UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

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

For the quarterly period ended September 30, ~~2017~~2021

☐

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

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

For the transition period from ~~_________~~________ to ~~_________~~________

Commission File Number: 001-37941

SENESTECH, INC.

(Exact name of registrant as specified in its charter)

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

~~3140~~23460 N. ~~Caden Court,~~19^th Avenue, Suite 1 ~~Flagstaff,~~110 Phoenix, AZ		~~86004~~85027
(Address of principal executive offices)		(Zip Code)

(928) 779-4143

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value		SNES		The NASDAQ Stock Market LLC (NASDAQ Capital Market)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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.

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐☒	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☒
Emerging growth company	☒

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 ☐ No ☒

The number of shares of common stock outstanding as of November ~~7, 2017: 10,389,497~~12, 2021: 12,207,283

SENESTECH, INC.

FORM 10-Q

For the Quarterly Period Ended September 30, ~~2017~~2021

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SENESTECH, INC.

CONDENSED BALANCE SHEETS

(In thousands, except shares and per share data)

September 30,
2017 December 31,
2016
ASSETS (Unaudited)

Current assets:
Cash $ 699 $ 11,826
Investment in securities held to maturity 2,949 —
Accounts receivable 7 10
Prepaid expenses 172 337
Inventory 394 57
Deposits 17 9
Total current assets 4,238 12,239

Property and equipment, net 1,559 631
Total assets $ 5,797 $ 12,870

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Short-term debt $ 174 $ 45
Accounts payable 175 351
Accrued contract cancellation settlement — 1,000
Accrued expenses 1,074 371
Notes payable, related parties 18 30
Total current liabilities 1,441 1,797

Notes payable, related parties — 6
Long-term debt, net 637 138
Common stock warrant liability 4 69
Deferred rent 45 33
Total liabilities 2,127 2,043

Commitments and contingencies (See note 15) — —

Stockholders’ equity:

Common stock, $0.001 par value, 100,000,000 shares authorized, 10,363,189 and 10,157,292 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 10 10
Additional paid-in capital 74,946 72,069
Stock subscribed, but not issued, consisting of -0- and 4,750 shares at September 30, 2017 and December 31, 2016, respectively — 59
Accumulated deficit (71,286 ) (61,311 )
Total stockholders’ equity 3,670 10,827

Total liabilities and stockholders’ equity $ 5,797 $ 12,870

	September 30,			December 31,
	2021			2020
ASSETS	(Unaudited)

Current assets:
Cash	$	11,083		$	3,643
Accounts receivable trade, net		79			25
Prepaid expenses		581			178
Inventory		1,007			945
Deposits		22			28
Total current assets		12,772			4,819

Right to use asset-operating leases		551			665
Property and equipment, net		397			538
Total assets	$	13,720		$	6,022

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Short-term debt	$	49		$	98
Accounts payable		267			404
Accrued expenses		550			292
Total current liabilities		866			794

Long-term debt, net		-			673
Operating lease liability		562			671
Total liabilities		1,428			2,138

Commitments and contingencies (See note 12)		-			-

Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 12,191,112 and 5,099,512 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		12			5
Additional paid-in capital		122,294			108,119
Accumulated deficit		(110,014	)		(104,240	)
Total stockholders’ equity		12,292			3,884

Total liabilities and stockholders’ equity	$	13,720		$	6,022

~~See~~The accompanying notes toare an integral part of these financial statements.

SENESTECH, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except shares and per share data)

(Unaudited)

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017 2016 2017 2016
Revenue:
License revenue $ — $ 131 $ — $ 261
Product Sales 17 — 34 —
Total revenue 17 131 34 261
Cost of goods sold 11 — 27 —
Gross profit 6 131 7 261

Operating expenses:
Research and development 721 829 2,517 1,964
General and administrative 2,235 1,932 7,506 5,259
Total operating expenses 2,956 2,761 10,023 7,223

Net operating loss (2,950 ) (2,630 ) (10,016 ) (6,962 )

Other income (expense):
Interest income 9 — 20 —
Interest expense (33 ) (6 ) (54 ) (49 )
Interest expense, related parties — (9 ) (1 ) (43 )
Loss on extinguishment of unsecured promissory note — (59 ) — (171 )
Other income (expense) 37 — 76 51
Total other income (expense) 13 (74 ) 41 (212 )

Net loss (2,937 ) (2,704 ) (9,975 ) (7,174 )

Series A convertible preferred stock dividends — (30 ) — (90 )

Net loss and comprehensive loss $ (2,937 ) $ (2,734 ) $ (9,975 ) $ (7,264 )

Weighted average common shares outstanding - basic and fully diluted 10,334,211 7,306,234 10,234,211 5,774,738

Net loss per common share - basic and fully diluted $ (0.28 ) $ (0.37 ) $ (0.97 ) $ (1.26 )

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2021			2020			2021			2020

Revenue:
Grant revenue	$	24		$	-		$	24		$	-
Sales		159			77			407			185
Total revenue		183			77			431			185

Cost of sales		106			41			275			106
Gross profit		77			36			156			79

Operating expenses:
Research and development		514			380			1,424			902
Selling, general and administrative		1,816			1,568			5,173			5,040
Total operating expenses		2,330			1,948			6,597			5,942

Net operating loss		(2,253	)		(1,912	)		(6,441	)		(5,863	)

Other income (expense):
Interest income		2			-			5			2
Interest expense		(2	)		(7	)		(10	)		(22	)
Payroll Protection Program loan forgiveness		-			-			650			-
Other income		-			-			22			18
Total other income		-			(7	)		667			(2	)

Net loss and comprehensive loss		(2,253	)		(1,919	)		(5,774	)		(5,865	)
Deemed dividend-warrant price protection-revaluation adjustment		-			-			-			414
Net loss attributable to common shareholders	$	(2,253	)	$	(1,919	)	$	(5,774	)	$	(6,279	)

Weighted average common shares outstanding - basic and fully diluted		12,190,257			3,398,832			10,850,197			2,593,288

Net loss per common share - basic and fully diluted	$	(0.18	)	$	(0.56	)	$	(0.53	)	$	(2.42	)

~~See~~The accompanying notes toare an integral part of these financial statements.

SENESTECH, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except shares and per share data)
(Unaudited)

For The Three Months Ended September 30, 2020 and 2021

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

Balance, June 30, 2020		3,398,832	$	3	$	105,117		$	(100,227	)	$	4,893

Stock based compensation		-		-		162			-			162
Offering expenses for June, 2020 share offering		-		-		(2	)		-			(2	)
Net loss for the three months ended September 30, 2020		-		-		-			(1,919	)		(1,919	)

Balance, September 30, 2020		3,398,832	$	3	$	105,277		$	(102,146	)	$	3,134

Balance, June 30, 2021		12,185,496	$	12	$	122,073		$	(107,761	)	$	14,324

Stock based compensation		-		-	$	213			-			213
Issuance of common stock upon exercise of warrants		5,616		-		8			-			8
Net loss for the three months ended September 30, 2021		-		-		-			(2,253	)		(2,253	)

Balance, September 30, 2021		12,191,112	$	12	$	122,294		$	(110,014	)	$	12,292

For The Nine Months Ended September 30, 2020 and 2021

Balance, December 31, 2019		1,414,671	$	1	$	98,433		$	(95,867	)	$	2,567

Stock based compensation		-		-		453			-			453
Issuance of common stock, sold for cash, net		1,928,180		2		5,739			-			5,741
Issuance of common stock upon exercise of warrants		51,414		-		238			-			238
Issuance costs of common stock for services		4,543		-		-			-			-
Issuance of common stock for fractional shares-20-1 reverse split		24		-		-			-			-
Warrant antidilution price protection adjustment		-		-		414			-			414
Net loss for the nine months ended September 30, 2020		-		-		-			(6,279	)		(6,279	)

Balance, September 30, 2020		3,398,832	$	3	$	105,277		$	(102,146	)	$	3,134

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

Stock based compensation		-		-		550			-			550
Issuance costs of common stock for service		20,951		-		-			-
Issuance of common stock, sold for cash, net		6,163,854		6		12,415			-			12,421
Issuance of common stock upon exercise of warrants		906,795		1		1,227			-			1,228
Payments for employee withholding taxes related to share based awards		-		-		(17	)		-			(17	)
Net loss for the nine months ended September 30, 2021		-		-		-			(5,774	)		(5,774	)

Balance, September 30, 2021		12,191,112	$	12	$	122,294		$	(110,014	)	$	12,292

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

SENESTECH, INC.
CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

For the Nine Months
Ended September 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (9,975 ) $ (7,174 )
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on investments held to maturity (20 ) —
Amortization of discounts on investments held to maturity 11 —
Depreciation and amortization 273 143
Stock-based compensation 2,818 2,406
Non-cash charge for settlement of dispute — 300
Amortization of debt discount — 27
Gain on remeasurement of common stock warrant liability (65 ) (51 )
Loss on extinguishment of unsecured promissory note — 171
(Increase) decrease in current assets:
Accounts receivable 3 (4 )
Prepaid expenses 165 (17 )
Inventory (337 ) —
Deposits (8 ) —
Increase (decrease) in current liabilities:
Accounts payable (176 ) 77
Accrued contract cancellation settlement (1,000 ) —
Accrued expenses 703 61
Deferred rent 12 (4 )
Deferred revenues — (175 )
Net cash used in operating activities (7,596 ) (4,240 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities held to maturity (2,940 ) —
Purchase of property and equipment (885 ) (54 )
Net cash used in investing activities (3,825 ) (54 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of series B convertible preferred stock — 896
Proceeds from the issuance of common stock — 6,199
Proceeds from the issuance of convertible notes payable — 326
Repayments of convertible notes payable — (810 )
Proceeds from the issuance of notes payable 437 —
Repayments of notes payable (48 ) (24 )
Repayments of notes payable, related parties (18 ) (721 )
Repayments of capital lease obligations (77 ) (16 )
Payment of deferred offering costs — (801 )
Proceeds from exercise of stock options and warrants — 449
Net cash provided by financing activities 294 5,498

NET CHANGE IN CASH (11,127 ) 1,204
CASH AT BEGINNING OF PERIOD 11,826 141
CASH AT END OF PERIOD $ 699 $ 1,345

SUPPLEMENTAL INFORMATION:
Interest paid $ 55 $ 23
Income taxes paid $ — $ —

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchases of equipment under capital lease obligations $ 316 $ 157
Original issue discount $ — $ 147
Debt discount on convertible notes $ — $ 9
Related party convertible note extinguished for settlement payable $ — $ 404
Contributed capital, debt forgiveness by related parties $ — $ 2,003
Issuance of series B convertible preferred stock in connection with conversion of convertible notes and $ — $ 16
Issuance of shares of common stock upon conversion of Series B convertible preferred stock $ — $ 260
Dividends $ — $ 90

	For the Nine Months Ended
	September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,774	)	$	(5,865	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		229			219
Stock-based compensation		550			453
Paycheck Protection Program loan forgiveness		(646	)		-
Paycheck Protection Program loan accrued interest forgiveness		(4	)		-
Gain on sale of equipment		(1	)		(18	)
(Increase) decrease in current assets:
Accounts receivable - trade		(54	)		(4	)
Accounts receivable - other		-			123
Other assets		11			2
Prepaid expenses		(403	)		(24	)
Inventory		(62	)		78
Increase (decrease) in current liabilities:
Accounts payable		(137	)		179
Accrued expenses		258			(639	)
Net cash used in operating activities		(6,033	)		(5,496	)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash received on sale of property and equipment		1			44
Purchase of property and equipment		(84	)		(48	)
Net cash provided by (used in) investing activities		(83	)		(4	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock, net		12,421			5,741
Proceeds from the issuance of notes payable		-			646
Repayments of notes payable		(36	)		(44	)
Repayments of finance lease obligations		(40	)		(62	)
Proceeds from the exercise of warrants		1,228			-
Payment of employee withholding taxes related to share based awards		(17	)		-
Net cash provided by financing activities		13,556			6,281

NET CHANGE IN CASH		7,440			781
CASH AT BEGINNING OF PERIOD		3,643			1,936
CASH AT END OF PERIOD	$	11,083		$	2,717

SUPPLEMENTAL INFORMATION:
Interest paid	$	9		$	22
Income taxes paid	$	-		$	-

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Forgiveness of accrual in warrant exercise	$	-		$	238
Deemed dividend	$	-		$	414

~~See~~The accompanying notes toare an integral part of these financial statements.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

Note 1 - Organization and Description of Business

SenesTech, Inc. (referred to in this report as “SenesTech,” the “Company,” “we” or “us”) has developed and is commercializing a global, proprietary technology for managing animal pest populations, initially rat populations, through fertility control.

Although there are myriad tools available to control rat populations, most rely on some form of lethal method to achieve effectiveness. Each of these solutions is inherently limited by rat species’ resilience and survival mechanisms as well as their extraordinary rate of reproduction. ContraPest®, our initial product, is unique in the pest control industry in attacking the reproductive systems of both male and female rats, which our field data shows results in a sustained reduction of the rat population.

Rats have plagued humanity throughout history. They pose significant threats to the environment and to the health and food security of many communities. In addition, rodents cause extensive product loss and damage through consumption and contamination. Rats also cause significant damage to critical infrastructure by burrowing beneath foundations and gnawing on electrical wiring, insulation, fire proofing systems, electronics and equipment.

The most prevalent solution to rat infestations is the use of increasingly powerful rodenticides. Although these solutions provide short term results, there are growing concerns about secondary exposure and bioaccumulation of rodenticides in the environment, as well as concerns about rodenticides that have no antidotes. The pest management industry and Pest Management Professionals (“PMPs”) are being asked for new solutions that are both effective and less toxic. Our goal is to provide customers with not only a solution to combat their most difficult rat problems, but also offer an effective, non-lethal option to serve customers that are looking to decrease or remove the amount of rodenticide used in their pest control programs.

ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide (“VCD”) and triptolide. ContraPest limits reproduction of male and female rats beginning with the first breeding cycle following consumption. ContraPest is being marketed for use in controlling Norway and roof rat populations.

SenesTech began the registration process with the United States Environmental Protection Agency (the ~~“Company”~~“EPA”) ~~was~~for ContraPest on August 23, 2015. On August 2, 2016, the EPA granted an unconditional registration for ContraPest as a Restricted Use Product (“RUP”), due to the need for applicator expertise for deployment. On October 18, 2018, the EPA approved the removal of the RUP designation. We believe ContraPest is the first and only non-lethal, fertility control product approved by the EPA for the management of rodent populations.

In addition to the EPA registration of ContraPest in the United States, ContraPest must obtain registration from the various state regulatory agencies prior to selling in each state. We have received registration for ContraPest in all 50 states and the District of Columbia. The District of Columbia and 48 states have also approved the removal of the RUP designation.

We expect to continue to pursue regulatory approvals and amendments to the existing U.S. registration for ContraPest to broaden the marketability and use of ContraPest, and if ContraPest begins to generate sufficient revenue, regulatory approvals for additional jurisdictions beyond the United States. In certain cases, our EPA and state registrations require completion of additional testing and certifications even though we have received approval for the product or its labelling. We continue to seek to comply with these requirements.

The Company also continues to research and develop enhancements to ContraPest that align with our target verticals and other potential fertility control options for additional species.

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

Note 1 - Organization and Description of Business – (continued)

We were formed in July 2004 and incorporated in the state of Nevada. The Company subsequently reincorporated in the state of Delaware in November 2015. ~~The Company has its~~Our corporate headquarters and manufacturing site are in ~~Flagstaff,~~Phoenix, Arizona. On December 8, 2016, we went public and are currently traded on Nasdaq under the symbol SNES.

On February 4, 2020, we amended our amended and restated certificate of incorporation to effect a 1-for-20 reverse split of our issued and outstanding shares of common stock. The Company has developed proprietary technology for managing animal pest populations through fertility control. The Company believes that its innovative non-lethal approach, targeting reproduction, is more humane, less harmfulaccompanying condensed financial statements and notes thereto give retrospective effect to the ~~environment,~~reverse stock split for all periods presented. All issued and ~~more effective~~outstanding common stock, options and warrants exercisable for common stock, restricted stock units, preferred stock conversions to common stock and per share amounts contained in ~~providing~~our condensed financial statements have been retrospectively adjusted.

Going Concern

Our financial statements as of September 30, 2021, December 31, 2020 and September 30, 2020 have been prepared under the assumption that we will continue as a ~~sustainable solution~~going concern. Our independent registered public accounting firm included in its opinion for the years ended December 31, 2020 and 2019 an explanatory paragraph referring to ~~pest infestations than traditional lethal pest management methods. Its first fertility control product candidate, ContraPest, is marketed for use~~our net loss from operations and net capital deficiency and expressing substantial doubt in controlling the rat population. The innovative compound is consumed by rats and leaves them non-reproductive without other observable side effects. The U.S. Environmental Protection Agency (“EPA”) granted registration approval for ContraPest effective August 2, 2016. The Company plansour ability to continue ~~to commercialize and distribute ContraPest by leveraging new and existing third-party relationships with manufacturing, marketing and distribution partners~~as a going concern without additional capital becoming available. If we encounter continued issues or delays in the ~~U.S.~~commercialization of ContraPest, our prior losses and ~~internationally.~~expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern. There are no assurances that such financing, if necessary, will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through additional financings, sales of our products, licensing fees, royalty payments or from other sources or transactions, we will exhaust our resources and will be unable to continue operations.

~~Potential Need for Additional~~Liquidity and Capital Resources

InSince our inception, we have sustained significant operating losses in the course of ~~its~~our research and development and commercialization activities ~~the Company has sustained operating losses since its inception~~ and ~~expects~~expect such losses to continue for the near future. ~~The Company’s~~We have generated limited revenue to date from product sales, research grants and licensing fees received under our former license agreement. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock. See Note 10 - Stockholders’ Deficit for a description of our public equity sales.

We have also raised capital through debt financing, consisting primarily of convertible notes and government loan programs, and, to a lesser extent, payments received in connection with product sales, grants and licensing fees.

Through September 30, 2021, we received net proceeds of $89.3 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of $1.4 million in net product sales and grants. As of September 30, 2021, we had an accumulated deficit of $110.0 million and cash and cash equivalents of $11.1 million.

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

Note 1 - Organization and Description of Business – (continued)

Our ultimate success depends upon the outcome of a combination of factors, including: (i) ~~the success of its research and development; (ii) ongoing regulatory approval and~~successful commercialization of ContraPest and ~~its other~~maintaining and obtaining regulatory approval of our products and product candidates; ~~(iii)~~(ii) market acceptance, ~~and~~ commercial viability and profitability of ContraPest and other ~~products if the Company obtains the necessary regulatory approvals; (iv)~~products; (iii) the ability to market ~~its~~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 ~~its~~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 September 30, 2021, in combination with anticipated revenue and additional sales of our equity securities, will be sufficient to fund our current operations for at least the ~~timely~~next 12 months. We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful ~~completion~~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. The Company has funded its operations~~financing before that time. If we need more financing, including within the next 12 months, and we are unable to ~~date~~raise necessary capital through the sale of ~~convertible preferred stock~~our securities, we may be required to take other measures that could impair our ability to be successful and ~~common stock, including an initial public offering of 1,875,000 shares of its common stock on December 8, 2016, debt financing, consisting primarily of convertible notes and, to~~operate as a lesser extent, payments received in connection with research grants and licensing fees. As of September 30, 2017, the Company had cash and cash equivalents and highly liquid investments of $3,648. However, the Company is likely togoing concern. In any event, we may require additional capital in order to fund ~~its~~our operating losses and research and development activities ~~by issuing additional~~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 ~~and equity instruments until such time as the Company is profitable.~~financing. If such equity or debt financing is not available at adequate levels ~~the Company will~~or on acceptable terms, we may need to ~~reevaluate its plans.~~delay, limit or terminate commercialization and development efforts or discontinue operations.

~~All amounts shown in these financial statements are in thousands, except percentages and per share and share amounts. Per share and share amounts reflect post-reverse split values.~~

Basis of Presentation

The accompanying unaudited condensed financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of September 30, ~~2017,~~2021, the Company’s operating results for the three and nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, and the Company’s cash flows for the nine months ended September 30, ~~2017~~2021 and ~~2016.~~2020. The accompanying financial information as of December 31, ~~2016~~2020 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2016.~~

2020, filed with the SEC on March 29, 2021. All amounts shown in these financial statements and accompanying notes are in thousands, except percentages and per share and share amounts.

~~SENESTECH, INC.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

Note 2 - Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States of America (“~~U.S. ~~GAAP”)~~GAAP requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities, ~~and~~ disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The significant estimates in the Company’s financial statements include the valuation of preferred stock, if issued, common stock and related warrants, and other stock-based awards. Actual results could differ from such estimates.

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

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

Reclassifications

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.

~~Deferred Offering Costs~~

Deferred offering costs consisted primarily of legal, accounting and other direct and incremental fees and costs related to the Company’s initial public offering on December 8, 2016. Deferred offering costs of $2,234 were offset against the proceeds received from the initial public offering in December 2016.There were no deferred offering costs at September 30, 2017.

Cash and Cash Equivalents

The Company considers money market fund investments to be cash equivalents. The Company had cash equivalents in the form of ~~$70~~money market fund investment of $10,493 and ~~$-0-~~$1,500 at September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively, included in cash as reported.

~~Investments in Securities Held to Maturity~~Accounts Receivable-Trade

The Company uses cash holdings to purchase highly liquid, short term, investment grade securities diversified among security types, industries and issuers. All of the Company’s investment securities are measured at fair value. The Company’s investment securities primarily consist of municipal debt securities, corporate bonds, U.S. agency securities and commercial paper and highly-liquid money market funds.

Accounts ~~Receivable~~

~~Accounts receivable~~receivable-trade consist primarily of ~~trade receivables.~~receivables from customers. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. The allowance for doubtful trade receivables was ~~$3 and $-0- as of~~$0 at September 30, ~~2017~~2021 and December 31, ~~2016, respectively.~~2020.

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. AsRaw materials are stocked to reduce the risk of ~~September 30, 2017~~impact on manufacturing for potential supply interruptions due to the COVID-19 pandemic or other supply chain interruptions and ~~December 31, 2016, the Company had inventories of $394 and $57, respectively.~~long lead times on certain ingredients.

~~SENESTECH, INC.~~Components of inventory are:

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

	September 30,			December 31,
	2021			2020
Raw materials	$	941		$	950
Work in progress		4			24
Finished goods		99			94
Total inventory		1,044			1,068
Less:
Reserve for obsolete and revaluation		(37	)		(123	)
Total net inventory	$	1,007		$	945

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

Prepaid Expenses

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

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

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

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Equipment held under ~~capital~~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 ~~capital~~finance leases is amortized over the shorter of the lease term or estimated useful life of the asset. The Company incurs repair and maintenance costs on its major ~~equipment. Repair and maintenance costs~~equipment, which are expensed as incurred.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require long-lived assets or asset groups to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, such as discounted cash flow models and the use of ~~third- party~~third-party independent appraisals. The Company has not recorded an impairment of long-lived assets since its inception.

Revenue Recognition

~~The~~Effective January 1, 2018, the Company adopted Accounting Standards Codification 606 — Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies ~~when~~by applying the following steps: (1) ~~persuasive evidence of an arrangement exists;~~identify the contract with a customer; (2) identify the performance ~~of service has been rendered~~obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to ~~a customer or delivery has occurred; (3)~~each performance obligation in the ~~amount of fee to be paid by a customer~~contract; and (5) recognize revenue when each performance obligation is ~~fixed and determinable; and (4) the collectability of the fee is reasonably assured.~~satisfied.

~~SENESTECH, INC.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

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

The Company has generated revenue from a license agreement with a strategic partner, pursuant to which the Company had granted to such partner the exclusive right to manufacture and distribute its product, ContraPest, once the required regulatory approvals were received. This licensing agreement was subsequently terminated on January 23, 2017. The terms of the licensing agreement contained multiple elements or deliverables, as discussed below. Management evaluates whether the arrangement involving the multiple deliverables contains more than one unit of accounting. To determine the units of accounting under a multiple-element arrangement, management evaluates certain separation criteria, including whether the deliverables have stand-alone value, based on the relevant facts and circumstances of the arrangement.

The Company determined that the license granted pursuant to the license agreement did not have stand-alone value and, therefore, the nonrefundable, upfront license fee payments received by the Company are recognized on a straight-line basis over the estimated related performance period (i.e. from the effective date of the agreement through the estimated completion date of the Company’s substantive performance obligations).

In accordance with the terms of the license agreement, the Company was also to receive a future fixed amount of contingent milestone payments (i.e. post-regulatory approval license fees) and contingent sales-based royalties to be received upon the achievement of certain milestone events. The milestone events under the agreement include regulatory approval, patent issuance or alternative intellectual property coverage, and sales-based events. The Company did not earn or receive any of the potential contingent milestone payments, as the milestone events to receive such post-approval license fees and sales-based royalties were not achieved. The Company recognizes revenue ~~that~~when product is ~~contingent upon the achievement~~shipped at a fixed selling price on payment terms of ~~a substantive milestone event in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable~~30 to the Company for such milestone has all of the following characteristics: (i) there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved; (ii) the event can only be achieved based in whole or part on either the Company’s performance or a specific outcome resulting120 days from the Company’s performance; and (iii) if achieved, the event would result in additional payments being due to the Company. As the potential contingent consideration was to be received only upon the achievement of milestone events that are considered substantive, the Company would only recognize such revenue in the period the milestone is achieved and the milestone payments became due and collectible. In addition, the Company accounts for sales-based royalties as revenue upon achievement of certain sales milestones.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue on the balance sheet. Amounts expected to be recognized as revenue in the next twelve months following the balance sheet date are classified as a current liability.

invoicing. The Company recognizes other revenue earned from pilot studies, consulting and implementation services upon the performance of specific services under the respective service contract.

~~For the nine months ended September 30, 2017, the~~The Company ~~generated~~derives revenue primarily from commercial sales of products, net ~~revenues~~ of ~~$34.~~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, ~~and~~ costs incurred related to conducting scientific trials and field studies, ~~and~~ regulatory compliance ~~costs. Also, included in research~~costs, as well as manufacturing costs associated with process improvement and other research. Research and development expenses isinclude an allocation of facilities related costs, including depreciation of ~~research and development~~ equipment.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

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

Stock-based Compensation

~~Employee stock-based~~Stock-based awards, consisting of stock options and restricted stock units ~~and stock options~~ expected to be settled in shares of the Company’s common stock, are recorded as equity awards. The grant date fair value of these awards is measured using

the Black-Scholes option pricing ~~model.~~model for stock options and grant date market value for restricted stock units. The Company expenses the grant date fair value of its ~~stock options~~stock-based awards on a straight-line basis over their respective vesting periods. ~~Performance-based awards are expensed over the performance period when the related performance goals are probable of being achieved.~~

For equity instruments issued to non-employees, the stock-based consideration is measured using a fair value method. The measurement of the stock-based compensation is subject to re-measurement as the underlying equity instruments vest.

The stock-based compensation expense recorded for the three and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020, is as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016

Research and development $ 85 $ 135 $ 269 $ 309
General and administrative 861 798 2,549 2,097
Total stock-based compensation expense $ 946 $ 933 $ 2,818 $ 2,406

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Research and development	$	1	$	2	$	2	$	7
Selling, general and administrative		213		160		548		446
Total stock-based compensation expense	$	214	$	162	$	550	$	453

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

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities and net operating loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. These deferred tax assets are subject to periodic assessments as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recorded which would increase the provision for income taxes. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. The Company currently maintains a full valuation allowance against its deferred tax assets.

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. Only those benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized. Based on its evaluation, the Company has concluded there are no significant uncertain tax positions requiring recognition in its financial statements.

The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There are no uncertain tax positions as of September 30, 2021 or December 31, 2020 and as such, no interest or penalties were recorded in income tax expense.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

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

Comprehensive Loss

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

Loss Per Share Attributable to Common Stockholders

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, the Series A convertible preferred stock (prior to its conversion into common stock), Series B convertible preferred stock (prior to its conversion into common stock), convertible promissory notes (prior to their conversion), common stock purchase warrants, and common stock options are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share attributable to common stockholders because their effect would be anti-dilutive given the net loss reported for the three and nine months ended September 30, ~~2017~~2021 and ~~2016.~~2020. Therefore, basic and diluted loss per share attributable to common stockholders ~~was~~are the same for ~~all periods~~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):

September 30,
2017 2016
Series A convertible preferred stock — 400,000
Series B convertible preferred stock — 483,609
Common stock purchase warrants 829,285 750,185
Restricted stock units 344,982 —
Common stock options 1,558,800 1,321,300
Total 2,733,067 2,955,094

	September 30,
	2021		2020
Common stock purchase warrants		4,547,618		2,504,597
Restricted stock units		667		1,334
Common stock options		1,068,736		427,570
Total		5,617,021		2,933,501

~~SENESTECH, INC.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

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

~~In May 2017, the FASB issued Accounting Standard Update (“ASU”)No.~~~~2017-9,~~~~Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting~~ ~~(“ASU2017-9”), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.Per ASU 2017-9, a~~n entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9.~~ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017.~~Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of~~ASU 2017-9~~ ~~is not expected to have a material impact on the Company’s financial statements or related disclosures.~~

~~In August 2016, the FASB issued ASU No. 2016-15,~~~~Statement of Cash Flows (Topic230): Classification of Certain Cash Receipts and Cash Payments~~. The amendments in this ASU provide guidance on the following eight specific cash flow classification issues: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. Current GAAP does not include specific guidance on these eight cash flow classification issues. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of ASU No. 2016-15 is not expected to have a material impact on the Company’s financial statements or related disclosures.

~~In March 2016, the FASB issued ASU No. 2016-09,~~~~Improvements to Employee Share-Based Payment Accounting~~(“ASU 2016-09”). This standard involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods for public business entities. The method of adoption is dependent on the specific aspect of accounting addressed in this new guidance. Early adoption was permitted in any interim or annual period. ASU 2016-09 was adopted by the Company and did not have a material impact on the Company’s financial statements or related disclosures.

~~In February 2016, the FASB issued ASU No. 2016-02,~~~~Leases~~(“ASU 2016-02”). This standard amends various aspects of existing accounting guidance for leases, including the recognition of a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This standard also introduces new disclosure requirements for leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early adoption is permitted and the new standard must be adopted using a modified retrospective approach, and provides for certain practical expedients. The Company is evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.Standard:

~~In January 2016, the FASB issued ASU No. 2016-01,~~~~Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities~~(“ASU 2016-01”). This standard affects the accounting for equity instruments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 is effective in the first quarter of 2019. The Company is evaluating the impact of the adoption of ASU 2016-01 on its financial statements and related disclosures.

~~In November 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2015-17,~~~~Balance Sheet Classification of Deferred Taxes~~, which eliminates the guidance in Topic 740, Income Taxes, that required an entity to separate deferred tax assets and liabilities between current and noncurrent amounts in a classified balance sheet. The amendments require that all deferred tax assets and liabilities of the same jurisdiction or a tax filing group, as well as any related valuation allowance, be offset and presented as a single noncurrent amount in a classified balance sheet. The standard became effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and may be applied on either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company has ~~adopted this standard retrospectively for~~considered all ~~periods presented. The adoption of this standard did not have a material impact on the Company’s financial statements.~~

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. Only those benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized. Based on its evaluation, the Companyrecently issued accounting pronouncements and has concluded that there are no ~~significant uncertain tax positions requiring recognition in its financial statements.~~

The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There are no uncertain tax positions as of September 30, 2017 or December 31, 2016 and as such, no interest or penalties were recorded in income tax expense.

~~In August 2014, the FASB~~recently issued ~~ASU No. 2014-15,~~~~Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern~~~~(“ASU 2014-15”). This standard requires management to perform an evaluation in each interim and annual reporting period whether there are conditions or events, considered in the aggregate,~~accounting pronouncements that raise substantial doubt about the entity’s ability to continue as a going concern within one year of the date the financial statements are issued. If such conditions or events exist, ASU 2014-14 also requires certain disclosures of management’s plans and evaluation, as well as the plans, if any, that are intended to mitigate those conditions or events that will alleviate the substantial doubt. ASU No. 2014- 15 is effective for the annual period ending after December 15, 2016 and for annual and interim periods thereafter. Early adoption was permitted for annual or interim reporting periods for which the financial statements have not been previously issued. ASU 2014-15 was adopted by the Company and did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

~~In May 2014 the FASB issued ASU No. 2014-09,~~~~Revenue from Contracts with Customers.~~ Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Adoption of the new standard is effective for reporting periods beginning after December 15, 2017. We plan to use the modified retrospective method of adoption and will adopt the standard as of January 1, 2018, the beginning of our next fiscal year.. We have completed an initial evaluation of the potential impact from adopting the new standard, including a detailed review of performance obligations for all material revenue streams. Based on this initial evaluation, we ~~do not expect adoption will~~believe may have a material impact on our unaudited condensed interim financial position, results of operations, or cash flows. Related disclosures will be expanded in line with the requirements of the standard. We will continue our evaluation until our adoption of the new standard.statements.

Note 3 - Fair Value Measurements

The ~~carrying amounts~~Company issued common stock warrants to purchase shares of ~~certain~~common stock in June of 2015 (see Note 9 - Common Stock Warrants and Common Stock Warrant Liability) that expired in June of 2020. These warrants contained a cash settlement provision that resulted in a common stock warrant liability that was revalued at the ~~Company’s financial instruments, including cash equivalents, accounts receivable and accounts payable approximate their fair values due to their short maturities. Assets and liabilities recorded~~end of each reporting period.

We valued these warrant derivatives at fair value on a recurring basis in the balance sheets, as well as assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values.value. The accounting guidance for fair value, ~~provides~~among other things, establishes a consistent framework for measuring fair value and ~~requires certain disclosures about how~~expands disclosure for each major asset and liability category measured at fair value ~~is determined.~~on either a recurring or nonrecurring basis. Fair value is defined as the price that would be received ~~upon the sale of~~to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the ~~measurement~~reporting date. The ~~accounting guidance also establishes~~framework for measuring fair value consists of a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs

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

Note 3 - Fair Value Measurements – (continued)

to valuation techniques is briefly summarized as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at

the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

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

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

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

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

The Company’s ~~cash equivalents, which include money market funds,~~common stock warrant liabilities are classified as Level 13 because they are valued using quoted market prices. The Company’s marketable securities consist of held to maturity securities and are generally classified as Level 2 because their value is based on valuations using significant inputs derived from or corroborated by observable market data.

~~In certain cases where~~ there is limited activity or less transparency around the inputs to ~~valuation, securities are classified as Level 3. Level 3 liabilities consist of common stock warrant liability.~~

~~SENESTECH, INC.~~valuation.

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

~~Note 3 - Fair Value Measurements – (continued)~~

~~Items Measured at Fair Value on a Recurring Basis~~

~~The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):~~

September 30, 2017
Level 1 Level 2 Level 3 Total
Financial Assets:
Money market funds $ 70 $ — $ — $ 70
Corporate fixed income debt securities — 2,949 — 2,949
Total $ 70 $ 2,949 $ — $ 3,019
Financial Liabilities:
Common stock warrant liability⁽¹⁾ $ — $ — $ 4 $ 4
Total $ — $ — $ 4 $ 4

December 31, 2016
Level 1 Level 2 Level 3 Total
Financial Assets:
None $ — $ — $ — $ —

Financial Liabilities:
Common stock warrant liability⁽¹⁾ $ — $ — $ 69 $ 69
Total $ — $ — $ 69 $ 69

⁽¹⁾ The change in the fair value of the common stock warrant and convertible notes payable for the three and nine months ended September 30, 2017 was recorded as a decrease to other income (expense) and interest expense of $30 and $69, respectively, in the statements of operations and comprehensive loss.

Financial Instruments Not Carried at Fair Value

The carrying amounts of the Company’s financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their short maturities. The estimated fair value of the convertible notes and other notes, not recorded at fair value, are recorded at cost or amortized cost which was deemed to estimate fair value.

~~SENESTECH, INC.~~Note 4 - Credit Risk

The Company is potentially subject to concentrations of credit risk in its accounts receivable. Credit risk with respect to receivables is limited due to the number of companies comprising the Company’s customer base, however the Company did identify a potentially uncollectable account at December 31, 2019 and maintained a reserve for this receivable balance of $123. At December 31, 2020, the account was deemed uncollectable and offset against the reserve. The Company did not have any potentially uncollectable account at September 30, 2021 or December 31, 2020 and therefore, did not record a reserve for uncollectable accounts at September 30, 2021 or December 31, 2020. The Company does not require collateral or other securities to support its accounts receivable.

SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

~~Note 4 - Investment in Securities Held to Maturity~~

As of September 30, 2017, investment in securities held to maturity primarily consisted of corporate fixed income securities and commercial paper. The Company did not have investments prior to the first quarter of 2017. The Company classifies all investments as held to maturity as these investments are short term, highly liquid investments which we intend to hold to maturity. Held to maturity securities are recorded at cost and gains and losses are only recognized as the sale or redemption of the securities is realized. Realized gains and losses are included in non-operating other income (expense) on the condensed statement of operations and are derived using the specific identification method for determining the cost of the securities sold. During the three and nine months ended September 30, 2017, the Company had a minimal amount of net realized gain (loss) on investments recorded. Interest and dividends on investments held to maturity are included in interest and other income, net, in the condensed statements of operations.

~~The following is a summary of held to maturity securities at September 30, 2017:~~

September 30, 2017
Contractual
Maturity (in months) Cost Gross Unrealized
Gains Gross Unrealized
Losses Fair Market
Value
Mutual funds $ — $ — $ — $ —
Corporate fixed income securities Less than 12 months 2,746 3 — 2,749
Commercial paper Less than 12 months 200 — — 200
Total investments $ 2,946 $ 3 $ — $ 2,949

Note 5 - Prepaid Expenses

Prepaid expenses consist of the following:

September 30,
2017 December 31,
2016
Director compensation $ — $ 215
Director, officer and other insurance 95 70
Legal retainer 25 25
Rent 17 17
Inventory Purchase Deposits 20 —
Engineering, software licenses and other 15 10
Total prepaid expenses $ 172 $ 337

	September 30,		December 31,
	2021		2020
Director, officer and other insurance	$	192	$	18
NASDAQ fees		15		-
Legal retainer		25		25
Marketing programs and conferences		300		106
Professional services retainer		13		8
Rent		-		18
Engineering, software licenses and other		36		3
Total prepaid expenses	$	581	$	178

~~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
Life September 30,
2017 December 31,
2016
Research and development equipment 5 years $ 1,335 $ 989
Office and computer equipment 3 years 672 235
Furniture and fixtures 7 years 34 17
Autos/Trucks 5 years 306 —
Leasehold improvements * 283 189
2,630 1,430
Less accumulated depreciation and amortization 1,071 799
Total $ 1,559 $ 631

* Shorter of lease term or estimated useful life

	Useful		September 30,			December 31,
	Life		2021			2020
Research and development equipment		5 years	$	1,425		$	1,397
Office and computer equipment ⁽¹⁾		3 years		762			733
Autos		5 years		54			54
Furniture and fixtures		7 years		41			41
Leasehold improvements		*		113			283
Construction in progress				32			115
				2,427			2,623
Less accumulated depreciation and amortization				(2,030	)		(2,085	)
Total			$	397		$	538

*	Shorter of lease term or estimated useful life

(1)	In the three months ended and nine months ended September 30, 2021, the Company received net proceeds of less than $1 in the sale of research and development equipment resulting in gains on the sale of these assets of less than $1. In the three months ended and nine months ended September 30, 2020, the Company received net proceeds of $0 and $44 in the sale of research and development equipment and office and computer equipment, respectively, resulting in a gain on the sale of these assets of $0 and $18 for the three months ended and nine months ended September 30, 2020, respectively.

Depreciation and amortization expense was approximately ~~$118~~$78 and ~~$49~~$71 for the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively, and ~~$272~~$229 and ~~$143~~$219 for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 7 - Accrued Expenses

Accrued expenses consist of the following:

September 30,
2017 December 31,
2016
Compensation and related benefits $ 705 $ 82
Accrued litigation 269 286
Research project agreement 100 —
Other — 3
Total accrued expenses $ 1,074 $ 371

	September 30,		December 31,
	2021		2020
Compensation and related benefits	$	513	$	218
Board Compensation		-		3
Personal property and franchise tax		-		57
Legal services		22		-
Other		15		14
Total accrued expenses	$	550	$	292

Note 8 - ~~Accrued Contract Cancellation Settlement~~Borrowings

~~The accrued contract cancellation settlement of $1,000 was the result~~A summary of the ~~Company entering into~~Company’s borrowings, including finance lease obligations, is as follows:

	September 30,			December 31,
	2021			2020
Short-term debt:
Current portion of long-term debt		49			98
Total short-term debt	$	49		$	98
Long-term debt:
Finance lease obligations	$	41		$	79
Other promissory notes		8			692
Total		49			771
Less: current portion of long-term debt		(49	)		(98	)
Total long-term debt	$	-		$	673

Finance Lease Obligations

Finance lease obligations at September 30, 2021 is for manufacturing equipment leased through ENGS Commercial Finance Co. This finance lease expires on April 18, 2022 and carries an interest rate of 11.4%.

Other Promissory Notes

Also included in the table above is a ~~settlement agreement with Neogen Corporation in which Neogen~~note payable to Fidelity Capital for the financing of a computing fixed asset. This note expires on July 1, 2022 and carries interest rate of 13.3%.

On June 18, 2021, the Company ~~agreed~~received notification from BMO Harris Bank National Association as the lender in a promissory note pursuant to ~~(a) terminate~~ the ~~existing Exclusive License Agreement between~~Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), that a loan to the Company and Neogen dated May 15, 2014 (the “License Agreement”), with neither Neogen or the Company having any further obligations thereunder (other than certain confidentiality obligations); (b) dismiss with prejudice the court action filed by Neogenunder this program in the ~~District Court for the District~~amount of Arizona on January 19, 2017 (the “Court Action”); and (c) mutually release any and all existing or future claims between the parties and their affiliates related to or arising from the License Agreement or the Court Action. Under$646 was forgiven in full under the terms of the ~~agreement,~~program. The forgiveness of this note and related interest was recorded as other income on the ~~Company agreed to make a one-time payment in~~Condensed Statements of Operations and Comprehensive Loss for the ~~amount of $1,000 in settlement of all claims and termination of all existing contracts between the parties. This payment was made in January, 2017. See Note 15 for further details.~~nine months ended September 30, 2021.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

~~Note 9 - Borrowings~~

~~A summary of the Company’s borrowings, including capital lease obligations, is as follows:~~

September 30,
2017 December 31,
2016
Short-term debt:
Current portion of long-term debt 174 45
Total short-term debt $ 174 $ 45
Long-term debt:
Capital lease obligations $ 290 $ 51
Other unsecured promissory notes 521 132
Total 811 183
Less: current portion of long-term debt (174 ) (45 )
Total long-term debt $ 637 $ 138

~~Capital Lease Obligations~~

Capital lease obligations are for computer and lab equipment leased through Great American, Thermo Fisher, Navitas and ENGS. These capital leases expire at various dates through June 2022. Also included in the table above are three notes payable to Direct Capital and one to M2 Financing for the financing of fixed assets.

~~Note 10 - Notes Payable, Related Parties~~

~~A summary of the Company’s notes payable, related parties is as follows:~~

September 30,
2017 December 31,
2016
Unsecured promissory note, interest rate of 4.25% and 8% per annum $ 18 $ 36
Less: current portion of notes payable, related parties 18 30
Total notes payable, long-term, related parties $ — $ 6

In April 2013, the Company and a previous employee entered into an agreement to settle all outstanding obligations consisting of a promissory note of $40, dated March 2009, and deferred salaries amounting to $72. The note and salary obligation continue to bear interest at 8% and 4.25%, respectively. The note requires monthly payments of $1 and matures in April 2018. The deferred salary obligation requires monthly payments of $1 and matures in May 2018.

~~Amounts outstanding on these obligations were $18 and $36 at September 30, 2017 and December 31, 2016, respectively.~~

~~Interest expense on the notes payable, related parties, was $-0- and $1 for the three months and nine months ended September 30, 2017 and $56 for the year ended December 31, 2016 respectively.~~

~~TECH, INC.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

Note 119 - Common Stock Warrants and Common Stock Warrant Liability

The table summarizes the common stock warrant activity as of September 30, ~~2017~~2021 as follows:

Number
of Date Exercise
Common Stock Warrants Warrants Issued Term Price
Outstanding at December 31, 2015 610,487
Initial Public Offering Underwriter 187,500 December 2016 5 years $ 9.60
Marketing and Development Services 100,000 February 2016 5 years⁽¹⁾ $ 7.50
Other Advisory Services 40,000 August 2016 3 years⁽¹⁾ $ 7.50
Promissory Notes 9,031 March 2016 3 years⁽¹⁾ $ 7.50
Warrants issued 336,531
Warrants exercised (117,733 )
Outstanding at December 31, 2016 829,285
Warrants issued —
Warrants exercised —
Outstanding at September 30, 2017 829,285

						Balance										Balance									Balance
Issue Date	Warrant Type	Term Date	Exercise Price			December 31, 2019		Issued		Exercised			Expired			December 31, 2020		Issued		Exercised			Expired		September 30, 2021

2016 and prior	Various	Various-2020/2021		Various			17,059		-		(9,375	)		(7,684	)		-		-		-			-		-

November 21, 2017	Common Stock Offering Warrants	November 21, 2022	$	1.3659	⁽¹⁾		143,501		-					-			143,501		-		(5,616	)		-		137,885

November 21, 2017	Dealer Manager Warrants	November 21, 2022	$	30.00			47,250		-		(47,250	)		-			-		-		-			-		-

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		-		-			-			202,943		-		(499	)		-		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	Registered Direct Offering	September 8, 2025	$	2.88			-		176,372		(176,372	)		-			-		-		-			-		-

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			-		1,574,308		(1,524,308	)		-			50,000		-		-			-		50,000

October 26, 2020	Private Warrant Inducement	April 27, 2026	$	1.73			-		1,700,680								1,700,680		-		(700,680	)		-		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

February 2, 2021	Dealer Manager Warrants	August 2, 2026	$	2.848			-		-		-			-			-		329,164							329,164

March 23, 2021	Dealer Manager Warrants	March 23, 2026	$	2.50			-		-		-			-			-		148,125							148,125

							489,176										2,582,697									4,547,618

(1)

⁽¹⁾

The initial exercise price of these warrants ~~also terminate, if not exercised by~~was $30.00 per share. Pursuant to antidilution price adjustment protection contained within these warrants, the ~~earlier~~initial exercise price of ~~(i) December 13,~~these warrants was adjusted downward to $29.40 on July 24, 2018, or the ~~second anniversary~~record date of the ~~closing of an initial public offering of common stock; or (ii)~~Right’s Offering and downward to $19.00 per share on August 13, 2018. These warrants were further adjusted downward from $19.00 to $7.13 and to $2.1122 on January 28, 2020 and March 4, 2020, respectively, in connection with separate Registered Direct Offerings. These warrants were further adjusted downward from $2.1122 to $1.3659 on October 26, 2020 in connection with a ~~liquidation, dissolution or winding up of the Company.~~Registered Direct Offering. These warrants are subject to further adjustment pursuant to antidilution price adjustment protection.

~~Promissory Notes; Common Stock Warrants~~

In conjunction with the issuance by the Company of certain promissory notes, the Company issued detachable common stock warrants (“Warrants”) to purchase an aggregate 270,400 shares of common stock, with an exercise price of $7.50 per share. The Warrants were exercisable until the earlier of (i) 5 years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering; and (iii) the closing of liquidation, dissolution or winding up of the Company.

The Warrants have a net share settlement (cashless exercise) provision. With this provision the holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of the common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. However, the Warrants would be exercised automatically in full pursuant to the net exercise provision, without any further action on behalf of the holder, immediately prior to the time the Warrants would otherwise terminate.

The Warrants are considered freestanding instruments as (i) they were transferred together with the notes issued but exist independently as a separate security; (ii) they may be exercised separately from the notes; and (iii) they are exercisable for a specific period (term) and do not impact the notes if and when exercised.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 119 - Common Stock Warrants and Common Stock Warrant Liability – (continued)

Outstanding Warrants

As of September 30, 2021, we had 4,547,618 shares of common stock issuable upon exercise of outstanding common stock warrants, at a weighted-average exercise price of $3.987 per share.

On November 21, 2017, the Company issued a total of 232,875 detachable common stock warrants issued with the second public offering of 293,000 shares of its common stock at $20.00 per share. The common stock warrant is exercisable until five years from the date of grant. The common shares of the Company’s stock and detachable warrants exist independently as separate securities. As such, the Company estimated the fair value of the ~~Warrants~~common stock warrants, exercisable at ~~issuance~~$30.00 per share, to be $661 using a ~~Monte Carlo option pricing~~lattice model based on the following significant inputs: common stock price of ~~$7.50 to $7.575;~~$20.00; comparable company volatility of ~~58.0%~~73.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 1.87%. The initial exercise price of these warrants was $30.00 per share, which adjusted downward to ~~76.7%; risk- free rates~~$29.40 on July 24, 2018, the record date of ~~1.31%~~the Right’s Offering and downward to ~~1.76%;~~$19.00 per share on August 13, 2018, the date of the Rights Offering, pursuant to antidilution price adjustment protection contained within these warrants. The exercise price of the warrants was adjusted downward to $7.13 on January 28, 2020 in connection with a private placement of common stock. Per guidance of Accounting Standards Codification (“ASC”) 260, the Company recorded a deemed dividend of $285 on the 143,501 unexercised warrants that contained this antidilution price adjustment protection provision and was calculated as the ~~probability~~difference between the fair value of ~~an equity event occurring. The Company reflected~~ the ~~amounts recorded for~~warrants immediately prior to downward exercise price adjustment and immediately after the ~~Warrants issued within stockholders’ deficit, as additional paid-in-capital. Although~~adjustment using a Black Scholes model based on the ~~Warrants are a derivative that can be net share settled, the Warrants are considered indexed to the Company’s~~following significant inputs: on January 28, 2020, common stock price of $7.90; comparable company volatility of 73.8%; remaining term 2.82 years; dividend yield of 0% and risk-free interest rate of 1.45%.

The exercise price of the warrants was adjusted downward to $2.1122 on March 4, 2020 in connection with a private placement of common stock. Per guidance of ASC 260, the Company ~~has~~recorded a deemed dividend of $129 on the ~~ability~~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 ~~settle~~downward exercise price adjustment and immediately after the ~~warrant contract in~~adjustment using a Black Scholes model based on the following significant inputs: on March 4, 2020, common ~~shares~~stock price of $2.88; comparable company volatility of 74.5%; remaining term 2.71 years; dividend yield of 0% and ~~met the conditions within the contract to classify the Warrants as an equity instrument.~~risk-free interest rate of 0.68%.

~~Common Stock Warrant Issued for Marketing~~The exercise price of the warrants was adjusted downward to $1.3659 on October 26, 2020 in connection with an inducement offering of common stock. Per guidance of ASC 260, the Company recorded a deemed dividend of $22 on the 143,501 unexercised warrants that contained this antidilution price adjustment protection provision and ~~Development Services~~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%.

~~In February 2016,~~On June 20, 2018, the Company entered into an agreement with a holder of 56,696 of the November 2017 warrants to exercise its original warrant representing 56,696 shares of common stock for cash at the $30.00 exercise price for gross proceeds of $1.7 million and the Company issued to holder a ~~stockholder a~~new warrant to purchase ~~100,000~~56,696 shares of common stock at an exercise price of ~~$7.50~~$36.40 per share. The new warrant did not contain the antidilution price adjustment protection that was contained within the exercised warrants. In June 2018, the Company recorded stock compensation expense of $1,700 representing the fair value of the of 56,696 inducement warrants issued. The Company estimated the fair value of the common stock warrants, exercisable at $36.40 per share, to be $1,700 using a Black Scholes model based on the following significant inputs: common stock price of $42.20; comparable company volatility of 72.6%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 2.8%. Also, in June 2018, an additional 17,088 of the November 8, 2017 warrants that were in the money at the time of exercise, were exercised for gross proceeds of $513.

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 its common stock, the Company issued 267,853 warrants to purchase shares of its common stock at an exercise price of $23.00 per share. The Company estimated the fair value of the common stock warrants, exercisable at $23.00 per share, to be $3,600 using a Monte Carlo model based on the following significant inputs: common stock price of $18.80; comparable company volatility of 159.0%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 2.77%.

In connection with the closing of the Rights Offering, the Company issued a warrant to purchase 13,393 shares of common stock to Maxim Partners LLC, an affiliate of the dealer-manager of the Rights Offering. The Company estimated the fair value of the common stock warrants, exercisable at $34.50 per share, to be $169 using a using a Monte Carlo model based on the following significant inputs: common stock price of $18.80; comparable company volatility of 159.0%; remaining term 5 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, the Company issued to H.C. Wainwright & Co., as placement agent, a warrant to purchase 8,334 shares of common stock at an exercise price of $33.75 per share as consideration for providing ~~marketing and development~~ services in ~~Southeast Asia.~~connection with a common stock offering in July 2019. The warrant was fully vested and exercisable on the date of grant. The common stock warrant has the similar features as the Warrants discussed above, except it is exercisable until the earlier of (i) five years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The Company estimated the fair value of the common stock warrant to be $431 on the date of grant using a Black- Scholes option pricing model based on the following significant inputs:common stock price of $7.57; comparable company volatility of 77.8%; remaining term 3.75 years; dividend yield of 0% and risk-free rate of 2.09%. The Company recorded the fair value of the warrant as stock-based compensation expense within general and administrative expense on the date of grant.

~~March 2016 Promissory Notes Common Stock Warrants~~

In March 2016, the Company issued certain unsecured notes with common stock warrants to purchase an aggregate of 9,032 shares of common stock at an exercise price of $7.50 per share. The common stock warrants are exercisable until the earlier of (i) three years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The Company estimated the fair value of the common stock warrants on the date of grant using a Monte Carlo pricing model based on the following significant inputs: common stock price of $7.575; comparable company volatility 79.6%; and risk-free rate of 1.49%.

~~August 2016 Other Advisory Services~~

On August 16, 2016, the Company issued to each of two advisors warrants to purchase 20,000 shares of common stock at an exercise price of $7.50 per share as consideration for providing advisory services to the Company. The warrants were fully vested and exercisable on the date of grant until the earlier of (i) three years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The Company recorded the fair value of the warrants as stock-based compensation expense within general and administrative expense on the date of grant.

~~Common Stock Warrant Issued to Initial Public Offering Underwriter~~

In December 2016, the Company issued to the underwriter of its IPO a warrant to purchase 187,500 shares of common stock at an exercise price of $9.60 per share as consideration for providing services in connection with the Company’s initial public offering. The warrant was fully vested and exercisable on the date of grant.issuance. The common stock warrant is exercisable until ~~five~~5 years from the date of grant. The Company estimated the fair value of the common stock ~~warrant~~warrants, exercisable at $33.75 per share, to be ~~$939 on the date of grant~~$127 using a ~~Black- Scholes option pricing~~lattice model based on the following significant ~~inputs~~:inputs: common stock price of ~~$8.00;~~$26.80; comparable company volatility of ~~82.1%~~133.3%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of ~~1.92%~~2.07%.

~~SENESTECH, INC.~~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 the Company’s common stock, the Company also issued warrants to purchase an aggregate of up to 353,872 shares of common stock to certain institutional and accredited investors that participated in the 2020 Registered Direct Offerings (the “2020 Warrants”). The warrants were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506(b) of Regulation D promulgated thereunder. Terms used but not otherwise defined herein will have the meanings given them in the warrants, attached as Exhibit 4.1 to our Form 8-K filed on January 28, 2020, and our Form 8-K filed on March 6, 2020.

The warrants issued in January 2020 to purchase 177,500 shares of common stock have an exercise price of $9.00 per share, are exercisable after July 28, 2020 and will expire July 28, 2025. The Company estimated the fair value of the common stock warrants, exercisable at $9.00 per share, to be $813 using a Black Scholes model based on the following significant inputs: common stock price of $7.90; comparable company volatility of 73.8%; remaining term 5 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. The Company estimated the fair value of the common stock warrants, exercisable at $2.88 per share, to be $242 using a Black Scholes model based on the following significant inputs: common stock price of $2.35; comparable company volatility of 74.8%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.39%.

For so long as the 2020 Warrants remain outstanding, the exercise price and number of shares of common stock issuable upon exercise of the warrants are subject to adjustment as follows: (a) upon payment of a stock dividend or other distribution on a class or series of shares common stock, not including shares issued under this warrant;

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 119 - Common Stock Warrants and Common Stock Warrant Liability – (continued)

(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.

~~University of Arizona Common Stock Warrant~~

In ~~connection with~~ the ~~June 2015 amended and restated exclusive license agreement with the University of Arizona (“University”),~~event that the Company ~~issued~~declares or makes any dividend or other distribution of its assets to holders of its common stock, each 2020 Warrant holder will be entitled to participate in such distribution to the ~~University a common stock warrant to purchase 15,000~~same extent that such holder would have participated therein if the holder had held the number of shares of common stock ~~at an~~acquirable upon exercise ~~price~~ of ~~$7.50 per share. The warrant was fully vested and exercisable on~~ the ~~date of grant, and expires, if not exercised, five years from the date of grant.~~ 2020 Warrant.

In the event of a ~~“terminating change”~~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 ~~Company, as defined~~voting power represented by our outstanding common stock, then the holders of the 2020 Warrants will be entitled to receive upon exercise of such warrants the kind and amount of securities, cash, assets or other property that the holders would have received had they exercised the 2020 Warrants immediately prior to such Fundamental Transaction. Subject to certain limitations, in the event of a Fundamental Transaction the 2020 Warrant holder may at its option require the Company or any Successor Entity to purchase such warrant ~~agreement,~~from the ~~warrant~~ holder ~~would be paid in~~by paying to the holder an amount of cash equal to the ~~aggregate fair market value~~Black Scholes Value of the ~~underlying shares immediately prior to~~remaining unexercised portion of the 2020 Warrant on the date of the consummation of the ~~terminating change event. Due~~Fundamental Transaction.

Any time that the Company grants, issues, or sells any securities pro rata to the cash settlement provision, the derivative warrant liability was recorded at fair value and is revalued at the end of each reporting period. The changes in fair value are reported in other income (expense) in the statements of operations and comprehensive loss. The estimated fair valueall of the ~~derivative warrant liability was $53 at the date of grant.~~

~~The estimated fair value~~record holders of the derivative warrant liability was $4 at September 30, 2017. As this derivative warrant liability is revalued at the end of each reporting period, the fair values as determined at the date of grant and subsequent periods were based on the following significant inputs using a Monte Carlo option pricing model: common stock ~~price~~(the “2020 Purchase Right”), each holder of ~~$7.91; comparable company volatility~~2020 Warrants will be entitled to acquire the aggregate amount of ~~77.7%~~securities that the holder could have acquired if the holder had held the number of the underlying common stock; risk-free rates of 1.93%; and dividend yield of 0%; including the probability assessment of a terminating change event occurring. The change in fair value of the derivative warrant liability was $65 for the nine months ended September 30, 2017 and was recorded in other income (expense) in the accompanying statements of operations and comprehensive loss.

~~July 2015 Consulting Agreement Common Stock Warrant~~

~~In July 2015, the Company issued a common stock warrant to purchase 121,227~~ shares of common stock acquirable upon exercise of the applicable 2020 Warrant. However, to the extent that an exercise of a 2020 Purchase Right would exceed the Beneficial Ownership Limitation (defined below), then to such extent the 2020 Purchase Right will be held in abeyance until such time, if ever, that complete exercise of the 2020 Purchase Right would not exceed the Beneficial Ownership Limitation.

After the Initial Exercisability Date (as defined in the 2020 Warrants), the 2020 Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise. If, at the time a holder exercises the 2020 Warrant (but not sooner than six months following the date of such warrant), a registration statement registering the issuance of the shares of common stock underlying the 2020 Warrants under the Securities Act is not then effective or available, nor is any current prospectus thereto available, and an exemption from registration under the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the number of shares of common stock determined according to a formula set forth in the 2020 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, the Company issued warrants to purchase 1,574,308 shares of common stock to the participants in the public offering and have an exercise price of ~~$7.50~~$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 ~~consideration for services under a consulting arrangement.~~amended (“Registration Statement”), which was declared effective by the SEC on February 14, 2020. The ~~warrant~~Post-Effective Amendment No. 2 to the Registration Statement was ~~fully vested and exercisable~~declared effective by the SEC on the date of grant. This common stock warrant has the similar features as the Warrants described above, except it is exercisable until the earlier of (i) ten years from the date of grant; (ii) December 13, 2018, the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. April 21, 2020.

The Company estimated the fair value of the common stock ~~warrant on the date of grant was $537 as determined by~~warrants, exercisable at $3.05 per share, to be $2,402 using a ~~Black-Scholes option pricing~~Black Scholes model based on the following significant inputs: common stock price of ~~$7.575;~~$2.40; comparable company volatility of ~~60.9%~~87.9%; ~~expected~~remaining term ~~of 6.25~~5 years; ~~risk-free rate of 2.09%; and~~ dividend yield of 0% and risk-free interest rate of 0.18%.

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

In connection with the separate private placements concurrent with registered direct offerings of shares of the Company’s common stock in January and March 2020, the Company issued to H.C. Wainwright & Co., LLC, as placement agent, a warrant to purchase 13,228 shares of common stock and a warrant to purchase 13,313 shares of common stock. The warrants were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. These warrants have substantially similar terms as the 2020 Warrants described above, except that the placement agent warrant issued in January 2020 has an exercise price of $10.00 per share, and the placement agent warrant issued in March 2020 has an exercise price of $3.7563 per share.

The Company ~~recorded~~estimated the fair value of the ~~warrant as stock-based compensation expense within general~~common stock warrants issued in January, with an exercise price of $10.00 per share, to be $58 using a Black Scholes model based on the following significant inputs: common stock price of $7.90; comparable company volatility of 73.8%; remaining term 5 years; dividend yield of 0% and ~~administrative expense in the accompanying statements~~risk-free interest rate of ~~operations and comprehensive loss in 2015.~~1.53%.

~~Northern Arizona University~~The Company estimated the fair value of the common stock warrants issued in March, with an exercise price of $3.7563 per share, to be $17 using a Black Scholes model based on the following significant inputs: common stock price of $2.35; comparable company volatility of 74.8%; remaining term 5.5 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)

In ~~November 2015,~~connection with the public offering of 145,586 Class A Units and 1,428,722 Class B Units on April 24, 2020, the Company issued ato H.C. Wainwright & Co., LLC, as placement agent, warrants to purchase 118,073 shares of common stock. The warrants were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. These warrants have substantially similar terms as the April 2020 Warrants described above, except that the placement agent warrant issued has an exercise price of $3.97 per share.

The Company estimated the fair value of the common stock ~~warrant~~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 5.5 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 (the “Original Warrants”) to purchase ~~210,526~~an equal number of shares of the Company’s common stock, the Company issued new unregistered warrants to purchase up to an aggregate of 1,700,680 shares of common stock at an exercise price of ~~$15.00~~$1.725 per share. The warrants issued were immediately exercisable with an exercise period of five and one-half years from the date of issuance. The Original Warrants were issued on March 6, 2020 and on April 24, 2020. Pursuant to the Letter Agreement, the per share exercise price of the Original Warrants were reduced from $2.88 and $3.05, respectively, to $1.725. The Company estimated the fair value of the common stock warrants, exercisable at $1.725 per share, to ~~Northern Arizona University (“NAU”) as part~~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 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.

In connection with the private warrant inducement in October 2020 of 1,700,680 shares of the ~~consideration given~~Company’s common warrants, the Company issued to H.C. Wainwright & Co., LLC, as placement agent, warrants to purchase 85,034 shares of common stock. 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.

The Company estimated the fair value of these common stock warrants, with an exercise price of $2.156 per share, to be $86 using a Black Scholes model based on the following significant inputs: common stock price of $1.47; comparable company volatility of 96.5%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.

Common Stock Warrants Issued in February 2021 Private Placement Agreement

In February 2021, in connection with a private placement agreement with certain institutional and accredited investors, the Company issued common stock warrants to purchase up to an aggregate of 2,194,427 shares of common stock at an exercise price of $2.216 per share. The warrants were exercisable immediately and have an exercise period of five and one-half years from the date of issuance. The warrant holder may not exercise any portion of such holder’s warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise. The Company estimated the fair value of the common stock warrants, exercisable at $2.216 per share, to be $3,052 using a Black Scholes model based on the following significant inputs: common stock price of $1.93; comparable company volatility of 95.6%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share 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 ~~Series A convertible preferred~~private placement in February 2021, the Company issued to H.C. Wainwright & Co., LLC, as placement agent, warrants to purchase up to 329,164 shares of Common Stock with an exercise price of $2.8481 per share. The warrants are exercisable immediately and have an exercise period of five and one-half years from the date of issuance. The Company estimated the fair value of these common stock warrants, with an exercise price of $2.8481 per share, to be $435 using a Black Scholes model based on the following significant inputs: common stock price of $1.93; comparable company volatility of 95.6%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.

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

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

In connection with the registered direct offering in March 2021, the Company issued to H.C. Wainwright & Co., LLC, as the placement agent, warrants to purchase up to 148,125 shares of Common Stock. The Placement Agent Warrants will be exercisable commencing six months following the date of issuance, expire five years following the date of sale and have an exercise price per share of $2.50 per share. The Placement Agent Warrants, and the shares of Common Stock issuable upon exercise thereof, will be issued in reliance on the exemption from registration provided in Section 4(a)(2) under the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. The Company estimated the fair value of these common stock warrants, with an exercise price of $2.50 per share, to be $181 using a Black Scholes model based on the following significant inputs: common stock price of $1.76; comparable company volatility of 100.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 0.31%.

Deemed Dividend Adjustment-Warrant Modified Terms Revaluation

On March 3, 2020, the Company issued an aggregate of 51,414 common shares in a cashless exercise of 56,625 warrants issued in December 2016 and November 2017. Consideration for the exercise of these warrants was the full ~~cancellation~~settlement of an outstanding litigation reserve of $238.

On October 26, 2020, in connection with the private warrant inducement with an existing accredited investor to exercise 1,700,680 Original Warrants, the Company agreed to modify the terms of the Original Warrants that were originally issued on March 6, 2020 and on April 24, 2020. Pursuant to the agreement, the per share exercise price of the Original Warrants were reduced from $2.88 and $3.05, respectively, to $1.725.

Per recent proposed guidance of ASC 260, the Company determined that this was an exchange of the existing 1,700,680 warrants that were affected and the difference between the fair value of the warrants immediately prior to modification of terms and immediately after the adjustment was a ~~promissory note that had been previously issued~~cost of raising capital and was recorded as a reduction of equity. The difference between the fair value of the warrants immediately prior to ~~NAU.~~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 1210 - Stockholders’ Deficit

~~Common~~Capital Stock

The Company was organized under the laws of the state of Nevada on July 27, 2004 and was subsequently reincorporated under the laws of the state of Delaware on November 10, 2015. In connection with the reincorporation, as approved by the stockholders, the Company changed its authorized capital stock to consist of (i) 100 million shares of common stock, $.001 par value, and (ii) 2 million shares of preferred stock, $0.001 par value, designated as Series A convertible preferred stock. In December 2015, the Company amended its Certificate of Incorporation to change its authorized capital stock to provide for 15 million authorized shares of preferred stock of which 7,515,000 was designated as Series B convertible preferred stock, par value $.001 per share.

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

Common Stock

The Company had ~~10,363,189~~12,191,112 and ~~10,157,292~~5,099,512 shares of common stock issued and outstanding as of September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively.

During the nine months ended September 30, ~~2017,~~2021, the Company issued 7,091,600 shares of common stock as follows:

	●	an aggregate of 4,388,854 shares in connection with a private placement offering and exercise of pre-funded warrants issued in connection with the offering, generating net proceeds to the Company in February 2021 of approximately $8,898, as further described below;

	●	an aggregate of 1,975,000 shares in connection with a registered direct offering generating net proceeds to the Company in March 2021 of approximately $3,523, as further described below;

	●	an aggregate of 706,795 shares in connection with the exercise of common stock warrants in March, June and July 2021, generating net proceeds to the Company of approximately $1,228, as further described below; and

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

Public Offerings and Registered Direct Offerings

On February 2, 2021, the Company consummated a private placement agreement with certain institutional and accredited investors and issued an aggregate of 3,968,854 shares of its common stock, par value $0.001 per share at a purchase price of $2.2785 per share, pre-funded warrants to purchase up to an aggregate of 420,000 shares of common stock at a purchase price of $2.2775 per pre-funded warrant and associated warrants to purchase up to an aggregate of 2,194,427 shares of common stock, for gross proceeds of approximately $10.0 million, prior to deducting placement agent fees and offering expenses. At March 29, 2021, all 420,000 pre-funded shares had been distributed. In connection with the offering, we issued the placement agent warrants to purchase up to 329,164 shares of Common Stock with an exercise price of $2.8481 per share.

On March 23, 2021, the Company consummated a registered direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of the Company’s common stock, par value $0.001 per share at a purchase price of $2.00 per share for gross proceeds to the Company of approximately $3.95 million, pursuant to a prospectus, dated August 24, 2018, and a prospectus supplement, dated March 22, 2021, in connection with a takedown from the Company’s shelf registration statement on Form S-3 (File No. 333-225712).

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 10 - Stockholders’ Deficit – (continued)

In connection with the offering, we issued the placement agent warrants to purchase up to 148,125 shares of Common Stock at an exercise price per share of $2.50 per share.

On March 19, 2021, June 22, 2021 and July 15, 2021, the Company issued an aggregate of ~~205,897~~700,680, 499 and 5,616 shares of ~~common~~commons stock ~~as follows: 48,240 shares to consultants for services, valued at $137, to settle previous claims; 14,014 shares~~ for the ~~cashless~~ exercise of ~~vested stock options; and 143,643 shares for~~certain warrants, respectively. The net ~~settlement of restricted stock units that vested during the period.~~

~~Rights Offering~~

~~In April 2016, the Company offered~~proceeds to the existing holders of shares of (i) its common stock and (ii) Series B convertible preferred stock, in each case, as of April 8, 2016 (the “Record Date”), at no charge, non-transferable subscription rights, on a pro rata basis, to purchase shares of common stock at a subscription price of $2.50 per share (the “Rights Offering”). In addition, the holders also had the right to purchase additional shares of common stock, if any shares remain unsubscribed. The Company offered subscription rights on 5,794,162 shares of its common stock. The Rights Offering was conducted as a private placement on a “best efforts” basis, with no minimum subscription required.

The subscription rights were initially exercisable beginning on April 8, 2016 and expiring on April 29, 2016 (the “Subscription Period”). However, the Company reserved the right to extend the Subscription Period for up to two additional weeks. The Company extended the Subscription Period for one additional week. The Rights Offering closed on May 6, 2016.

The Company issued 2,478,486 shares of common stock and received aggregate consideration of $6,199 in the Rights Offering. The aggregate consideration received consisted of: (i) $5,284 in cash; (ii) $821 in consideration paid through the cancellation of $821 in outstanding principal amount (and related unpaid interest) under certain outstanding unsecured notes; and (iii) the extinguishment of $94 in amounts owed by the Company for ~~services and related miscellaneous expenses. Such cash proceeds will be used for working capital and general corporate purposes. As the Rights Offering~~these exercises was offered to certain existing holders of the Company’s stock, the shares sold are treated as outstanding from the date of their issuance in the computation of loss per share, basic and diluted in future periods.$1,228.

Note 1311 - Stock-based Compensation

~~Effective December 2008, the Company established the 2008 – 2009 Non-Qualified~~ Stock Option Plan (the “2008 – 2009 Plan”) under which no stock options remain outstanding at September 30, 2017. The stock-based awards were issued with a price not less than $15.00 per share or 100% of the fair value of a share of common stock on the date of grant. After July 2015, no further awards were granted under the 2008 – 2009 Plan.Options

~~Effective July 2015, the Company’s stockholders approved the 2015 Equity Incentive Plan (the “2015 Plan”), which permits the issuance of up to 2,000,000 shares reserved for the grant of stock~~Stock options stock appreciation rights, restricted stock units and other stock-based awards for employees, directors or consultants of the Company. The Board of Directors and the Company’s stockholders approved an additional 1,000,000 shares of common stock for issuance under the 2015 Plan. The stock-based awards are generally issued with a per share exercise price equal to no less than fair market value atof our common stock on the date of grant. Options granted under the ~~2015~~2018 Plan generally vest ~~immediately, or ratably~~ over a ~~two-~~twelve- to 36-month period coinciding with their respective service periods; however, participants may exercise their options prior to vesting as provided by the 2015 Plan. Unvested shares issued for option exercised early may be subject to a repurchase by the Company if the participant terminates at the original exercise price.periods. Options under the ~~2015~~2018 Plan generally have a ~~contractual~~ term of five ~~or ten~~ years. Certain stock ~~option awards~~options provide for accelerated vesting upon a change in control.

As of September 30, ~~2017,~~2021, the Company had ~~779,095~~2,857,184 shares of common stock available for issuance under the ~~2015~~2018 Plan.

The Company measures the fair value of stock options with service-based ~~and performance-based~~ vesting criteria to employees, directors and consultants on the date of grant using the Black-Scholes option pricing model. ~~The fair value of equity instruments issued to non-employees is re-measured as the award vests.~~ The Black-Scholes valuation model requires the Company to make certain estimates and assumptions, including assumptions related to the expected price volatility of the Company’s stock, the period ~~under~~during which the options ~~with~~will be outstanding, the rate of return on risk-free investments, and the expected dividend yield for the Company’s stock.

~~SENESTECH, INC.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

~~Note 13 - 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 nine months ended September 30, ~~2017,~~2021 were as follows:

	~~Employee~~			~~Non-Employee~~
Expected volatility		~~73.8% -83.7~~96.5	%		~~N/A~~
Expected dividend yield		—			~~N/A~~
Expected term (in years)		~~3.0 to 3.5~~			~~N/A~~2.99
Risk-free interest rate		~~1.45%-1.94~~0.44	%		~~N/A~~

The weighted average grant date fair value of options granted during the nine months ended September 30, 2021 was $0.98 per share, as per the table above.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 11 - Stock-based Compensation – (continued)

Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption was determined based on historical volatilities from traded options of biotech companies of comparable in size and stability, whose share prices are publicly available. The expected term of options granted to employees is calculated based on the mid-point between the vesting date and the end of the contractual term according to the simplified method as described in SEC Staff Accounting Bulletin 110 because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term due to the limited period of time its awards have been outstanding. For non-employee options, the expected term of options granted is the contractual term of the options. The risk-free interest rate is determined by reference to the implied yields of U.S. Treasury securities with a remaining term equal to the expected term assumed at the time of grant. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not intend to pay dividends.

The following table summarizes the stock option activity for ~~both 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, 2016 1,477,300 1.61 5.8 $ 9,662
Granted 161,500 $ 8.04 5.0 $ —
Exercised (15,000 ) $ 0.50 — —
Forfeited — $ — — —
Expired (65,000 ) $ 10.22 — —
Outstanding at September 30, 2017 1,558,800 1.73 5.1 $ 183
Exercisable at September 30, 2017 1,263,599 $ 1.08 4.8 $ 968

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (1)
Outstanding at December 31, 2020		496,471		$	8.63		3.9	$	—
Granted		575,565		$	1.65		4.8	$	—
Exercised		—		$	—		—	$	—
Forfeited		(3,300	)	$	—		—	$	—
Expired		—		$	—		—	$	—
Outstanding at September 30, 2021		1,068,736		$	4.73		2.1	$	—
Exercisable at September 30, 2021		519,125		$	6.95		1.9	$	—

(1)

⁽¹⁾

The aggregate intrinsic value onin the table was calculated based on the difference between the estimated fair market value of the Company’s stock and the exercise price of the underlying ~~option.~~options. The estimated stock values used in the calculation ~~was $1.85~~were $1.73 and ~~$8.15~~$1.51 per share atfor the year ended December 31, 2020 and the nine months ended September 30, ~~2017 and December 31, 2016,~~2021, respectively.

~~SENESTECH, INC.~~Restricted Stock Units

The following table summarizes restricted stock unit activity for the nine months ended September 30, 2021:

	Number of Units			Weighted Average Grant-Date Fair Value Per Unit
Outstanding as of December 31, 2020		32,072		$	2.01
Granted		—		$	—
Vested		(31,405	)	$	1.97
Forfeited		—		$	—
Outstanding as of September 30, 2021		667		$	1.80

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 1311 - Stock-based Compensation – (continued)

The stock-based compensation expense was recorded as follows:

Three Months Ended September 30 Nine Months Ended September 30,
2017 2016 2017 2016
Research and development $ 85 135 $ 269 $ 309
General and administrative 861 798 2,549 2,097
Total stock-based compensation expense $ 946 933 $ 2,818 $ 2,406

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Research and development	$	1	$	2	$	2	$	7
Selling, general and administrative		213		160		548		446
Total stock-based compensation expense	$	214	$	162	$	550	$	453

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 September 30, ~~2017,~~2021, the total compensation cost related to ~~non-vested~~restricted stock units and unvested options not yet recognized was ~~$1,942,~~$782, which will be recognized over a weighted average period of ~~four years,~~32 months, assuming the employees and non-employees complete their service period required for vesting.

Effective December 2008, the Company established the 2008-2009 Plan under which no stock options remain outstanding at September 30, 2017. The stock-based awards were issued with a price not less than $15.00 per share or 100% of the fair value of a share of common stock on the date of grant. After July 2015, no further awards were granted under the 2008 – 2009 Plan.

~~Restricted Stock Units~~

~~The following table summarizes restricted stock unit activity for the nine months ended September 30, 2017:~~

Number of
Units Weighted
Average
Grant-Date Fair
Value Per Units
Outstanding as of December 31, 2016 455,430 $ 0.76
Granted 117,885 ⁽¹⁾ $ 6.95
Vested (228,333 ) $ 2.00
Forfeited — $ —
Outstanding as of September 30, 2017 344,982 ⁽²⁾ $ 2.05

~~(1)~~

40,000 restricted stock units were granted on March 27, 2017 with a weighted average grant date fair value of $8.35, 17,885 restricted stock units were granted on May 19, 2017 with a weighted average grant date fair value of $6.99 and 60,000 restricted stock units were granted on June 19, 2017 with a weighted average grant date fair value of $6.00.

⁽²⁾

At September 30, 2017, the total compensation cost related to non-vested restricted stock units not yet recognized was $1,075, which will be recognized over a weighted average period of 1.3 years, assuming the recipients complete their service period required for vesting.

~~SENESTECH, INC.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

~~Note 14 - License and Other Agreements~~

~~Neogen Corporation~~

In May 2014, the Company entered into an exclusive license agreement with Neogen Corporation (“Neogen”). The Company granted an exclusive license to Neogen to (i) use the Company’s intellectual property (“IP”), consisting primarily of the ContraPest technology and (ii) manufacture, distribute and sell commercial rodent control products in the United States and certain U.S. territories, Canada and Mexico.

As previously disclosed in our Current Report on Form 8-K dated and filed January 23, 2017, on January 23, 2017 we entered into a termination agreement (the “Settlement Agreement”) with Neogen Corporation (“Neogen”). Pursuant to the Settlement Agreement, the parties agreed to (a) terminate the existing Exclusive License Agreement between us and Neogen dated May 15, 2014 (the “License Agreement”), with neither Neogen or us having any further obligations thereunder (other than certain confidentiality obligations); (b) dismiss with prejudice the court action filed by Neogen in the District Court for the District of Arizona on January 19, 2017 (the “Court Action”), as further described below; and (c) mutually release any and all existing or future claims between the parties and their affiliates related to or arising from the License Agreement or the Court Action. As part of the Settlement Agreement, we agreed to pay to Neogen upon the execution of the Settlement Agreement an aggregate of $1,000 in settlement of all claims.

~~For the nine months ended September 30, 2017 and the year ended December 31, 2016, the Company recognized revenue of $0 and $186, respectively, under the License Agreement.~~

~~Bioceres/INMET S.A. Agreement~~

In January 2016, the Company entered into a services agreement with Bioceres, Inc. (“Bioceres”), a wholly-owned subsidiary of Bioceres S.A., a leading agricultural biotechnology company in Argentina, and its Argentinean subsidiary, Ingenieria Metabolica S.A. (“INMET”) to develop a production method for synthetic triptolide, the main ingredient in ContraPest. The Company also entered into an agency agreement with INMET whereby the Company appointed INMET as its exclusive agent to seek regulatory approval for and conduct pre-sales and marketing of its product, ContraPest, in Argentina. The Company and INMET have also agreed to manufacture and distribute its product in Argentina and other countries, as mutually agreed, through a newly formed entity.

The term of the service agreement is for two years. The service agreement can be terminated at any time upon written notice by either party for any reason. The term of the agency agreement with INMET is the earlier of: (i) when the Company and INMET incorporate the joint venture entity in Argentina or (ii) January 2018.

~~At September 30, 2017, the Company had accrued expenses of $100 due to Bioceres as detailed in the table or accrued expenses in Note 7~~

~~SENESTECH, INC.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

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

Note 1512 - Commitments and Contingencies

Legal Proceedings

The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.

~~Neogen Settlement Agreement~~Lease Commitments

~~See Note 14 above with regards to the Settlement Agreement with Neogen.~~

Although notice of the legal action by Neogen and the Settlement Agreement with Neogen, occurred after December 31, 2016, as per the provisions of Accounting Standards Codification Topic 450 Loss Contingencies, included in the financial statements of the Company at December 31, 2016 is a $1,000 charge to general and administrative expenses and a corresponding accrual of contract cancellation settlement agreement related to this agreement.

~~SENESTECH, INC.~~In February 2012, the Company entered into an operating lease for its then corporate headquarters in Flagstaff, Arizona, which expired in December 2019. In December 2019, we extended the lease for only the manufacturing facilities located in Flagstaff, Arizona, occupying a total of 7,632 square feet of space. The lease for these manufacturing facilities expired in December 2020.

On November 16, 2016, we leased an additional 1,954 square feet of manufacturing, research and development space, also in Flagstaff. This lease expired on November 15, 2018 but was extended for an additional 24 months, through November 2020. A subsequent amendment to the lease allows for the Company to cancel the lease at any time through the lease term with 30 days’ notice. The Company provided a 30-day cancellation notice effective February 2020.

On December 1, 2019, we entered into a lease for our corporate headquarters in Phoenix, Arizona where we lease and occupy approximately 5,529 square feet of office space. This lease expires in November 2024.

On August 1, 2020, we entered into a lease for our manufacturing and research facility in Phoenix, Arizona where we occupy approximately 5,105 square feet of manufacturing and warehouse space. This lease expires on November 30, 2024.

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

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 1512 - Commitments and Contingencies – (continued)

~~Resolution of Dispute~~

In recognition of his continued support and cooperation, and to resolve a dispute regarding whether his options appropriately expired in the first quarter of 2016, in July 2016, the Company’s Board of Directors agreed to issue to its former chief executive officer 120,000 shares of the Company’s common stock. The expense of $300 associated with this full and final settlement was recorded at December 31, 2016.

~~Lease Commitments~~

Rent expense was ~~$246~~$166 and ~~$234~~$202 for the nine months ended ~~and year ended~~ September 30, ~~2017~~2021 and ~~December 31, 2016,~~2020, respectively. The future minimum lease payments under non-cancellable operating lease and future minimum ~~capital~~finance lease payments as of September 30, ~~2017~~2021 are follows:

Capital
Leases Operating
Lease
Years Ending December 31,
2017 $ 25 $ 63
2018 96 258
2019 88 221
2020 67 —
2021 84 —
Total minimum lease payments $ 360 $ 542

Years Ending December 31,	Finance Leases		Operating Lease
2021		14		48
2022		28		194
2023		-		198
2024		-		186
Total minimum lease payments	$	42	$	626

Capital
Leases
Less: amounts representing interest (ranging from 7.25% to 11.56%) $ 75

Present value of minimum lease payments 285

Less: current installments under capital lease obligations 70

Total long-term portion $ 215

	Finance Leases
Less: amounts representing interest (11.43%)	$	2
Present value of minimum lease payments		40
Less: current installments under finance lease obligations		40
Total long-term portion	$	-

Note 1613 - Subsequent Events

InOn October ~~of 2017,~~7, 2021, the Company issued ~~26,308~~16,171 shares of ~~its~~ common stock in connection with the exercise of common stock warrants generating net proceeds to ~~two executives of~~ the Company ~~in net settlement~~ of ~~restricted stock units that vested on September 30, 2017 but were not issued until October 2, 2017.~~approximately $20.

COVID-19

The travel and other restrictions that began in March 2020 in response to the COVID-19 global pandemic resulted in a significant slowdown in our field studies and sales efforts. We were able to resume some projects by mid-year 2020, however, we still have delays on certain projects that might remain on hold until businesses and government entities return to more normal operations. These continued delays have impacted our results of operations and could impact our results in future quarters. In addition, extended stay at home orders and other social distancing initiatives severely limited our ability to communicate with current and potential commercial and governmental customers. While many restrictions were lifted during our second and third fiscal quarters of 2021, we have not returned to full scope pre-pandemic activities, and are uncertain as to when or if, with potential further restrictions, that may occur. The COVID-19 pandemic is also placing a significant budgetary burden on federal, state and local governments, which may impede or delay their ability to purchase our products.

The Company has evaluated subsequent events from the balance sheet date through November 12, 2021, the date at which the financial statements were issued, and determined that there were no other items that require adjustment to or disclosure in the financial statements.

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” ~~and “the Company”~~ 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 ~~consolidated~~ financial statements and related notes.

Forward-Looking Statements

Some statements and information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, notes to our condensed ~~consolidated~~ financial statements and elsewhere in this ~~Quarterly Report on Form 10-Q~~report are not historical facts but are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)~~. In some cases, readers~~ and within the meaning of the safe-harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can ~~identify forward-looking statements~~often be identified by ~~terms~~words such ~~as “may,” “will,” “should,”~~as: “expect,~~” “plan,” “intend,” “forecast,” “anticipate,~~” “believe,” “estimate,” ~~“predict,~~“plan,” “strategy,” “future,” “potential,” “continue,” ~~or the negative of these terms or other comparable terminology, which when used are meant~~“may,” “should,” “will,” and similar references to ~~signify the statement as forward-looking. These forward-looking~~future periods. Examples include, among others, statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements that are not historical facts. Specific examples of forward-looking statements include those concerning the sufficiency of our cash and future revenue to fund operations, our expectations as to expenses, future revenue and the commercialization of our products, our research and development plans and initiatives and the development of our products. about:

●

The impacts and implications of the COVID-19 pandemic;

●

Our commercialization and promotion strategy and plans, including key elements of our business strategy, how we commercialize, our sales approach, the tools we use, our hiring and retention strategy; our areas and markets of focus, our pricing strategy, our strategic relationships and which geographic markets we target;

●

The success and effectiveness of our products;

●

Our seeking, obtaining or maintaining regulatory approvals for our products and product candidates;

●

Our expectations regarding the potential market size for our products and how the market may develop;

●

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

●

Our ability to, and the expected benefits of, improving our cost structure and gross margins, and limiting our cash burn;

●

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

●

Our ability to enter into strategic arrangements and to achieve the expected results from such arrangements;

●

The adequacy of our facilities to meet our current needs;

●

The initiation, timing, progress and results of field studies and other studies and trials and our research and development programs;

●

Our financial performance, including our ability to fund operations; 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, 27 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 1A1A-“Risk Factors” of Part I of our Annual Report on Form ~~10-K/A~~10-K, for the year ended December 31, ~~2016~~2020, filed with the SEC on March 29, 2021, and Item 1A of Part II of this Form 10-Q, in each case entitled “Risk Factors,” and those contained from time to time in our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

~~All amounts shown in the following Management’s Discussion and Analysis of Financial Condition and Results of Operations are full amounts (and are not shown in thousands).~~

Overview

Since our inception, ~~in 2004,~~ we have ~~devoted substantially all~~sustained significant operating losses in the course of our ~~resources to organizing and staffing our company, conducting~~ research and development activities and commercialization efforts and expect such losses to continue for ~~our product candidates, business planning, raising capital and acquiring and developing product and technology rights. Until August 2016, we did not~~the near future. We have ~~any products approved for sale, and we have not~~ generated ~~any significant~~limited revenue to date from product sales, ~~to date.~~grants and licensing fees received under a former license. We have primarily funded our operations to date ~~with proceeds from~~through the sale of equity securities, including convertible preferred stock, common stock and ~~preferred stock, the issuance~~warrants to purchase common stock; and debt financing, consisting primarily of convertible ~~and other promissory notes and, to a lesser extent, payments received in connection with research grants and licensing fees.~~ notes.

Through September 30, ~~2017,~~2021, we ~~had~~have received net proceeds of ~~$49.2~~$89.3 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of ~~$1.6~~$1.4 million ~~from research grants~~in net product sales. As of September 30, 2021, we had an accumulated deficit of $110.0 million and ~~licensing fees.~~cash and cash equivalents of $11.1 million.

On June 18, 2021, the Company received notification from BMO Harris Bank National Association as the lender in a promissory note pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), that a loan to the Company under this program in the amount of $645,700 was forgiven in full under the terms of the program. This loan was originally granted and funded on April 15, 2020.

We have incurred significant operating losses every year since our inception. Our net losses were ~~$2.9 million, $10.0~~$2.3 million and ~~$11.0~~$1.9 million for the three months ended September 30, 2021 and 2020, respectively, and $5.8 million and $6.3 million for the nine months ended September 30, ~~2017~~2021 and ~~the year ended December 31, 2016,~~2020, respectively. ~~As of September 30, 2017, we had an accumulated deficit of $71.3 million.~~ We expect to continue to incur significant expenses and generate operating losses for at least the next 12 months.

We ~~have historically utilized, and intend~~will need additional funding in order to continue to ~~utilize, various forms of stock-based awards in order to hire, retain~~fund our operations and ~~motivate talented employees, consultants~~achieve profitability and directors and encourage them to devote their best efforts to our business and financial success. In addition, we believe that our ability to grant stock-based awards is a valuable and necessary compensation tool that aligns the long-term financial interests of our employees, consultants and directors with the financial interests of our stockholders.

~~As a result, a significant portion of our operating expenses includes stock-based compensation expense. Stock-based compensation expense has been,~~become cash flow positive and will continue to ~~be for~~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 it is difficult to measure the ~~foreseeable future, a significant recurring expense in our business~~effect and ~~an important part~~impact of ~~our compensation strategy. Specifically, our stock-based compensation expense for each of~~the COVID-19 pandemic on revenue during the nine months ended September 30, ~~2017~~2021 and September 30, ~~2016 was $2.8 million~~2020, the travel and ~~$2.4 million, respectively, which represented 28.1%~~other restrictions that started in March 2020 resulted in a significant slowdown in our proof-of-concept field studies and ~~33.0%, respectively,~~sales efforts. While we were able to resume field studies in some important projects by mid-year 2020 and initially believed that we would re-start all our most significant field studies as we obtained limited waivers of certain travel bans, we still have delays on certain projects that might remain on hold until certain businesses and government entities return to more normal operations. Continued delays or new restrictions on travel or operations as a result of new outbreaks and variants could impact our results in future quarters. Initially, we believed that pest control would continue through the COVID-19 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 COVID-19 pandemic continue. Extended stay at home orders across the world, whether imposed by governments or individual businesses, 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 COVID-19 pandemic. This may delay or impede their ability to make near term purchases of our ~~total operating expenses~~products. While we have stocked certain long lead time inventory raw material ingredients, any prolonged impact on the suppliers we rely on for ~~those periods.~~the purchase of these items by the COVID-19 pandemic could impact future manufacturing operations.

Components of our Results of Operations

Grant Revenue

~~To date, we~~Grant revenue is comprised entirely of grant funding provided by the City of Phoenix, Arizona for jobs created and new employee training in the City of Phoenix, Arizona during the calendar year 2021.

Sales

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

Cost of Sales

Cost of sales consist primarily of cost of products sold, including scrap and reserves for obsolescence. We continue to focus on improving our cost structure, with the goals of shifting resources to commercialization, significantly reducing our year-over-year burn rate and achieving a 50% or greater gross margin. Steps have ~~generated $34,000, from product sales,~~included relocating to more cost-efficient space, organizational restructuring, improving our manufacturing and wesupply processes and reducing staffing. We expect to ~~generate increased revenue~~realize the benefits from ~~the sale of products or royalties~~these steps in the fourth quarter of 2017. Except for the minimal product sales noted above, all our revenue to date has been derived from payments received in connection with research grants and licensing fees received as a result of our execution of the former license agreement with Neogen.coming quarters.

We recognized product sales revenue of $17,000 and $-0- for the three months ended September 30, 2017 and 2016, respectively, and $34,000 and $-0- and for the nine months ended September 30, 2017 and 2016, respectively. In addition, for the nine months ended September 30, 2016, we recognized revenue of $139,000 under our former license agreement with Neogen and $122,000 under NIH grants. We do not anticipate additional grant revenue under the NIH grants or additional revenue from our former license agreement with Neogen.

Operating Expenses

Research and Development Expenses

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

●

~~Employee-related~~Employee related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research and development functions;

●

Expenses incurred in connection with the development of our product ~~candidates;~~candidates [including related regulatory and production expenses]; and

●

Facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies.

We expense research and development costs as incurred.

~~At this time, we cannot reasonably estimate the costs for completing the development of ContraPest or the cost associated with the development of any of our other product candidates.~~

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

~~General and Administrative Expenses~~

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. 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 anticipate that our general and administrative expenses may increase in the future as we increase our headcount to support commercialization of any approved products and further development of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company.

We plan to continue to hire employees to support our commercialization of any approved products and further development of our product candidates, and anticipate that we will 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 general and administrative expenses for the foreseeable future.

~~Other Income (Expense), Net~~

~~Interest Income~~. Interest income consists primarily of interest income earned on cash and cash equivalents. Our interest income has not been significant due to nominal cash and investment balances and low interest earned on invested balances.

~~Interest Expense~~. Interest expense in 2017 consists primarily of interest accrued on our lease and note commitments. Interest expense in 2016 consisted primarily of interest on $2.9 million in convertible and other promissory notes we issued during 2014, 2015 and 2016, most of which was converted or redeemed by December 31, 2016.

~~Other Income (Expense), Net~~~~. Other income (expense), net; consists primarily of net losses on extinguishment of convertible and non-convertible, secured and unsecured promissory notes.~~

~~Income Taxes~~

Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits, due to our uncertainty of realizing a benefit from those items. As of December 31, 2016, we had federal net operating loss carryforwards of $34.0 million which begin to expire in 2021 and state net operating loss carryforwards of $27.8 million which began to expire in 2016, unless utilized.

~~Comparison of the Three and Nine Months Ended September 30, 2017 and 2016~~

~~The following table summarizes our results of operations for the three and nine months ended September 30, 2017 and 2016:~~

~~SENESTECH, INC.~~

~~CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS~~

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

~~(Unaudited)~~

For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2017 2016 2017 2016
Revenue:
License revenue $ — $ 131 $ — $ 261
Product Sales 17 — 34 —
Total revenue 17 131 34 261
Cost of goods sold 11 — 27 —
Gross profit 6 131 7 261

Operating expenses:
Research and development 721 829 2,517 1,964
General and administrative 2,235 1,932 7,506 5,259
Total operating expenses 2,956 2,761 10,023 7,223

Net operating loss (2,950 ) (2,630 ) (10,016 ) (6,962 )

Other income (expense):
Interest income 9 — 20 —
Interest expense (33 ) (6 ) (54 ) (49 )
Interest expense, related parties — (9 ) (1 ) (43 )
Loss on extinguishment of unsecured promissory note — (59 ) — (171 )
Other income (expense) 37 — 76 51
Total other income (expense) 13 (74 ) 41 (212 )

Net loss (2,937 ) (2,704 ) (9,975 ) (7,174 )

Series A convertible preferred stock dividends — (30 ) — (90 )

Net loss and comprehensive loss $ (2,937 ) $ (2,734 ) $ (9,975 ) $ (7,264 )

~~Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016:~~

~~Revenue~~

~~Revenue was $17,000 for the three months ended September 30, 2017, compared to $131,000 for three months ended September 30, 2016.~~

The $17,000 revenue recognized for the three months ended September 30, 2017 represented sales of our product, ContraPest. The $131,000 of revenue for the three months ended September 30, 2016, was earned from research grants and from our former license agreement with Neogen, which was terminated in January 2017. We did not recognize any license fees in 2017 under this agreement.

~~Cost of Goods Sold~~

Cost of goods sold was $11,000 for the three months ended September 30, 2017, compared to $-0- for three months ended September 30, 2016. The increase in cost of goods sold corresponded to the product launch of ContraPest.

~~Research and Development Expenses~~

Three Months Ended
September 30, Increase /
2017 2016 (Decrease)
(in thousands)
Direct research and development expenses:
Unallocated expenses:
Personnel related (including stock-based compensation) $ 449 $ 701 $ (252)
Professional Fees/Consultants 39 10 29
Facility related 76 51 25
Other 157 67 90
Total research and development expenses $ 721 $ 829 $ (108)

Research and development expenses were $721,000 for the three months ended September 30, 2017, compared to $829,000 for the same period in 2016. The $108,000 decrease in research and development expenses was primarily due to a decrease of $252,000 in personnel-related costs, offset by increases in professional fees/consultant expenses of $29,000, facility expenses of $25,000 and other expenses of $90,000. The decrease in personnel-related costs resulted from lower research and development salaries of $219,000 due to reduced headcount and a decrease in stock-based compensation expense of $50,000, offset by higher payroll taxes of $17,000. Professional services and consulting expenses increased $29,000 for the three months ended September 30, 2017, compared to the same period in 2016 primarily due to an increase in synthetic triptolide research fees and legal fees. Rent and utilities for the three months ended September 30, 2017 increased $25,000 over the same period in 2016 due primarily to the expansion into the research space at Northern Arizona Center for Entrepreneurship and Technology (“NACET”) facility. Other expenses increased by $90,000 from $67,000 for the three months ended September 30, 2017 as compared to the same period in 2016, primarily due to increased travel expenses of $34,000 related to field team support due to on-site evaluations of potential customers and research operations and increased depreciation expense of $70,000 due to fixed asset additions in our research operations offset by lower lab fees of $14,000. As noted last quarter, we have now filed in all 50 states and the District of Columbia and have begun the process of refiling in some states.

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, sales, marketing and administrative functions. Selling, general and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, consulting, accounting and audit services. We plan to continue to utilize various forms of stock-based compensation awards in order to attract and retain qualified employees. As a result, we anticipate that stock-based compensation expense will continue to represent a significant portion of our selling, general and administrative expenses for the foreseeable future.

Interest Income

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

Interest Expense

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

Other Income (Expense), Net

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

Income Taxes

Deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company’s effective tax rate for the nine months ended September 30, 2021, as well as for the year ended December 31, 2020, has been impacted by the full valuation allowance on the Company’s deferred tax assets.

The Company has not recorded any U.S. federal or state income tax benefits for our net operating losses incurred since inception or for our research and development tax credits generated to date, due to the uncertainty regarding our ability to realize a benefit from these tax attributes in the future. Based on tax return activity through December 31, 2020, the Company has federal and state net operating loss carryforwards of approximately $69.1 million and $55.7 million, respectively, not considering any potential Internal Revenue Code of 1986 (“IRC”) Section 382 annual limitation discussed below. The Company is accruing additional net operating losses in calendar year 2021, 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 $69.1 million of federal loss carryforwards are approximately $24.7 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 are subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code od 1986, and similar state tax provisions due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383 results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period. The Company has not conducted an analysis of an ownership change under section 382. To the extent that a study is completed and an ownership change is deemed to occur, the Company’s net operating losses could be limited.

During the quarter ended June 30, 2021, the Company received notification that a loan to the Company under the Paycheck Protection Program (the “PPP”) in the amount of approximately $646 thousand was forgiven in full pursuant to the PPP program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Section 1106(i) of the CARES Act specifically requires taxpayers to exclude canceled indebtedness from PPP loans from gross income, and accordingly, the debt forgiveness amount is nontaxable to the Company. Subsequent to the passage of the CARES Act, the IRS issued Notice 2020-32, which precludes a deduction for an expense that would otherwise be deductible if the payment results in the forgiveness of a loan, thereby preventing entities from claiming a double tax benefit on the qualifying expenses for PPP loans. On December 27, 2020, the Consolidated Appropriations Act (“CAA”) was signed into law, which reverses existing IRS guidance provided in Notice 2020-32 by allowing taxpayers to fully deduct any business expenses, regardless of whether the expense was paid for using forgiven PPP loan proceeds. None of the other provisions of the CARES Act or CAA had a material impact to the Company’s tax accounts.

Comparison of the Three Months Ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2021			2020			2021			2020

Revenue:
Grant revenue	$	24		$	-		$	24		$	-
Sales		159			77			407			185
Total revenue		183			77			431			185

Cost of sales		106			41			275			106
Gross profit		77			36			156			79

Operating expenses:
Research and development		514			380			1,424			902
Selling, general and administrative		1,816			1,568			5,173			5,040
Total operating expenses		2,330			1,948			6,597			5,942

Net operating loss		(2,253	)		(1,912	)		(6,441	)		(5,863	)

Other income (expense):
Interest income		2			-			5			2
Interest expense		(2	)		(7	)		(10	)		(22	)
Payroll Protection Program loan forgiveness		-			-			650			-
Other income		-			-			22			18
Total other income		-			(7	)		667			(2	)

Net loss and comprehensive loss		(2,253	)		(1,919	)		(5,774	)		(5,865	)
Deemed dividend-warrant price protection-revaluation adjustment		-			-			-			414
Net loss attributable to common shareholders	$	(2,253	)	$	(1,919	)	$	(5,774	)	$	(6,279	)

Weighted average common shares outstanding - basic and fully diluted		12,190,257			3,398,832			10,850,197			2,593,288

Net loss per common share - basic and fully diluted	$	(0.18	)	$	(0.56	)	$	(0.53	)	$	(2.42	)

Grant Revenue

Grant revenue for the three months ended September 30, 2021 was $24,000 compared to $0 in the same period of 2020 and was granted for jobs created and related new employee training in the City of Phoenix, Arizona during the three months ended September 30, 2021.

Sales

Sales, shown net of sales discounts and promotions, were $159,000 for the three months ended September 30, 2021, compared to $77,000 for the same period in 2020. Sales increased by $82,000 in the three months ended September 30, 2021 due, in part, to the continued focus on 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. While these initiatives continue to progress, we believe the benefits of these initiatives continue to be impacted by reduced spending by customers due to the COVID-19 pandemic.

Cost of Sales

Cost of sales was $106,000 or 66.7% of sales, exclusive of grant revenue, for the three months ended September 30, 2021, compared to $41,000 or 53.2% of sales, exclusive of grant revenue, for the three months ended September 30, 2020. The increase in cost of sales of $65,000 in the three months ended September 30, 2021 is primarily due to higher sales volume as well as the impact of increases in manufacturing scrap associated with manufacturing scale up activities during 2021. The increase in cost of sales as a percentage of sales was primarily due to the impact of increased new customer sales incentives during the quarter ended September 30, 2021 and increases in manufacturing scrap associated with manufacturing scale up activities during 2021 as noted above.

We continue to focus on manufacturing process improvement and efficiencies and anticipate cost of sales as a percentage of sales will improve in the future due to manufacturing efficiencies as a result of scale-up activities.

Gross Profit

Gross profit for the three months ended September 30, 2021 was $77,000 or 42.1% of total revenue, compared to a gross profit of $36,000 or 46.8% of total revenue, for the same period in 2020. The increase in gross profit of $41,000 for the three months ended September 30, 2021 as compared to the same period in 2020 was primarily due to the impact of increased sales volume and the receipt of $24,000 of training grant revenues in the period. The decrease in gross profit as a % of net sales was a direct result of the impact of increased new customer sales incentives during the quarter ended September 30, 2021 as well as the impact of increases in manufacturing scrap associated with manufacturing scale up activities during 2021 noted above.

Research and Development Expenses

	Three Months Ended September 30,				Increase
	2021		2020		(Decrease)
	(in thousands)
Direct research and development expenses:
Personnel related (including stock-based compensation)	$	177	$	191	$	14
Professional fees		92		106		14
Facility-related		26		46		20
Other		219		37		(182	)
Total research and development expenses	$	514	$	380	$	134

Research and development expenses were $514,000 for the three months ended September 30, 2021, compared to $380,000 for the same period in 2020. The $134,000 increase in research and development expenses was primarily due to an increase of $182,000 in other research and development costs, offset by a decrease in facility related expenses of $20,000, a decrease in professional fees of $14,000 and a decrease in personnel related expenses of $14,000.

Facility-related expenses decreased $20,000 for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, due primarily to the expiration of a facility lease of 7,632 square feet of manufacturing space in Flagstaff, Arizona at December 31, 2020.

Personnel related expenses decreased $14,000 in the three months ended September 30, 2021 compared to the same period in 2020 due primarily to delays in hiring as a result of employee turnover.

Professional fees decreased $14,000 in the three months ended September 30, 2021 compared to the same period in 2020 due primarily to a decrease in regulatory legal expenses.

The increase in other research and development expenses of $182,000 in the three months ended September 30, 2021 compared to the same period in 2020 was primarily due to increased shipping expenses due to higher sales volume and field and regulatory compliance studies. We also continue to incur expenses in improving our manufacturing process and formulation.

Selling, General and Administrative Expenses

	Three Months Ended September 30,				Increase
	2021		2020		(Decrease)
	(in thousands)
Direct selling, general and administrative expenses:
Personnel related (including stock-based compensation)	$	995	$	809	$	(186	)
Professional fees		335		250		(85	)
Facility-related		38		44		6
Other		448		465		17
Total selling, general and administrative expenses	$	1,816	$	1,568	$	(248	)

Selling, general and administrative expenses were ~~$2.2~~approximately $1.8 million for the three months ended September 30, ~~2017,~~2021, as compared to ~~$1.9~~approximately $1.6 million for the three months ended September 30, ~~2016.~~2020. The increase of ~~$0.3 million~~$200,000 in selling, general and administrative expenses was primarily due to an increase of ~~$228,000~~$186,000 in personnel related expenses, an increase of $89,000 in insurance expenses related to the increased D&O insurance expense as a public company, an increase of $18,000 in non-capitalized furniture and computer equipmentnet salary costs and an increase in ~~occupancy expenses~~professional fees of ~~$8,000,~~$85,000, offset by a ~~$24,000~~ decrease of $17,000 in other selling, general and administrative expenses and a decrease in facility related expenses of $6,000.

The increase in net salary costs of $186,000 was due primarily to incentive bonuses accruals of $131,000 in the three months ended September 30, 2021, the impact of incremental strategic hiring in the three months ended June 30, 2021 of $50,000 and increased stock compensation due to the issuance of certain common stock option awards. The increase in professional services ~~fees~~expenses of $85,000 was primarily due to increased legal expenses incurred in patent registration filings.

The decrease in other selling, general and administrative expenses of $17,000 was primarily due to ~~lower audit~~reduced miscellaneous expenses offset by increased travel expenses and ~~accounting fees~~increased selling and ~~a $20,000 reduction in travel and entertainment expenses.~~ marketing initiatives.

The increase in ~~personnel~~travel expenses was a direct result of eased COVID-19 travel restrictions that were put in place at the end of March 2020. The increase in marketing expenses is a result of costs associated with rebranding activities to highlight the commercial focus of the Company and continued on-line marketing program expansion in the three months ended September 30, 2021.

The decrease in facilities related expenses ~~consisted~~ of an increase of $144,000 in net additional salary costs, an increase in stock based compensation of $61,000, an increase in payroll taxes and processing fees of $35,000 and an increase of $32,000 in recruiting expenses offset by a $44,000 reduction in employee benefits due to reduced relocation and benefits costs.

~~Interest Expense~~

~~We recorded $24,000 of interest expense, net~~$6,000 for the three months ended September 30, ~~2017, compared to $6,000 for~~2021 over the same period in ~~2016. The increase~~2020 is a direct result of the expiration of a facility lease of 7,632 square feet of manufacturing space in Flagstaff, Arizona at December 31, 2020.

Interest Income/Expense, Net

We recorded interest expense, net of ~~$18,000 was the result of increased debt in the form of notes payable and leases on equipment acquisitions during 2017.~~

~~Other Income (Expense), Net~~

~~We recorded $37,000 of other income, net~~$0 for the three months ended September 30, ~~2017,~~2021, as compared to ~~$59,000~~interest expense, net of ~~other expense~~$7,000 for the same period in ~~2016.~~2020. The ~~$96,000 net~~$7,000 decrease in ~~other~~interest expense, net for the period was ~~primarily due to lower~~a result of decreased interest expense ~~related~~on certain notes payable and finance leases that expired after September 30, 2020 and increased interest income in the three months ended September 30, 2021 as a result of higher investments in cash invested in money market accounts.

Other Income (Expense)

Other income, net, of $0 for the three months ended September 30, 2021 was unchanged as compared to the ~~year-over-year fair market value adjustment of our convertible promissory notes and losses on the extinguishment of said promissory notes.~~same period in 2020.

Nine Months Ended September 30, ~~2017~~2021 compared to Nine Months Ended September 30, ~~2016~~2020::

Grant Revenue

~~Revenue~~

~~Revenue was $34,000 for the nine months ended September 30, 2017, compared to $261,000 for nine months ended September 30, 2016.~~

~~The $34,000 revenue recognized for the nine months ended September 30, 2017 represented sales of our product, ContraPest. The $261,000 of~~Grant revenue for the nine months ended September 30, ~~2016~~2021 was ~~earned from research grants~~$24,000 compared to $0 in the same period of 2020 and ~~from our former license agreement with Neogen, which~~ was ~~terminated~~granted for jobs created and related new employee training in ~~January 2017. We did not recognize any license fees in 2017 under this agreement.~~the City of Phoenix, Arizona during the nine months ended September 30, 2021.

~~Cost of Goods Sold~~Sales

~~Cost~~Sales, shown net of ~~goods sold was $27,000~~sales discounts and promotions, were $407,000 for the nine months ended September 30, ~~2017,~~2021, compared to ~~$-0-~~$185,000 for the same period in 2020. Sales increased by $222,000 in the nine months ended September 30, ~~2016.~~2021 due, in part, to the continued focus on 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. We believe the benefits of these initiatives continue to be impacted by reduced spending by customers due to the COVID-19 pandemic.

Cost of Sales

Cost of sales was $275,000 or 67.6% of sales, exclusive of grant revenue, for the nine months ended September 30, 2021, compared to $106,000 or 57.3% of sales, exclusive of grant revenue, for the nine months ended September 30, 2020. The increase in cost of ~~goods sold corresponded~~sales of $169,000 in the nine months ended September 30, 2021 is primarily due to higher sales volume as well as the impact of increases in manufacturing scrap associated with manufacturing scale up activities during 2021. The increase in cost of sales as a percentage of net sales was primarily due to the ~~product launch~~impact of ~~ContraPest. Cost~~increased new customer sales incentives during the nine months ended September 30, 2021 and increases in manufacturing scrap associated with manufacturing scale up activities as noted above.

We continue to focus on manufacturing process improvement and efficiencies. We anticipate cost of ~~goods sold~~sales as a percentage of sales ~~for~~will improve in the ~~period was approximately 80%~~future due to manufacturing ~~inefficiencies surrounding~~efficiencies as a result of scale-up activities.

Gross Profit

Gross profit for the ~~start-up~~nine months ended September 30, 2021 was $156,000 or 36.2% of total revenue, compared to a gross profit of $79,000 or 42.7% of total revenuefor the same period in 2020. The increase in gross profit of $77,000 for the nine months ended September 30, 2021 as compared to the same period in 2020 was primarily due to the impact of increased sales volume and the receipt of $24,000 of training grant revenues received. The decrease in gross profit as a % of net sales was a direct result of the impact of increased new customer sales incentives during the nine months ended September 30, 2021 as well as the increased manufacturing ~~line and~~scrap discussed above, offset by the ~~cost~~gross profit impact of ~~replacement product shipped to replace damaged product.~~grant revenue.

Research and Development Expenses

Nine Months Ended
September 30, Increase/
2017 2016 (Decrease)
(in thousands)
Direct research and development expenses:
Unallocated expenses:
Personnel related (including stock-based compensation) $ 1,471 $ 1,384 $ 87
Professional Fees/Consultants 272 142 130
Facility related 228 157 71
Other 546 281 265
Total research and development expenses $ 2,517 $ 1,964 $ 553

	Nine Months Ended September 30,				Increase
	2021		2020		(Decrease)
	(in thousands)
Direct research and development expenses:
Personnel related (including stock-based compensation)	$	669	$	414	$	(255	)
Professional fees		217		107		(110	)
Facility-related		72		122		50
Other		466		259		(207	)
Total research and development expenses	$	1,424	$	902	$	(522	)

Research and development expenses were ~~$2.5~~$1.4 million for the nine months ended September 30, ~~2017,~~2021, compared to ~~$2.0 million~~$902,000 for the same period in ~~2016.~~2020. The $500,000 increase in research and development expenses was ~~partially~~primarily due to an increase of ~~$87,000~~$255,000 in manufacturing personnel-related ~~costs. This~~costs relative to the same period of 2020, which was impacted by the COVID-19 pandemic, in addition to increases in manufacturing and regulatory headcount to meet current and future demand.

The increase in ~~personnel-related costs resulted from~~professional fee expenses of $110,000 in the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to increased regulatory legal expenses and expenses related to field and regulatory compliance studies.

The increase in other research and development ~~salaries~~expenses of ~~$47,000~~$207,000 in the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to ~~headcount additions in 2017~~increased expenses related to field and ~~an increase in stock-based compensation expense of $40,000. Professional services~~regulatory compliance studies and ~~consulting~~increased shipping expenses ~~increased $130,000~~due to higher sales volume during the period.

Facility-related expenses decreased $50,000 for the nine months ended September 30, ~~2017~~2021, compared to ~~the same period in 2016 primarily due to an increase in synthetic triptolide research fees and legal fees.~~

~~State registration and filing fees increased $27,000 for~~ the nine months ended September 30, ~~2017 compared~~2020, due primarily to the ~~same period~~expiration of a facility lease of 7,632 square feet of manufacturing space in 2016 due to the increase in state filings and registrations as we have now filed in all 50 states and the District of Columbia and have begun the process of refiling in some states. Travel expenses related to field team support increased $97,000 for nine months ended September 30, 2017 over the same period in 2016 due to on-site evaluations of potential customers and research operations. Rent and utilities for the nine months ended September 30, 2017 increased $51,000 over the same period in 2016 due to the expansion into the research spaceFlagstaff, Arizona at ~~our NACET facility. Depreciation expense increased $62,000 for the nine months ended September 30, 2017 over the same period in 2016 due to fixed asset additions in our research operations.~~December 31, 2020.

We continue to investigate applications of our core technology to other product candidates, which includes laboratory tests and academic collaborations. We also continue to develop our supply chain, particularly identifying and improving our sourcing of triptolide, a key active ingredient for our product candidates.

Selling, General and Administrative Expenses

	Nine Months Ended September 30,				Increase
	2021		2020		(Decrease)
	(in thousands)
Direct selling, general and administrative expenses:
Personnel related (including stock-based compensation)	$	3,046	$	2,591	$	(455	)
Professional fees		825		1,108		283
Facility-related		119		130		11
Other		1,183		1,211		28
Total selling, general and administrative expenses	$	5,173	$	5,040	$	(133	)

~~General~~

Selling, general and administrative expenses were ~~$7.5~~approximately $5.2 million for the nine months ended September 30, ~~2017,~~2021, as compared to ~~$5.3~~approximately $5.0 million for the nine months ended September 30, ~~2016.~~2020. The increase of ~~$2.2 million~~$200,000 in selling, general and administrative expenses was primarily due to an increase of ~~$1.5 million~~$455,000 in ~~personnel~~net salary costs, offset by a decrease of $283,000 in professional service expenses, a decrease in other selling, general and administrative expenses of $28,000 and a decrease in facility related expenses ~~an increase in travel expenses~~ of $113,000, an increase in insurance expense of $248,000, a $178,000 increase in office supplies and non-capitalized furniture and computer equipment and an increase in marketing, stock service and shareholder relations expenses of $23,000. $11,000.

The increase in ~~personnel related~~net salary costs of $455,000 was due primarily to recognition of incentive compensation expense for employees of $362,000, severance expense of $40,000 for the elimination of in-house marketing program headcount in June 2021 and increased stock compensation due to the issuance of certain common stock option awards of $53,000 in the nine months ended September 30, 2021.

The $283,000 decrease in professional services expenses ~~consisted of an increase in stock based compensation of $450,000 and an increase of $1.1 million in net additional salary costs. The increase in insurance~~for the nine months ended September 20, 2021 over the nine months ended September 30, 2020 was primarily due to ~~increased director~~reduced legal expenses related to a litigation settlement incurred in the nine months ended September 30, 2020 that were not incurred in the same period of 2021, partially offset by an increase in professional services expenses relating to legal patent registration filings in the nine months ended September 30, 2021 that were not incurred in the same period of 2020.

The $28,000 decrease in other selling, general and ~~officer insurance as a result of the public becoming a public reporting company in December of 2016. Likewise, marketing, stock service and shareholder relations~~administrative expenses ~~increased due to the Company becoming a commercial, public reporting company in December of 2016.~~

~~Interest Expense~~

~~We recorded $35,000 of interest expense, net~~ for the nine months ended September 30, ~~2017,~~2021 compared to ~~$92,000~~the same period in 2020 was primarily due to $34,000 of increased marketing expenses is a result of costs associated with rebranding activities to highlight the commercial focus of the Company and on-line marketing program expansion and increase in travel expenses as a direct result of eased COVID-19 travel restrictions that were put in place at the end of March 2020, offset by a $62,000 decrease in transfer agent fees in the nine months ended September 30, 2021 over the same period of 2020 was due to expenses related to a 20-for-1 reverse stock split effected by the Company in February 2020.

The decrease in facilities related expenses of $11,000 for the nine months ended September 30, 2021 over the same period in 2020 is a direct result of the expiration of a facility lease of 7,632 square feet of manufacturing space in Flagstaff, Arizona at December 31, 2020.

Interest Income/Expense, Net

We recorded interest expense, net of $5,000 for the nine months ended September 30, 2021, as compared to interest expense, net of $20,000 for the same period in ~~2016.~~2020. The $15,000 decrease in interest expense, ~~of $57,000~~net for the period was ~~the~~a result of ~~a decrease of $2.9 million in convertible notes that were issued in 2014 and exchanged for Series B convertible preferred stock in December 2016 partially offset by the increase in~~decreased interest ~~related to increased debt in the form of~~expense on certain notes payable and finance leases ~~on equipment acquisitions~~that expired during ~~2017.~~2020 and increased interest income as a result of higher investments in cash invested in money market accounts..

Paycheck Protection Program Loan Forgiveness

PPP loan forgiveness income for the nine months ended September 30, 2021 represents the forgiveness of a promissory note pursuant to the PPP under the CARES Act that the Company secured under this program.

Other Income (Expense)~~, Net~~

~~We recorded $76,000 of other~~Other income, net, was $22,000 for the nine months ended September 30, 2021 as compared to $18,000 for the period ended September 30, 2020. Other income, net for the nine months ended September 30, ~~2017, compared to $120,000 of~~2021 primarily represented a payroll benefits accrual from 2019 that was reversed as the liability period had expired. The $18,000 other ~~expense~~income, net for the ~~same~~nine month period ~~in 2016. The $196,000 net decrease in other expense was primarily due to the expense related to the year-over-year fair market value adjustment of our convertible promissory notes and losses~~ended September 30, 2020 represented recognized gains on the ~~extinguishment~~sale of ~~said promissory notes.~~fixed assets during the period.

Liquidity and Capital Resources

Since our inception, we have sustained significant operating losses in the course of our research and development activities ~~we have sustained significant operating losses~~ and ~~expects~~commercialization efforts and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under ~~our~~a former license agreement with Neogen. During the first nine months of 2017, we began full scale marketing of our first product, ContraPest and we continue to develop other product candidates, which are in various phases of development.license. We have primarily funded our operations to date ~~primarily with proceeds from~~through the sale of equity securities, including convertible preferred stock, common stock and ~~preferred stock, the issuance~~warrants to purchase common stock; and debt financing, consisting primarily of convertible ~~and other promissory notes and, to a lesser extent, payments received under research grants and pursuant to our former license agreement with Neogen.~~ notes.

Through September 30, ~~2017,~~2021, we ~~had~~have received net proceeds of ~~$49.2~~$89.3 million from our sales of common stock, ~~and~~ 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 ~~$1.6~~$1.4 million ~~from licensing fees.~~ in net product sales. As of September 30, 2021, we had an accumulated deficit of $110.0 million and cash and cash equivalents of $11.1 million.

~~The Company’s~~As discussed in Note 8 - Borrowings, of our Notes to Condensed Financial Statements, on April 15, 2020, the Company also received cash proceeds of $645,700 from the PPP of the Coronavirus Aid, Relief, and Economic Security Act. We used the proceeds from the PPP loan to retain employees, maintain payroll and make lease, interest and utility payments. This loan was fully forgiven, under terms of the PPP, on June 14, 2021.

Based upon ~~its~~our current operating plan, ~~the Company expects~~we expect that cash and cash equivalents ~~and highly liquid, short term investments~~ at September 30, ~~2017,~~2021, in combination with anticipated revenue and additional sales of our equity securities, will be sufficient to fund ~~its~~our current operations for at least the ~~near future.~~next 12 months. We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ContraPest in the United States. However, if anticipated revenue targets and margin targets are not achieved or expenses are more than we have budgeted, we may need to raise additional financing before that time. If we need more financing, including within the ~~Company is likely~~next 12 months, and we are unable to raise necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern. In any event, we may require additional capital in order to fund ~~its~~our operating losses and research and development activities ~~by issuing additional~~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 ~~and equity instruments, until such time as the Company is profitable.~~financing. If such equity or debt financing is not available at adequate levels ~~the Company will~~or on acceptable terms, we may need to ~~reevaluate its plans.~~

~~Off-Balance Sheet Arrangements~~

~~As of September 30, 2017, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.~~

delay, limit or terminate commercialization and development efforts or discontinue operations.

Additional Funding Requirements

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

In particular, we expect to incur substantial and increased expenses as we:

	●	Work to maximize market acceptance for, and generate sales of, our products;

	●	Ramp up of our sales, marketing, advertising and distribution expenses of ContraPest and any other product candidates for which we may receive regulatory approval;

	●	Continue the ~~research and~~ development of ContraPest and our other product candidates, including engaging in any necessary field studies;

	●
	●	Seek ~~ongoing~~additional, and to maintain, regulatory approvals for ContraPest and our other product candidates;

	●
	●	Scale up manufacturing processes and quantities to ~~prepare for the commercialization~~meet future demand of ContraPest and any other product candidates for which we receive regulatory approval;

	●	~~Establish an infrastructure for the sales, marketing and distribution~~
	●	Continue product development of ContraPest and ~~any other product candidates for which we may receive regulatory approval;~~

●

~~Attempt to achieve market acceptance for our products;~~

●

~~Expand~~advance our research and development activities and advance the ~~discovery~~research and development programs for other product candidates;

	●
	●	Maintain, expand 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.~~company; and

	●	Expand regulatory approvals for ContraPest, with an effort to make the product more user friendly and available for use in an increased number of applications.

We believe we will need additional financing to fund these continuing and additional expenses.

Cash Flows

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

Nine Months Ended
September 30,
2017 2016
Cash used in operating activities $ (7,596 ) $ (4,240 )
Cash used in investing activities (3,825 ) (54 )
Cash provided by financing activities 294 5,498
Net increase (decrease) in cash and cash equivalents $ (11,127 ) $ 1,204

	Nine Months Ended September 30,
	2021			2020
Cash used in operating activities	$	(6,033	)	$	(5,496	)
Cash used in investing activities		(83	)		(4	)
Cash provided by financing activities		13,556			6,281
Net increase in cash and cash equivalents	$	7,440		$	781

Operating Activities.

During the nine months ended September 30, ~~2017,~~2021, operating activities used ~~$7.6~~$6.0 million of cash, primarily resulting from our net loss of ~~$10.0~~$5.8 million, ~~and by~~ changes in our operating assets and liabilities of ~~$0.6 million, partially~~$387,000, offset by non-cash charges of ~~$3.0 million.~~$128,000, consisting primarily of stock-based compensation, depreciation and amortization and by the Paycheck Protection Program loan forgiveness during the period. Our net loss was primarily ~~attributed~~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 nine months ended September 30, ~~2017~~2021 of $387,000 consisted primarily of ~~a decrease~~an increase in prepaid expenses of ~~$165,000 and a decrease~~$403,000, an increase in ~~receivables~~inventory of ~~$3,000~~$62,000 and an increase in ~~deferred rent~~accounts receivable of ~~$12,000,~~$54,000, offset by a net ~~decrease~~increase in accrued expenses and accounts payable of ~~$473,000,~~$121,000 and a ~~net increase in inventories of $337,000 and an increase in deposits of $8,000. The net~~ decrease in ~~accrued expenses and accounts payable was primarily due to timing~~other assets of ~~expense occurrence and payables management, offset by our payment of the $1.0 million contract cancellation settlement accrual in January.~~ $11,000.

During the nine months ended September 30, ~~2016,~~2020, operating activities used ~~$4.2~~$5.5 million of cash, primarily resulting from our net loss of ~~$7.2~~$5.9 million ~~partially offset by non-cash charges of $3.0 million~~ and ~~by cash provided~~ by changes in our operating assets and liabilities of ~~$62,000.~~$285,000, offset by non-cash charges of $654,000, consisting primarily of stock-based compensation, depreciation and amortization. Our net loss was primarily ~~attributed~~attributable to research and development activities and our selling, general and administrative expenses, as we generated limited ~~research grant and licensing~~product revenue during the period. Net cash ~~provided~~used by changes in our operating assets and liabilities for the nine months ended September 30, ~~2016~~2020, consisted primarily of a ~~$175,000 decrease in deferred revenue related to our license agreement with Neogen and a $202,000 decrease in accrued expenses and accounts payable. The~~net decrease in accrued expenses and accounts payable ~~was due to increased payments as~~of $460,000 and an increase in prepaid expenses of $24,000 offset by a ~~result~~decrease in inventory of ~~the receipt~~$78,000, a decrease in receivables of ~~cash raised~~$119,000 and a decrease in ~~financing activities.~~other assets of $2,000.

Investing ~~Activities~~Activities.

For the nine months ended September 30, ~~2017, we~~2021, net cash used ~~$3.8 million~~ in investing activities ~~consisting of $2.9 million of purchases in securities~~was $83,000 due to ~~be held to maturity and $885,000 in~~the purchases of property, plant and ~~equipment.~~equipment and increases in construction in progress of $84,000, offset by proceeds on sale of property and equipment of $1,000.

For the nine months ended September 30, ~~2016, we~~2020, net cash used ~~$54,000 of cash~~ in investing activities ~~consisting~~was $4,000 due to the sale of property and equipment of $44,000, offset by purchases of property, plant and ~~equipment.~~equipment and construction in progress of $40,000.

Financing ~~Activities~~Activities.

During the nine months ended September 30, ~~2017,~~2021, net cash ~~generated from~~provided by financing activities was ~~$294,000~~$13.6 million as a result of ~~$437,000 of~~$12.4 million in net proceeds from the issuance ~~notes payable~~of common stock and net proceeds of $1.2 million from the exercise of warrants, offset by $40,000 related to payments of ~~$66,000~~finance lease obligations, $36,000 related to repayments of notes payable and ~~notes payable~~$17,000 for the payment of employee withholding taxes related ~~party and $77,000 in payments of capital lease obligations.~~to share based awards.

During the nine months ended September 30, ~~2016,~~2020, net cash provided by financing activities was ~~$5.5~~$6.3 million as a result of ~~$6.2~~$5.7 million ofin net proceeds from the issuance of ~~shares of~~ common stock ~~in our rights offering discussed elsewhere in this prospectus, $326,000~~and net proceeds of ~~proceeds received from our issuance of notes payable, $896,000 of proceeds received~~$646,000 from the issuance of ~~Series B convertible preferred stock, and $449,000 of proceeds received from~~a note pursuant to the ~~exercise of stock options, all of which were partially~~Paycheck Protection Program, offset by ~~payments~~$44,000 of ~~$1.6~~repayments related to ~~the~~ notes payable ~~notes payable related party~~ and ~~convertible notes payable, $16,000~~$62,000 in repayments of ~~capital~~finance lease ~~repayments and $801,000 of deferred offering cost payments.~~obligations.

~~Recent Developments~~

~~None~~

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in 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 accounting policies are described in more detail in Note 2 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

~~We recognize revenue in accordance with~~Effective January 1, 2018, the ~~Financial Accounting Standards Board (the “FASB”)~~Company adopted Accounting Standards Codification (“ASC”)~~, Topic 605,~~ 606 — Revenue ~~Recognition~~from Contracts with Customers (“ASC 606”). ~~Accordingly, we recognize~~Under ASC 606, the Company recognizes revenue from the commercial ~~sale~~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 the Company under ASC 606 are straightforward and similar to the unit of account and performance obligation determination under ASC Topic 605, Revenue Recognition.

~~We have generated~~The Company recognizes revenue when product is shipped at a fixed selling price on payment terms of 30 to 120 days from ~~a license agreement with a strategic partner pursuant to which we had granted to such partner the exclusive license in North America to manufacture, distribute~~invoicing. The Company recognizes other revenue earned from pilot studies, consulting and ~~sell commercial control products based on our intellectual property, which includes ContraPest, for the later of 10 years or the expiration of the patent for ContraPest (if issued).~~

~~The license agreement was subsequently terminated on January 23, 2017.~~

When we receive non-refundable, upfront license fee payments for the exclusive rights to licensing our intellectual property, management determines if such license has stand-alone value. Since management determined that the license to our intellectual property did not have stand-alone value, we recognized revenue attributable to that license on a straight-line basis over the estimated related performance period. Any changes in the estimated period of performance will be accounted for prospectively as a change in estimate.

~~Our licensing agreement also provided for a future fixed amount of contingent milestone payments and contingent sales-based royalties to be received~~implementation services upon the ~~achievement~~performance of ~~milestone events. We recognize~~specific services under the respective service contract.

The Company derives revenue ~~that is contingent upon the achievement~~primarily from commercial sales of ~~a substantive milestone~~products, net of discounts and promotions, as well as consulting and implementation services provided in its entirety in the period in which the milestone is achieved and the milestone payments are due and collectible. A milestone is considered substantive when the consideration payable to us for such milestone has all of the following characteristics: (1) there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved; (2) the event can only be achieved based in whole or part on eitherconjunction with our performance or a specific outcome resulting from our performance; and (3) if achieved, the event would result in additional payments being due to us. In making this assessment in the future, we will consider all facts and circumstances relevant to the arrangement, including whether any portion of the milestone consideration is related to future performance or deliverables. In addition, we will account for sales-based royalties as revenue upon achievement of certain sales milestones. product deployments.

Stock-Based Compensation

We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant, net of estimated forfeitures, in accordance with ASC Topic 718 — Stock Compensation ~~(“ASC 718”)~~. 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 account for stock-based compensation arrangements with non-employees using a fair value approach. The fair value of these stock options is measured using the Black-Scholes option-pricing model reflecting the same assumptions as applied to employee options in each of the reported periods, other than the expected life, which is assumed to be the remaining contractual life of the option. The fair value of the stock options granted to non-employees is re-measured as the stock options vest and is recognized in the statements of operations and comprehensive loss during the period the related services are rendered.

We recorded stock-based compensation expense of approximately ~~$2.8 million~~$214,000 and ~~$2.4 million~~$162,000 for the three months ended September 30, 2021 and September 30, 2020, respectively, and approximately $550,000 and $453,000 for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~September 30, 2020, respectively. We expect to continue to grant stock options and other equity-based awards in the future and continue to ~~the extent that we do, our~~recognize stock-based compensation expense ~~recognized~~ in future ~~periods will likely increase.~~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:

●

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 ~~until a sufficient amount of historical information regarding the volatility of our own common stock price becomes available, or~~ 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.

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. ~~Prior to our initial public offering in December 2016, in~~In the absence of an active market for our common stock, we ~~previously~~ utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of our common stock. In addition, we have conducted periodic assessments of the valuation of our common stock.

The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management’s 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:

Three Months Ended
September 30 Nine Months Ended
September 30,
2017 2016 2017 2016
Research and development $ 85 $ 135 $ 269 $ 309
General and administrative 861 798 2,549 2,097
Total stock-based compensation expense $ 946 $ 933 $ 2,818 $ 2,406

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Research and development	$	1	$	2	$	2	$	7
Selling, general and administrative		213		160		548		446
Total stock-based compensation expense	$	214	$	162	$	550	$	453

The intrinsic value of stock options outstanding as of September 30, ~~2017 is $183,000, of which $968,000 and $(785,000) would have been related to stock options that were vested and unvested, respectively, at that date.~~2021 was $0.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we intend to comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies. We will cease to be an emerging growth company at the end of 2021.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

~~Item~~4.

~~Controls and Procedures~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We ~~maintain~~conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act), under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures ~~that~~(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 ~~the~~ information required to be disclosed in ~~the~~our reports that ~~we file~~are filed or ~~submit~~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 ~~our~~ management, including ~~our Chief Executive Officer~~the principal executive and ~~Chief Financial Officer (or Acting Principal Financial Officer, as the case may be),~~principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. ~~Our management conducted an evaluation (pursuant to Rule 13a-15(b)) of~~

Based on the Exchange Act, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this report. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that ~~our~~these disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There ~~were~~was no ~~changes~~change in our internal control over financial reporting that occurred during the ~~three-month period~~quarter ended September 30, ~~2017~~2021, that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

~~The Company may be subject to~~For information regarding legal proceedings in which we are involved, see Note 12 - Commitments and ~~claims arising from contracts or other matters from time~~Contingencies under the subsection titled “Legal Proceedings” in our Notes to ~~time~~Condensed Financial Statements in ~~the ordinary course~~Part I, Item 1 of ~~business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect~~this Quarterly Report on ~~its financial position, results of operations or liquidity.~~Form 10-Q.

~~Item 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

~~Except as detailed below and disclosed in subsequently filed Quarterly Reports on Form 10-Q, there~~We have ~~been no~~not made material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our 2020 Annual ~~Report on Form 10-K/A for the year ended December 31, 2016.~~Report.

Depending on the commercial success of ContraPest, we may require additional capital to fund our operations. Failure to obtain this necessary capital if needed may force us to delay, limit, or terminate our product development efforts or other operations.

Developing product candidates, including conducting experiments and field studies, obtaining and maintaining regulatory approval and commercializing any products later approved for sale, is a time-consuming, expensive and uncertain process that takes years to complete. We expect our expenses to continue to increase in connection with our ongoing activities, particularly as we advance our commercialization activities. We plan to substantially expand our operations, and as a result of many factors, some of which may be currently unknown to us, our expenses may be higher than expected. Securing additional financing may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates, including ContraPest. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to:

●

~~Significantly delay, scale back or discontinue the development or commercialization of our product candidates, including ContraPest;~~

●

Seek strategic partners for the manufacturing, sales and distribution of ContraPest or any of our other product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; and

●

~~Relinquish, or license on unfavorable terms, our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.~~

~~The occurrence of any of the events described above would have a material adverse effect on our business, operating results and prospects and on our ability to develop our product candidates.~~

If securities or industry analysts, or other sources of information, do not publish research, or publish inaccurate or unfavorable research or other information about our business, our stock price and trading volume could decline.

The trading market for our common stock may depend on the research, reports and other information that securities or industry analysts, or other, third party sources of information, publish about us or our business. We do not have any control over these analysts or other, third party sources of information, and from time to time inaccurate or unfavorable research or other information about our business, financial condition, results of operations and stock ownership may be published. We cannot assure that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline. If incorrect or misleading information is disseminated publicly by third parties about us, our stock price could decline.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~

~~Use~~There have been no recent sales of ~~Proceeds from Public Offering of Common Stock~~

~~In December 2016, we closed our initial public offering (“IPO”),~~unregistered securities not previously disclosed in ~~which we sold 1,875,000 shares of common stock at~~ a price to the public of $8.00 per share. No shares were sold in connection with the underwriters’ option to purchase additional shares. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statementCurrent Report on Form S-1 (File No. 333-213736), which was declared effective by the SEC on December 7, 2016. We raised approximately $12.6 million in net proceeds after deducting underwriting discounts and commissions of approximately $1.1 million and offering expenses of approximately $1.3 million. Using the proceeds from the IPO, on December 13, 2016, we paid $175,890 to the holder of all of our shares of Series A convertible preferred stock for its agreement to waive all accrued dividends on the Series A convertible preferred stock and convert all of its shares of Series A convertible preferred stock into common stock immediately prior to the consummation of the IPO. No payments were made by us to directors, officers or persons owning 10% or more of our capital stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries. There has been no material change in the planned use of proceeds from our IPO as described in the final prospectus issued in connection with the IPO. We have invested the remaining proceeds in accordance with our board approved investment policy, which provides for investments in obligations of the U.S. government, money market instruments, registered money market funds and corporate bonds. The managing underwriter of our IPO was Roth Capital Partners, LLC and co-managing underwriters were Craig-Hallum Capital Group LLC and Aegis Capital Corp. 8-K.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

~~Item 5.~~

~~Other Information~~

~~None.~~Item 5. Other Information

None.

~~Item 6.~~

~~Exhibits~~

Item 6. Exhibits

~~The exhibits listed in the Index to Exhibits are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.~~

INDEX TO EXHIBITS

Exhibit
Number Filed or
Furnished Herewith
Incorporated by Reference
Description Form Filing
Date Exhibit File No.
3.1 Amended and Restated Certificate of Incorporation S-1/A 10/20/2016 3.3 333-213736

3.2 Amended and Restated Bylaws S-1 9/21/2016 3.5 333-213736

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 X

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 X

32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X

32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X

101.INS XBRL Instance Document X

101.SCH XBRL Taxonomy Extension Schema X

101.CAL XBRL Taxonomy Extension Calculation Linkbase X

101.DEF XBRL Taxonomy Extension Definition Linkbase X

101.LAB XBRL Taxonomy Extension Label Linkbase X

101.PRE XBRL Taxonomy Extension Presentation Linkbase X

~~SIGNATURES~~

Exhibit

Filed or
Furnished

Incorporated by Reference

Number

Description

Herewith

Form

Filing Date

Exhibit

File No.

3.1

Amended and Restated Certificate of Incorporation, as amended by the Certificate of Amendment to the Amended and Restated Certificate of Incorporation

10-K

3/29/2021

3.1

001-37941

3.2

Amended and Restated Bylaws, as amended by Amendment No. 1

10-Q

8/13/2021

3.2

001-37941

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SENESTECH, INC.
	(Registrant)

Dated: November ~~8, 2017~~12, 2021	By:	/s/ ~~Loretta P. Mayer, Ph.D.~~Kenneth Siegel
		~~Loretta P. Mayer, Ph.D.~~Kenneth Siegel
		~~Chair of the Board,~~ Chief Executive Officer ~~and~~
		~~Chief Scientific Officer~~

Dated: November ~~8, 2017~~12, 2021	By:	/s/ Thomas C. Chesterman
		Thomas C. Chesterman
		Chief Financial Officer and Treasurer

0001680378 snes:CommonStockOptionsMember 2020-01-01 2020-09-30 iso4217:USD xbrli:shares

		Page
	PART I. FINANCIAL INFORMATION	31
~~Item 1~~	~~Financial Statements~~	3
Item 1	Financial Statements	1
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2827
Item 3	Quantitative and Qualitative Disclosures About Market Risk	3941
Item 4	Controls and Procedures	3941

	PART II. OTHER INFORMATION	39
~~Item 1A~~	~~Risk Factors~~	39
~~Item 5~~	~~Other Information~~	40
~~Item 6~~	~~Exhibits~~	4142
	~~Index to Exhibits~~	41
Item 1	~~Signatures~~Legal Proceedings	42
Item 1A	Risk Factors	42
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3	Defaults Upon Senior Securities	42
Item 4	Mine Safety Disclosures	42

	September 30, 2017			December 31, 2016
ASSETS		(Unaudited)

Current assets:
Cash	$	699		$	11,826
Investment in securities held to maturity		2,949			—
Accounts receivable		7			10
Prepaid expenses		172			337
Inventory		394			57
Deposits		17			9
Total current assets		4,238			12,239

Property and equipment, net		1,559			631
Total assets	$	5,797		$	12,870

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Short-term debt	$	174		$	45
Accounts payable		175			351
Accrued contract cancellation settlement		—			1,000
Accrued expenses		1,074			371
Notes payable, related parties		18			30
Total current liabilities		1,441			1,797

Notes payable, related parties		—			6
Long-term debt, net		637			138
Common stock warrant liability		4			69
Deferred rent		45			33
Total liabilities		2,127			2,043

Commitments and contingencies (See note 15)		—			—

Stockholders’ equity:

Common stock, $0.001 par value, 100,000,000 shares authorized, 10,363,189 and 10,157,292 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		10			10
Additional paid-in capital		74,946			72,069
Stock subscribed, but not issued, consisting of -0- and 4,750 shares at September 30, 2017 and December 31, 2016, respectively		—			59
Accumulated deficit		(71,286	)		(61,311	)
Total stockholders’ equity		3,670			10,827

Total liabilities and stockholders’ equity	$	5,797		$	12,870

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue:
License revenue	$	—		$	131		$	—		$	261
Product Sales		17			—			34			—
Total revenue		17			131			34			261
Cost of goods sold		11			—			27			—
Gross profit		6			131			7			261

Operating expenses:
Research and development		721			829			2,517			1,964
General and administrative		2,235			1,932			7,506			5,259
Total operating expenses		2,956			2,761			10,023			7,223

Net operating loss		(2,950	)		(2,630	)		(10,016	)		(6,962	)

Other income (expense):
Interest income		9			—			20			—
Interest expense		(33	)		(6	)		(54	)		(49	)
Interest expense, related parties		—			(9	)		(1	)		(43	)
Loss on extinguishment of unsecured promissory note		—			(59	)		—			(171	)
Other income (expense)		37			—			76			51
Total other income (expense)		13			(74	)		41			(212	)

Net loss		(2,937	)		(2,704	)		(9,975	)		(7,174	)

Series A convertible preferred stock dividends		—			(30	)		—			(90	)

Net loss and comprehensive loss	$	(2,937	)	$	(2,734	)	$	(9,975	)	$	(7,264	)

Weighted average common shares outstanding - basic and fully diluted		10,334,211			7,306,234			10,234,211			5,774,738

Net loss per common share - basic and fully diluted	$	(0.28	)	$	(0.37	)	$	(0.97	)	$	(1.26	)

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	70	$	—	$	—	$	70
Corporate fixed income debt securities		—		2,949		—		2,949
Total	$	70	$	2,949	$	—	$	3,019
Financial Liabilities:
Common stock warrant liability⁽¹⁾	$	—	$	—	$	4	$	4
Total	$	—	$	—	$	4	$	4

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Financial Assets:
None	$	—	$	—	$	—	$	—

Financial Liabilities:
Common stock warrant liability⁽¹⁾	$	—	$	—	$	69	$	69
Total	$	—	$	—	$	69	$	69

		September 30, 2017
	Contractual Maturity (in months)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Mutual funds		$	—	$	—	$	—	$	—
Corporate fixed income securities	Less than 12 months		2,746		3		—		2,749
Commercial paper	Less than 12 months		200		—		—		200
Total investments		$	2,946	$	3	$	—	$	2,949

	September 30, 2017		December 31, 2016
Director compensation	$	—	$	215
Director, officer and other insurance		95		70
Legal retainer		25		25
Rent		17		17
Inventory Purchase Deposits		20		—
Engineering, software licenses and other		15		10
Total prepaid expenses	$	172	$	337

	Useful Life	September 30, 2017		December 31, 2016
Research and development equipment	5 years	$	1,335	$	989
Office and computer equipment	3 years		672		235
Furniture and fixtures	7 years		34		17
Autos/Trucks	5 years		306		—
Leasehold improvements	*		283		189
			2,630		1,430
Less accumulated depreciation and amortization			1,071		799
Total		$	1,559	$	631

	September 30, 2017		December 31, 2016
Unsecured promissory note, interest rate of 4.25% and 8% per annum	$	18	$	36
Less: current portion of notes payable, related parties		18		30
Total notes payable, long-term, related parties	$	—	$	6

	Number
	of			Date			Exercise
Common Stock Warrants	Warrants			Issued	Term		Price
Outstanding at December 31, 2015		610,487
Initial Public Offering Underwriter		187,500		December 2016		5 years	$	9.60
Marketing and Development Services		100,000		February 2016		5 years⁽¹⁾	$	7.50
Other Advisory Services		40,000		August 2016		3 years⁽¹⁾	$	7.50
Promissory Notes		9,031		March 2016		3 years⁽¹⁾	$	7.50
Warrants issued		336,531
Warrants exercised		(117,733	)
Outstanding at December 31, 2016		829,285
Warrants issued		—
Warrants exercised		—
Outstanding at September 30, 2017		829,285

	Three Months Ended September 30				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85		135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946		933	$	2,818	$	2,406

	Number of Units			Weighted Average Grant-Date Fair Value Per Units
Outstanding as of December 31, 2016		455,430		$	0.76
Granted		117,885	⁽¹⁾	$	6.95
Vested		(228,333	)	$	2.00
Forfeited		—		$	—
Outstanding as of September 30, 2017		344,982	⁽²⁾	$	2.05

	Capital Leases		Operating Lease
Years Ending December 31,
2017	$	25	$	63
2018		96		258
2019		88		221
2020		67		—
2021		84		—
Total minimum lease payments	$	360	$	542

	Capital Leases
Less: amounts representing interest (ranging from 7.25% to 11.56%)	$	75

Present value of minimum lease payments		285

Less: current installments under capital lease obligations		70

Total long-term portion	$	215

	Three Months Ended September 30,				Increase /
	2017		2016		(Decrease)
	(in thousands)
Direct research and development expenses:
Unallocated expenses:
Personnel related (including stock-based compensation)	$	449	$	701	$	(252)
Professional Fees/Consultants		39		10		29
Facility related		76		51		25
Other		157		67		90
Total research and development expenses	$	721	$	829	$	(108)

	Nine Months Ended September 30,				Increase/
	2017		2016		(Decrease)
	(in thousands)
Direct research and development expenses:
Unallocated expenses:
Personnel related (including stock-based compensation)	$	1,471	$	1,384	$	87
Professional Fees/Consultants		272		142		130
Facility related		228		157		71
Other		546		281		265
Total research and development expenses	$	2,517	$	1,964	$	553

	Three Months Ended September 30				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85	$	135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946	$	933	$	2,818	$	2,406

Exhibit Number		Filed or Furnished Herewith	Incorporated by Reference
Exhibit Number	Description	Filed or Furnished Herewith	Form	Filing Date	Exhibit	File No.
3.1	Amended and Restated Certificate of Incorporation		S-1/A	10/20/2016	3.3	333-213736

3.2	Amended and Restated Bylaws		S-1	9/21/2016	3.5	333-213736

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934	X

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934	X

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

101.INS	XBRL Instance Document	X

101.SCH	XBRL Taxonomy Extension Schema	X

101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X

101.DEF	XBRL Taxonomy Extension Definition Linkbase	X

101.LAB	XBRL Taxonomy Extension Label Linkbase	X

101.PRE	XBRL Taxonomy Extension Presentation Linkbase	X