10-Q

UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-37941

SENESTECH, INC. 

(Exact name of registrant as specified in its charter)

Delaware	20-2079805
(State or other jurisdiction of  incorporation or organization)	(I.R.S. Employer  Identification No.)
3140 N. Caden Court, Suite 1 Flagstaff, AZ	86004
(Address of principal executive offices)	(Zip Code)

(928) 779-4143  

(Registrant’s telephone number, including area code)  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

The number of shares of common stock outstanding as of November 7, 2017: 10,389,497

1

SENESTECH, INC. 

FORM 10-Q  

For the Quarterly Period Ended September 30, 2017

TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION	3
Item 1	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4	Controls and Procedures	39
	PART II. OTHER INFORMATION	39
Item 1A	Risk Factors	39
Item 5	Other Information	40
Item 6	Exhibits	41
	Index to Exhibits	41
	Signatures	42

2

PART I. FINANCIAL INFORMATION

Item 1.       Financial Statements

SENESTECH, INC.
CONDENSED BALANCE SHEETS
(In thousands, except shares and per share data)

	September 30, 2017			December 31, 2016
ASSETS		(Unaudited)
Current assets:
Cash	$	699		$	11,826
Investment in securities held to maturity		2,949			—
Accounts receivable		7			10
Prepaid expenses		172			337
Inventory		394			57
Deposits		17			9
Total current assets		4,238			12,239
Property and equipment, net		1,559			631
Total assets	$	5,797		$	12,870
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	174		$	45
Accounts payable		175			351
Accrued contract cancellation settlement		—			1,000
Accrued expenses		1,074			371
Notes payable, related parties		18			30
Total current liabilities		1,441			1,797
Notes payable, related parties		—			6
Long-term debt, net		637			138
Common stock warrant liability		4			69
Deferred rent		45			33
Total liabilities		2,127			2,043
Commitments and contingencies (See note 15)		—			—
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 10,363,189 and 10,157,292 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		10			10
Additional paid-in capital		74,946			72,069
Stock subscribed, but not issued, consisting of -0- and 4,750 shares at September 30, 2017 and December 31, 2016, respectively		—			59
Accumulated deficit		(71,286	)		(61,311	)
Total stockholders’ equity		3,670			10,827
Total liabilities and stockholders’ equity	$	5,797		$	12,870

See accompanying notes to financial statements.

3 

SENESTECH, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except shares and per share data)
(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue:
License revenue	$	—		$	131		$	—		$	261
Product Sales		17			—			34			—
Total revenue		17			131			34			261
Cost of goods sold		11			—			27			—
Gross profit		6			131			7			261
Operating expenses:
Research and development		721			829			2,517			1,964
General and administrative		2,235			1,932			7,506			5,259
Total operating expenses		2,956			2,761			10,023			7,223
Net operating loss		(2,950	)		(2,630	)		(10,016	)		(6,962	)
Other income (expense):
Interest income		9			—			20			—
Interest expense		(33	)		(6	)		(54	)		(49	)
Interest expense, related parties		—			(9	)		(1	)		(43	)
Loss on extinguishment of unsecured promissory note		—			(59	)		—			(171	)
Other income (expense)		37			—			76			51
Total other income (expense)		13			(74	)		41			(212	)
Net loss		(2,937	)		(2,704	)		(9,975	)		(7,174	)
Series A convertible preferred stock dividends		—			(30	)		—			(90	)
Net loss and comprehensive loss	$	(2,937	)	$	(2,734	)	$	(9,975	)	$	(7,264	)
Weighted average common shares outstanding - basic and fully diluted		10,334,211			7,306,234			10,234,211			5,774,738
Net loss per common share - basic and fully diluted	$	(0.28	)	$	(0.37	)	$	(0.97	)	$	(1.26	)

See accompanying notes to financial statements.

4 

SENESTECH, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	For the Nine Months
	Ended September 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(9,975	)	$	(7,174	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on investments held to maturity		(20	)		—
Amortization of discounts on investments held to maturity		11			—
Depreciation and amortization		273			143
Stock-based compensation		2,818			2,406
Non-cash charge for settlement of dispute		—			300
Amortization of debt discount		—			27
Gain on remeasurement of common stock warrant liability		(65	)		(51	)
Loss on extinguishment of unsecured promissory note		—			171
(Increase) decrease in current assets:
Accounts receivable		3			(4	)
Prepaid expenses		165			(17	)
Inventory		(337	)		—
Deposits		(8	)		—
Increase (decrease) in current liabilities:
Accounts payable		(176	)		77
Accrued contract cancellation settlement		(1,000	)		—
Accrued expenses		703			61
Deferred rent		12			(4	)
Deferred revenues		—			(175	)
Net cash used in operating activities		(7,596	)		(4,240	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities held to maturity		(2,940	)		—
Purchase of property and equipment		(885	)		(54	)
Net cash used in investing activities		(3,825	)		(54	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of series B convertible preferred stock		—			896
Proceeds from the issuance of common stock		—			6,199
Proceeds from the issuance of convertible notes payable		—			326
Repayments of convertible notes payable		—			(810	)
Proceeds from the issuance of notes payable		437			—
Repayments of notes payable		(48	)		(24	)
Repayments of notes payable, related parties		(18	)		(721	)
Repayments of capital lease obligations		(77	)		(16	)
Payment of deferred offering costs		—			(801	)
Proceeds from exercise of stock options and warrants		—			449
Net cash provided by financing activities		294			5,498
NET CHANGE IN CASH		(11,127	)		1,204
CASH AT BEGINNING OF PERIOD		11,826			141
CASH AT END OF PERIOD	$	699		$	1,345
SUPPLEMENTAL INFORMATION:
Interest paid	$	55		$	23
Income taxes paid	$	—		$	—
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchases of equipment under capital lease obligations	$	316		$	157
Original issue discount	$	—		$	147
Debt discount on convertible notes	$	—		$	9
Related party convertible note extinguished for settlement payable	$	—		$	404
Contributed capital, debt forgiveness by related parties	$	—		$	2,003
Issuance of series B convertible preferred stock in connection with conversion of convertible notes and	$	—		$	16
Issuance of shares of common stock upon conversion of Series B convertible preferred stock	$	—		$	260
Dividends	$	—		$	90

See accompanying notes to financial statements.

5 

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 1 - Organization and Description of Business

SenesTech, Inc. (the “Company”) was formed in July 2004 and incorporated in the state of Nevada. The Company subsequently reincorporated in the state of Delaware in November 2015. The Company has its corporate headquarters in Flagstaff, Arizona.

The Company has developed proprietary technology for managing animal pest populations through fertility control. The Company believes that its innovative non-lethal approach, targeting reproduction, is more humane, less harmful to the environment, and more effective in providing a sustainable solution to pest infestations than traditional lethal pest management methods. Its first fertility control product candidate, ContraPest, is marketed for use in controlling the rat population. The innovative compound is consumed by rats and leaves them non-reproductive without other observable side effects. The U.S. Environmental Protection Agency (“EPA”) granted registration approval for ContraPest effective August 2, 2016. The Company plans to continue to commercialize and distribute ContraPest by leveraging new and existing third-party relationships with manufacturing, marketing and distribution partners in the U.S. and internationally.

Potential Need for Additional Capital

In the course of its research and development activities, the Company has sustained operating losses since its inception and expects such losses to continue for the near future. The Company’s ultimate success depends upon the outcome of a combination of factors, including: (i) the success of its research and development; (ii) ongoing regulatory approval and commercialization of ContraPest and its other product candidates; (iii) market acceptance and commercial viability and profitability of ContraPest and other products if the Company obtains the necessary regulatory approvals; (iv) the ability to market its products and establish an effective sales force and marketing infrastructure to generate significant revenue; (v) the ability to retain and attract key personnel to develop, operate and grow its business; and (vi) the timely and successful completion of additional financing. The Company has funded its operations to date through the sale of convertible preferred stock and common stock, including an initial public offering of 1,875,000 shares of its common stock on December 8, 2016, debt financing, consisting primarily of convertible notes and, to a lesser extent, payments received in connection with research grants and licensing fees. As of September 30, 2017, the Company had cash and cash equivalents and highly liquid investments of $3,648. However, the Company is likely to require additional capital in order to fund its operating losses and research and development activities by issuing additional debt and equity instruments until such time as the Company is profitable. If such equity or debt financing is not available at adequate levels, the Company will need to reevaluate its plans.

All amounts shown in these financial statements are in thousands, except percentages and per share and share amounts. Per share and share amounts reflect post-reverse split values.

Basis of Presentation

The accompanying unaudited condensed financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of September 30, 2017, the Company’s operating results for the three and nine months ended September 30, 2017 and 2016, and the Company’s cash flows for the nine months ended September 30, 2017 and 2016. The accompanying financial information as of December 31, 2016 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2016.

All amounts shown in these financial statements are in thousands, except percentages and per share and share amounts.

6 

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 2 - Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The significant estimates in the Company’s financial statements include the valuation of common stock and related warrants, and other stock-based awards. Actual results could differ from such estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings, financial position or cash flows.

Deferred Offering Costs

Deferred offering costs consisted primarily of legal, accounting and other direct and incremental fees and costs related to the Company’s initial public offering on December 8, 2016. Deferred offering costs of $2,234 were offset against the proceeds received from the initial public offering in December 2016.There were no deferred offering costs at September 30, 2017.

Cash and Cash Equivalents

The Company considers money market fund investments to be cash equivalents. The Company had cash equivalents of $70 and $-0- at September 30, 2017 and December 31, 2016, respectively, included in cash as reported.

Investments in Securities Held to Maturity

The Company uses cash holdings to purchase highly liquid, short term, investment grade securities diversified among security types, industries and issuers. All of the Company’s investment securities are measured at fair value. The Company’s investment securities primarily consist of municipal debt securities, corporate bonds, U.S. agency securities and commercial paper and highly-liquid money market funds.

Accounts Receivable

Accounts receivable consist primarily of trade receivables. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. The allowance for doubtful trade receivables was $3 and $-0- as of September 30, 2017 and December 31, 2016, respectively.

Inventories

Inventories are stated at the lower of cost or market value, using the first-in, first-out convention. Inventories consist of raw materials and finished goods. As of September 30, 2017 and December 31, 2016, the Company had inventories of $394 and $57, respectively.

7 

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 2 - Summary of Significant Accounting Policies – (continued)

Prepaid Expenses

Prepaid expenses consist primarily of payments made for director and officer insurance, rent, legal and inventory purchase deposits and seminar fees to be expensed in the current year.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Equipment held under capital leases are stated at the present value of minimum lease payments less accumulated amortization.

Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The cost of leasehold improvements is amortized over the life of the improvement or the term of the lease, whichever is shorter. Equipment held under capital leases is amortized over the shorter of the lease term or estimated useful life of the asset. The Company incurs maintenance costs on its major equipment. Repair and maintenance costs are expensed as incurred.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require long-lived assets or asset groups to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, such as discounted cash flow models and the use of third- party independent appraisals. The Company has not recorded an impairment of long-lived assets since its inception.

Revenue Recognition

The Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies when (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

8 

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 2 - Summary of Significant Accounting Policies – (continued)

The Company has generated revenue from a license agreement with a strategic partner, pursuant to which the Company had granted to such partner the exclusive right to manufacture and distribute its product, ContraPest, once the required regulatory approvals were received. This licensing agreement was subsequently terminated on January 23, 2017. The terms of the licensing agreement contained multiple elements or deliverables, as discussed below. Management evaluates whether the arrangement involving the multiple deliverables contains more than one unit of accounting. To determine the units of accounting under a multiple-element arrangement, management evaluates certain separation criteria, including whether the deliverables have stand-alone value, based on the relevant facts and circumstances of the arrangement.

The Company determined that the license granted pursuant to the license agreement did not have stand-alone value and, therefore, the nonrefundable, upfront license fee payments received by the Company are recognized on a straight-line basis over the estimated related performance period (i.e. from the effective date of the agreement through the estimated completion date of the Company’s substantive performance obligations).

In accordance with the terms of the license agreement, the Company was also to receive a future fixed amount of contingent milestone payments (i.e. post-regulatory approval license fees) and contingent sales-based royalties to be received upon the achievement of certain milestone events. The milestone events under the agreement include regulatory approval, patent issuance or alternative intellectual property coverage, and sales-based events. The Company did not earn or receive any of the potential contingent milestone payments, as the milestone events to receive such post-approval license fees and sales-based royalties were not achieved. The Company recognizes revenue that is contingent upon the achievement of a substantive milestone event in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable to the Company for such milestone has all of the following characteristics: (i) there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved; (ii) the event can only be achieved based in whole or part on either the Company’s performance or a specific outcome resulting from the Company’s performance; and (iii) if achieved, the event would result in additional payments being due to the Company. As the potential contingent consideration was to be received only upon the achievement of milestone events that are considered substantive, the Company would only recognize such revenue in the period the milestone is achieved and the milestone payments became due and collectible. In addition, the Company accounts for sales-based royalties as revenue upon achievement of certain sales milestones. 

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue on the balance sheet. Amounts expected to be recognized as revenue in the next twelve months following the balance sheet date are classified as a current liability.

The Company recognizes other revenue earned from pilot studies upon the performance of specific services under the respective service contract.

For the nine months ended September 30, 2017, the Company generated net revenues of $34.

Research and Development

Research and development costs are expensed as incurred. Research and development expenses primarily consist of salaries and benefits for research and development employees, stock-based compensation, consulting fees, lab supplies, and costs incurred related to conducting scientific trials and field studies, and regulatory compliance costs. Also, included in research and development expenses is an allocation of facilities related costs, including depreciation of research and development equipment.

9 

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 2 - Summary of Significant Accounting Policies – (continued)

Stock-based Compensation

Employee stock-based awards, consisting of restricted stock units and stock options expected to be settled in shares of the Company’s common stock, are recorded as equity awards. The grant date fair value of these awards is measured using the Black-Scholes option pricing model. The Company expenses the grant date fair value of its stock options on a straight-line basis over their respective vesting periods. Performance-based awards are expensed over the performance period when the related performance goals are probable of being achieved.

For equity instruments issued to non-employees, the stock-based consideration is measured using a fair value method. The measurement of the stock-based compensation is subject to re-measurement as the underlying equity instruments vest.

The stock-based compensation expense recorded for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85	$	135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946	$	933	$	2,818	$	2,406

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities and net operating loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. These deferred tax assets are subject to periodic assessments as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recorded which would increase the provision for income taxes. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.

10 

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 2 - Summary of Significant Accounting Policies – (continued)

Comprehensive Loss

Net loss and comprehensive loss were the same for all periods presented; therefore, a separate statement of comprehensive loss is not included in the accompanying financial statements.

Loss Per Share Attributable to Common Stockholders

Basic loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share attributable to common stockholders is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock and if-converted methods. For purposes of the computation of diluted loss per share attributable to common stockholders, the Series A convertible preferred stock (prior to its conversion into common stock), Series B convertible preferred stock (prior to its conversion into common stock), convertible promissory notes (prior to their conversion), common stock purchase warrants, and common stock options are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share attributable to common stockholders because their effect would be anti-dilutive given the net loss reported for the three and nine months ended September 30, 2017 and 2016. Therefore, basic and diluted loss per share attributable to common stockholders was the same for all periods presented.

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders (in common stock equivalent shares):

	September 30,
	2017		2016
Series A convertible preferred stock		—		400,000
Series B convertible preferred stock		—		483,609
Common stock purchase warrants		829,285		750,185
Restricted stock units		344,982		—
Common stock options		1,558,800		1,321,300
Total		2,733,067		2,955,094

11 

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS  

(In thousands, except share and per share data)

Note 2 - Summary of Significant Accounting Policies – (continued)

In May 2017, the FASB issued Accounting Standard Update (“ASU”) No. 2017-9, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU2017-9”), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of ASU 2017-9 is not expected to have a material impact on the Company’s financial statements or related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU provide guidance on the following eight specific cash flow classification issues: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. Current GAAP does not include specific guidance on these eight cash flow classification issues. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of ASU No. 2016-15 is not expected to have a material impact on the Company’s financial statements or related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). This standard involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods for public business entities. The method of adoption is dependent on the specific aspect of accounting addressed in this new guidance. Early adoption was permitted in any interim or annual period. ASU 2016-09 was adopted by the Company and did not have a material impact on the Company’s financial statements or related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). This standard amends various aspects of existing accounting guidance for leases, including the recognition of a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This standard also introduces new disclosure requirements for leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early adoption is permitted and the new standard must be adopted using a modified retrospective approach, and provides for certain practical expedients. The Company is evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.

12

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This standard affects the accounting for equity instruments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 is effective in the first quarter of 2019. The Company is evaluating the impact of the adoption of ASU 2016-01 on its financial statements and related disclosures.

In November 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes, which eliminates the guidance in Topic 740, Income Taxes, that required an entity to separate deferred tax assets and liabilities between current and noncurrent amounts in a classified balance sheet. The amendments require that all deferred tax assets and liabilities of the same jurisdiction or a tax filing group, as well as any related valuation allowance, be offset and presented as a single noncurrent amount in a classified balance sheet. The standard became effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and may be applied on either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company has adopted this standard retrospectively for all periods presented. The adoption of this standard did not have a material impact on the Company’s financial statements.

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. Only those benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized. Based on its evaluation, the Company has concluded there are no significant uncertain tax positions requiring recognition in its financial statements.

The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There are no uncertain tax positions as of September 30, 2017 or December 31, 2016 and as such, no interest or penalties were recorded in income tax expense.

In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). This standard requires management to perform an evaluation in each interim and annual reporting period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year of the date the financial statements are issued. If such conditions or events exist, ASU 2014-14 also requires certain disclosures of management’s plans and evaluation, as well as the plans, if any, that are intended to mitigate those conditions or events that will alleviate the substantial doubt. ASU No. 2014- 15 is effective for the annual period ending after December 15, 2016 and for annual and interim periods thereafter. Early adoption was permitted for annual or interim reporting periods for which the financial statements have not been previously issued. ASU 2014-15 was adopted by the Company and did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

In May 2014 the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Adoption of the new standard is effective for reporting periods beginning after December 15, 2017. We plan to use the modified retrospective method of adoption and will adopt the standard as of January 1, 2018, the beginning of our next fiscal year.. We have completed an initial evaluation of the potential impact from adopting the new standard, including a detailed review of performance obligations for all material revenue streams. Based on this initial evaluation, we do not expect adoption will have a material impact on our financial position, results of operations, or cash flows. Related disclosures will be expanded in line with the requirements of the standard. We will continue our evaluation until our adoption of the new standard.

13

Note 3 - Fair Value Measurements

The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, accounts receivable and accounts payable approximate their fair values due to their short maturities. Assets and liabilities recorded at fair value on a recurring basis in the balance sheets, as well as assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value, and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The Company’s cash equivalents, which include money market funds, are classified as Level 1 because they are valued using quoted market prices. The Company’s marketable securities consist of held to maturity securities and are generally classified as Level 2 because their value is based on valuations using significant inputs derived from or corroborated by observable market data.

In certain cases where there is limited activity or less transparency around the inputs to valuation, securities are classified as Level 3. Level 3 liabilities consist of common stock warrant liability.

14

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 3 - Fair Value Measurements – (continued)

Items Measured at Fair Value on a Recurring Basis

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	70	$	—	$	—	$	70
Corporate fixed income debt securities		—		2,949		—		2,949
Total	$	70	$	2,949	$	—	$	3,019
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	4	$	4
Total	$	—	$	—	$	4	$	4

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Financial Assets:
None	$	—	$	—	$	—	$	—
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	69	$	69
Total	$	—	$	—	$	69	$	69

⁽¹⁾ The change in the fair value of the common stock warrant and convertible notes payable for the three and nine months ended September 30, 2017 was recorded as a decrease to other income (expense) and interest expense of $30 and $69, respectively, in the statements of operations and comprehensive loss.

Financial Instruments Not Carried at Fair Value

The carrying amounts of the Company’s financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their short maturities. The estimated fair value of the convertible notes and other notes, not recorded at fair value, are recorded at cost or amortized cost which was deemed to estimate fair value.

15

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 4 - Investment in Securities Held to Maturity

As of September 30, 2017, investment in securities held to maturity primarily consisted of corporate fixed income securities and commercial paper. The Company did not have investments prior to the first quarter of 2017. The Company classifies all investments as held to maturity as these investments are short term, highly liquid investments which we intend to hold to maturity. Held to maturity securities are recorded at cost and gains and losses are only recognized as the sale or redemption of the securities is realized. Realized gains and losses are included in non-operating other income (expense) on the condensed statement of operations and are derived using the specific identification method for determining the cost of the securities sold. During the three and nine months ended September 30, 2017, the Company had a minimal amount of net realized gain (loss) on investments recorded. Interest and dividends on investments held to maturity are included in interest and other income, net, in the condensed statements of operations.

The following is a summary of held to maturity securities at September 30, 2017:

		September 30, 2017
	Contractual Maturity (in months)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Mutual funds		$	—	$	—	$	—	$	—
Corporate fixed income securities	Less than 12 months		2,746		3		—		2,749
Commercial paper	Less than 12 months		200		—		—		200
Total investments		$	2,946	$	3	$	—	$	2,949

Note 5 - Prepaid Expenses

Prepaid expenses consist of the following:

	September 30, 2017		December 31, 2016
Director compensation	$	—	$	215
Director, officer and other insurance		95		70
Legal retainer		25		25
Rent		17		17
Inventory Purchase Deposits		20		—
Engineering, software licenses and other		15		10
Total prepaid expenses	$	172	$	337

16

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 6 - Property and Equipment

Property and equipment, net consist of the following:

	Useful Life	September 30, 2017		December 31, 2016
Research and development equipment	5 years	$	1,335	$	989
Office and computer equipment	3 years		672		235
Furniture and fixtures	7 years		34		17
Autos/Trucks	5 years		306		—
Leasehold improvements	*		283		189
			2,630		1,430
Less accumulated depreciation and amortization			1,071		799
Total		$	1,559	$	631

* Shorter of lease term or estimated useful life

Depreciation and amortization expense was approximately $118 and $49 for the three months ended September 30, 2017 and 2016, respectively, and $272 and $143 for the nine months ended September 30, 2017 and 2016, respectively.

Note 7 - Accrued Expenses

Accrued expenses consist of the following:

	September 30, 2017		December 31, 2016
Compensation and related benefits	$	705	$	82
Accrued litigation		269		286
Research project agreement		100		—
Other		—		3
Total accrued expenses	$	1,074	$	371

Note 8 - Accrued Contract Cancellation Settlement

The accrued contract cancellation settlement of $1,000 was the result of the Company entering into a settlement agreement with Neogen Corporation in which Neogen and the Company agreed to (a) terminate the existing Exclusive License Agreement between the Company and Neogen dated May 15, 2014 (the “License Agreement”), with neither Neogen or the Company having any further obligations thereunder (other than certain confidentiality obligations); (b) dismiss with prejudice the court action filed by Neogen in the District Court for the District of Arizona on January 19, 2017 (the “Court Action”); and (c) mutually release any and all existing or future claims between the parties and their affiliates related to or arising from the License Agreement or the Court Action. Under the terms of the agreement, the Company agreed to make a one-time payment in the amount of $1,000 in settlement of all claims and termination of all existing contracts between the parties. This payment was made in January, 2017. See Note 15 for further details.

17

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 9 - Borrowings

A summary of the Company’s borrowings, including capital lease obligations, is as follows:

	September 30, 2017			December 31, 2016
Short-term debt:
Current portion of long-term debt		174			45
Total short-term debt	$	174		$	45
Long-term debt:
Capital lease obligations	$	290		$	51
Other unsecured promissory notes		521			132
Total		811			183
Less: current portion of long-term debt		(174	)		(45	)
Total long-term debt	$	637		$	138

Capital Lease Obligations

Capital lease obligations are for computer and lab equipment leased through Great American, Thermo Fisher, Navitas and ENGS. These capital leases expire at various dates through June 2022. Also included in the table above are three notes payable to Direct Capital and one to M2 Financing for the financing of fixed assets.

Note 10 - Notes Payable, Related Parties

A summary of the Company’s notes payable, related parties is as follows:

	September 30, 2017		December 31, 2016
Unsecured promissory note, interest rate of 4.25% and 8% per annum	$	18	$	36
Less: current portion of notes payable, related parties		18		30
Total notes payable, long-term, related parties	$	—	$	6

In April 2013, the Company and a previous employee entered into an agreement to settle all outstanding obligations consisting of a promissory note of $40, dated March 2009, and deferred salaries amounting to $72. The note and salary obligation continue to bear interest at 8% and 4.25%, respectively. The note requires monthly payments of $1 and matures in April 2018. The deferred salary obligation requires monthly payments of $1 and matures in May 2018.

Amounts outstanding on these obligations were $18 and $36 at September 30, 2017 and December 31, 2016, respectively.

Interest expense on the notes payable, related parties, was $-0- and $1 for the three months and nine months ended September 30, 2017 and $56 for the year ended December 31, 2016 respectively.

18

TECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 11 - Common Stock Warrants and Common Stock Warrant Liability

The table summarizes the common stock warrant activity as of September 30, 2017 as follows:

	Number
	of			Date			Exercise
Common  Stock Warrants	Warrants			Issued	Term		Price
Outstanding at December 31, 2015		610,487
Initial Public Offering Underwriter		187,500		December 2016		5 years	$	9.60
Marketing and Development Services		100,000		February 2016		5 years(1)	$	7.50
Other Advisory Services		40,000		August 2016		3 years(1)	$	7.50
Promissory Notes		9,031		March 2016		3 years(1)	$	7.50
Warrants issued		336,531
Warrants exercised		(117,733	)
Outstanding at December 31, 2016		829,285
Warrants issued		—
Warrants exercised		—
Outstanding at September 30, 2017		829,285

⁽¹⁾ The warrants also terminate, if not exercised by the earlier of (i) December 13, 2018, or the second anniversary of the closing of an initial public offering of common stock; or (ii) a liquidation, dissolution or winding up of the Company.

Promissory Notes; Common Stock Warrants

In conjunction with the issuance by the Company of certain promissory notes, the Company issued detachable common stock warrants (“Warrants”) to purchase an aggregate 270,400 shares of common stock, with an exercise price of $7.50 per share. The Warrants were exercisable until the earlier of (i) 5 years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering; and (iii) the closing of liquidation, dissolution or winding up of the Company.

The Warrants have a net share settlement (cashless exercise) provision. With this provision the holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of the common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. However, the Warrants would be exercised automatically in full pursuant to the net exercise provision, without any further action on behalf of the holder, immediately prior to the time the Warrants would otherwise terminate.

The Warrants are considered freestanding instruments as (i) they were transferred together with the notes issued but exist independently as a separate security; (ii) they may be exercised separately from the notes; and (iii) they are exercisable for a specific period (term) and do not impact the notes if and when exercised. 

19

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 11 - Common Stock Warrants and Common Stock Warrant Liability – (continued)

The Company estimated the fair value of the Warrants at issuance using a Monte Carlo option pricing model based on the following significant inputs: common stock price of $7.50 to $7.575; comparable company volatility of 58.0% to 76.7%; risk- free rates of 1.31% to 1.76%; and the probability of an equity event occurring. The Company reflected the amounts recorded for the Warrants issued within stockholders’ deficit, as additional paid-in-capital. Although the Warrants are a derivative that can be net share settled, the Warrants are considered indexed to the Company’s common stock and the Company has the ability to settle the warrant contract in common shares and met the conditions within the contract to classify the Warrants as an equity instrument.

Common Stock Warrant Issued for Marketing and Development Services

In February 2016, the Company issued to a stockholder a warrant to purchase 100,000 shares of common stock at an exercise price of $7.50 per share as consideration for providing marketing and development services in Southeast Asia. The warrant was fully vested and exercisable on the date of grant. The common stock warrant has the similar features as the Warrants discussed above, except it is exercisable until the earlier of (i) five years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The Company estimated the fair value of the common stock warrant to be $431 on the date of grant using a Black- Scholes option pricing model based on the following significant inputs: common stock price of $7.57; comparable company volatility of 77.8%; remaining term 3.75 years; dividend yield of 0% and risk-free rate of 2.09%. The Company recorded the fair value of the warrant as stock-based compensation expense within general and administrative expense on the date of grant.

March 2016 Promissory Notes Common Stock Warrants

In March 2016, the Company issued certain unsecured notes with common stock warrants to purchase an aggregate of 9,032 shares of common stock at an exercise price of $7.50 per share. The common stock warrants are exercisable until the earlier of (i) three years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The Company estimated the fair value of the common stock warrants on the date of grant using a Monte Carlo pricing model based on the following significant inputs: common stock price of $7.575; comparable company volatility 79.6%; and risk-free rate of 1.49%.

August 2016 Other Advisory Services

On August 16, 2016, the Company issued to each of two advisors warrants to purchase 20,000 shares of common stock at an exercise price of $7.50 per share as consideration for providing advisory services to the Company. The warrants were fully vested and exercisable on the date of grant until the earlier of (i) three years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The Company recorded the fair value of the warrants as stock-based compensation expense within general and administrative expense on the date of grant.

Common Stock Warrant Issued to Initial Public Offering Underwriter

In December 2016, the Company issued to the underwriter of its IPO a warrant to purchase 187,500 shares of common stock at an exercise price of $9.60 per share as consideration for providing services in connection with the Company’s initial public offering. The warrant was fully vested and exercisable on the date of grant. The common stock warrant is exercisable until five years from the date of grant. The Company estimated the fair value of the common stock warrant to be $939 on the date of grant using a Black- Scholes option pricing model based on the following significant inputs: common stock price of $8.00; comparable company volatility of 82.1%; remaining term 5 years; dividend yield of 0% and risk-free rate of 1.92%.

20

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 11 - Common Stock Warrants and Common Stock Warrant Liability – (continued)

University of Arizona Common Stock Warrant

In connection with the June 2015 amended and restated exclusive license agreement with the University of Arizona (“University”), the Company issued to the University a common stock warrant to purchase 15,000 shares of common stock at an exercise price of $7.50 per share. The warrant was fully vested and exercisable on the date of grant, and expires, if not exercised, five years from the date of grant. In the event of a “terminating change” of the Company, as defined in the warrant agreement, the warrant holder would be paid in cash the aggregate fair market value of the underlying shares immediately prior to the consummation of the terminating change event. Due to the cash settlement provision, the derivative warrant liability was recorded at fair value and is revalued at the end of each reporting period. The changes in fair value are reported in other income (expense) in the statements of operations and comprehensive loss. The estimated fair value of the derivative warrant liability was $53 at the date of grant.

The estimated fair value of the derivative warrant liability was $4 at September 30, 2017. As this derivative warrant liability is revalued at the end of each reporting period, the fair values as determined at the date of grant and subsequent periods were based on the following significant inputs using a Monte Carlo option pricing model: common stock price of $7.91; comparable company volatility of 77.7% of the underlying common stock; risk-free rates of 1.93%; and dividend yield of 0%; including the probability assessment of a terminating change event occurring. The change in fair value of the derivative warrant liability was $65 for the nine months ended September 30, 2017 and was recorded in other income (expense) in the accompanying statements of operations and comprehensive loss.

July 2015 Consulting Agreement Common Stock Warrant

In July 2015, the Company issued a common stock warrant to purchase 121,227 shares of common stock, with an exercise price of $7.50 per share, as consideration for services under a consulting arrangement. The warrant was fully vested and exercisable on the date of grant. This common stock warrant has the similar features as the Warrants described above, except it is exercisable until the earlier of (i) ten years from the date of grant; (ii) December 13, 2018, the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The estimated the fair value of the common stock warrant on the date of grant was $537 as determined by using a Black-Scholes option pricing model based on the following significant inputs: common stock price of $7.575; comparable company volatility of 60.9%; expected term of 6.25 years; risk-free rate of 2.09%; and dividend yield of 0%. The Company recorded the fair value of the warrant as stock-based compensation expense within general and administrative expense in the accompanying statements of operations and comprehensive loss in 2015.

Northern Arizona University Common Stock Warrant

In November 2015, the Company issued a common stock warrant to purchase 210,526 shares of common stock at an exercise price of $15.00 per share to Northern Arizona University (“NAU”) as part of the consideration given with the Series A convertible preferred stock in exchange for the full cancellation of a promissory note that had been previously issued to NAU.

Note 12 - Stockholders’ Deficit

Common Stock

The Company had 10,363,189 and 10,157,292 shares of common stock issued and outstanding as of September 30, 2017 and December 31, 2016, respectively. 

During the nine months ended September 30, 2017, the Company issued an aggregate of 205,897 shares of common stock as follows: 48,240 shares to consultants for services, valued at $137, to settle previous claims; 14,014 shares for the cashless exercise of vested stock options; and 143,643 shares for net settlement of restricted stock units that vested during the period.

21

Rights Offering

In April 2016, the Company offered to the existing holders of shares of (i) its common stock and (ii) Series B convertible preferred stock, in each case, as of April 8, 2016 (the “Record Date”), at no charge, non-transferable subscription rights, on a pro rata basis, to purchase shares of common stock at a subscription price of $2.50 per share (the “Rights Offering”). In addition, the holders also had the right to purchase additional shares of common stock, if any shares remain unsubscribed. The Company offered subscription rights on 5,794,162 shares of its common stock. The Rights Offering was conducted as a private placement on a “best efforts” basis, with no minimum subscription required.

The subscription rights were initially exercisable beginning on April 8, 2016 and expiring on April 29, 2016 (the “Subscription Period”). However, the Company reserved the right to extend the Subscription Period for up to two additional weeks. The Company extended the Subscription Period for one additional week. The Rights Offering closed on May 6, 2016.

The Company issued 2,478,486 shares of common stock and received aggregate consideration of $6,199 in the Rights Offering. The aggregate consideration received consisted of: (i) $5,284 in cash; (ii) $821 in consideration paid through the cancellation of $821 in outstanding principal amount (and related unpaid interest) under certain outstanding unsecured notes; and (iii) the extinguishment of $94 in amounts owed by the Company for services and related miscellaneous expenses. Such cash proceeds will be used for working capital and general corporate purposes. As the Rights Offering was offered to certain existing holders of the Company’s stock, the shares sold are treated as outstanding from the date of their issuance in the computation of loss per share, basic and diluted in future periods.

Note 13 - Stock-based Compensation

Effective December 2008, the Company established the 2008 – 2009 Non-Qualified Stock Option Plan (the “2008 – 2009 Plan”) under which no stock options remain outstanding at September 30, 2017. The stock-based awards were issued with a price not less than $15.00 per share or 100% of the fair value of a share of common stock on the date of grant. After July 2015, no further awards were granted under the 2008 – 2009 Plan.

Effective July 2015, the Company’s stockholders approved the 2015 Equity Incentive Plan (the “2015 Plan”), which permits the issuance of up to 2,000,000 shares reserved for the grant of stock options, stock appreciation rights, restricted stock units and other stock-based awards for employees, directors or consultants of the Company. The Board of Directors and the Company’s stockholders approved an additional 1,000,000 shares of common stock for issuance under the 2015 Plan. The stock-based awards are generally issued with a price equal to no less than fair value at the date of grant. Options granted under the 2015 Plan generally vest immediately, or ratably over a two- to 36-month period coinciding with their respective service periods; however, participants may exercise their options prior to vesting as provided by the 2015 Plan. Unvested shares issued for option exercised early may be subject to a repurchase by the Company if the participant terminates at the original exercise price. Options under the 2015 Plan generally have a contractual term of five or ten years. Certain stock option awards provide for accelerated vesting upon a change in control. As of September 30, 2017, the Company had 779,095 shares of common stock available for issuance under the 2015 Plan.

The Company measures the fair value of stock options with service-based and performance-based vesting criteria to employees, directors and consultants on the date of grant using the Black-Scholes option pricing model. The fair value of equity instruments issued to non-employees is re-measured as the award vests. The Black-Scholes valuation model requires the Company to make certain estimates and assumptions, including assumptions related to the expected price volatility of the Company’s stock, the period under which the options with be outstanding, the rate of return on risk-free investments, and the expected dividend yield for the Company’s stock.

22

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 13 - Stock-based Compensation - (continued)

The weighted-average assumptions used in the Black-Scholes option-pricing model used to calculate the fair value of options granted during the nine months ended September 30, 2017, were as follows:

	Employee			Non-Employee
Expected volatility		73.8% -83.7	%		N/A
Expected dividend yield		—			N/A
Expected term (in years)		3.0 to 3.5			N/A
Risk-free interest rate		1.45%-1.94	%		N/A

Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption was determined based on historical volatilities from traded options of biotech companies of comparable in size and stability, whose share prices are publicly available. The expected term of options granted to employees is calculated based on the mid-point between the vesting date and the end of the contractual term according to the simplified method as described in SEC Staff Accounting Bulletin 110 because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term due to the limited period of time its awards have been outstanding. For non-employee options, the expected term of options granted is the contractual term of the options. The risk-free rate by reference to the implied yields of U.S. Treasury securities with a remaining term equal to the expected term assumed at the time of grant. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not intend to pay dividends.

The table summarizes the stock option activity, for both plans, for the periods indicated as follows:

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value(1)
Outstanding at December 31, 2016		1,477,300			1.61		5.8	$	9,662
Granted		161,500		$	8.04		5.0	$	—
Exercised		(15,000	)	$	0.50		—		—
Forfeited		—		$	—		—		—
Expired		(65,000	)	$	10.22		—		—
Outstanding at September 30, 2017		1,558,800			1.73		5.1	$	183
Exercisable at September 30, 2017		1,263,599		$	1.08		4.8	$	968

⁽¹⁾ The aggregate intrinsic value on the table was calculated based on the difference between the estimated fair value of the Company’s stock and the exercise price of the underlying option. The estimated stock values used in the calculation was $1.85 and $8.15 per share at September 30, 2017 and December 31, 2016, respectively.

23

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 13 - Stock-based Compensation – (continued)

The stock-based compensation expense was recorded as follows:

	Three Months Ended September 30				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85		135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946		933	$	2,818	$	2,406

The allocation between research and development and general and administrative expense was based on the department and services performed by the employee or non-employee.

At September 30, 2017, the total compensation cost related to non-vested options not yet recognized was $1,942, which will be recognized over a weighted average period of four years, assuming the employees complete their service period required for vesting.

Effective December 2008, the Company established the 2008-2009 Plan under which no stock options remain outstanding at September 30, 2017. The stock-based awards were issued with a price not less than $15.00 per share or 100% of the fair value of a share of common stock on the date of grant. After July 2015, no further awards were granted under the 2008 – 2009 Plan.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the nine months ended September 30, 2017:

	Number of  Units			Weighted Average Grant-Date Fair Value Per Units
Outstanding as of December 31, 2016		455,430		$	0.76
Granted		117,885	(1)	$	6.95
Vested		(228,333	)	$	2.00
Forfeited		—		$	—
Outstanding as of September 30, 2017		344,982	(2)	$	2.05

(1) 40,000 restricted stock units were granted on March 27, 2017 with a weighted average grant date fair value of $8.35, 17,885 restricted stock units were granted on May 19, 2017 with a weighted average grant date fair value of $6.99 and 60,000 restricted stock units were granted on June 19, 2017 with a weighted average grant date fair value of $6.00.

⁽²⁾ At September 30, 2017, the total compensation cost related to non-vested restricted stock units not yet recognized was $1,075, which will be recognized over a weighted average period of 1.3 years, assuming the recipients complete their service period required for vesting.

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SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 14 - License and Other Agreements

Neogen Corporation

In May 2014, the Company entered into an exclusive license agreement with Neogen Corporation (“Neogen”). The Company granted an exclusive license to Neogen to (i) use the Company’s intellectual property (“IP”), consisting primarily of the ContraPest technology and (ii) manufacture, distribute and sell commercial rodent control products in the United States and certain U.S. territories, Canada and Mexico.

As previously disclosed in our Current Report on Form 8-K dated and filed January 23, 2017, on January 23, 2017 we entered into a termination agreement (the “Settlement Agreement”) with Neogen Corporation (“Neogen”). Pursuant to the Settlement Agreement, the parties agreed to (a) terminate the existing Exclusive License Agreement between us and Neogen dated May 15, 2014 (the “License Agreement”), with neither Neogen or us having any further obligations thereunder (other than certain confidentiality obligations); (b) dismiss with prejudice the court action filed by Neogen in the District Court for the District of Arizona on January 19, 2017 (the “Court Action”), as further described below; and (c) mutually release any and all existing or future claims between the parties and their affiliates related to or arising from the License Agreement or the Court Action. As part of the Settlement Agreement, we agreed to pay to Neogen upon the execution of the Settlement Agreement an aggregate of $1,000 in settlement of all claims.

For the nine months ended September 30, 2017 and the year ended December 31, 2016, the Company recognized revenue of $0 and $186, respectively, under the License Agreement.

Bioceres/INMET S.A. Agreement

In January 2016, the Company entered into a services agreement with Bioceres, Inc. (“Bioceres”), a wholly-owned subsidiary of Bioceres S.A., a leading agricultural biotechnology company in Argentina, and its Argentinean subsidiary, Ingenieria Metabolica S.A. (“INMET”) to develop a production method for synthetic triptolide, the main ingredient in ContraPest. The Company also entered into an agency agreement with INMET whereby the Company appointed INMET as its exclusive agent to seek regulatory approval for and conduct pre-sales and marketing of its product, ContraPest, in Argentina. The Company and INMET have also agreed to manufacture and distribute its product in Argentina and other countries, as mutually agreed, through a newly formed entity.

The term of the service agreement is for two years. The service agreement can be terminated at any time upon written notice by either party for any reason. The term of the agency agreement with INMET is the earlier of: (i) when the Company and INMET incorporate the joint venture entity in Argentina or (ii) January 2018.

At September 30, 2017, the Company had accrued expenses of $100 due to Bioceres as detailed in the table or accrued expenses in Note 7

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SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS 

(In thousands, except share and per share data)

Note 15 - Commitments and Contingencies

Legal Proceedings

The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.

Neogen Settlement Agreement

See Note 14 above with regards to the Settlement Agreement with Neogen.

Although notice of the legal action by Neogen and the Settlement Agreement with Neogen, occurred after December 31, 2016, as per the provisions of Accounting Standards Codification Topic 450 Loss Contingencies, included in the financial statements of the Company at December 31, 2016 is a $1,000 charge to general and administrative expenses and a corresponding accrual of contract cancellation settlement agreement related to this agreement.

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SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 15 - Commitments and Contingencies – (continued)

Resolution of Dispute

In recognition of his continued support and cooperation, and to resolve a dispute regarding whether his options appropriately expired in the first quarter of 2016, in July 2016, the Company’s Board of Directors agreed to issue to its former chief executive officer 120,000 shares of the Company’s common stock. The expense of $300 associated with this full and final settlement was recorded at December 31, 2016.

Lease Commitments

Rent expense was $246 and $234 for the nine months ended and year ended September 30, 2017 and December 31, 2016, respectively. The future minimum lease payments under non-cancellable operating lease and future minimum capital lease payments as of September 30, 2017 are follows:

	Capital Leases		Operating  Lease
Years Ending December 31,
2017	$	25	$	63
2018		96		258
2019		88		221
2020		67		—
2021		84		—
Total minimum lease payments	$	360	$	542

	Capital Leases
Less: amounts representing interest (ranging from 7.25% to 11.56%)	$	75
Present value of minimum lease payments		285
Less: current installments under capital lease obligations		70
Total long-term portion	$	215

Note 16 - Subsequent Events

In October of 2017, the Company issued 26,308 shares of its common stock to two executives of the Company in net settlement of restricted stock units that vested on September 30, 2017 but were not issued until October 2, 2017.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our” and “the Company” refer to SenesTech, Inc., a Delaware corporation.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed consolidated financial statements and related notes. Some statements and information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, notes to our condensed consolidated financial statements and elsewhere in this Quarterly Report on Form 10-Q are not historical facts but are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, readers can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other comparable terminology, which when used are meant to signify the statement as forward-looking. These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements that are not historical facts. Specific examples of forward-looking statements include those concerning the sufficiency of our cash and future revenue to fund operations, our expectations as to expenses, future revenue and the commercialization of our products, our research and development plans and initiatives and the development of our products. 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 of Part I of our Annual Report on Form 10-K/A for the year ended December 31, 2016 entitled “Risk Factors,” and those contained from time to time in our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

All amounts shown in the following Management’s Discussion and Analysis of Financial Condition and Results of Operations are full amounts (and are not shown in thousands).

Overview

Since our inception in 2004, we have devoted substantially all of our resources to organizing and staffing our company, conducting research and development activities for our product candidates, business planning, raising capital and acquiring and developing product and technology rights. Until August 2016, we did not have any products approved for sale, and we have not generated any significant revenue from product sales to date. We have funded our operations to date with proceeds from the sale of common stock and preferred stock, the issuance of convertible and other promissory notes and, to a lesser extent, payments received in connection with research grants and licensing fees. Through September 30, 2017, we had received net proceeds of $49.2 million from our sales of common stock, preferred stock and issuance of convertible and other promissory notes and an aggregate of $1.6 million from research grants and licensing fees.

We have incurred significant operating losses since our inception. Our net losses were $2.9 million, $10.0 million and $11.0 million for the three and nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. As of September 30, 2017, we had an accumulated deficit of $71.3 million. We expect to continue to incur significant expenses and generate operating losses for at least the next 12 months.

We have historically utilized, and intend to continue to utilize, various forms of stock-based awards in order to hire, retain and motivate talented employees, consultants and directors and encourage them to devote their best efforts to our business and financial success. In addition, we believe that our ability to grant stock-based awards is a valuable and necessary compensation tool that aligns the long-term financial interests of our employees, consultants and directors with the financial interests of our stockholders.

As a result, a significant portion of our operating expenses includes stock-based compensation expense. Stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy. Specifically, our stock-based compensation expense for each of the nine months ended September 30, 2017 and September 30, 2016 was $2.8 million and $2.4 million, respectively, which represented 28.1% and 33.0%, respectively, of our total operating expenses for those periods.

Components of our Results of Operations

Revenue

To date, we have generated $34,000, from product sales, and we expect to generate increased revenue from the sale of products or royalties in the fourth quarter of 2017. Except for the minimal product sales noted above, all our revenue to date has been derived from payments received in connection with research grants and licensing fees received as a result of our execution of the former license agreement with Neogen.

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We recognized product sales revenue of $17,000 and $-0- for the three months ended September 30, 2017 and 2016, respectively, and $34,000 and $-0- and for the nine months ended September 30, 2017 and 2016, respectively. In addition, for the nine months ended September 30, 2016, we recognized revenue of $139,000 under our former license agreement with Neogen and $122,000 under NIH grants. We do not anticipate additional grant revenue under the NIH grants or additional revenue from our former license agreement with Neogen.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates, which include:

● Employee-related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research and development functions;

● Expenses incurred in connection with the development of our product candidates; and

● Facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies.

We expense research and development costs as incurred.

At this time, we cannot reasonably estimate the costs for completing the development of ContraPest or the cost associated with the development of any of our other product candidates.

We plan to continue to hire employees to support our research and development efforts and anticipate that we will continue to utilize various forms of stock-based compensation awards in order to attract and retain employees for our research and development efforts. As a result, we anticipate that stock-based compensation expense will continue to represent a significant portion of our research and development expenses for the foreseeable future.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, consulting, accounting and audit services.

We anticipate that our general and administrative expenses may increase in the future as we increase our headcount to support commercialization of any approved products and further development of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company.

We plan to continue to hire employees to support our commercialization of any approved products and further development of our product candidates, and anticipate that we will continue to utilize various forms of stock-based compensation awards in order to attract and retain qualified employees. As a result, we anticipate that stock-based compensation expense will continue to represent a significant portion of our general and administrative expenses for the foreseeable future.

Other Income (Expense), Net

Interest Income. Interest income consists primarily of interest income earned on cash and cash equivalents. Our interest income has not been significant due to nominal cash and investment balances and low interest earned on invested balances.

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Interest Expense. Interest expense in 2017 consists primarily of interest accrued on our lease and note commitments. Interest expense in 2016 consisted primarily of interest on $2.9 million in convertible and other promissory notes we issued during 2014, 2015 and 2016, most of which was converted or redeemed by December 31, 2016.

Other Income (Expense), Net. Other income (expense), net; consists primarily of net losses on extinguishment of convertible and non-convertible, secured and unsecured promissory notes.

Income Taxes

Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits, due to our uncertainty of realizing a benefit from those items. As of December 31, 2016, we had federal net operating loss carryforwards of $34.0 million which begin to expire in 2021 and state net operating loss carryforwards of $27.8 million which began to expire in 2016, unless utilized.

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Comparison of the Three and Nine Months Ended September 30, 2017 and 2016

The following table summarizes our results of operations for the three and nine months ended September 30, 2017 and 2016:

SENESTECH, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except shares and per share data)

(Unaudited)

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2017			2016			2017			2016
Revenue:
License revenue	$	—		$	131		$	—		$	261
Product Sales		17			—			34			—
Total revenue		17			131			34			261
Cost of goods sold		11			—			27			—
Gross profit		6			131			7			261
Operating expenses:
Research and development		721			829			2,517			1,964
General and administrative		2,235			1,932			7,506			5,259
Total operating expenses		2,956			2,761			10,023			7,223
Net operating loss		(2,950	)		(2,630	)		(10,016	)		(6,962	)
Other income (expense):
Interest income		9			—			20			—
Interest expense		(33	)		(6	)		(54	)		(49	)
Interest expense, related parties		—			(9	)		(1	)		(43	)
Loss on extinguishment of unsecured promissory note		—			(59	)		—			(171	)
Other income (expense)		37			—			76			51
Total other income (expense)		13			(74	)		41			(212	)
Net loss		(2,937	)		(2,704	)		(9,975	)		(7,174	)
Series A convertible preferred stock dividends		—			(30	)		—			(90	)
Net loss and comprehensive loss	$	(2,937	)	$	(2,734	)	$	(9,975	)	$	(7,264	)

Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016:

Revenue

Revenue was $17,000 for the three months ended September 30, 2017, compared to $131,000 for three months ended September 30, 2016.

The $17,000 revenue recognized for the three months ended September 30, 2017 represented sales of our product, ContraPest. The $131,000 of revenue for the three months ended September 30, 2016, was earned from research grants and from our former license agreement with Neogen, which was terminated in January 2017. We did not recognize any license fees in 2017 under this agreement.

Cost of Goods Sold

Cost of goods sold was $11,000 for the three months ended September 30, 2017, compared to $-0- for three months ended September 30, 2016. The increase in cost of goods sold corresponded to the product launch of ContraPest.

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Research and Development Expenses

	Three Months Ended September 30,				Increase /
	2017		2016		(Decrease)
	(in thousands)
Direct research and development expenses:
Unallocated expenses:
Personnel related (including stock-based compensation)	$	449	$	701	$	(252)
Professional Fees/Consultants		39		10		29
Facility related		76		51		25
Other		157		67		90
Total research and development expenses	$	721	$	829	$	(108)

Research and development expenses were $721,000 for the three months ended September 30, 2017, compared to $829,000 for the same period in 2016. The $108,000 decrease in research and development expenses was primarily due to a decrease of $252,000 in personnel-related costs, offset by increases in professional fees/consultant expenses of $29,000, facility expenses of $25,000 and other expenses of $90,000. The decrease in personnel-related costs resulted from lower research and development salaries of $219,000 due to reduced headcount and a decrease in stock-based compensation expense of $50,000, offset by higher payroll taxes of $17,000. Professional services and consulting expenses increased $29,000 for the three months ended September 30, 2017, compared to the same period in 2016 primarily due to an increase in synthetic triptolide research fees and legal fees. Rent and utilities for the three months ended September 30, 2017 increased $25,000 over the same period in 2016 due primarily to the expansion into the research space at Northern Arizona Center for Entrepreneurship and Technology (“NACET”) facility. Other expenses increased by $90,000 from $67,000 for the three months ended September 30, 2017 as compared to the same period in 2016, primarily due to increased travel expenses of $34,000 related to field team support due to on-site evaluations of potential customers and research operations and increased depreciation expense of $70,000 due to fixed asset additions in our research operations offset by lower lab fees of $14,000. As noted last quarter, we have now filed in all 50 states and the District of Columbia and have begun the process of refiling in some states.

We continue to investigate applications of our core technology to other product candidates, which includes laboratory tests and academic collaborations. We also continue to develop our supply chain, particularly identifying and improving our sourcing of triptolide, a key active ingredient for our product candidates.

General and Administrative Expenses

General and administrative expenses were $2.2 million for the three months ended September 30, 2017, compared to $1.9 million for the three months ended September 30, 2016. The increase of $0.3 million in general and administrative expenses was due to an increase of $228,000 in personnel related expenses, an increase of $89,000 in insurance expenses related to the increased D&O insurance expense as a public company, an increase of $18,000 in non-capitalized furniture and computer equipment and an increase in occupancy expenses of $8,000, offset by a $24,000 decrease in professional services fees due primarily to lower audit and accounting fees and a $20,000 reduction in travel and entertainment expenses. The increase in personnel related expenses consisted of an increase of $144,000 in net additional salary costs, an increase in stock based compensation of $61,000, an increase in payroll taxes and processing fees of $35,000 and an increase of $32,000 in recruiting expenses offset by a $44,000 reduction in employee benefits due to reduced relocation and benefits costs.

Interest Expense

We recorded $24,000 of interest expense, net for the three months ended September 30, 2017, compared to $6,000 for the same period in 2016. The increase in interest expense of $18,000 was the result of increased debt in the form of notes payable and leases on equipment acquisitions during 2017.

Other Income (Expense), Net

We recorded $37,000 of other income, net for the three months ended September 30, 2017, compared to $59,000 of other expense for the same period in 2016. The $96,000 net decrease in other expense was primarily due to lower expense related to the year-over-year fair market value adjustment of our convertible promissory notes and losses on the extinguishment of said promissory notes.

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Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016:

Revenue

Revenue was $34,000 for the nine months ended September 30, 2017, compared to $261,000 for nine months ended September 30, 2016.

The $34,000 revenue recognized for the nine months ended September 30, 2017 represented sales of our product, ContraPest. The $261,000 of revenue for the nine months ended September 30, 2016 was earned from research grants and from our former license agreement with Neogen, which was terminated in January 2017. We did not recognize any license fees in 2017 under this agreement.

Cost of Goods Sold

Cost of goods sold was $27,000 for the nine months ended September 30, 2017, compared to $-0- for nine months ended September 30, 2016. The increase in cost of goods sold corresponded to the product launch of ContraPest. Cost of goods sold as a percentage of sales for the period was approximately 80% due to manufacturing inefficiencies surrounding the start-up of the new manufacturing line and the cost of replacement product shipped to replace damaged product.

Research and Development Expenses

	Nine Months Ended September 30,				Increase/
	2017		2016		(Decrease)
	(in thousands)
Direct research and development expenses:
Unallocated expenses:
Personnel related (including stock-based compensation)	$	1,471	$	1,384	$	87
Professional Fees/Consultants		272		142		130
Facility related		228		157		71
Other		546		281		265
Total research and development expenses	$	2,517	$	1,964	$	553

Research and development expenses were $2.5 million for the nine months ended September 30, 2017, compared to $2.0 million for the same period in 2016. The $500,000 increase in research and development expenses was partially due to an increase of $87,000 in personnel-related costs. This increase in personnel-related costs resulted from increased research and development salaries of $47,000 due to headcount additions in 2017 and an increase in stock-based compensation expense of $40,000. Professional services and consulting expenses increased $130,000 for the nine months ended September 30, 2017 compared to the same period in 2016 primarily due to an increase in synthetic triptolide research fees and legal fees.

State registration and filing fees increased $27,000 for the nine months ended September 30, 2017 compared to the same period in 2016 due to the increase in state filings and registrations as we have now filed in all 50 states and the District of Columbia and have begun the process of refiling in some states. Travel expenses related to field team support increased $97,000 for nine months ended September 30, 2017 over the same period in 2016 due to on-site evaluations of potential customers and research operations. Rent and utilities for the nine months ended September 30, 2017 increased $51,000 over the same period in 2016 due to the expansion into the research space at our NACET facility. Depreciation expense increased $62,000 for the nine months ended September 30, 2017 over the same period in 2016 due to fixed asset additions in our research operations.

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We continue to investigate applications of our core technology to other product candidates, which includes laboratory tests and academic collaborations. We also continue to develop our supply chain, particularly identifying and improving our sourcing of triptolide, a key active ingredient for our product candidates.

General and Administrative Expenses

General and administrative expenses were $7.5 million for the nine months ended September 30, 2017, compared to $5.3 million for the nine months ended September 30, 2016. The increase of $2.2 million in general and administrative expenses was due to an increase of $1.5 million in personnel related expenses, an increase in travel expenses of $113,000, an increase in insurance expense of $248,000, a $178,000 increase in office supplies and non-capitalized furniture and computer equipment and an increase in marketing, stock service and shareholder relations expenses of $23,000. The increase in personnel related expenses consisted of an increase in stock based compensation of $450,000 and an increase of $1.1 million in net additional salary costs. The increase in insurance was primarily due to increased director and officer insurance as a result of the public becoming a public reporting company in December of 2016. Likewise, marketing, stock service and shareholder relations expenses increased due to the Company becoming a commercial, public reporting company in December of 2016.

Interest Expense

We recorded $35,000 of interest expense, net for the nine months ended September 30, 2017, compared to $92,000 for the same period in 2016. The decrease in interest expense of $57,000 was the result of a decrease of $2.9 million in convertible notes that were issued in 2014 and exchanged for Series B convertible preferred stock in December 2016 partially offset by the increase in interest related to increased debt in the form of notes payable and leases on equipment acquisitions during 2017.

Other Income (Expense), Net

We recorded $76,000 of other income, net, for the nine months ended September 30, 2017, compared to $120,000 of other expense for the same period in 2016. The $196,000 net decrease in other expense was primarily due to the expense related to the year-over-year fair market value adjustment of our convertible promissory notes and losses on the extinguishment of said promissory notes.

Liquidity and Capital Resources

Since our inception, in the course of our research and development activities, we have sustained significant operating losses and expects such losses to continue for the near future. We have generated limited revenue to date from research grants and licensing fees received under our former license agreement with Neogen. During the first nine months of 2017, we began full scale marketing of our first product, ContraPest and we continue to develop other product candidates, which are in various phases of development. We have funded our operations to date primarily with proceeds from the sale of common stock and preferred stock, the issuance of convertible and other promissory notes and, to a lesser extent, payments received under research grants and pursuant to our former license agreement with Neogen. Through September 30, 2017, we had received net proceeds of $49.2 million from our sales of common stock and preferred stock and issuance of convertible and other promissory notes, and an aggregate of $1.6 million from licensing fees. 

The Company’s ultimate success depends upon the outcome of a combination of factors, including: (i) the success of its research and development; (ii) ongoing regulatory approval and commercialization of ContraPest and its other product candidates; (iii) market acceptance and commercial viability and profitability of ContraPest and other products if the Company obtains the necessary regulatory approvals; (iv) the ability to market its products and establish an effective sales force and marketing infrastructure to generate significant revenue; (v) the ability to retain and attract key personnel to develop, operate and grow its business; and (vi) the timely and successful completion of additional financing as needed. The Company has funded its operations to date through the sale of convertible preferred stock and common stock, including an initial public offering of 1,875,000 shares of its common stock on December 8, 2016, debt financing, consisting primarily of convertible notes and, to a lesser extent, payments received in connection with research grants and licensing fees. As of September 30, 2017, we had an accumulated deficit of $71.3 million and cash and cash equivalents and highly liquid investments of $3,648.

Based upon its current operating plan, the Company expects that cash and cash equivalents and highly liquid, short term investments at September 30, 2017, in combination with anticipated revenue, will be sufficient to fund its current operations for the near future. However, the Company is likely to require additional capital in order to fund its operating losses and research and development activities by issuing additional debt and equity instruments, until such time as the Company is profitable. If such equity or debt financing is not available at adequate levels, the Company will need to reevaluate its plans.

Off-Balance Sheet Arrangements

As of September 30, 2017, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

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Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance field studies of our product candidates in development. In addition, we incur additional costs associated with operating as a public company.

In particular, we expect to incur substantial and increased expenses as we:

● Continue the research and development of ContraPest and our other product candidates, including engaging in any necessary field studies;

● Seek ongoing regulatory approvals for ContraPest and our other product candidates;

● Scale up manufacturing processes and quantities to prepare for the commercialization of ContraPest and any other product candidates for which we receive regulatory approval;

● Establish an infrastructure for the sales, marketing and distribution of ContraPest and any other product candidates for which we may receive regulatory approval;

● Attempt to achieve market acceptance for our products;

● Expand our research and development activities and advance the discovery and development programs for other product candidates;

● Maintain, expand 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.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

	Nine Months Ended September 30,
	2017			2016
Cash used in operating activities	$	(7,596	)	$	(4,240	)
Cash used in investing activities		(3,825	)		(54	)
Cash provided by financing activities		294			5,498
Net increase (decrease) in cash and cash equivalents	$	(11,127	)	$	1,204

Operating Activities

During the nine months ended September 30, 2017, operating activities used $7.6 million of cash, primarily resulting from our net loss of $10.0 million and by changes in our operating assets and liabilities of $0.6 million, partially offset by non-cash charges of $3.0 million. Our net loss was primarily attributed to research and development activities and our general and administrative expenses, as we generated limited product revenue during the period. Net cash used by changes in our operating assets and liabilities for the nine months ended September 30, 2017 consisted primarily of a decrease in prepaid expenses of $165,000 and a decrease in receivables of $3,000 and an increase in deferred rent of $12,000, offset by a net decrease in accrued expenses and accounts payable of $473,000, a net increase in inventories of $337,000 and an increase in deposits of $8,000. The net decrease in accrued expenses and accounts payable was primarily due to timing of expense occurrence and payables management, offset by our payment of the $1.0 million contract cancellation settlement accrual in January. 

35

During the nine months ended September 30, 2016, operating activities used $4.2 million of cash, primarily resulting from our net loss of $7.2 million, partially offset by non-cash charges of $3.0 million and by cash provided by changes in our operating assets and liabilities of $62,000. Our net loss was primarily attributed to research and development activities and our general and administrative expenses, as we generated limited research grant and licensing revenue during the period. Net cash provided by changes in our operating assets and liabilities for the nine months ended September 30, 2016 consisted primarily of a $175,000 decrease in deferred revenue related to our license agreement with Neogen and a $202,000 decrease in accrued expenses and accounts payable. The decrease in accrued expenses and accounts payable was due to increased payments as a result of the receipt of cash raised in financing activities.

Investing Activities

For the nine months ended September 30, 2017, we used $3.8 million in investing activities consisting of $2.9 million of purchases in securities to be held to maturity and $885,000 in purchases of property and equipment.

For the nine months ended September 30, 2016, we used $54,000 of cash in investing activities, consisting of purchases of property and equipment.

Financing Activities

During the nine months ended September 30, 2017, net cash generated from financing activities was $294,000 as a result of $437,000 of proceeds from the issuance notes payable offset by payments of $66,000 related to notes payable and notes payable related party and $77,000 in payments of capital lease obligations.

During the nine months ended September 30, 2016, net cash provided by financing activities was $5.5 million as a result of $6.2 million of proceeds from the issuance of shares of common stock in our rights offering discussed elsewhere in this prospectus, $326,000 of proceeds received from our issuance of notes payable, $896,000 of proceeds received from the issuance of Series B convertible preferred stock, and $449,000 of proceeds received from the exercise of stock options, all of which were partially offset by payments of $1.6 related to the notes, payable, notes payable related party and convertible notes payable, $16,000 of capital lease repayments and $801,000 of deferred offering cost payments.

Recent Developments

None

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

36

While our significant accounting policies are described in more detail in Note 2 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We recognize revenue in accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”), Topic 605, Revenue Recognition. Accordingly, we recognize revenue from the commercial sale of products, licensing agreements and contracts to perform pilot studies when (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

We have generated revenue from a license agreement with a strategic partner pursuant to which we had granted to such partner the exclusive license in North America to manufacture, distribute and sell commercial control products based on our intellectual property, which includes ContraPest, for the later of 10 years or the expiration of the patent for ContraPest (if issued).

The license agreement was subsequently terminated on January 23, 2017.

When we receive non-refundable, upfront license fee payments for the exclusive rights to licensing our intellectual property, management determines if such license has stand-alone value. Since management determined that the license to our intellectual property did not have stand-alone value, we recognized revenue attributable to that license on a straight-line basis over the estimated related performance period. Any changes in the estimated period of performance will be accounted for prospectively as a change in estimate.

Our licensing agreement also provided for a future fixed amount of contingent milestone payments and contingent sales-based royalties to be received upon the achievement of milestone events. We recognize revenue that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved and the milestone payments are due and collectible. A milestone is considered substantive when the consideration payable to us for such milestone has all of the following characteristics: (1) there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved; (2) the event can only be achieved based in whole or part on either our performance or a specific outcome resulting from our performance; and (3) if achieved, the event would result in additional payments being due to us. In making this assessment in the future, we will consider all facts and circumstances relevant to the arrangement, including whether any portion of the milestone consideration is related to future performance or deliverables. In addition, we will account for sales-based royalties as revenue upon achievement of certain sales milestones. 

Stock-Based Compensation

We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant, net of estimated forfeitures, in accordance with ASC Topic 718 —  Stock Compensation (“ASC 718”). We estimate the grant date fair value of the awards, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of stock-based awards is expensed on a straight-line basis over the vesting period of the respective award. We account for stock-based compensation arrangements with non-employees using a fair value approach. The fair value of these stock options is measured using the Black-Scholes option-pricing model reflecting the same assumptions as applied to employee options in each of the reported periods, other than the expected life, which is assumed to be the remaining contractual life of the option. The fair value of the stock options granted to non-employees is re-measured as the stock options vest and is recognized in the statements of operations and comprehensive loss during the period the related services are rendered.

We recorded stock-based compensation expense of approximately $2.8 million and $2.4 million for the nine months ended September 30, 2017 and 2016, respectively. We expect to continue to grant stock options and other equity-based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.

The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based awards. If we had made different assumptions, our stock-based compensation expense, net loss and loss per share of common stock could have been significantly different. Our assumptions are as follows:

● Expected term.  The expected term represents the period that the stock-based awards are expected to be outstanding. Our historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore we estimate the expected term by using the simplified method, which calculates the expected term as the average of the time-to-vesting and the contractual life of the options.

37

● Expected volatility.   Expected volatility is derived from the average historical volatilities of publicly traded companies within our industry that we consider to be comparable to our business over a period approximately equal to the expected term. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

● Risk-free interest rate.  The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term.

● Expected dividend.  The expected dividend is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on our common stock.

● Expected forfeitures.  We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period that the estimates are revised.

Significant Factors, Assumptions and Methodologies Used in Determining Fair Value of Our Common Stock

As noted above, we are required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations using the Black-Scholes option-pricing model. Prior to our initial public offering in December 2016, in the absence of an active market for our common stock, we previously utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of our common stock. 

The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. If we had made different assumptions than those used, the amount of our stock-based compensation expense, net income and net income per share amounts could have been significantly different. The fair value per share of our common stock for purposes of determining stock-based compensation expense is the closing price of our common stock as reported on the applicable grant date. The compensation cost that has been included in the statements of operations and comprehensive loss for all stock-based compensation arrangements is as follows:

	Three Months Ended September 30				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85	$	135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946	$	933	$	2,818	$	2,406

The intrinsic value of stock options outstanding as of September 30, 2017 is $183,000, of which $968,000 and $(785,000) would have been related to stock options that were vested and unvested, respectively, at that date.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we intend to comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

38

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4.  Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (or Acting Principal Financial Officer, as the case may be), as appropriate, to allow timely decisions regarding required disclosure. Our management conducted an evaluation (pursuant to Rule 13a-15(b)) of the Exchange Act, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this report. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There were no changes in our internal control over financial reporting during the three-month period ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity. 

Item 1A. Risk Factors

Except as detailed below and disclosed in subsequently filed Quarterly Reports on Form 10-Q, there have been no material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2016.

Depending on the commercial success of ContraPest, we may require additional capital to fund our operations. Failure to obtain this necessary capital if needed may force us to delay, limit, or terminate our product development efforts or other operations.

Developing product candidates, including conducting experiments and field studies, obtaining and maintaining regulatory approval and commercializing any products later approved for sale, is a time-consuming, expensive and uncertain process that takes years to complete. We expect our expenses to continue to increase in connection with our ongoing activities, particularly as we advance our commercialization activities. We plan to substantially expand our operations, and as a result of many factors, some of which may be currently unknown to us, our expenses may be higher than expected. Securing additional financing may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates, including ContraPest. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to:

● Significantly delay, scale back or discontinue the development or commercialization of our product candidates, including ContraPest;

● Seek strategic partners for the manufacturing, sales and distribution of ContraPest or any of our other product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; and

● Relinquish, or license on unfavorable terms, our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.

The occurrence of any of the events described above would have a material adverse effect on our business, operating results and prospects and on our ability to develop our product candidates.

39

If securities or industry analysts, or other sources of information, do not publish research, or publish inaccurate or unfavorable research or other information about our business, our stock price and trading volume could decline.

The trading market for our common stock may depend on the research, reports and other information that securities or industry analysts, or other, third party sources of information, publish about us or our business. We do not have any control over these analysts or other, third party sources of information, and from time to time inaccurate or unfavorable research or other information about our business, financial condition, results of operations and stock ownership may be published. We cannot assure that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline. If incorrect or misleading information is disseminated publicly by third parties about us, our stock price could decline.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Use of Proceeds from Public Offering of Common Stock

In December 2016, we closed our initial public offering (“IPO”), in which we sold 1,875,000 shares of common stock at a price to the public of $8.00 per share. No shares were sold in connection with the underwriters’ option to purchase additional shares. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-213736), which was declared effective by the SEC on December 7, 2016. We raised approximately $12.6 million in net proceeds after deducting underwriting discounts and commissions of approximately $1.1 million and offering expenses of approximately $1.3 million. Using the proceeds from the IPO, on December 13, 2016, we paid $175,890 to the holder of all of our shares of Series A convertible preferred stock for its agreement to waive all accrued dividends on the Series A convertible preferred stock and convert all of its shares of Series A convertible preferred stock into common stock immediately prior to the consummation of the IPO. No payments were made by us to directors, officers or persons owning 10% or more of our capital stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries. There has been no material change in the planned use of proceeds from our IPO as described in the final prospectus issued in connection with the IPO.  We have invested the remaining proceeds in accordance with our board approved investment policy, which provides for investments in obligations of the U.S. government, money market instruments, registered money market funds and corporate bonds. The managing underwriter of our IPO was Roth Capital Partners, LLC and co-managing underwriters were Craig-Hallum Capital Group LLC and Aegis Capital Corp. 

Item 5.   Other Information  

 None.

40

Item 6. Exhibits

The exhibits listed in the Index to Exhibits are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.

INDEX TO EXHIBITS

Exhibit Number		Filed or Furnished Herewith	Incorporated by Reference
	Description		Form	Filing Date	Exhibit	File No.
3.1	Amended and Restated Certificate of Incorporation		S-1/A	10/20/2016	3.3	333-213736
3.2	Amended and Restated Bylaws		S-1	9/21/2016	3.5	333-213736
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934	X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934	X
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	X
101.LAB	XBRL Taxonomy Extension Label Linkbase	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	X

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SENESTECH, INC.
	(Registrant)
Dated: November 8, 2017	By:	/s/ Loretta P. Mayer, Ph.D.
		Loretta P. Mayer, Ph.D.
		Chair of the Board, Chief Executive Officer and
		Chief Scientific Officer
Dated: November 8, 2017	By:	/s/ Thomas C. Chesterman
		Thomas C. Chesterman
		Chief Financial Officer and Treasurer

42

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

RULE 13(a)-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Loretta P. Mayer, Ph.D., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SenesTech, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Intentionally omitted pursuant to the last sentence of Exchange Act Rule 13(a)-14(a); 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 8, 2017	/s/ Loretta P. Mayer, Ph.D.
	Loretta P. Mayer, Ph.D.
	Chair of the Board, Chief Executive Officer and Chief Scientific Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

RULE 13(a)-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Thomas C. Chesterman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SenesTech, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Intentionally omitted pursuant to the last sentence of Exchange Act Rule 13(a)-14(a); 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 8, 2017	/s/ Thomas C. Chesterman
	Thomas C. Chesterman
	Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Loretta P. Mayer Ph.D., Chair of the Board, Chief Executive Officer and Chief Scientific Officer, certify that:

1. To my knowledge, this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. To my knowledge, the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of SenesTech, Inc.

Dated: November 8, 2017	/s/ Loretta P. Mayer, Ph.D.
	Loretta P. Mayer, Ph.D.
	Chair of the Board, Chief Executive Officer and Chief Scientific Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Thomas C. Chesterman, Chief Financial Officer and Treasurer, certify that:

1. To my knowledge, this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. To my knowledge, the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of SenesTech, Inc.

Dated: November 8, 2017	/s/ Thomas C. Chesterman
	Thomas C. Chesterman
	Chief Financial Officer and Treasurer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 07, 2017
Document And Entity Information
Entity Registrant Name	SenesTech, Inc.
Entity Central Index Key	0001680378
Trading Symbol	SNES
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		10,389,497
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017

XML

CONDENSED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash	$ 699	$ 11,826
Investment in securities held to maturity	2,949
Accounts receivable	7	10
Prepaid expenses	172	337
Inventory	394	57
Deposits	17	9
Total current assets	4,238	12,239
Property and equipment, net	1,559	631
Total assets	5,797	12,870
Current liabilities:
Short-term debt	174	45
Accounts payable	175	351
Accrued contract cancellation settlement		1,000
Accrued expenses	1,074	371
Notes payable, related parties	18	30
Total current liabilities	1,441	1,797
Notes payable, related parties		6
Long-term debt, net	637	138
Common stock warrant liability	4	69
Deferred rent	45	33
Total liabilities	2,127	2,043
Commitments and contingencies ( See note 15)
Stockholders' equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 10,363,189 and 10,157,292 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	10	10
Additional paid-in capital	74,946	72,069
Stock subscribed, but not issued, consisting of -0- and 4,750 shares at September 30, 2017 and December 31, 2016, respectively		59
Accumulated deficit	(71,286)	(61,311)
Total stockholders' equity	3,670	10,827
Total liabilities and stockholders' equity	$ 5,797	$ 12,870

XML

CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Common stock par value	$ 0.001	$ 0.001
Common stock shares authorized	100,000,000	100,000,000
Common stock shares issued	10,363,189	10,157,292
Common stock shares outstanding	10,363,189	10,157,292
Shares subscribed but unissued	0	4,750

XML

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenue:
License revenue		$ 131		$ 261
Product Sales	17		34
Total revenue	17	131	34	261
Cost of goods sold	11		27
Gross profit	6	131	7	261
Operating expenses:
Research and development	721	829	2,517	1,964
General and administrative	2,235	1,932	7,506	5,259
Total operating expenses	2,956	2,761	10,023	7,223
Net operating loss	(2,950)	(2,630)	(10,016)	(6,962)
Other income (expense):
Interest income	9		20
Interest expense	(33)	(6)	(54)	(49)
Interest expense, related parties		(9)	(1)	(43)
Loss on extinguishment of unsecured promissory note		(59)		(171)
Other income (expense)	37		76	51
Total other income (expense)	13	(74)	41	(212)
Net loss	(2,937)	(2,704)	(9,975)	(7,174)
Series A convertible preferred stock dividends		(30)		(90)
Net loss and comprehensive loss	$ (2,937)	$ (2,734)	$ (9,975)	$ (7,264)
Weighted average common shares outstanding - basic and fully diluted (in shares)	10,334,211	7,306,234	10,234,211	5,774,738
Net loss per common share - basic and fully diluted (in dollars per shares)	$ (0.28)	$ (0.37)	$ (0.97)	$ (1.26)

XML

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (9,975)	$ (7,174)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on investments held to maturity	(20)
Amortization of discounts on investments held to maturity	11
Depreciation and amortization	273	143
Stock-based compensation	2,818	2,406
Non-cash charge for settlement of dispute		300
Amortization of debt discount		27
Gain on remeasurement of common stock warrant liability	(65)	(51)
Loss on extinguishment of unsecured promissory note		171
(Increase) decrease in current assets:
Accounts receivable	3	(4)
Prepaid expenses	165	(17)
Inventory	(337)
Deposits	(8)
Increase (decrease) in current liabilities:
Accounts payable	(176)	77
Accrued contract cancellation settlement	(1,000)
Accrued expenses	703	61
Deferred rent	12	(4)
Deferred revenues		(175)
Net cash used in operating activities	(7,596)	(4,240)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities held to maturity	(2,940)
Purchase of property and equipment	(885)	(54)
Net cash used in investing activities	(3,825)	(54)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of series B convertible preferred stock		896
Proceeds from the issuance of common stock		6,199
Proceeds from the issuance of convertible notes payable		326
Repayments of convertible notes payable		(810)
Proceeds from the issuance of notes payable	437
Repayments of notes payable	(48)	(24)
Repayments of notes payable, related parties	(18)	(721)
Repayments of capital lease obligations	(77)	(16)
Payment of deferred offering costs		(801)
Proceeds from exercise of stock options and warrants		449
Net cash provided by financing activities	294	5,498
NET CHANGE IN CASH	(11,127)	1,204
CASH AT BEGINNING OF PERIOD	11,826	141
CASH AT END OF PERIOD	699	1,345
SUPPLEMENTAL INFORMATION:
Interest paid	55	23
Income taxes paid
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchases of equipment under capital lease obligations	316	157
Original issue discount		147
Debt discount on convertible notes		9
Related party convertible note extinguished for settlement payable		404
Contributed capital, debt forgiveness by related parties		2,003
Issuance of series B convertible preferred stock in connection with conversion of convertible notes and		16
Issuance of shares of common stock upon conversion of Series B convertible preferred stock		260
Dividends		$ 90

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Organization and Description of Business

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of Business

Note 1 - Organization and Description of Business

SenesTech, Inc. (the “Company”) was formed in July 2004 and incorporated in the state of Nevada. The Company subsequently reincorporated in the state of Delaware in November 2015. The Company has its corporate headquarters in Flagstaff, Arizona.

The Company has developed proprietary technology for managing animal pest populations through fertility control. The Company believes that its innovative non-lethal approach, targeting reproduction, is more humane, less harmful to the environment, and more effective in providing a sustainable solution to pest infestations than traditional lethal pest management methods. Its first fertility control product candidate, ContraPest, is marketed for use in controlling the rat population. The innovative compound is consumed by rats and leaves them non-reproductive without other observable side effects. The U.S. Environmental Protection Agency (“EPA”) granted registration approval for ContraPest effective August 2, 2016. The Company plans to continue to commercialize and distribute ContraPest by leveraging new and existing third-party relationships with manufacturing, marketing and distribution partners in the U.S. and internationally.

Potential Need for Additional Capital

In the course of its research and development activities, the Company has sustained operating losses since its inception and expects such losses to continue for the near future. The Company’s ultimate success depends upon the outcome of a combination of factors, including: (i) the success of its research and development; (ii) ongoing regulatory approval and commercialization of ContraPest and its other product candidates; (iii) market acceptance and commercial viability and profitability of ContraPest and other products if the Company obtains the necessary regulatory approvals; (iv) the ability to market its products and establish an effective sales force and marketing infrastructure to generate significant revenue; (v) the ability to retain and attract key personnel to develop, operate and grow its business; and (vi) the timely and successful completion of additional financing. The Company has funded its operations to date through the sale of convertible preferred stock and common stock, including an initial public offering of 1,875,000 shares of its common stock on December 8, 2016, debt financing, consisting primarily of convertible notes and, to a lesser extent, payments received in connection with research grants and licensing fees. As of September 30, 2017, the Company had cash and cash equivalents and highly liquid investments of $3,648. However, the Company is likely to require additional capital in order to fund its operating losses and research and development activities by issuing additional debt and equity instruments until such time as the Company is profitable. If such equity or debt financing is not available at adequate levels, the Company will need to reevaluate its plans.

All amounts shown in these financial statements are in thousands, except percentages and per share and share amounts. Per share and share amounts reflect post-reverse split values.

Basis of Presentation

The accompanying unaudited condensed financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial position as of September 30, 2017, the Company’s operating results for the three and nine months ended September 30, 2017 and 2016, and the Company’s cash flows for the nine months ended September 30, 2017 and 2016. The accompanying financial information as of December 31, 2016 is derived from audited financial statements. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2016.

All amounts shown in these financial statements are in thousands, except percentages and per share and share amounts.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 - Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The significant estimates in the Company’s financial statements include the valuation of common stock and related warrants, and other stock-based awards. Actual results could differ from such estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings, financial position or cash flows.

Deferred Offering Costs

Deferred offering costs consisted primarily of legal, accounting and other direct and incremental fees and costs related to the Company’s initial public offering on December 8, 2016. Deferred offering costs of $2,234 were offset against the proceeds received from the initial public offering in December 2016.There were no deferred offering costs at September 30, 2017.

Cash and Cash Equivalents

The Company considers money market fund investments to be cash equivalents. The Company had cash equivalents of $70 and $-0- at September 30, 2017 and December 31, 2016, respectively, included in cash as reported.

Investments in Securities Held to Maturity

The Company uses cash holdings to purchase highly liquid, short term, investment grade securities diversified among security types, industries and issuers. All of the Company’s investment securities are measured at fair value. The Company’s investment securities primarily consist of municipal debt securities, corporate bonds, U.S. agency securities and commercial paper and highly-liquid money market funds.

Accounts Receivable

Accounts receivable consist primarily of trade receivables. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. The allowance for doubtful trade receivables was $3 and $-0- as of September 30, 2017 and December 31, 2016, respectively.

Inventories

Inventories are stated at the lower of cost or market value, using the first-in, first-out convention. Inventories consist of raw materials and finished goods. As of September 30, 2017 and December 31, 2016, the Company had inventories of $394 and $57, respectively.

Prepaid Expenses

Prepaid expenses consist primarily of payments made for director and officer insurance, rent, legal and inventory purchase deposits and seminar fees to be expensed in the current year.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Equipment held under capital leases are stated at the present value of minimum lease payments less accumulated amortization.

Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The cost of leasehold improvements is amortized over the life of the improvement or the term of the lease, whichever is shorter. Equipment held under capital leases is amortized over the shorter of the lease term or estimated useful life of the asset. The Company incurs maintenance costs on its major equipment. Repair and maintenance costs are expensed as incurred.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require long-lived assets or asset groups to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, such as discounted cash flow models and the use of third- party independent appraisals. The Company has not recorded an impairment of long-lived assets since its inception.

Revenue Recognition

The Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies when (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

The Company has generated revenue from a license agreement with a strategic partner, pursuant to which the Company had granted to such partner the exclusive right to manufacture and distribute its product, ContraPest, once the required regulatory approvals were received. This licensing agreement was subsequently terminated on January 23, 2017. The terms of the licensing agreement contained multiple elements or deliverables, as discussed below. Management evaluates whether the arrangement involving the multiple deliverables contains more than one unit of accounting. To determine the units of accounting under a multiple-element arrangement, management evaluates certain separation criteria, including whether the deliverables have stand-alone value, based on the relevant facts and circumstances of the arrangement.

The Company determined that the license granted pursuant to the license agreement did not have stand-alone value and, therefore, the nonrefundable, upfront license fee payments received by the Company are recognized on a straight-line basis over the estimated related performance period (i.e. from the effective date of the agreement through the estimated completion date of the Company’s substantive performance obligations).

In accordance with the terms of the license agreement, the Company was also to receive a future fixed amount of contingent milestone payments (i.e. post-regulatory approval license fees) and contingent sales-based royalties to be received upon the achievement of certain milestone events. The milestone events under the agreement include regulatory approval, patent issuance or alternative intellectual property coverage, and sales-based events. The Company did not earn or receive any of the potential contingent milestone payments, as the milestone events to receive such post-approval license fees and sales-based royalties were not achieved. The Company recognizes revenue that is contingent upon the achievement of a substantive milestone event in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable to the Company for such milestone has all of the following characteristics: (i) there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved; (ii) the event can only be achieved based in whole or part on either the Company’s performance or a specific outcome resulting from the Company’s performance; and (iii) if achieved, the event would result in additional payments being due to the Company. As the potential contingent consideration was to be received only upon the achievement of milestone events that are considered substantive, the Company would only recognize such revenue in the period the milestone is achieved and the milestone payments became due and collectible. In addition, the Company accounts for sales-based royalties as revenue upon achievement of certain sales milestones. 

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue on the balance sheet. Amounts expected to be recognized as revenue in the next twelve months following the balance sheet date are classified as a current liability.

The Company recognizes other revenue earned from pilot studies upon the performance of specific services under the respective service contract.

For the nine months ended September 30, 2017, the Company generated net revenues of $34.

Research and Development

Research and development costs are expensed as incurred. Research and development expenses primarily consist of salaries and benefits for research and development employees, stock-based compensation, consulting fees, lab supplies, and costs incurred related to conducting scientific trials and field studies, and regulatory compliance costs. Also, included in research and development expenses is an allocation of facilities related costs, including depreciation of research and development equipment.

Stock-based Compensation

Employee stock-based awards, consisting of restricted stock units and stock options expected to be settled in shares of the Company’s common stock, are recorded as equity awards. The grant date fair value of these awards is measured using the Black-Scholes option pricing model. The Company expenses the grant date fair value of its stock options on a straight-line basis over their respective vesting periods. Performance-based awards are expensed over the performance period when the related performance goals are probable of being achieved.

For equity instruments issued to non-employees, the stock-based consideration is measured using a fair value method. The measurement of the stock-based compensation is subject to re-measurement as the underlying equity instruments vest.

The stock-based compensation expense recorded for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85	$	135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946	$	933	$	2,818	$	2,406

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities and net operating loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. These deferred tax assets are subject to periodic assessments as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recorded which would increase the provision for income taxes. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.

Comprehensive Loss

Net loss and comprehensive loss were the same for all periods presented; therefore, a separate statement of comprehensive loss is not included in the accompanying financial statements.

Loss Per Share Attributable to Common Stockholders

Basic loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share attributable to common stockholders is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock and if-converted methods. For purposes of the computation of diluted loss per share attributable to common stockholders, the Series A convertible preferred stock (prior to its conversion into common stock), Series B convertible preferred stock (prior to its conversion into common stock), convertible promissory notes (prior to their conversion), common stock purchase warrants, and common stock options are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share attributable to common stockholders because their effect would be anti-dilutive given the net loss reported for the three and nine months ended September 30, 2017 and 2016. Therefore, basic and diluted loss per share attributable to common stockholders was the same for all periods presented.

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders (in common stock equivalent shares):

	September 30,
	2017		2016
Series A convertible preferred stock		—		400,000
Series B convertible preferred stock		—		483,609
Common stock purchase warrants		829,285		750,185
Restricted stock units		344,982		—
Common stock options		1,558,800		1,321,300
Total		2,733,067		2,955,094

In May 2017, the FASB issued Accounting Standard Update (“ASU”) No. 2017-9, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU2017-9”), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of ASU 2017-9 is not expected to have a material impact on the Company’s financial statements or related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU provide guidance on the following eight specific cash flow classification issues: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. Current GAAP does not include specific guidance on these eight cash flow classification issues. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of ASU No. 2016-15 is not expected to have a material impact on the Company’s financial statements or related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). This standard involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods for public business entities. The method of adoption is dependent on the specific aspect of accounting addressed in this new guidance. Early adoption was permitted in any interim or annual period. ASU 2016-09 was adopted by the Company and did not have a material impact on the Company’s financial statements or related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). This standard amends various aspects of existing accounting guidance for leases, including the recognition of a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This standard also introduces new disclosure requirements for leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early adoption is permitted and the new standard must be adopted using a modified retrospective approach, and provides for certain practical expedients. The Company is evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This standard affects the accounting for equity instruments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 is effective in the first quarter of 2019. The Company is evaluating the impact of the adoption of ASU 2016-01 on its financial statements and related disclosures.

In November 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes, which eliminates the guidance in Topic 740, Income Taxes, that required an entity to separate deferred tax assets and liabilities between current and noncurrent amounts in a classified balance sheet. The amendments require that all deferred tax assets and liabilities of the same jurisdiction or a tax filing group, as well as any related valuation allowance, be offset and presented as a single noncurrent amount in a classified balance sheet. The standard became effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and may be applied on either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company has adopted this standard retrospectively for all periods presented. The adoption of this standard did not have a material impact on the Company’s financial statements.

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. Only those benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized. Based on its evaluation, the Company has concluded there are no significant uncertain tax positions requiring recognition in its financial statements.

The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There are no uncertain tax positions as of September 30, 2017 or December 31, 2016 and as such, no interest or penalties were recorded in income tax expense.

In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). This standard requires management to perform an evaluation in each interim and annual reporting period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year of the date the financial statements are issued. If such conditions or events exist, ASU 2014-14 also requires certain disclosures of management’s plans and evaluation, as well as the plans, if any, that are intended to mitigate those conditions or events that will alleviate the substantial doubt. ASU No. 2014- 15 is effective for the annual period ending after December 15, 2016 and for annual and interim periods thereafter. Early adoption was permitted for annual or interim reporting periods for which the financial statements have not been previously issued. ASU 2014-15 was adopted by the Company and did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

In May 2014 the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Adoption of the new standard is effective for reporting periods beginning after December 15, 2017. We plan to use the modified retrospective method of adoption and will adopt the standard as of January 1, 2018, the beginning of our next fiscal year.. We have completed an initial evaluation of the potential impact from adopting the new standard, including a detailed review of performance obligations for all material revenue streams. Based on this initial evaluation, we do not expect adoption will have a material impact on our financial position, results of operations, or cash flows. Related disclosures will be expanded in line with the requirements of the standard. We will continue our evaluation until our adoption of the new standard.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 3 - Fair Value Measurements

The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, accounts receivable and accounts payable approximate their fair values due to their short maturities. Assets and liabilities recorded at fair value on a recurring basis in the balance sheets, as well as assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value, and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows: 

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The Company’s cash equivalents, which include money market funds, are classified as Level 1 because they are valued using quoted market prices. The Company’s marketable securities consist of held to maturity securities and are generally classified as Level 2 because their value is based on valuations using significant inputs derived from or corroborated by observable market data. 

In certain cases where there is limited activity or less transparency around the inputs to valuation, securities are classified as Level 3. Level 3 liabilities consist of common stock warrant liability.

Items Measured at Fair Value on a Recurring Basis

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands): 

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	70	$	—	$	—	$	70
Corporate fixed income debt securities		—		2,949		—		2,949
Total	$	70	$	2,949	$	—	$	3,019
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	4	$	4
Total	$	—	$	—	$	4	$	4

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Financial Assets:
None	$	—	$	—	$	—	$	—
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	69	$	69
Total	$	—	$	—	$	69	$	69

⁽¹⁾ The change in the fair value of the common stock warrant and convertible notes payable for the three and nine months ended September 30, 2017 was recorded as a decrease to other income (expense) and interest expense of $30 and $69, respectively, in the statements of operations and comprehensive loss.

Financial Instruments Not Carried at Fair Value 

The carrying amounts of the Company’s financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their short maturities. The estimated fair value of the convertible notes and other notes, not recorded at fair value, are recorded at cost or amortized cost which was deemed to estimate fair value.

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Investment in Securities Held to Maturity

9 Months Ended

Sep. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Investments In Securities Held To Maturity

Note 4 - Investment in Securities Held to Maturity

As of September 30, 2017, investment in securities held to maturity primarily consisted of corporate fixed income securities and commercial paper. The Company did not have investments prior to the first quarter of 2017. The Company classifies all investments as held to maturity as these investments are short term, highly liquid investments which we intend to hold to maturity. Held to maturity securities are recorded at cost and gains and losses are only recognized as the sale or redemption of the securities is realized. Realized gains and losses are included in non-operating other income (expense) on the condensed statement of operations and are derived using the specific identification method for determining the cost of the securities sold. During the three and nine months ended September 30, 2017, the Company had a minimal amount of net realized gain (loss) on investments recorded. Interest and dividends on investments held to maturity are included in interest and other income, net, in the condensed statements of operations.

The following is a summary of held to maturity securities at September 30, 2017:

		September 30, 2017
	Contractual Maturity (in months)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Mutual funds		$	—	$	—	$	—	$	—
Corporate fixed income securities	Less than 12 months		2,746		3		—		2,749
Commercial paper	Less than 12 months		200		—		—		200
Total investments		$	2,946	$	3	$	—	$	2,949

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Prepaid Expenses

9 Months Ended

Sep. 30, 2017

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaid Expenses

Note 5 - Prepaid Expenses

Prepaid expenses consist of the following:

	September 30, 2017		December 31, 2016
Director compensation	$	—	$	215
Director, officer and other insurance		95		70
Legal retainer		25		25
Rent		17		17
Inventory Purchase Deposits		20		—
Engineering, software licenses and other		15		10
Total prepaid expenses	$	172	$	337

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Property and Equipment

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Property and Equipment

Note 6 - Property and Equipment

Property and equipment, net consist of the following:

	Useful Life	September 30, 2017		December 31, 2016
Research and development equipment	5 years	$	1,335	$	989
Office and computer equipment	3 years		672		235
Furniture and fixtures	7 years		34		17
Autos/Trucks	5 years		306		—
Leasehold improvements	*		283		189
			2,630		1,430
Less accumulated depreciation and amortization			1,071		799
Total		$	1,559	$	631

* Shorter of lease term or estimated useful life

Depreciation and amortization expense was approximately $118 and $49 for the three months ended September 30, 2017 and 2016, respectively, and $272 and $143 for the nine months ended September 30, 2017 and 2016, respectively.

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Accrued Expenses

9 Months Ended

Sep. 30, 2017

Payables and Accruals [Abstract]

Accrued Expenses

Note 7 - Accrued Expenses

Accrued expenses consist of the following:

	September 30, 2017		December 31, 2016
Compensation and related benefits	$	705	$	82
Accrued litigation		269		286
Research project agreement		100		—
Other		—		3
Total accrued expenses	$	1,074	$	371

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Accrued Contract Cancellation Settlement

9 Months Ended

Sep. 30, 2017

Accrued Contract Cancellation Settlement Disclosure [Abstract]

Accrued Contract Cancellation Settlement

Note 8 - Accrued Contract Cancellation Settlement

The accrued contract cancellation settlement of $1,000 was the result of the Company entering into a settlement agreement with Neogen Corporation in which Neogen and the Company agreed to (a) terminate the existing Exclusive License Agreement between the Company and Neogen dated May 15, 2014 (the “License Agreement”), with neither Neogen or the Company having any further obligations thereunder (other than certain confidentiality obligations); (b) dismiss with prejudice the court action filed by Neogen in the District Court for the District of Arizona on January 19, 2017 (the “Court Action”); and (c) mutually release any and all existing or future claims between the parties and their affiliates related to or arising from the License Agreement or the Court Action. Under the terms of the agreement, the Company agreed to make a one-time payment in the amount of $1,000 in settlement of all claims and termination of all existing contracts between the parties. This payment was made in January, 2017. See Note 15 for further details. 

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Borrowings

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Borrowings

Note 9 - Borrowings

A summary of the Company’s borrowings, including capital lease obligations, is as follows: 

	September 30, 2017			December 31, 2016
Short-term debt:
Current portion of long-term debt		174			45
Total short-term debt	$	174		$	45
Long-term debt:
Capital lease obligations	$	290		$	51
Other unsecured promissory notes		521			132
Total		811			183
Less: current portion of long-term debt		(174	)		(45	)
Total long-term debt	$	637		$	138

Capital Lease Obligations

Capital lease obligations are for computer and lab equipment leased through Great American, Thermo Fisher, Navitas and ENGS. These capital leases expire at various dates through June 2022. Also included in the table above are three notes payable to Direct Capital and one to M2 Financing for the financing of fixed assets.

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Notes Payable, Related Parties

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Notes Payable, Related Parties

Note 10 - Notes Payable, Related Parties

A summary of the Company’s notes payable, related parties is as follows:

	September 30, 2017		December 31, 2016
Unsecured promissory note, interest rate of 4.25% and 8% per annum	$	18	$	36
Less: current portion of notes payable, related parties		18		30
Total notes payable, long-term, related parties	$	—	$	6

In April 2013, the Company and a previous employee entered into an agreement to settle all outstanding obligations consisting of a promissory note of $40, dated March 2009, and deferred salaries amounting to $72. The note and salary obligation continue to bear interest at 8% and 4.25%, respectively. The note requires monthly payments of $1 and matures in April 2018. The deferred salary obligation requires monthly payments of $1 and matures in May 2018.

Amounts outstanding on these obligations were $18 and $36 at September 30, 2017 and December 31, 2016, respectively.

Interest expense on the notes payable, related parties, was $-0- and $1 for the three months and nine months ended September 30, 2017 and $56 for the year ended December 31, 2016 respectively.

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Common Stock Warrants and Common Stock Warrant Liability

9 Months Ended

Sep. 30, 2017

Warrants and Rights Note Disclosure [Abstract]

Common Stock Warrants and Common Stock Warrant Liability

Note 11 - Common Stock Warrants and Common Stock Warrant Liability

The table summarizes the common stock warrant activity as of September 30, 2017 as follows:

	Number
	of			Date			Exercise
Common  Stock Warrants	Warrants			Issued	Term		Price
Outstanding at December 31, 2015		610,487
Initial Public Offering Underwriter		187,500		December 2016		5 years	$	9.60
Marketing and Development Services		100,000		February 2016		5 years(1)	$	7.50
Other Advisory Services		40,000		August 2016		3 years(1)	$	7.50
Promissory Notes		9,031		March 2016		3 years(1)	$	7.50
Warrants issued		336,531
Warrants exercised		(117,733	)
Outstanding at December 31, 2016		829,285
Warrants issued		—
Warrants exercised		—
Outstanding at September 30, 2017		829,285

⁽¹⁾ The warrants also terminate, if not exercised by the earlier of (i) December 13, 2018, or the second anniversary of the closing of an initial public offering of common stock; or (ii) a liquidation, dissolution or winding up of the Company.

Promissory Notes; Common Stock Warrants

In conjunction with the issuance by the Company of certain promissory notes, the Company issued detachable common stock warrants (“Warrants”) to purchase an aggregate 270,400 shares of common stock, with an exercise price of $7.50 per share. The Warrants were exercisable until the earlier of (i) 5 years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering; and (iii) the closing of liquidation, dissolution or winding up of the Company.

The Warrants have a net share settlement (cashless exercise) provision. With this provision the holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of the common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. However, the Warrants would be exercised automatically in full pursuant to the net exercise provision, without any further action on behalf of the holder, immediately prior to the time the Warrants would otherwise terminate.

The Warrants are considered freestanding instruments as (i) they were transferred together with the notes issued but exist independently as a separate security; (ii) they may be exercised separately from the notes; and (iii) they are exercisable for a specific period (term) and do not impact the notes if and when exercised. 

The Company estimated the fair value of the Warrants at issuance using a Monte Carlo option pricing model based on the following significant inputs: common stock price of $7.50 to $7.575; comparable company volatility of 58.0% to 76.7%; risk- free rates of 1.31% to 1.76%; and the probability of an equity event occurring. The Company reflected the amounts recorded for the Warrants issued within stockholders’ deficit, as additional paid-in-capital. Although the Warrants are a derivative that can be net share settled, the Warrants are considered indexed to the Company’s common stock and the Company has the ability to settle the warrant contract in common shares and met the conditions within the contract to classify the Warrants as an equity instrument.

Common Stock Warrant Issued for Marketing and Development Services

In February 2016, the Company issued to a stockholder a warrant to purchase 100,000 shares of common stock at an exercise price of $7.50 per share as consideration for providing marketing and development services in Southeast Asia. The warrant was fully vested and exercisable on the date of grant. The common stock warrant has the similar features as the Warrants discussed above, except it is exercisable until the earlier of (i) five years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The Company estimated the fair value of the common stock warrant to be $431 on the date of grant using a Black- Scholes option pricing model based on the following significant inputs: common stock price of $7.57; comparable company volatility of 77.8%; remaining term 3.75 years; dividend yield of 0% and risk-free rate of 2.09%. The Company recorded the fair value of the warrant as stock-based compensation expense within general and administrative expense on the date of grant.

March 2016 Promissory Notes Common Stock Warrants

In March 2016, the Company issued certain unsecured notes with common stock warrants to purchase an aggregate of 9,032 shares of common stock at an exercise price of $7.50 per share. The common stock warrants are exercisable until the earlier of (i) three years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The Company estimated the fair value of the common stock warrants on the date of grant using a Monte Carlo pricing model based on the following significant inputs: common stock price of $7.575; comparable company volatility 79.6%; and risk-free rate of 1.49%.

August 2016 Other Advisory Services

On August 16, 2016, the Company issued to each of two advisors warrants to purchase 20,000 shares of common stock at an exercise price of $7.50 per share as consideration for providing advisory services to the Company. The warrants were fully vested and exercisable on the date of grant until the earlier of (i) three years from the date of grant; (ii) December 13, 2018, or the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The Company recorded the fair value of the warrants as stock-based compensation expense within general and administrative expense on the date of grant.

Common Stock Warrant Issued to Initial Public Offering Underwriter

In December 2016, the Company issued to the underwriter of its IPO a warrant to purchase 187,500 shares of common stock at an exercise price of $9.60 per share as consideration for providing services in connection with the Company’s initial public offering. The warrant was fully vested and exercisable on the date of grant. The common stock warrant is exercisable until five years from the date of grant. The Company estimated the fair value of the common stock warrant to be $939 on the date of grant using a Black- Scholes option pricing model based on the following significant inputs: common stock price of $8.00; comparable company volatility of 82.1%; remaining term 5 years; dividend yield of 0% and risk-free rate of 1.92%.

University of Arizona Common Stock Warrant

In connection with the June 2015 amended and restated exclusive license agreement with the University of Arizona (“University”), the Company issued to the University a common stock warrant to purchase 15,000 shares of common stock at an exercise price of $7.50 per share. The warrant was fully vested and exercisable on the date of grant, and expires, if not exercised, five years from the date of grant. In the event of a “terminating change” of the Company, as defined in the warrant agreement, the warrant holder would be paid in cash the aggregate fair market value of the underlying shares immediately prior to the consummation of the terminating change event. Due to the cash settlement provision, the derivative warrant liability was recorded at fair value and is revalued at the end of each reporting period. The changes in fair value are reported in other income (expense) in the statements of operations and comprehensive loss. The estimated fair value of the derivative warrant liability was $53 at the date of grant.

The estimated fair value of the derivative warrant liability was $4 at September 30, 2017. As this derivative warrant liability is revalued at the end of each reporting period, the fair values as determined at the date of grant and subsequent periods were based on the following significant inputs using a Monte Carlo option pricing model: common stock price of $7.91; comparable company volatility of 77.7% of the underlying common stock; risk-free rates of 1.93%; and dividend yield of 0%; including the probability assessment of a terminating change event occurring. The change in fair value of the derivative warrant liability was $65 for the nine months ended September 30, 2017 and was recorded in other income (expense) in the accompanying statements of operations and comprehensive loss.

July 2015 Consulting Agreement Common Stock Warrant

In July 2015, the Company issued a common stock warrant to purchase 121,227 shares of common stock, with an exercise price of $7.50 per share, as consideration for services under a consulting arrangement. The warrant was fully vested and exercisable on the date of grant. This common stock warrant has the similar features as the Warrants described above, except it is exercisable until the earlier of (i) ten years from the date of grant; (ii) December 13, 2018, the second anniversary of the closing of our initial public offering of common stock; and (iii) the closing of a liquidation, dissolution or winding up of the Company. The estimated the fair value of the common stock warrant on the date of grant was $537 as determined by using a Black-Scholes option pricing model based on the following significant inputs: common stock price of $7.575; comparable company volatility of 60.9%; expected term of 6.25 years; risk-free rate of 2.09%; and dividend yield of 0%. The Company recorded the fair value of the warrant as stock-based compensation expense within general and administrative expense in the accompanying statements of operations and comprehensive loss in 2015.

Northern Arizona University Common Stock Warrant

In November 2015, the Company issued a common stock warrant to purchase 210,526 shares of common stock at an exercise price of $15.00 per share to Northern Arizona University (“NAU”) as part of the consideration given with the Series A convertible preferred stock in exchange for the full cancellation of a promissory note that had been previously issued to NAU.

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Stockholders' Deficit

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Stockholders' Deficit

Note 12 - Stockholders’ Deficit

Common Stock

The Company had 10,363,189 and 10,157,292 shares of common stock issued and outstanding as of September 30, 2017 and December 31, 2016, respectively. 

During the nine months ended September 30, 2017, the Company issued an aggregate of 205,897 shares of common stock as follows: 48,240 shares to consultants for services, valued at $137, to settle previous claims; 14,014 shares for the cashless exercise of vested stock options; and 143,643 shares for net settlement of restricted stock units that vested during the period.

Rights Offering

In April 2016, the Company offered to the existing holders of shares of (i) its common stock and (ii) Series B convertible preferred stock, in each case, as of April 8, 2016 (the “Record Date”), at no charge, non-transferable subscription rights, on a pro rata basis, to purchase shares of common stock at a subscription price of $2.50 per share (the “Rights Offering”). In addition, the holders also had the right to purchase additional shares of common stock, if any shares remain unsubscribed. The Company offered subscription rights on 5,794,162 shares of its common stock. The Rights Offering was conducted as a private placement on a “best efforts” basis, with no minimum subscription required.

The subscription rights were initially exercisable beginning on April 8, 2016 and expiring on April 29, 2016 (the “Subscription Period”). However, the Company reserved the right to extend the Subscription Period for up to two additional weeks. The Company extended the Subscription Period for one additional week. The Rights Offering closed on May 6, 2016.

The Company issued 2,478,486 shares of common stock and received aggregate consideration of $6,199 in the Rights Offering. The aggregate consideration received consisted of: (i) $5,284 in cash; (ii) $821 in consideration paid through the cancellation of $821 in outstanding principal amount (and related unpaid interest) under certain outstanding unsecured notes; and (iii) the extinguishment of $94 in amounts owed by the Company for services and related miscellaneous expenses. Such cash proceeds will be used for working capital and general corporate purposes. As the Rights Offering was offered to certain existing holders of the Company’s stock, the shares sold are treated as outstanding from the date of their issuance in the computation of loss per share, basic and diluted in future periods.

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Stock-based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

Note 13 - Stock-based Compensation 

Effective December 2008, the Company established the 2008 – 2009 Non-Qualified Stock Option Plan (the “2008 – 2009 Plan”) under which no stock options remain outstanding at September 30, 2017. The stock-based awards were issued with a price not less than $15.00 per share or 100% of the fair value of a share of common stock on the date of grant. After July 2015, no further awards were granted under the 2008 – 2009 Plan.

Effective July 2015, the Company’s stockholders approved the 2015 Equity Incentive Plan (the “2015 Plan”), which permits the issuance of up to 2,000,000 shares reserved for the grant of stock options, stock appreciation rights, restricted stock units and other stock-based awards for employees, directors or consultants of the Company. The Board of Directors and the Company’s stockholders approved an additional 1,000,000 shares of common stock for issuance under the 2015 Plan. The stock-based awards are generally issued with a price equal to no less than fair value at the date of grant. Options granted under the 2015 Plan generally vest immediately, or ratably over a two- to 36-month period coinciding with their respective service periods; however, participants may exercise their options prior to vesting as provided by the 2015 Plan. Unvested shares issued for option exercised early may be subject to a repurchase by the Company if the participant terminates at the original exercise price. Options under the 2015 Plan generally have a contractual term of five or ten years. Certain stock option awards provide for accelerated vesting upon a change in control. As of September 30, 2017, the Company had 779,095 shares of common stock available for issuance under the 2015 Plan. 

The Company measures the fair value of stock options with service-based and performance-based vesting criteria to employees, directors and consultants on the date of grant using the Black-Scholes option pricing model. The fair value of equity instruments issued to non-employees is re-measured as the award vests. The Black-Scholes valuation model requires the Company to make certain estimates and assumptions, including assumptions related to the expected price volatility of the Company’s stock, the period under which the options with be outstanding, the rate of return on risk-free investments, and the expected dividend yield for the Company’s stock.

The weighted-average assumptions used in the Black-Scholes option-pricing model used to calculate the fair value of options granted during the nine months ended September 30, 2017, were as follows:

	Employee			Non-Employee
Expected volatility		73.8% -83.7	%		N/A
Expected dividend yield		—			N/A
Expected term (in years)		3.0 to 3.5			N/A
Risk-free interest rate		1.45%-1.94	%		N/A

Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption was determined based on historical volatilities from traded options of biotech companies of comparable in size and stability, whose share prices are publicly available. The expected term of options granted to employees is calculated based on the mid-point between the vesting date and the end of the contractual term according to the simplified method as described in SEC Staff Accounting Bulletin 110 because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term due to the limited period of time its awards have been outstanding. For non-employee options, the expected term of options granted is the contractual term of the options. The risk-free rate by reference to the implied yields of U.S. Treasury securities with a remaining term equal to the expected term assumed at the time of grant. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not intend to pay dividends. 

The table summarizes the stock option activity, for both plans, for the periods indicated as follows:

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value(1)
Outstanding at December 31, 2016		1,477,300			1.61		5.8	$	9,662
Granted		161,500		$	8.04		5.0	$	—
Exercised		(15,000	)	$	0.50		—		—
Forfeited		—		$	—		—		—
Expired		(65,000	)	$	10.22		—		—
Outstanding at September 30, 2017		1,558,800			1.73		5.1	$	183
Exercisable at September 30, 2017		1,263,599		$	1.08		4.8	$	968

⁽¹⁾ The aggregate intrinsic value on the table was calculated based on the difference between the estimated fair value of the Company’s stock and the exercise price of the underlying option. The estimated stock values used in the calculation was $1.85 and $8.15 per share at September 30, 2017 and December 31, 2016, respectively.

The stock-based compensation expense was recorded as follows:

	Three Months Ended September 30				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85		135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946		933	$	2,818	$	2,406

The allocation between research and development and general and administrative expense was based on the department and services performed by the employee or non-employee.

At September 30, 2017, the total compensation cost related to non-vested options not yet recognized was $1,942, which will be recognized over a weighted average period of four years, assuming the employees complete their service period required for vesting.

Effective December 2008, the Company established the 2008-2009 Plan under which no stock options remain outstanding at September 30, 2017. The stock-based awards were issued with a price not less than $15.00 per share or 100% of the fair value of a share of common stock on the date of grant. After July 2015, no further awards were granted under the 2008 – 2009 Plan.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the nine months ended September 30, 2017: 

	Number of  Units			Weighted Average Grant-Date Fair Value Per Units
Outstanding as of December 31, 2016		455,430		$	0.76
Granted		117,885	(1)	$	6.95
Vested		(228,333	)	$	2.00
Forfeited		—		$	—
Outstanding as of September 30, 2017		344,982	(2)	$	2.05

(1) 40,000 restricted stock units were granted on March 27, 2017 with a weighted average grant date fair value of $8.35, 17,885 restricted stock units were granted on May 19, 2017 with a weighted average grant date fair value of $6.99 and 60,000 restricted stock units were granted on June 19, 2017 with a weighted average grant date fair value of $6.00.

⁽²⁾ At September 30, 2017, the total compensation cost related to non-vested restricted stock units not yet recognized was $1,075, which will be recognized over a weighted average period of 1.3 years, assuming the recipients complete their service period required for vesting.

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License and Other Agreements

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

License and Other Agreements

Note 14 - License and Other Agreements

Neogen Corporation

In May 2014, the Company entered into an exclusive license agreement with Neogen Corporation (“Neogen”). The Company granted an exclusive license to Neogen to (i) use the Company’s intellectual property (“IP”), consisting primarily of the ContraPest technology and (ii) manufacture, distribute and sell commercial rodent control products in the United States and certain U.S. territories, Canada and Mexico.

As previously disclosed in our Current Report on Form 8-K dated and filed January 23, 2017, on January 23, 2017 we entered into a termination agreement (the “Settlement Agreement”) with Neogen Corporation (“Neogen”). Pursuant to the Settlement Agreement, the parties agreed to (a) terminate the existing Exclusive License Agreement between us and Neogen dated May 15, 2014 (the “License Agreement”), with neither Neogen or us having any further obligations thereunder (other than certain confidentiality obligations); (b) dismiss with prejudice the court action filed by Neogen in the District Court for the District of Arizona on January 19, 2017 (the “Court Action”), as further described below; and (c) mutually release any and all existing or future claims between the parties and their affiliates related to or arising from the License Agreement or the Court Action. As part of the Settlement Agreement, we agreed to pay to Neogen upon the execution of the Settlement Agreement an aggregate of $1,000 in settlement of all claims.

For the nine months ended September 30, 2017 and the year ended December 31, 2016, the Company recognized revenue of $0 and $186, respectively, under the License Agreement.

Bioceres/INMET S.A. Agreement

In January 2016, the Company entered into a services agreement with Bioceres, Inc. (“Bioceres”), a wholly-owned subsidiary of Bioceres S.A., a leading agricultural biotechnology company in Argentina, and its Argentinean subsidiary, Ingenieria Metabolica S.A. (“INMET”) to develop a production method for synthetic triptolide, the main ingredient in ContraPest. The Company also entered into an agency agreement with INMET whereby the Company appointed INMET as its exclusive agent to seek regulatory approval for and conduct pre-sales and marketing of its product, ContraPest, in Argentina. The Company and INMET have also agreed to manufacture and distribute its product in Argentina and other countries, as mutually agreed, through a newly formed entity.

The term of the service agreement is for two years. The service agreement can be terminated at any time upon written notice by either party for any reason. The term of the agency agreement with INMET is the earlier of: (i) when the Company and INMET incorporate the joint venture entity in Argentina or (ii) January 2018.

At September 30, 2017, the Company had accrued expenses of $100 due to Bioceres as detailed in the table or accrued expenses in Note 7

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 15 - Commitments and Contingencies

Legal Proceedings

The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.

Neogen Settlement Agreement

See Note 14 above with regards to the Settlement Agreement with Neogen.

Although notice of the legal action by Neogen and the Settlement Agreement with Neogen, occurred after December 31, 2016, as per the provisions of Accounting Standards Codification Topic 450 Loss Contingencies, included in the financial statements of the Company at December 31, 2016 is a $1,000 charge to general and administrative expenses and a corresponding accrual of contract cancellation settlement agreement related to this agreement.

Resolution of Dispute

In recognition of his continued support and cooperation, and to resolve a dispute regarding whether his options appropriately expired in the first quarter of 2016, in July 2016, the Company’s Board of Directors agreed to issue to its former chief executive officer 120,000 shares of the Company’s common stock. The expense of $300 associated with this full and final settlement was recorded at December 31, 2016.

Lease Commitments

Rent expense was $246 and $234 for the nine months ended and year ended September 30, 2017 and December 31, 2016, respectively. The future minimum lease payments under non-cancellable operating lease and future minimum capital lease payments as of September 30, 2017 are follows:

	Capital Leases		Operating  Lease
Years Ending December 31,
2017	$	25	$	63
2018		96		258
2019		88		221
2020		67		—
2021		84		—
Total minimum lease payments	$	360	$	542

	Capital Leases
Less: amounts representing interest (ranging from 7.25% to 11.56%)	$	75
Present value of minimum lease payments		285
Less: current installments under capital lease obligations		70
Total long-term portion	$	215

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

Note 16 - Subsequent Events

In October of 2017, the Company issued 26,308 shares of its common stock to two executives of the Company in net settlement of restricted stock units that vested on September 30, 2017 but were not issued until October 2, 2017.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The significant estimates in the Company’s financial statements include the valuation of common stock and related warrants, and other stock-based awards. Actual results could differ from such estimates.

Reclassifications

Reclassifications

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings, financial position or cash flows.

Deferred Offering Costs

Deferred Offering Costs

Deferred offering costs consisted primarily of legal, accounting and other direct and incremental fees and costs related to the Company’s initial public offering on December 8, 2016. Deferred offering costs of $2,234 were offset against the proceeds received from the initial public offering in December 2016.There were no deferred offering costs at September 30, 2017.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers money market fund investments to be cash equivalents. The Company had cash equivalents of $70 and $-0- at September 30, 2017 and December 31, 2016, respectively, included in cash as reported.

Investments In Securities Held To Maturity

Investments in Securities Held to Maturity

The Company uses cash holdings to purchase highly liquid, short term, investment grade securities diversified among security types, industries and issuers. All of the Company’s investment securities are measured at fair value. The Company’s investment securities primarily consist of municipal debt securities, corporate bonds, U.S. agency securities and commercial paper and highly-liquid money market funds.

Accounts Receivable

Accounts Receivable

Accounts receivable consist primarily of trade receivables. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. The allowance for doubtful trade receivables was $3 and $-0- as of September 30, 2017 and December 31, 2016, respectively.

Inventories

Inventories

Inventories are stated at the lower of cost or market value, using the first-in, first-out convention. Inventories consist of raw materials and finished goods. As of September 30, 2017 and December 31, 2016, the Company had inventories of $394 and $57, respectively.

Prepaid Expenses

Prepaid Expenses

Prepaid expenses consist primarily of payments made for director and officer insurance, rent, legal and inventory purchase deposits and seminar fees to be expensed in the current year.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Equipment held under capital leases are stated at the present value of minimum lease payments less accumulated amortization.

Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The cost of leasehold improvements is amortized over the life of the improvement or the term of the lease, whichever is shorter. Equipment held under capital leases is amortized over the shorter of the lease term or estimated useful life of the asset. The Company incurs maintenance costs on its major equipment. Repair and maintenance costs are expensed as incurred.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require long-lived assets or asset groups to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, such as discounted cash flow models and the use of third- party independent appraisals. The Company has not recorded an impairment of long-lived assets since its inception.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies when (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

The Company has generated revenue from a license agreement with a strategic partner, pursuant to which the Company had granted to such partner the exclusive right to manufacture and distribute its product, ContraPest, once the required regulatory approvals were received. This licensing agreement was subsequently terminated on January 23, 2017. The terms of the licensing agreement contained multiple elements or deliverables, as discussed below. Management evaluates whether the arrangement involving the multiple deliverables contains more than one unit of accounting. To determine the units of accounting under a multiple-element arrangement, management evaluates certain separation criteria, including whether the deliverables have stand-alone value, based on the relevant facts and circumstances of the arrangement.

The Company determined that the license granted pursuant to the license agreement did not have stand-alone value and, therefore, the nonrefundable, upfront license fee payments received by the Company are recognized on a straight-line basis over the estimated related performance period (i.e. from the effective date of the agreement through the estimated completion date of the Company’s substantive performance obligations).

In accordance with the terms of the license agreement, the Company was also to receive a future fixed amount of contingent milestone payments (i.e. post-regulatory approval license fees) and contingent sales-based royalties to be received upon the achievement of certain milestone events. The milestone events under the agreement include regulatory approval, patent issuance or alternative intellectual property coverage, and sales-based events. The Company did not earn or receive any of the potential contingent milestone payments, as the milestone events to receive such post-approval license fees and sales-based royalties were not achieved. The Company recognizes revenue that is contingent upon the achievement of a substantive milestone event in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable to the Company for such milestone has all of the following characteristics: (i) there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved; (ii) the event can only be achieved based in whole or part on either the Company’s performance or a specific outcome resulting from the Company’s performance; and (iii) if achieved, the event would result in additional payments being due to the Company. As the potential contingent consideration was to be received only upon the achievement of milestone events that are considered substantive, the Company would only recognize such revenue in the period the milestone is achieved and the milestone payments became due and collectible. In addition, the Company accounts for sales-based royalties as revenue upon achievement of certain sales milestones. 

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue on the balance sheet. Amounts expected to be recognized as revenue in the next twelve months following the balance sheet date are classified as a current liability.

The Company recognizes other revenue earned from pilot studies upon the performance of specific services under the respective service contract.

For the nine months ended September 30, 2017, the Company generated net revenues of $34.

Research and Development

Research and Development

Research and development costs are expensed as incurred. Research and development expenses primarily consist of salaries and benefits for research and development employees, stock-based compensation, consulting fees, lab supplies, and costs incurred related to conducting scientific trials and field studies, and regulatory compliance costs. Also, included in research and development expenses is an allocation of facilities related costs, including depreciation of research and development equipment.

Stock-based Compensation

Stock-based Compensation

Employee stock-based awards, consisting of restricted stock units and stock options expected to be settled in shares of the Company’s common stock, are recorded as equity awards. The grant date fair value of these awards is measured using the Black-Scholes option pricing model. The Company expenses the grant date fair value of its stock options on a straight-line basis over their respective vesting periods. Performance-based awards are expensed over the performance period when the related performance goals are probable of being achieved.

For equity instruments issued to non-employees, the stock-based consideration is measured using a fair value method. The measurement of the stock-based compensation is subject to re-measurement as the underlying equity instruments vest.

The stock-based compensation expense recorded for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85	$	135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946	$	933	$	2,818	$	2,406

Income Taxes

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities and net operating loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. These deferred tax assets are subject to periodic assessments as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recorded which would increase the provision for income taxes. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.

Comprehensive Loss

Comprehensive Loss

Net loss and comprehensive loss were the same for all periods presented; therefore, a separate statement of comprehensive loss is not included in the accompanying financial statements.

Loss Per Share Attributable to Common Stockholders

Loss Per Share Attributable to Common Stockholders

Basic loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share attributable to common stockholders is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock and if-converted methods. For purposes of the computation of diluted loss per share attributable to common stockholders, the Series A convertible preferred stock (prior to its conversion into common stock), Series B convertible preferred stock (prior to its conversion into common stock), convertible promissory notes (prior to their conversion), common stock purchase warrants, and common stock options are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share attributable to common stockholders because their effect would be anti-dilutive given the net loss reported for the three and nine months ended September 30, 2017 and 2016. Therefore, basic and diluted loss per share attributable to common stockholders was the same for all periods presented.

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders (in common stock equivalent shares):

	September 30,
	2017		2016
Series A convertible preferred stock		—		400,000
Series B convertible preferred stock		—		483,609
Common stock purchase warrants		829,285		750,185
Restricted stock units		344,982		—
Common stock options		1,558,800		1,321,300
Total		2,733,067		2,955,094

In May 2017, the FASB issued Accounting Standard Update (“ASU”) No. 2017-9, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU2017-9”), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of ASU 2017-9 is not expected to have a material impact on the Company’s financial statements or related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU provide guidance on the following eight specific cash flow classification issues: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. Current GAAP does not include specific guidance on these eight cash flow classification issues. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of ASU No. 2016-15 is not expected to have a material impact on the Company’s financial statements or related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). This standard involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods for public business entities. The method of adoption is dependent on the specific aspect of accounting addressed in this new guidance. Early adoption was permitted in any interim or annual period. ASU 2016-09 was adopted by the Company and did not have a material impact on the Company’s financial statements or related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). This standard amends various aspects of existing accounting guidance for leases, including the recognition of a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This standard also introduces new disclosure requirements for leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early adoption is permitted and the new standard must be adopted using a modified retrospective approach, and provides for certain practical expedients. The Company is evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This standard affects the accounting for equity instruments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 is effective in the first quarter of 2019. The Company is evaluating the impact of the adoption of ASU 2016-01 on its financial statements and related disclosures.

In November 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes, which eliminates the guidance in Topic 740, Income Taxes, that required an entity to separate deferred tax assets and liabilities between current and noncurrent amounts in a classified balance sheet. The amendments require that all deferred tax assets and liabilities of the same jurisdiction or a tax filing group, as well as any related valuation allowance, be offset and presented as a single noncurrent amount in a classified balance sheet. The standard became effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and may be applied on either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company has adopted this standard retrospectively for all periods presented. The adoption of this standard did not have a material impact on the Company’s financial statements.

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. Only those benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized. Based on its evaluation, the Company has concluded there are no significant uncertain tax positions requiring recognition in its financial statements.

The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There are no uncertain tax positions as of September 30, 2017 or December 31, 2016 and as such, no interest or penalties were recorded in income tax expense.

In August 2014, the FASB issued ASU No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). This standard requires management to perform an evaluation in each interim and annual reporting period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year of the date the financial statements are issued. If such conditions or events exist, ASU 2014-14 also requires certain disclosures of management’s plans and evaluation, as well as the plans, if any, that are intended to mitigate those conditions or events that will alleviate the substantial doubt. ASU No. 2014- 15 is effective for the annual period ending after December 15, 2016 and for annual and interim periods thereafter. Early adoption was permitted for annual or interim reporting periods for which the financial statements have not been previously issued. ASU 2014-15 was adopted by the Company and did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

In May 2014 the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Adoption of the new standard is effective for reporting periods beginning after December 15, 2017. We plan to use the modified retrospective method of adoption and will adopt the standard as of January 1, 2018, the beginning of our next fiscal year.. We have completed an initial evaluation of the potential impact from adopting the new standard, including a detailed review of performance obligations for all material revenue streams. Based on this initial evaluation, we do not expect adoption will have a material impact on our financial position, results of operations, or cash flows. Related disclosures will be expanded in line with the requirements of the standard. We will continue our evaluation until our adoption of the new standard.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Schedule of employee stock-based compensation expense

The stock-based compensation expense recorded for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85	$	135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946	$	933	$	2,818	$	2,406

Schedule of outstanding potentially dilutive securities calculation of diluted loss per share attributable to common stockholders

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders (in common stock equivalent shares):

	September 30,
	2017		2016
Series A convertible preferred stock		—		400,000
Series B convertible preferred stock		—		483,609
Common stock purchase warrants		829,285		750,185
Restricted stock units		344,982		—
Common stock options		1,558,800		1,321,300
Total		2,733,067		2,955,094

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of fair value on a recurring basis by level of fair value hierarchy

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands): 

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	70	$	—	$	—	$	70
Corporate fixed income debt securities		—		2,949		—		2,949
Total	$	70	$	2,949	$	—	$	3,019
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	4	$	4
Total	$	—	$	—	$	4	$	4

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Financial Assets:
None	$	—	$	—	$	—	$	—
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	69	$	69
Total	$	—	$	—	$	69	$	69

⁽¹⁾ The change in the fair value of the common stock warrant and convertible notes payable for the three and nine months ended September 30, 2017 was recorded as a decrease to other income (expense) and interest expense of $30 and $69, respectively, in the statements of operations and comprehensive loss.

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Investment in Securities Held to Maturity (Tables)

9 Months Ended

Sep. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Summary of held to maturity securities

The following is a summary of held to maturity securities at September 30, 2017:

		September 30, 2017
	Contractual Maturity (in months)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Mutual funds		$	—	$	—	$	—	$	—
Corporate fixed income securities	Less than 12 months		2,746		3		—		2,749
Commercial paper	Less than 12 months		200		—		—		200
Total investments		$	2,946	$	3	$	—	$	2,949

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Prepaid Expenses (Tables)

9 Months Ended

Sep. 30, 2017

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of prepaid expenses

Prepaid expenses consist of the following:

	September 30, 2017		December 31, 2016
Director compensation	$	—	$	215
Director, officer and other insurance		95		70
Legal retainer		25		25
Rent		17		17
Inventory Purchase Deposits		20		—
Engineering, software licenses and other		15		10
Total prepaid expenses	$	172	$	337

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment, net consist of the following:

	Useful Life	September 30, 2017		December 31, 2016
Research and development equipment	5 years	$	1,335	$	989
Office and computer equipment	3 years		672		235
Furniture and fixtures	7 years		34		17
Autos/Trucks	5 years		306		—
Leasehold improvements	*		283		189
			2,630		1,430
Less accumulated depreciation and amortization			1,071		799
Total		$	1,559	$	631

* Shorter of lease term or estimated useful life

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Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2017

Payables and Accruals [Abstract]

Schedule of accrued expenses

Accrued expenses consist of the following:

	September 30, 2017		December 31, 2016
Compensation and related benefits	$	705	$	82
Accrued litigation		269		286
Research project agreement		100		—
Other		—		3
Total accrued expenses	$	1,074	$	371

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of capital lease obligations

A summary of the Company’s borrowings, including capital lease obligations, is as follows: 

	September 30, 2017			December 31, 2016
Short-term debt:
Current portion of long-term debt		174			45
Total short-term debt	$	174		$	45
Long-term debt:
Capital lease obligations	$	290		$	51
Other unsecured promissory notes		521			132
Total		811			183
Less: current portion of long-term debt		(174	)		(45	)
Total long-term debt	$	637		$	138

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Notes Payable, Related Parties (Tables)

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Schedule of notes payable, related parties

A summary of the Company’s notes payable, related parties is as follows:

	September 30, 2017		December 31, 2016
Unsecured promissory note, interest rate of 4.25% and 8% per annum	$	18	$	36
Less: current portion of notes payable, related parties		18		30
Total notes payable, long-term, related parties	$	—	$	6

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Common Stock Warrants and Common Stock Warrant Liability (Tables)

9 Months Ended

Sep. 30, 2017

Warrants and Rights Note Disclosure [Abstract]

Schedule of common stock warrant activity

The table summarizes the common stock warrant activity as of September 30, 2017 as follows:

	Number
	of			Date			Exercise
Common  Stock Warrants	Warrants			Issued	Term		Price
Outstanding at December 31, 2015		610,487
Initial Public Offering Underwriter		187,500		December 2016		5 years	$	9.60
Marketing and Development Services		100,000		February 2016		5 years(1)	$	7.50
Other Advisory Services		40,000		August 2016		3 years(1)	$	7.50
Promissory Notes		9,031		March 2016		3 years(1)	$	7.50
Warrants issued		336,531
Warrants exercised		(117,733	)
Outstanding at December 31, 2016		829,285
Warrants issued		—
Warrants exercised		—
Outstanding at September 30, 2017		829,285

(1) The warrants also terminate, if not exercised by the earlier of (i) December 13, 2018, or the second anniversary of the closing of an initial public offering of common stock; or (ii) a liquidation, dissolution or winding up of the Company.

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Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of fair value of options granted

The weighted-average assumptions used in the Black-Scholes option-pricing model used to calculate the fair value of options granted during the nine months ended September 30, 2017, were as follows:

	Employee			Non-Employee
Expected volatility		73.8% -83.7	%		N/A
Expected dividend yield		—			N/A
Expected term (in years)		3.0 to 3.5			N/A
Risk-free interest rate		1.45%-1.94	%		N/A

Schedule of stock option activity

The table summarizes the stock option activity, for both plans, for the periods indicated as follows:

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value(1)
Outstanding at December 31, 2016		1,477,300			1.61		5.8	$	9,662
Granted		161,500		$	8.04		5.0	$	—
Exercised		(15,000	)	$	0.50		—		—
Forfeited		—		$	—		—		—
Expired		(65,000	)	$	10.22		—		—
Outstanding at September 30, 2017		1,558,800			1.73		5.1	$	183
Exercisable at September 30, 2017		1,263,599		$	1.08		4.8	$	968

⁽¹⁾ The aggregate intrinsic value on the table was calculated based on the difference between the estimated fair value of the Company’s stock and the exercise price of the underlying option. The estimated stock values used in the calculation was $1.85 and $8.15 per share at September 30, 2017 and December 31, 2016, respectively.

Schedule of stock-based compensation expense

The stock-based compensation expense was recorded as follows:

	Three Months Ended September 30				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development	$	85		135	$	269	$	309
General and administrative		861		798		2,549		2,097
Total stock-based compensation expense	$	946		933	$	2,818	$	2,406

Schedule of summarizes restricted stock unit activity [Table Text Block]

The following table summarizes restricted stock unit activity for the nine months ended September 30, 2017: 

	Number of  Units			Weighted Average Grant-Date Fair Value Per Units
Outstanding as of December 31, 2016		455,430		$	0.76
Granted		117,885	(1)	$	6.95
Vested		(228,333	)	$	2.00
Forfeited		—		$	—
Outstanding as of September 30, 2017		344,982	(2)	$	2.05

(1) 40,000 restricted stock units were granted on March 27, 2017 with a weighted average grant date fair value of $8.35, 17,885 restricted stock units were granted on May 19, 2017 with a weighted average grant date fair value of $6.99 and 60,000 restricted stock units were granted on June 19, 2017 with a weighted average grant date fair value of $6.00.

⁽²⁾ At September 30, 2017, the total compensation cost related to non-vested restricted stock units not yet recognized was $1,075, which will be recognized over a weighted average period of 1.3 years, assuming the recipients complete their service period required for vesting.

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of the future minimum lease payments under non-cancellable operating lease and future minimum capital lease payments

The future minimum lease payments under non-cancellable operating lease and future minimum capital lease payments as of September 30, 2017 are follows:

	Capital Leases		Operating  Lease
Years Ending December 31,
2017	$	25	$	63
2018		96		258
2019		88		221
2020		67		—
2021		84		—
Total minimum lease payments	$	360	$	542

	Capital Leases
Less: amounts representing interest (ranging from 7.25% to 11.56%)	$	75
Present value of minimum lease payments		285
Less: current installments under capital lease obligations		70
Total long-term portion	$	215

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Organization and Description of Business (Details Narrative) - USD ($) $ in Thousands		9 Months Ended
	Dec. 08, 2016	Sep. 30, 2017
Stock issued during period		205,897
Cash, cash equivalents and short-term investments		$ 3,648
Common Stock [Member]
Stock issued during period	1,875,000

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Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Total stock-based compensation expense	$ 946	$ 933	$ 2,818	$ 2,406
Research and Development [Member]
Total stock-based compensation expense	85
General and Administrative Expense [Member]
Total stock-based compensation expense	$ 861		2,549	2,097
Research and Development Expense [Member]
Total stock-based compensation expense		135	$ 269	$ 309
General and Administrative [Member]
Total stock-based compensation expense		$ 798

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Summary of Significant Accounting Policies (Details 1) - shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Total	2,733,067	2,955,094
Series A Convertible Preferred Stock [Member]
Total		400,000
Series B Convertible Preferred Stock [Member]
Total		483,609
Common Stock Purchase Warrants [Member]
Total	829,285	750,185
Restricted Stock Units [Member]
Total	344,982
Employee Stock Options [Member]
Total	1,558,800	1,321,300

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Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Accounting Policies [Abstract]
Deferred offering costs		$ 2,234
Cash equivalents, at carrying value	$ 70	0
Allowance for doubtful trade receivables	3	0
Inventory, net	394	$ 57
Net revenues	$ 34

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Fair Value Measurements (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Financial Assets:
Held-to-maturity Securities, Fair Value		$ 2,949
Fair Value Measurements, Recurring [Member]
Financial Assets:
Total		3,019
Financial Liabilities:
Common stock warrant liability	[1]	4	$ 69
Total		4	69
Fair Value Measurements, Recurring [Member] | Corporate Fixed Income Debt Securities [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value		2,949
Fair Value Inputs, Level 1 [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Total		70
Financial Liabilities:
Common stock warrant liability	[1]
Total
Fair Value Inputs, Level 1 [Member] | Fair Value Measurements, Recurring [Member] | Corporate Fixed Income Debt Securities [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value
Fair Value Inputs, Level 2 [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Total		2,949
Financial Liabilities:
Common stock warrant liability	[1]
Total
Fair Value Inputs, Level 2 [Member] | Fair Value Measurements, Recurring [Member] | Corporate Fixed Income Debt Securities [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value		2,949
Fair Value Inputs, Level 3 [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Total
Financial Liabilities:
Common stock warrant liability	[1]	4	69
Total		4	$ 69
Fair Value Inputs, Level 3 [Member] | Fair Value Measurements, Recurring [Member] | Corporate Fixed Income Debt Securities [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value
Money Market Funds [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value		70
Money Market Funds [Member] | Fair Value Inputs, Level 1 [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value		70
Money Market Funds [Member] | Fair Value Inputs, Level 2 [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value
Money Market Funds [Member] | Fair Value Inputs, Level 3 [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value

[1] The change in the fair value of the common stock warrant and convertible notes payable for the three and nine months ended September 30, 2017 was recorded as a decrease to other income (expense) and interest expense of $30 and $69, respectively, in the statements of operations and comprehensive loss.

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Fair Value Measurements (Details Narrative) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017	Sep. 30, 2016
Fair Value Disclosures [Abstract]
Fair value adjustment of warrants	$ 30	$ (65)	$ (51)

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Investment in Securities Held to Maturity (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Schedule of Held-to-maturity Securities [Line Items]
Cost	$ 2,946
Gross Unrealized Gains	3
Gross Unrealized Losses
Fair Market Value	2,949
Corporate Fixed Income Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost	2,746
Gross Unrealized Gains	3
Gross Unrealized Losses
Fair Market Value	2,749
Mutual Funds [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Market Value
Commercial Paper [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost	200
Gross Unrealized Gains
Gross Unrealized Losses
Fair Market Value	$ 200

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Prepaid Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Director compensation		$ 215
Director, officer and other insurance	95	70
Legal retainer	25	25
Rent	17	17
Inventory Purchase Deposits	20
Engineering, software licenses and other	15	10
Total prepaid expenses	$ 172	$ 337

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Property and Equipment (Details) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2017	Dec. 31, 2016
Property, Plant and Equipment, Gross		$ 2,630	$ 1,430
Less accumulated depreciation and amortization		1,071	799
Total		1,559	631
Research and Development Equipment [Member]
Property, Plant and Equipment, Gross		$ 1,335	989
Property, Plant and Equipment, Useful Life		5 years
Office and Computer Equipment [Member]
Property, Plant and Equipment, Gross		$ 672	235
Property, Plant and Equipment, Useful Life		3 years
Furniture and Fixtures [Member]
Property, Plant and Equipment, Gross		$ 34	17
Property, Plant and Equipment, Useful Life		7 years
Autos/Trucks [Member]
Property, Plant and Equipment, Gross		$ 306
Property, Plant and Equipment, Useful Life		5 years
Leasehold Improvements [Member]
Property, Plant and Equipment, Gross	[1]	$ 283	$ 189

[1] Shorter of lease term or estimated useful life

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Property and Equipment (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense	$ 118	$ 49	$ 273	$ 143

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Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Payables and Accruals [Abstract]
Compensation and related benefits	$ 705	$ 82
Accrued litigation	269	286
Research project agreement	100
Other		3
Total accrued expenses	$ 1,074	$ 371

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Accrued Contract Cancellation Settlement (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2017	Jan. 23, 2017	Dec. 31, 2016
Accrued Contract Cancellation Settlement Disclosure [Abstract]
Accrued Contract Cancellation Settlement Liabilities		$ 1,000	$ 1,000

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Borrowings (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Short-term debt:
Current portion of long-term debt	$ 174	$ 45
Total short-term debt	174	45
Long-term debt:
Capital lease obligations	290	51
Other unsecured promissory notes	521	132
Total	811	183
Less: current portion of long-term debt	(174)	(45)
Total long-term debt	$ 637	$ 138

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Notes Payable, Related Parties (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Related Party Transactions [Abstract]
Unsecured promissory note, interest rate of 4.25% and 8% per annum	$ 18	$ 36
Less: current portion of notes payable, related parties	18	30
Total notes payable, long-term, related parties		$ 6

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Notes Payable, Related Parties (Details Narrative) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Apr. 30, 2013	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Settlement of outstanding obligations	$ 40
Due to Employees	$ 72
Interest expense related party			$ 9	$ 1	$ 43	$ 56
Salary Obligation [Member]
Debt interest rate	4.25%
Debt instrument payment	$ 1
Debt instrument maturity date	May 31, 2018
Unsecured Promissory Note [Member]
Debt interest rate	8.00%
Debt instrument payment	$ 1
Debt instrument maturity date	Apr. 30, 2018

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Common Stock Warrants and Common Stock Warrant Liability (Details) - $ / shares		9 Months Ended	12 Months Ended
		Sep. 30, 2017	Dec. 31, 2016
Outstanding at beginning		829,285	610,487
Warrants issued			336,531
Warrants exercised			(117,733)
Outstanding at end		829,285	829,285
Initial Public Offering Underwriter Warrants [Member]
Warrants issued			187,500
Date Issued			2016-12
Term			5 years
Exercise Price (in dollars per share)			$ 9.60
Marketing and Development Services Warrants [Member]
Warrants issued			100,000
Date Issued			2016-02
Term	[1]		5 years
Exercise Price (in dollars per share)			$ 7.50
Other Advisory Services Warrants [Member]
Warrants issued			40,000
Date Issued			2016-08
Term	[1]		3 years
Exercise Price (in dollars per share)			$ 7.50
Promissory Notes [Member]
Warrants issued			9,031
Date Issued			2016-03
Term	[1]		3 years
Exercise Price (in dollars per share)			$ 7.50

[1] The warrants also terminate, if not exercised by the earlier of (i) December 13, 2018, or the second anniversary of the closing of an initial public offering of common stock; or (ii) a liquidation, dissolution or winding up of the Company.

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Common Stock Warrants and Common Stock Warrant Liability (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended				3 Months Ended	9 Months Ended
	Aug. 16, 2016	Dec. 31, 2016	Mar. 31, 2016	Feb. 29, 2016	Jul. 31, 2015	Sep. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2016	Nov. 30, 2015	Sep. 30, 2015
Share price (in dollars per share)		$ 8.15				$ 1.85	$ 1.85
Fair value adjustment of warrants						$ 30	$ (65)	$ (51)
Minimum [Member]
Expected term							3 years
Maximum [Member]
Expected term							3 years 6 months
Common Stock Warrants [Member]
Number of shares purchased						270,400	270,400
Exercise price (in dollars per share)						$ 7.50	$ 7.50
Warrant term							5 years
Description of method used							Monte Carlo option pricing model
Expected volatility rate, minimum							58.00%
Expected volatility rate, maximum							76.70%
Risk free interest rate, minimum							1.31%
Risk free interest rate, maximum							1.76%
Common Stock Warrants [Member] | Minimum [Member]
Share price (in dollars per share)						7.50	$ 7.50
Common Stock Warrants [Member] | Maximum [Member]
Share price (in dollars per share)						7.575	$ 7.575
Common Stock Warrant Issued for Marketing and Development Services [Member]
Number of shares purchased				100,000
Exercise price (in dollars per share)				$ 7.50
Warrant term				5 years
Description of method used				Black- Scholes option pricing model
Share price (in dollars per share)				$ 7.57
Fair value of common stock warrant				$ 431
Expected volatility rate				77.80%
Expected term				3 years 9 months
Expected dividend rate				0.00%
Risk free interest rate				2.09%
March 2016 Promissory Notes Common Stock Warrants [Member]
Number of shares purchased									9,032
Exercise price (in dollars per share)									$ 7.50
Warrant term			3 years
Description of method used			Monte Carlo pricing model
Share price (in dollars per share)									$ 7.575
Expected volatility rate			79.60%
Risk free interest rate			1.49%
August 2016 Other Advisory Services [Member]
Number of shares purchased	20,000
Exercise price (in dollars per share)	$ 7.50
Warrant term	3 years
Common Stock Warrant Issued To Initial Public Offering Underwriter [Member]
Number of shares purchased		187,500
Exercise price (in dollars per share)		$ 9.60
Warrant term		5 years
Description of method used		Black- Scholes option pricing model
Share price (in dollars per share)		$ 8.00
Fair value of common stock warrant		$ 939
Expected volatility rate		82.10%
Expected term		5 years
Expected dividend rate		0.00%
Risk free interest rate		1.92%
University of Arizona Common Stock Warrant [Member]
Number of shares purchased											15,000
Exercise price (in dollars per share)											$ 7.50
Warrant term							5 years
Description of method used							Monte Carlo option pricing model
Share price (in dollars per share)						$ 7.91	$ 7.91
Expected volatility rate							77.70%
Expected dividend rate							0.00%
Risk free interest rate							1.93%
Derivative liability						$ 4	$ 4				$ 53
Fair value adjustment of warrants							$ 65
July 2015 Consulting Agreement Common Stock Warrant [Member]
Number of shares purchased					121,227
Exercise price (in dollars per share)					$ 7.50
Warrant term					10 years
Description of method used					Black-Scholes option pricing model
Share price (in dollars per share)					$ 7.575
Fair value of common stock warrant					$ 537
Expected volatility rate					60.90%
Expected term					6 years 3 months
Expected dividend rate					0.00%
Risk free interest rate					2.09%
Northern Arizona University Common Stock Warrant [Member]
Number of shares purchased										210,526
Exercise price (in dollars per share)										$ 15.00

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Stockholders' Deficit (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended		9 Months Ended
	May 06, 2016	Apr. 29, 2016	Sep. 30, 2017	Sep. 30, 2016	Apr. 29, 2017	Dec. 31, 2016
Common stock, shares, issued			10,363,189			10,157,292
Common stock, shares, outstanding			10,363,189			10,157,292
Aggregate number of common stock issued			205,897
Proceeds from issuance of common stock				$ 6,199
Number of shares issued for settle a previous claim			137
Cashless exercise of vested stock options			15,000
Rights Offering [Member]
Value of common stock issued	$ 6,199
Aggregate number of common stock issued	2,478,486
Proceeds from issuance of common stock		$ 5,284
Number of stock offered for subscription rights		5,794,162
Rights Offering [Member] | Series B Convertible Preferred Stock [Member]
Subscription price					$ 2.50
Rights Offering [Member] | Unsecured Promissory Note 2015 and 2016 [Member]
Proceeds from cancellation of outstanding principal amount		$ 821
Extinguishment debt		$ 94
Restricted Stock Units [Member]
Cashless exercise of vested stock options			14,014
Number of restricted stock unitsvested during the period			143,643
Consultant [Member]
Number of shares issued consultants for services			48,240

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Stock-based Compensation (Details)	9 Months Ended
	Sep. 30, 2017
Minimum [Member]
Expected term (in years)	3 years
Maximum [Member]
Expected term (in years)	3 years 6 months
Employee [Member]
Expected volatility, Minimum	73.80%
Expected volatility, Maximum	83.70%
Expected dividend yield	0.00%
Risk-free interest rate, Minimum	1.45%
Risk-free interest rate, Maximum	1.94%

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Stock-based Compensation (Details 1) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at beginning | shares	1,477,300
Granted | shares	161,500
Exercised | shares	(15,000)
Forfeited | shares
Expired | shares	(65,000)
Outstanding at ending | shares	1,558,800
Exercisable at ending | shares	1,263,599
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding at beginning | $ / shares	$ 1.61
Granted | $ / shares	8.04
Exercised | $ / shares	0.50
Forfeited | $ / shares
Expired | $ / shares	10.22
Outstanding at ending | $ / shares	1.73
Exercisable at ending | $ / shares	$ 1.08
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Life [Roll Forward]
Outstanding at beginning	5 years 9 months 18 days
Granted	5 years
Outstanding at ending	5 years 1 month 6 days
Exercisable at ending	4 years 9 months 18 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Aggregate Intrinsic Value [Roll Forward]
Outstanding at beginning | $	$ 9,662	[1]
Outstanding at ending | $	183	[1]
Exercisable at ending | $	$ 968	[1]

[1] The aggregate intrinsic value on the table was calculated based on the difference between the estimated fair value of the Company's stock and the exercise price of the underlying option. The estimated stock values used in the calculation was $1.85 and $8.15 per share at September 30, 2017 and December 31, 2016, respectively.

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Stock-based Compensation (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Allocated Share-based Compensation Expense	$ 946	$ 933	$ 2,818	$ 2,406
Research and Development [Member]
Allocated Share-based Compensation Expense	85
Research and Development Expense [Member]
Allocated Share-based Compensation Expense		135	269	309
General and Administrative Expense [Member]
Allocated Share-based Compensation Expense	$ 861		$ 2,549	$ 2,097
General and Administrative [Member]
Allocated Share-based Compensation Expense		$ 798

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Stock-based Compensation (Details 3) - Restricted Stock Units [Member] - $ / shares					9 Months Ended
		Jun. 19, 2017	May 19, 2017	Mar. 27, 2017	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward]
Balance at beginning					455,430
Granted		60,000	17,885	40,000	117,885	[1]
Vested					(228,333)
Forfeited
Balance at ending	[2]				344,982
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Balance at beginning					$ 0.76
Granted		$ 6.00	$ 6.99	$ 8.35	6.95
Vested					2.00
Forfeited
Balance at ending					$ 2.05

[1] 40,000 restricted stock units were granted on March 27, 2017 with a weighted average grant date fair value of $8.35, 17,885 restricted stock units were granted on May 19, 2017 with a weighted average grant date fair value of $6.99 and 60,000 restricted stock units were granted on June 19, 2017 with a weighted average grant date fair value of $6.00.

[2] At September 30, 2017, the total compensation cost related to non-vested restricted stock units not yet recognized was $1,075, which will be recognized over a weighted average period of 1.3 years, assuming the recipients complete their service period required for vesting.

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Stock-based Compensation (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands				1 Months Ended	9 Months Ended
	Jun. 19, 2017	May 19, 2017	Mar. 27, 2017	Jul. 31, 2015	Sep. 30, 2017		Dec. 31, 2016
Share price					$ 1.85		$ 8.15
Restricted Stock Units [Member]
Compensation cost not yet recognized					$ 1,075
Compensation cost not yet recognized, period for recognition					1 year 3 months 18 days
Stock units granted	60,000	17,885	40,000		117,885	[1]
Weighted average grant date fair value	$ 6.00	$ 6.99	$ 8.35		$ 6.95
Stock Option Plan 2008-2009 [Member]
Number of shares outstanding					0
Basis price per share					$ 15.00
Common stock purchase price					100.00%
Compensation cost not yet recognized					$ 1,942
Compensation cost not yet recognized, period for recognition					4 years
Equity Incentive Plan 2015 [Member]
Number of shares authorized				2,000,000
Number of additional shares authorized				1,000,000
Common stock capital shares reserved for future issuance					779,095

[1] 40,000 restricted stock units were granted on March 27, 2017 with a weighted average grant date fair value of $8.35, 17,885 restricted stock units were granted on May 19, 2017 with a weighted average grant date fair value of $6.99 and 60,000 restricted stock units were granted on June 19, 2017 with a weighted average grant date fair value of $6.00.

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License and Other Agreements (Details Narrative) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended		12 Months Ended
	Jan. 23, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Litigation Settlement, Amount			$ 300
Accrued expenses due Bioceres		100
Neogen Corporation [Member]
License and Services Revenue		$ 0		$ 186
Litigation Settlement, Amount	$ 1,000

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
2017	$ 25
2018	96
2019	88
2020	67
2021	84
Total minimum lease payments	360
2017	63
2018	258
2019	221
2020
2021
Total minimum lease payments	542
Less: amounts representing interest (ranging from 7.25% to 11.56%)	75
Present value of minimum lease payments	285
Less: current installments under capital lease obligations	70
Total long-term portion	$ 290	$ 51

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Commitments and Contingencies (Details Narrative) - USD ($)	1 Months Ended	9 Months Ended		12 Months Ended
	Jul. 31, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Debt Instrument, Interest Rate, Effective Percentage [Abstract]
Share-based Compensation		$ 2,818,000	$ 2,406,000
Rent Expense		$ 246,000		$ 234,000
General and Administrative Expense [Member]
Debt Instrument, Interest Rate, Effective Percentage [Abstract]
Loss Contingency, Loss in Period				1,000,000
Chief Executive Officer [Member]
Debt Instrument, Interest Rate, Effective Percentage [Abstract]
Number of shares issued	120,000
Share-based Compensation				$ 300
Minimum [Member] | Capital Lease Obligations [Member]
Debt Instrument, Interest Rate, Effective Percentage [Abstract]
Capital Leases of Lessee, Contingent Rentals, Basis Spread on Variable Rate		7.25%
Maximum [Member] | Capital Lease Obligations [Member]
Debt Instrument, Interest Rate, Effective Percentage [Abstract]
Capital Leases of Lessee, Contingent Rentals, Basis Spread on Variable Rate		11.56%

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Subsequent Events (Details) - shares	1 Months Ended	9 Months Ended
	Oct. 31, 2017	Sep. 30, 2017
Subsequent Event [Line Items]
Number of shares issued		205,897
Subsequent Event [Member]
Subsequent Event [Line Items]
Number of shares issued	26,308