SenesTech, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are to FY2021. This is an annual filing, not a standalone fourth-quarter report. SenesTech develops and sells ContraPest, a fertility-control bait for rats, for use in pest-management programs.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $1.019 million | $600,000 |
| Product sales | $1.019 million | $576,000 |
| Gross profit / margin | $464,000 / 45.5% | $244,000 / 42.4% excluding grant revenue |
| Operating expenses | $10.138 million | $9.178 million |
| Loss from operations | $(9.674) million | $(8.934) million |
| Net loss | $(9.695) million | $(8.268) million |
| Cash used in operating activities | $(8.577) million | $(7.779) million |
Revenue rose 70%; product sales increased by $443,000, with growth in e-commerce and sales to pest-management professionals, zoos, and sanctuaries. Gross margin improved as the company raised prices and reduced free shipping. SG&A increased 15%, principally due to higher legal, consulting, recruiting, and marketing costs; FY2022 included $356,000 in severance related to the former CEO. FY2021 net income comparisons benefited from approximately $651,000 of PPP loan-forgiveness income.
Cash and cash equivalents were $4.775 million at year-end, down from $9.326 million. Total assets were $6.782 million and total liabilities were $1.503 million; current assets of $6.119 million exceeded current liabilities of $1.324 million. The balance sheet reported no short-term debt at year-end, but operating lease liabilities totaled $359,000. Financing activities provided $4.196 million in 2022, primarily from common-stock issuance. The company reported an accumulated deficit of $122.2 million.
Material changes and notable items
- In November 2022, SenesTech completed an equity offering with approximately $5.0 million in gross proceeds before fees and expenses. It issued common shares and multiple warrant classes. The company reported $4.228 million in net proceeds from common-stock issuance in its cash-flow statement.
- A 1-for-20 reverse stock split took effect in November 2022; share and per-share figures in the financial statements reflect the split retrospectively.
- At December 31, 2022, the filing reported approximately 4.4 million common-stock warrants outstanding, in addition to 280,810 options and 18,799 restricted stock units. The filing says 1.23 million remaining pre-funded warrants were exercised in early 2023.
- ContraPest received an EPA sub-label in March 2022 for an alternative hanging bait-station delivery system, marketed as Elevate Bait.
Outlook, risks, and contingencies
Management expects continued losses and expenses and is concentrating resources on U.S. commercialization of ContraPest. It stated that year-end cash, anticipated revenue, and additional equity sales were expected to fund current operations for at least 12 months, but warned that lower-than-planned revenue or margins, or higher expenses, could require earlier financing. The auditor’s report includes a going-concern paragraph expressing substantial doubt about the company’s ability to continue without additional capital. There is no specific revenue or earnings guidance in the filing.
Key risks include limited market adoption of the company’s only currently commercialized product, reliance on external financing, regulatory requirements and potential label restrictions, and dependence on single suppliers for each active ingredient, including triptolide sourced from China and other Asian countries. Manufacturing is concentrated at one Arizona location. The company also cited possible impacts from COVID-19-related delays, geopolitical and capital-market disruption, and the EPA’s review of rodenticides and potential effects on product registrations.
A former general counsel’s lawsuit seeks damages in excess of $500,000, treble damages, and attorneys’ fees; the company disputes the claims and says it does not expect a material operational effect. Separately, the company disclosed possible SEC action or investor rescission claims relating to a reported resale of approximately 175,000 shares before a registration statement became effective. Management reported disclosure controls effective and internal controls effective as of year-end; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Whether revenue growth and improved gross margin can continue, and whether ContraPest adoption can support a path to profitability.
- Cash runway assumptions, actual financing needs, and the availability and potential cost or dilution of future capital.
- The potential dilution from outstanding warrants, options, and other equity awards, including the effect of the 2023 pre-funded warrant exercises.
- Progress on required regulatory testing and any EPA decisions affecting ContraPest’s permitted uses or registrations.
- Developments in the former counsel litigation and the possible SEC or rescission matter.
- The filing gives differing counts for state approvals removing the Restricted Use designation (48 in one note and 49 elsewhere) and differing warrant totals (4,414,685 and 4,414,810); confirm the current figures with the company’s subsequent filings.