SenesTech(SNES) - 2025 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the unaudited condensed financial statements, management's discussion and analysis, and disclosures on market risk and internal controls for the period ended March 31, 2025 Item 1. Financial Statements (unaudited) The unaudited condensed financial statements for Q1 2025 show a year-over-year revenue increase to $485,000, a reduced net loss of $1.7 million, and highlight a significant going concern risk with existing cash expected to fund operations for only the next four months - Auditors express substantial doubt about the company's going concern ability due to a history of operating losses and an accumulated deficit of $137.8 million as of March 31, 2025[23][24][27] - Existing cash and cash equivalents of $1.7 million as of March 31, 2025, are projected to fund operations for only the next four months, necessitating additional financing[29][84] Condensed Balance Sheets As of March 31, 2025, total assets increased to $3.6 million and total stockholders' equity improved to $2.9 million due to capital raising, while total liabilities slightly decreased to $0.7 million Condensed Balance Sheet Data (in thousands) | Account | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,655 | $1,307 | | Total current assets | $3,164 | $2,813 | | Total assets | $3,626 | $3,278 | | Liabilities & Equity | | | | Total current liabilities | $543 | $561 | | Total liabilities | $734 | $767 | | Total stockholders' equity | $2,892 | $2,511 | | Total liabilities and stockholders' equity | $3,626 | $3,278 | Condensed Statements of Operations and Comprehensive Loss For Q1 2025, revenues increased 17% year-over-year to $485,000, gross profit surged 132% to $313,000, and net loss improved to $1.7 million from $1.8 million in the prior year Q1 2025 vs Q1 2024 Performance (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues, net | $485 | $415 | | Cost of sales | $172 | $280 | | Gross profit | $313 | $135 | | Total operating expenses | $1,976 | $1,978 | | Loss from operations | ($1,663) | ($1,843) | | Net loss | ($1,665) | ($1,832) | | Net loss per share - basic and diluted | ($1.28) | ($3.56) | Condensed Statements of Cash Flows In Q1 2025, net cash used in operating activities was $1.6 million, offset by $1.9 million from financing activities, resulting in a net increase in cash of $0.3 million and ending the period with $1.7 million in cash and cash equivalents Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,557) | ($1,829) | | Net cash used in investing activities | ($36) | ($2) | | Net cash provided by (used in) financing activities | $1,941 | ($2) | | Increase (decrease) in cash | $348 | ($1,833) | | Cash and cash equivalents, end of period | $1,655 | $3,562 | Notes to Condensed Financial Statements The notes detail the company's pest fertility control business, including new product launches, significant customer concentration, substantial financing activities, and a material legal contingency involving a trade secret misappropriation lawsuit - The company's lead product is Evolve Rat, launched in January 2024, with Evolve Mouse launched in May 2024, both being minimum risk pesticides exempt from federal EPA registration[19][20][21] - In March 2025, a warrant inducement transaction generated $1.1 million in gross proceeds from issuing 374,718 shares and new short-term warrants for over 1.5 million shares[55][57][61] - During Q1 2025, 365,319 shares were sold under the ATM facility for $1.2 million in gross proceeds, with the facility expanded in April 2025[58][71] - Liphatech Inc. is suing the company for breach of contract and trade secret misappropriation, with the company asserting strong defenses despite an uncertain outcome and no accrued settlement amount[69] - Customer concentration is significant, with one customer representing 31% of Q1 2025 revenue and 50% of accounts receivable as of March 31, 2025[67][68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights critical liquidity challenges and reliance on external financing despite a 17% year-over-year revenue increase driven by the higher-margin Evolve product line, which improved gross profit margin to 64.5% - The company has a history of significant operating losses, with an accumulated deficit of $137.8 million as of March 31, 2025, and expects these losses to continue[80][81] - Existing cash, anticipated revenue, and equity sales are projected to fund operations for only the next four months, making additional financing critical for survival[84][96] - The company may never achieve profitability or positive cash flow and requires continuous capital raising, with failure to do so potentially leading to operational delays or termination[85][96] Results of Operations Q1 2025 revenue grew 17% year-over-year to $485,000, primarily from the Evolve product line, which significantly improved gross margin to 64.5% while total operating expenses remained flat Revenue Breakdown by Product (in thousands) | Product | Q1 2025 Revenue | % of Total | Q1 2024 Revenue | % of Total | | :--- | :--- | :--- | :--- | :--- | | Evolve Rat | $303 | 62% | $250 | 60% | | Evolve Mouse | $81 | 17% | $— | 0% | | ContraPest | $101 | 21% | $165 | 40% | | Revenues, net | $485 | 100% | $415 | 100% | - Gross profit margin increased to 64.5% in Q1 2025 from 32.5% in Q1 2024, driven by a product mix shift to the lower-cost Evolve line[88] - R&D expenses increased by $48,000 (13%) primarily due to personnel realignment to R&D activities[90] - SG&A expenses decreased by $50,000 (3%) due to reduced headcount and lower personnel costs, partially offset by severance and increased investor relations consulting fees[91] Liquidity and Capital Resources The company faces critical liquidity, with $1.7 million in cash projected to last only four months, necessitating additional capital to fund operations and R&D, despite $1.9 million raised in Q1 2025 from ATM sales and warrant exercises Sources and Uses of Cash (in thousands) | Cash Flow | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in Operating activities | ($1,557) | ($1,829) | | Net cash used in Investing activities | ($36) | ($2) | | Net cash provided by Financing activities | $1,941 | ($2) | | Cash and cash equivalents, end of period | $1,655 | $3,562 | - Net cash from financing activities in Q1 2025 totaled $1.9 million, including $1.1 million from the ATM Facility and $889,000 from warrant exercises[105] - The company anticipates continued or increased expenses as it focuses on marketing, sales, regulatory approvals, and product development[97][103] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not applicable as the company is a smaller reporting company - Quantitative and qualitative disclosures about market risk are not applicable for the company[108] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the report period end[111] - No material changes to internal control over financial reporting occurred during the quarter[112] PART II — OTHER INFORMATION This section details legal proceedings, risk factors, other information, and exhibits filed with the report Item 1. Legal Proceedings The company is involved in legal proceedings, including a lawsuit filed by Liphatech Inc. in December 2024, with details provided in Note 10 of the financial statements - The company refers to Note 10, Contingencies, for information on legal proceedings, specifically detailing a lawsuit from Liphatech Inc[114][69] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors from the Annual Report on Form 10-K for the year ended December 31, 2024, have been reported[115] Item 5. Other Information During the quarter ended March 31, 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2025[116] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including forms of common stock purchase warrants, an inducement letter, and officer certifications - Exhibits filed include forms for Series G Common Stock Purchase Warrants, Placement Agent Warrants, and CEO/CFO certifications[117] Signatures This section contains the official signatures of the company's executive officers, certifying the report's contents - The report was signed on May 8, 2025, by Joel L. Fruendt, President and Chief Executive Officer, and Thomas C. Chesterman, Executive Vice President and Chief Financial Officer[120][122][123]