Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed financial statements, related notes and other information included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 13, 2026.
Forward-Looking Statements
The statements contained in this Quarterly Report on Form 10-Q that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). All statements other than statements of historical facts contained or incorporated herein by reference in this Quarterly Report on Form 10-Q, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "estimates," "expects," "intends," "suggests," "targets," "contemplates," "projects," "predicts," "may," "might," "plan," "would," "should," "could," "can," "potential," "continue," "objective," or the negative of those terms, or similar expressions intended to identify forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:
•the size of the market for our products, and our ability to serve that market;
•our belief that ContraPest® or Evolve® are novel in the pest control industry;
•the success of competing products that are or become available;
•existing regulations and regulatory developments towards first and second generation anti-coagulant rodenticides in the United States and other jurisdictions;
•our belief that Evolve qualifies for exemption from registration as a minimum risk pesticide under Section 25(b) of the United States Environmental Protection Agency's (the "EPA's") Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA");
•our ability to meet current and anticipated demand by our internal production capabilities;
•the success of non-registered, online product sales advertising rodent reproduction control;
•our plan to continue to utilize various forms of stock-based awards to hire, retain and motivate talented employees, consultants and directors;
•our expectation that our expenses may continue to increase in connection with our ongoing activities, particularly as we advance our commercialization activities;
•our ability to gain market acceptance, commercial viability and profitability of ContraPest, Evolve and any other approved products;
•our ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue;
•the success of our research and development;
•the development of our products for multiple indications including application to non-Rodentia mammalian species;
•our ability to retain and attract key personnel to develop, operate and grow our business;
•our ability to meet our working capital needs;
•our expectations regarding our ability to obtain and maintain intellectual property protection for our products and our ability to operate our business without infringing on the intellectual property rights of others;
•our belief that product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop;
•the effect that a reverse stock split or other capital restructuring may have on the liquidity of the shares of our common stock;
•the volatility of our stock price, which could subject us to securities class action litigation;
•our estimates or expectations related to our revenue, cash flow, expenses, capital requirements and need for additional financing; and
•our financial performance, including our ability to fund operations.
These forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and situations that are difficult to predict and that may cause our own, or our industry's, actual results to be materially different from the future results that are expressed or implied by these statements. Accordingly, actual results may differ materially from those anticipated or expressed in such statements as a result of a variety of factors, including those discussed in Item 1A-"Risk Factors" of Part I of our Annual Report on Form 10-K, for the year ended December 31, 2025, filed with the SEC on March 13, 2026, and those contained from time to time in our other filings with the SEC. A number of factors could cause our actual results to differ materially from those indicated by the forward-looking statements. Such factors include, among others, the following:
•the successful commercialization of our products;
•market acceptance of our products;
•our financial performance, including our ability to fund operations;
•our ability to maintain compliance with Nasdaq Capital Market's continued listing requirements;
•regulatory approval and regulation of our products; and
•other factors and risks identified from time to time in our filings with the SEC, including this Quarterly Report on Form 10-Q.
All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q reflect our views as of the date of this Quarterly Report on Form 10-Q about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results, performance or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance or achievements.
We are subject to the information requirements of the Exchange Act, and we file or furnish reports, proxy statements and other information with the SEC. Such reports and other information we file with the SEC are available free of charge at www.senestech.com as soon as practicable after such reports are available on the SEC's website at www.sec.gov. The SEC's website contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Overview
We have developed and are commercializing products for managing animal pest populations through fertility control and population management strategies. Our current products focus on rat and mouse populations, and are known as: ContraPest, Evolve Rat, and Evolve Mouse.
During 2025, we experienced strong growth in our Evolve product line, which now represents the majority of our total revenue, which has continued into the first quarter of 2026. Sales of Evolve Rat and Evolve Mouse increased across all major distribution channels, led by e-commerce, pest management professionals, and retail expansion. Our products are
now available on retailer e-commerce sites, which we view as an important step toward broader brick-and-mortar retail availability.
Our focus remains on achieving sustainable revenue growth while progressing toward profitability. To that end, we continue to emphasize operational efficiency, manufacturing cost efficiencies, and sales channel optimization. Gross margins remain strong, reflecting the favorable economics of our Evolve products and improved manufacturing throughput.
We have also expanded our distribution reach and continued to support our international distribution partners as they introduce our fertility control technology to new markets.
We believe the market opportunity for non-poison rodent control remains significant and growing, driven by regulatory restrictions on traditional rodenticides and increasing demand for safer, sustainable pest-management alternatives. Our near-term priorities are to further scale our Evolve product family, expand e-commerce and retail and professional distribution channels, and strengthen our path to profitability.
Results of Operations
The following table summarizes our results of operations for the periods presented (in thousands):
| Three Months Ended March 31, | % Increase (Decrease) | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Revenues, net | $ | 493 | $ | 485 | 2 | % | |||||||||||
| Cost of sales | 155 | 172 | (10) | % | |||||||||||||
| Gross profit | 338 | 313 | 8 | % | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 422 | 418 | 1 | % | |||||||||||||
| Selling, general and administrative | 2,035 | 1,558 | 31 | % | |||||||||||||
| Total operating expenses | 2,457 | 1,976 | 24 | % | |||||||||||||
| Loss from operations | (2,119) | (1,663) | 27 | % | |||||||||||||
| Interest income (expense), net | 56 | (2) | (2900) | % | |||||||||||||
| Net loss | $ | (2,063) | $ | (1,665) | 24 | % | |||||||||||
Revenues
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Evolve | $ | 418 | 85 | % | $ | 384 | 79 | % | ||||||||||||||||||
ContraPest | 75 | 15 | % | 101 | 21 | % | ||||||||||||||||||||
| Revenues, net | $ | 493 | 100 | % | $ | 485 | 100 | % | ||||||||||||||||||
Sales, net of sales discounts and promotions, were $493,000 for the first quarter of 2026, compared to $485,000 for the first quarter of 2025. The $8,000 increase was driven by sales of our Evolve product offerings-Evolve Rat and Evolve Mouse (collectively, "Evolve")-partially offset by a decline in units sold of our existing ContraPest product line.
Evolve, which launched in January 2024 and expanded with variations later that year, is a soft bait containing the active ingredient, cottonseed oil. It represented approximately 85% of first quarter 2026 revenues, compared to 79% in the first quarter of 2025. The increase in Evolve revenues was partially offset by an expected decline in ContraPest sales.
Cost of Sales
Cost of sales consists of costs related to products sold, including scrap and reserves for obsolescence, as well as shipping costs when charged to the customer. Cost of sales was $155,000, or 31.4% of net sales, for the first quarter of 2026, compared to $172,000, or 35.5%, for the first quarter of 2025.
For the foreseeable future, tariffs on foreign countries are not expected to increase our costs, as the majority of our components are sourced domestically.
Gross Profit
Gross profit for the first quarter of 2026 was $338,000, representing a margin of 68.6%, compared to $313,000, or 64.5%, in the first quarter of 2025. The improvement reflects a combination of improved production efficiency and average selling prices.
Research and Development Expenses
Research and development expenses consisted of the following (in thousands):
| Three Months Ended March 31, |
Increase (Decrease) | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Personnel related (including stock-based compensation) | $ | 256 | $ | 253 | 1 | % | |||||||||||
| Facility-related | 101 | 75 | 35 | % | |||||||||||||
| Depreciation | 30 | 32 | (6) | % | |||||||||||||
| Supplies and maintenance | 18 | 20 | (10) | % | |||||||||||||
| Other | 17 | 38 | (55) | % | |||||||||||||
| Total | $ | 422 | $ | 418 | 1 | % | |||||||||||
Research and development expenses were $422,000 for the first quarter of 2026, compared to $418,000 for the first quarter of 2025, representing an increase of $4,000.
The slight increase was due to higher facility-related expenses following our move to a new manufacturing site in April 2025, which provides expanded production capacity and corporate office space. This increase was largely offset by savings from ongoing cost-containment efforts.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consisted of the following (in thousands):
| Three Months Ended March 31, |
Increase (Decrease) | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Personnel related (including stock-based compensation) | $ | 907 | $ | 712 | 27 | % | |||||||||||
| Professional fees | 793 | 430 | 84 | % | |||||||||||||
| Marketing | 56 | 64 | (13) | % | |||||||||||||
| Insurance | 55 | 50 | 10 | % | |||||||||||||
| Licensed software | 51 | 51 | - | % | |||||||||||||
| Travel and entertainment | 47 | 62 | (24) | % | |||||||||||||
| Other | 126 | 189 | (33) | % | |||||||||||||
| Total | $ | 2,035 | $ | 1,558 | 31 | % | |||||||||||
Selling, general and administrative expenses were $2.0 million for the first quarter of 2026, compared to $1.6 million for the first quarter of 2025, representing an increase of $477,000.
The increase was primarily driven by higher professional fees, including $213,000 in legal expenses associated with the settlement of a specific litigation matter and increased general corporate activity. Consulting costs related to marketing efforts also rose due to changes in product packaging and strategy, including a shift toward direct sales on Amazon. Also included in professional fees, board compensation increased as a result of changes in director responsibilities and committee assignments.
Personnel-related costs included $230,000 of severance expense incurred during the first quarter of 2026, as well as executive search fees related to succession planning, partially offset by changes in headcount.
Interest Income (Expense), Net
For the first quarter of 2026, interest income, net was $56,000, consisting of $60,000 in interest income and $4,000 in interest expense. This compares to interest expense, net of $2,000 in the first quarter of 2025, consisting of $3,000 in interest income and $5,000 in interest expense. The increase in interest income in 2026 reflects a higher average balance of cash, cash equivalents and investments compared to the same period in 2025.
Liquidity and Capital Resources
Liquidity
Since our inception, we have incurred operating losses related to our research and development activities and commercialization efforts, with a net loss of $2.1 million for the three months ended March 31, 2026, and we expect these losses to continue for the near future. Although sales of our product have increased over the last three years-20% in 2025, 56% in 2024, and 17% in 2023-we are not yet able to fund operations by product sales alone. We have primarily funded our operations through the sale of equity securities, including common stock and warrants to purchase common stock.
Through March 31, 2026, we received net proceeds of $117.2 million primarily from the sales of our equity securities, including warrant exercises, an aggregate of $8.3 million in product sales and an aggregate of $1.7 million from licensing fees. As of March 31, 2026, cash and cash equivalents and short-term investments were $6.8 million, compared to $8.6 million as of December 31, 2025.
Based on our current operating plan, we expect that our cash and cash equivalents as of March 31, 2026, in combination with anticipated revenue, will be sufficient to fund our current operations into the third quarter of 2027. This estimate assumes continued execution of our current commercialization strategy, planned levels of operating expenses, and no significant changes in working capital requirements.
Our projected cash runway does not assume the receipt of additional capital from equity issuances, debt financings, strategic partnerships, or other external sources. If revenue growth does not occur at anticipated levels, or if expenses exceed current expectations, we may be required to seek additional financing sooner than currently anticipated.
We continue to evaluate various financing alternatives, including equity offerings under our existing ATM program, strategic partnerships, and other capital-raising transactions. There can be no assurance that additional capital will be available on acceptable terms, if at all.
Additional Funding Requirements
Our expenses may continue to increase in connection with our ongoing activities, particularly as we focus on marketing and sales of fertility control products. In addition, we will continue to incur costs associated with operating as a public company.
In particular, we expect to incur increased expenses as we:
•work to maximize market acceptance for, and generate sales of, our products, including by conducting field demonstrations for potential lead customers;
•explore strategic partnerships to enable us to penetrate additional target markets and geographical locations;
•manage the infrastructure for sales, marketing and distribution of fertility control products and any other product candidates for which we may receive regulatory approval;
•seek additional regulatory approvals for fertility control products, including to more fully expand the market and use for fertility control products and, if we believe there is commercial viability, for our other product candidates;
•further develop our manufacturing processes to contain costs while being able to scale to meet future demand of fertility control products and any other product candidates for which we receive regulatory approval;
•continue product development of fertility control products and advance our research and development activities and, as our operating budget permits, advance the research and development programs for other product candidates;
•maintain and protect our intellectual property portfolio; and
•add operational, financial and management information systems and personnel, including personnel to support our product development and commercialization efforts and operations as a public company.
We may need additional financing to fund these continuing and additional expenses.
Capital Resources
The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash and cash equivalents, beginning of period | $ | 7,575 | $ | 1,307 | |||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | (1,929) | (1,557) | |||||||||
| Investing activities | 1,000 | (36) | |||||||||
| Financing activities | 158 | 1,941 | |||||||||
| Increase (decrease) in cash and cash equivalents | (771) | 348 | |||||||||
| Cash and cash equivalents, end of period | $ | 6,804 | $ | 1,655 | |||||||
Cash Flows from Operating Activities-Cash flows from operating activities are generally determined by the amount and timing of cash received from customers and payments made to vendors, as well as the nature and amount of non-cash items, including depreciation and amortization and stock-based compensation included in operating results during a given period.
During the three months ended March 31, 2026, operating activities used $1.9 million of cash, resulting from our net loss of $2.1 million and net changes in our operating assets and liabilities of $73,000, partially offset by net non-cash charges of $61,000, consisting primarily of stock-based compensation, depreciation and amortization and operating lease expenses. Our net loss was driven by costs related to our selling, general and administrative activities resulting from our continued efforts to commercialize our products, combined with research and development costs related to our continued efforts on formulations of new products and improvements to existing products. Net cash provided by changes in our operating assets and liabilities consisted of a net increase in accounts payable and accrued expenses of $142,000 and a decrease in accounts receivable of $32,000, partially offset by increases in prepaid expenses of $40,000 and inventory of $54,000.
During the three months ended March 31, 2025, operating activities used $1.6 million of cash, resulting from our net loss of $1.7 million and net changes in our operating assets and liabilities of $22,000, partially offset by non-cash charges of $130,000, consisting primarily of stock-based compensation and depreciation and amortization expense. Our net loss was driven by costs related to our selling, general and administrative activities resulting from our efforts to commercialize our products, combined with costs related to our research and development efforts. Net cash used by changes in our operating assets and liabilities consisted primarily of an increase in accounts receivable of $163,000 and a decrease in accounts payable accrued expenses of $19,000, partially offset by decreases in prepaid expenses of $119,000 and inventory of $41,000.
Cash Flows from Investing Activities-Cash flows used in investing activities consist of held-to-maturity investment transactions and purchases of property and equipment. For the three months ended March 31, 2026, cash provided by investing activities consisted of the maturity of a held-to-maturity investment totaling $1.0 million compared to cash used in investing activities related to property and equipment purchases of $36,000 in the same period of 2025.
Cash Flows from Financing Activities-Financing activities provide cash for both day-to-day operations and capital requirements as needed. During the three months ended March 31, 2026, net cash provided by financing activities consisted of net proceeds received from the issuance of common stock under our ATM Facility of $173,000, partially offset by repayments on notes payable of $15,000. During the three months ended March 31, 2025, net cash provided by financing activities consisted of net proceeds received from the issuance of common stock under our ATM Facility of $1.1 million and from the exercise of warrants of $889,000, partially offset by the repayment of notes payable of $14,000.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates as previously disclosed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 13, 2026.