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, 2023~~March 31, 2024

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)


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

23460 N 19th Ave, Suite 110
Phoenix, AZ						85027
(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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

SNES

The 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 filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	o

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: 2,964,485~~May 7, 2024: 5,144,632

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SENESTECH, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2023~~MARCH 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
ASSETS	ASSETS	(unaudited)
Current assets:	Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	2,196	$	4,775
Accounts receivable, net	Accounts receivable, net	44		113
Prepaid expenses	Prepaid expenses	330		378
Inventory, net	Inventory, net	765		853
Total current assets	Total current assets	3,335		6,119
Right to use assets, operating leases	Right to use assets, operating leases	261		347
Property and equipment, net	Property and equipment, net	245		294
Other noncurrent assets	Other noncurrent assets	22		22
Total assets	Total assets	$	3,863	$	6,782
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable
Accounts payable
Accounts payable	Accounts payable	$	120	$	540
Accrued expenses	Accrued expenses	621		560
Current portion of operating lease liability	Current portion of operating lease liability	188		180
Current portion of note payable
Deferred revenue	Deferred revenue	24		44
Total current liabilities	Total current liabilities	953		1,324
Operating lease liability, less current portion		83		179

Note payable, less current portion
Note payable, less current portion
Note payable, less current portion
Total liabilities	Total liabilities	1,036		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 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, 2,964,485 and 809,648 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		3		1
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 capital	Additional paid-in capital	129,057		127,481
Accumulated deficit	Accumulated deficit	(126,233)		(122,203)
Total stockholders’ equity	Total stockholders’ equity	2,827		5,279
Total liabilities and stockholders’ equity	Total 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,
		2023		2022		2023		2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Revenues, net
Revenues, net
Revenues, net	Revenues, net	$	305	$	277	$	538	$	472
Cost of sales	Cost of sales	163		141		304		246
Cost of sales
Cost of sales
Gross profit
Gross profit
Gross profit	Gross profit	142		136		234		226
Operating expenses:	Operating expenses:
Operating expenses:
Operating expenses:
Research and development
Research and development
Research and development	Research and development	381		431		768		947
Selling, general and administrative	Selling, general and administrative	1,761		2,277		3,511		4,184
Selling, general and administrative
Selling, general and administrative
Total operating expenses
Total operating expenses
Total operating expenses	Total operating expenses	2,142		2,708		4,279		5,131
Loss from operations	Loss 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 income	Interest income	7		1		15		3
Interest income
Interest income
Interest expense	Interest expense	—		—		—		(1)
Miscellaneous income		—		2		—		2
Interest expense
Interest expense

Other income, net

Other income, net

Other income, net	Other income, net	7		3		15		4
Net loss and comprehensive loss	Net loss and comprehensive loss	$	(1,993)	$	(2,569)	$	(4,030)	$	(4,901)

Weighted average shares outstanding - basic and fully diluted		2,860,874		610,635		2,208,162		610,543
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,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Cash flows from operating activities:	Cash flows from operating activities:
Net loss	Net 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 amortization	Depreciation and amortization	69		113
Stock-based compensation	Stock-based compensation	336		430
Bad debt expense	Bad 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 receivable	Accounts receivable	71		(19)

Other assets		(2)		—
Prepaid expenses
Prepaid expenses
Prepaid expenses	Prepaid expenses	92		(108)
Inventory	Inventory	88		25
Other assets
Accounts payable	Accounts payable	(420)		(47)
Accrued expenses	Accrued expenses	61		306
Deferred revenue	Deferred revenue	(20)		41
Net cash used in operating activities	Net 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 activities	Net cash used in investing activities	(21)		(146)

Cash flows from financing activities:	Cash flows from financing activities:
Proceeds from the issuance of common stock, net		1,210		—
Cash flows from financing activities:
Cash flows from financing activities:

Repayments of notes payable	Repayments 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 awards	Payment of employee withholding taxes related to share based awards	(11)		—
Net cash provided by (used in) financing activities		1,199		(32)
Net cash used in financing activities

Decrease in cash and cash equivalents
Decrease in cash and cash equivalents
Decrease in cash and cash equivalents	Decrease in cash and cash equivalents	(2,579)		(4,326)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	4,775		9,326
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	2,196	$	5,000

Supplemental disclosures of cash flow information:
Interest paid		$	—	$	1
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 our~~control. Our first product is known as ContraPest®.

ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide and triptolide. ContraPest limits reproduction of male and female rats beginning with the first breeding cycle following consumption. ContraPest is being marketed for use in controlling Norway and roof rat populations. In addition to the U.S. Environmental Protection Agency registration of ContraPest, we must obtain registration from the various state regulatory agencies prior to selling in each state. To date, we have received registration for ContraPest in all 50 states and the District of Columbia, 49 of which have approved the removal of the Restricted Use designation, as well as the District of Columbia and five major U.S. territories.

In November 2023, we launched our latest product 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, 2023~~March 31, 2024 were prepared under the assumption that we would continue as a going concern. The reports of our independent registered public accounting firm that accompanies our financial statements for each of the years ended December 31, ~~2022~~2023 and December 31, ~~2021~~2022 contain a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time. Specifically, we have incurred operating losses since our inception, and we expect to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. If we encounter continued issues or delays in the commercialization of ~~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.

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product candidates; (ii) market acceptance, commercial viability and profitability of ~~ContraPest~~fertility control products and other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs.

~~Table of Contents~~

While we have evaluated and continue to evaluate our operating expenses and concentrate our resources toward the successful commercialization of ~~ContraPest~~fertility control products in the United States, additional financing will be needed before achieving anticipated revenue targets and margin targets. If we are unable to raise necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern. In any event, additional capital is needed in order to fund our operating losses and research and development activities before we become profitable. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.

Condensed Financial Statements

Our accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with the U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In our opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly our financial position as of ~~June 30, 2023,~~March 31, 2024, and our operating results and cash flows for the ~~three- and six-month~~three month periods ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023. The accompanying financial information as of December 31, ~~2022~~2023 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~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, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, included within cash and cash equivalents in the condensed balance sheets.

~~Table of Contents~~

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 receivable	Accounts receivable	$	48	$	119
Allowance for uncollectible accounts	Allowance for uncollectible accounts	(4)		(6)
Accounts receivable, net	Accounts 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,
		2023		2022		2023		2022
		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 period	Balance as of beginning of period	$	4	$	—	$	6	$	—
Increase in provision	Increase in provision	—		12		—		12
Increase in provision
Increase in provision
Amounts written off, less recoveries
Amounts written off, less recoveries
Amounts written off, less recoveries	Amounts written off, less recoveries	—		—		(2)		—
Balance as of end of period	Balance as of end of period	$	4	$	12	$	4	$	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 materials	Raw materials	$	729	$	772

Work in progress
Finished goods	Finished goods	54		99
Total inventory	Total inventory	783		871
Less: reserve for obsolescence	Less: reserve for obsolescence	(18)		(18)
Inventory, net	Inventory, 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,
		2023		2022		2023		2022
		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 period	Balance as of beginning of period	$	18	$	26	$	18	$	29
Increase in reserve	Increase in reserve	—		—		—		—
Increase in reserve
Increase in reserve
Amounts relieved
Amounts relieved
Amounts relieved	Amounts relieved	—		(4)		—		(7)
Balance as of end of period	Balance 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 services	Professional services	$	107	$	41
Insurance	Insurance	97		61
Software licenses		94		157
Deposit on equipment purchase
Patents
Prepaid inventory

Other	Other	14		6
Patents		10		39
Marketing programs and conferences		8		74
Other
Other
Total prepaid expenses	Total 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 equipment	Research and development equipment	$	1,569	$	1,558
Office and computer equipment	Office and computer equipment	803		800
Autos	Autos	54		54
Furniture and fixtures	Furniture and fixtures	41		41
Leasehold improvements	Leasehold improvements	119		119
Total in service	Total in service	2,586		2,572
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(2,353)		(2,283)
Total in service, net		233		289
Construction in progress		12		5

Property and equipment, net	Property 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 services		138		36
Product warranty		15		18
Personal property and franchise tax		—		6
Other
Other
Other	Other	—		3
Total accrued expenses	Total 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
2025	36
2026	39
2027	43
2028	38

Total principal payments	181
Less: current portion of notes payable	(34)
Notes payable, less current portion	$	147

NOTE 3: FAIR VALUE MEASUREMENTS

The carrying amounts of our financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their short maturities. Notes payable are recorded at amortized cost, which approximates fair value.

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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,
2023 2022 2023 2022
Operating lease cost $ 55 $ 56 $ 111 $ 112
Finance lease cost:
Amortization of right-of-use asset $ — $ 11 $ — $ 27
Interest on lease liability — — — 1
Total finance lease cost $ — $ 11 $ — $ 28


	Three Months Ended March 31,
	2024		2023
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
2024	2024	186

Total operating lease payments	Total operating lease payments	285
Less imputed interest		(14)

Total operating lease payments

Total operating lease payments
Less: imputed interest
Total operating lease liabilities	Total 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 ~~848,614~~70,717 shares.

~~Stock~~Currently, we only have stock options outstanding under the 2018 Plan, which are generally issued with a per share exercise price equal to the fair market value of our common stock at the date of grant. Options granted generally vest immediately, or ratably over a 12- to 36-month period coinciding with their respective service periods, with terms generally of five years. Certain stock option awards provide for accelerated vesting upon a change in control.

As of ~~June 30, 2023,~~March 31, 2024, we had ~~465,580~~42,049 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 Options Weighted
Average
Exercise
Price Per
Share Weighted
Average
Remaining
Contractual
Term
(years)
Three months ended June 30, 2023:
Outstanding as of March 31, 2023 280,448 $ 17.11 4.4
Granted 199,421 1.25 5.0
Exercised — — —
Forfeited (107) 39.64 —
Expired (336) 118.25 —
Outstanding as of June 30, 2023 479,426 (1) 10.01 4.5
Six months ended June 30, 2023:
Outstanding as of December 31, 2022 280,810 17.00 3.9
Granted 199,421 1.25 5.0
Exercised — — —
Forfeited (433) 119.46 —
Expired (372) 680.87 —
Outstanding as of June 30, 2023 479,426 (1) 10.01 4.5
Exercisable as of June 30, 2023 139,583 29.16 3.8


	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)
Three months ended March 31, 2024:
Outstanding as of December 31, 2023	36,708		$	119.70	4.0


Forfeited	(41)		300.62		3.0

Outstanding as of March 31, 2024	36,667	(1)	119.49		3.8

(1) Includes options related to ~~99,000~~8,249 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 volatility~~	~~128~~	%
~~Expected dividend yield~~	—
~~Expected term (in years)~~	5
~~Risk-free interest rate~~	~~5.3~~	%

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, 2022 18,799 $ 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
		2023		2022		2023		2022
Research and development

Research and development	Research and development	$	5	$	3	$	9	$	4
Selling, general and administrative (1)	Selling, general and administrative (1)	165		203		327		426
Selling, general and administrative (1)
Selling, general and administrative (1)
Total stock-based compensation expense	Total 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 $56,000~~Includes $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 ~~1.6~~1.1 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 ~~six~~three month periods ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ was as follows (dollars in thousands):

Common Stock Additional
Paid-In
Capital Accumulated
Deficit Total
Shares Amount
2023
Balances as of December 31, 2022 809,648 $ 1 $ 127,481 $ (122,203) $ 5,279
Stock-based compensation — — 166 — 166
Issuance of common stock upon exercise of warrants 1,230,000 1 (1) — —
Issuance of common stock for service 54,466 — 100 — 100
Issuance of shares pursuant to the vesting of restricted stock units, net of shares withheld for taxes 13,225 — (11) — (11)
Net loss — — — (2,037) (2,037)
Balances as of March 31, 2023 2,107,339 2 127,735 (124,240) 3,497
Stock-based compensation — — 113 — 113
Issuance of common stock, net of issuance costs 857,146 1 1,209 — 1,210
Net loss — — — (1,993) (1,993)
Balances as of June 30, 2023 2,964,485 $ 3 $ 129,057 $ (126,233) $ 2,827
2022
Balances as of December 31, 2021 610,364 $ 1 $ 122,542 $ (112,508) $ 10,035
Stock-based compensation — — 221 — 221
Issuance of common stock for service 250 — 3 — 3
Net loss — — — (2,332) (2,332)
Balances as of March 31, 2022 610,614 1 122,766 (114,840) 7,927
Stock-based compensation — — 205 — 205
Issuance of common stock for service 34 — 1 — 1
Net loss — — — (2,569) (2,569)
Balances as of June 30, 2022 610,648 $ 1 $ 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.~~


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total

	Shares	Amount
2024
Balances as of December 31, 2023	5,140,024	$	5	$	136,259	$	(129,913)	$	6,351
Stock-based compensation	—	—		85		—		85
Issuance of common stock upon exercise of warrants	4,608	—		6		—		6


Net loss	—	—		—		(1,832)		(1,832)
Balances as of March 31, 2024	5,144,632	$	5	$	136,350	$	(131,745)	$	4,610










2023
Balances as of December 31, 2022	67,472	$	—	$	127,482	$	(122,203)	$	5,279
Stock-based compensation	—	—		166		—		166
Issuance of common stock upon exercise of warrants	102,500	—		—		—		—
Issuance of shares pursuant to the vesting of restricted stock units, net of shares withheld for taxes	1,102	—		(11)		—		(11)
Issuance of common stock for service	4,539	—		100		—		100
Net loss	—	—		—		(2,037)		(2,037)
Balances as of March 31, 2023	175,613	$	—	$	127,737	$	(124,240)	$	3,497

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NOTE 7: COMMON STOCK WARRANTS

The following table presents the common stock warrant activity:

Shares Weighted
Average
Exercise
Price Per
Share Weighted
Average
Remaining
Contractual
Term
(years)
Outstanding as of December 31, 2022 4,414,810 $ 6.58 3.0
Issued 921,432 1.66 5.3
Exercised (1,230,000) 3.50 —
Expired (2,835) 728.00 —
Outstanding as of June 30, 2023 4,103,407 5.91 3.2


	Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)
Outstanding as of December 31, 2023	7,775,734	$	2.95	3.4

Exercised	(4,608)	1.30		—

Outstanding as of March 31, 2024	7,771,126	2.95		3.1

During the ~~six~~three months ended ~~June 30, 2023:~~

•~~Series C~~March 31, 2024, warrants ~~were issued to the investors in the offering discussed in Note 6 to purchase up to 857,146~~representing 4,608 shares of ~~our~~ common ~~stock. The Series C warrants are exercisable immediately~~stock 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 ~~and~~used 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 units~~warrants are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share because their effect would be anti-dilutive given the net losses reported for all periods presented. Therefore, basic and diluted loss per share are the same for each period presented.

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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,
2023 2022 2023 2022
Common stock warrants — — 166,661 —
Stock options 10,171 — 75,466 —
Restricted stock units — — — —
10,171 — 242,127 —


	Three Months Ended March 31,
	2024	2023
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 ~~three~~six 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 partnership~~additional 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 from~~sale of our ~~field sales organization was primarily due~~securities, we may be required to ~~an increase in the number of product units sold, including~~take other measures that could impair our ~~Elevate Bait System~~TM;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 ~~will~~may 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 ~~for~~of our product and product candidates;

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

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

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

We are subject to the information requirements of the Exchange Act, and we file or furnish reports, proxy statements and other information with the 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 revenue~~increased over the last three years, 17% in 2023, 77% in 2022 and 123% in 2021, we are not yet able to ~~date from~~fund 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 ~~losses~~loss 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 ~~ContraPest~~fertility control products and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of ~~ContraPest~~fertility control products and other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs.

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While we have evaluated and continue to evaluate our operating expenses and concentrate our resources toward the successful commercialization of ~~ContraPest~~fertility 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)
		2023		2022				2023				2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Revenues, net
Revenues, net
Revenues, net	Revenues, net	$	305	$	277			10	%			$	538			$	472			14	%
Cost of sales	Cost of sales	163		141		16	%			304				246				24	%
Cost of sales
Cost of sales
Gross profit
Gross profit
Gross profit	Gross profit	142		136		4	%			234				226				4	%
Operating expenses:	Operating expenses:
Operating expenses:
Operating expenses:
Research and development
Research and development
Research and development	Research and development	381		431		(12)	%			768				947				(19)	%
Selling, general and administrative	Selling, general and administrative	1,761		2,277		(23)	%			3,511				4,184				(16)	%
Selling, general and administrative
Selling, general and administrative
Total operating expenses
Total operating expenses
Total operating expenses	Total operating expenses	2,142		2,708		(21)	%			4,279				5,131				(17)	%
Loss from operations	Loss 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, net	Other income, net	7		3		133	%			15				4				275	%
Net loss	Net 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 ~~second~~first quarter of ~~2023,~~2024, compared to ~~$277,000~~$233,000 for the ~~second~~first quarter of ~~2022. Sales increased~~2023. The $182,000 increase was driven by ~~$28,000, due to continued focus on~~the launch of our ~~internet sales initiatives, augmenting our existing pull through sales strategy, where demand from~~latest 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 $472,000~~revenues for the ~~six months ended June 30, 2022. The $66,000 increase was primarily due to an increase in the number~~first 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 ~~second~~first quarter of ~~2023,~~2024, compared to $141,000, or ~~50.9%~~60.4% of net sales, for the ~~second~~first quarter of ~~2022. We have experienced an increase~~2023. Cost of sales in the first quarter of 2024 was impacted by the higher cost of ~~certain~~a key ingredient in our new Evolve product, ~~components in 2023, and when combined with changes~~as 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 second~~first 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 driven~~impacted 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 ~~second~~first quarter of ~~2023~~2024 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 ~~second~~first quarter of ~~2022.~~

~~For the six months ended June 30, 2023, gross profit was $234,000, for a~~2023. 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 margin~~2023 was ~~the driven~~impacted by the ~~effects~~higher 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)
		2023		2022				2023				2022
		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 fees	Professional fees	34		58		(24)				78				148				(70)
Depreciation		28		33		(5)				56				79				(23)
Facilities		25		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
Other	Other	80		51		29				127				164				(37)
Total	Total	$	381	$	431	$	(50)			$	768			$	947			$	(179)
Total
Total

Research and development expenses were ~~$381,000~~$370,000 for the ~~second~~first quarter of ~~2023,~~2024, compared to ~~$431,000~~$387,000 for the ~~second~~first 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 were~~purposes, 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.~~

~~Table~~studies 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)
		2023		2022				2023				2022
		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 fees	Professional fees	419		464		(45)				871				900				(29)
Professional fees
Professional fees
Marketing
Marketing
Marketing
Licensed software
Licensed software
Licensed software
Insurance
Insurance
Insurance	Insurance	93		145		(52)				179				311				(132)
Travel and entertainment	Travel and entertainment	53		60		(7)				127				106				21
Office supplies/IT		65		86		(21)				136				169				(33)
Marketing		63		225		(162)				117				245				(128)
Travel and entertainment
Travel and entertainment
Facilities
Facilities
Facilities	Facilities	39		39		—				77				78				(1)
Other	Other	139		143		(4)				211				190				21
Other
Other
Total	Total	$	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 ~~second~~first 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, both~~professional fees. Consulting fees related to marketing efforts are lower ~~stock-based compensation and lower headcount, and lower marketing costs resulting from~~in 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, consulting~~both 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 increase~~higher franchise fees in ~~travel and entertainment costs related~~the first quarter of 2024 when compared to ~~increased sales-related activities.~~the first quarter of 2023.

Other Income, Net

Other income, net for the ~~second~~first 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 ~~which~~of $8,000.

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Interest income was ~~$6,000~~ higher ~~than~~due to a combination of a higher average balance of cash and cash equivalents and higher interest rate during the ~~second~~first quarter of ~~2022 due to higher interest rates of~~2024 when compared with the ~~comparable periods. Additionally, we had miscellaneous income of $2,000 for the second~~first quarter of ~~2022~~2023. Interest expense in the first quarter of 2024 relates to the notes payable entered into in late 2023 related to the ~~sale~~purchase 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 ~~ContraPest~~our fertility control products and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of ~~ContraPest~~our 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 ~~three~~six months. We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ~~ContraPest~~our 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 ~~three~~six 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 ~~ContraPest~~fertility 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 ~~ContraPest~~fertility 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 ~~ContraPest~~fertility control products and any other product candidates for which we receive regulatory approval;

•continue product development of ~~ContraPest~~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;

•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,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Cash and cash equivalents, beginning of period	Cash 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 activities	Operating activities	(3,757)		(4,148)
Investing activities	Investing activities	(21)		(146)
Financing activities	Financing activities	1,199		(32)
Decrease in cash and cash equivalents	Decrease in cash and cash equivalents	(2,579)		(4,326)
Cash and cash equivalents, end of period	Cash 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 ~~six~~three 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 ~~decreases~~decrease in prepaid expenses of ~~$92,000, inventory of $88,000, and accounts receivable of $71,000.~~$42,000.

During the ~~six~~three 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 ~~decrease~~decreases 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 ~~six~~three 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 regarding~~From time to time, we may be a party to certain legal proceedings, ~~in which~~incidental 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” in~~believe 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*						~~Form of Series C Warrant (Form 8-K filed April 12, 2023, Exhibit 4.28 (File no. 001-37941)).~~
4.29*						~~Form of Series Placement Agent Warrant (Form 8-K filed April 12, 2023, Exhibit 4.29 (File no. 001-37941)).~~
10.26*						~~Form of Securities Purchase Agreement (Form 8-K filed April 12, 2023, Exhibit 10.26 (File no. 001-37941)).~~
10.27*						~~Separation Agreement between SenesTech, Inc. and Nicole Williams dated April 21, 2023 (Form 8-K filed April 24, 2023, Exhibit 10.27 (File no. 001-37941)).~~
10.28*						~~SenesTech, Inc. 2018 Equity Incentive Plan, as amended (Form 8-K filed June 27, 2023, Exhibit 10.28 (File no. 001-37941)).~~
31.1						Rule 13a-14(a)/15d-14(a) C ~~ertification~~Certification of Chief Executive Officer.
31.2						Rule 13a-14(a)/15d-14(a) C ~~ertification~~Certification of Chief Financial Officer.
32.1						Section 1350 C ~~ertification~~Certification of Chief Executive Officer.
32.2						Section 1350 C ~~ertification~~Certification of Chief Financial Officer.
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).

* Incorporated by reference as indicated.

2320

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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, 2023~~May 9, 2024	By:	/s/ Joel L. Fruendt
		Joel L. Fruendt
		President and Chief Executive Officer

Date: ~~August 10, 2023~~May 9, 2024	By:	/s/ Thomas C. Chesterman
		Thomas C. Chesterman
		Executive Vice President, Chief Financial Officer, Treasurer and Secretary

2421


	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations and Comprehensive Loss	2
	Condensed Statements of Cash Flows	3
	Notes to Condensed Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1412





Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2019
Item 4.	Controls and Procedures	2119
	PART II — OTHER INFORMATION
Item 1. 1.	~~Legal~~L egal Proceedings	2220
Item 1A.	Risk Factors	2220
Item 5.	Other Information	2220
Item 6.	Exhibits	2320
	~~SIGNATUR~~ESSIGNATURES	2421


	Number of Units	Weighted Average Grant-Date Fair Value Per Unit
Unvested balance as of December 31, 2022	18,799	$	2.71
Granted	—	—
Vested	(18,799)	2.71
Forfeited	—	—
Unvested balance as of June 30, 2023	—	—