SenesTech, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 29, 2022. SenesTech develops and commercializes ContraPest, a fertility-control bait for Norway and roof rats, for use alone or in integrated pest management programs. This is an annual report, not a standalone Q4 report.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $0.600 million | $0.282 million |
| Product sales | $0.576 million | $0.258 million |
| Gross profit | $0.244 million | $0.001 million |
| Gross margin on sales | 42.4% | Less than 1% |
| Operating expenses | $9.178 million | $7.934 million |
| Operating loss | $8.934 million | $7.933 million |
| Net loss | $8.268 million | $7.937 million |
| Cash used in operating activities | $7.779 million | $7.108 million |
| Cash and cash equivalents at year-end | $9.326 million | $3.643 million |
Revenue growth was 113%, driven by product sales; sales remained small relative to operating costs. Management said the FY2020 gross margin would have been 42.6% excluding a $119,000 reserve for obsolete delivery-system supplies, so the reported margin comparison is affected by that unusual item. FY2021 net loss includes $673,000 of reported PPP loan-forgiveness income; the cash-flow statement identifies $646,000 of loan forgiveness.
Financing activities provided $13.561 million in 2021, including $12.421 million net proceeds from common-stock issuance and $1.250 million from warrant exercises. Shares outstanding rose to 12.207 million at year-end from 5.100 million a year earlier. Year-end current liabilities were $0.943 million; short-term debt was $32,000, with no long-term debt reported. Operating lease liabilities were $0.523 million. Accumulated deficit was $112.508 million.
Changes versus FY2020
- Sales increased $318,000, while total revenue rose $318,000 to $600,000.
- Gross profit increased to $244,000, but operating expenses rose $1.244 million, including higher R&D and selling, general and administrative costs. Marketing expense increased with rebranding and online marketing efforts.
- Net loss increased by $331,000, notwithstanding PPP forgiveness income in 2021; operating loss widened by $1.001 million.
- Operating cash use increased $671,000. Year-end cash increased after substantial equity financing and warrant exercises.
- Basic and diluted loss per share was $(0.74), versus $(2.78) in 2020; the weighted-average share count increased substantially. FY2020 common-stockholder loss also included a $436,000 deemed dividend related to warrant price protection.
Outlook, risks and unusual matters
- Management expects continued losses and expenses for at least the next 12 months and says additional capital will be needed before profitability or positive cash flow. It estimated year-end cash, anticipated revenue and possible equity sales would fund current operations for at least 12 months, but warned that lower revenue or margins, higher expenses, or unavailable financing could require further funding or reductions to operations.
- The independent auditor expressed substantial doubt about the company’s ability to continue as a going concern. The financial statements contain no adjustments for the outcome of that uncertainty.
- ContraPest is registered in all 50 states and Washington, D.C., but its EPA label limits use to indoors and within one foot of manmade structures. Additional testing and regulatory approvals are being pursued; the company reported ongoing stability-testing and certification requirements.
- Commercialization and customer adoption remain unproven at scale. COVID-19-related travel, field-study and customer-spending constraints affected sales efforts; renewed restrictions and supply interruptions remain risks.
- Supply depends on single suppliers for each active ingredient, including triptolide sourced from China and other Asian countries. The company also relies on a single manufacturing location.
- A former general counsel’s lawsuit seeks damages exceeding $500,000, treble damages and attorneys’ fees over claimed unpaid stock options. The company disputes the claims and says it does not expect a material operational effect. Separately, it disclosed possible SEC action or purchaser rescission claims related to approximately 175,000 shares allegedly resold under an ineffective registration statement.
- On March 2, 2022, Nasdaq notified the company that its bid price had been below $1.00 for 30 consecutive business days. The initial compliance deadline was August 29, 2022; a reverse split was identified as a possible remedy.
- Management reported disclosure controls and internal control over financial reporting effective as of year-end, but the auditor did not attest to internal controls. The filing’s risk discussion also describes uncertainty around assessment and remediation of control weaknesses; investors should reconcile these disclosures.
Most important facts for investors to verify
- Cash runway assumptions, planned financing needs, and any subsequent financing or share-count changes.
- Whether sales growth can scale enough to cover operating expenses and improve margins, including progress toward management’s stated 50%+ gross-margin goal.
- Actual customer adoption and repeat purchasing, and progress on expanded EPA uses and required testing.
- Resolution and potential financial exposure from the former counsel lawsuit and the possible securities resale/rescission matter.
- Nasdaq bid-price compliance status and any reverse split or other listing action.
- The control-environment disclosures, including whether any material weaknesses remain or have been remediated.