UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ 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 jurisdic ...

SenesTech, Inc. (NASDAQ:SNES) Q2 2021 Earnings Conference Call August 12, 2021 5:00 PM ET Company Participants Robert Blum – Managing Partner, Lytham Partners Ken Siegel – Chief Executive Officer Nicole Williams – Chief Strategy Officer Tom Chesterman – Chief Financial Officer Conference Call Participants Operator Good day, and welcome to the SenesTech, Inc. Second Quarter Fiscal Year 2021 Financial Results. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: | | | Name of each exchange on which | | --- | --- | --- | | Title of each class | Trading Symbol(s) | registered | | Common Stock, $0.001 par value | SNES | The NASDAQ Stock Market LLC | | | | (NASDAQ Capi ...

Senestech, Inc. (NASDAQ:SNES) Q1 2021 Earnings Conference Call May 13, 2021 5:00 PM ET Company Participants Joe Diaz - Lytham Partners Kenneth Siegel - CEO & Director Thomas Chesterman - EVP, CFO, Treasurer & Assistant Secretary Conference Call Participants Operator Good day, and welcome to the SenesTech's first quarter fiscal year 2021 financial results. [Operator Instructions]. I would now like to turn the conference over to Joe Diaz with Lytham Partners. Please go ahead. Joe Diaz Thank you, Carl, and tha ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐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 othe ...

Financial Data and Key Metrics Changes - Revenue for the year was approximately $282,000 compared to approximately $143,000 in 2019, an increase of 97% [37] - Fourth quarter revenue was $97,000, which included $24,000 of grant revenue received [37] - Net loss for the year was $8.4 million compared with a loss of $10 million in 2019 [42] Business Line Data and Key Metrics Changes - Significant progress was made in obtaining real-world data, particularly in agricultural and urban settings, demonstrating the efficacy of ContraPest [12][20] - In agricultural settings, ContraPest cut rat populations in half within three months and produced a sustained 90% decline in rat activity over 12 months [14] - In urban settings, one site showed a 94% reduction in rat activity and a 98% decline in juvenile rats over 12 months [20] Market Data and Key Metrics Changes - The company is focusing on California due to the adoption of the Ecosystem Protection Act, which limits the use of common rodenticides [49] - The company is also targeting the southeastern U.S. and looking to expand into grain storage and transport markets [51] Company Strategy and Development Direction - The company is focused on ramping adoption of ContraPest in commercial settings and enhancing its e-commerce capabilities [29][30] - A collaboration with Liphatech was announced to develop a new non-liquid formulation of ContraPest, opening new market opportunities [24] - The company aims to leverage existing systems and regional distributors to increase market penetration [52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2021, highlighting significant steps taken to position the company for future growth [31][34] - The company has a strong balance sheet with approximately $17.5 million in cash, providing visibility for driving business adoption [44] Other Important Information - Operating expenses decreased to $7.9 million in 2020 from $10 million in 2019, with sustainable operational improvements contributing to this reduction [41] - The company completed a $10 million private placement in February and a $4 million financing in March [43] Q&A Session Summary Question: What is the commercialization strategy going forward? - The focus will be on California, particularly with the Ecosystem Protection Act, and outreach to municipalities is a priority [49][50] Question: Will the company be more aggressive in marketing efforts now that it has a strong balance sheet? - Yes, the company plans to ramp up advertising and deploy cash strategically to drive sales [55][56] Question: What drove the top-line growth in 2020? - Growth was driven by a mix of direct sales and increased orders from various distributors, not solely from the online portal [57][58] Question: What is the share count after recent financings? - The pro forma share count is approximately 12.2 million [59] Question: What milestones should be looked for in 2021? - Key milestones include execution and revenue growth, along with updates on product improvements and initiatives with the EPA [60]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ 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 | | --- | --- | ...

SenesTech, Inc. (NASDAQ:SNES) Q3 2020 Earnings Conference Call November 11, 2020 5:00 PM ET Company Participants Robert Blum - Lytham Partners Ken Siegel - Chief Executive Officer Tom Chesterman - Chief Financial Officer Conference Call Participants Pete Enderlin - Maz Partners Operator Good day, and welcome to the SenesTech Inc Reports Third Quarter Fiscal Year 2020 Financial Results. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would no ...

Financial Data and Key Metrics Changes - Revenue for Q2 2020 was $71,000, compared to $24,000 in Q2 2019 and $37,000 in Q1 2020, marking significant growth [40] - Total revenue for the first half of 2020 was $108,000, a 150% increase year-over-year from $43,000 in the first half of 2019, and a 90% sequential growth from Q1 2020 [42] - Adjusted EBITDA loss was $1.4 million for Q2 2020, an improvement from a $2.2 million loss in Q1 2020 [49] Business Line Data and Key Metrics Changes - The revenue growth is attributed to the e-commerce channel, which has shown strong results, particularly among DIY customers and smaller pest management professionals [43] - The company has implemented service fees for technical services, which is expected to grow as demand increases [41] Market Data and Key Metrics Changes - The company has added 208 new accounts through July 2020, compared to 63 new accounts added in all of 2019, indicating accelerated growth [25] - The e-commerce platform has enabled the company to tap into the direct-to-consumer market, showing significant month-to-month growth despite COVID-19 [29] Company Strategy and Development Direction - The company has refocused its sales and marketing efforts to drive demand in targeted verticals and launched an e-commerce platform for direct sales [14][29] - The repositioning of ContraPest as part of an integrated pest management strategy aims to improve its effectiveness and acceptance in the market [15][31] - The company is working on new dispensers and formulations to expand the usability of ContraPest, with plans to submit a new dispenser for EPA approval [21][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by COVID-19 but remains optimistic about the company's progress and future economic performance [7][38] - The company has implemented cost-cutting measures, reducing expenses by over $200,000 per month, and raised $4.3 million in capital to fund operations [35][51] Other Important Information - The company has secured new manufacturing space in Phoenix, which is expected to improve efficiency and reduce costs [45][46] - The California AB1788 bill has been reactivated, which could have implications for the industry, although the future remains uncertain [36][60] Q&A Session Summary Question: Expansion in San Francisco - Management is awaiting clearance from San Francisco to announce details regarding the size and implementation of the expansion [56][57] Question: Future of California's AB1788 - Management indicated that amendments to the bill may allow for exemptions, making it potentially more acceptable to the industry [60][61] Question: Headcount and Income Statement - Management clarified that any headcount increases would be for revenue-producing positions, avoiding general administrative additions [66]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited condensed financial statements for the quarter and six months ended June 30, 2020 [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) The company's balance sheet reflects a notable increase in total assets primarily driven by a rise in cash reserves Condensed Balance Sheet Highlights (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash | $4,718 | $1,936 | | Total current assets | $6,200 | $3,542 | | Total assets | $7,337 | $4,979 | | Total current liabilities | $1,153 | $1,581 | | Total liabilities | $2,444 | $2,412 | | Total stockholders' equity | $4,893 | $2,567 | - Total assets increased by **$2,358 thousand (47.3%)** from December 31, 2019, to June 30, 2020, primarily driven by an increase in cash[9](index=9&type=chunk) - Total current liabilities decreased by **$428 thousand (27.1%)** from December 31, 2019, to June 30, 2020, mainly due to a decrease in accrued expenses[9](index=9&type=chunk) [Condensed Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company's operating results show significant revenue growth and a reduction in net loss compared to the prior year Condensed Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue: Sales | $71 | $24 | $108 | $43 | | Gross profit | $28 | $3 | $43 | $10 | | Total operating expenses | $1,653 | $2,294 | $3,994 | $4,662 | | Net operating loss | $(1,625) | $(2,291) | $(3,951) | $(4,652) | | Net loss and comprehensive loss | $(1,629) | $(2,289) | $(3,946) | $(4,653) | | Net loss per common share - basic and fully diluted | $(0.59) | $(1.86) | $(1.99) | $(3.87) | - Sales increased by **$47 thousand (195.8%)** for the three months ended June 30, 2020, compared to the same period in 2019, and by **$65 thousand (151.2%)** for the six months ended June 30, 2020, year-over-year[10](index=10&type=chunk) - Net loss decreased by **$660 thousand (28.8%)** for the three months ended June 30, 2020, and by **$707 thousand (15.2%)** for the six months ended June 30, 2020, compared to the respective prior year periods[10](index=10&type=chunk) [Condensed Statement of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Statement%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)) Stockholders' equity improved significantly due to proceeds from the issuance of common stock during the period Changes in Stockholders' Equity (in thousands) | Item | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Balance, March 31, 2020 / December 31, 2019 | $2,074 / $2,567 | $2,567 | | Issuance of common stock, sold for cash, net | $4,307 | $5,743 | | Stock-based compensation | $141 | $291 | | Net loss | $(1,629) | $(4,360) | | Balance, June 30, 2020 | $4,893 | $4,893 | - Total stockholders' equity increased from **$2,567 thousand** at December 31, 2019, to **$4,893 thousand** at June 30, 2020, primarily due to net proceeds from common stock issuances[12](index=12&type=chunk) - The company issued **1,574,308 shares** of common stock for cash, net, generating **$4,307 thousand** during the three months ended June 30, 2020[12](index=12&type=chunk) [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Cash flows reflect reduced operating cash burn and a substantial increase in financing activities Condensed Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,573) | $(3,907) | | Net cash provided by (used in) investing activities | $44 | $(47) | | Net cash provided by financing activities | $6,311 | $1,609 | | Net change in cash | $2,782 | $(2,345) | | Cash at end of period | $4,718 | $2,575 | - Net cash used in operating activities decreased by **$334 thousand (8.5%)** for the six months ended June 30, 2020, compared to the same period in 2019[14](index=14&type=chunk) - Net cash provided by financing activities significantly increased by **$4,702 thousand (292.2%)** for the six months ended June 30, 2020, primarily due to proceeds from common stock issuance and a PPP loan[14](index=14&type=chunk) [Note 1 - Organization and Description of Business](index=8&type=section&id=Note%201%20-%20Organization%20and%20Description%20of%20Business) The company focuses on developing and commercializing fertility control technology for animal pest populations - SenesTech, Inc. develops and commercializes proprietary technology for animal pest population management, initially focusing on rat fertility control with its product **ContraPest®**[16](index=16&type=chunk)[17](index=17&type=chunk) - ContraPest is a non-lethal, fertility control product approved by the EPA for rodent population management, registered in all **50 states and the District of Columbia**[21](index=21&type=chunk)[22](index=22&type=chunk) - The company has an accumulated deficit of **$100.0 million** and cash of **$4.7 million** as of June 30, 2020, and requires additional funding to continue operations and achieve profitability[30](index=30&type=chunk)[32](index=32&type=chunk) [Note 2 - Summary of Significant Accounting Policies](index=10&type=section&id=Note%202%20-%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting policies, including revenue recognition, R&D costs, and lease accounting standards - The company adopted **ASC 606** for revenue recognition, recognizing revenue when product is shipped or services are performed[47](index=47&type=chunk)[48](index=48&type=chunk) - Research and development costs are expensed as incurred, including salaries, consulting fees, lab supplies, and regulatory compliance costs[50](index=50&type=chunk) Stock-based Compensation Expense (in thousands) | Period | 2020 | 2019 | | :--- | :--- | :--- | | Three Months Ended June 30 | $140 | $219 | | Six Months Ended June 30 | $291 | $471 | - Effective January 1, 2019, the company adopted **ASU No. 2016-02, Leases (Topic 842)**, recognizing right-of-use lease assets and lease liabilities on its balance sheet[63](index=63&type=chunk) [Note 3 - Fair Value Measurements](index=17&type=section&id=Note%203%20-%20Fair%20Value%20Measurements) The company's common stock warrant liabilities are classified within the Level 3 fair value hierarchy - The company's common stock warrant liabilities are classified as **Level 3** within the fair value hierarchy due to limited activity or transparency of valuation inputs[81](index=81&type=chunk) - As of June 30, 2020, and December 31, 2019, there were **no common stock warrant liabilities** measured at fair value on a recurring basis[84](index=84&type=chunk) [Note 4 - Credit Risk](index=18&type=section&id=Note%204%20-%20Credit%20Risk) The company manages credit risk through a diverse customer base and maintains an allowance for doubtful accounts - The company is subject to concentrations of credit risk in its accounts receivable but limits this risk due to a **diverse customer base**[86](index=86&type=chunk) - An allowance for doubtful trade receivables of **$123 thousand** was maintained at June 30, 2020, and December 31, 2019[86](index=86&type=chunk) [Note 5 - Prepaid Expenses](index=19&type=section&id=Note%205%20-%20Prepaid%20Expenses) Prepaid expenses saw a slight increase, primarily related to insurance and marketing programs Prepaid Expenses (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Director, officer and other insurance | $129 | $115 | | Marketing programs and conferences | $42 | $80 | | Total prepaid expenses | $284 | $257 | - Total prepaid expenses increased by **$27 thousand (10.5%)** from December 31, 2019, to June 30, 2020[89](index=89&type=chunk) [Note 6 - Property and Equipment](index=19&type=section&id=Note%206%20-%20Property%20and%20Equipment) The net value of property and equipment decreased due to depreciation and amortization expenses Property and Equipment, Net (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Research and development equipment | $1,452 | $1,585 | | Office and computer equipment | $733 | $753 | | Total property and equipment, net | $564 | $738 | - Total property and equipment, net, decreased by **$174 thousand (23.6%)** from December 31, 2019, to June 30, 2020[90](index=90&type=chunk) - Depreciation and amortization expense was **$71 thousand** for Q2 2020 and **$148 thousand** for YTD 2020[90](index=90&type=chunk) [Note 7 - Accrued Expenses](index=19&type=section&id=Note%207%20-%20Accrued%20Expenses) Accrued expenses decreased substantially, driven by lower compensation liabilities and litigation settlement Accrued Expenses (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Compensation and related benefits | $382 | $935 | | Accrued Litigation | $0 | $238 | | Total accrued expenses | $399 | $1,193 | - Total accrued expenses decreased significantly by **$794 thousand (66.6%)** from December 31, 2019, to June 30, 2020, primarily due to a reduction in compensation and related benefits and the settlement of accrued litigation[91](index=91&type=chunk) [Note 8 - Borrowings](index=20&type=section&id=Note%208%20-%20Borrowings) The company's borrowings increased significantly due to a loan received under the Paycheck Protection Program Summary of Borrowings (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Short-term debt | $114 | $123 | | Long-term debt, net | $714 | $137 | | Total borrowings | $828 | $260 | - Long-term debt, net, increased substantially by **$577 thousand (421.2%)** from December 31, 2019, to June 30, 2020[93](index=93&type=chunk) - The company received a **$645.7 thousand** loan under the Paycheck Protection Program (PPP) in April 2020, maturing April 15, 2022, with a **1.00% interest rate**, subject to forgiveness[96](index=96&type=chunk) [Note 9 - Common Stock Warrants and Common Stock Warrant Liability](index=21&type=section&id=Note%209%20-%20Common%20Stock%20Warrants%20and%20Common%20Stock%20Warrant%20Liability) The number of outstanding common stock warrants increased dramatically following public and private offerings in 2020 Common Stock Warrants Outstanding | Date | Number of Warrants | | :--- | :--- | | December 31, 2019 | 489,176 | | June 30, 2020 | 2,504,597 | | Weighted-average exercise price (June 30, 2020) | $6.18 per share | - The number of outstanding common stock warrants increased significantly from **489,176** at December 31, 2019, to **2,504,597** at June 30, 2020, primarily due to new issuances in 2020 public and private offerings[100](index=100&type=chunk)[102](index=102&type=chunk) - Warrants issued in January 2020 (**177,500 shares**) have an exercise price of **$9.00** and expire July 28, 2025; Warrants issued in March 2020 (**176,372 shares**) have an exercise price of **$2.88** and expire September 8, 2025[113](index=113&type=chunk)[114](index=114&type=chunk) - In April 2020, **1,574,308 warrants** were issued with an exercise price of **$3.05**, expiring April 24, 2025[124](index=124&type=chunk) [Note 10 - Stockholders' Deficit](index=28&type=section&id=Note%2010%20-%20Stockholders'%20Deficit) The company issued a significant number of common stock shares, generating substantial net proceeds from offerings Common Stock Issued and Outstanding | Date | Shares | | :--- | :--- | | December 31, 2019 | 1,414,671 | | June 30, 2020 | 3,398,832 | - During the six months ended June 30, 2020, the company issued **1,984,161 shares** of common stock, including **1,574,308 shares** from a public offering and pre-funded warrant exercise, generating approximately **$4,334 thousand** in net proceeds[139](index=139&type=chunk)[142](index=142&type=chunk) - Other issuances included **177,500 shares** (net proceeds **$1,200 thousand**) and **176,372 shares** (net proceeds **$500 thousand**) from registered direct offerings, **51,414 shares** for warrant exercise in litigation settlement, and shares for RSU vesting and reverse stock split true-up[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) [Note 11 - Stock-based Compensation](index=30&type=section&id=Note%2011%20-%20Stock-based%20Compensation) This note details the company's equity incentive plans, stock option activity, and related compensation expenses - The 2018 Equity Incentive Plan authorizes the issuance of **50,000 shares**, with an additional **122,279 shares** available from the prior 2015 Plan[145](index=145&type=chunk) Stock Option Activity | Metric | Outstanding at Dec 31, 2019 | Granted | Forfeited | Outstanding at June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Number of Options | 136,489 | 25,000 | (6,000) | 155,489 | | Weighted Average Exercise Price | $28.00 | $2.44 | N/A | $24.83 | Stock-based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Research and development | $2 | $5 | | General and administrative | $138 | $286 | | Total | $140 | $291 | - As of June 30, 2020, unrecognized compensation cost related to restricted stock units and unvested options was **$719 thousand**, to be recognized over a weighted average period of **33 months**[158](index=158&type=chunk) [Note 12 - Commitments and Contingencies](index=33&type=section&id=Note%2012%20-%20Commitments%20and%20Contingencies) The company outlines its lease commitments and confirms no material pending or threatened litigation - The company is not aware of any pending or threatened litigation that could materially adversely affect its financial position[159](index=159&type=chunk) - The company has finance leases for equipment expiring through April 2022 and operating leases for corporate headquarters and manufacturing facilities expiring in November 2024 and December 2020, respectively[160](index=160&type=chunk)[161](index=161&type=chunk)[164](index=164&type=chunk) Future Minimum Lease Payments (in thousands) as of June 30, 2020 | Year | Finance Leases | Operating Lease | | :--- | :--- | :--- | | 2020 | $32 | $116 | | 2021 | $58 | $136 | | 2022 | $28 | $138 | | 2023 | $0 | $141 | | 2024 | $0 | $132 | | Total | $118 | $663 | [Note 13 - Subsequent Events](index=34&type=section&id=Note%2013%20-%20Subsequent%20Events) This note discusses the ongoing impact of the COVID-19 pandemic and a new lease agreement - The COVID-19 pandemic has caused significant slowdowns and delays in field studies and sales efforts, potentially impacting future results of operations[166](index=166&type=chunk) - The company entered into a new lease in Phoenix, Arizona, on June 22, 2020, for manufacturing and warehousing, commencing August 1, 2020, and expiring November 30, 2024[167](index=167&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, results of operations, and the ongoing impact of COVID-19 [Overview](index=36&type=section&id=Overview) The company has a history of operating losses and an accumulated deficit, with ongoing concerns about COVID-19's impact - SenesTech has sustained significant operating losses since inception, with net losses of **$1.6 million** for Q2 2020 and **$4.4 million** for YTD 2020[175](index=175&type=chunk) - As of June 30, 2020, the company had an accumulated deficit of **$100.0 million** and cash and cash equivalents of **$4.7 million**[174](index=174&type=chunk) - Stock-based compensation represented **8.5%** and **7.3%** of total operating expenses for the three and six months ended June 30, 2020, respectively[177](index=177&type=chunk) - The COVID-19 pandemic has caused significant slowdowns in field studies and sales efforts, potentially impacting future results, and the company has concerns over customer spending[180](index=180&type=chunk) [Components of our Results of Operations](index=37&type=section&id=Components%20of%20our%20Results%20of%20Operations) This section details the primary drivers of the company's revenues and major expense categories - Net sales primarily derive from commercial sales of **ContraPest** and related components, along with consulting and implementation services[181](index=181&type=chunk) - Research and development expenses include personnel costs, product development expenses, and facility-related costs, all expensed as incurred[182](index=182&type=chunk)[183](index=183&type=chunk) - Selling, general and administrative expenses include salaries, stock-based compensation, facility costs, and professional fees, with a focus on improving cost structure and shifting resources to commercialization[185](index=185&type=chunk)[186](index=186&type=chunk) - The company has federal and state net operating loss carryforwards of approximately **$61.3 million** and **$47.8 million**, respectively, as of June 30, 2020, with a full valuation allowance recorded[192](index=192&type=chunk) [Comparison of the Three and Six Months Ended June 30, 2020 and 2019](index=40&type=section&id=Comparison%20of%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202020%20and%202019) The company's financial performance improved with increased sales, higher gross margins, and reduced operating expenses Key Financial Performance Comparison (in thousands) | Metric | Q2 2020 | Q2 2019 | YTD 2020 | YTD 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $71 | $24 | $108 | $43 | | Cost of Sales | $43 | $21 | $65 | $33 | | Gross Profit | $28 | $3 | $43 | $10 | | Gross Profit Margin | 39.4% | 12.5% | 39.8% | 23.3% | | Research and Development Expenses | $226 | $463 | $522 | $927 | | Selling, General and Administrative Expenses | $1,427 | $1,831 | $3,472 | $3,735 | | Net Operating Loss | $(1,625) | $(2,291) | $(3,951) | $(4,652) | | Net Loss | $(1,629) | $(2,289) | $(3,946) | $(4,653) | - Net sales increased by **$47 thousand (195.8%)** in Q2 2020 and **$65 thousand (151.2%)** in YTD 2020, partly due to internet sales capability and customer product implementation services, though offset by COVID-19 impacts[195](index=195&type=chunk)[204](index=204&type=chunk) - Gross profit margin improved significantly to **39.4%** in Q2 2020 (from 12.5% in Q2 2019) and **39.8%** in YTD 2020 (from 23.3% in YTD 2019), driven by reduced scrap expense and process efficiencies[197](index=197&type=chunk)[206](index=206&type=chunk) - Research and development expenses decreased by **$237 thousand (51.2%)** in Q2 2020 and **$405 thousand (43.7%)** in YTD 2020, primarily due to reclassification of field support employees to sales and marketing and reduced personnel costs[198](index=198&type=chunk)[208](index=208&type=chunk) - Selling, general and administrative expenses decreased by **$400 thousand (21.8%)** in Q2 2020 and **$200 thousand (5.4%)** in YTD 2020, mainly due to lower salary costs (including stock compensation), reduced travel, and professional service fees, partially offset by increased expenses in other areas[201](index=201&type=chunk)[211](index=211&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) The company has historically funded operations through equity and debt financing and will require additional capital - The company has funded operations through equity securities sales (**$73.2 million** net proceeds), debt financing, licensing fees (**$1.7 million**), and product sales (**$0.7 million**) through June 30, 2020[218](index=218&type=chunk) - As of June 30, 2020, the company had an accumulated deficit of **$100.0 million** and cash and cash equivalents of **$4.7 million**[218](index=218&type=chunk) - The company received **$645.7 thousand** from the Paycheck Protection Program (PPP) loan to retain employees and cover payroll, lease, interest, and utility payments[219](index=219&type=chunk) - **Additional funding will be required** to support ongoing operations, marketing, sales, product development, regulatory approvals, and public company costs, especially with potential delays from the COVID-19 pandemic[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Cash used in operating activities | $(3,573) | $(3,907) | | Cash provided by (used in) investing activities | $44 | $(47) | | Cash provided by financing activities | $6,311 | $1,609 | | Net increase (decrease) in cash and cash equivalents | $2,782 | $(2,345) | [Critical Accounting Policies and Significant Judgments and Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section highlights key accounting policies, including revenue recognition and stock-based compensation valuation - The company adopted **ASC 606** for revenue recognition, identifying performance obligations and recognizing revenue upon satisfaction[235](index=235&type=chunk) - Stock-based compensation costs are recognized based on the estimated fair value of awards using the **Black-Scholes option-pricing model**, with key assumptions including expected term, volatility, risk-free interest rate, and dividend yield[236](index=236&type=chunk)[238](index=238&type=chunk) - The company has irrevocably elected to **'opt out'** of the extended transition period for complying with new or revised accounting standards as an emerging growth company[241](index=241&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There are no applicable quantitative and qualitative disclosures about market risk for the company - The company has **no applicable** quantitative and qualitative disclosures about market risk[242](index=242&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2020[245](index=245&type=chunk) - There were **no material changes** in internal control over financial reporting during the quarter ended June 30, 2020[246](index=246&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material adverse effects from legal proceedings as detailed in Note 12 - Information on legal proceedings is provided in Note 12, indicating **no material adverse effects** on the company's financial position, results of operations, or liquidity[248](index=248&type=chunk)[159](index=159&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) The company highlights the significant adverse impacts of the COVID-19 pandemic on its business operations - The **COVID-19 pandemic** poses significant risks, including widespread travel and transportation restrictions, closures of commercial spaces, and limitations on sales and field studies[250](index=250&type=chunk) - Potential adverse effects include disruptions to manufacturing, reduced customer purchasing, supply chain issues for critical raw materials from Asia, and limited ability to raise necessary financing[250](index=250&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities or use of proceeds for the period - **No unregistered sales** of equity securities or use of proceeds were reported[251](index=251&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities during the period - **No defaults** upon senior securities were reported[252](index=252&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are **not applicable** to the company[252](index=252&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) The company reports no other information for the period - **No other information** was reported[253](index=253&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate documents and certifications - The report includes exhibits such as the Amended and Restated Certificate of Incorporation, Bylaws, Promissory Note, Securities Purchase Agreement, 2018 Equity Incentive Plan, and a Standard Industrial/Commercial Multi-Tenant Lease[255](index=255&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer, as well as XBRL instance and taxonomy documents, are also filed as exhibits[255](index=255&type=chunk) [SIGNATURES](index=51&type=section&id=SIGNATURES) The report is certified by the company's Chief Executive Officer and Chief Financial Officer - The report is signed by **Kenneth Siegel, Chief Executive Officer**, and **Thomas C. Chesterman, Chief Financial Officer and Treasurer**, on August 13, 2020[257](index=257&type=chunk)