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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023March 31, 2024
OR
o 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)
Delaware20-2079805
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
23460 N 19th Ave, Suite 110
Phoenix, AZ85027
(Address of principal executive offices)(Zip Code)
(928) 779-4143
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueSNESThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyo
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of common stock outstanding as of August 9, 2023: 2,964,485May 7, 2024: 5,144,632
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SENESTECH, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023MARCH 31, 2024
TABLE OF CONTENTS
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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
SENESTECH, INC.
CONDENSED BALANCE SHEETS
(In thousands, except shares and per share data)
June 30,
2023
December 31, 2022
March 31,
2024
March 31,
2024
December 31, 2023
ASSETSASSETS(unaudited)
Current assets:Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$2,196 $4,775 
Accounts receivable, netAccounts receivable, net44 113 
Prepaid expensesPrepaid expenses330 378 
Inventory, netInventory, net765 853 
Total current assetsTotal current assets3,335 6,119 
Right to use assets, operating leasesRight to use assets, operating leases261 347 
Property and equipment, netProperty and equipment, net245 294 
Other noncurrent assetsOther noncurrent assets22 22 
Total assetsTotal assets$3,863 $6,782 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable
Accounts payable
Accounts payableAccounts payable$120 $540 
Accrued expensesAccrued expenses621 560 
Current portion of operating lease liabilityCurrent portion of operating lease liability188 180 
Current portion of note payable
Deferred revenueDeferred revenue24 44 
Total current liabilitiesTotal current liabilities953 1,324 
Operating lease liability, less current portion83 179 
Note payable, less current portion
Note payable, less current portion
Note payable, less current portion
Total liabilitiesTotal liabilities1,036 1,503 
Commitments and contingencies (see notes)Commitments and contingencies (see notes)Commitments and contingencies (see notes)
Stockholders’ equity:Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstandingPreferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding— — 
Common stock, $0.001 par value, 100,000,000 shares authorized, 2,964,485 and 809,648 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding
Common stock, $0.001 par value, 100,000,000 shares authorized, 5,144,632 shares and 5,140,024 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
Additional paid-in capitalAdditional paid-in capital129,057 127,481 
Accumulated deficitAccumulated deficit(126,233)(122,203)
Total stockholders’ equityTotal stockholders’ equity2,827 5,279 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$3,863 $6,782 
See accompanying notes to condensed financial statements.
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SENESTECH, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except shares and per share data)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
2024
2024
Revenues, net
Revenues, net
Revenues, netRevenues, net$305 $277 $538 $472 
Cost of salesCost of sales163 141 304 246 
Cost of sales
Cost of sales
Gross profit
Gross profit
Gross profitGross profit142 136 234 226 
Operating expenses:Operating expenses:
Operating expenses:
Operating expenses:
Research and development
Research and development
Research and developmentResearch and development381 431 768 947 
Selling, general and administrativeSelling, general and administrative1,761 2,277 3,511 4,184 
Selling, general and administrative
Selling, general and administrative
Total operating expenses
Total operating expenses
Total operating expensesTotal operating expenses2,142 2,708 4,279 5,131 
Loss from operationsLoss from operations(2,000)(2,572)(4,045)(4,905)
Loss from operations
Loss from operations
Other income (expense):
Other income (expense):
Other income (expense):Other income (expense):
Interest incomeInterest income15 
Interest income
Interest income
Interest expenseInterest expense— — — (1)
Miscellaneous income— — 
Interest expense
Interest expense
Other income, net
Other income, net
Other income, netOther income, net15 
Net loss and comprehensive lossNet loss and comprehensive loss$(1,993)$(2,569)$(4,030)$(4,901)
Weighted average shares outstanding - basic and fully diluted2,860,874610,6352,208,162610,543
Net loss per share - basic and fully diluted$(0.70)$(4.21)$(1.83)$(8.03)
Net loss and comprehensive loss
Net loss and comprehensive loss
Weighted average shares outstanding - basic and diluted
Weighted average shares outstanding - basic and diluted
Weighted average shares outstanding - basic and diluted
Net loss per share - basic and diluted
Net loss per share - basic and diluted
Net loss per share - basic and diluted
See accompanying notes to condensed financial statements.
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SENESTECH, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
20232022
Three Months Ended
March 31,
Three Months Ended
March 31,
202420242023
Cash flows from operating activities:Cash flows from operating activities:
Net lossNet loss$(4,030)$(4,901)
Net loss
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortizationDepreciation and amortization69 113 
Stock-based compensationStock-based compensation336 430 
Bad debt expenseBad debt expense(2)12 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Changes in operating assets and liabilities:
Changes in operating assets and liabilities:
Accounts receivable
Accounts receivable
Accounts receivableAccounts receivable71 (19)
Other assets(2)— 
Prepaid expenses
Prepaid expenses
Prepaid expensesPrepaid expenses92 (108)
InventoryInventory88 25 
Other assets
Accounts payableAccounts payable(420)(47)
Accrued expensesAccrued expenses61 306 
Deferred revenueDeferred revenue(20)41 
Net cash used in operating activitiesNet cash used in operating activities(3,757)(4,148)
Cash flows from investing activities:Cash flows from investing activities:
Cash flows from investing activities:
Cash flows from investing activities:
Purchase of property and equipment
Purchase of property and equipment
Purchase of property and equipment
Purchase of property and equipment(21)(146)
Net cash used in investing activities
Net cash used in investing activities
Net cash used in investing activitiesNet cash used in investing activities(21)(146)
Cash flows from financing activities:Cash flows from financing activities:
Proceeds from the issuance of common stock, net1,210 — 
Cash flows from financing activities:
Cash flows from financing activities:
Repayments of notes payableRepayments of notes payable— (5)
Repayments of finance lease obligations— (27)
Repayments of notes payable
Repayments of notes payable
Proceeds from the exercise of warrants
Proceeds from the exercise of warrants
Proceeds from the exercise of warrants
Payment of employee withholding taxes related to share based awardsPayment of employee withholding taxes related to share based awards(11)— 
Net cash provided by (used in) financing activities1,199 (32)
Net cash used in financing activities
Decrease in cash and cash equivalents
Decrease in cash and cash equivalents
Decrease in cash and cash equivalentsDecrease in cash and cash equivalents(2,579)(4,326)
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period4,775 9,326 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$2,196 $5,000 
Supplemental disclosures of cash flow information:
Interest paid$— $
Income taxes paid$— $— 
Supplemental cash flow information is as follows:
Supplemental cash flow information is as follows:
Supplemental cash flow information is as follows:
Cash paid for interest
Cash paid for interest
Cash paid for interest
Cash paid for income taxes
See accompanying notes to condensed financial statements.
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SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
Nature of Business
SenesTech, Inc. (subsequently referred to in this report as “we,” “us,” “our,” or “our Company”company”) was incorporated in the state of Nevada in July 2004. On November 12, 2015, we subsequently reincorporated in the state of Delaware. Our corporate headquarters and manufacturing site are in Phoenix, Arizona. We have developed and are commercializing a global, proprietary technology for managing animal pest populations, initially rat populations, through fertility control with ourcontrol. Our first product is known as ContraPest®.
ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide and triptolide. ContraPest limits reproduction of male and female rats beginning with the first breeding cycle following consumption. ContraPest is being marketed for use in controlling Norway and roof rat populations. In addition to the U.S. Environmental Protection Agency registration of ContraPest, we must obtain registration from the various state regulatory agencies prior to selling in each state. To date, we have received registration for ContraPest in all 50 states and the District of Columbia, 49 of which have approved the removal of the Restricted Use designation, as well as the District of Columbia and five major U.S. territories.
In November 2023, we launched our latest product EvolveTM, a soft bait containing the active ingredient cottonseed oil. Evolve limits reproduction of male and female rats after one to two breeding cycles following consumption. Evolve is considered a minimum risk pesticide under the U.S. Environmental Protection Agency Federal Insecticide, Fungicide, and Rodenticide Act, Section 25(b). We must obtain registration from the various state regulatory agencies that do not accept the federal exemption. To date, we are authorized to sell Evolve in 33 states.
Going Concern
Our condensed financial statements as of June 30, 2023March 31, 2024 were prepared under the assumption that we would continue as a going concern. The reports of our independent registered public accounting firm that accompanies our financial statements for each of the years ended December 31, 20222023 and December 31, 20212022 contain a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time. Specifically, we have incurred operating losses since our inception, and we expect to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. If we encounter continued issues or delays in the commercialization of ContraPest,fertility control products, our expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern. There are no assurances that such financing, if necessary, will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through additional financings, sales of our products, licensing fees, royalty payments or from other sources or transactions, we will exhaust our resources and will be unable to continue operations.
Liquidity and Capital Resources
Since our inception, we have sustained significant operating losses in the course of our research and development and commercialization activities and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under a former license agreement. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock.
We have also raised capital through debt financing, consisting primarily of convertible notes and government loan programs, and, to a lesser extent, payments received in connection with product sales, research grants and licensing fees.
As of June 30, 2023,March 31, 2024, we had an accumulated deficit of $126.2$131.7 million and cash and cash equivalents of $2.2$3.6 million.
Our ultimate success depends upon the outcome of a combination of factors, including the following: (i) successful commercialization of ContraPestfertility control products and maintaining and obtaining regulatory approval of our products and
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product candidates; (ii) market acceptance, commercial viability and profitability of ContraPestfertility control products and other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs.
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Based upon our current operating plan, we expect that cash and cash equivalents at June 30, 2023,March 31, 2024, in combination with anticipated revenue and any additional sales of our equity securities, (see Note 10), will be sufficient to fund our current operations for at least the next threesix months.
While we have evaluated and continue to evaluate our operating expenses and concentrate our resources toward the successful commercialization of ContraPestfertility control products in the United States, additional financing will be needed before achieving anticipated revenue targets and margin targets. If we are unable to raise necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern. In any event, additional capital is needed in order to fund our operating losses and research and development activities before we become profitable. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.
Condensed Financial Statements
Our accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with the U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In our opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly our financial position as of June 30, 2023,March 31, 2024, and our operating results and cash flows for the three- and six-monththree month periods ended June 30, 2023March 31, 2024 and 2022.2023. The accompanying financial information as of December 31, 20222023 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022,2023, filed with the SEC on March 17, 2023.February 21, 2024.
Recent Accounting Pronouncements
There have been no new accounting pronouncements not yet effective or adopted in the current year that we believe have a significant impact, or potential significant impact, to our condensed financial statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The significant estimates in our financial statements include the valuation of inventory, common stock warrants, and stock-based awards, such as stock options and restricted stock units. Actual results could differ from such estimates.
Advertising Costs
Advertising costs are expensed as incurred and was $61,000 and $41,000 for the three months ended March 31, 2024 and 2023.
Comprehensive Loss
We have no other comprehensive income items for the periods presented. As a result, our net loss and comprehensive loss were the same for the periods presented and a separate statement of comprehensive loss is not included in the accompanying condensed financial statements.
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NOTE 2: BALANCE SHEET COMPONENTS
Cash and Cash Equivalents
Highly liquid investments with maturities of three months or less as of the date of acquisition are classified as cash equivalents, of which we had $2.2$3.6 million and $4.8$5.4 million as of June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively, included within cash and cash equivalents in the condensed balance sheets.
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Accounts Receivable, Net
Accounts receivable, net consisted of the following (in thousands):
June 30,
2023
December 31,
2022
March 31,
2024
March 31,
2024
December 31,
2023
Accounts receivableAccounts receivable$48 $119 
Allowance for uncollectible accountsAllowance for uncollectible accounts(4)(6)
Accounts receivable, netAccounts receivable, net$44 $113 
The following was the activity in the allowance for uncollectible accounts (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2023202220232022
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
2024
2024
2024
Balance as of beginning of period
Balance as of beginning of period
Balance as of beginning of periodBalance as of beginning of period$$— $$— 
Increase in provisionIncrease in provision— 12 — 12 
Increase in provision
Increase in provision
Amounts written off, less recoveries
Amounts written off, less recoveries
Amounts written off, less recoveriesAmounts written off, less recoveries— — (2)— 
Balance as of end of periodBalance as of end of period$$12 $$12 
Balance as of end of period
Balance as of end of period
Inventory, net
Inventory, net consisted of the following (in thousands):
June 30,
2023
December 31,
2022
March 31,
2024
March 31,
2024
December 31,
2023
Raw materialsRaw materials$729 $772 
Work in progress
Finished goodsFinished goods54 99 
Total inventoryTotal inventory783 871 
Less: reserve for obsolescenceLess: reserve for obsolescence(18)(18)
Inventory, netInventory, net$765 $853 
The following was the activity in the reserve for obsolescence (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2023202220232022
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
2024
2024
2024
Balance as of beginning of period
Balance as of beginning of period
Balance as of beginning of periodBalance as of beginning of period$18 $26 $18 $29 
Increase in reserveIncrease in reserve— — — — 
Increase in reserve
Increase in reserve
Amounts relieved
Amounts relieved
Amounts relievedAmounts relieved— (4)— (7)
Balance as of end of periodBalance as of end of period$18 $22 $18 $22 
Balance as of end of period
Balance as of end of period
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Prepaid Expenses
Prepaid expenses consisted of the following (in thousands):
June 30,
2023
December 31,
2022
March 31,
2024
March 31,
2024
December 31,
2023
Software licenses
Professional servicesProfessional services$107 $41 
InsuranceInsurance97 61 
Software licenses94 157 
Deposit on equipment purchase
Patents
Prepaid inventory
OtherOther14 
Patents10 39 
Marketing programs and conferences74 
Other
Other
Total prepaid expensesTotal prepaid expenses$330 $378 
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
June 30,
2023
December 31,
2022
March 31,
2024
March 31,
2024
December 31,
2023
Research and development equipmentResearch and development equipment$1,569 $1,558 
Office and computer equipmentOffice and computer equipment803 800 
AutosAutos54 54 
Furniture and fixturesFurniture and fixtures41 41 
Leasehold improvementsLeasehold improvements119 119 
Total in serviceTotal in service2,586 2,572 
Accumulated depreciation and amortizationAccumulated depreciation and amortization(2,353)(2,283)
Total in service, net233 289 
Construction in progress12 
Property and equipment, netProperty and equipment, net$245 $294 
Property and equipment, net
Property and equipment, net
Accrued Expenses
Accrued expenses consisted of the following (in thousands):
March 31,
2024
March 31,
2024
December 31,
2023
Compensation, severance and related benefits
Legal and consulting professional services
Product warranty
June 30,
2023
December 31,
2022
Compensation, severance and related benefits$468 $497 
Legal services138 36 
Product warranty15 18 
Personal property and franchise tax— 
Other
Other
OtherOther— 
Total accrued expensesTotal accrued expenses$621 $560 
Notes Payable
In 2023, we arranged financing for the purchase of certain equipment. The notes payable for that certain equipment have an annual interest rate of 9.1% with a term of five years and is secured by the underlying equipment.
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As of March 31, 2024, future principal payments were as follows (in thousands):
2024$25 
202536 
202639 
202743 
202838 
Total principal payments181 
Less: current portion of notes payable(34)
Notes payable, less current portion$147 
NOTE 3: FAIR VALUE MEASUREMENTS
The carrying amounts of our financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their short maturities. Notes payable are recorded at amortized cost, which approximates fair value.
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NOTE 4: LEASES
We have operating leases for our corporate headquarters and our manufacturing and research facility, which expire in 2024. We were obligated under finance leases for certain research and computer equipment, of which the last arrangement expired in June 2022.
The components of lease cost were as follows (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2023202220232022
Operating lease cost$55 $56 $111 $112 
Finance lease cost:
Amortization of right-of-use asset$— $11 $— $27 
Interest on lease liability— — — 
Total finance lease cost$— $11 $— $28 
Three Months Ended
March 31,
20242023
Operating lease cost$56 $56 
As of June 30, 2023,March 31, 2024, maturities of operating lease liabilities were as follows (in thousands):
2023$99 
20242024186 
Total operating lease paymentsTotal operating lease payments285 
Less imputed interest(14)
Total operating lease payments
Total operating lease payments
Less: imputed interest
Total operating lease liabilitiesTotal operating lease liabilities$271 
NOTE 5: STOCK-BASED COMPENSATION
In 2018, our stockholders approved the adoption of the SenesTech, Inc. 2018 Equity Incentive Plan (the “2018 Plan”). which provides for the issuance of stock-based instruments, such as stock options or restricted stock units, to employees or consultants as deemed appropriate. The 2018 Plan has since been amended and restated on certain occasions, most recently on June 26, 2023, when our stockholders approved an increase to the total number of authorized shares to 848,61470,717 shares.
StockCurrently, we only have stock options outstanding under the 2018 Plan, which are generally issued with a per share exercise price equal to the fair market value of our common stock at the date of grant. Options granted generally vest immediately, or ratably over a 12- to 36-month period coinciding with their respective service periods, with terms generally of five years. Certain stock option awards provide for accelerated vesting upon a change in control.
As of June 30, 2023,March 31, 2024, we had 465,58042,049 shares of common stock available for issuance under the 2018 Plan.
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Stock Options
The following table presents the outstanding stock option activity:
Number of OptionsWeighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Term
(years)
Three months ended June 30, 2023:
Outstanding as of March 31, 2023280,448 $17.11 4.4
Granted199,421 1.25 5.0
Exercised— — — 
Forfeited(107)39.64 — 
Expired(336)118.25 — 
Outstanding as of June 30, 2023479,426 (1)10.01 4.5
Six months ended June 30, 2023:
Outstanding as of December 31, 2022280,810 17.00 3.9
Granted199,421 1.25 5.0
Exercised— — — 
Forfeited(433)119.46 — 
Expired(372)680.87 — 
Outstanding as of June 30, 2023479,426 (1)10.01 4.5
Exercisable as of June 30, 2023139,583 29.16 3.8
Number of OptionsWeighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Term
(years)
Three months ended March 31, 2024:
Outstanding as of December 31, 202336,708 $119.70 4.0
Forfeited(41)300.62 3.0
Outstanding as of March 31, 202436,667 (1)119.49 3.8
(1) Includes options related to 99,0008,249 shares that are inducement awards and not granted under the 2018 Plan.
The weighted average grant date fair value of options granted during the six months ended June 30, 2023 was $1.24 per share, based on the following assumptions used in the Black-Scholes option pricing model:
Expected volatility128 %
Expected dividend yield— 
Expected term (in years)5
Risk-free interest rate5.3 %
The expected volatility assumption is based on the calculated volatility of our common stock at the date of grant based on historical prices over the most recent period commensurate with the term of the award. The expected dividend yield assumption is based on our history and expected dividend payouts: we have not, and do not expect to, pay dividends. The expected term assumption is the contractual term of the options for non-employees. The risk-free interest rate assumption is determined using the U.S. treasury yields for bonds with a maturity commensurate with the term of the award.
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Restricted Stock Units
The following table presents the unvested restricted stock unit activity:
Number of
Units
Weighted
Average
Grant-Date
Fair
Value Per
Unit
Unvested balance as of December 31, 202218,799 $2.71 
Granted— — 
Vested(18,799)2.71 
Forfeited— — 
Unvested balance as of June 30, 2023— — 
The stock-based compensation expense was recorded as follows (in thousands):
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
2024
2024
2024
Three Months Ended
June 30,
Six Months Ended
June 30,
Research and development
2023202220232022
Research and development
Research and developmentResearch and development$$$$
Selling, general and administrative (1)
Selling, general and administrative (1)
165203327426
Selling, general and administrative (1)
Selling, general and administrative (1)
Total stock-based compensation expenseTotal stock-based compensation expense$170 $206 $336 $430 
Total stock-based compensation expense
Total stock-based compensation expense
(1) For the three and six month periods ended June 30, 2023, includes $56,000Includes $2,000 related to stock issued in exchange for marketing services.services for the three months ended March 31, 2023.
The allocation between research and development and selling, general and administrative expense was based on the department and services performed by the employee or non-employee.
At June 30, 2023,March 31, 2024, the total compensation cost related to unvested options not yet recognized was $469,000,$207,000, which will be recognized over a weighted average period of 1.61.1 years, assuming the employees and non-employees complete their service period required for vesting.
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NOTE 6: STOCKHOLDERS’ EQUITY
Activity in equity during the sixthree month periods ended June 30,March 31, 2024 and 2023 and 2022 was as follows (dollars in thousands):
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Total
SharesAmount
2023
Balances as of December 31, 2022809,648$$127,481 $(122,203)$5,279 
Stock-based compensation— 166 — 166 
Issuance of common stock upon exercise of warrants1,230,000(1)— — 
Issuance of common stock for service54,466— 100 — 100 
Issuance of shares pursuant to the vesting of restricted stock units, net of shares withheld for taxes13,225— (11)— (11)
Net loss— — (2,037)(2,037)
Balances as of March 31, 20232,107,339127,735 (124,240)3,497 
Stock-based compensation— 113 — 113 
Issuance of common stock, net of issuance costs857,1461,209 — 1,210 
Net loss— — (1,993)(1,993)
Balances as of June 30, 20232,964,485$$129,057 $(126,233)$2,827 
2022
Balances as of December 31, 2021610,364$$122,542 $(112,508)$10,035 
Stock-based compensation— 221 — 221 
Issuance of common stock for service250— — 
Net loss— — (2,332)(2,332)
Balances as of March 31, 2022610,614122,766 (114,840)7,927 
Stock-based compensation— 205 — 205 
Issuance of common stock for service34— — 
Net loss— — (2,569)(2,569)
Balances as of June 30, 2022610,648$$122,972 $(117,409)$5,564 
During the six months ended June 30, 2023, the following shares of common stock were issued:
857,146 shares pursuant to a registered direct offering with certain institutional investors for $1.75 per share for gross proceeds of $1.5 million, before deducting issuance costs of $290,000. The shares were offered and sold pursuant to a prospectus, dated May 6, 2022, and a prospectus supplement, dated April 10, 2023, in connection with a takedown from our shelf registration statement on Form S-3 (File No. 333-261227).
1,230,000 shares pursuant to the exercise of previously outstanding prefunded warrants, which were issued in November 2022 with an exercise price of $3.50 per share;
54,466 restricted shares in exchange for marketing services to be performed through September 2023, with the total value of services to be recognized based on the stock price on the date of issuance; and
13,225 shares pursuant to the vesting of restricted stock units.
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Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Total
SharesAmount
2024
Balances as of December 31, 20235,140,024 $$136,259 $(129,913)$6,351 
Stock-based compensation— — 85 — 85 
Issuance of common stock upon exercise of warrants4,608 — — 
Net loss— — — (1,832)(1,832)
Balances as of March 31, 20245,144,632 $$136,350 $(131,745)$4,610 
2023
Balances as of December 31, 202267,472 $— $127,482 $(122,203)$5,279 
Stock-based compensation— — 166 — 166 
Issuance of common stock upon exercise of warrants102,500 — — — — 
Issuance of shares pursuant to the vesting of restricted stock units, net of shares withheld for taxes1,102 — (11)— (11)
Issuance of common stock for service4,539 — 100 — 100 
Net loss— — — (2,037)(2,037)
Balances as of March 31, 2023175,613 $— $127,737 $(124,240)$3,497 

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NOTE 7: COMMON STOCK WARRANTS
The following table presents the common stock warrant activity:
SharesWeighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Term
(years)
Outstanding as of December 31, 20224,414,810 $6.58 3.0
Issued921,432 1.66 5.3
Exercised(1,230,000)3.50 — 
Expired(2,835)728.00 — 
Outstanding as of June 30, 20234,103,407 5.91 3.2
SharesWeighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Term
(years)
Outstanding as of December 31, 20237,775,734 $2.95 3.4
Exercised(4,608)1.30 — 
Outstanding as of March 31, 20247,771,126 2.95 3.1
During the sixthree months ended June 30, 2023:
Series CMarch 31, 2024, warrants were issued to the investors in the offering discussed in Note 6 to purchase up to 857,146representing 4,608 shares of our common stock. The Series C warrants are exercisable immediatelystock were exercised with an exercise price of $1.62$1.30 per share and expire October 12, 2028. We estimated the fair value of these warrants to be $1.1 million using a Black-Scholes model based on the following significant inputs: common stock price of $1.38 per share; volatility of 164%; term of 5.5 years; dividend yield of —%; and risk-free interest rate of 3.4%;
Placement agent warrants were issued to purchase up to 64,286 shares of our common stock. The placement agent warrants are exercisable immediately upon issuance, with an exercise price per share of $2.1875 per share, and expire April 10, 2028. We estimated the fair value of these warrants to be $82,000 using a Black-Scholes model based on the following significant inputs: common stock price of $1.38 per share; volatility of 165%; term of 5 years; dividend yield of —%;and risk-free interest rate of 3.5%; and
Prefunded warrants representing 1,230,000 shares of common stock were exercised. Such prefunded warrants were issued in November 2022 with an exercise price of $3.50 per share.
NOTE 8: LOSS PER SHARE
Basic loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period.period, which includes prefunded warrants and shares held in abeyance from date of issuance. Diluted loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares andused in the basic loss per share calculation plus potentially dilutive securities outstanding during the period determined using the treasury stock method. Stock options warrants and restricted stock unitswarrants are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share because their effect would be anti-dilutive given the net losses reported for all periods presented. Therefore, basic and diluted loss per share are the same for each period presented.
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The following shares were excluded from the calculation of diluted net loss per share:
Three Months Ended
June 30,
Six Months Ended
June 30,
2023202220232022
Common stock warrants— — 166,661 — 
Stock options10,171 — 75,466 — 
Restricted stock units— — — — 
10,171 — 242,127 — 
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Three Months Ended
March 31,
20242023
Common stock warrants— 265,401 
Stock options— 23,371 
— 288,772 

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NOTE 9: CONTINGENCIES
Legal Proceedings
In July 2020, our former corporate general counsel (the “Plaintiff”) commenced an action against us in the Superior Court of the State of California, for the County of San Diego. The complaint alleges, among other things, that we breached the Plaintiff’s employment contract with us, as well as the implied covenant of good faith and fair dealing, by refusing to issue him the balance of stock options he claims we owe him. In September 2021, the Plaintiff served us and also named 10 individuals as defendants, consisting of current and former directors and employees. We do not believe that all of the defendants have yet been served. Furthermore, two individually named defendants have separately settled with the Plaintiff.
The Plaintiff alleges that such individuals agreed to knowingly and wrongfully withhold the stock options owed to him and are knowingly in receipt of stolen property. The Plaintiff seeks compensatory damages in excess of $500,000, treble damages, and reasonable attorneys’ fees. We do not believe the claims described above have merit and intend to aggressively defend against these accusations. The Plaintiff has agreed to mediation to resolve the issues. We do not believe that this litigation is likely to have a material effect on our operations.
NOTE 10:9: SUBSEQUENT EVENTS
On July 21, 2023, subject to stockholder approval, our board of directors approved an amendment to our amended and restated certificate of incorporation, as amended, to effect a reverse stock split (the “Reverse Stock Split”) of our issued and outstanding common stock by a ratio of not less than 1-for-2 and not more than 1-for-12. The exact ratio of the Reverse Stock Split will be set within this range as determined by our board of directors in its sole discretion prior to the time of the Reverse Stock Split and will be publicly announced by us prior to the effective time. A special meeting of stockholders is scheduled for August 18, 2023 to vote on such matter, among other items.
On July 21, 2023, our board of directors approved a public offering of shares of our common stock, together with Series D and Series E warrants to purchase shares of our common stock for aggregate gross proceeds of up to $7.5 million. See Form S-1 filed with the SEC on July 21, 2023 (File No. 333-273370).
We have evaluated subsequent events from the balance sheet date through August 10, 2023,May 9, 2024, the date at which the condensed financial statements were issued, and determined that there were no additional items that require adjustment to or disclosure in the condensed financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations –
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed financial statements and related notes.
Forward-Looking Statements
The statements contained in this Quarterly Report on Form 10-Q that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts contained or incorporated herein by reference in this Quarterly Report on Form 10-Q, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “suggests,” “targets,” “contemplates,” “projects,” “predicts,” “may,” “might,” “plan,” “would,” “should,” “could,” “can,” “potential,” “continue,” “objective,” or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Quarterly Report on Form 10-Q include statements regarding:
our belief that Evolve is considered a minimum risk pesticide under the United States Environmental Protection Agency’s (the “EPA’s”) Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”), Section 25(b);
our expectation that we will continue to incur significant expenses and generate operating losses for the foreseeable future;
our expectation that cash and cash equivalents at June 30, 2023,March 31, 2024, in combination with anticipated revenue and any additional sales of our equity securities, will be sufficient to fund our current operations for at least the next threesix months;
our expectation that significant operating losses in the course of our research and development and commercialization activities will continue for the near future;
our expectation that we will continue to incur significant expenses and generate operating losses for at least the next six months;
our belief that sales increased in part due to continued focus of our internet sales initiatives, enhanced strategic partnershipadditional financing will be needed before achieving anticipated revenue targets and collaborations with key distributors and Pest Management Professionals (“PMP”s);margin targets;
our belief that if we are unable to raise necessary capital through the increased sales activity fromsale of our field sales organization was primarily duesecurities, we may be required to an increase in the number of product units sold, includingtake other measures that could impair our Elevate Bait SystemTM;ability to be successful and operate as a going concern;
our successful commercialization of ContraPest;additional capital is needed to fund our operating losses and research and development activities before we become profitable;
our belief that we may require additional capital in order to fund our operating losses and research and development activities before we become profitable;
our ability to achieve profitability or generate positive cash flows;
our expectation that we will incur substantial and increased expenses;
our belief that we will need additional financing to fund these continuing and additional expenses;
our belief that if we encounter continued issues or delays in the commercialization of ContraPest,fertility control products, our expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern;
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our ability to maximize market acceptance for, and generate sales of, our products, including by conducting field demonstrations for potential lead customers;
our ability to enter into strategic partnerships to enable us to penetrate additional target markets and geographical locations;
our ability to manage the infrastructure for sales, marketing and distribution of fertility control products and any other product candidates for which we may receive regulatory approval;
our ability to seek regulatory approvals for fertility control products, including to more fully expand the market and use for fertility control products and, if we believe there is commercial viability, for our other product candidates;
our ability to further develop our manufacturing processes to contain costs while being able to scale to meet future demand of fertility control products and any other product candidates for which we receive regulatory approval;
our ability to continue product development of fertility control products and advance our research and development activities and, as our operating budget permits, advance the research and development programs for other product candidates;
our ability to maintain and protect our intellectual property portfolio;
our ability to 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;
our expectation that our expenses willmay continue or increase in connection with our ongoing activities, particularly as we focus on marketing and sales of ContraPest;fertility control products;
our successful commercialization of fertility control products in the United States;
our ability to maintain and obtain regulatory approval forof our product and product candidates;
our ability to gain market acceptance, commercial viability and profitability of ContraPestour fertility control products and any other products;
our ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue;
the success of our research and development;development activities;
our ability to retain and attract key personnel to develop, operate, and grow our business;
our ability to meet our working capital needs;
our estimates or expectations related to our revenue, cash flow, expenses, capital requirements and need for additional financing;
our plans for our business, including for research and development;
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our belief the claims against us do not have merit and our intention to aggressively defend against these accusations;
our belief the litigation against us is not likely to have a material effect on our operations;
our financial performance, including our ability to fund operations; and
developments and projections relating to our projects, competitors and our industry, including legislative developments and impacts from those developments.
These forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and situations that are difficult to predict and that may cause our own, or our industry’s, actual results to be materially different from the future results that are expressed or implied by these statements. Accordingly, actual results may differ materially from those anticipated or expressed in such statements as a result of a variety of factors, including
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those discussed in Item 1A-“Risk Factors” of Part I of our Annual Report on Form 10-K, for the year ended December 31, 2022,2023, filed with the SEC on March 17, 2023,February 21, 2024, and those contained from time to time in our other filings with the SEC. A number of factors could cause our actual results to differ materially from those indicated by the forward-looking statements. Such factors include, among others, the following:
the successful commercialization of our products;products;
market acceptance of our products;products;
our financial performance, including our ability to fund operations;
our ability to regain and maintain compliance with Nasdaq’s continued listing requirements; and
regulatory approval and regulation of our productsproducts; and
other factors and risks identified from time to time in our filings with the SEC, including this Quarterly Report on Form 10-Q.
All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q reflect our views as of the date of this Quarterly Report on Form 10-Q about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results, performance or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance or achievements.
We are subject to the information requirements of the Exchange Act, and we file or furnish reports, proxy statements and other information with the SEC. Such reports and other information we file with the SEC are available free of charge at www.senestech.com as soon as practicable after such reports are available on the SEC’s website at www.sec.gov. The SEC’s website contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Overview
Since our inception, we have sustained significant operating losses in the course of our research and development and commercialization activities and expect such losses to continue for the near future. WeAlthough sales of our product have generated limited revenueincreased over the last three years, 17% in 2023, 77% in 2022 and 123% in 2021, we are not yet able to date fromfund operations by product sales research grants and licensing fees received under our former license agreement.alone. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock. We have also generated limited revenue from research grants and licensing fees received under former license agreements.
Through June 30, 2023,March 31, 2024, we received net proceeds of $94.8$101.8 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 $3.0$4.1 million in net product sales. As of June 30, 2023,March 31, 2024, we had an accumulated deficit of $126.2$131.7 million and cash and cash equivalents of $2.2$3.6 million.
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We have incurred significant operating losses every year since our inception, with a net lossesloss of $2.0 million and $2.6$1.8 million for the three months ended June 30, 2023 and 2022, respectively.March 31, 2024. We expect to continue to incur significant expenses and generate operating losses for at least the next six months.
Our ultimate success depends upon the outcome of a combination of factors, including the following: (i) successful commercialization of ContraPestfertility control products and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of ContraPestfertility control products and other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs.
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Based upon our current operating plan, we expect that cash and cash equivalents at June 30, 2023,March 31, 2024, in combination with anticipated revenue and any additional sales of our equity securities, will be sufficient to fund our current operations for at least the next threesix months. In July 2023, we initiated a public offering of shares of our common stock, together with Series D and Series E warrants to purchase shares of our common stock seeking aggregate gross proceeds of up to $7.5 million.
While we have evaluated and continue to evaluate our operating expenses and concentrate our resources toward the successful commercialization of ContraPestfertility control products in the United States and internationally, additional financing will be needed before achieving anticipated revenue targets and margin targets. If we are unable to raise necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern. In any event, additional capital is needed in order to fund our operating losses and research and development activities before we become profitable. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.
Results of Operations
The following table summarizes our results of operations for the periods presented (in thousands):
Three Months Ended June 30,% Increase (Decrease)Six Months Ended June 30,% Increase (Decrease)
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
2024
2024
Revenues, net
Revenues, net
Revenues, netRevenues, net$305 $277 10 %$538 $472 14 %
Cost of salesCost of sales163 141 16 %304 246 24 %
Cost of sales
Cost of sales
Gross profit
Gross profit
Gross profitGross profit142 136 %234 226 %
Operating expenses:Operating expenses:  
Operating expenses:
Operating expenses:
Research and development
Research and development
Research and developmentResearch and development381 431 (12)%768 947 (19)%
Selling, general and administrativeSelling, general and administrative1,761 2,277 (23)%3,511 4,184 (16)%
Selling, general and administrative
Selling, general and administrative
Total operating expenses
Total operating expenses
Total operating expensesTotal operating expenses2,142 2,708 (21)%4,279 5,131 (17)%
Loss from operationsLoss from operations(2,000)(2,572)(22)%(4,045)(4,905)(18)%
Loss from operations
Loss from operations
Other income, net
Other income, net
Other income, netOther income, net133 %15 275 %
Net lossNet loss$(1,993)$(2,569)(22)%$(4,030)$(4,901)(18)%
Net loss
Net loss
Revenues
Sales, net of sales discounts and promotions, were $305,000$415,000 for the secondfirst quarter of 2023,2024, compared to $277,000$233,000 for the secondfirst quarter of 2022. Sales increased2023. The $182,000 increase was driven by $28,000, due to continued focus onthe launch of our internet sales initiatives, augmenting our existing pull through sales strategy, where demand fromlatest product Evolve in November 2023. Evolve is a soft bait containing the consumer market encourages,active ingredient cottonseed oil and represented approximately 56%, or pulls, resellers and pest management professionals to offer our products, as well as enhanced strategic partnerships and collaborations with key distributors and PMPs. In particular, we saw increased sales activity from our field sales team, as we continue to optimize our sales organization. The higher sales was primarily due to an increase in the number$232,000, of product units sold, including our Elevate Bait System, which was launched in June 2022.
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For the six months ended June 30, 2023, sales were $538,000, compared to $472,000revenues for the six months ended June 30, 2022. The $66,000 increase was primarily due to an increase in the numberfirst quarter of units sold, including our Elevate Bait System product offering.2023.
Cost of Sales
Cost of sales consisted primarily of the cost of products sold, including scrap and reserves for obsolescence, and was $163,000,$280,000, or 53.6%67.5% of net sales, for the secondfirst quarter of 2023,2024, compared to $141,000, or 50.9%60.4% of net sales, for the secondfirst quarter of 2022. We have experienced an increase2023. Cost of sales in the first quarter of 2024 was impacted by the higher cost of certaina key ingredient in our new Evolve product, components in 2023, and when combined with changesas we transitioned from development-stage raw materials pricing to production-level raw materials pricing. Cost of sales in the underlying mix of products sold, our cost of sales as a percent of sales for the secondfirst quarter of 2023 is higher when compared with the second quarter of 2022.
For the six months ended June 30, 2023, cost of sales was $304,000, or 56.5% of net sales, compared to $246,000, or 52.1% of net sales, for the six months ended June 30, 2022. The higher cost of sales as a percentage of net sales was drivenimpacted by the scrapping of defective trays no longer used in our products, in the first quarter of 2023, which totaled $42,000.
Gross Profit
Gross profit for the secondfirst quarter of 20232024 was $142,000,$135,000, for a gross profit margin of 46.4%32.5%, compared to a gross profit of $136,000,$92,000, or a gross profit margin of 49.1%39.6%, for the secondfirst quarter of 2022.
For the six months ended June 30, 2023, gross profit was $234,000, for a2023. The gross profit margin in the first quarter of 43.5%, compared to $226,000,2024 was impacted by both the higher-than-expected cost of a key ingredient in our new Evolve product, combined with an increased proportion of our sales coming from distributors. The gross profit margin in the first quarter of 47.9%, for the six months ended June 30, 2022. The lower gross profit margin2023 was the drivenimpacted by the effectshigher cost of sales related to the scrapping of defective tanks during no longer used in our products. Excluding the cost associated with the scrapped inventory, gross profit margin was 51.3% for the six months ended June 30, 2023.
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Research and Development Expenses
Research and development expenses consisted of the following (in thousands):
Three Months Ended June 30,Increase
(Decrease)
Six Months Ended June 30,Increase
(Decrease)
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
2024
2024
Personnel (including stock-based compensation)Personnel (including stock-based compensation)$214 $262 $(48)$456 $503 $(47)
Personnel (including stock-based compensation)
Personnel (including stock-based compensation)
Facility-related
Facility-related
Facility-related
Depreciation
Depreciation
Depreciation
Supplies and maintenance
Supplies and maintenance
Supplies and maintenance
Professional feesProfessional fees34 58 (24)78 148 (70)
Depreciation28 33 (5)56 79 (23)
Facilities25 27 (2)51 53 (2)
Professional fees
Professional fees
Stability studies, materials and testing
Stability studies, materials and testing
Stability studies, materials and testing
Other
Other
OtherOther80 51 29 127 164 (37)
TotalTotal$381 $431 $(50)$768 $947 $(179)
Total
Total
Research and development expenses were $381,000$370,000 for the secondfirst quarter of 2023,2024, compared to $431,000$387,000 for the secondfirst quarter of 2022.2023. The $50,000$17,000 decrease was primarily due to lower headcount and consulting and legal fees required for research and development purposes. Such decreases werepurposes, which was partially offset by higher expenses related to field and product improvement studies resulting from the completion of a stability study in the second quarter of 2023.
For the six months ended June 30, 2023, research and development expenses were $768,000, compared to $947,000 for the six months ended June 30, 2022. The $179,000 decrease was primarily due to lower headcount, consulting and legal fees required for research and development purposes, lower depreciation as several assets became fully depreciated in 2023 and lower expenses overall related to field and product improvement studies.
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Tablestudies in the first quarter of Contents
2024 when compared with the first quarter of 2023.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consisted of the following (in thousands):
Three Months Ended June 30,Increase
(Decrease)
Six Months Ended June 30,Increase
(Decrease)
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
2024
2024
Personnel (including stock-based compensation)
Personnel (including stock-based compensation)
Personnel (including stock-based compensation)Personnel (including stock-based compensation)$890 $1,115 $(225)$1,793 $2,185 $(392)
Professional feesProfessional fees419 464 (45)871 900 (29)
Professional fees
Professional fees
Marketing
Marketing
Marketing
Licensed software
Licensed software
Licensed software
Insurance
Insurance
InsuranceInsurance93 145 (52)179 311 (132)
Travel and entertainmentTravel and entertainment53 60 (7)127 106 21 
Office supplies/IT65 86 (21)136 169 (33)
Marketing63 225 (162)117 245 (128)
Travel and entertainment
Travel and entertainment
Facilities
Facilities
FacilitiesFacilities39 39 — 77 78 (1)
OtherOther139 143 (4)211 190 21 
Other
Other
TotalTotal$1,761 $2,277 $(516)$3,511 $4,184 $(673)
Total
Total
Selling, general and administrative expenses were $1.6 million for the first quarter of 2024, as compared to $1.8 million for the secondfirst quarter of 2023, as compared to $2.3 million for the second quarter of 2022.2023. The decrease of $516,000$142,000 was primarily due to lower personnel-related expenses, bothprofessional fees. Consulting fees related to marketing efforts are lower stock-based compensation and lower headcount, and lower marketing costs resulting fromin the first of 2024 when compared with the first quarter of 2023 due to changes in our overall marketing program.program, while legal fees are lower due to the settlement of a legal matter in November 2023. Additionally, personnel-related expenses were lower due to lower headcount and stock-based compensation and insurance is lower as well as consulting and legal fees required for general corporate purposes.
For the six months ended June 30, 2023, selling, general and administrative expenses were $3.5 million, compared to $4.2 million for the six months ended June 30, 2022. The $673,000 decrease was primarily due to lower personnel-related expenses, both lower stock-based compensation and lower headcount, lower insurance and lower marketing costs resulting from changes in our overall marketing program. Additionally, consultingboth policy and legal fees required for general corporate purposes is lower than the comparable period of 2022.rate changes. These decreases were partially offset by an increasehigher franchise fees in travel and entertainment costs relatedthe first quarter of 2024 when compared to increased sales-related activities.the first quarter of 2023.
Other Income, Net
Other income, net for the secondfirst quarter of 2024 consisted of interest income of $15,000, partially offset by interest expense of $4,000, while the first quarter of 2023 consisted of interest income whichof $8,000.
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Interest income was $6,000 higher thandue to a combination of a higher average balance of cash and cash equivalents and higher interest rate during the secondfirst quarter of 2022 due to higher interest rates of2024 when compared with the comparable periods. Additionally, we had miscellaneous income of $2,000 for the secondfirst quarter of 20222023. Interest expense in the first quarter of 2024 relates to the notes payable entered into in late 2023 related to the salepurchase of certain assets.
For the six months ended June 30, 2023, other income, net, consisted of interest income, which was $12,000 higher than the six months ended June 30, 2022 due to higher interest rates of the comparable periods. Additionally, for the six months ended June 30, 2022, we had interest expense of $1,000 related to certain notes payable and finance leases that expired in 2022 and miscellaneous income of $2,000 related to the sale of certain assets.equipment.
Liquidity and Capital Resources
Liquidity
Since our inception, we have sustained significant operating losses in the course of our research and development activities and commercialization efforts and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under a former license. We have primarily funded our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock; and debt financing, consisting primarily of convertible notes.
Through June 30, 2023,March 31, 2024, we have received net proceeds of $94.8$101.8 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and other promissory notes, an aggregate of $3.0$4.1 million in net product
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sales and an aggregate of $1.7 million from licensing fees. As of June 30, 2023,March 31, 2024, we had an accumulated deficit of $126.2$131.7 million and cash and cash equivalents of $2.2$3.6 million.
Our ultimate success depends upon the outcome of a combination of factors, including the following: (i) successful commercialization of ContraPestour fertility control products and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of ContraPestour fertility control products and any other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development activities; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs.
Based upon our current operating plan, we expect that cash and cash equivalents at June 30, 2023,March 31, 2024, in combination with anticipated revenue and any additional sales of our equity securities, will be sufficient to fund our current operations for at least the next threesix months. We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ContraPestour fertility control products in the United States.States and internationally. However, if anticipated revenue targets and margin targets are not achieved or expenses are more than we have budgeted, we may need to raise additional financing before that time. If we need more financing, including within the next threesix months, and we are unable to raise the necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern. In any event, we may require additional capital in order to fund our operating losses and research and development activities before we become profitable and may opportunistically raise capital. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.
Additional Funding Requirements
We expect our expenses to continue or increase in connection with our ongoing activities, particularly as we focus on marketing and sales of ContraPest.fertility control products. In addition, we will continue to incur 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, including by conducting field demonstrations for potential lead customers;
explore strategic partnerships to enable us to penetrate additional target markets and geographical locations;
manage the infrastructure for sales, marketing and distribution of ContraPestfertility control products and any other product candidates for which we may receive regulatory approval;
seek additional regulatory approvals for ContraPest,fertility control products, including to more fully expand the market and use for ContraPestfertility control products and, if we believe there is commercial viability, for our other product candidates;
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further develop our manufacturing processes to contain costs while being able to scale to meet future demand of ContraPestfertility control products and any other product candidates for which we receive regulatory approval;
continue product development of ContraPestfertility control products and advance our research and development activities and, as our operating budget permits, advance the research and development programs for other product candidates;
maintain and protect our intellectual property portfolio; and
add operational, financial and management information systems and personnel, including personnel to support our product development and commercialization efforts and operations as a public company.
We will need additional financing to fund these continuing and additional expenses.
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Capital Resources
The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):
Six Months Ended June 30,
20232022
Three Months Ended March 31,Three Months Ended March 31,
202420242023
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period$4,775 $9,326 
Net cash provided by (used in):Net cash provided by (used in):
Operating activities
Operating activities
Operating activitiesOperating activities(3,757)(4,148)
Investing activitiesInvesting activities(21)(146)
Financing activitiesFinancing activities1,199 (32)
Decrease in cash and cash equivalentsDecrease in cash and cash equivalents(2,579)(4,326)
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$2,196 $5,000 
Cash Flows from Operating Activities—Cash flows from operating activities are generally determined by the amount and timing of cash received from customers and payments made to vendors, as well as the nature and amount of non-cash items, including depreciation and amortization and stock-based compensation included in operating results during a given period.
During the sixthree months ended June 30, 2023,March 31, 2024, operating activities used $3.8$1.8 million of cash, resulting from our net loss of $4.0$1.8 million and net changes in our operating assets and liabilities of $130,000,$119,000, partially offset by net non-cash charges of $403,000,$122,000, consisting primarily of stock-based compensation and depreciation and amortization expense. Our net loss was driven by costs related to our selling, general and administrative activities resulting from our continued efforts to commercialize our products, combined with research and development costs. Net cash used by changes in our operating assets and liabilities consisted primarily of increases in inventory of $79,000 and accounts receivable of $66,000, a net decrease in accounts payable and accrued expenses of $359,000,$11,000, and a decrease in deferred revenue of $3,000, partially offset by decreasesdecrease in prepaid expenses of $92,000, inventory of $88,000, and accounts receivable of $71,000.$42,000.
During the sixthree months ended June 30, 2022,March 31, 2023, operating activities used $4.1$2.0 million of cash, resulting from our net loss of $4.9$2.0 million, partially offset by net changes in our operating assets and liabilities of $198,000$178,000 and by non-cash charges of $555,000,$200,000, consisting primarily of stock-based compensation and depreciation and amortization expense. Our net loss was driven by costs related to our selling, general and administrative activities resulting from our efforts to commercialize our products, combined with our research and development costs. Net cash provided by changes in our operating assets and liabilities consisted of a net decreasedecreases in accounts payable and accrued expenses of $259,000, a decrease in deferred revenue of $41,000 and an increase in inventory of $25,000,$301,000, partially offset by increases in accounts receivable of $69,000, inventory of $38,000, and prepaid expenses of $108,000 and accounts receivable of $19,000.$28,000.
Cash Flows from Investing Activities—Cash flows used in investing activities primarily consist of the purchase of property and equipment, offset by any proceeds received in connection with sales of property and equipment. During the six three
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months ended June 30,March 31, 2024 and 2023, and 2022, cash flows used in investing activities consisted of property and equipment purchases of $21,000 and $146,000, respectively.purchases.
Cash Flows from Financing Activities—Financing activities provide cash for both day-to-day operations and capital requirements as needed. During the sixthree months ended June 30,March 31, 2024, net cash used in financing activities consisted of repayments on notes payable of $8,000, partially offset by proceeds received from the exercise of warrants of $6,000. During the three months ended March 31, 2023, net cash used in financing activities consisted of net proceeds of $1.2 million from the issuance of common stock, slightly offset by the payment of employee withholding taxes of $11,000. During the six months ended June 30, 2022, net cash used in financing activities consisted of repayments of notes payable and finance lease obligations of $32,000.related to share-based awards.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates as previously disclosed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022,2023, filed with the SEC on March 17, 2023.February 21, 2024.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We periodically conduct evaluations (pursuant to Rule 13a-15(b) of the Exchange Act), under the supervision and with the participation of management, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this report.
These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
For information regardingFrom time to time, we may be a party to certain legal proceedings, in whichincidental to the normal course of business. We are not currently a party to any pending or threatened legal proceedings that we are involved, see Note 9 - Contingencies under the subsection titled “Legal Proceedings” inbelieve could have a material adverse effect on our Notes to Condensed Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.business or financial condition.
Item 1A. Risk Factors
There have been no material changes to our risk factors set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2022,2023, filed with the SEC on March 17, 2023.February 21, 2024.
Item 5. Other Information
During the quarter ended June 30, 2023,March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).
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Item 6. Exhibits
Exhibit
Number
Description
4.28*
4.29*
10.26*
10.27*
10.28*
31.1
31.2
32.1
32.2
101.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*    Incorporated by reference as indicated.
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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.
Date: August 10, 2023May 9, 2024By:/s/ Joel L. Fruendt
Joel L. Fruendt
President and Chief Executive Officer
Date: August 10, 2023May 9, 2024By:/s/ Thomas C. Chesterman
Thomas C. Chesterman
Executive Vice President, Chief Financial Officer, Treasurer and Secretary
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