SenesTech(SNES) - 2023 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed financial statements for Q1 2023 report a $2.0 million net loss and $2.7 million cash, with auditors expressing substantial doubt about the company's going concern due to recurring losses Condensed Balance Sheets As of March 31, 2023, total assets decreased to $4.6 million from $6.8 million at year-end 2022, driven by a reduction in cash and cash equivalents Condensed Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,748 | $4,775 | | Total current assets | $4,059 | $6,119 | | Total assets | $4,645 | $6,782 | | Total current liabilities | $1,016 | $1,324 | | Total liabilities | $1,148 | $1,503 | | Total stockholders' equity | $3,497 | $5,279 | Condensed Statements of Operations and Comprehensive Loss For Q1 2023, SenesTech reported a net loss of $2.0 million, an improvement from $2.3 million in Q1 2022, with revenues increasing to $233,000 Q1 2023 vs Q1 2022 Statement of Operations (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues, net | $233 | $195 | | Gross profit | $92 | $90 | | Total operating expenses | $2,137 | $2,423 | | Loss from operations | ($2,045) | ($2,333) | | Net loss | ($2,037) | ($2,332) | | Net loss per share | ($1.32) | ($3.82) | Condensed Statements of Cash Flows Net cash used in operating activities for Q1 2023 was $2.0 million, resulting in a $2.0 million decrease in cash and cash equivalents, ending the period at $2.7 million Q1 2023 vs Q1 2022 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,015) | ($2,029) | | Net cash used in investing activities | ($1) | ($66) | | Net cash used in financing activities | ($11) | ($16) | | Decrease in cash and cash equivalents | ($2,027) | ($2,111) | | Cash and cash equivalents, end of period | $2,748 | $7,215 | Notes to Condensed Financial Statements The notes detail significant risks, including substantial doubt about the company's going concern status due to recurring losses and an accumulated deficit, alongside a recent $1.5 million equity offering and ongoing legal disputes - The company's financial statements are prepared on a going concern basis, but auditors have expressed substantial doubt about its ability to continue due to a history of operating losses and expected future losses[20] - As of March 31, 2023, the company had an accumulated deficit of $124.2 million and cash of $2.7 million. Management expects current cash, combined with anticipated revenue and potential equity sales, will fund operations for at least the next six months[23][25] - In April 2023, the company completed a registered direct offering, issuing 857,146 shares of common stock at $1.75 per share for gross proceeds of $1.5 million[57] - The company is in a legal dispute with its former general counsel, who is seeking compensatory damages over $500,000 related to allegedly withheld stock options. The company believes the claims lack merit[54][56] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial performance, noting a 19% revenue increase to $233,000 despite a decline in gross profit margin, and reiterates the need for additional financing to address going concern risks Q1 2023 vs Q1 2022 Results of Operations (in thousands) | | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues, net | $233 | $195 | 19% | | Gross profit | $92 | $90 | 2% | | Research and development | $387 | $516 | (25)% | | Selling, general and administrative | $1,750 | $1,907 | (8)% | | Net loss | ($2,037) | ($2,332) | (13)% | - Revenue increased by 19% YoY due to a focus on internet sales, strategic partnerships with distributors and Pest Management Professionals (PMPs), and the launch of the new Elevate product[73] - Gross profit margin declined to 39.6% from 46.2% in the prior year, primarily due to a $42,000 charge for scrapping defective tanks. Excluding this charge, the gross margin would have been 57.8%[74][75] - The company expects its cash of $2.7 million (as of March 31, 2023) plus proceeds from a subsequent $1.5 million offering will be sufficient to fund operations for at least the next six months, but acknowledges that additional financing will be required[70][81] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the company for this reporting period - The company has indicated that quantitative and qualitative disclosures about market risk are not applicable[94] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, 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 end of the period covered by the report[97] - No changes occurred in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[98] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in a lawsuit with its former general counsel seeking over $500,000 in damages related to stock options, which the company intends to defend against - The company is being sued by its former general counsel over an alleged breach of an employment contract concerning stock options. The plaintiff seeks damages over $500,000. The company denies the claims and does not expect the litigation to have a material effect on operations[54][56][101] Item 1A. Risk Factors No material changes to the company's risk factors have occurred since its 2022 Annual Report on Form 10-K was filed - No material changes to the company's risk factors have occurred since its 2022 Annual Report on Form 10-K was filed[102] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On March 10, 2023, the company issued 54,466 shares of common stock to Outside The Box Capital Inc. for marketing services, exempt from registration - The company issued 54,466 shares of common stock to Outside The Box Capital Inc. for marketing services, relying on an exemption from registration requirements under Section 4(a)(2) of the Securities Act[103] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[104] Item 4. Mine Safety Disclosures This section is not applicable to the company - Not applicable[105] Item 5. Other Information The company reported no other information for this period - None[106] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including forms of warrants, a securities purchase agreement, a separation agreement, and officer certifications - Exhibits filed include forms of Series C and Placement Agent Warrants, a Securities Purchase Agreement, a Separation Agreement, and CEO/CFO certifications[108]