SenesTech, Inc. - Quarter Report: 2023 September (Form 10-Q)

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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 September 30, 2023

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” 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 November 8, 2023: 3,631,060

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SENESTECH, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS


	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	15





Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
	SIGNATURES	25

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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)


	September 30, 2023		December 31, 2022
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	2,145	$	4,775
Accounts receivable, net	83		113
Prepaid expenses	385		378
Inventory, net	703		853
Total current assets	3,316		6,119
Right to use assets, operating leases	217		347
Property and equipment, net	313		294
Other noncurrent assets	22		22
Total assets	$	3,868	$	6,782
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	147	$	540
Accrued expenses	671		560
Current portion of operating lease liability	192		180
Current portion of note payable	9		—
Deferred revenue	15		44
Total current liabilities	1,034		1,324
Operating lease liability, less current portion	34		179
Note payable, less current portion	44		—
Total liabilities	1,112		1,503
Commitments and contingencies (see notes)
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding	—		—
Common stock, $0.001 par value, 100,000,000 shares authorized, 5,899,060 shares issued and 3,279,485 shares outstanding as of September 30, 2023 and 809,648 shares issued and outstanding as of December 31, 2022	3		1
Additional paid-in capital	130,933		127,481
Accumulated deficit	(128,180)		(122,203)
Total stockholders’ equity	2,756		5,279
Total liabilities and stockholders’ equity	$	3,868	$	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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues, net	$	360	$	250	$	898	$	722
Cost of sales	184		128		488		374
Gross profit	176		122		410		348
Operating expenses:
Research and development	379		452		1,147		1,399
Selling, general and administrative	1,748		2,289		5,259		6,473
Total operating expenses	2,127		2,741		6,406		7,872
Loss from operations	(1,951)		(2,619)		(5,996)		(7,524)
Other income (expense):
Interest income	4		1		19		4
Interest expense	—		—		—		(1)
Miscellaneous expense, net	—		(28)		—		(26)
Other income (expense), net	4		(27)		19		(23)
Net loss and comprehensive loss	$	(1,947)	$	(2,646)	$	(5,977)	$	(7,547)
Weighted average shares outstanding - basic and diluted	4,176,592		610,648		3,037,790		610,578
Net loss per share - basic and diluted	$	(0.47)	$	(4.33)	$	(1.97)	$	(12.36)

See accompanying notes to condensed financial statements.

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SENESTECH, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(5,977)	$	(7,547)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	104		148
Stock-based compensation	467		570
Bad debt expense	(4)		5


Loss on sale of property and equipment	—		28
Changes in operating assets and liabilities:
Accounts receivable	34		(16)

Prepaid expenses	(7)		(174)
Inventory	150		48
Other assets	(3)		—
Accounts payable	(393)		142
Accrued expenses	111		409
Deferred revenue	(29)		48
Net cash used in operating activities	(5,547)		(6,339)

Cash flows from investing activities:
Purchase of property and equipment	(114)		(167)
Proceeds received from sale of property and equipment	—		4
Net cash used in investing activities	(114)		(163)

Cash flows from financing activities:
Proceeds from issuances of common stock, net	2,998		—
Proceeds from (repayments of) notes payable, net	44		(5)
Repayments of finance lease obligations	—		(27)

Payment of employee withholding taxes related to share based awards	(11)		—
Net cash provided by (used in) financing activities	3,031		(32)

Decrease in cash and cash equivalents	(2,630)		(6,534)
Cash and cash equivalents, beginning of period	4,775		9,326
Cash and cash equivalents, end of period	$	2,145	$	2,792

Supplemental cash flow information is as follows:
Cash paid for interest	$	—	$	1
Cash paid for income taxes	—		—
Non-cash investing and financing activities:
Note payable incurred for the purchase of certain equipment	10		—

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”) was incorporated in the state of Nevada in July 2004. On November 12, 2015, we subsequently reincorporated in the state of Delaware. Our corporate headquarters and manufacturing site are in Phoenix, Arizona. We have developed and are commercializing a global, proprietary technology for managing animal pest populations, initially rat populations, through fertility control. Our first product is known as ContraPest®.

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

We are pursuing additional products including 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 being developed as a minimum risk pesticide under the U.S. Environmental Protection Agency Federal Insecticide, Fungicide, and Rodenticide Act, Section 25(b). For further information see Note 10.

Going Concern

Our condensed financial statements as of September 30, 2023 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 and December 31, 2021 contain a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at that time. Specifically, we have incurred operating losses since our inception, and we expect to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. If we encounter continued issues or delays in the commercialization of fertility control products, our expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern. There are no assurances that such financing, if necessary, will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through additional financings, sales of our products, licensing fees, royalty payments or from other sources or transactions, we will exhaust our resources and will be unable to continue operations.

Liquidity and Capital Resources

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

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

As of September 30, 2023, we had an accumulated deficit of $128.2 million and cash and cash equivalents of $2.1 million.

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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.

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

Condensed Financial Statements

Our accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with the U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In our opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly our financial position as of September 30, 2023, and our operating results and cash flows for the three- and nine-month periods ended September 30, 2023 and 2022. The accompanying financial information as of December 31, 2022 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, filed with the SEC on March 17, 2023.

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.

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.

Reclassification

To conform with the 2023 presentation, we have reclassified the Loss on sale of property and equipment of $28,000 and Proceeds received from sale of property and equipment of $4,000 from Purchases of property and equipment in the condensed statement of cash flows for the nine months ended September 30, 2022. These reclassifications had no impact on our condensed statement of operations and comprehensive loss for the nine months ended September 30, 2022.

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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 $2.1 million and $4.8 million as of September 30, 2023 and December 31, 2022, respectively, included within cash and cash equivalents in the condensed balance sheets.

Accounts Receivable, Net

Accounts receivable, net consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Accounts receivable	$	85	$	119
Allowance for uncollectible accounts	(2)		(6)
Accounts receivable, net	$	83	$	113

The following was the activity in the allowance for uncollectible accounts (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance as of beginning of period	$	4	$	12	$	6	$	—
Increase in provision	2		—		2		12
Amounts written off, less recoveries	(4)		(7)		(6)		(7)
Balance as of end of period	$	2	$	5	$	2	$	5

Inventory, net

Inventory, net consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Raw materials	$	670	$	772
Work in progress	5		—
Finished goods	46		99
Total inventory	721		871
Less: reserve for obsolescence	(18)		(18)
Inventory, net	$	703	$	853

The following was the activity in the reserve for obsolescence (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance as of beginning of period	$	18	$	22	$	18	$	29
Increase in reserve	—		—		—		—
Amounts relieved	—		(3)		—		(10)
Balance as of end of period	$	18	$	19	$	18	$	19

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Prepaid Expenses

Prepaid expenses consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Software licenses	138		157
Professional services	95		41
Insurance	44		61
Patents	17		39
Marketing programs and conferences	6		74
Other	85		6
Total prepaid expenses	$	385	$	378

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Research and development equipment	$	1,621	$	1,558
Office and computer equipment	808		800
Autos	54		54
Furniture and fixtures	41		41
Leasehold improvements	119		119
Total in service	2,643		2,572
Accumulated depreciation and amortization	(2,387)		(2,283)
Total in service, net	256		289
Construction in progress	57		5
Property and equipment, net	$	313	$	294

Accrued Expenses

Accrued expenses consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Compensation, severance and related benefits	$	521	$	497
Legal services	135		36
Product warranty	15		18
Personal property and franchise tax	—		6
Other	—		3
Total accrued expenses	$	671	$	560

Note Payable

In August 2023, we arranged financing for the purchase of certain equipment. The note payable has an annual interest rate of 9.1% with a term of 5 years and is secured by the underlying equipment.

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As of September 30, 2023, future principal payments were as follows (in thousands):


2023	$	3
2024	9
2025	10
2026	11
2027	12
Thereafter	8
Total principal payments	53
Less: current portion of note payable	(9)
Note payable, less current portion	$	44

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. Note payable is recorded at amortized cost, which approximates fair value.

NOTE 4: LEASES

We have operating leases for our corporate headquarters and our manufacturing and research facility, which expire in 2024. 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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	55	$	55	$	166	$	167
Finance lease cost:
Amortization of right-of-use asset	$	—	$	—	$	—	$	27
Interest on lease liability	—		—		—		1
Total finance lease cost	$	—	$	—	$	—	$	28

As of September 30, 2023, maturities of operating lease liabilities were as follows (in thousands):


2023	$	50
2024	186

Total operating lease payments	236
Less: imputed interest	(10)
Total operating lease liabilities	$	226

NOTE 5: STOCK-BASED COMPENSATION

In 2018, our stockholders approved the adoption of the SenesTech, Inc. 2018 Equity Incentive Plan (the “2018 Plan”). 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 shares.

Stock options 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.

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As of September 30, 2023, we had 496,330 shares of common stock available for issuance under the 2018 Plan.

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 September 30, 2023:
Outstanding as of June 30, 2023	479,426		$	17.11	4.4
Granted	—		—		—
Exercised	—		—		—
Forfeited	(30,750)		5.25		—
Expired	—		—		—
Outstanding as of September 30, 2023	448,676	(1)	10.34		4.2
Nine months ended September 30, 2023:
Outstanding as of December 31, 2022	280,810		17.00		3.9
Granted	199,421		1.25		5.0
Exercised	—		—		—
Forfeited	(31,183)		17.97		—
Expired	(372)		680.87		—
Outstanding as of September 30, 2023	448,676	(1)	10.34		4.2
Exercisable as of September 30, 2023	194,878		30.92		3.9

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

The weighted average grant date fair value of options granted during the nine months ended September 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 September 30, 2023	—	—

The stock-based compensation expense was recorded as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Research and development	$	5	$	1	$	12	$	5
Selling, general and administrative (1)	165		139		455		565
Total stock-based compensation expense	$	170	$	140	$	467	$	570

(1) Includes $44,000 and $100,000 related to stock issued in exchange for marketing services for the three and nine month periods ended September 30, 2023, respectively.

The allocation between research and development and selling, general and administrative expense was based on the department and services performed by the employee or non-employee.

At September 30, 2023, the total compensation cost related to unvested options not yet recognized was $382,000, which will be recognized over a weighted average period of 1.3 years, assuming the employees and non-employees complete their service period required for vesting.

NOTE 6: STOCKHOLDERS’ EQUITY

On August 18, 2023, at a special meeting of stockholders, our stockholders 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.

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). No shares have yet been issued pursuant to this filing.

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Activity in equity during the nine month periods ended September 30, 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	13,225	—		100		—		100
Issuance of shares pursuant to the vesting of restricted stock units, net of shares withheld for taxes	54,466	—		(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
Stock-based compensation	—	—		88		—		88
Modification of terms related to certain warrants	—	—		657				657
Issuance of common stock upon exercise of warrants, net	315,000	—		1,131		—		1,131
Net loss	—	—		—		(1,947)		(1,947)
Balances as of September 31, 2023	3,279,485	3		$	130,933	$	(128,180)	$	2,756
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
Stock-based compensation	—	—		139		—		139
Net loss	—	—		—		(2,646)		(2,646)
Balances as of September 30, 2022	610,648	1		$	123,111	$	(120,055)	$	3,057

During the nine months ended September 30, 2023, the following shares of common stock were issued:

•315,000 shares pursuant to the exercise of warrants. A certain warrant holder was induced to exercise warrants related to 2,934,575 shares by reducing the exercise price to the then current market price of our common stock (the “Warrant Inducement”). The original warrants had an exercise price of $3.165 per share and a weighted average remaining life of 2.3 years. These warrants were exercised for $0.7202 per share for gross proceeds of $2.1 million, before deducting $326,000 of issuance costs and $657,000 related to the modification of the terms of the warrants to induce exercise. Of the 2,934,575 shares issued, 2,619,575 shares are held in abeyance and not considered outstanding, at which time such shares will become outstanding. The balance of the shares held in abeyance will be held in abeyance until notice from the stock holder that the balance, or portion thereof, may be issued in compliance with a beneficial ownership limitation provision in the warrants. See Note 10 for a discussion of outstanding abeyance shares.

In connection with the Warrant Inducement transaction, new warrants to purchase 5,869,150 shares of our common stock were issued, which are discussed in Note 7.

•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

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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 $1.54 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.

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

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	6,937,311	0.88		4.9
Exercised	(4,164,575)	1.54		—
Expired	(13,629)	527.05		—
Outstanding as of September 30, 2023	7,173,917	2.00		4.9

During the nine months ended September 30, 2023:

•In August, warrants were issued to the investor in the Warrant Inducement transaction discussed in Note 6 to purchase up to 5,869,150 shares of our common stock. These warrants are exercisable immediately with an exercise price of $0.7202 per share, and 3,012,006 expiring August 24, 2028 (5-Year Warrants) and 2,857,144 expiring September 24, 2024 (13-Month Warrants). We estimated the fair value of the 5-Year Warrants to be $1.5 million using a Black-Scholes model based on the following significant inputs: common stock price of $0.682 per share; volatility of 98%; term of 5 years; dividend yield of 0%; and risk-free rate of 4.4%. The fair value of the 13-Month Warrants was estimated to be $930,000 using the Black-Scholes model based on the following significant inputs: common stock price of $0.682 per share; volatility of 122%; term of 1.1 year; dividend yield of 0%; and risk-free rate of 4.4%.

•In August, placement agent warrants were issued to purchase up to 146,729 shares of our common stock. The placement agent warrants are exercisable immediately upon issuance, with an exercise price per share of $0.9003 per share, and expire August 24, 2028. We estimated the fair value of these warrants to be $72,000 using a Black-Scholes model based on the following significant inputs: common stock price of $0.682 per share; volatility of 98%; term of 5 years; dividend yield of 0%;and risk-free interest rate of 5.4%.

•In August, warrants representing 2,934,575 shares of common stock were exercised for $0.7202 per share. The terms of these warrants were modified in order to induce exercise. See Warrant Inducement discussion in Note 6. We recorded additional equity costs of $657,000 related to the warrant exercise transaction, which was calculated as the difference between the fair value of the warrants immediately prior to modification and immediately after modification using the Black-Scholes model based on the following significant inputs: common stock price of $0.682 per share; volatility of 96%; term of 2.3 years; dividend yield of 0%; and risk-free rate of 5.0%.

•In April, Series C warrants were issued to the investors in the offering discussed in Note 6 to purchase up to 857,146 shares of our common stock. The Series C warrants are exercisable immediately with an exercise price of $1.62 per share and expire October 12, 2028. We estimated the fair value of these warrants to be $1.1 million

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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 0%; and risk-free interest rate of 3.4%.

•In April, 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 0%;and risk-free interest rate of 3.5%.

•In February, 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 $1.54 per share.

NOTE 8: LOSS PER SHARE

Basic loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period, which includes prefunded warrants and shares held in abeyance from date of issuance. Diluted loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares used in the basic loss per share calculation plus potentially dilutive securities outstanding during the period determined using the treasury stock method. Stock options, warrants and restricted stock units 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.

The following shares were excluded from the calculation of diluted net loss per share:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Common stock warrants	259,380	—	3,277,507	—
Stock options	—	—	42,825	10,170
Restricted stock units	—	—	—	—
	259,380	—	3,320,332	10,170

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: SUBSEQUENT EVENTS

In connection with the Warrant Inducement discussed in Note 6, of the 2,934,575 shares issued, 2,619,575 shares were held in abeyance and not considered outstanding until certain conditions are met, at which time such shares will become outstanding. The balance of the shares in abeyance will be held in abeyance until notice from the stock holder that the balance, or potion thereof, may be issued in compliance with a beneficial ownership limitation provision in the warrants. In

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October 2023, the conditions were met and the stock holder provided notice to release 351,575 shares from abeyance which became outstanding. As of November 9, 2023, there were 3,631,060 shares of common stock outstanding and 2,268,000 shares held in abeyance.

In November 2023, we launched our latest product, Evolve, 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 being marketed for use in controlling rat populations as 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 12 states.

We have evaluated subsequent events from the balance sheet date through November 9, 2023, 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 expectation that we will continue to incur significant expenses and operating losses for the foreseeable future;

•our expectation that cash and cash equivalents at September 30, 2023, in combination with anticipated revenue and any additional sales of our equity securities, will be sufficient to fund our current operations for at least the next three 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 additional financing will be needed before achieving anticipated revenue targets and margin targets;

•our belief that 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;

•our additional capital is needed 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 successful commercialization of fertility control products in the United States;

•our belief that 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;

•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 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;

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

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

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

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

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

•the success of our research and development;

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

•our ability to meet our working capital needs;

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

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

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

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

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

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

These forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and situations that are difficult to predict and that may cause our own, or our industry’s, actual results to be materially different from the future results that are expressed or implied by these statements. Accordingly, actual results may differ materially from those anticipated or expressed in such statements as a result of a variety of factors, including those discussed in Item 1A-“Risk Factors” of Part I of our Annual Report on Form 10-K, for the year ended December 31, 2022, filed with the SEC on March 17, 2023, 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;

•market acceptance of our products;

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

•our ability to maintain compliance with Nasdaq’s continued listing requirements; and

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

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

We are subject to the information requirements of the Exchange Act, and we file or furnish reports, proxy statements and other information with the 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

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SEC’s website contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Overview

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

Through September 30, 2023, we received net proceeds of $96.6 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of $3.4 million in net product sales. As of September 30, 2023, we had an accumulated deficit of $128.2 million and cash and cash equivalents of $2.1 million.

We have incurred significant operating losses every year since our inception, with a net loss of $1.9 million for the three months ended September 30, 2023. 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 fertility control products and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of fertility control products and other products; (iii) the ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue; (iv) the success of our research and development; (v) the ability to retain and attract key personnel to develop, operate and grow our business; and (vi) our ability to meet our working capital needs.

Based upon our current operating plan, we expect that cash and cash equivalents at September 30, 2023, in combination with anticipated revenue and any additional sales of our equity securities, will be sufficient to fund our current operations for at least the next three 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. And, in August 2023, a certain warrant holder was induced to exercise warrants related to 2,934,575 shares by reducing the exercise price to the then current market price for our common stock. These warrants were exercised for $0.7202 per share for gross proceeds of $2.1 million, before deducting issuance costs. Of the 2,934,575 shares issued, 2,619,575 shares are held in abeyance and not considered outstanding until certain conditions are met, at which time such shares will become outstanding. The balance of the shares in abeyance will be held in abeyance until notice from the stock holder that the balance, or a portion thereof, may be issued in compliance with beneficial limitation provision in the warrants.

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Results of Operations

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


	Three Months Ended September 30,				% Increase (Decrease)		Nine Months Ended September 30,				% Increase (Decrease)
	2023		2022				2023		2022
Revenues, net	$	360	$	250	44	%	$	898	$	722	24	%
Cost of sales	184		128		44	%	488		374		30	%
Gross profit	176		122		44	%	410		348		18	%
Operating expenses:
Research and development	379		452		(16)	%	1,147		1,399		(18)	%
Selling, general and administrative	1,748		2,289		(24)	%	5,259		6,473		(19)	%
Total operating expenses	2,127		2,741		(22)	%	6,406		7,872		(19)	%
Loss from operations	(1,951)		(2,619)		(26)	%	(5,996)		(7,524)		(20)	%
Other income (expense), net	4		(27)		(115)	%	19		(23)		(183)	%
Net loss	$	(1,947)	$	(2,646)	(26)	%	$	(5,977)	$	(7,547)	(21)	%

Revenues

Sales, net of sales discounts and promotions, were $360,000 for the third quarter of 2023, compared to $250,000 for the third quarter of 2022. Sales increased by $110,000, due to continued focus on our internet sales initiatives, augmenting our existing pull through sales strategy, where demand from the consumer market encourages, or pulls, resellers and pest management professionals to offer our products, as well as enhanced strategic partnerships and collaborations with key distributors and 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 of product units sold, including our Elevate Bait SystemTM, which was launched in June 2022, and, most recently, our Isolate Bait SystemTM, which was launched in August 2023.

For the nine months ended September 30, 2023, sales were $898,000, compared to $722,000 for the nine months ended September 30, 2022. The $176,000 increase was primarily due to an increase in the number of units sold, including our Elevate Bait System product offering, and, most recently, our Isolate Bait System, which was launched in August 2023.

Cost of Sales

Cost of sales consisted primarily of the cost of products sold, including scrap and reserves for obsolescence, and was $184,000, or 51.2% of net sales, for the third quarter of 2023, compared to $128,000, or 51.2% of net sales, for the third quarter of 2022.

For the nine months ended September 30, 2023, cost of sales was $488,000, or 54.4% of net sales, compared to $374,000, or 51.8% of net sales, for the nine months ended September 30, 2022. The higher cost of sales as a percentage of net sales was driven 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 third quarter of 2023 was $176,000, for a gross profit margin of 48.8%, compared to a gross profit of $122,000, or a gross profit margin of 48.8%, for the third quarter of 2022.

For the nine months ended September 30, 2023, gross profit was $410,000, for a gross profit margin of 45.6%, compared to $348,000, gross profit margin of 48.2%, for the nine months ended September 30, 2022. The lower gross profit margin was the driven by the effects of scrapping defective tanks during no longer used in our products. Excluding the cost associated with the scrapped inventory, gross profit margin was 50.3% for the nine months ended September 30, 2023.

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Research and Development Expenses

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


	Three Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)
	2023		2022				2023		2022
Personnel (including stock-based compensation)	$	231	$	284	$	(53)	$	687	$	787	$	(100)
Professional fees	34		68		(34)		112		216		(104)
Depreciation	28		24		4		84		103		(19)
Facilities	28		29		(1)		79		82		(3)
Other	58		47		11		185		211		(26)
Total	$	379	$	452	$	(73)	$	1,147	$	1,399	$	(252)

Research and development expenses were $379,000 for the third quarter of 2023, compared to $452,000 for the third quarter of 2022. The $73,000 decrease was primarily due to lower headcount and consulting and legal fees required for research and development purposes.

For the nine months ended September 30, 2023, research and development expenses were $1,147,000, compared to $1,399,000 for the nine months ended September 30, 2022. The $252,000 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. In 2022, we incurred costs related to product improvement and continue into 2023 using the results from those studies for product development.

Selling, General and Administrative Expenses

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


	Three Months Ended September 30,				Increase (Decrease)		Nine Months Ended September 30,				Increase (Decrease)
	2023		2022				2023		2022
Personnel (including stock-based compensation)	$	880	$	952	$	(72)	$	2,673	$	3,137	$	(464)
Professional fees	365		639		(274)		1,236		1,539		(303)
Insurance	121		143		(22)		299		454		(155)
Marketing	81		261		(180)		199		506		(307)
Travel and entertainment	53		46		7		180		152		28

Facilities	39		38		1		116		116		—
Other	209		210		(1)		556		569		(13)
Total	$	1,748	$	2,289	$	(541)	$	5,259	$	6,473	$	(1,214)

Selling, general and administrative expenses were $1.7 million for the third quarter of 2023, as compared to $2.3 million for the third quarter of 2022. The decrease of $541,000 was primarily due to consulting and legal fees required for general corporate purposes largely due to higher legal fees incurred in the third quarter of 2022 and lower marketing costs resulting from changes in our overall marketing program. See Note 9 in our Notes to Condensed Financial Statements for a discussion of our legal matter. Additionally, personnel-related expenses were lower due to lower headcount and stock-based compensation.

For the nine months ended September 30, 2023, selling, general and administrative expenses were $5.3 million, compared to $6.5 million for the nine months ended September 30, 2022. The $1,214,000 decrease was primarily due to lower personnel-related expenses resulting from both lower stock-based compensation and lower headcount, lower marketing

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costs resulting from changes in our overall marketing program, and lower consulting and legal fees required for general corporate purposes largely due to higher legal fees incurred in the third quarter of 2022 related to our outstanding legal matter. Additionally, insurance is lower than the comparable period of 2022 resulting from both policy and rate changes. These decreases were partially offset by an increase in travel and entertainment costs related to increased sales-related activities.

Other Income, Net

Other income for the third quarter of 2023 consisted of interest income, which was $3,000 higher than the third quarter of 2022 due to higher interest rates of the comparable periods. Additionally, the third quarter of 2022 included a $28,000 loss on the sale of property and equipment.

For the nine months ended September 30, 2023, other income, net, consisted of interest income, which was $15,000 higher than the nine months ended September 30, 2022 due to higher interest rates of the comparable periods. Additionally, the nine months ended September 30, 2022 included $1,000 of interest expense related to certain notes payable and finance leases that expired in 2022, a $28,000 loss on the sale of property and equipment and $2,000 of miscellaneous income.

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 September 30, 2023, we have received net proceeds of $96.6 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and other promissory notes, an aggregate of $3.4 million in net product sales and an aggregate of $1.7 million from licensing fees. As of September 30, 2023, we had an accumulated deficit of $128.2 million and cash and cash equivalents of $2.1 million.

Our ultimate success depends upon the outcome of a combination of factors, including the following: (i) successful commercialization of our fertility control products and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of our 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 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 September 30, 2023, in combination with anticipated revenue and any additional sales of our equity securities, will be sufficient to fund our current operations for at least the next three months. We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of our fertility control products in the United States. However, if anticipated revenue targets and margin targets are not achieved or expenses are more than we have budgeted, we may need to raise additional financing before that time. If we need more financing, including within the next three 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 fertility control products. In addition, we will continue to incur costs associated with operating as a public company.

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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 fertility control products and any other product candidates for which we may receive regulatory approval;

•seek additional 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;

•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;

•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;

•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.

Capital Resources

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


	Nine Months Ended September 30,
	2023		2022
Cash and cash equivalents, beginning of period	$	4,775	$	9,326
Net cash provided by (used in):
Operating activities	(5,547)		(6,339)
Investing activities	(114)		(163)
Financing activities	3,031		(32)
Decrease in cash and cash equivalents	(2,630)		(6,534)
Cash and cash equivalents, end of period	$	2,145	$	2,792

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 nine months ended September 30, 2023, operating activities used $5.5 million of cash, resulting from our net loss of $6.0 million and net changes in our operating assets and liabilities of $137,000, partially offset by net non-cash charges of $567,000, 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 a net decrease in accounts payable and accrued expenses of $282,000 and

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deferred revenue of $29,000 and an increase in prepaid expenses of $7,000, partially offset by decreases in inventory of $150,000 and accounts receivable of $34,000.

During the nine months ended September 30, 2022, operating activities used $6.3 million of cash, resulting from our net loss of $7.5 million, partially offset by net changes in our operating assets and liabilities of $457,000 and by non-cash charges of $751,000, consisting primarily of stock-based compensation, depreciation and amortization expense and loss on sale of property and equipment. 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 decreases in accounts payable and accrued expenses of $551,000 and deferred revenue of $48,000 and an increase in inventory of $48,000, partially offset by increases in prepaid expenses of $174,000 and accounts receivable of $16,000.

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 nine months ended September 30, 2023 and 2022, cash flows used in investing activities consisted of property and equipment purchases. During the nine months ended September 30, 2022, net cash used in investing also included proceeds received from the sale of property and equipment of $4,000.

Cash Flows from Financing Activities—Financing activities provide cash for both day-to-day operations and capital requirements as needed. During the nine months ended September 30, 2023, net cash provided by financing activities consisted of net proceeds of $3.0 million from the issuances of common stock and $44,000 from the financing of certain equipment, slightly offset by the payment of employee withholding taxes of $11,000. During the nine months ended September 30, 2022, net cash used in financing activities consisted of repayments of notes payable and finance lease obligations of $32,000.

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, filed with the SEC on March 17, 2023.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

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 legal proceedings in which we are involved, see Note 9 - Contingencies under the subsection titled “Legal Proceedings” in our Notes to Condensed Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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, filed with the SEC on March 17, 2023.

Item 5. Other Information

During the quarter ended September 30, 2023, 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



4.33*						Form of New Warrants (Form 8-K filed August 22, 2023, Exhibit 4.33 (File no. 001-37941)).



10.29*						Form of Inducement Letter (Form 8-K filed August 22, 2023, Exhibit 10.29 (File no. 001-37941)).
31.1						Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2						Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1						Section 1350 Certification of Chief Executive Officer.
32.2						Section 1350 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.

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

Date: November 9, 2023	By:	/s/ Thomas C. Chesterman
		Thomas C. Chesterman
		Executive Vice President, Chief Financial Officer, Treasurer and Secretary