SenesTech, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. SenesTech develops and commercializes fertility-control products for rodent populations, including ContraPest and Evolve.
Financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $415,000 | $233,000 |
| Gross profit / margin | $135,000 / 32.5% | $92,000 / 39.6% |
| Operating expenses | $1.978 million | $2.137 million |
| Operating loss | $1.843 million | $2.045 million |
| Net loss | $1.832 million | $2.037 million |
| Basic and diluted loss per share | $0.36 | $11.91 |
| Net cash used in operating activities | $1.829 million | $2.015 million |
At March 31, 2024, cash and cash equivalents were $3.562 million, down from $5.395 million at year-end 2023. Current assets were $4.943 million and current liabilities $715,000. Total liabilities were $862,000, including $181,000 of notes payable and $159,000 of operating lease liabilities. The equipment notes bear 9.1% interest. Accumulated deficit was $131.745 million.
Changes and operating performance
- Revenue increased 78% year over year; management attributed the $182,000 increase to Evolve, launched in November 2023.
- Cost of sales rose 99% and equaled 67.5% of revenue, versus 60.4%. Management cited higher-than-expected costs for a key Evolve ingredient as production pricing replaced development-stage pricing, and a higher distributor sales mix.
- Gross margin fell to 32.5% from 39.6%. The prior-year period included $42,000 of costs from scrapping defective trays.
- Operating expenses declined 7%, primarily from lower professional fees and personnel costs. R&D was $370,000; selling, general and administrative expense was $1.608 million.
- Operating cash use improved by $186,000 year over year. Investing cash use was $2,000; financing cash use was $2,000, reflecting $8,000 of note repayments partly offset by $6,000 from warrant exercises.
Outlook, risks and other items
- Management expects current cash, anticipated revenue and any additional equity sales to fund current operations for at least six months from March 31, 2024. It also says additional financing is needed before anticipated revenue and margin targets are reached. There is no quantified revenue or earnings guidance.
- The company expects continued operating losses and may never achieve profitability or positive cash flow. If financing is unavailable on acceptable terms, it may need to delay, limit or terminate development and commercialization activities or discontinue operations.
- The company cited substantial doubt about its ability to continue as a going concern in the auditors’ reports accompanying its 2022 and 2023 annual financial statements. The current interim statements contain no adjustments for the outcome of this uncertainty.
- Commercialization, market acceptance, regulatory approvals, financing, manufacturing scale and costs, and Nasdaq continued-listing compliance are among the stated risks. ContraPest is registered in all 50 states and the District of Columbia; Evolve is authorized for sale in 33 states.
- Management reported no material changes to previously disclosed risk factors, no material pending or threatened legal proceedings, and effective disclosure controls. Operating leases for the headquarters and manufacturing/research facility expire in 2024.
Important facts for investors to verify
- The revenue discussion says Evolve generated approximately $232,000, or 56% of revenue, “for the first quarter of 2023,” despite also saying Evolve launched in November 2023. Confirm the intended period and amount.
- Reconcile reported weighted-average shares of 171,047 for Q1 2023 with 5,144,531 for Q1 2024 and the reported per-share losses; the supplied filing text does not explain the large difference.
- Assess the six-month cash runway assumption, expected equity financing and timing of further funding needs against quarterly cash burn and commercialization progress.
- Evaluate gross-margin sustainability given Evolve ingredient costs and distributor mix, and potential dilution from 7,771,126 outstanding warrants at a $2.95 weighted-average exercise price.