are subject to examination by taxing authorities.

Our policy is to recognize interest expense and penalties related to income tax

matters as a component of income tax expense.

As of December 31, 2021, we had no interest or penalties accrued for uncertain tax positions.

Commitments and Contingencies

Legal Proceedings

In July 2020, Kennan E.

Kaedar, our former corporate general counsel

(the “Plaintiff”), commenced an action against us in the Superior Court of the State of California, for the County of San

The complaint alleges, among other things, that we breached the Plaintiff’s employment contract with us, as well as the implied

covenant of good faith and fair dealing, by refusing to issue him the balance of stock options he claims we owe him.

In September 2021,

the Plaintiff also named the following individuals as defendants:

Loretta Mayer, Cheryl Dyer, Thomas C.

Chesterman, Kim Wolin, Grover

Wickersham, Marc Dumont, Bob Ramsey, Matthew Szot, Julia Williams, and Bill Baker.

The Plaintiff alleges that such individuals agreed

to knowingly and wrongfully withhold the stock options owed to him and are knowingly in receipt of stolen property.

The Plaintiff seeks

compensatory damages in excess of $ 500,000 , treble damages and reasonable attorneys’ fees.

We do not believe the claims described

above have merit and intend to aggressively defend against these accusations.

We do not believe that this litigation is likely to have

a material effect on our operations.

In addition to the matter described above, we may be subject to other

legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business.

is not aware of any other pending or threatened litigation where the ultimate disposition or resolution could have a material adverse

effect on our financial position, results of operations or liquidity.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Commitments and Contingencies – (continued)

Lease Commitments

We are obligated under finance leases for certain research and computer

equipment that expire on various dates through July 2023.

At December 31, 2021, the gross amount of office and computer equipment, and

research equipment and the related accumulated amortization recorded under the finance leases was $ 478 and $ 442 , respectively.

In February 2012, we entered into an operating lease for our then corporate

headquarters in Flagstaff, Arizona.

The lease was originally due to expire in January 2015.

In December 2013, we amended our lease to

expand into the remaining area in the building and extended the term to December 31, 2019.

In February 2014, we further amended the lease

to expand into an adjacent building.

The lease required escalating rental payments over the lease term.

Minimum rental payments under

the operating lease were recognized on a straight-line basis over the term of the lease and accordingly, we recorded the difference between

the cash rent payments and the recognition of rent expense as a deferred rent liability.

The lease was guaranteed by the former President

of our Company.

In December 2019, we extended the current lease for only our manufacturing facilities are located in Flagstaff, Arizona,

occupying a total of 7,632 square feet of space.

The lease for our 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, Arizona.

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 us to cancel the lease at any time through the lease

term with 30 days notice.

We provided a 30-day cancellation notice effective February 2020.

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.

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.

believe that our existing facilities are adequate and meet our current needs for business, manufacturing and research.

expense was $286 and $253 for the years ended December 31, 2020 and 2019, respectively.

The future minimum lease payments under

non-cancellable operating lease and future minimum finance lease payments as of December 31, 2020 are follows:

Ending December 31,

minimum lease payments

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

and Contingencies –

amounts representing interest (6.39%, ranging from 10.48% to 11.56%)

value of minimum lease payments

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.

expires on November 30, 2024.

We believe that our existing facilities are adequate and meet our current

needs for business, manufacturing and research.

Rent expense was $ 222 and $ 286 for the years ended December 31, 2021

and 2020, respectively.

The future minimum lease payments under non-cancellable operating lease and future minimum finance lease payments

as of December 31, 2021 are follows:

Years Ending December 31,

Total minimum lease payments

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Commitments and Contingencies – (continued)

amounts representing interest ( 11.43 %)

Present value of minimum lease payments

current installments under finance lease obligations

long-term portion

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.

pre-funded warrants have an exercise price of $0.001 per share, are exercisable immediately, and may be exercised at any time

until such pre-funded warrants are exercised in full.

The warrants have an exercise price of $2.216 per share, are exercisable

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

A holder of a pre-funded warrant

or the warrant may not exercise any portion of such holder’s pre-funded warrants or 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.

At March 29, 2021, all 420,000 pre-funded shares had been distributed.

net proceeds to the company from the private placement were approximately $9.2 million, after deducting placement agent fees and

expenses and estimated offering expenses payable by the Company.

The Company intends to use the net proceeds from the private

placement for general corporate purposes.

connection with the private placement agreement, the Company entered into a registration rights agreement with the purchasers,

pursuant to which, among other things, the Company will prepare and file with the Securities and Exchange Commission a registration

statement on Form S-3 to register for resale the shares and the shares of common stock issuable upon the exercise of the pre-funded

warrants and the warrants.

Wainwright & Co., LLC acted as exclusive placement agent for

the private placement.

In connection with the private placement, the Company agreed to pay the placement agent a cash fee equal to 7.5%

of the gross proceeds of the private placement and a management fee of 1.0% of the gross proceeds of the private placement and reimburse

the placement agent for a non-accountable expense allowance of $25 and accountable expenses of $50.

The Company also agreed to issue

the placement agent warrants to purchase up to 7.5% of the aggregate number of shares issuable to the investors in the private placement,

or 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.

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 (“

Registration Statement ”)

on Form S-3 (File No.

In connection with the Offering, the Company agreed to pay the placement

agent a cash fee equal to 7.5% of the gross proceeds of the Offering, a management fee of 1% of the gross proceeds of the Offering,

a non-accountable expense allowance of $25 and up to $50 for reasonable and documented out-of-pocket expenses.

The Company also

agreed to issue the placement agent warrants to purchase up to 7.5% of the aggregate number of shares of Common Stock sold in the

Offering, or 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.

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 was $1,209.

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.

These delays 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 customers.

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 March 29, 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.

in and Disagreements with Accountants on Accounting and Financial Disclosure .

Total long-term portion

Related Party Transactions

Related party transactions are conducted in the normal course of business

and, unless otherwise noted, are measured at the exchange amount, which is the amount of consideration established and agreed to by the

related parties.

In connection with consulting agreements in place, during each of the years ended December 31, 2021 and December 30,

2020, $ 50,400 of cash payments were made to the Kito Impact Foundation of which Dr.

Bechtel, the Chair of our board, serves as chief executive

Subsequent Events

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 during 2020 and into 2021, however, we still have delays on certain projects that might remain on hold until certain government

restrictions are lifted.

These delays have impacted our results of operations and could impact our results in future quarters.

stay at home orders and other social distancing initiatives continue to limit our ability to communicate with current and potential commercial

Further, new stay at home orders and other social distancing initiatives may be reimplemented at any time.

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.

On March 2, 2022, we received a letter from the

listing qualifications staff (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) providing notification that the

bid price for our common stock had closed below $1.00 per share for the previous 30 consecutive business days and our common stock no

longer meets the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2).

In accordance with Nasdaq Listing

Rule 5810(c)(3)(A), we have an initial period of 180 calendar days, or until August 29, 2022, to regain compliance.

To regain compliance,

the closing bid price of our common stock must be $1.00 per share or more for a minimum of 10 consecutive business days at any time before

August 29, 2022.

If we do not regain compliance with Rule 5550(a)(2)

by August 29, 2022, we may be eligible for an additional 180 calendar day compliance period.

To qualify, we would need to meet the continued

listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with

the exception of the minimum bid price requirement, and would need to provide written notice of our intention to cure the deficiency during

the second compliance period, by effecting a reverse stock split, if necessary.

However, if it appears to the Staff that we will not be

able to cure the deficiency, or if we are otherwise not eligible, Nasdaq would notify us that our securities would be subject to delisting.

In the event of such notification, we may appeal the Staff’s determination to delist our securities, but there can be no assurance

the Staff would grant our request for continued listing.

The Nasdaq notification has no immediate effect

on the listing of our common stock on the Nasdaq Capital Market.

We intend to actively monitor the bid price of our common stock and our

minimum market value of listed securities and will consider options available to us to achieve compliance with the Nasdaq listing rules.

There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance

with the other listing standards for the Nasdaq Capital Market.

Settlement of Restricted Stock Units

On March 1, 2022, the Company issued 5,000 shares of common stock in

the settlement of restricted stock units that were issued and vested during the period.

Other Subsequent Events

We have evaluated subsequent events from the balance sheet date through

March 29, 2022, 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.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .

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-K

Item 8. Financial Statements and Supplementary Data