See accompanying notes to financial statements.
See accompanying notes to financial statements.
See accompanying notes to financial statements.
SENESTECH, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| |
For the Three Months | |
| |
Ended March 31, | |
| |
2022 | | |
2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | |
| |
Net loss | |
$ | (2,332 | ) | |
$ | (1,821 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 66 | | |
| 73 | |
Stock-based compensation | |
| 224 | | |
| 155 | |
(Increase) decrease in current assets: | |
| | | |
| | |
Accounts receivable - trade | |
| 21 | | |
| (2 | ) |
Other assets | |
| - | | |
| 5 | |
Prepaid expenses | |
| (29 | ) | |
| (182 | ) |
Inventory | |
| 54 | | |
| 40 | |
Increase (decrease) in current liabilities: | |
| | | |
| | |
Accounts payable | |
| (89 | ) | |
| (229 | ) |
Accrued expenses | |
| 56 | | |
| (54 | ) |
Net cash used in operating activities | |
| (2,029 | ) | |
| (2,015 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
Purchase of property and equipment | |
| (66 | ) | |
| (63 | ) |
Net cash used in investing activities | |
| (66 | ) | |
| (63 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Proceeds from the issuance of common stock, net | |
| - | | |
| 12,421 | |
Repayments of notes payable | |
| (3 | ) | |
| (17 | ) |
Repayments of finance lease obligations | |
| (13 | ) | |
| (13 | ) |
Proceeds from the exercise of warrants | |
| - | | |
| 1,209 | |
Net cash (used in) provided by financing activities | |
| (16 | ) | |
| 13,600 | |
| |
| | | |
| | |
NET CHANGE IN CASH | |
| (2,111 | ) | |
| 11,522 | |
CASH AT BEGINNING OF PERIOD | |
| 9,326 | | |
| 3,643 | |
CASH AT END OF PERIOD | |
$ | 7,215 | | |
$ | 15,165 | |
| |
| | | |
| | |
| |
| | | |
| | |
SUPPLEMENTAL INFORMATION: | |
| | | |
| | |
Interest paid | |
$ | 1 | | |
$ | 5 | |
Income taxes paid | |
$ | - | | |
$ | - | |
See accompanying notes to financial statements.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
Note 1 - Organization and Description of Business
SenesTech, Inc. (referred to in this report as “SenesTech,”
the “Company,” “we” or “us”) was formed in July 2004 and incorporated in the state of Nevada. We subsequently
reincorporated in the state of Delaware in November 2015. Our corporate headquarters is in Phoenix, Arizona. We have developed and are
commercializing a global, proprietary technology for managing animal pest populations, initially rat populations, through fertility control.
Although there are myriad tools available to control rat populations,
most rely on some form of lethal method to achieve effectiveness. Each of these solutions is inherently limited by rat species’
resilience and survival mechanisms as well as their extraordinary rate of reproduction. ContraPest®, our initial product,
is unique in the pest control industry in attacking the reproductive systems of both male and female rats, which our field data shows
will result in a sustained reduction of the rat population.
Rats have plagued humanity throughout history. They pose significant
threats to the health and food security of many communities. In addition, rodents cause significant product loss and damage through consumption
and contamination. Rats also cause significant damage to critical infrastructure by burrowing beneath foundations and gnawing on electrical
wiring, insulation, fire proofing systems, electronics and equipment.
The most prevalent solution to rat
infestations is the use of increasingly powerful rodenticides. Although these solutions provide short term results, there are
growing concerns about secondary exposure and bioaccumulation of rodenticides in the environment, as well as concerns about
rodenticides that have no antidotes. The pest management industry and Pest Management Professionals (“PMPs”) are being
asked for new solutions that are both effective and less toxic. Our goal is to provide customers with not only a highly effective
solution to combat their rat problems, but also offer a non-lethal option to serve customers that are looking to
decrease or remove the amount of rodenticide used in their pest control programs.
ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene
diepoxide (“VCD”) 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.
SenesTech began the registration process with the United States Environmental
Protection Agency (the “EPA”) for ContraPest on August 23, 2015. On August 2, 2016, the EPA granted an unconditional registration
for ContraPest as a Restricted Use Product (“RUP”), due to the need for applicator expertise for deployment. On October 18,
2018, the EPA approved the removal of the RUP designation. We believe ContraPest is the first and only non-lethal, fertility control product
approved by the EPA for the management of rodent populations.
In addition to the EPA registration of ContraPest in the United States,
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, 48 of which have approved the removal of the Restricted Use designation.
In addition to product registration, the EPA also approves all labeling
(the container label, instructional inserts, and the Safety Data Sheet (SDS)) of ContraPest. Generally, states accept the EPA approved
label as is. ContraPest’s labeling was submitted to states at initial registration and is resubmitted during state scheduled reregistration
or for any significant labeling change requiring EPA approval.
We expect to continue to pursue regulatory
approvals and amendments to the existing U.S. registration for ContraPest to broaden the marketability and use of ContraPest, and if
ContraPest begins to generate sufficient revenue, regulatory approvals for additional jurisdictions beyond the United States. In
certain cases, our EPA and state registrations require completion of additional testing and certifications even though we have
received approval for the product or its labelling. We continue to seek to comply with these requirements.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 1 - Organization and Description of Business – (continued)
We also continue to research and develop enhancements to ContraPest
that align with our target verticals and other potential fertility control options for additional species.
Going Concern
Our financial statements as of March 31, 2022, December 31, 2021 and
March 31, 2021 were prepared under the assumption that we would continue as a going concern, the report of our independent registered
public accounting firm that accompanies our financial statements for the years ended December 31, 2021 and December 31, 2020 contains
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, as noted above, we have incurred operating losses since our inception, and we expect
to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses
have had, and will continue to have, an adverse effect on our financial condition. If we encounter continued issues or delays in the commercialization
of ContraPest, our prior losses and 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 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. See Note 10 for a description of our public equity sales.
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.
Through March 31, 2022, we received net proceeds
of $89.6 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 $1.7 million in net product sales. As of March 31, 2022, we
had an accumulated deficit of $114.8 million and cash and cash equivalents of $7.2 million.
Our ultimate success depends upon the outcome
of a combination of factors, including the following: (i) successful commercialization of ContraPest and maintaining and obtaining regulatory
approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of ContraPest 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.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 1 - Organization and Description of Business – (continued)
Based upon our current operating plan, we expect
that cash and cash equivalents at March 31, 2022, 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 9 to 12 months. We have evaluated and will continue to evaluate
our operating expenses and will concentrate our resources toward the successful commercialization of ContraPest 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 9 to 12 months, and 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, 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.
Basis of Presentation
Our accompanying unaudited condensed financial
statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”)
for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared
in accordance with 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 March 31, 2022, our operating results for
the three months ended March 31, 2022 and 2021, and our cash flows for the three months ended March 31, 2022 and 2021. The accompanying
financial information as of December 31, 2021 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, 2021, filed with the SEC on March 29, 2022. All amounts shown in these financial statements
and accompanying notes are in thousands, except percentages and per share and share amounts.
Note 2 - Summary of Significant Accounting Policies
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 preferred stock,
if issued, common stock and related warrants, and other stock-based awards. Actual results could differ from such estimates.
Reclassifications
Certain prior year amounts have been reclassified
to conform to the current period presentation. These reclassifications had no material impact on net earnings, financial position or cash
flows.
Cash and Cash Equivalents
We consider money market fund investments to be
cash equivalents. We had cash equivalents in the form of money market fund investment of $6,794 and $8,793 at March 31, 2022 and December
31, 2021, respectively, included in cash as reported.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 2 - Summary of Significant Accounting
Policies – (continued)
Accounts Receivable-Trade
Accounts receivable-trade consist primarily of receivables from customers.
We provide an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical
collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts
receivable. We did not have any allowance for doubtful trade receivables at March 31, 2022 or at December 31, 2021.
Inventories
Inventories are stated at the lower of cost or
market value, using the first-in, first-out convention. Inventories consist of raw materials, work in progress and finished goods. Raw
materials are stocked to reduce the risk of impact on manufacturing for potential supply interruptions due to the COVID-19 pandemic or
long lead times on certain ingredients.
Components of inventory are:
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Raw materials | |
$ | 890 | | |
$ | 937 | |
Work in progress | |
| 4 | | |
| 5 | |
Finished goods | |
| 79 | | |
| 88 | |
Total inventory | |
| 973 | | |
| 1,030 | |
Less: | |
| | | |
| | |
Reserve for obsolete | |
| (26 | ) | |
| (29 | ) |
Total net inventory | |
$ | 947 | | |
$ | 1,001 | |
Prepaid Expenses
Prepaid expenses consist primarily of payments
made for director and officer insurance, director compensation, rent, legal and inventory purchase deposits and seminar/trade show fees
to be expensed in the current year.
Property and Equipment
Property and equipment are stated at cost less
accumulated depreciation. Equipment held under finance leases are stated at the present value of minimum lease payments less accumulated
amortization.
Depreciation on property and equipment is computed
using the straight-line method over the estimated useful lives of the respective assets. The cost of leasehold improvements is amortized
over the life of the improvement or the term of the lease, whichever is shorter. Equipment held under finance leases is amortized over
the shorter of the lease term or estimated useful life of the asset. We incur repair and maintenance costs on our major equipment, which
are expensed as incurred.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 2 - Summary of Significant Accounting Policies – (continued)
Impairment of Long-Lived Assets
Long-lived assets, such as property and
equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. If circumstances require long- lived assets or asset groups to be tested for possible impairment, we compare the
undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount. If the carrying
amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is
recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation
techniques, such as discounted cash flow models and the use of third-party independent appraisals. We have not recorded an
impairment of long-lived assets since its inception.
Revenue Recognition
Effective January 1, 2018, we adopted Accounting Standards Codification
(“ASC”) 606 — Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, we recognize
revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps:
(1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation
is satisfied.
We recognize revenue when product is shipped at a fixed selling price
on payment terms of 30 to 120 days from invoicing. We recognize other revenue earned from pilot studies, consulting and implementation
services upon the performance of specific services under the respective service contract.
We derive revenue primarily from commercial sales of products, net
of discounts and promotions, as well as consulting and implementation services provided in conjunction with our product deployments.
Research and Development
Research and development costs are expensed as incurred. Research and
development expenses primarily consist of salaries and benefits for research and development employees, stock-based compensation, consulting
fees, lab supplies, costs incurred related to conducting scientific trials and field studies, regulatory compliance costs,
as well as manufacturing costs associated with process improvement
and other research. Research and development expenses include an allocation of facilities related costs, including depreciation of equipment.
Stock-Based Compensation
Stock-based awards, consisting of stock options
and restricted stock units expected to be settled in shares of our common stock, are recorded as equity awards. The grant date fair value
of these awards is measured using the Black-Scholes option pricing model for stock options and grant date market value for restricted
stock units. We expense the grant date fair value of stock options on a straight-line basis over their respective vesting periods.
The stock-based compensation expense recorded
for the three months ended March 31, 2022 and 2021, is as follows:
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Research and development | |
$ | 1 | | |
$ | 2 | |
Selling, general and administrative | |
| 223 | | |
| 153 | |
Total stock-based compensation expense | |
$ | 224 | | |
$ | 155 | |
See Note 11 for additional discussion on stock-based compensation.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 2 - Summary of Significant Accounting Policies – (continued)
Income Taxes
We account for income taxes under the asset and
liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the
differences between the financial statements and tax bases of assets and liabilities and net operating loss carryforwards using enacted
tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the period that includes the enactment date.
We record net deferred tax assets to the extent
we believe these assets will more likely than not be realized. These deferred tax assets are subject to periodic assessments as to recoverability
and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recorded which
would increase the provision for income taxes. In making such determination, we consider all available positive and negative evidence,
including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent
financial operations.
We apply a more-likely-than-not recognition threshold
for all tax uncertainties. Only those benefits that have a greater than 50% likelihood of being sustained upon examination by the taxing
authorities are recognized. Based on our evaluation, we have concluded there are no significant uncertain tax positions requiring recognition
in our financial statements.
We recognize interest and/or penalties related
to uncertain tax positions in income tax expense. There are no uncertain tax positions as of March 31, 2022 or December 31, 2021 and as
such, no interest or penalties were recorded in income tax expense.
Comprehensive Loss
Net loss and comprehensive loss were the same
for all periods presented; therefore, a separate statement of comprehensive loss is not included in the accompanying financial statements.
Loss Per Share Attributable to Common Stockholders
Basic loss per share attributable to common stockholders
is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding
during the period. Diluted loss per share attributable to common stockholders is computed by dividing the loss attributable to common
stockholders by the weighted average number of common shares and potentially dilutive securities outstanding for the period determined
using the treasury stock and if-converted methods. For purposes of the computation of diluted loss per share attributable to common stockholders,
common stock purchase warrants, and common stock options are considered to be potentially dilutive securities but have been excluded from
the calculation of diluted loss per share attributable to common stockholders because their effect would be anti-dilutive given the net
loss reported for the three months ended March 31, 2022 and 2021. Therefore, basic and diluted loss per share attributable to common stockholders
are the same for each period presented.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 2 - Summary of Significant Accounting Policies – (continued)
The following table sets forth the outstanding
potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders
(in common stock equivalent shares):
| |
March 31, | |
| |
2022 | | |
2021 | |
Common stock purchase warrants | |
| 4,531,447 | | |
| 4,553,733 | |
Restricted stock units | |
| 667 | | |
| 31,405 | |
Common stock options | |
| 1,477,320 | | |
| 506,852 | |
Total | |
| 6,009,434 | | |
| 5,091,990 | |
Accounting Standards Issued but Not Yet Adopted
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 consolidated
financial statements.
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. The estimated fair value of
our notes, not recorded at fair value, are recorded at cost or amortized cost which was deemed to estimate fair value.
Note 4 - Credit Risk
We are potentially subject to concentrations of credit risk in our
accounts receivable. Credit risk with respect to receivables is limited due to the number of companies comprising our customer base. We
did not have any potentially uncollectable accounts at March 31, 2022 or December 31, 2021 and therefore, did not record a reserve for
uncollectable accounts at March 31, 2022 or December 31, 2021. We do not require collateral or other securities to support its accounts
receivable.
Note 5 - Prepaid Expenses
Prepaid expenses consist of the following:
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Director, officer and other insurance | |
$ | 169 | | |
$ | 109 | |
Marketing programs and conferences | |
| 34 | | |
| 66 | |
Patents | |
| 25 | | |
| 41 | |
Engineering, software licenses and other | |
| 17 | | |
| 12 | |
Engineering, software licenses and other | |
| 14 | | |
| 2 | |
Total prepaid expenses | |
$ | 259 | | |
$ | 230 | |
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 6 - Property and Equipment
Property and equipment, net consist of the following:
| |
Useful | |
March 31, | | |
December 31, | |
| |
Life | |
2022 | | |
2021 | |
Research and development equipment | |
5 years | |
$ | 1,437 | | |
$ | 1,425 | |
Office and computer equipment | |
3 years | |
| 786 | | |
| 762 | |
Autos | |
5 years | |
| 54 | | |
| 54 | |
Furniture and fixtures | |
7 years | |
| 41 | | |
| 41 | |
Leasehold improvements | |
* | |
| 117 | | |
| 112 | |
Construction in progress | |
| |
| 70 | | |
| 45 | |
| |
| |
| 2,505 | | |
| 2,439 | |
Less accumulated depreciation and amortization | |
| |
| (2,171 | ) | |
| (2,105 | ) |
Total | |
| |
$ | 334 | | |
$ | 334 | |
* | Shorter of lease term or estimated useful life |
Depreciation and amortization expense was approximately
$66 and $73 for the three months ended March 31, 2022 and 2021, respectively.
Note 7 - Accrued Expenses
Accrued expenses consist of the following:
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Compensation and related benefits | |
$ | 584 | | |
$ | 524 | |
Legal services | |
| - | | |
| 17 | |
Product warranty | |
| 23 | | |
| 18 | |
Personal property and franchise tax | |
| 13 | | |
| 5 | |
Other | |
| 14 | | |
| 14 | |
Total accrued expenses | |
$ | 634 | | |
$ | 578 | |
Note 8 - Borrowings
A summary of our borrowings, including finance lease obligations, is
as follows:
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Short-term debt: | |
| | |
| |
Finance lease obligations | |
$ | 14 | | |
$ | 27 | |
Other promissory notes | |
| 2 | | |
| 5 | |
Total | |
$ | 16 | | |
$ | 32 | |
Finance Lease Obligations
Finance lease obligations at March 31, 2022 was for manufacturing equipment
leased through ENGS Commercial Finance Co. This finance lease expires on April 18, 2022 and carries an interest rate of 11.4%.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 8 - Borrowings – (continued)
Other Promissory Notes
Also included in the table above is a note payable to Fidelity Capital
for the financing of a computing fixed asset. This note expires on July 1, 2022 and carries interest rate of 13.3%.
Note 9 - Common Stock Warrants and Common Stock Warrant Liability
The table summarizes the common stock warrant activity as of March
31, 2022 by warrant type.:
| |
| |
| |
| | |
Balance | | |
| | |
| | |
| | |
Balance | | |
| | |
| | |
| | |
Balance | |
Issue Date | |
Warrant Type | |
Term
Date | |
Exercise
Price | | |
December
31, 2020 | | |
Issued | | |
Exercised | | |
Expired | | |
December
31, 2021 | | |
Issued | | |
Exercised | | |
Expired | | |
March 31,
2022 | |
| |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
November 21, 2017 | |
Common Stock Offering Warrants | |
November 21, 2022 | |
| $ 1.3659 | (1) | |
| 143,501 | | |
| - | | |
| (21,787 | ) | |
| - | | |
| 121,714 | | |
| - | | |
| - | | |
| - | | |
| 121,714 | |
June 20, 2018 | |
Warrant Reissue | |
December 20, 2023 | |
$ | 36.40 | | |
| 56,696 | | |
| - | | |
| - | | |
| - | | |
| 56,696 | | |
| - | | |
| - | | |
| - | | |
| 56,696 | |
August 13, 2018 | |
Rights Offering Warrants | |
July 25, 2023 | |
$ | 23.00 | | |
| 202,943 | | |
| - | | |
| (499 | ) | |
| - | | |
| 202,444 | | |
| - | | |
| - | | |
| - | | |
| 202,444 | |
August 13, 2018 | |
Dealer Manager Warrants | |
August 13, 2023 | |
$ | 34.50 | | |
| 13,393 | | |
| - | | |
| - | | |
| - | | |
| 13,393 | | |
| - | | |
| - | | |
| - | | |
| 13,393 | |
July 16, 2019 | |
Dealer Manager Warrants | |
July 11, 2024 | |
$ | 33.75 | | |
| 8,334 | | |
| - | | |
| - | | |
| - | | |
| 8,334 | | |
| - | | |
| - | | |
| - | | |
| 8,334 | |
January 28, 2020 | |
Registered Direct Offering | |
July 28, 2025 | |
$ | 9.00 | | |
| 177,500 | | |
| - | | |
| - | | |
| - | | |
| 177,500 | | |
| - | | |
| - | | |
| - | | |
| 177,500 | |
January 28, 2020 | |
Dealer Manager Warrants | |
July 28, 2025 | |
$ | 10.00 | | |
| 13,315 | | |
| - | | |
| - | | |
| - | | |
| 13,315 | | |
| - | | |
| - | | |
| - | | |
| 13,315 | |
March 6, 2020 | |
Dealer Manager Warrants | |
March 4, 2025 | |
$ | 3.76 | | |
| 13,228 | | |
| - | | |
| - | | |
| - | | |
| 13,228 | | |
| - | | |
| - | | |
| - | | |
| 13,228 | |
April 21, 2020 | |
Dealer Manager Warrants | |
April 21, 2025 | |
$ | 3.97 | | |
| 118,073 | | |
| - | | |
| - | | |
| - | | |
| 118,073 | | |
| - | | |
| - | | |
| - | | |
| 118,073 | |
April 24, 2020 | |
Registered Direct Offering | |
April 24, 2025 | |
$ | 3.05 | | |
| 50,000 | | |
| - | | |
| - | | |
| - | | |
| 50,000 | | |
| - | | |
| - | | |
| - | | |
| 50,000 | |
October 26, 2020 | |
Private Warrant Inducement | |
April 27, 2026 | |
$ | 1.73 | | |
| 1,700,680 | | |
| | | |
| (700,680 | ) | |
| | | |
| 1,000,000 | | |
| - | | |
| - | | |
| - | | |
| 1,000,000 | |
October 26, 2020 | |
Dealer Manager Warrants | |
April 27, 2026 | |
$ | 2.16 | | |
| 85,034 | | |
| - | | |
| | | |
| | | |
| 85,034 | | |
| - | | |
| - | | |
| - | | |
| 85,034 | |
February 2, 2021 | |
Private Placement Agreement | |
August 2, 2026 | |
$ | 2.216 | | |
| - | | |
| 2,194,427 | | |
| - | | |
| - | | |
| 2,194,427 | | |
| - | | |
| - | | |
| - | | |
| 2,194,427 | |
February 2, 2021 | |
Dealer Manager Warrants | |
August 2, 2026 | |
$ | 2.848 | | |
| - | | |
| 329,164 | | |
| - | | |
| - | | |
| 329,164 | | |
| - | | |
| - | | |
| - | | |
| 329,164 | |
March 23, 2021 | |
Dealer Manager Warrants | |
March 23, 2026 | |
$ | 2.50 | | |
| - | | |
| 148,125 | | |
| - | | |
| - | | |
| 148,125 | | |
| - | | |
| - | | |
| - | | |
| 148,125 | |
| |
| |
| |
| | | |
| 2,582,697 | | |
| | | |
| | | |
| | | |
| 4,531,447 | | |
| | | |
| | | |
| | | |
| 4,531,447 | |
| (1) | The initial exercise price of these
warrants was $30.00 per share. Pursuant to antidilution price adjustment protection contained within these warrants, the initial exercise
price of these warrants was adjusted downward to $29.40 on July 24, 2018, the record date of the 2018 Rights Offering (defined herein)
and downward to $19.00 per share on August 13, 2018. These warrants were further adjusted downward from $19.00 to $7.13 and to $2.1122
on January 28, 2020 and March 4, 2020, respectively, in connection with separate registered direct offerings. These warrants were
further adjusted downward from $2.1122 to $1.3659 on October 26, 2020 in connection with a registered direct offering. These warrants
are subject to further adjustment pursuant to antidilution price adjustment protection. |
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability
– (continued)
Outstanding Warrants
As of March 31, 2022, we had 4,531,447 shares
of common stock issuable upon exercise of outstanding common stock warrants, at a weighted-average exercise price of $4.00 per share.
On November 21, 2017, we issued a total of 232,875
detachable common stock warrants issued with the second public offering of 293,000 shares of our common stock at $20.00 per share. The
common stock warrant is exercisable until five years from the date of grant. Our common stock and detachable warrants exist independently
as separate securities. As such, we estimated the fair value of the common stock warrants, exercisable at $30.00 per share, to be $661
using a lattice model based on the following significant inputs: common stock price of $20.00; comparable company volatility of 73.8%;
remaining term five years; dividend yield of 0% and risk-free interest rate of 1.87. The initial exercise price of these warrants was
$30.00 per share, which adjusted downward to $29.40 on July 24, 2018, the record date of the 2018 Rights Offering, and downward to $19.00
per share on August 13, 2018, the date of the 2018 Rights Offering, pursuant to antidilution price adjustment protection contained within
these warrants. The exercise price of the warrants was adjusted downward to $7.13 on January 28, 2020 in connection with a private placement
of common stock. Per guidance of ASC 260 – Earnings Per Share (“ASC 260”), we recorded a deemed dividend of $285
on the 143,501 unexercised warrants that contained this antidilution price adjustment protection provision and was calculated as the difference
between the fair value of the warrants immediately prior to downward exercise price adjustment and immediately after the adjustment using
a Black Scholes model based on the following significant inputs: On January 28, 2020, common stock price of $7.90; comparable company
volatility of 73.8%; remaining term 2.82 years; dividend yield of 0% and risk-free interest rate of 1.45%.
The exercise price of the warrants was adjusted downward to $2.1122
on March 4, 2020 in connection with a private placement of common stock. Per guidance of ASC 260, we recorded a deemed dividend of $129
on the 143,501 unexercised warrants that contained this antidilution price adjustment protection provision and was calculated as the difference
between the fair value of the warrants immediately prior to downward exercise price adjustment and immediately after the adjustment using
a Black Scholes model based on the following significant inputs: On March 4, 2020, common stock price of $2.88; comparable company volatility
of 74.5%; remaining term 2.71 years; dividend yield of 0% and risk-free interest rate of 0.68%.
The exercise price of the warrants was adjusted downward to $1.3659
on October 26, 2020 in connection with an inducement offering of common stock. Per guidance of ASC 260, we recorded a deemed dividend
of $22 on the 143,501 unexercised warrants that contained this antidilution price adjustment protection provision and was calculated as
the difference between the fair value of the warrants immediately prior to downward exercise price adjustment and immediately after the
adjustment using a Black Scholes model based on the following significant inputs: On October 26, 2020, common stock price of $1.47; comparable
company volatility of 96.5%; remaining term 2.08 years; dividend yield of 0% and risk-free interest rate of 0.18%.
On June 20, 2018, we entered into an
agreement with a holder of 56,696 of the November 2017 warrants to exercise its original warrant representing 56,696 shares of
common stock for cash at the $30.00 exercise price for gross proceeds of $1.7 million, and we issued to holder a new warrant to
purchase 56,696 shares of common stock at an exercise price of $36.40 per share. The new warrant did not contain the antidilution
price adjustment protection that was contained within the exercised warrants. In June 2018, we recorded stock compensation expense
of $1,700 representing the fair value of the of 56,696 inducement warrants issued. We estimated the fair value of the common stock
warrants, exercisable at $36.40 per share, to be $1,700 using a Black Scholes model based on the following significant inputs:
common stock price of $42.20; comparable company volatility of 72.6%; remaining term five years; dividend yield of 0% and risk-free
interest rate of 2.8%. Also, in June 2018, an additional 17,088 of the November 8, 2017 warrants that were in the money at the time
of exercise, were exercised for gross proceeds of $513.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability
– (continued)
On August 13, 2018, in connection with a rights offering of 267,853
shares of our common stock (the “2018 Rights Offering), we issued 267,853 warrants to purchase shares of our common stock at an
exercise price of $23.00 per share. We estimated the fair value of the common stock warrants, exercisable at $23.00 per share, to be $3,600
using a Monte Carlo model based on the following significant inputs: common stock price of $18.80; comparable company volatility of 159.0%;
remaining term five years; dividend yield of 0% and risk-free interest rate of 2.77%.
In connection with the closing of the 2018 Rights Offering, we issued
a warrant to purchase 13,393 shares of common stock to Maxim Partners LLC, an affiliate of the dealer-manager of the 2018 Rights Offering.
We estimated the fair value of the common stock warrants, exercisable at $34.50 per share, to be $169 using a using a Monte Carlo model
based on the following significant inputs: common stock price of $18.80; comparable company volatility of 159.0%; remaining term five
years; dividend yield of 0% and risk-free interest rate of 2.77%.
Common Stock Warrant Issued to Underwriter
of Common Stock Offering
In July 2019, we issued to H.C. Wainwright & Co., as placement
agent, a warrant to purchase 8,334 shares of common stock at an exercise price of $33.75 per share as consideration for providing services
in connection with a common stock offering in July 2019. The warrant was fully vested and exercisable on the date of issuance. The common
stock warrant is exercisable until five years from the date of grant. We estimated the fair value of the common stock warrants, exercisable
at $33.75 per share, to be $127 using a lattice model based on the following significant inputs: common stock price of $26.80; comparable
company volatility of 133.3%; remaining term five years; dividend yield of 0% and risk-free interest rate of 2.07%.
Common Stock Warrants Issued in January
and March 2020 Private Placements
In January and March 2020, in separate private placements concurrent
with registered direct offerings (collectively, the “2020 Registered Direct Offerings”) of shares of our common stock, we
also issued warrants to purchase an aggregate of up to 353,872 shares of common stock to certain institutional and accredited investors
that participated in the 2020 Registered Direct Offerings (the “2020 Warrants”). The warrants were issued in reliance on the
exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and
Rule 506(b) of Regulation D promulgated thereunder. Terms used but not otherwise defined herein will have the meanings given them in the
warrants, attached as Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on January 28, 2020 and our Current Report
on Form 8-K filed with the SEC on March 6, 2020.
The warrants issued in January 2020 to purchase 177,500 shares of common
stock have an exercise price of $9.00 per share, are exercisable after July 28, 2020 and will expire July 28, 2025. We estimated
the fair value of the common stock warrants, exercisable at $9.00 per share, to be $813 using a Black Scholes model based on the following
significant inputs: common stock price of $7.90; comparable company volatility of 73.8%; remaining term five years; dividend yield of
0% and risk-free interest rate of 1.53%.
The warrants issued in March 2020 to purchase 176,372 shares of common
stock have an exercise price of $2.88 per share, are immediately exercisable and will expire September 8, 2025. We estimated the fair
value of the common stock warrants, exercisable at $2.88 per share, to be $242 using a Black Scholes model based on the following significant
inputs: common stock price of $2.35; comparable company volatility of 74.8%; remaining term five and one-half years; dividend yield of
0% and risk-free interest rate of 0.39%.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability
– (continued)
For so long as the 2020 Warrants remain outstanding, the exercise price
and number of shares of common stock issuable upon exercise of the warrants are subject to adjustment as follows: (a) upon payment
of a stock dividend or other distribution on a class or series of shares common stock, not including shares issued under this warrant;
(b) upon subdivision (by stock spilt, stock dividend, recapitalization, or otherwise) or combination (by reverse stock split or otherwise)
of shares of common stock; or (c) upon the issuance of any shares of capital stock by reclassification of shares of the common stock.
In the event that we declare or make any dividend or other distribution
of our assets to holders of our common stock, each 2020 Warrant holder will be entitled to participate in such distribution to the same
extent that such holder would have participated therein if the holder had held the number of shares of common stock acquirable upon exercise
of the 2020 Warrant.
In the event of a Fundamental Transaction, as described in the 2020
Warrants and generally including the sale, transfer or other disposition of all or substantially all of our properties or assets; our
consolidation or merger with or into another person or reorganization; a recapitalization, reorganization or reclassification in which
our common stock is converted into other securities, cash or property; or any acquisition of our outstanding common stock that results
in any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, then the
holders of the 2020 Warrants will be entitled to receive upon exercise of such warrants the kind and amount of securities, cash, assets
or other property that the holders would have received had they exercised the 2020 Warrants immediately prior to such Fundamental Transaction.
Subject to certain limitations, in the event of a Fundamental Transaction the 2020 Warrant holder may at its option require us or any
Successor Entity to purchase such warrant from the holder by paying to the holder an amount of cash equal to the Black Scholes Value of
the remaining unexercised portion of the 2020 Warrant on the date of the consummation of the Fundamental Transaction.
Any time that we grant, issue, or sell any securities pro rata to all
of the record holders of our common stock (the “2020 Purchase Right”), each holder of 2020 Warrants will be entitled to acquire
the aggregate amount of securities that the holder could have acquired if the holder had held the number of shares of common stock acquirable
upon exercise of the applicable 2020 Warrant. However, to the extent that an exercise of a 2020 Purchase Right would exceed the Beneficial
Ownership Limitation (defined below), then to such extent the 2020 Purchase Right will be held in abeyance until such time, if ever, that
complete exercise of the 2020 Purchase Right would not exceed the Beneficial Ownership Limitation.
After the Initial Exercisability Date, the 2020 Warrants will be exercisable,
at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full
for the number of shares of our common stock purchased upon such exercise. If, at the time a holder exercises the 2020 Warrant (but not
sooner than six months following the date of such warrant), a registration statement registering the issuance of the shares of common
stock underlying the 2020 Warrants under the Securities Act is not then effective or available, nor is any current prospectus thereto
available, and an exemption from registration under the Securities Act is not available for the issuance of such shares, then in lieu
of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the
holder may elect instead to receive upon such exercise (either in whole or in part) the number of shares of common stock determined according
to a formula set forth in the 2020 Warrant.
Limitations on Exercise. A holder
(together with its affiliates) may not exercise any portion of the 2020 Warrants to the extent that the holder would own more than
4.99% of the outstanding common stock after exercise (the “Beneficial Ownership Limitation”), except that upon at least
61 days’ prior notice from the holder to us, the holder may increase the Beneficial Ownership Limitation up to 9.99% of the
number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is
determined in accordance with the terms of the 2020 Warrants. No fractional shares of common stock will be issued in connection with
the exercise of a 2020 Warrant. In lieu of fractional shares, we will either pay the holder an amount in cash equal to the
fractional amount multiplied by the exercise price or round up to the next whole share.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability
– (continued)
Except as otherwise provided in the 2020 Warrants or by virtue of such
holder’s ownership of shares of our common stock, the holders of the 2020 Warrants do not have the rights or privileges of holders
of our common stock, including any voting rights, unless and until they exercise such warrants.
Common Stock Warrants Issued in April 2020
Public Offering
On April 24, 2020, in connection with a previously announced public
offering of 145,586 Class A Units and 1,428,722 Class B Units, we issued warrants to purchase 1,574,308 shares of common stock to the
participants in the public offering and have an exercise price of $3.05 per share (the “April 2020 Warrants”). These warrants
are immediately exercisable and will expire April 24, 2025.
The Common Stock, Pre-Funded Warrants and Warrants sold in this Public
Offering were offered and sold pursuant to a registration statement on Form S-1 (File No. 333-236302) initially filed with the SEC on
February 7, 2020, as amended (“Registration Statement”), which was declared effective by the SEC on February 14, 2020. The
Post-Effective Amendment No. 2 to the Registration Statement was declared effective by the SEC on April 21, 2020.
We estimated the fair value of the common stock warrants, exercisable
at $3.05 per share, to be $2,402 using a Black Scholes model based on the following significant inputs: common stock price of $2.40; comparable
company volatility of 87.9%; remaining term five years; dividend yield of 0% and risk-free interest rate of 0.18%.
Common Stock Warrants Issued to Placement
Agent in 2020 Registered Direct Offerings and Private Placement
In connection with the separate private placements concurrent with
registered direct offerings of shares of our common stock in January and March 2020, we issued to H.C. Wainwright & Co., LLC, as placement
agent, a warrant to purchase 13,228 shares of common stock and a warrant to purchase 13,313 shares of common stock. The warrants were
issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation
D promulgated thereunder. These warrants have substantially similar terms as the 2020 Warrants described above, except that the placement
agent warrant issued in January 2020 has an exercise price of $10.00 per share, and the placement agent warrant issued in March 2020 has
an exercise price of $3.7563 per share.
We estimated the fair value of the common stock warrants issued in
January, with an exercise price of $10.00 per share, to be $58 using a Black Scholes model based on the following significant inputs:
common stock price of $7.90; comparable company volatility of 73.8%; remaining term five years; dividend yield of 0% and risk-free interest
rate of 1.53%.
We estimated the fair value of the common stock warrants issued in
March, with an exercise price of $3.7563 per share, to be $17 using a Black Scholes model based on the following significant inputs: common
stock price of $2.35; comparable company volatility of 74.8%; remaining term five and one-half years; dividend yield of 0% and risk-free
interest rate of 0.39%.
In connection with the public offering of
145,586 Class A Units and 1,428,722 Class B Units on April 24, 2020, we issued to H.C. Wainwright & Co., LLC, as placement
agent, warrants to purchase 118,073 shares of common stock. The warrants were issued in reliance on the exemption from registration
provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. These warrants have
substantially similar terms as the April 2020 Warrants described above, except that the placement agent warrant issued has an
exercise price of $3.97 per share.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability
– (continued)
We estimated the fair value of the common stock warrants issued in
April, with an exercise price of $3.97 per share, to be $167 using a Black Scholes model based on the following significant inputs: common
stock price of $2.40; comparable company volatility of 87.9%; remaining term five and one-half years; dividend yield of 0% and risk-free
interest rate of 0.18%.
Common Stock Warrants Issued in October 2020 Private Warrant
Inducement
In October 2020, in connection with an inducement agreement with an
existing accredited investor to exercise 1,700,680 outstanding warrants to purchase an equal number of shares of our common stock, we
issued new unregistered warrants to purchase up to an aggregate of 1,700,680 shares of common stock at an exercise price of $1.725 per
share. The warrants issued were immediately exercisable with an exercise period of five and one-half years from the date of issuance.
The Original Warrants were issued on March 6, 2020 and on April 24, 2020. Pursuant to the Letter Agreement, the per share exercise price
of the Original Warrants were reduced from $2.88 and $3.05, respectively, to $1.725. We estimated the fair value of the common stock warrants,
exercisable at $1.725 per share, to be $1,806 using a Black Scholes model based on the following significant inputs: common stock price
of $1.47; comparable company volatility of 96.5%; remaining term five and one-half years; dividend yield of 0% and risk-free interest
rate of 0.18%.
Common Stock Warrants Issued to Placement Agent in October 2020
Inducement Offering
In connection with the private warrant inducement in October 2020 of
1,700,680 shares of our common warrants, we issued to H.C. Wainwright & Co., LLC, as placement agent, warrants to purchase 85,034
shares of common stock. These warrants have substantially similar terms as the 2020 Warrants described above, except that the placement
agent warrant issued in October 2020 has an exercise price of $2.156 per share.
We estimated the fair value of these common stock warrants, with an
exercise price of $2.156 per share, to be $86 using a Black Scholes model based on the following significant inputs: common stock price
of $1.47; comparable company volatility of 96.5%; remaining term 5.5 years; dividend yield of 0% and risk-free interest rate of 0.18%.
Common Stock Warrants Issued in February 2021 Private Placement
Agreement
In February 2021, in connection with a private placement agreement
with certain institutional and accredited investors, we issued common stock warrants to purchase up to an aggregate of 2,194,427 shares
of common stock at an exercise price of $2.216 per share. The warrants were exercisable immediately and have an exercise period of five
and one-half years from the date of issuance. The warrant holder may not exercise any portion of such holder’s warrants to the extent
that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of our
outstanding shares of common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to
us, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of common stock outstanding immediately
after giving effect to the exercise. We estimated the fair value of the common stock warrants, exercisable at $2.216 per share, to be
$3,052 using a Black Scholes model based on the following significant inputs: common stock price of $1.93; comparable company volatility
of 95.6%; remaining term five and one-half years; dividend yield of 0% and risk-free interest rate of 0.18%.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 9 - Common Stock Warrants and Common Stock Warrant Liability
– (continued)
Common Stock Warrants Issued to Placement Agent in February 2021
Private Placement Agreement
In connection with the private placement in February 2021, we issued
to H.C. Wainwright & Co., LLC, as placement agent, warrants to purchase up to 329,164 shares of common stock with an exercise price
of $2.8481 per share. The warrants are exercisable immediately and have an exercise period of five and one-half years from the date of
issuance. We estimated the fair value of these common stock warrants, with an exercise price of $2.8481 per share, to be $435 using a
Black Scholes model based on the following significant inputs: common stock price of $1.93; comparable company volatility of 95.6%; remaining
term five and one-half years; dividend yield of 0% and risk-free interest rate of 0.18%.
Common Stock Warrants Issued to Placement Agent in March 2021
Registered Direct Offering
On March 23, 2021, we consummated a registered direct offering with
certain institutional investors and issued an aggregate of 1,975,000 shares of our common stock, par value $0.001 per share at a purchase
price of $2.00 per share for gross proceeds to us of approximately $3.95 million, before deducting fees payable to the placement agent
and other estimated offering expenses payable by us. The 1,975,000 shares of common stock sold in the offering were offered and sold pursuant
to a prospectus, dated August 24, 2018, and a prospectus supplement, dated March 22, 2021, in connection with a takedown from our shelf
registration statement on Form S-3 (File No. 333-225712).
In connection with the registered direct offering in March 2021, we
issued to H.C. Wainwright & Co., LLC, as the placement agent, warrants to purchase up to 148,125 shares of common stock. The placement
agent warrants will be exercisable commencing six months following the date of issuance, expire five years following the date of sale
and have an exercise price per share of $2.50 per share. The placement agent warrants, and the shares of common stock issuable upon exercise
thereof, will be issued in reliance on the exemption from registration provided in Section 4(a)(2) under the Securities Act of 1933, as
amended, and Regulation D promulgated thereunder. We estimated the fair value of these common stock warrants, with an exercise price of
$2.50 per share, to be $181 using a Black Scholes model based on the following significant inputs: common stock price of $1.76; comparable
company volatility of 100.8%; remaining term five years; dividend yield of 0% and risk-free interest rate of 0.31%.
Deemed Dividend Adjustment-Warrant Modified
Terms Revaluation
On March 3, 2020, we issued an aggregate of 51,414 common shares in
a cashless exercise of 56,625 warrants issued in December 2016 and November 2017. Consideration for the exercise of these warrants was
the full settlement of an outstanding litigation reserve of $238.
On October 26, 2020, in connection with the private warrant inducement
with an existing accredited investor to exercise 1,700,680 outstanding warrants (“Original Warrants”), we agreed to modify
the terms of the original warrants that were originally issued on March 6, 2020 and on April 24, 2020. Pursuant to the agreement, the
per share exercise price of the original warrants were reduced from $2.88 and $3.05, respectively, to $1.725.
Per recent proposed guidance of ASC 260, we determined that this was
an exchange of the existing 1,700,680 warrants that were affected and the difference between the fair value of the warrants immediately
prior to modification of terms and immediately after the adjustment was a cost of raising capital and was recorded as a reduction of equity.
The difference between the fair value of the warrants immediately prior to modification of terms and immediately after the adjustment
was calculated as $237, using a Black Scholes model based on the following significant inputs: On October 26, 2020: common stock price
of $1.47; comparable company volatility of 96.5%; remaining term 4.5-4.8 years; dividend yield of 0% and risk-free interest rate of 0.18.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 10 - Stockholders’ Deficit
Capital Stock
We organized under the laws of the state of Nevada
on July 27, 2004 and subsequently reincorporated under the laws of the state of Delaware on November 10, 2015. In connection with the
reincorporation, as approved by the stockholders, we changed our authorized capital stock to consist of (i) 100 million shares of common
stock, $.001 par value, and (ii) 2 million shares of preferred stock, $0.001 par value, designated as Series A convertible preferred stock.
In December 2015, we amended our Certificate of Incorporation to change our authorized capital stock to provide for 15 million authorized
shares of preferred stock of which 7,515,000 was designated as Series B convertible preferred stock, par value $.001 per share.
Prior to November 10, 2015, our authorized capital
stock consisted of 100 million shares of common stock, $.001 par value, and 10 million shares of preferred stock, $.001 par value.
Common Stock
We had 12,212,283 and 12,207,283 shares of common
stock issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.
During the three months ended March 31, 2022,
we issued 5,000 shares of common stock as follows:
| ● | an aggregate of 5,000 shares in connection with a restricted stock grant that was issued and vested on February 25, 2022 for services. |
Note 11 - Stock-Based Compensation
On June 12, 2018, our stockholders approved the 2018 Equity Incentive
Plan (the “2018 Plan”) to replace our 2015 Equity Incentive Plan (the “2015 Plan”). On July 8, 2020, our stockholders
approved an amendment to the 2018 Plan to increase the number of shares of common stock available for issuance under the 2018 Plan by
800,000 shares from 50,000 to 850,000. In addition, up to 122,279 shares of our common stock previously reserved for issuance under the
2015 Plan are available for issuance under the 2018 Plan to the extent such shares were available for issuance under the 2015 Plan as
of June 12, 2018 or thereafter cease to be subject to awards outstanding under the 2015 Plan, such as by expiration, cancellation, or
forfeiture of such awards.
On June 24, 2021, our stockholders approved an amendment to the 2018
Plan to increase the number of shares of common stock available for issuance under the 2018 Plan by 3,000,000 shares.
Stock options are generally issued with a per share exercise price
equal to no less than fair market value of our common stock at the date of grant. Options granted under the 2018 Plan generally vest immediately,
or ratably over a two- to 36-month period coinciding with their respective service periods. Options under the 2018 Plan generally have
a term of five years. Certain stock option awards provide for accelerated vesting upon a change in control.
As of March 31, 2022, we had 2,453,600 shares
of common stock available for issuance under the 2018 Plan.
Stock Options
We measure the fair value of stock options with service-based vesting
criteria to employees, directors and consultants on the date of grant using the Black-Scholes option pricing model. The Black-Scholes
valuation model requires us to make certain estimates and assumptions, including assumptions
related to the expected price volatility of our stock, the period during which the options will be outstanding, the rate of return on
risk-free investments, and the expected dividend yield for our stock.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 11 - Stock-Based Compensation – (continued)
The weighted-average assumptions used in the Black-Scholes
option-pricing model used to calculate the fair value of options granted during the three months ended March 31, 2022 were as follows:
Expected volatility | |
| 77.0 | % |
Expected dividend yield | |
| — | |
Expected term (in years) | |
| 3.5 | |
Risk-free interest rate | |
| 1.7 | % |
The weighted average grant date fair value of
options granted during the three months ended March 31, 2022 was $0.444 per share, as per the table above.
Due to our limited operating history and lack
of company-specific historical or implied volatility, the expected volatility assumption was determined based on historical volatilities
from traded options of biotech companies of comparable size and stability, whose share prices are publicly available. The expected term
of options granted to employees is calculated based on the mid-point between the vesting date and the end of the contractual term according
to the simplified method as described in SEC Staff Accounting Bulletin 110 because we do not have sufficient historical exercise data
to provide a reasonable basis upon which to estimate the expected term due to the limited period of time its awards have been outstanding.
For non-employee options, the expected term of options granted is the contractual term of the options. The risk-free interest rate is
determined by reference to the implied yields of U.S. Treasury securities with a remaining term equal to the expected term assumed at
the time of grant. The expected dividend assumption is based on our history and expectation of dividend payouts. We have not paid and
do not intend to pay dividends.
The following table summarizes the stock option
activity, for both equity plans, for the periods indicated as follows:
| |
Number of Options | | |
Weighted Average Exercise Price Per Share | | |
Weighted Average Remaining Contractual Term (years) | | |
Aggregate Intrinsic Value (1) | |
Outstanding at December 31, 2021 | |
| 1,087,820 | | |
$ | 4.08 | | |
| 3.9 | | |
$ | — | |
Granted | |
| 390,000 | | |
$ | 0.82 | | |
| 4.9 | | |
$ | — | |
Exercised | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Forfeited | |
| (500 | ) | |
$ | — | | |
| — | | |
$ | — | |
Expired | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Outstanding at March 31, 2022 | |
| 1,477,320 | | |
$ | 3.23 | | |
| 3.2 | | |
$ | — | |
Exercisable at March 31, 2022 | |
| 795,019 | | |
$ | 4.79 | | |
| 2.0 | | |
$ | — | |
(1) | The aggregate intrinsic value in the table was calculated based on the difference between the estimated fair market value of our stock and the exercise price of the underlying options. The estimated stock values used in the calculation were $0.98 and $0.73 per share for the year ended December 31, 2021 and the three months ended March 31, 2022, respectively. |
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 11 - Stock-Based Compensation – (continued)
Restricted Stock Units
The following table summarizes restricted stock
unit activity for the three months ended March 31, 2022:
| |
Number of Units | | |
Weighted Average Grant-Date Fair Value Per Unit | |
Outstanding as of December 31, 2021 | |
| 667 | | |
$ | 1.80 | |
Granted | |
| 5,000 | | |
$ | 0.76 | |
Vested | |
| (5,000 | ) | |
$ | 0.76 | |
Forfeited | |
| — | | |
$ | — | |
Outstanding as of March 31, 2022 | |
| 667 | | |
$ | 1.80 | |
The stock-based compensation expense was recorded as follows:
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Research and development | |
$ | 1 | | |
$ | 2 | |
Selling, general and administrative | |
| 223 | | |
| 153 | |
Total stock-based compensation expense | |
$ | 224 | | |
$ | 155 | |
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 March 31, 2022, the total compensation cost
related to restricted stock units and unvested options not yet recognized was $533, which will be recognized over a weighted average period
of 34 months, assuming the employees and non-employees complete their service period required for vesting.
Note 12 - Commitments and Contingencies
Legal Proceedings
In July 2020, Kennan E. Kaedar, 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 the following individuals as
defendants: Loretta Mayer, Cheryl Dyer, Thomas C. Chesterman, Kim Wolin, Grover Wickersham, Marc Dumont, Bob Ramsey, Matthew Szot,
Julia Williams, and Bill Baker. We do not believe that all of the defendants have yet been served. 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. We do not believe
that this litigation is likely to have a material effect on our operations.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Note 12 - Commitments and Contingencies –
(continued)
In addition to the matter described above, we may be subject to other
legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management
is not aware of any other pending or threatened litigation where the ultimate disposition or resolution could have a material adverse
effect on our financial position, results of operations or liquidity.
Lease Commitments
On December 1, 2019, we entered into a lease for our corporate headquarters
in Phoenix, Arizona where we lease and occupy approximately 5,529 square feet of office space. This lease expires in November 2024.
On August 1, 2020, we entered into a lease for our manufacturing and
research facility in Phoenix, Arizona where we occupy approximately 5,105 square feet of manufacturing and warehouse space. This lease
expires on November 30, 2024.
We believe that our existing facilities are adequate
and meet our current needs for business, manufacturing and research.
Rent expense was $56 and $54 for the three months
ended March 31, 2022 and 2021, respectively. The future minimum lease payments under non-cancellable operating lease and future minimum
finance lease payments as of March 31, 2022 are follows:
Years Ending December 31, | |
Finance Leases | | |
Operating Lease | |
2022 | |
| 14 | | |
| 146 | |
2023 | |
| - | | |
| 198 | |
2024 | |
| - | | |
| 186 | |
Total minimum lease payments | |
$ | 14 | | |
$ | 530 | |
| |
Finance Leases | |
Less: amounts representing interest (ranging from 11.43% to 14.68%) | |
$ | - | |
Present value of minimum lease payments | |
| 4 | |
Less: current installments under finance lease obligations | |
| 4 | |
Total long-term portion | |
$ | 0 | |
Note 13 - Subsequent Events
On May 4, 2022, the Company issued 667 shares
of common stock for service for restricted stock units that vested in April, 2022.
We have evaluated subsequent events from the balance
sheet date through May 13, 2022, the date at which the financial statements were issued, and determined that there were no other items
that require adjustment to or disclosure in the financial statements.