SenesTech, Inc. 10-Q

Item 1. Financial Statements SENESTECH, INC. CONDENSED BALANCE SHEETS (In thousands, except shares and per share data) March 31, 2024 December 31, 2023 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 3,562 $ 5,395 Accounts receivable, net 161 95 Prepaid expenses 346 388 Inventory, net 874 795 Total current assets 4,943 6,673 Right to use assets, operating leases 154 210 Property and equipment, net 353 388 Other noncurrent assets 22 22 Total assets $ 5,472 $ 7,293 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 116 $ 150 Accrued expenses 391 368 Current portion of operating lease liability 159 217 Current portion of note payable 34 33 Deferred revenue 15 18 Total current liabilities 715 786 Note payable, less current portion 147 156 Total liabilities 862 942 Commitments and contingencies (see notes) Stockholders’ equity: 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, 5,144,632 shares and 5,140,024 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively 5 5 Additional paid-in capital 136,350 136,259 Accumulated deficit ( 131,745 ) ( 129,913 ) Total stockholders’ equity 4,610 6,351 Total liabilities and stockholders’ equity $ 5,472 $ 7,293 See accompanying notes to condensed financial statements. 1 Table of Contents SENESTECH, INC. CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except shares and per share data) (Unaudited) Three Months Ended March 31, 2024 2023 Revenues, net $ 415 $ 233 Cost of sales 280 141 Gross profit 135 92 Operating expenses: Research and development 370 387 Selling, general and administrative 1,608 1,750 Total operating expenses 1,978 2,137 Loss from operations ( 1,843 ) ( 2,045 ) Other income (expense): Interest income 15 8 Interest expense ( 4 ) — Other income, net 11 8 Net loss and comprehensive loss $ ( 1,832 ) $ ( 2,037 ) Weighted average shares outstanding - basic and diluted 5,144,531 171,047 Net loss per share - basic and diluted $ ( 0.36 ) $ ( 11.91 ) See accompanying notes to condensed financial statements. 2 Table of Contents SENESTECH, INC. CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 1,832 ) $ ( 2,037 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 37 36 Stock-based compensation 85 166 Bad debt expense — ( 2 ) Changes in operating assets and liabilities: Accounts receivable ( 66 ) 69 Prepaid expenses 42 28 Inventory ( 79 ) 38 Other assets ( 2 ) ( 1 ) Accounts payable ( 34 ) ( 325 ) Accrued expenses 23 24 Deferred revenue ( 3 ) ( 11 ) Net cash used in operating activities ( 1,829 ) ( 2,015 ) Cash flows from investing activities: Purchase of property and equipment ( 2 ) ( 1 ) Net cash used in investing activities ( 2 ) ( 1 ) Cash flows from financing activities: Repayments of notes payable ( 8 ) — Proceeds from the exercise of warrants 6 — Payment of employee withholding taxes related to share based awards — ( 11 ) Net cash used in financing activities ( 2 ) ( 11 ) Decrease in cash and cash equivalents ( 1,833 ) ( 2,027 ) Cash and cash equivalents, beginning of period 5,395 4,775 Cash and cash equivalents, end of period $ 3,562 $ 2,748 Supplemental cash flow information is as follows: Cash paid for interest $ 4 $ — Cash paid for income taxes $ — $ — See accompanying notes to condensed financial statements. 3 Table of Contents SENESTECH, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) NOTE 1: BASIS OF PRESENTATION Nature of Business SenesTech, Inc. (subsequently referred to in this report as “we,” “us,” “our,” or “our company”) was incorporated in the state of Nevada in July 2004. On November 12, 2015, we 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. Our first product is 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 U.S. Environmental Protection Agency registration of ContraPest, 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, 49 of which have approved the removal of the Restricted Use designation, as well as the District of Columbia and five major U.S. territories. In November 2023, we launched our latest product Evolve TM , a soft bait containing the active ingredient cottonseed oil. Evolve limits reproduction of male and female rats after one to two breeding cycles following consumption. Evolve is considered a minimum risk pesticide under the U.S. Environmental Protection Agency Federal Insecticide, Fungicide, and Rodenticide Act, Section 25(b). We must obtain registration from the various state regulatory agencies that do not accept the federal exemption. To date, we are authorized to sell Evolve in 33 states. Going Concern Our condensed financial statements as of March 31, 2024 were prepared under the assumption that we would continue as a going concern. The reports of our independent registered public accounting firm that accompanies our financial statements for each of the years ended December 31, 2023 and December 31, 2022 contain 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, 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 fertility control products, our expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern. There are no assurances that such financing, if necessary, will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through additional financings, sales of our products, licensing fees, royalty payments or from other sources or transactions, we will exhaust our resources and will be unable to continue operations. Liquidity and Capital Resources Since our inception, we have sustained significant operating losses in the course of our research and development and commercialization activities and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under a former license agreement. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock. We have also raised capital through debt financing, consisting primarily of convertible notes and government loan programs, and, to a lesser extent, payments received in connection with product sales, research grants and licensing fees. As of March 31, 2024, we had an accumulated deficit of $ 131.7 million and cash and cash equivalents of $ 3.6 million. Our ultimate success depends upon the outcome of a combination of factors, including the following: (i) successful commercialization of fertility control products and maintaining and obtaining regulatory approval of our products and 4 Table of Contents product candidates; (ii) market acceptance, commercial viability and profitability of fertility control products and other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs. Based upon our current operating plan, we expect that cash and cash equivalents at March 31, 2024, 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 six months. While we have evaluated and continue to evaluate our operating expenses and concentrate our resources toward the successful commercialization of fertility control products in the United States, additional financing will be needed before achieving anticipated revenue targets and margin targets. If 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, additional capital is needed in order to fund our operating losses and research and development activities before we become profitable. 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. Condensed Financial Statements Our accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with the U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In our opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly our financial position as of March 31, 2024, and our operating results and cash flows for the three month periods ended March 31, 2024 and 2023. The accompanying financial information as of December 31, 2023 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024. Recent Accounting Pronouncements 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 financial statements. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The significant estimates in our financial statements include the valuation of inventory, common stock warrants, and stock-based awards, such as stock options and restricted stock units. Actual results could differ from such estimates. Advertising Costs Advertising costs are expensed as incurred and was $ 61,000 and $ 41,000 for the three months ended March 31, 2024 and 2023. 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 the periods presented and a separate statement of comprehensive loss is not included in the accompanying condensed financial statements. 5 Table of Contents NOTE 2: BALANCE SHEET COMPONENTS Cash and Cash Equivalents Highly liquid investments with maturities of three months or less as of the date of acquisition are classified as cash equivalents, of which we had $ 3.6 million and $ 5.4 million as of March 31, 2024 and December 31, 2023, respectively, included within cash and cash equivalents in the condensed balance sheets. Accounts Receivable, Net Accounts receivable, net consisted of the following (in thousands): March 31, 2024 December 31, 2023 Accounts receivable $ 165 $ 99 Allowance for uncollectible accounts ( 4 ) ( 4 ) Accounts receivable, net $ 161 $ 95 The following was the activity in the allowance for uncollectible accounts (in thousands): Three Months Ended March 31, 2024 2023 Balance as of beginning of period $ 4 $ 6 Increase in provision — — Amounts written off, less recoveries — ( 2 ) Balance as of end of period $ 4 $ 4 Inventory, net Inventory, net consisted of the following (in thousands): March 31, 2024 December 31, 2023 Raw materials $ 797 $ 747 Work in progress 11 — Finished goods 71 53 Total inventory 879 800 Less: reserve for obsolescence ( 5 ) ( 5 ) Inventory, net $ 874 $ 795 The following was the activity in the reserve for obsolescence (in thousands): Three Months Ended March 31, 2024 2023 Balance as of beginning of period $ 5 $ 18 Increase in reserve — — Amounts relieved — — Balance as of end of period $ 5 $ 18 6 Table of Contents Prepaid Expenses Prepaid expenses consisted of the following (in thousands): March 31, 2024 December 31, 2023 Software licenses 139 152 Professional services 66 30 Insurance 49 64 Deposit on equipment purchase 25 — Patents 9 14 Prepaid inventory 8 111 Other 50 17 Total prepaid expenses $ 346 $ 388 Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): March 31, 2024 December 31, 2023 Research and development equipment $ 1,763 $ 1,763 Office and computer equipment 808 808 Autos 54 54 Furniture and fixtures 41 41 Leasehold improvements 143 141 Total in service 2,809 2,807 Accumulated depreciation and amortization ( 2,456 ) ( 2,419 ) Property and equipment, net $ 353 $ 388 Accrued Expenses Accrued expenses consisted of the following (in thousands): March 31, 2024 December 31, 2023 Compensation, severance and related benefits $ 285 $ 232 Legal and consulting professional services 27 121 Product warranty 12 15 Other 67 — Total accrued expenses $ 391 $ 368 Notes Payable In 2023, we arranged financing for the purchase of certain equipment. The notes payable for that certain equipment have an annual interest rate of 9.1 % with a term of five years and is secured by the underlying equipment. 7 Table of Contents As of March 31, 2024, future principal payments were as follows (in thousands): 2024 $ 25 2025 36 2026 39 2027 43 2028 38 Total principal payments 181 Less: current portion of notes payable ( 34 ) Notes payable, less current portion $ 147 NOTE 3: FAIR VALUE MEASUREMENTS The carrying amounts of our financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their short maturities. Notes payable are recorded at amortized cost, which approximates fair value. NOTE 4: LEASES We have operating leases for our corporate headquarters and our manufacturing and research facility, which expire in 2024. The components of lease cost were as follows (in thousands): Three Months Ended March 31, 2024 2023 Operating lease cost $ 56 $ 56 As of March 31, 2024, maturities of operating lease liabilities were as follows (in thousands): 2024 $ 164 Total operating lease payments 164 Less: imputed interest ( 5 ) Total operating lease liabilities $ 159 NOTE 5: STOCK-BASED COMPENSATION In 2018, our stockholders approved the adoption of the SenesTech, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) which provides for the issuance of stock-based instruments, such as stock options or restricted stock units, to employees or consultants as deemed appropriate. The 2018 Plan has since been amended and restated on certain occasions, most recently on June 26, 2023, when our stockholders approved an increase to the total number of authorized shares to 70,717 shares. Currently, we only have stock options outstanding under the 2018 Plan, which 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 12 - to 36 -month period coinciding with their respective service periods, with terms generally of five years . Certain stock option awards provide for accelerated vesting upon a change in control. As of March 31, 2024, we had 42,049 shares of common stock available for issuance under the 2018 Plan. 8 Table of Contents The following table presents the outstanding stock option activity: Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term (years) Three months ended March 31, 2024: Outstanding as of December 31, 2023 36,708 $ 119.70 4.0 Forfeited ( 41 ) 300.62 3.0 Outstanding as of March 31, 2024 36,667 (1) 119.49 3.8 (1) Includes options related to 8,249 shares that are inducement awards and not granted under the 2018 Plan. The stock-based compensation expense was recorded as follows (in thousands): Three Months Ended March 31, 2024 2023 Research and development $ 4 $ 4 Selling, general and administrative (1) 81 162 Total stock-based compensation expense $ 85 $ 166 (1) Includes $ 2,000 related to stock issued in exchange for marketing services for the three months ended March 31, 2023. The allocation between research and development and selling, general and administrative expense was based on the department and services performed by the employee or non-employee. At March 31, 2024, the total compensation cost related to unvested options not yet recognized was $ 207,000 , which will be recognized over a weighted average period of 1.1 years, assuming the employees and non-employees complete their service period required for vesting. 9 Table of Contents NOTE 6: STOCKHOLDERS’ EQUITY Activity in equity during the three month periods ended March 31, 2024 and 2023 was as follows (dollars in thousands): Common Stock Additional Paid-In Capital Accumulated Deficit Total Shares Amount 2024 Balances as of December 31, 2023 5,140,024 $ 5 $ 136,259 $ ( 129,913 ) $ 6,351 Stock-based compensation — — 85 — 85 Issuance of common stock upon exercise of warrants 4,608 — 6 — 6 Net loss — — — ( 1,832 ) ( 1,832 ) Balances as of March 31, 2024 5,144,632 $ 5 $ 136,350 $ ( 131,745 ) $ 4,610 2023 Balances as of December 31, 2022 67,472 $ — $ 127,482 $ ( 122,203 ) $ 5,279 Stock-based compensation — — 166 — 166 Issuance of common stock upon exercise of warrants 102,500 — — — — Issuance of shares pursuant to the vesting of restricted stock units, net of shares withheld for taxes 1,102 — ( 11 ) — ( 11 ) Issuance of common stock for service 4,539 — 100 — 100 Net loss — — — ( 2,037 ) ( 2,037 ) Balances as of March 31, 2023 175,613 $ — $ 127,737 $ ( 124,240 ) $ 3,497 NOTE 7: COMMON STOCK WARRANTS The following table presents the common stock warrant activity: Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term (years) Outstanding as of December 31, 2023 7,775,734 $ 2.95 3.4 Exercised ( 4,608 ) 1.30 — Outstanding as of March 31, 2024 7,771,126 2.95 3.1 During the three months ended March 31, 2024, warrants representing 4,608 shares of common stock were exercised with an exercise price of $ 1.30 per share. NOTE 8: LOSS PER SHARE Basic loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period, which includes prefunded warrants and shares held in abeyance from date of issuance. Diluted loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares used in the basic loss per share calculation plus potentially dilutive securities outstanding during the period determined using the treasury stock method. Stock options and warrants are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share because their effect would be anti-dilutive given the net losses reported for all periods presented. Therefore, basic and diluted loss per share are the same for each period presented. 10 Table of Contents The following shares were excluded from the calculation of diluted net loss per share: Three Months Ended March 31, 2024 2023 Common stock warrants — 265,401 Stock options — 23,371 — 288,772 NOTE 9: SUBSEQUENT EVENTS We have evaluated subsequent events from the balance sheet date through May 9, 2024, the date at which the condensed financial statements were issued, and determined that there were no additional items that require adjustment to or disclosure in the condensed financial statements. 11 Table of Contents