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Item 8. Financial Statements and Supplementary Data

2023-03-17 compared with 2022-03-29 · 694 added, 1242 removed, 120 unchanged (94% of the section changed)

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

the Board of Directors and

The following financial statements and report are included in Item 8:

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

Balance Sheets as of December 31, 202 2 and 202 1

Statements of Operations and Comprehensive Loss for the years ended December 31, 202 2 and 202 1

Statements of Changes in Stockholder s ’ Equity for the years ended December 31, 202 2 and 202 1

Statements of Cash Flows for the years ended December 31, 202 2 and 202 1

Notes to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of SenesTech, Inc.

on the Financial Statements

have audited the accompanying balance sheets of SenesTech, Inc.

(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 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.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of SenesTech, Inc.

(the Company) as of December 31, 2022 and 2021, and the related statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

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

As discussed in Note 1 to the financial statements, the Company 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 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These 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.

We 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 or fraud.

The Company 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.

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 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

Our 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.

Critical Audit Matter

The critical audit matter communicated below is a matter 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Equity Transactions

As discussed in Note 9 to the financial statements, the Company issues options and warrants.

The proper valuation of options and warrants requires significant management judgment in determining the volatility and method used to calculate the option and warrant values.

To evaluate the appropriateness of the model and estimates determined by management, we examined and evaluate the model, and the time period and stock prices used in determining the valuation of the options and warrants issued.

/s/ M&K CPAS, PLLC

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

March 16, 2023

thousands, except shares and per share data)

SENESTECH, INC.

BALANCE SHEETS

(In thousands, except share and per share data amounts)

As of December 31,

Current assets:

Accounts receivable trade, net

Cash and cash equivalents $ 4,775 $ 9,326

Accounts receivable, net 113 77

Prepaid expenses 378 230

Inventory, net 853 1,001

Total current assets 6,119 10,634

Right to use asset-operating leases

Right to use assets, operating leases 347 511

Property and equipment, net 294 334

Other noncurrent assets 22 22

Total assets $ 6,782 $ 11,501

LIABILITIES AND STOCKHOLDERS’ EQUITY

3 unchanged sentences

Accrued expenses 560 578

Current portion of operating lease liability 180 164

Deferred revenue 44 —

Total current liabilities 1,324 1,107

Long-term debt, net

Operating lease liability

Operating lease liability, less current portion 179 359

Total liabilities 1,503 1,466

Commitments and contingencies (See note 13)

Commitments and contingencies (see notes)

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

Preferred stock, $ 0.001 par value, 10,000,000 shares authorized, none issued and outstanding

Common stock, $ 0.001 par value, 100,000,000 shares authorized, 809,648 and 610,364 shares issued and outstanding as of December 31, 2022 and 2021, respectively

Additional paid-in capital 127,481 122,542

2 unchanged sentences

Total liabilities and stockholders’ equity $ 6,782 $ 11,501

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

OF OPERATIONS AND COMPREHENSIVE LOSS

thousands, except shares and per share data)

For the Years

Ended December 31,

See accompanying notes to the financial statements.

SENESTECH, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

Years Ended December 31,

Product sales, net $ 1,019 $ 576

Grant revenue — 24

Total revenue

Total revenues 1,019 600

Cost of sales 555 356

Gross profit 464 244

Operating expenses:

2 unchanged sentences

Total operating expenses 10,138 9,178

Net operating loss

Loss from operations ( 9,674 ) ( 8,934 )

Other income (expense):

2 unchanged sentences

Payroll Protection Program loan forgiveness — 651

Total other income

Miscellaneous income (expense) ( 26 ) 22

Other income (expense), net ( 21 ) 666

Net loss and comprehensive loss ( 9,695 ) ( 8,268 )

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)

thousands, except shares and per share data)

For The Years Ended December 31, 2020 and 2021

Stockholders’

Equity (Deficit)

Balance, December 31, 2019

Weighted average shares outstanding - basic and diluted 625,401 559,591

Loss per share - basic and diluted $ ( 15.50 ) $ ( 14.77 )

See accompanying notes to the financial statements.

SENESTECH, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except shares)

Capital Accumulated

Deficit Total

Shares Amount

Balance as of December 31, 2020 254,976 $ — $ 108,124 $ ( 104,240 ) $ 3,884

Stock-based compensation — — 765 — 765

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 )

Net proceeds received for issuance of common stock 308,193 — 12,421 — 12,421

Net proceeds received for exchange of warrants for common stock 46,148 — 1,250 — 1,250

Issuance of common stock for services 1,047 — — — —

Shares forfeited for payment of employee withholding taxes related to share based awards — — ( 17 ) — ( 17 )

Net loss — — — ( 8,268 ) ( 8,268 )

Balance as of December 31, 2021 610,364 1 122,542 ( 112,508 ) 10,035

Stock-based compensation — — 707 — 707

Issuance costs of common stock for service

Issuance of common stock, sold for cash, net

Net proceeds received for issuance of common stock and prefunding of warrants 67,572 — 4,228 — 4,228

Issuance of common stock upon exercise of warrants 131,000 — — — —

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.

OF CASH FLOWS

For the Years

Ended December 31,

Issuance of common stock for services 679 — 4 — 4

Issuance of common stock for fractional shares in the 20:1 reverse stock split 33 — — — —

Net loss — — — ( 9,695 ) ( 9,695 )

Balance as of December 31, 2022 809,648 $ 1 $ 127,481 $ ( 122,203 ) $ 5,279

See accompanying notes to the financial statements.

SENESTECH, INC.

STATEMENTS OF CASH FLOWS

(In thousands)

Years Ended December 31,

Cash flows from operating activities:

Net loss $ ( 9,695 ) $ ( 8,268 )

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

2 unchanged sentences

Paycheck Protection Program loan forgiveness — ( 646 )

Gain on sale of equipment

(Increase) decrease in current assets:

Accounts receivable - trade

Accounts receivable - other

Loss on sale of equipment 28 —

Bad debt expense 6 —

Changes in operating assets and liabilities:

Accounts receivable ( 42 ) ( 52 )

Other assets — 12

Prepaid expenses ( 148 ) ( 52 )

Increase (decrease) in current liabilities:

Inventory 148 ( 56 )

Accounts payable 206 ( 71 )

Accrued expenses ( 18 ) 286

Deferred revenue 44 —

Net cash used in operating activities ( 8,577 ) ( 7,779 )

Cash flows from investing activities:

Cash received on sale of property and equipment

Proceeds received on sale of property and equipment 4 1

Purchase of property and equipment ( 174 ) ( 100 )

Net cash provided by (used in) investing activities

Net cash used in investing activities ( 170 ) ( 99 )

Cash flows from financing activities:

Proceeds from the issuance of common stock, net 4,228 12,421

Proceeds from the issuance of notes payable

Repayments of notes payable ( 5 ) ( 39 )

3 unchanged sentences

Net cash provided by financing activities 4,196 13,561

NET CHANGE IN CASH

CASH AT BEGINNING OF PERIOD

CASH AT END OF PERIOD

SUPPLEMENTAL INFORMATION:

Increase (decrease) in cash and cash equivalents ( 4,551 ) 5,683

Cash and cash equivalents, beginning of year 9,326 3,643

Cash and cash equivalents, end of year $ 4,775 $ 9,326

Supplemental disclosures of cash flow information:

Cash paid for:

Interest paid $ 1 $ 11

Income taxes paid — —

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Forgiveness of accrual in warrant exercise

Deemed dividend

accompanying notes are an integral part of these financial statements.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

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.

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

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.

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.

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.

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 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.

TO THE FINANCIAL STATEMENTS

thousands, except share and per share data)

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.

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 $ 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”).

See accompanying notes to the financial statements.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS

BASIS OF PRESENTATION

Nature of Business

SenesTech, Inc.

(referred to in this report as “SenesTech,” the “Company,” “we” or “us”) was incorporated in the state of Nevada in July 2004.

On November 15, 2015, the Company subsequently reincorporated in the state of Delaware.

Our corporate headquarters and manufacturing site are in Phoenix, Arizona.

We have developed and are commercializing a global, proprietary technology for managing animal pest populations, initially rat populations, through fertility control with our product known as ContraPest.

ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide 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.

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, as well as the District of Columbia and five major U.S.

Reverse Stock Split

On November 15, 2022, we amended our amended and restated certificate of incorporation to effect a 1-for-20 reverse split of our issued and outstanding shares of common stock.

The accompanying 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 and per share amounts contained in our financial statements have been retrospectively adjusted.

Going Concern

Although our audited financial statements for the years ended December 31, 2022 and December 31, 2021 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, 2022 and December 31, 2021 contains a going concern qualification in which such firm expressed substantial doubt in our ability to continue as a going concern without additional capital from becoming available, 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 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.

Need for Additional Capital

Since our inception, we have sustained significant operating losses in the course of our research and development and commercialization activities and expect such losses to continue for the near future.

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

We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock;

and debt financing, consisting primarily of convertible notes.

As of December 31, 2022, we had an accumulated deficit of $ 122.2 million and cash and cash equivalents of $ 4.8 million.

In April 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,

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

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

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

(ii) market acceptance, commercial viability

and profitability of ContraPest and other products;

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

marketing infrastructure to generate significant revenue;

In June 2021, the Company received notification from BMO Harris Bank National Association as the lender in a promissory note pursuant to the CARES Act, that this loan was forgiven in full under the terms of the program.

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

(i) successful commercialization of ContraPest and maintaining and obtaining regulatory approval of our products and product candidates;

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

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

(iv) the success of our research and development;

(v) the ability to retain

and attract key personnel to develop, operate and grow our business;

(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)

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 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.

Based upon our current operating plan, we expect that cash and cash equivalents at December 31, 2022, 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.

Use of Estimates

The preparation of our financial statements and related disclosures in accordance with U.S.

GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements.

We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We evaluate our estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates under different conditions.

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.

and Cash Equivalents

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.

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.

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

of inventory are:

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)

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.

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

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.

To conform with the 2022 presentation, we have reclassified (i) Deposits of $ 22,000 with Other noncurrent assets and (ii) provided separate presentation of Current portion of operating lease liability of $ 164,000 from Operating lease liability in the balance sheet as of December 31, 2021.

In addition, we have reclassified $ 22,000 to Miscellaneous income from Paycheck Protection Program loan forgiveness in the statement of operations and comprehensive loss for the year ended December 31, 2021.

These reclassifications had no impact on our statement of cash flows for the year ended December 31, 2021.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Highly liquid investments with maturities of three months or less as the date of acquisition are classified as cash equivalents, of which we had $ 4.4 million and $ 8.8 million as of December 31, 2022 and 2021, respectively, included within Cash and cash equivalents in the balance sheets.

Accounts Receivable

Accounts receivable are recorded at invoiced amounts based on standard prices and do not bear interest.

We provide an allowance for doubtful receivables equal to the estimated uncollectible amounts.

That estimate is based on historical

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

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

Provisions for uncollectible accounts receivable are charged to Selling, general and administrative expense, with an offsetting credit to the allowance for uncollectible accounts.

Inventories consist of raw materials, work in progress and finished goods and are stated at the lower of cost or market value, using the first-in, first-out convention.

Cost includes the acquired cost of raw materials, with work-in-progress and finished goods including the application of labor and overhead costs related to the manufacturing process.

Raw materials are stocked to reduce the risk of impact on manufacturing for any potential supply interruptions or long lead times on certain ingredients.

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

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.

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

Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets as follows:

Research and development equipment 5 years

Office and computer equipment 3 years

Autos 5 years

Furniture and fixtures 7 years

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.

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.

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:

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If circumstances require long-lived assets or asset groups to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount.

If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value.

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

We have not recorded an impairment of long-lived assets since our inception.

Revenue Recognition

In accordance with Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers (“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;

(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;

(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, 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)

Summary of Significant Accounting Policies – (continued)

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

We 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.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

We 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.

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.

Research 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, 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.

Stock-based Compensation

Stock-based 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.

Advertising Costs

Advertising costs are expensed as incurred and was $ 369,000 and $ 431,000 for the years ended December 31, 2022 and 2021, respectively.

We 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.

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, 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).

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.

We 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.

We 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.

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

There are no uncertain tax positions as of December 31, 2022 or December 31, 2021 and as such, no interest or penalties were recorded in income tax expense.

Comprehensive Loss

We have no other comprehensive income items for the periods presented.

As a result, our net loss and comprehensive loss were the same for all periods presented and a separate statement of comprehensive loss is not included in the accompanying financial statements.

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

NOTES TO THE FINANCIAL STATEMENTS, continued

BALANCE SHEET COMPONENTS

Accounts Receivable, Net

Accounts receivable, net consist of the following (in thousands):

As of December 31,

Accounts receivable $ 119 $ 77

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.

Allowance for uncollectible accounts ( 6 ) —

Accounts receivable, net $ 113 $ 77

The following is the activity in the allowance for uncollectible accounts (in thousands):

Years Ended December 31,

Balance as of beginning of year $ — $ —

Increase in provision 8 —

Amounts written off, less recoveries ( 2 ) —

Balance as of end of year $ 6 $ —

Inventory, Net

Inventory, net consist of the following (in thousands):

As of December 31,

Raw materials $ 772 $ 937

Work in progress 0 5

Finished goods 99 88

Total inventory 871 1,030

Reserve for obsolescence ( 18 ) ( 29 )

Inventory, net $ 853 $ 1,001

The following is the activity in the reserve for obsolescence (in thousands):

Years Ended December 31,

Balance as of beginning of year $ 29 $ 123

Increase in reserve — 13

Amounts relieved ( 11 ) ( 107 )

Balance as of end of year $ 18 $ 29

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

Prepaid Expenses

Prepaid expenses consisted of the following:

Director, officer and other insurance

Prepaid expenses consist of the following (in thousands):

As of December 31,

Software licenses $ 157 $ 14

Marketing programs and conferences 74 66

Legal retainer

Professional service retainer

Engineering, software licenses and other

Insurance 61 109

Patents 39 41

Professional services 41 —

Total prepaid expenses $ 378 $ 230

Property and Equipment

Property and equipment, net consisted of the following:

Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):

As of December 31,

Research and development equipment $ 1,558 $ 1,425

2 unchanged sentences

Leasehold improvements 119 112

Total in service 2,572 2,394

Accumulated depreciation and amortization ( 2,283 ) ( 2,105 )

Total in service, net 289 289

Construction in progress 5 45

Less accumulated depreciation and amortization

Total property and equipment

of lease term or estimated useful life

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)

Property and equipment, net $ 294 $ 334

During the years ended December 31, 2022 and 2021, depreciation and amortization expense was $ 183,000 and $ 303,000 , respectively.

Accrued Expenses

Accrued expenses consisted of the following:

Accrued expenses consist of the following (in thousands):

As of December 31,

Compensation, severance and related benefits $ 497 $ 524

3 unchanged sentences

Total accrued expenses $ 560 $ 578

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

At December 31,

Short-term debt:

Current portion of long-term debt

Total short-term debt

Long-term debt:

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

Common Stock Offering Warrants

November 21, 2022

November 21, 2017

Dealer Manager Warrants

NOTES TO THE FINANCIAL STATEMENTS, continued

FAIR VALUE MEASUREMENTS

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:

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 data.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

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

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.

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.

We determine if an arrangement is a lease at inception and whether the arrangement is classified as an operating or finance lease.

At commencement of the lease, we record a right-of-use (“ROU”) asset and lease liability in the balance sheet based on the present value of lease payments over the term of the arrangement.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

If the implicit rate is not readily determinable in the contract, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Contract terms may

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

include options to extend or terminate the lease, and, when we deem it is reasonably certain that we will exercise that option, it is included in the ROU asset and liability.

Operating leases reflect lease expense on a straight-line basis, while any finance leases result in the separate presentation of interest expense on the lease liability and amortization expense of the ROU asset.

We have operating leases for our corporate headquarters and our manufacturing and research facility, which expire in 2024.

We were obligated under finance leases for certain research and computer equipment, of which the last arrangement expired in July 2023.

The components of lease cost are as follows (in thousands):

Years Ended December 31,

Operating lease cost $ 222 $ 222

Finance lease cost:

Amortization of ROU asset 35 86

Interest on lease liability 1 6

Total finance lease cost $ 36 $ 92

As of December 31, 2022, maturities of operating lease liabilities are follows (in thousands):

Years Ending December 31:

Total operating lease payments 384

Less imputed interest ( 25 )

Total operating lease liabilities $ 359

STOCK-BASED COMPENSATION

In 2018, our stockholders approved the adoption of the SenesTech, Inc.

2018 Equity Incentive Plan (the “2018 Plan”).

The 2018 Plan has since been amended and restated on certain occasions, most recently on October 12, 2022, when our stockholders approved an increase to the total number of authorized shares to 348,614 shares.

Stock options are generally issued with a per share exercise price equal to the fair market value of our common stock at the date of grant.

Options granted generally vest immediately, or ratably over a two - to 36-month period coinciding with their respective service periods, with terms of generally five years .

Certain stock option awards provide for accelerated vesting upon a change in control.

As of December 31, 2022, we had 164,486 shares of common stock available for issuance under the 2018 Plan.

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.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

Fair value of options granted is determined using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate 3.7 % 0.5 %

Expected dividend yield — % — %

Expected volatility 90.5 % 95.8 %

Expected term (in years) 3.3 3.0

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.

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

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

The stock option activity consists of the following:

Options Weighted

Share Weighted

(years) Aggregate

Outstanding as of December 31, 2020 24,824 $ 172.60 3.9 $ —

Granted 29,932 19.40 4.6 $ —

Exercised — — — $ —

Forfeited ( 165 ) — — $ —

Expired ( 200 ) — — $ —

Outstanding as of December 31, 2021 54,391 172.60 3.9 $ —

Granted 241,962 5.79 4.8 $ —

Exercised — — — $ —

Forfeited ( 15,343 ) — — $ —

Expired ( 200 ) — — $ —

Outstanding as of December 31, 2022 280,810 17.00 3.9 $ —

Exercisable as of December 31, 2022 71,131 55.40 3.9 $ —

(1) The 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 $ 5.96 and $ 19.60 per share for each of the years ended December 31, 2022 and 2021, respectively.

The weighted average grant date fair value of options granted to employees for the year ended December 31, 2022 was $ 3.42 per share.

As of December 31, 2022, the unrecognized stock-based compensation cost was $ 569,000 , which is expected to be recognized over a weighted average period of 28 months.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

Restricted Stock Units

The restricted stock unit activity consists of the following:

Units Weighted Average

Grant Date Fair Value Per Unit

Outstanding as of December 31, 2020 1,603 $ 82.60

Vested ( 1,570 ) 84.40

Forfeited — —

Outstanding as of December 31, 2021 33 36.00

Granted 19,049 2.87

Vested ( 283 ) 17.67

Forfeited — —

Outstanding as of December 31, 2022 18,799 2.71

The stock-based compensation expense was recorded as following (in thousands):

Years Ended December 31,

Research and development $ 3 $ 3

General and administrative 708 762

Total stock-based compensation expense $ 711 $ 765

Our losses before income taxes for the years ended December 31, 2022 and December 31, 2021 were generated entirely from U.S.

We have no current or deferred provision for income taxes from continuing operations for the years ended December 31, 2022 and 2021.

The significant differences between the U.S.

Federal statutory rate and our effective rate for financial reporting purposes are as follows:

Years Ended December 31,

Federal statutory tax rate ( 21.0 ) % ( 21.0 ) %

State taxed, net of federal tax benefit ( 3.7 ) ( 4.0 )

Change in valuation allowance 14.3 23.9

Return-to-provision and other 7.9 1.3

Stock-based compensation 2.5 1.4

PPP loan forgiveness — ( 1.7 )

Effective tax rate — % — %

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

Deferred income tax assets and liabilities consist of the following (in thousands):

As of December 31,

Deferred income tax assets:

Federal and state net operating loss carryovers $ 20,498 $ 19,448

Capitalized research costs 432 —

Stock-based compensation 253 333

Compensation accruals and other 92 139

Operating leases related to ROU assets 89 130

Deferred revenue 11 —

Depreciation 8 —

Total deferred income tax assets 21,384 20,050

Valuation allowance for deferred income tax assets ( 21,298 ) ( 19,916 )

Deferred income tax assets, net of valuation allowance 86 134

Deferred income tax liabilities:

Depreciation — ( 7 )

ROU assets ( 86 ) ( 127 )

Total deferred income tax liabilities ( 86 ) ( 134 )

Deferred income tax assets, net $ — $ —

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.

As of December 31, 2022, we had federal and state net operating loss carryforwards of approximately $ 84.5 million and $ 71.0 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 have approximately $ 40.1 million of the total $ 84.5 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 Jobs Act.

The state net operating losses expire if not utilized by 2042.

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.

We have 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, our net operating losses could be limited.

We do no t have any unrecognized tax benefits at the beginning and end of the years ended December 31, 2022 and 2021, and 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, 2022, we had no interest or penalties accrued related to uncertain tax positions.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

STOCKHOLDERS’ EQUITY

Preferred Stock

We are authorized to issue 10 million shares of preferred stock with a par value of $ 0.001 .

Rights and any series designation would be established at time of issuance of preferred stock.

As of December 31, 2022 and 2021 there was no preferred stock outstanding.

We are authorized to issue 100 million shares of common stock with a par value of $ 0.001 per share.

Stockholders of common stock have unlimited voting rights and are entitled to receive the net assets of the Company upon dissolution, subject to the rights of the preferred stockholders, if any.

We had the following common stock offerings in 2022 and 2021:

November 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

We consummated a private placement with certain institutional and accredited investors and issued an aggregate of 67,572 shares of our common stock at a purchase price of $ 3.50 per share, pre-funded warrants to purchase up to an aggregate of 1,361,000 shares of common stock at a purchase price of $ 3.50 per pre-funded warrant (“Pre-Funded Warrants”) and associated warrants to purchase up to an aggregate of 2,857,144 share of common stock at $ 3.165 per share, for gross proceeds of approximately $ 5.0 million, prior to deducting placement agent fees and offering expenses.

In connection with this offering, we issued the placement agent warrants to purchase up to 107,143 shares of common stock with an exercise price of $ 4.375 per share.

Of the Pre-Funded Warrants, 131,000 were exercised in December 2022, with the remaining 1,230,000 exercised in early 2023.

The common stock, Pre-Funded Warrants and warrants sold in this November 2022 public offering were offered and sold pursuant to a registration statement on Form S-1 (File No.

333-267991) initially filed with the SEC on October 24, 2022, as amended, which was declared effective by the SEC on November 16, 2022.

We consummated a registered direct offering with certain institutional investors and issued an aggregate of 98,750 shares of our common stock at a purchase price of $ 40.00 per share for gross proceeds 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.

In connection with the offering, we issued the placement agent warrants to purchase up to 7,408 shares of common stock at an exercise price per share of $ 50.00 per share.

February 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.

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.

We consummated a private placement with certain institutional and accredited investors and issued an aggregate of 198,443 shares of our common stock at a purchase price of $ 45.57 per share, pre-funded warrants to purchase up to an aggregate of 21,000 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 109,730 shares of common stock, for gross proceeds of approximately $ 10.0 million, prior to deducting placement agent fees and offering expenses.

During 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.

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 %;

remaining term 5 years;

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 %;

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 %.

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 ;

company volatility of 96.5 %;

remaining term 2.08 years;

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

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.

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 ;

NOTES TO THE FINANCIAL STATEMENTS, continued

COMMON STOCK WARRANTS

The following is the activity for common stock warrants:

Issue Date Warrant Type Term

Date Exercise

Price Balance

2020 Issued Exercised Expired Balance

2021 Issued Exercised Expired Balance

November 2017 Common Stock Offering November 2022 $ 27.32 7,175 — ( 1,089 ) — 6,086 — — ( 6,086 ) —

June 2018 Reissue December 2023 $ 728.00 2,835 — — — 2,835 — — — 2,835

August 2018 Rights Offering July 2023 $ 460.00 10,149 — ( 25 ) — 10,124 — — — 10,124

August 2018 Dealer Manager August 2023 $ 690.00 670 — — — 670 — — — 670

July 2019 Dealer Manager July 2024 $ 675.00 419 — — — 419 — — — 419

January 2020 Registered Direct Offering July 2025 $ 180.00 8,761 — — — 8,761 — — — 8,761

January 2020 Dealer Manager July 2025 $ 200.00 667 — — — 667 — — — 667

March 2020 Dealer Manager March 2025 $ 75.13 664 — — — 664 — — — 664

April 2020 Dealer Manager April 2025 $ 79.40 5,906 — — — 5,906 — — — 5,906

April 2020 Registered Direct Offering April 2025 $ 61.00 2,500 — — — 2,500 — — — 2,500

October 2020 Private Inducement April 2026 $ 34.500 35,034 — ( 35,034 ) — — — — — —

October 2020 Private Inducement November 2027 $ 3.165 50,000 — — — 50,000 — — — 50,000

October 2020 Dealer Manager April 2026 $ 43.12 4,254 — — — 4,254 — — — 4,254

February 2021 Private Placement Agreement August 2026 $ 44.32 — 82,300 — — 82,300 — — — 82,300

February 2021 Private Placement Agreement November 2027 $ 3.165 — 27,430 — — 27,430 — — — 27,430

February 2021 Dealer Manager August 2026 $ 56.96 — 16,460 — — 16,460 — — — 16,460

March 2021 Dealer Manager March 2026 $ 50.00 — 7,408 — — 7,408 — — — 7,408

November 2022 Pre-Funded Warrants February 2023 $ 3.50 — — — — — 1,361,000 ( 131,000 ) — 1,230,000

November 2022 Series A November 2027 $ 3.165 — — — — — 1,428,572 — — 1,428,572

November 2022 Series B December 2023 $ 3.165 — — — — — 1,428,572 — — 1,428,572

November 2022 Dealer Manager November 2027 $ 4.375 — — — — — 107,143 — — 107,143

129,034 133,598 ( 35,059 ) — 226,484 4,325,287 ( 131,000 ) — 4,414,685

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

As of December 31, 2022, we had 4,414,685 shares of common stock issuable upon exercise of outstanding common stock warrants, at a weighted-average exercise price of $ 6.58 per share and expiring as follows:

Weighted Average Exercise Price Shares

Years Ending December 31:

2023 $ 5.99 2,672,201

2024 675.00 419

2025 128.75 18,498

2026 46.54 110,422

2027 3.25 1,613,145

6.58 4,414,685

Common Stock Warrant Inducement

In June 2018, in order to induce an existing warrant holder to exercise its original warrant representing 2,835 shares of common stock for cash at the $ 600.00 exercise price for gross proceeds of $ 1.7 million, we issued to the holder a new warrant to purchase 2,835 shares of common stock at an exercise price of $ 728.00 per share.

In connection with the issuance of these inducement warrants, we recorded stock-based compensation expense of $ 1,700 , representing the fair value of the inducement warrants issued using the Black Scholes model based on the following significant inputs:

common stock price of $ 844.00 per share;

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 .

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 ;

remaining term of five years;

dividend yield of 0 %;

and risk-free interest rate of 2.8 %.

Common Stock Warrants Issued in August 2018 Rights Offering

In August 2018, in connection with a rights offering of 13,393 shares of our common stock, we issued warrants to purchase 13,393 shares of our common stock at an exercise price of $ 460.00 per share.

We estimated the fair value of these warrants to be $ 3.6 million using a Monte Carlo model based on the following significant inputs:

common stock price of $ 376.00 per share;

comparable company volatility of 159.0 %;

remaining term 5 years;

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 ;

remaining term of five years;

dividend yield of 0 %;

and risk-free interest rate of 2.77 %.

In connection with the closing of the August 2018 rights offering, we issued warrants to purchase 670 shares of our common stock at an exercise price of $ 690.00 per share to Maxim Partners LLC, an affiliate of the dealer-manager of the rights offering.

We estimated the fair value of these warrants to be $ 169,000 using a using a Monte Carlo model based on the following significant inputs:

common stock price of $ 376.00 per share;

comparable company volatility of 159.0 %;

remaining term 5 years;

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)

remaining term of five years;

dividend yield of 0 %;

and risk-free interest rate of 2.77 %.

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.

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 ;

company volatility of 133.3 %;

remaining term 5 years;

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

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 ;

Wainwright & Co., as placement agent, a warrant to purchase 419 shares of common stock at an exercise price of $ 675.00 per share as consideration for providing services in connection with a common stock offering in July 2019.

We estimated the fair value of this warrant to be $ 127,000 using a lattice model based on the following significant inputs:

common stock price of $ 536.00 per share;

comparable company volatility of 133.3 %;

remaining term 5 years;

remaining term of five years;

dividend yield of 0 %;

and risk-free interest rate of 2.07 %.

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 ;

Common Stock Warrants Issued in January 2020 Private Placement

In January 2020, in a private placement concurrent with a registered direct offering of shares of our common stock, we also issued warrants to purchase an aggregate of up to 8,875 shares of common stock to certain institutional and accredited investors that participated in the 2020 Registered Direct Offerings (the “January 2020 Warrants”).

These 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

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

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.

We estimated the fair value of the January 2020 Warrants to be $ 813,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 158.00 per share;

comparable company volatility of 73.8 %;

remaining term 5.5 years;

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;

remaining term of five years;

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

For so long as the January 2020 Warrants remain outstanding, the exercise price and number of shares of common stock issuable upon exercise of these 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 spilled, 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.

In the event that we declare or make any dividend or other distribution of our assets to holders of our common stock, each January 2020 Warrants 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 January 2020 Warrants.

In the event of a Fundamental Transaction, as described in the January 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 January 2020 Warrants immediately prior to such Fundamental Transaction.

Subject to certain limitations, in the event of a Fundamental Transaction the January 2020 Warrants 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 January 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 January 2020 Warrants.

However, to the extent that an exercise of a 2020 Purchase Right would exceed the Beneficial Ownership Limitation (defined below), then to such extent the 2020 Purchase Right will be held in abeyance until such time, if ever, that complete exercise of the 2020 Purchase Right would not exceed the Beneficial Ownership Limitation.

After the Initial Exercisability Date, the January 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 January 2020 Warrants (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 January 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 January 2020 Warrants.

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.

A holder (together with its affiliates) may not exercise any portion of the January 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 January 2020

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

No fractional shares of common stock will be issued in connection with the exercise of a January 2020 Warrants.

In lieu of fractional shares, we will either pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share.

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

In April 2020, in connection with a previously announced public offering of our common stock, we issued warrants to purchase 78,715 shares of common stock at an exercise price of $ 61.00 to the participants in the public offering (the “April 2020 Warrants”).

We estimated the fair value of these warrants to be $ 2.4 million using a Black Scholes model based on the following significant inputs:

common stock price of $ 48.00 per share;

comparable company volatility of 87.9 %;

remaining term of five years;

dividend yield of 0 %;

and risk-free interest rate of 0.18 %.

The common stock, pre-funded warrants and warrants sold in this April 2020 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.

The Post-Effective Amendment No.

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

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 ;

Common Stock Warrants Issued to Placement Agent in 2020 Private Placements

In connection with the separate private placements concurrent with registered direct offerings of shares of our common stock, we issued to H.C.

Wainwright & Co., LLC, as placement agent, in January 2020, warrants to purchase 667 shares of common stock at an exercise price of $ 200.00 per share and in March 2020, warrant to purchase 664 shares of common stock at an exercise price of $ 75.13 per share.

These 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 and have substantially similar terms as the January 2020 Warrants described above, except for differing exercise prices.

We estimated the fair value of the January 2020 warrants issued in January to be $ 58,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 158.00 ;

comparable company volatility of 73.8 %;

remaining term 5 years;

remaining term of five years;

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

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

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

D promulgated thereunder.

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

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

an exercise price of $ 3.7563 per share.

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 ;

We estimated the fair value of the March 2020 warrants to be $ 17,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 47.00 per share;

comparable company volatility of 74.8 %;

remaining term 5 years;

dividend yield of 0 % and risk-free interest

rate of 1.53 %.

remaining term of six years;

dividend yield of 0 %;

and risk-free interest rate of 0.39 %.

Common Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offering

In connection with the public offering of (preferred or common) stock in April 2020, we issued to H.C.

Wainwright & Co., LLC, as placement agent, warrants to purchase 5,906 shares of common stock at an exercise price of $ 79.40 per share.

These 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, and have substantially similar terms as the April 2020 Warrants described above, except for differing exercise prices.

We estimated the fair value of these warrants to be $ 167,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 48.00 per share;

comparable company volatility of 87.9 %;

remaining term of six years;

dividend yield of 0 %;

and risk-free interest rate of 0.18 %.

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 85,034 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 85,034 shares of common stock at an exercise price of $ 34.50 per share.

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 ;

NOTES TO THE FINANCIAL STATEMENTS, continued

warrants were issued in March and April, 2020, whereby the per share exercise price of the original warrants were reduced from $ 57.60 per share and $ 61.00 per share, respectively, to $ 34.50 per share.

We estimated the fair value of these warrants to be $ 1.8 million using a Black Scholes model based on the following significant inputs:

common stock price of $ 29.40 per share;

comparable company volatility of 96.5 %;

remaining term 5.5 years;

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 ;

remaining term of six years;

dividend yield of 0 %;

and risk-free interest rate of 0.18 %.

In connection with the November 2022 registered direct offering with certain institutional and accredited investors, we modified the terms of the then outstanding warrants related to 50,000 shares to an exercise price of $ 3.165 per share and extended the expiration date to November 2027.

We estimated the fair value of these warrants to be $ 110,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 3.03 per share;

comparable company volatility of 93.9 %;

remaining term 5.5 years;

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

remaining term of five years;

dividend yield of 0 %;

and risk-free interest rate of 3.83 %.

Common Stock Warrants Issued to Placement Agent in October 2020 Inducement Offering

In connection with the private warrant inducement in October 2020 of 85,034 shares of our common warrants, we issued to H.C.

Wainwright & Co., LLC, as placement agent, warrants to purchase 4,254 shares of common stock at an exercise price of $ 43.12 per share.

These warrants have substantially similar terms as the January 2020 Warrants described above, except for differing exercise prices.

We estimated the fair value of these warrants to be $ 86,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 29.40 per share;

comparable company volatility of 96.5 %;

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 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

remaining term of six years;

dividend yield of 0 %;

and risk-free interest rate of 0.18 %.

Common Stock Warrants Issued in February 2021 Private Placement Agreement

In February 2021, in connection with a private placement agreement with certain institutional and accredited investors, we issued common stock warrants to purchase up to an aggregate of 109,730 shares of common stock at an exercise price of $ 44.32 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 these warrants to be $ 3.1 million using a Black Scholes model based on the following significant inputs:

common stock price of $ 38.60 per share;

comparable company volatility of 95.6 %;

remaining term 5.5 years;

remaining term of six years;

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

In connection with the November 2022 registered direct offering with certain institutional and accredited investors, we modified the terms related to 27,430 shares of these warrants to an exercise price of $ 3.165 per share and extended the expiration date to November 2027.

We estimated the fair value of these warrants to be $ 60,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 3.03 per share;

comparable company volatility of 93.9 %;

remaining term of five years;

dividend yield of 0 %;

and risk-free interest rate of 3.83 %.

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 16,460 shares of common stock with an exercise price of $ 56.96 per share.

We estimated the fair value of these warrants to be $ 435,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 38.60 per share;

comparable company volatility of 95.6 %;

remaining term six years;

dividend yield of 0 %;

and risk-free interest rate of 0.18 %.

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;

NOTES TO THE FINANCIAL STATEMENTS, continued

Common Stock Warrants Issued to Placement Agent in March 2021 Registered Direct Offering

In March 2021, we consummated a registered direct offering with certain institutional investors and issued an aggregate of 98,750 shares of our common stock at a purchase price of $ 40.00 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.

These shares 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 7,408 shares of common stock at an exercise price of $ 50.00 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 warrants to be $ 181,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 35.20 per share;

comparable company volatility of 100.8 %;

remaining term of five years;

dividend yield of 0 %;

and risk-free interest rate of 0.31 %.

Common Stock Warrants Issued in November 2022 Common Stock Offering

In November 2022, in connection with a registered direct offering with certain institutional and accredited investors, we issued common stock warrants as follows:

• Pre-Funded Warrants to purchase up to an aggregate of 1,361,000 shares of common stock at an exercise price of $ 3.50 per share, which are exercisable immediately and terminate until exercised in full.

A portion of the Pre-Funded Warrants were exercised in December 2022, with the last traunch of these warrants being exercised in February 2023.

We estimated the fair value of the Pre-Funded Warrants to be $ 153,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 3.03 per share;

comparable company volatility of 93.9 %;

remaining term of three months;

dividend yield of 0 % and risk-free interest rate of 3.83 %.

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;

• Series A warrants to purchase up to an aggregate of 1,428,572 shares at an exercise price of $ 3.165 per share, which are exercisable immediately and expire five years from date of issuance.We estimated the fair value of the Series A warrants to be $ 3.1 million using a Black Scholes model based on the following significant inputs:

common stock price of $ 3.03 per share;

comparable company volatility of 93.9 %;

remaining term of five years;

dividend yield of 0 % and risk-free interest rate of 3.83 %.

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.

• Series B warrants to purchase up to an aggregate of 1,428,572 shares at an exercise price of $ 3.165 per share, which are exercisable immediately and expire 13 months from date of issuance.

We estimated the fair value of the Series B warrants to be $ 1.6 million using a Black Scholes model based on the following significant inputs:

common stock price of $ 3.03 per share;

comparable company volatility of 93.9 %;

remaining term of five years;

dividend yield of 0 % and risk-free interest rate of 3.83 %.

Common Stock Warrants Issued to Placement Agent in November 2022 Common Stock Offering

In connection with the registered direct offering in November 2022, we issued to H.C.

Wainwright & Co., LLC, as the placement agent, warrants to purchase up to 107,143 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:

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 $ 4.375 per share.

We estimated the fair value of these warrants to be $ 240,000 using a Black Scholes model based on the following significant inputs:

common stock price of $ 3.25 ;

company volatility of 100.8 %;

remaining term 5 years;

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

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 93.9 %;

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.

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.

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.

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.

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

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

remaining term five years;

dividend yield of 0 %;

and risk-free interest rate of 3.83 %.

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.

NOTES TO THE FINANCIAL STATEMENTS, continued

LOSS PER SHARE

Basic loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period.

Diluted loss per share attributable to common stockholders is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock and if-converted methods.

For purposes of the computation of diluted loss per share attributable to common stockholders, common stock purchase warrants, 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, 2022 and 2021.

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

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders (in common stock equivalent shares):

Common stock warrants 4,414,810 226,572

Restricted stock units 18,799 33

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

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.

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)

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:

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:

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

Common stock options 281,801 54,391

Total 4,715,410 280,996

CONTINGENCIES

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:

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 Diego.

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.

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

Total long-term portion

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.

Management 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.

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

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, 2022 and 2021, $ 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 officer.

SENESTECH, INC.

NOTES TO THE FINANCIAL STATEMENTS, continued

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.

Through February 13, 2023, the Pre-Funded Warrants were exercised in full with the issuance of 1,230,000 shares of common stock.

We have evaluated subsequent events from the balance sheet date through March 16, 2023, 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