SenesTech, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unless otherwise noted, amounts are in thousands of dollars. SenesTech develops and commercializes ContraPest, a fertility-control product for rat populations.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $88 | $37 |
| Cost of sales | $50 | $22 |
| Gross profit and margin | $38; 43.2% | $15; 40.5% |
| Research and development | $455 | $296 |
| Selling, general and administrative | $1,422 | $2,045 |
| Operating loss | $(1,839) | $(2,326) |
| Net loss | $(1,821) | $(2,317) |
| Net loss attributable to common shareholders | $(1,821) | $(2,731) |
| Loss per share, basic and diluted | $(0.22) | $(1.69) |
| Cash used in operating activities | $(2,015) | $(1,871) |
- At March 31, 2021, cash was $15,165, versus $3,643 at December 31, 2020. Total assets were $17,638 and total liabilities were $1,790. Current assets were $16,483 and current liabilities were $492.
- Borrowings, including finance leases, totaled approximately $741: $79 current and $662 long term. The balance includes a $645.7 PPP loan bearing 1% interest; the company applied for forgiveness in February 2021, but forgiveness is not assured.
- Financing activities provided $13,600, mainly from common-stock issuance and warrant exercises. The company reported $12,421 net proceeds from common-stock issuance and $1,209 from warrant exercises.
Changes versus the prior comparable period
- Revenue rose by $51, or about 138%, from a low base. Management attributed the increase partly to internet sales and implementation-service billings, while pandemic-related customer spending reductions offset some gains.
- Gross margin improved 2.7 percentage points to 43.2%; management cited implementation-service billings and expects manufacturing efficiencies to support future improvement.
- Operating expenses fell $464 overall: SG&A decreased $623, partly reflecting lower professional fees, administration payroll, travel, marketing, and transfer-agent costs. R&D increased $159, including higher personnel costs and field/product studies and regulatory expenses.
- Net loss narrowed, while loss attributable to common shareholders fell more sharply partly because Q1 2020 included a $414 deemed dividend related to warrant price protection. Weighted-average shares rose to 8.14 million from 1.61 million, reflecting equity issuance and warrant exercises.
- Cash used in operations increased to $2,015 from $1,871. The quarter-end cash increase primarily reflected equity financing, not operating cash generation.
Outlook, risks, and unusual items
- Management expects operating losses and significant expenses to continue for at least the next 12 months. It states that March 31 cash, anticipated revenue, and any additional equity sales are expected to fund current operations for at least 12 months; this depends on revenue and margin targets and expense control. Additional financing may be needed sooner if assumptions are not met.
- The filing describes substantial doubt about continuing as a going concern without additional capital, citing the company’s history of losses and commercialization risks. Management warns that unavailable or inadequate financing could force delays, limits, or termination of development and commercialization, or cessation of operations.
- ContraPest is registered in all 50 states and the District of Columbia; the company continues to pursue regulatory amendments and other approvals. Commercial success, market acceptance, sales infrastructure, product development, and working capital remain key dependencies.
- COVID-19 restrictions delayed field studies and hindered customer outreach and sales. Management also cited potential pressure on distributor, operator, consumer, and government spending, as well as possible supplier disruption despite stocked long-lead-time ingredients.
- The company is targeting a gross margin of 50% or greater and says it is pursuing cost improvements and commercialization; it provided no specific revenue or earnings forecast.
- Other income of $21 included reversal of an expired 2019 payroll-benefits accrual. The filing reports no material pending or threatened litigation known to management and no material changes to the risk factors in its 2020 Form 10-K.
Most important facts for investors to verify
- Whether ContraPest sales and margins improve enough to reduce cash burn; Q1 revenue was only $88 and gross margin was 43.2%.
- Whether the company can sustain operations beyond the stated 12-month liquidity outlook without further financing, and the terms and dilution of any capital raises.
- The status and outcome of the $645.7 PPP loan forgiveness application.
- The dilution overhang: shares outstanding increased from 5.10 million at year-end to 12.16 million at March 31; 4.55 million warrants were outstanding at quarter-end. Shares outstanding were 12,184,997 as of May 14, 2021.
- Whether pandemic-related field-study, customer-spending, and supply-chain risks continue to delay commercialization or affect future results.