☒ xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐o No ☒

The number of shares of common stock outstanding as of May ~~13, 2022: 12,212,950~~

There have been no new accounting pronouncements not yet effective or adopted in ~~these~~the current year that we believe have a significant impact, or potential significant impact, to our condensed financial ~~statements and accompanying notes are in thousands, except percentages and per share and share amounts.~~

~~Note 2 - Summary of Significant Accounting Policies~~

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 ~~preferred stock, if issued,~~inventory, common stock ~~and related~~ warrants, and ~~other~~ stock-based ~~awards.~~awards, such as stock options and restricted stock units. Actual results could differ from such estimates.

~~Reclassifications~~

Comprehensive Loss

~~Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no material impact on net earnings, financial position or cash flows.~~

~~Cash and Cash Equivalents~~

We consider money market fund investments to be cash equivalents. We had cash equivalents in the form of money market fund investment of $6,794 and $8,793 at March 31, 2022 and December 31, 2021, respectively, included in cash as reported.

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 2 - Summary of Significant Accounting Policies – (continued)~~

~~Accounts Receivable-Trade~~

Accounts 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 March 31, 2022 or at December 31, 2021.

~~Inventories~~

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

~~Components of inventory are:~~

March 31, December 31,
2022 2021
Raw materials $ 890 $ 937
Work in progress 4 5
Finished goods 79 88
Total inventory 973 1,030
Less:
Reserve for obsolete (26 ) (29 )
Total net inventory $ 947 $ 1,001

~~Prepaid Expenses~~

Prepaid expenses consist primarily of payments made for director and officer insurance, director compensation, rent, legal and inventory purchase deposits and seminar/trade show fees to be expensed in the current year.

~~Property and Equipment~~

~~Property and equipment are stated at cost less accumulated depreciation. Equipment held under finance leases are stated at the present value of minimum lease payments less accumulated amortization.~~

Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The cost of leasehold improvements is amortized over the life of the improvement or the term of the lease, whichever is shorter. Equipment held under finance leases is amortized over the shorter of the lease term or estimated useful life of the asset. We incur repair and maintenance costs on our major equipment, which are expensed as incurred.

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 2 - Summary of Significant Accounting Policies – (continued)~~

~~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, we compare 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 its inception.~~

~~Revenue Recognition~~

~~We recognize revenue when product is shipped at a fixed selling price on payment terms of 30 to 120 days from invoicing. We recognize~~no other ~~revenue earned from pilot studies, consulting and implementation services upon the performance of specific services under the respective service contract.~~

~~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~~

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

~~The stock-based compensation expense recorded~~comprehensive income items for the ~~three months ended March 31, 2022 and 2021, is as follows:~~

Three Months Ended
March 31,
2022 2021
Research and development $ 1 $ 2
Selling, general and administrative 223 153
Total stock-based compensation expense $ 224 $ 155

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

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 2 - Summary of Significant Accounting Policies – (continued)~~

~~Income Taxes~~

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 andperiods presented. As a result, our 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.

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 apply a more-likely-than-not recognition threshold for all tax uncertainties. Only those benefits that have a greater than 50% 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 March 31, 2022 or December 31, 2021 and as such, no interest or penalties were recorded in income tax expense.

~~Comprehensive Loss~~

~~Net~~ loss and comprehensive loss were the same for ~~all~~the periods ~~presented; therefore,~~presented and a separate statement of comprehensive loss is not included in the accompanying condensed financial statements.

~~Basic loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number~~

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

~~Note 4 - Credit Risk~~

Table of Contents

NOTE 4: LEASES

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 June 2022.

The components of lease cost are potentially subject to concentrations of credit risk in our accounts receivable. Credit risk with respect to receivables is limited due to the number of companies comprising our customer base. We did not have any potentially uncollectable accounts at March 31, 2022 or December 31, 2021 and therefore, did not record a reserve for uncollectable accounts at March 31, 2022 or December 31, 2021. We do not require collateral or other securities to support its accounts receivable.

~~Note 5 - Prepaid Expenses~~

as follows (in thousands):

~~Prepaid expenses consist of the following:~~


	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	56	$	56
Finance lease cost:
Amortization of right-of-use asset	$	—	$	16
Interest on lease liability	—		1
Total finance lease cost	$	—	$	17

March 31, December 31,
2022 2021
Director, officer and other insurance $ 169 $ 109
Marketing programs and conferences 34 66
Patents 25 41
Engineering, software licenses and other 17 12
Engineering, software licenses and other 14 2
Total prepaid expenses $ 259 $ 230

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 6 - Property and Equipment~~

~~Property and equipment, net consist of the following:~~

Useful March 31, December 31,
Life 2022 2021
Research and development equipment 5 years $ 1,437 $ 1,425
Office and computer equipment 3 years 786 762
Autos 5 years 54 54
Furniture and fixtures 7 years 41 41
Leasehold improvements * 117 112
Construction in progress 70 45
2,505 2,439
Less accumulated depreciation and amortization (2,171 ) (2,105 )
Total $ 334 $ 334

*	~~Shorter of lease term or estimated useful life~~

~~Depreciation and amortization expense was approximately $66 and $73 for the three months ended March 31, 2022 and 2021, respectively.~~

~~Note 7 - Accrued Expenses~~

~~Accrued expenses consist of the following:~~

March 31, December 31,
2022 2021
Compensation and related benefits $ 584 $ 524
Legal services - 17
Product warranty 23 18
Personal property and franchise tax 13 5
Other 14 14
Total accrued expenses $ 634 $ 578

~~Note 8 - Borrowings~~

~~A summary of our borrowings, including finance lease obligations, is as follows:~~

March 31, December 31,
2022 2021
Short-term debt:
Finance lease obligations $ 14 $ 27
Other promissory notes 2 5
Total $ 16 $ 32

~~Finance Lease Obligations~~

Finance lease obligations at March 31, 2022 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%.

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 8 - Borrowings – (continued)~~

~~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%.~~

~~Note 9 - Common Stock Warrants and Common Stock Warrant Liability~~

~~The table summarizes the common stock warrant activity as of March 31, 2022 by warrant type.:~~

Balance Balance Balance
Issue Date Warrant Type Term
Date Exercise
Price December 31,
2020 Issued Exercised Expired December 31,
2021 Issued Exercised Expired March 31,
2022

November 21, 2017 Common Stock Offering Warrants November 21, 2022 $ 1.3659 ⁽¹⁾ 143,501 - (21,787 ) - 121,714 - - - 121,714
June 20, 2018 Warrant Reissue December 20, 2023 $ 36.40 56,696 - - - 56,696 - - - 56,696
August 13, 2018 Rights Offering Warrants July 25, 2023 $ 23.00 202,943 - (499 ) - 202,444 - - - 202,444
August 13, 2018 Dealer Manager Warrants August 13, 2023 $ 34.50 13,393 - - - 13,393 - - - 13,393
July 16, 2019 Dealer Manager Warrants July 11, 2024 $ 33.75 8,334 - - - 8,334 - - - 8,334
January 28, 2020 Registered Direct Offering July 28, 2025 $ 9.00 177,500 - - - 177,500 - - - 177,500
January 28, 2020 Dealer Manager Warrants July 28, 2025 $ 10.00 13,315 - - - 13,315 - - - 13,315
March 6, 2020 Dealer Manager Warrants March 4, 2025 $ 3.76 13,228 - - - 13,228 - - - 13,228
April 21, 2020 Dealer Manager Warrants April 21, 2025 $ 3.97 118,073 - - - 118,073 - - - 118,073
April 24, 2020 Registered Direct Offering April 24, 2025 $ 3.05 50,000 - - - 50,000 - - - 50,000
October 26, 2020 Private Warrant Inducement April 27, 2026 $ 1.73 1,700,680 (700,680 ) 1,000,000 - - - 1,000,000
October 26, 2020 Dealer Manager Warrants April 27, 2026 $ 2.16 85,034 - 85,034 - - - 85,034
February 2, 2021 Private Placement Agreement August 2, 2026 $ 2.216 - 2,194,427 - - 2,194,427 - - - 2,194,427
February 2, 2021 Dealer Manager Warrants August 2, 2026 $ 2.848 - 329,164 - - 329,164 - - - 329,164
March 23, 2021 Dealer Manager Warrants March 23, 2026 $ 2.50 - 148,125 - - 148,125 - - - 148,125
2,582,697 4,531,447 4,531,447

~~(1)~~

The initial exercise price of these warrants was $30.00 per share. Pursuant to antidilution price adjustment protection contained within these warrants, the initial exercise price of these warrants was adjusted downward to $29.40 on July 24, 2018, the record date of the 2018 Rights Offering (defined herein) and downward to $19.00 per share on August 13, 2018. These warrants were further adjusted downward from $19.00 to $7.13 and to $2.1122 on January 28, 2020 and March 4, 2020, respectively, in connection with separate registered direct offerings. These warrants were further adjusted downward from $2.1122 to $1.3659 on October 26, 2020 in connection with a registered direct offering. These warrants are subject to further adjustment pursuant to antidilution price adjustment protection.

~~SENESTECH, INC.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

~~Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)~~

~~Outstanding Warrants~~

As of March 31, ~~2022, we had 4,531,447 shares~~2023, maturities of ~~common stock issuable upon exercise of outstanding common stock warrants, at a weighted-average exercise price of $4.00 per share.~~

operating lease liabilities are follows (in thousands):

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 five years; dividend yield of 0% and risk-free interest rate of 1.87. The initial exercise price of these warrants was $30.00 per share, which adjusted downward to $29.40 on July 24, 2018, the record date of the 2018 Rights Offering, and downward to $19.00 per share on August 13, 2018, the date of the 2018 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 – ~~Earnings Per Share~~ (“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 of 1.45%.

The exercise price of the warrants was adjusted downward to $2.1122 on March 4, 2020 in connection with a private placement of common stock. Per guidance of ASC 260, 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 of 74.5%; 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; comparable 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; comparable company volatility of 72.6%; remaining term five 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.


2023	$	149
2024	186

Total operating lease payments	335
Less imputed interest	(19)
Total operating lease liabilities	$	316

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)~~

On August 13, 2018, in connection with a rights offering of 267,853 shares of our common stock (the “2018 Rights Offering), 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; comparable company volatility of 159.0%; remaining term five years; dividend yield of 0% and risk-free interest rate of 2.77%.

NOTE 5: STOCK-BASED COMPENSATION

In connection with the closing of the 2018 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 2018 Rights Offering. We estimated the fair value of the common stock warrants, exercisable at $34.50 per share, to be $169 using a using a Monte Carlo model based on the following significant inputs: common stock price of $18.80; comparable company volatility of 159.0%; remaining term 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. The common stock warrant is exercisable until five years from the date of grant. We estimated the fair value of the common stock warrants, exercisable at $33.75 per share, to be $127 using a lattice model based on the following significant inputs: common stock price of $26.80; comparable company volatility of 133.3%; remaining term five 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 of 1933, as amended (the “Securities Act”) and Rule 506(b) of Regulation D promulgated thereunder. Terms used but not otherwise defined herein will have the meanings given them in the warrants, attached as Exhibit 4.1 to our Current Report on Form 8-K filed with 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. We estimated the fair value of the common stock warrants, exercisable at $9.00 per share, to be $813 using a Black Scholes model based on the following significant inputs: common stock price of $7.90; comparable company volatility of 73.8%; remaining term five years; dividend yield of 0% and risk-free interest rate of 1.53%.

The warrants issued in March 2020 to purchase 176,372 shares of common stock have an exercise price of $2.88 per share, are immediately exercisable and will expire September 8, 2025. We estimated the fair value of the common stock warrants, exercisable at $2.88 per share, to be $242 using a Black Scholes model based on the following significant inputs: common stock price of $2.35; comparable company volatility of 74.8%; remaining term five and one-half years; dividend yield of 0% and risk-free interest rate of 0.39%.

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)~~

For so long as the 2020 Warrants remain outstanding, the exercise price and number of shares of common stock issuable upon exercise of the warrants are subject to adjustment as follows: (a) upon payment of a stock dividend or other distribution on a class or series of shares common stock, not including shares issued under this warrant; (b) upon subdivision (by stock spilt, stock dividend, recapitalization, or otherwise) or combination (by reverse stock split or otherwise) of shares of common stock; or (c) upon the issuance of any shares of capital stock by reclassification of shares of the common stock.

In the event that we declare or make any dividend or other distribution of our assets to holders of our common stock, each 2020 Warrant holder will be entitled to participate in such distribution to the same extent that such holder would have participated therein if the holder had held the number of shares of common stock acquirable upon exercise of the 2020 Warrant.

In the event of a Fundamental Transaction, as described in the 2020 Warrants and generally including the sale, transfer or other disposition of all or substantially all of our properties or assets; our consolidation or merger with or into another person or reorganization; a recapitalization, reorganization or reclassification in which our common stock is converted into other securities, cash or property; or any acquisition of our outstanding common stock that results in any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, then the holders of the 2020 Warrants will be entitled to receive upon exercise of such warrants the kind and amount of securities, cash, assets or other property that the holders would have received had they exercised the 2020 Warrants immediately prior to such Fundamental Transaction. Subject to certain limitations, in the event of a Fundamental Transaction the 2020 Warrant holder may at its option require 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.

After the Initial Exercisability Date, the 2020 Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise. If, at the time a holder exercises the 2020 Warrant (but not sooner than six months following the date of such warrant), a registration statement registering the issuance of the shares of common stock underlying the 2020 Warrants under the Securities Act is not then effective or available, nor is any current prospectus thereto available, and an exemption from registration under the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the number of shares of common stock determined according to a formula set forth in the 2020 Warrant.

~~Limitations on Exercise~~. A holder (together with its affiliates) may not exercise any portion of the 2020 Warrants to the extent that the holder would own more than 4.99% of the outstanding common stock after exercise (the “Beneficial Ownership Limitation”), except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the Beneficial Ownership Limitation up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the 2020 Warrants. No fractional shares of common stock will be issued in connection with the exercise of a 2020 Warrant. In lieu of fractional shares, we will either pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share.

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)~~

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. 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: common stock price of $2.40; comparable company volatility of 87.9%; remaining term five years; dividend yield of 0% and risk-free interest rate of 0.18%.

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

In connection with the separate private placements concurrent with registered direct offerings of shares of 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; comparable company volatility of 73.8%; remaining term five years; dividend yield of 0% and risk-free interest rate of 1.53%.

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: common stock price of $2.35; comparable company volatility of 74.8%; remaining term five and one-half years; dividend yield of 0% and risk-free interest rate of 0.39%.

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.

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)~~

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: common stock price of $2.40; comparable company volatility of 87.9%; remaining term five and one-half 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 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 share. The warrants issued were immediately exercisable with an exercise period of five and one-half years from the date of issuance. The Original Warrants were issued on March 6, 2020 and on April 24, 2020. Pursuant to the Letter Agreement, the per share exercise price of the Original Warrants were reduced from $2.88 and $3.05, respectively, to $1.725. 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 of $1.47; comparable company volatility of 96.5%; remaining term five and one-half 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 of $1.47; comparable company volatility of 96.5%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.

~~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 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 of 95.6%; remaining term five and one-half years; dividend yield of 0% and risk-free interest rate of 0.18%.

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 9 - Common Stock Warrants and Common Stock Warrant Liability – (continued)~~

~~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 of 95.6%; remaining term five and one-half years; dividend yield of 0% and risk-free interest rate of 0.18%.

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

On March 23, 2021, we consummated a registered direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of our common stock, par value $0.001 per share at a purchase price of $2.00 per share for gross proceeds to us of approximately $3.95 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by us. The 1,975,000 shares of common stock sold in the offering were offered and sold pursuant to a prospectus, dated August 24, 2018, and a prospectus supplement, dated March 22, 2021, in connection with a takedown from our shelf registration statement on Form S-3 (File No. 333-225712).

In connection with the registered direct offering in March 2021, we issued to H.C. Wainwright & Co., LLC, as the placement agent, warrants to purchase up to 148,125 shares of common stock. The placement agent warrants will be exercisable commencing six months following the date of issuance, expire five years following the date of sale and have an exercise price per share of $2.50 per share. The placement agent warrants, and the shares of common stock issuable upon exercise thereof, will be issued in reliance on the exemption from registration provided in Section 4(a)(2) under the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. We estimated the fair value of these common stock warrants, with an exercise price of $2.50 per share, to be $181 using a Black Scholes model based on the following significant inputs: common stock price of $1.76; comparable company volatility of 100.8%; remaining term five years; dividend yield of 0% and risk-free interest rate of 0.31%.

~~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 of $1.47; comparable company volatility of 96.5%; remaining term 4.5-4.8 years; dividend yield of 0% and risk-free interest rate of 0.18.

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 10 - 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, $.001 par value, and (ii) 2 million shares of preferred stock, $0.001 par value, designated as Series A convertible preferred stock. In December 2015, 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.~~

~~Common Stock~~

~~We had 12,212,283 and 12,207,283 shares of common stock issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.~~

~~During the three months ended March 31, 2022, we issued 5,000 shares of common stock as follows:~~

●

~~an aggregate of 5,000 shares in connection with a restricted stock grant that was issued and vested on February 25, 2022 for services.~~

~~Note 11 - Stock-Based Compensation~~

~~On June 12,~~ 2018, our stockholders approved the adoption of the SenesTech, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) ~~to replace our 2015 Equity Incentive~~. The 2018 Plan ~~(the “2015 Plan”). On July 8, 2020,~~has since been amended and restated on certain occasions, most recently on October 12, 2022, when our stockholders approved an ~~amendment~~increase to the ~~2018 Plan to increase the~~total number of authorized 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.

348,614 shares.

~~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~~the 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-~~12- to 36-month period coinciding with their respective service ~~periods. Options under the 2018 Plan~~periods, with terms of generally ~~have a term of~~ five years. Certain stock option awards provide for accelerated vesting upon a change in control.

As of March 31, ~~2022,~~2023, we had ~~2,453,600~~164,522 shares of common stock available for issuance under the 2018 Plan.

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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 CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 11 - Stock-Based Compensation – (continued)~~

~~The weighted-average assumptions used in the Black-Scholes option-pricing model used to calculate the fair value of options granted during the three months ended March 31, 2022 were as follows:~~

~~Expected volatility~~	~~77.0~~	%
~~Expected dividend yield~~	—
~~Expected term (in years)~~	~~3.5~~
~~Risk-free interest rate~~	~~1.7~~	%

~~The weighted average grant date fair value of options granted during the three months ended March 31, 2022 was $0.444 per share, as per the table above.~~

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 its awards have been outstanding. For non-employee options, the expected term of options granted is the contractual term of the options. The risk-free interest rate is determined by reference to the implied yields of U.S. Treasury securities with a remaining term equal to the expected term assumed at the time of grant. 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 following table summarizes the stock option activity for ~~both equity plans, for~~ the periods indicated as follows:

Number of
Options Weighted
Average
Exercise
Price Per
Share Weighted
Average
Remaining
Contractual
Term
(years) Aggregate
Intrinsic
Value (1)
Outstanding at December 31, 2021 1,087,820 $ 4.08 3.9 $ —
Granted 390,000 $ 0.82 4.9 $ —
Exercised — $ — — $ —
Forfeited (500 ) $ — — $ —
Expired — $ — — $ —
Outstanding at March 31, 2022 1,477,320 $ 3.23 3.2 $ —
Exercisable at March 31, 2022 795,019 $ 4.79 2.0 $ —


	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)
Outstanding as of December 31, 2022	280,810		$	17.00	3.9
Granted	—		—		—
Exercised	—		—		—
Forfeited	(326)		—		—
Expired	(36)		—		—
Outstanding as of March 31, 2023	280,448	(1)	17.11		4.4
Exercisable as of March 31, 2023	98,406		32.22		—

~~(1)~~

The aggregate intrinsic value in the table was calculated based on the difference between the estimated fair market value of our stock and the exercise price of the underlying options. The estimated stock values used in the calculation were $0.98 and $0.73 per share for the year ended December 31, 2021 and the three months ended March 31, 2022, respectively.

(1) - Includes options related to 99,000 shares that are inducement awards and not granted under the 2018 Plan.

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SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)

~~Note 11 - Stock-Based Compensation – (continued)~~

Restricted Stock Units

The following table summarizes restricted stock unit activity for the three months ended March 31, ~~2022:~~

2023:

Number of
Units Weighted Average
Grant-Date Fair
Value Per Unit
Outstanding as of December 31, 2021 667 $ 1.80
Granted 5,000 $ 0.76
Vested (5,000 ) $ 0.76
Forfeited — $ —
Outstanding as of March 31, 2022 667 $ 1.80


	Number of Units	Weighted Average Grant-Date Fair Value Per Unit
Outstanding as of December 31, 2022	18,799	$	2.71
Granted	—	—
Vested	(18,799)	2.71
Forfeited	—	—
Outstanding as of March 31, 2023	—	—

The stock-based compensation expense was recorded as ~~follows:~~

follows (in thousands):

Three Months Ended
March 31,
2022 2021
Research and development $ 1 $ 2
Selling, general and administrative 223 153
Total stock-based compensation expense $ 224 $ 155


	Three Months Ended March 31,
	2023		2022

Research and development	$	4	$	1
Selling, general and administrative	162		223
Total stock-based compensation expense	$	166	$	224

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, ~~2022,~~2023, the total compensation cost related to ~~restricted stock units and~~ unvested options not yet recognized was ~~$533,~~$403,000, which will be recognized over a weighted average period of 3424 months, assuming the employees and non-employees complete their service period required for vesting.

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NOTE 6: STOCKHOLDERS’ EQUITY

Activity in equity during the three-month periods ended March 31, 2023 and 2022 was as follows (dollars in thousands):


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total
	Shares	Amount
2023
Balances as of December 31, 2022	809,648	$	1	$	127,481	$	(122,203)	$	5,279
Stock-based compensation	—	—		166		—		166
Issuance of common stock upon exercise of warrants	1,230,000	1		(1)		—		—
Issuance of common stock for service	54,466	—		100		—		100
Issuance of shares pursuant to the vesting of restricted stock units, net of shares withheld for taxes	13,225	—		(11)		—		(11)
Net loss	—	—		—		(2,037)		(2,037)
Balances as of March 31, 2023	2,107,339	$	2	$	127,735	$	(124,240)	$	3,497








2022
Balances as of December 31, 2021	610,364	$	1	$	122,542	$	(112,508)	$	10,035
Stock-based compensation	—	—		221		—		221
Issuance of common stock for service	250	—		3		—		3
Net loss	—	—		—		(2,332)		(2,332)
Balances as of March 31, 2022	610,614	$	1	$	122,766	$	(114,840)	$	7,927

During the three months ended March 31, 2023, the following shares of common stock were issued:

•1,230,000 shares pursuant to the exercise of previously outstanding prefunded warrants, which were issued in November 2022 with an exercise price of $3.50 per share;

•54,466 restricted shares in exchange for marketing services to be performed through September 2023, with the total value of services to be recognized based on the stock price on date of issuance; and

•13,225 shares pursuant to the vesting of restricted stock units.

~~Note 12 - Commitments and Contingencies~~

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NOTE 7: COMMON STOCK WARRANTS

The following table summarizes the common stock warrant activity for the three months ended March 31, 2023:


	Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)
Outstanding as of December 31, 2022	4,414,810	$	6.58	3.0
Issued	—	—		—
Exercised	(1,230,000)	3.50		—
Expired	—	—		—
Outstanding as of March 31, 2023	3,184,810	7.78		2.8

During the three months ended March 31, 2023, prefunded warrants representing 1,230,000 shares of common stock were exercised. Such prefunded warrants were issued in November 2022 with an exercise price of $3.50 per share.

NOTE 8: 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, and common stock options are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share attributable to common stockholders because their effect would be anti-dilutive given the net loss reported for the three months ended March 31, 2023 and 2022. Therefore, basic and diluted loss per share attributable to common stockholders are the same for each period 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):

Three Months Ended
March 31,
2023 2022
Common stock warrants $ 3,184,810 $ 226,572
Restricted stock units — 33
Common stock options 280,448 72,366
$ 3,465,258 $ 298,971

NOTE 9: CONTINGENCIES

Legal Proceedings

In July 2020, Kennan E. ~~Kaedar,~~Kaeder, 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 served us and 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. We do not believe that all of the defendants have yet been served. Furthermore, Loretta Mayer and Cheryl Dyer have separately settled with the Plaintiff.

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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. The Plaintiff has agreed to mediation to resolve the issues. We do not believe that this litigation is likely to have a material effect on our operations.

NOTE 10: SUBSEQUENT EVENTS

~~SENESTECH, INC.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~(In thousands, except share~~On April 12, 2023, we consummated a registered direct offering with certain institutional investors and ~~per share data)~~

~~Note 12 - Commitments and Contingencies – (continued)~~

~~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~~issued an aggregate 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.

~~Lease Commitments~~

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. This lease expires on November 30, 2024.

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

Rent expense was $56 and $54 for the three months ended March 31, 2022 and 2021, respectively. The future minimum lease payments under non-cancellable operating lease and future minimum finance lease payments as of March 31, 2022 are follows:

Years Ending December 31, Finance
Leases Operating
Lease
2022 14 146
2023 - 198
2024 - 186
Total minimum lease payments $ 14 $ 530

Finance
Leases
Less: amounts representing interest (ranging from 11.43% to 14.68%) $ -
Present value of minimum lease payments 4
Less: current installments under finance lease obligations 4
Total long-term portion $ 0

~~Note 13 - Subsequent Events~~

~~On May 4, 2022, the Company issued 667~~857,146 shares of our common stock for ~~service~~$1.75 per share for ~~restricted stock units that vested~~gross proceeds of $1.5 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by us. The shares were offered and sold pursuant to a prospectus, dated May 6, 2022, and a prospectus supplement, dated April 10, 2023, in connection with a takedown from our shelf registration statement on Form S-3 (File No. 333-261227).

In connection with the registered direct offering, the following warrants were issued:

•Series C warrants to the investors in the offering to purchase up to 857,146 shares of our common stock. The Series C warrants are exercisable immediately with an exercise price of $1.62 per share, and expire five and one-half years from the date of issuance, or October 12, 2028.

•Placement agent warrants to purchase up to 64,286 shares of our common stock. The placement agent warrants will be exercisable immediately upon issuance, with an exercise price per share of $2.1875 per share, and expire five years following the date of issuance, or April ~~2022.~~

10, 2028.

We have evaluated subsequent events from the balance sheet date through May ~~13, 2022,~~11, 2023, the date at which the condensed financial statements were issued, and determined that there were no ~~other~~additional items that require adjustment to or disclosure in the condensed financial statements.

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

–

~~As used in this Quarterly Report on Form 10-Q, “SenesTech,” the “Company,” “we,” “us,” or “our” refer to SenesTech, Inc., a Delaware corporation.~~

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed financial statements and related notes.

Forward-Looking Statements

The statements contained in this Quarterly Report on Form 10-Q that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts contained or incorporated herein by reference in this Quarterly Report on Form 10-Q, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “suggests,” “targets,” “contemplates,” “projects,” “predicts,” “may,” “might,” “plan,” “would,” “should,” “could,” “can,” “potential,” “continue,” “objective,” or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Quarterly Report on Form 10-Q include statements regarding:

	●	our expectation 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;

	●	~~our expectation to continue to incur significant expenses and operating losses for the foreseeable future;~~

	●	our expectation that cash and cash equivalents at March 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 9 to 12 months;

•our expectation that we will continue to incur significant expenses and generate operating losses for the foreseeable future;

•our expectation that cash and cash equivalents at March 31, 2023, 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;

•our belief that sales increased in part due to continued focus of our internet sales initiatives, enhanced strategic partnership and collaborations with key distributors and Pest Management Professionals (“PMP”s);

	●•our belief that the increased sales activity from our field sales organization was due in part to the launch of our new Elevate product offering;	~~our plan to continue to utilize various forms of stock-based compensation awards to attract and retain qualified employees;~~

	●	~~our anticipation that stock-based compensation expense will continue to represent a significant portion of our selling, general and administrative expenses for the foreseeable future;~~

	●	~~our expectation our expenses to continue or increase in connection with our ongoing activities, particularly as we focus on marketing and sales of ContraPest;~~

	●	our expectation to continue to grant stock options and other equity-based awards, such as restricted stock units, in the future and to continue to recognize stock-based compensation expense in future periods;

	●	~~our estimates or expectations related to our revenue, cash flow, expenses, capital requirements and need for additional financing;~~

	●	~~the adequacy of our facilities to meet our current needs;~~

	●	~~our belief the claims against us do not have merit and our intention to aggressively defend against these accusations;~~

•our successful commercialization of ContraPest;

•our belief that 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;

•our ability to enter into strategic partnerships to enable us to penetrate additional target markets and geographical locations;

•our expectation that our expenses will continue or increase in connection with our ongoing activities, particularly as we focus on marketing and sales of ContraPest;

•our ability to maintain and obtain regulatory approval for our product and product candidates;

•our ability to gain market acceptance, commercial viability and profitability of ContraPest and other products;

•our ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue;

•the success of our research and development;

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

•our ability to meet our working capital needs;

•our estimates or expectations related to our revenue, cash flow, expenses, capital requirements and need for additional financing;

•our plans for our business, including for research and development;

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•our belief the claims against us do not have merit and our intention to aggressively defend against these accusations;

•our belief the litigation against us is not likely to have a material effect on our operations;

•our financial performance, including our ability to fund operations; and

•developments and projections relating to our projects, competitors and our industry, including legislative developments and impacts from those developments.

These forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and situations that are difficult to predict and that may cause our own, or our industry’s, actual results to be materially different from the future results that are expressed or implied by these statements. Accordingly, actual results may differ materially from those anticipated or expressed in such statements as a result of a variety of factors, including those discussed in Item 1A-“Risk Factors” of Part I of our Annual Report on Form 10-K, for the year ended December 31, ~~2021,~~2022, filed with the SEC on March ~~29, 2022, and Item 1A of Part II of this Form 10-Q, in each case entitled “Risk Factors,”~~17, 2023, and those contained from time to time in our other filings with the ~~Securities and Exchange Commission.~~SEC. A number of factors could cause our actual results to differ materially from those indicated by the forward-looking statements. Such factors include, among others, the following:

•the successful commercialization of our products;

•market acceptance of our products; and

	●	~~the impacts and implications of the COVID-19 pandemic;~~

	●	~~the successful commercialization of our products;~~

	●	~~market acceptance of our products; and~~

	●	regulatory approval and regulation of our products and other factors and risks identified from time to time in our filings with the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q.

•regulatory approval and regulation of our products and other factors and risks identified from time to time in our filings with the SEC, including this Quarterly Report on Form 10-Q.

All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q reflect our views as of the date of this Quarterly Report on Form 10-Q about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results, performance or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance or achievements.

We are subject to the information requirements of the Exchange Act, and we file or furnish reports, proxy statements and other information with the ~~Securities and Exchange Commission (the “SEC”).~~SEC. Such reports and other information we file with the SEC are available free of charge at www.senestech.com as soon as practicable after such reports are available on the SEC’s website at www.sec.gov. The SEC’s website contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Overview

Since our inception, we have sustained significant operating losses in the course of our research and development and commercialization activities and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under our former license agreement. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock.

Through March 31, 2023, we received net proceeds of $93.6 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 $2.7 million in net product sales. As of March 31, 2023, we had an accumulated deficit of $124.2 million and cash and cash equivalents of $2.7 million.

We have incurred significant operating losses every year since our inception, with net losses of $2.0 million and $2.3 million for the three months ended March 31, 2023 and 2022, respectively. We expect to continue to incur significant expenses and generate operating losses for at least the next six months.

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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; 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, 2023, 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. In April 2023, we consummated a registered direct offering with certain institutional investors and issued an aggregate of 857,146 shares of our common stock for $1.75 per share for gross proceeds of $1.5 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by us.

While we have evaluated and continue to evaluate our operating expenses and concentrate our resources toward the successful commercialization of ContraPest 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.

~~Overview~~

Results of Operations

The following table summarizes our results of operations for the periods presented (in thousands):


	Three Months Ended March 31,				% Increase (Decrease)
	2023		2022
Revenues, net	$	233	$	195	19	%
Cost of sales	141		105		34	%
Gross profit	92		90		2	%
Operating expenses:
Research and development	387		516		(25)	%
Selling, general and administrative	1,750		1,907		(8)	%
Total operating expenses	2,137		2,423		(12)	%
Loss from operations	(2,045)		(2,333)		(12)	%
Other income, net	8		1		700	%
Net loss	$	(2,037)	$	(2,332)	(13)	%

Revenues

Sales, net of sales discounts and promotions, were $233,000 for the first quarter of 2023, compared to $195,000 for the first quarter of 2022. Sales increased by $38,000, in part, due to continued focus on our internet sales initiatives, augmenting our existing pull through sales strategy, where demand from the consumer market encourages, or pulls, resellers and pest management professionals to offer our products, as well as enhanced strategic partnerships and collaborations with key distributors and PMP. In addition, we saw increased sales activity from our field sales organization, including the launch of our new Elevate product offering.

Cost of Sales

Cost of sales consist primarily of the cost of products sold, including scrap and reserves for obsolescence, and was $141,000, or 60.4% of net sales, for the first quarter of 2023, compared to $105,000, or 53.8% of net sales, for the first quarter of 2022. The increase in cost of sales as a percentage of net sales during the first quarter of 2023 was driven by the scrapping of defective tanks no longer used in our products, which totaled $42,000.

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Gross Profit

Gross profit for the first quarter of 2023 was $92,000, for a gross profit margin of 39.6%, compared to a gross profit of $90,000, or a gross profit margin of 46.2%, for the first quarter of 2022. The lower gross profit margin was the direct result of scrapping defective tanks no longer used in our products. Excluding the cost associated with the scrapped inventory, gross profit margin is 57.8% for the first quarter of 2023.

Research and Development Expenses

Research and development expenses consisted of the following (in thousands):


	Three Months Ended March 31,				Increase (Decrease)
	2023		2022
Personnel related (including stock-based compensation)	$	242	$	241	$	1
Professional fees	44		90		(46)
Depreciation	28		46		(18)
Facility-related	26		26		—
Other	47		113		(66)
Total	$	387	$	516	$	(129)

Research and development expenses were $387,000 for the first quarter of 2023, compared to $516,000 for the first quarter of 2022. The $129,000 decrease was primarily due to lower consulting and legal fees required for research and development purposes, lower depreciation as several assets became fully depreciated in 2023, and lower expenses related to field and product improvement studies.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consisted of the following (in thousands):


	Three Months Ended March 31,				Increase (Decrease)
	2023		2022
Personnel related (including stock-based compensation)	$	903	$	1,070	$	(167)
Professional fees	452		436		16
Insurance	86		166		(80)
Travel and entertainment	74		46		28
Office supplies/IT	71		83		(12)
Marketing	54		20		34
Facility-related	38		39		(1)
Other	72		47		25
Total	$	1,750	$	1,907	$	(157)

Selling, general and administrative expenses were $1.8 million for the first quarter of 2023, as compared to $1.9 million for the first quarter of 2022. The decrease of $157,000 was primarily due to lower personnel-related expenses, both lower stock-based compensation and lower headcount, combined with lower insurance and software-related license costs. This decrease was partially offset by higher digital marketing advertising costs and travel and entertainment expenses as we continue to focus efforts on the commercialization of our products, as well as higher legal related to selling, general and administrative and software license costs.

Other Income, Net

Other income for the first quarter of 2023 consisted of interest income of $8,000, which was $6,000 higher than the first quarter of 2022 due to higher interest rates of the comparable periods. Additionally, we had interest expense of $1,000 for the first quarter of 2022 related to certain notes payable and finance leases that expired in 2022.

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Liquidity and Capital Resources

Liquidity

Since our inception, we have sustained significant operating losses in the course of our research and development activities and commercialization efforts and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under a former ~~license with Neogen.~~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~~stock; and debt financing, consisting primarily of convertible notes. ~~See Note 9 - Common Stock Warrants and Common Stock Warrant Liability for a description of our public equity sales.~~

Through March 31, ~~2022,~~2023, we have received net proceeds of ~~$89.6~~$93.6 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 ~~$1.7~~$2.7 million in net product sales. As of March 31, ~~2022,~~2023, we had an accumulated deficit of ~~$114.8~~$124.2 million and cash and cash equivalents of ~~$7.2~~$2.7 million.

~~We have incurred significant operating losses every year since our inception. Our~~ And, in April 2023, we received net ~~losses were $2.3~~proceeds of $1.2 million ~~and $1.8 million for~~from the ~~three months ended March 31, 2022 and 2021, respectively. We expect to continue to incur significant expenses and generate operating losses for at least the next 12 months.~~

sale of common stock.

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 activities; (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.

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

While the effect and impact of the COVID-19 pandemic on revenue during the three months ended March 31, 2022 is difficult to measure, the travel and other restrictions that started in 2020 resulted in a significant slowdown in our proof-of-concept field studies and sales efforts. We were able to resume field studies in some important projects mid-year 2020 and initially believed that we would re-start all our most significant field studies as we obtained limited waivers of certain travel bans; however, we still have delays on certain projects that might remain on hold until further lifting of government restrictions. These continued delays may impact our results in future quarters. Initially, we believed that pest control would continue through the pandemic as a necessity and we were and have been able to maintain our manufacturing with cautionary, best practices put in place. However, we have concerns about distributor, pest control operator and individual consumer spending as restrictive measures related to the pandemic continue. Extended stay at home orders and other restrictions across the world have impeded our ability to communicate with current and prospective customers, potentially reducing sales until the orders are lifted. In addition, federal, state and municipal budgets continue to be severely strained as a result of the pandemic. This may delay or impede their ability to make near term purchases of our products. While we have stocked certain long lead time inventory raw material ingredients, any prolonged impact on the suppliers we rely on for the purchase of these items by the COVID-19 pandemic could impact future manufacturing operations.

Sales are comprised primarily of sales, net of discounts and promotions, of ContraPest and related components, to our distributors and customers, as well as consulting and implementation services provided in conjunction with ContraPest deployments.

Cost of sales consist primarily of cost of products sold, including scrap and reserves for obsolescence. We continue to focus on improving our cost structure, with the goals of shifting resources to commercialization, significantly reducing our year-over-year burn rate and achieving a 50% or greater gross margin. Steps have included relocating to more cost-efficient space, organizational restructuring, and improving our manufacturing and supply processes and reducing staffing.

~~Research and development expenses consist primarily of costs incurred in connection with the research and development of ContraPest and our other product candidates, which costs include:~~

We continue to investigate other applications of our core technology to other product candidates and modifications to our existing products to expand usability, which includes laboratory tests, corporate relationships and academic collaborations. We also continue to develop our supply chain, particularly identifying and improving our sourcing of triptolide, a key active ingredient for our product candidates. At this time, we cannot reasonably estimate the costs for further development of ContraPest or the cost associated with the development of any of our other product candidates.

Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, sales, marketing and administrative functions. Selling, general and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, consulting, accounting and audit services.

We plan to continue to utilize various forms of stock-based compensation awards in order to attract and retain qualified employees. As a result, we anticipate that stock-based compensation expense will continue to represent a significant portion of our selling, general and administrative expenses for the foreseeable future.

~~Interest income consists primarily of interest income earned on cash and cash equivalents.~~

~~Interest expense consists primarily of interest accrued on our finance lease and note commitments.~~

Other income (expense), net, consists primarily of any recognized gains or losses related to the sale of fixed assets. In 2021, other income also included the reversal of a payroll benefits accrual from 2019 that was reversed as the liability period had expired.

Deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. Our effective tax rate for the three months ended March 31, 2022, as well as for the year ended December 31, 2021, has been impacted by the full valuation allowance on our deferred tax assets.

Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net operating losses we have incurred in each year in our history or for our generated research and development tax credits, due to the uncertainty regarding our ability to realize a benefit from these tax attributes. Based on tax return activity through December 31, 2021, we had federal and state net operating loss carryforwards of approximately $77.2 million and $63.7 million, respectively, not considering any potential Internal Revenue Code of 1986 (“IRC”) Section 382 annual limitation discussed below. We are accruing additional net operating losses in calendar year 2022, which will be added to the carryover net operating loss balance once the current year is completed. The federal loss carryforwards begin to expire in 2029, unless previously utilized. The state loss carryforwards begin to expire in 2032, unless previously utilized. Included in the $77.2 million of federal loss carryforwards are approximately $32.7 million of net operating losses that do not expire due to the tax law changes promulgated in conjunction with the Tax Cuts and Jobs Act of 2017.

Additionally, the utilization of the net operating loss carryforwards is 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.

~~The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:~~

Sales, shown net of sales discounts and promotions, were $195,000 for the three months ended March 31, 2022, compared to $88,000 for the same period in 2021. Sales increased by $107,000 in the first three months of 2022 due, in part, to continued focus of our internet sales initiatives, augmenting our existing pull through sales strategy, where demand from the consumer market encourages, or pulls, resellers and pest management professionals to offer our products, as well as enhanced strategic partnerships and collaborations with key distributors and PMPs. In addition, we saw increased sales activity from our field sales organization.

Cost of sales was $105,000 or 53.8% of net sales for the three months ended March 31, 2022, compared to $50,000 or 56.8% of net sales for the three months ended March 31, 2021. The increase in cost of goods sold of $55,000 in 2022 is primarily due to higher sales volume. The decrease in cost of sales as a percentage of net sales was primarily due to lower production scrap during the three months ended March 31, 2022. We continue to focus on manufacturing process improvement and efficiencies.

Gross profit for the three months ended March 31, 2022 was $90,000 or 46.2% of net sales, compared to a gross profit of $38,000 or 43.2% of net sales, for the same period in 2021. The increase in gross profit was a direct result of the impact of lower production scrap and continued manufacturing efficiencies as a result of scale-up activities.

Research and development expenses were $516,000 for the three months ended March 31, 2022, compared to $455,000 for the same period in 2021. The $61,000 increase in research and development expenses was primarily due to an increase of $9,000 in personnel-related costs, a $14,000 increase in professional fees, a $15,000 increase in freight expense, a $6,000 increase in facility related expenses and $44,000 increase in other research and development expenses, offset by a $27,000 decrease in depreciation expense.

~~Personnel related expense, including stock-based compensation expense, increased relative to the same period of 2021 due to an increase in headcount to meet current and future demand.~~

Professional fees increased relative to the same period of 2021 primarily due to increased consulting expenses related to field and regulatory compliance studies and increased annual EPA and state registrations.

Unbilled freight expense increased for the three months ended March 31, 2022 relative to the same period of 2021 primarily due to increased product sales volume associated with new customer acquisition and increased freight rates due to increased fuel surcharges.

~~Facility-related expenses increased $6,000 due primarily to contractual rent escalation in our facility lease contracts.~~

The increase in other research and development expenses of $44,000 in the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to increased expenses related to field and product improvement studies. We also continue to develop our supply chain, particularly identifying and improving our sourcing of key ingredients for our product candidates.

~~Depreciation expense decreased $27,000 for the three months ended March 31, 2022 over the three months ended March 31, 2021 due to several assets becoming fully depreciated during the period.~~

Selling, general and administrative expenses were approximately $1.9 million for the three months ended March 31, 2022, as compared to approximately $1.4 million for the three months ended March 31, 2021. The increase of $500,000 in selling, general and administrative expenses was primarily due to an increase of $212,000 in net salary costs, an increase of $215,000 in professional fees, a $3,000 decrease in facility-related expenses, a $14,000 increase in office supplies/IT expenses, a $48,000 increase in insurance expense and a decrease in other selling, general and administrative expenses of $1,000. The increase in net salary costs of $212,000 was due primarily to expenses related to an equity award to our employees as well as an increase in administrative headcount during 2021. The increase in professional services expenses was primarily due to professional services and consultants associated with our marketing campaign. Facility related expenses were lower during the three months ended March 31, 2022 over the same period in 2021 due to lower utility costs that were incurred in 2021 to wind down the Flagstaff facility not incurred in 2022. Office supplies/IT expenses were higher during the three months ended March 31, 2022 over the same period in 2021 due to increased IT support services. Insurance expenses increased during the three months ended March 31, 2022 primarily due to increased Directors and Officers insurance premiums.

We recorded interest income, net of $1,000 for the three months ended March 31, 2022, as compared to interest expense, net of $3,000 for the same period in 2021. The $2,000 decrease in interest expense, net for the period was a result of decreased interest expense on certain notes payable and finance leases that were paid down or expired after March 31, 2021.

Other income, net, was $0 for the three months ended March 31, 2022 as compared to $21,000 for the three months ended March 31, 2021. The $21,000 of other income, net for the three months ended March 31, 2021 represented a payroll benefits accrual from 2019 that was reversed as the liability period had expired. We had no other income in 2022.

Since our inception, we have sustained significant operating losses in the course of our research and development activities and commercialization efforts and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under a former license. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock; and debt financing, consisting primarily of convertible notes.

Through March 31, 2022, we have received net proceeds of $89.6 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 $1.7 million in net product sales. As of March 31, 2022, we had an accumulated deficit of $114.8 million and cash and cash equivalents of $7.2 million.

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 activities; (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, ~~2022,~~2023, 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 9six to 12nine 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 9six to 12nine months, and we are unable to raise the 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.

We expect our expenses to continue or increase in connection with our ongoing activities, particularly as we focus on marketing and sales of ContraPest. ~~Further, the COVID-19 pandemic will likely continue to delay the completion of field studies and achievement of sales, which will further increase our need for financing.~~ In addition, we will continue to incur costs associated with operating as a public company.

The following table summarizes our sources and uses of cash for each of the periods ~~presented:~~

During the three months ended March 31, ~~2022,~~2023, operating activities used $2.0 million of cash, primarily resulting from our net loss of ~~$2.3~~$2.0 million offset by changes in our operating assets and liabilities of ~~$13,000~~$178,000 and by non-cash charges of ~~$290,000,~~$200,000, consisting primarily of stock-based compensation and depreciation and amortization. Our net loss was primarily attributable to research and development activities and our selling, general and administrative expenses, as we generated limited product revenue during the period. Net cash generated by changes in our operating assets and liabilities for the three months ended March 31, 2022 of $13,000 consisted primarily of a net decrease in accrued expenses and accounts payable of $33,000 and an increase in prepaid expenses of $29,000, offset by a decrease in accounts receivable of $21,000 and by a decrease in inventory of $54,000.

During the three months ended March 31, 2021, operating activities used $2.0 million of cash, primarily resulting from our net loss of $1.8 million and by changes in our operating assets and liabilities of $422,000, offset by non-cash charges of $228,000, consisting primarily of stock-based compensation, depreciation and amortization.amortization expense. Our net loss was primarily attributable to research and development activities and our selling, general and administrative expenses, as we generated limited product revenue during the period. Net cash used by changes in our operating assets and liabilities for the three months ended March 31, ~~2021~~2023 of ~~$422,000~~$178,000 consisted primarily of a net decrease in accounts payable and accrued expenses of $301,000, partially offset by decreases in accounts receivable of $69,000, inventory of $38,000 and prepaid expenses of $28,000.

~~For~~Cash Flows from Financing Activities—Financing activities provide cash for both day-to-day operations and capital requirements as needed. During the three months ended March 31, 2023, net cash used in financing activities consisted of the payment of employee withholding taxes of $11,000. During the three months ended March 31, 2022, net cash used in ~~investing activities was $66,000 due to the purchases of property, plant and equipment and construction in progress.~~

~~For the three months ended March 31, 2021, net cash used in investing activities was $63,000 due to the purchases of property, plant and equipment and construction in progress.~~

~~During the three months ended March 31, 2022, net cash used by~~ financing activities ~~was $16,000 as a result~~consisted of ~~$3,000 of~~ repayments ~~related to~~ notes payable and ~~$13,000 in repayments of~~ finance lease ~~obligations.~~

~~During the three months ended March 31, 2021, net cash provided by financing activities was $13.6 million as a result~~obligations of $12.4 million in net proceeds from the issuance of common stock and net proceeds of $1.2 million from the exercise of warrants, offset by $17,000 of repayments related to notes payable and $13,000 in repayments of finance lease obligations.

~~Our financial statements are prepared in accordance with generally accepted accounting principles in~~There have been no material changes to the United States, or U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

~~While our significant~~Company’s critical accounting policies ~~are described~~and estimates as previously disclosed in ~~more detail in Note 2 to our financial statements included elsewhere in this Quarterly~~Item 7 of the Company’s Annual Report on Form ~~10-Q, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.~~

~~Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606 —~~ ~~Revenue from Contracts with Customers~~ ~~(“ASC 606”)~~. Under ASC 606, we recognize revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — ~~Revenue Recognition~~ ~~(“ASC 605”)~~. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of the fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. The performance obligations identified by us under ASC 606 are straightforward and similar to the unit of account and performance obligation determination under ASC Topic 605, ~~Revenue Recognition~~.

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.

We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant, net of estimated forfeitures, in accordance with ASC Topic 718 — ~~Stock Compensation~~. We estimate the grant date fair value of the awards, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of stock-based awards is expensed on a straight-line basis over the vesting period of the respective award.

~~We recorded stock-based compensation expense of approximately $224,000 and $155,000~~10-K for the ~~three months~~year ended ~~March~~December 31, 2022, ~~and~~filed with the SEC on March ~~31, 2021, respectively. We expect to continue to grant stock options and other equity-based awards in the future and continue to recognize stock-based compensation expense in future periods.~~

The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based awards. If we had made different assumptions, our stock-based compensation expense, net loss and loss per share of common stock could have been significantly different. Our assumptions are as follows:

~~Significant Factors, Assumptions and Methodologies Used in Determining Fair Value of Our Common Stock~~

As noted above, we are required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations using the Black-Scholes option-pricing model.

The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. If we had made different assumptions than those used, the amount of our stock-based compensation expense, net income and net income per share amounts could have been significantly different. The fair value per share of our common stock for purposes of determining stock-based compensation expense is the closing price of our common stock as reported on the applicable grant date. The compensation cost that has been included in the statements of operations and comprehensive loss for all stock-based compensation arrangements is as follows:

~~The intrinsic value of stock options outstanding as of March 31, 2022 was $0.~~

We ~~conducted an evaluation pursuant~~periodically conduct evaluations (pursuant to Rule 13a-15(b) of the Exchange ~~Act,~~Act), under the supervision and with the participation of management, ~~including the Chief Executive Officer and Chief Financial Officer,~~ of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this report.

These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.

There ~~was~~were no ~~change~~changes in our internal control over financial reporting that occurred during the ~~quarter ended March 31, 2022,~~period covered by this quarterly report that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes ~~in the~~to our risk factors set forth in Part I, Item 1A, ~~“Risk Factors” in our 2021~~of the Company’s Annual ~~Report.~~


Delaware						20-2079805
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

23460 N.N 19th ~~Avenue,~~ Ave, Suite 110
Phoenix, AZ						85027
(Address of principal executive offices)						(Zip Code)

		~~Page~~
			PART I.I — FINANCIAL INFORMATION		1
Item 1.			Financial Statements (unaudited)		1
~~Item 1~~			~~Financial Statements~~Condensed Balance Sheets		1
			Condensed Statements of Operations and Comprehensive Loss		2
			Condensed Statements of Cash Flows		3
			Notes to Condensed Financial Statements		4
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		2414





Item 3.			Quantitative and Qualitative Disclosures About Market Risk		3620
Item 4.			Controls and Procedures		3620
			PART II — OTHER INFORMATION
Item 1.			~~PART II. OTHER INFORMATION~~Legal Proceedings		3721
Item 1A.			Risk Factors		21
~~Item 1~~			~~Legal Proceedings~~	37
~~Item 1A~~	~~Risk Factors~~	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			3721
Item 3.			Defaults Upon Senior Securities		3721
Item 4.			Mine Safety Disclosures		3721
Item 5.			Other Information		37 21
Item 6.			Exhibits		38 22
			~~Signatures~~SIGNATURE		39 23


	March 31, 2023		December 31, 2022
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	2,748	$	4,775
Accounts receivable, net	46		113
Prepaid expenses	450		378
Inventory, net	815		853
Total current assets	4,059		6,119
Right to use assets, operating leases	305		347
Property and equipment, net	259		294
Other noncurrent assets	22		22
Total assets	$	4,645	$	6,782
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	215	$	540
Accrued expenses	584		560
Current portion of operating lease liability	184		180
Deferred revenue	33		44
Total current liabilities	1,016		1,324
Operating lease liability, less current portion	132		179
Total liabilities	1,148		1,503
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, 2,107,339 and 809,648 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	2		1
Additional paid-in capital	127,735		127,481
Accumulated deficit	(124,240)		(122,203)
Total stockholders’ equity	3,497		5,279
Total liabilities and stockholders’ equity	$	4,645	$	6,782

	March 31,			December 31,
	2022			2021
	(Unaudited)
ASSETS
Current assets:
Cash	$	7,215		$	9,326
Accounts receivable trade, net		56			77
Prepaid expenses		259			230
Inventory		947			1,001
Deposits		22			22
Total current assets		8,499			10,656

Right to use asset-operating leases		471			511
Property and equipment, net		334			334
Total assets	$	9,304		$	11,501


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Short-term debt	$	16		$	32
Accounts payable		244			333
Accrued expenses		634			578
Total current liabilities		894			943

Operating lease liability		483			523
Total liabilities		1,377			1,466

Commitments and contingencies (See note 12)		-			-

Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 12,212,283 and 12,207,283 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		12			12
Additional paid-in capital		122,755			122,531
Accumulated deficit		(114,840	)		(112,508	)
Total stockholders’ equity		7,927			10,035

Total liabilities and stockholders’ equity	$	9,304		$	11,501

					Additional						Total
	Common Stock				Paid-In			Accumulated			Stockholders'
	Shares		Amount		Capital			Deficit			Equity (Deficit)

Balance, December 31, 2020		5,099,512	$	5	$	108,119		$	(104,240	)	$	3,884

Stock-based compensation		-		-		155			-			155
Issuance of common stock, sold for cash, net		6,163,854		6		12,586			-			12,592
Issuance of common stock upon exercise of warrants, net		900,680		1		1,208			-			1,209
Issuance of common stock upon cashless exercise of warrants		-		-		(171	)		-			(171	)
Net loss for the three months ended March 31, 2021		-		-		-			(1,821	)		(1,821	)

Balance, March 31, 2021		12,164,046	$	12	$	121,897		$	(106,061	)	$	15,848

Balance, December 31, 2021		12,207,283	$	12	$	122,531		$	(112,508	)	$	10,035

Stock-based compensation		-		-		221			-			221
Issuance costs of common stock for service		5,000		-		3			-			3
Net loss for the three months ended March 31, 2022		-		-		-			(2,332	)		(2,332	)

Balance, March 31, 2022		12,212,283	$	12	$	122,755		$	(114,840	)	$	7,927


Large accelerated filer	☐o	Accelerated filer	☐o
Non-accelerated filer	☒x	Smaller reporting company	☒x
Emerging growth company	☐o

	For the Three Months
	Ended March 31,
	2022			2021


Sales	$	195		$	88

Cost of sales		105			50
Gross profit		90			38

Operating expenses:
Research and development		516			455
Selling, general and administrative		1,907			1,422
Total operating expenses		2,423			1,877

Net operating loss		(2,333	)		(1,839	)

Other income (expense):
Interest income		2			2
Interest expense		(1	)		(5	)
Other income		-			21
Total other income		1			18

Net loss and comprehensive loss	$	(2,332	)	$	(1,821	)

Weighted average common shares outstanding - basic and fully diluted		12,209,005			8,137,038

Net loss per common share - basic and fully diluted	$	(0.19	)	$	(0.22	)


	March 31, 2023		December 31, 2022
Accounts receivable	$	50	$	119
Allowance for uncollectible accounts	(4)		(6)
Accounts receivable, net	$	46	$	113


	March 31, 2023		December 31, 2022
Raw materials	$	771	$	772
Work in progress	6		—
Finished goods	56		99
Total inventory	833		871
Less: reserve for obsolescence	(18)		(18)
Inventory, net	$	815	$	853


	March 31, 2023		December 31, 2022
Software licenses	$	113	$	157
Marketing programs and conferences	10		74
Insurance	93		61
Patents	24		39
Professional services	198		41
Other	12		6
Total prepaid expenses	$	450	$	378


	March 31, 2023		December 31, 2022
Research and development equipment	$	1,563	$	1,558
Office and computer equipment	801		800
Autos	54		54
Furniture and fixtures	41		41
Leasehold improvements	119		119
Total in service	2,578		2,572
Accumulated depreciation and amortization	(2,319)		(2,283)
Total in service, net	259		289
Construction in progress	—		5
Property and equipment, net	$	259	$	294


	March 31, 2023		December 31, 2022
Compensation, severance and related benefits	$	416	$	497
Legal services	150		36
Product warranty	18		18
Personal property and franchise tax	—		6
Other	—		3
Total accrued expenses	$	584	$	560

	Useful	March 31,			December 31,
	Life	2022			2021
Research and development equipment	5 years	$	1,437		$	1,425
Office and computer equipment	3 years		786			762
Autos	5 years		54			54
Furniture and fixtures	7 years		41			41
Leasehold improvements	*		117			112
Construction in progress			70			45
			2,505			2,439
Less accumulated depreciation and amortization			(2,171	)		(2,105	)
Total		$	334		$	334

						Balance									Balance								Balance
Issue Date	Warrant Type	Term Date	Exercise Price			December 31, 2020		Issued		Exercised			Expired		December 31, 2021		Issued		Exercised		Expired		March 31, 2022

November 21, 2017	Common Stock Offering Warrants	November 21, 2022		$ 1.3659	⁽¹⁾		143,501		-		(21,787	)		-		121,714		-		-		-		121,714
June 20, 2018	Warrant Reissue	December 20, 2023	$	36.40			56,696		-		-			-		56,696		-		-		-		56,696
August 13, 2018	Rights Offering Warrants	July 25, 2023	$	23.00			202,943		-		(499	)		-		202,444		-		-		-		202,444
August 13, 2018	Dealer Manager Warrants	August 13, 2023	$	34.50			13,393		-		-			-		13,393		-		-		-		13,393
July 16, 2019	Dealer Manager Warrants	July 11, 2024	$	33.75			8,334		-		-			-		8,334		-		-		-		8,334
January 28, 2020	Registered Direct Offering	July 28, 2025	$	9.00			177,500		-		-			-		177,500		-		-		-		177,500
January 28, 2020	Dealer Manager Warrants	July 28, 2025	$	10.00			13,315		-		-			-		13,315		-		-		-		13,315
March 6, 2020	Dealer Manager Warrants	March 4, 2025	$	3.76			13,228		-		-			-		13,228		-		-		-		13,228
April 21, 2020	Dealer Manager Warrants	April 21, 2025	$	3.97			118,073		-		-			-		118,073		-		-		-		118,073
April 24, 2020	Registered Direct Offering	April 24, 2025	$	3.05			50,000		-		-			-		50,000		-		-		-		50,000
October 26, 2020	Private Warrant Inducement	April 27, 2026	$	1.73			1,700,680				(700,680	)				1,000,000		-		-		-		1,000,000
October 26, 2020	Dealer Manager Warrants	April 27, 2026	$	2.16			85,034		-							85,034		-		-		-		85,034
February 2, 2021	Private Placement Agreement	August 2, 2026	$	2.216			-		2,194,427		-			-		2,194,427		-		-		-		2,194,427
February 2, 2021	Dealer Manager Warrants	August 2, 2026	$	2.848			-		329,164		-			-		329,164		-		-		-		329,164
March 23, 2021	Dealer Manager Warrants	March 23, 2026	$	2.50			-		148,125		-			-		148,125		-		-		-		148,125
							2,582,697									4,531,447								4,531,447

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (1)
Outstanding at December 31, 2021		1,087,820		$	4.08		3.9	$	—
Granted		390,000		$	0.82		4.9	$	—
Exercised		—		$	—		—	$	—
Forfeited		(500	)	$	—		—	$	—
Expired		—		$	—		—	$	—
Outstanding at March 31, 2022		1,477,320		$	3.23		3.2	$	—
Exercisable at March 31, 2022		795,019		$	4.79		2.0	$	—

	Number of Units			Weighted Average Grant-Date Fair Value Per Unit
Outstanding as of December 31, 2021		667		$	1.80
Granted		5,000		$	0.76
Vested		(5,000	)	$	0.76
Forfeited		—		$	—
Outstanding as of March 31, 2022		667		$	1.80

Years Ending December 31,	Finance Leases		Operating Lease
2022		14		146
2023		-		198
2024		-		186
Total minimum lease payments	$	14	$	530

	Finance Leases
Less: amounts representing interest (ranging from 11.43% to 14.68%)	$	-
Present value of minimum lease payments		4
Less: current installments under finance lease obligations		4
Total long-term portion	$	0

	●	employee related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research and development functions, including that portion of manufacturing not included in cost of goods sold;

	●	~~expenses incurred in connection with the development of our product candidates including related regulatory and production expenses: and~~

	●	~~facilities, depreciation, unbilled customer freight charges and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies.~~

	Three Months Ended March 31,				Increase
	2022		2021		(Decrease)
	(in thousands)
Direct research and development expenses:
Personnel related (including stock-based compensation)	$	241	$	232	$	9
Professional fees		90		76		14
Depreciation		46		73		(27	)
Freight		26		11		15
Facility-related		26		20		6
Other		87		43		44
Total research and development expenses	$	516	$	455	$	61

	Three Months Ended March 31				Increase
	2022		2021		(Decrease)
	(in thousands)
Direct selling, general and administrative expenses:
Personnel related (including stock-based compensation)	$	1,070	$	858	$	212
Professional fees		436		221		215
Facility-related		39		42		(3	)
Office supplies/IT		83		69		14
Insurance		165		117		48
Other		114		115		(1	)
Total selling, general and administrative expenses	$	1,907	$	1,422	$	485

	● •manage the infrastructure for sales, marketing and distribution of ContraPest and any other product candidates for which we may receive regulatory approval; •	~~work to maximize market acceptance for, and generate sales of, our products, including by conducting field demonstrations at potential lead customers;~~

	●	~~explore strategic partnerships to enable us to penetrate additional target markets and geographical locations;~~

	●	~~maintain and protect our intellectual property portfolio; and~~

	●	~~add operational, financial and management information systems and personnel, including personnel to support our product development and commercialization efforts and operations as a public company.~~

	●	~~Expected term~~. The expected term represents the period that the stock-based awards are expected to be outstanding. Our historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore, we estimate the expected term by using the simplified method, which calculates the expected term as the average of the time-to-vesting and the contractual life of the options.

	●	~~Expected volatility~~. Expected volatility is derived from the average historical volatilities of publicly traded companies within our industry that we consider to be comparable to our business over a period approximately equal to the expected term. We intend to continue to consistently apply this process using the same or similar public companies unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

	●	~~Risk-free interest rate~~~~. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term.~~

	●	~~Expected dividend~~~~. The expected dividend is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on our common stock.~~

	●	~~Expected forfeitures~~. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period that the estimates are revised.


			SENESTECH, INC.
			(Registrant)

~~Dated:~~Date: May ~~13, 2022~~			~~By:~~	~~/s/ Kenneth Siegel~~
		~~Kenneth Siegel~~
		~~Chief Executive Officer~~

~~Dated: May 13, 2022~~11, 2023	By:			/s/ Thomas C. Chesterman
					Thomas C. Chesterman
					Chief Financial Officer, Treasurer and ~~Treasurer~~Secretary
					(duly authorized officer and principal financial officer)