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 March 31, 2018

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, a smaller reporting company or an emerging growth 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 May 14, 2018: 16,537,710 

SENESTECH, INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2018

TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION
Item 1	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4	Controls and Procedures	34
	PART II. OTHER INFORMATION
Item 1A	Risk Factors	34
Item 6	Exhibits	35
	Index to Exhibits	35
	Signatures	36

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SENESTECH, INC.

CONDENSED BALANCE SHEETS

(In thousands, except shares and per share data)

	March 31,			December 31,
	2018			2017
	(Unaudited)
ASSETS
Current assets:
Cash	$	528		$	2,101
Investment in securities held to maturity		4,243			5,023
Accounts receivable		2			16
Prepaid expenses		245			170
Inventory		787			540
Deposits		17			19
Total current assets		5,822			7,869
Property and equipment, net		1,350			1,454
Total assets	$	7,172		$	9,323
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	182		$	177
Accounts payable		369			391
Accrued expenses		473			589
Notes payable, related parties		6			12
Total current liabilities		1,030			1,169
Long-term debt, net		552			591
Deferred rent		35			41
Total liabilities		1,617			1,801
Commitments and contingencies (See note 15)		—			—
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 16,512,246 and 16,404,195 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively		17			16
Additional paid-in capital		81,792			81,103
Stock subscribed, but not issued		8			—
Accumulated deficit		(76,262	)		(73,597	)
Total stockholders’ equity		5,555			7,522
Total liabilities and stockholders’ equity	$	7,172		$	9,323

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 March 31,
	2018			2017
Revenue:
Sales	$	19		$	7
Cost of sales		19			4
Gross profit (loss)		—			3
Operating expenses:
Research and development		634			823
Selling, general and administrative		2,028			2,639
Total operating expenses		2,662			3,462
Net operating loss		(2,662	)		(3,459	)
Other income (expense):
Interest income		6			10
Interest expense		(22	)		(13	)
Interest expense, related parties		—			(1	)
Other income (expense)		13			8
Total other income (expense)		(3	)		4
Net loss	$	(2,665	)	$	(3,455	)
Weighted average common shares outstanding - basic and fully diluted		16,496,385			10,160,917
Net loss per common share - basic and fully diluted	$	(0.16	)	$	(0.34	)

See accompanying notes to financial statements.

4

SENESTECH, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	For the Three Months
	Ended March 31,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,665	)	$	(3,455	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on investments held to maturity		(18	)		(9	)
Amortization of discounts on investments held to maturity		—			5
Bad debts expense		5			—
Depreciation and amortization		117			59
Stock-based compensation		698			1,061
Amortization of debt discount		—			(9	)
(Increase) decrease in current assets:
Accounts receivable		9			4
Prepaid expenses		(75	)		90
Inventory		(247	)		(54	)
Deposits		2			(196	)
Increase (decrease) in current liabilities:
Accounts payable		(22	)		(166	)
Accrued contract cancellation settlement		—			(1,000	)
Accrued expenses		(116	)		291
Deferred rent		(6	)		5
Net cash used in operating activities		(2,318	)		(3,374	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities held to maturity		—			(2,957	)
Proceeds received on sale of securities held to maturity		798			—
Purchase of property and equipment		(3	)		(130	)
Net cash provided by (used in) investing activities		795			(3,087	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of notes payable		—			21
Repayments of notes payable		(26	)		(6	)
Repayments of notes payable, related parties		(6	)		(10	)
Repayments of capital lease obligations		(18	)		(7	)
Net cash used in financing activities		(50	)		(2	)
NET CHANGE IN CASH		(1,573	)		(6,463	)
CASH AT BEGINNING OF PERIOD		2,101			11,826
CASH AT END OF PERIOD	$	528		$	5,363
SUPPLEMENTAL INFORMATION:
Interest paid	$	22		$	14
Income taxes paid	$	—		$	—
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchases of equipment under capital lease obligations	$	10		$	—

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. (“SenesTech,” the “Company,” “we” or “us”) was formed in July 2004 and incorporated in the state of Nevada. The Company subsequently reincorporated in the state of Delaware in November 2015. Our corporate headquarters is in Flagstaff, Arizona. We have developed and are commercializing a global, proprietary technology for managing animal pest populations, primarily rat populations, through fertility control.

Although there is a myriad of tools available to fight rat infestations, pest management professionals (PMPs) continue to face challenges in controlling infestations. Not only do these infestations result in incredible infrastructure damage, but rats also pose additional risks to the health and food security of our communities. In addition to these challenges, PMPs are being increasingly asked for new solutions to help them solve the infestation problem. With growing interest in non-lethal options, it is becoming increasingly important for PMPs to have new tools at their disposable. Our goal is to provide PMPs with a proven solution to not only combat their most difficult infestations, but also offer a non-lethal option to serve customers that are looking to decrease or remove the amount of poison used in their integrated pest management programs.

Our first fertility control product, ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide (“VCD”) and triptolide. When consumed, ContraPest targets reproduction, limiting fertility in male and female rats beginning with the first breeding cycle following consumption. ContraPest is being marketed for use in controlling rat populations, specifically Norway and roof rats. We submitted ContraPest for registration with the EPA on August 23, 2015, and the EPA granted registration approval for ContraPest effective August 2, 2016. We expect to continue to pursue regulatory approvals and amendments to existing registration in the United States for ContraPest, including additional species and additional jurisdictions.

We believe ContraPest is the first and only non-lethal, fertility control product approved by the EPA for the management of rodent populations. In addition to the EPA registration of ContraPest in the U.S., we must obtain registration from the various state regulatory agencies prior to selling in each state. To date, we have received registration for ContraPest in 49 states and the District of Columbia. Registration in California is currently pending.

Potential Need for Additional Capital

Since our inception, we have sustained significant operating losses in the course of our research and development activities, and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under our former license agreement with Neogen. In 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 through the sale of convertible preferred stock and common stock, including an initial public offering of 1,875,000 shares of our common stock on December 8, 2016 with warrants to purchase an additional 187,500 shares issued to Roth Capital Partners, LLC as underwriter, and a second offering on November 21, 2017 of 5,860,000 shares of our common stock at $1 per share with warrants issued to investors to purchase an additional 4,657,500 shares of our common stock at $1.50 per share, and warrants issued to Roth Capital Partners, LLC, as underwriter, to purchase an additional 945,000 shares at $1.50 per share; debt financing, consisting primarily of convertible notes; and, to a lesser extent, payments received in connection with research grants and licensing fees. Through March 31, 2018, we had received net proceeds of $54.4 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. At March 31, 2018, we had an accumulated deficit of $76.3 million and cash and cash equivalents and highly liquid investments of $4.8 million. 

Our ultimate success depends upon the outcome of a combination of factors, including: (i) the success of our research and development; (ii) ongoing regulatory approval and successful commercialization of ContraPest and our other product candidates; (iii) market acceptance, commercial viability and profitability of ContraPest and other products; (iv) the ability to market our 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 our business; and (vi) our ability to meet our working capital needs. 

Based upon our current operating plan, we expect that cash and cash equivalents and highly liquid, short term investments at March 31, 2018, in combination with anticipated revenue, will be sufficient to fund our current operations for the near future. However, if anticipated revenue targets are not achieved, we may seek to reduce operating expenses and are likely to require additional capital in order to fund our operating losses and research and development activities until we become profitable. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will need to continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate development and commercialization efforts. 

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 March 31, 2018, the Company’s operating results for the three months ended March 31, 2018 and 2017, and the Company’s cash flows for the three months ended March 31, 2018 and 2017. The accompanying financial information as of December 31, 2017 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 for the year ended December 31, 2017. All amounts shown in these financial statements and accompanying notes 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 and classification of assets and liabilities, 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 preferred stock, 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 material impact on net earnings, financial position or cash flows.

Cash and Cash Equivalents

The Company considers money market fund investments to be cash equivalents. The Company had cash equivalents of $51 and $3 at March 31, 2018 and December 31, 2017, 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 $5 as of March 31, 2018 and $0 at December 31, 2017.

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 March 31, 2018 and December 31, 2017, the Company had inventories of $787 and $540, 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 compensation as well as payments made for director and officer insurance, rent and legal deposits 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 repair and maintenance costs on its major equipment, which 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

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (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 the fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three months ended March 31, 2018 and 2017, or the twelve months ended December 31, 2017.

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 derives revenue primarily from commercial sales of products.

For the three months ended March 31, 2018 and March 31, 2017, the Company generated net revenues of $19 and $7, respectively, from the sale of ContraPest.

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, 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 months ended March 31, 2018 and 2017, is as follows:

	Three Months Ended March 31,
	2018		2017
Research and development	$	29	$	94
Selling, general and administrative		669		967
Total stock-based compensation expense	$	698	$	1,061

See Note 13 for additional discussion on stock-based compensation.

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)

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 March 31, 2018 or December 31, 2017 and as such, no interest or penalties were recorded in income tax expense.

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, 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 months ended March 31, 2018 and 2017. Therefore, basic and diluted loss per share attributable to common stockholders are the same for each period 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):

	March 31,
	2018		2017
Common stock purchase warrants		6,431,785		829,284
Restricted stock unit		237,885		855,430
Common stock options		1,629,967		1,502,300
Total		8,299,637		3,187,014

11

SENESTECH, INC. 

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

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

Adoption of New Accounting Standards:

In May 2014 the FASB issued ASU 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. Effective January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers” using the modified retrospective method to all contracts that were not completed as of the date of adoption. The results of operations for reported periods after January 1, 2018 are presented under this amended guidance, while prior period amounts are reported in accordance with ASC 605 — Revenue Recognition. There was no material impact on our financial position, results of operations, or cash flows. See Note 2 — Summary of Significant Accounting Policies — Revenue Recognition.

In March 2016, the FASB issued ASU 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. The Company has adopted the provisions of ASU 2016-09 on its financial statements. There was no material impact on our financial position, results of operations, or cash flows

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): 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. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company has adopted the provisions of ASU 2016-15 on its financial statements. There was no material impact on our financial position, results of operations, or cash flows.

In January 2016, the FASB issued ASU 2016-01, 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 the first quarter of 2018. The Company has adopted the provisions of ASU 2016-01 on its financial statements. There was no material impact on our financial position, results of operations, or cash flows.

Accounting Standards Issued But Not Yet Adopted:

In February 2016, the FASB issued ASU 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 February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The new guidance allows an entity to reclassify the income tax effects of the Public Law 115-97 “An Act to Provide Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018”, commonly known as the Tax Cuts and Job Act of 2017 (the “2017 Tax Act”) on items within accumulated other comprehensive income/(loss) to retained earnings. This new guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The new standard must be adopted retrospectively to each period in which a taxpayer recognizes the effect of the change in the U.S. federal corporate income tax rate from the 2017 Tax Act. The Company is currently assessing the impact of ASU 2018-02 on our consolidated financial statements and related disclosures.] 

12

SENESTECH, INC. 

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 3 - Fair Value Measurements

We invest in various short term, highly liquid financial instruments, which may include municipal debt securities, corporate bonds, U.S. agency securities and commercial paper. We value these instruments at fair value. The accounting guidance for fair value, among other things, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The framework for measuring fair value consists of 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.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:

A. Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

B. Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

C. Income approach: Techniques to convert future amounts to a single present amount based upon market expectations, including present value techniques, option-pricing and excess earnings models.

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.

13

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):

	March 31, 2018
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	51	$	—	$	—	$	51
Corporate fixed income debt securities		—		4,243		—		4,243
Total	$	51	$	4,243	$	—	$	4,294
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—
	December 31, 2017
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	3	$	—	$	—	$	3
Corporate fixed income debt securities		—		5,023		—		5,023
Total	$	3	$	5,023	$	—	$	5,026
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—

(1) The change in the fair value of the common stock warrant and convertible notes payable for the three months ended March 31, 2018 was recorded as a decrease to other income (expense) and interest expense of less than $1, 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.

14

SENESTECH, INC. 

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 4 - Investments in Securities Held to Maturity

As of March 31, 2018, investment in securities held to maturity primarily consisted of corporate fixed income securities 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 plus or minus market fluctuation and gains and losses are recognized as the sale or redemption of the securities is 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. For the three months ended March 31, 2018, the Company recorded $18 net 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 March 31, 2018:

		March 31, 2018
	Contractual Maturity (in months)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market  Value
Mutual funds		$	—	$	—	$	—	$	—
Corporate fixed income securities	Less than 12 months		4,237		6		—		4,243
Total investments		$	4,237	$	6	$	—	$	4,243

Note 5 - Prepaid Expenses

Prepaid expenses consist of the following:

	March 31,		December 31,
	2018		2017
Director compensation	$	37	$	66
Director and officer insurance		82		33
NASDAQ fees		41		—
Legal retainer		25		25
Inventory purchase deposits		20		20
Professional services retainer		8		8
Rent		17		—
Equipment service deposits		5		7
Engineering, software licenses and other		10		11
Total prepaid expenses	$	245	$	170

15

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:

		March 31,			December 31,
	Useful Life	2018			2017
Research and development equipment	5 years	$	1,349		$	1,349
Office and computer equipment	3 years		686			672
Autos	5 years		305			305
Furniture and fixtures	7 years		34			34
Leasehold improvements	*		283			283
			2,657			2,643
Less accumulated depreciation and amortization			(1,307	)		(1,189	)
Total		$	1,350		$	1,454

* Shorter of lease term or estimated useful life

Depreciation and amortization expense was approximately $117 and $59 for the three months ended March 31, 2018 and 2017, respectively.

Note 7 - Accrued Expenses

Accrued expenses consist of the following:

	March 31,		December 31,
	2018		2017
Compensation and related benefits	$	198	$	304
Accrued Litigation		269		269
Board Compensation		—		16
Other		6		—
Total accrued expenses	$	473	$	589

Note 8 - Accrued Contract Cancellation Settlement

The accrued contract cancellation settlement of $1,000 was a 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 — Commitments and Contingencies for further details.

16

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:

	March 31,			December 31,
Short-term debt:	2018			2017
Current portion of long-term debt		182			177
Total short-term debt	$	182		$	177
Long-term debt:
Capital lease obligations	$	263		$	272
Other promissory notes		471			496
Total		734			768
Less: current portion of long-term debt		(182	)		(177	)
Total long-term debt	$	552		$	591

Capital Lease Obligations 

Capital lease obligations are for computer and lab equipment leased through GreatAmerica Financial Services, Thermo Fisher Scientific, Navitas Credit Corp. and ENGS Commercial Finance Co. These capital leases expire at various dates through April 2022 and carry interest rates ranging from 6.4% to 11.6%.

Other Promissory Notes

Also included in the table above are three notes payable to Direct Capital, one note to M2 Financing and one note to Fidelity Capital, all for the financing of fixed assets. These notes expire at various dates through June 2022 and carry interest rates ranging from 4.3% to 13.8%.

Note 10 - Notes Payable, Related Parties

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

	March 31,		December 31,
	2018		2017
Unsecured promissory note, interest rate of 4.25% and 8% per annum	$	6	$	12
Total notes payable, related parties		6		12
Less: current portion of notes payable, related parties		6		12
Total notes payable, long-term	$	—	$	—

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 May 2018. The deferred salary obligation requires monthly payments of $1 and matures in June 2018.

Amounts outstanding on these obligations were $6 and $12 at March 31, 2018 and December 31, 2017, respectively.

Interest expense on the notes payable, related parties, was $0 and $1 for the three months ended March 31, 2018 and the year ended December 31, 2017 respectively.

17

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

The table summarizes the common stock warrant activity as of March 31, 2018 as follows:

	Number
	of		Date
Common Stock Warrants	Warrants		Issued	Term		Exercise Price
Outstanding at December 31, 2016		829,285
Common Stock Offering Warrants Issued		4,657,500	November 2017		5 years	$	1.50
Common Stock Offering Underwriter Warrants		945,000	November 2017		5 years	$	1.50
Outstanding at December 31, 2017		6,431,785
Warrants issued		—
Warrants exercised		—
Outstanding at March 31, 2018		6,431,785

Common Stock Warrants Issued to Participants in Offering of the Company’s Common Stock

On November 8, 2017, the Company issued a total of 4,657,500 detachable common stock warrants issued with the second public offering of 5,860,000 shares of its common stock at $1.00 per share. The common stock warrant is exercisable until five years from the date of grant. The common shares of the Company’s stock and detachable warrants exist independently as separate securities. As such, the Company estimated the fair value of the common stock warrants, exercisable at $1.50 per share, to be $661 using a lattice model based on the following significant inputs: Common stock price of $1.00; comparable company volatility of 73.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 1.87%.

Common Stock Warrant Issued to Underwriter of Common Stock Offering

In November 2017, the Company issued to Roth Capital Partners, LLC, as underwriter, a warrant to purchase 945,000 shares of common stock at an exercise price of $1.50 per share as consideration for providing services in connection with our common stock offering. The warrant was fully vested and exercisable on the date of issuance. The common stock warrant is exercisable until five years from the date of grant. The Company estimated the fair value of the common stock warrants, exercisable at $1.50 per share, to be $134 using a lattice model based on the following significant inputs: Common stock price of $1.00; comparable company volatility of 73.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 1.87%.

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 $0 at March 31, 2018. 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 was 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 less than $1 for the three months ended March 31, 2018 and was recorded in other income (expense) in the accompanying statements of operations and comprehensive loss.

Note 12 - Stockholders’ Deficit

Common Stock

The Company had 16,512,246 and 16,404,195 shares of common stock issued and outstanding as of March 31, 2018 and December 31, 2017, respectively. 

During the three months ended March 31, 2018, the Company issued an aggregate of 108,051 shares of common stock as follows: 13,900 shares for the cashless exercise of stock options, 32,625 shares to a former employee for the net settlement of restricted stock units whose vesting accelerated upon the termination of their employment contract, 37,162 shares to a Board member in net settlement of Board compensation totaling $28 and 24,364 shares for the net settlement of restricted stock units that vested during the period.

18

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 13 - Stock-based Compensation 

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, effective September 26, 2016. 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 March 31, 2018, the Company had 1,008,928 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 three months ended March 31, 2018, were as follows:

	Employee			Non-Employee
Expected volatility		71.0% -72.3	%		N/A
Expected dividend yield		—			N/A
Expected term (in years)		3.5			N/A
Risk-free interest rate		1.58%-2.44	%		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.

19

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 13 - Stock-based Compensation – (continued)

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, 2017		1,651,800		$	1.67		5.0	$	—
Granted		34,167		$	0.65		5.0	$	—
Exercised		(56,000	)	$	0.50		—	$	—
Forfeited		—		$	—		—	$	—
Expired		—		$	—		—	$	—
Outstanding at March 31, 2018		1,629,967		$	1.69		4.5	$	—
Exercisable at March 31, 2018		1,276,596		$	1.31		4.3	$	—

(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 $0.51 and $0.72 per share for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively.

The stock-based compensation expense was recorded as follows:

	Three Months Ended March 31,
	2018		2017
Research and development	$	29	$	94
Selling, general and administrative		669		967
Total stock-based compensation expense	$	698	$	1,061

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

20

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 13 - Stock-based Compensation – (continued)

At March 31, 2018, the total compensation cost related to unvested options not yet recognized was $1,425, which will be recognized over a weighted average period of four years, assuming the employees complete their service period required for vesting.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the three months ended March 31, 2018:

	Number of  Units			Weighted Average Grant-Date Fair Value Per Units
Outstanding as of December 31, 2017		287,885		$	1.86
Granted		—		$	—
Vested		(50,000	)(1)	$	6.00
Forfeited		—		$	—
Outstanding as of March 31, 2018		237,885		$	0.99

(1) In February 2018, the Company net issued 32,625 shares of common stock to a former employee of the Company under the employee’s separation agreement, which accelerated the vesting of certain restricted stock units.

21

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”), which agreement was subsequently terminated in January 2017. Under the terms of the license agreement, 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. Under the terms of the licensing agreement, the Company was required to submit an application to the United States Environmental Protection Agency (“EPA”) for approval of ContraPest, complete two agricultural field trials that support commercial feasibility for use of the product, and submit such studies and results to Neogen for their approval. The application to the EPA was submitted in August 2015, and the EPA granted registration approval for ContraPest effective August 2, 2016. The first field trial was completed, but never approved by Neogen. With respect to the second trial, the EPA indicated to the Company that it would be more efficient to wait until the product was approved rather than applying for an additional experimental use permit. Given that the EPA has granted registration approval, the Company is now preparing to commence the second field trial.

The Company received nonrefundable, upfront license fee payments, totaling $488. The remaining license fee of $162 was to be paid when Neogen formally accepted the Company’s report on its study of the field trials. The Company has determined that the license does not have stand-alone value, therefore, the license fees of $488 are deferred and recognized, on a straight-line basis, from May 2014, the effective date of the agreement, over the estimated related period of performance through December 2016, which includes the acceptance by Neogen of the Company’s study for the field trials that support commercial feasibility for use of the product.

The Company did not recognize any revenue for the three months ended March 31, 2018 or the year ended December 31, 2017 under the licensing agreement.

In addition, Neogen was obligated under the licensing agreement to pay additional consideration to the Company consisting of future fixed-amount of contingent milestone payments (i.e. post-regulatory approval license fees) of up to an aggregate of $3.0 million, and sales-based royalties on the net sales of licensed products by Neogen, as well as its affiliates and sub licensees. The Company did not receive or earn these potential contingent consideration payments as the milestone events to receive such post-approval license fees and sales based royalties were not achieved prior to the termination of the agreement. The agreement was to expire upon the later of (i) the expiration of last patent included in the licensed IP; or (ii) the tenth anniversary of the effective date of the agreement (i.e. May 2024).

On January 23, 2017 we entered into a termination agreement (the “Settlement Agreement”) with 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 $1.0 million in settlement of all claims.

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 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. These agreements were renewed for an additional year, through January 2019.

22

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.

On February 20, 2018, New Enterprises, Ltd. (“New Enterprises”), filed suit in the U.S. District Court for the District of Arizona against the Company and Roth Capital Partners, LLC. The suit alleges nine counts against the Company, including that the Company engaged in common law fraud and securities fraud to induce the chairman of New Enterprises into investing in the Company; that the Company breached the lock-up agreement and tortuously interfered with prospective business advantage. New Enterprises is seeking monetary damages, including compensatory damages, punitive damages, and attorney’s fees. The Company believes there is no basis to any of the claims, and intends to vigorously defend itself, including seeking appropriate counterclaims.

Neogen Settlement Agreement

On January 23, 2017, the Company entered into an 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 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”), 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. Prior to the notice of filing received by SenesTech, the Company was unaware that any action was contemplated or actioned and was proceeding with all elements of the agreement in good faith. All communications prior to the complaint indicated that Neogen also was proceeding in good faith to execute on the agreement.

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. Both Neogen and the Company further agreed to drop any and all legal complaints, claims or threat of litigation for failure to perform under the previous contractual relationship.

Although notice of the legal action by Neogen and the subsequent agreement to terminate existing agreements with Neogen, occurred after December 31, 2016, as per the provisions of FAS 5 Loss Contingency, included in the financial statements of the Company at December 31, 2016 is a $1,000 charge to selling, general and administrative expenses and a corresponding accrual of contract cancellation settlement agreement related to this agreement.

Lease Commitments

Rent expense was $61 and $78 for the three months ended March 31, 2018 and March 31, 2017, respectively. The future minimum lease payments under non-cancellable operating lease and future minimum capital lease payments as of March 31, 2018 are as follows:

	Capital Leases		Operating  Lease
Years Ending December 31,
2018		76		192
2019		92		221
2020		71		—
2021		57		—
2022		28		—
Total minimum lease payments	$	324	$	413

	Capital Leases
Less: amounts representing interest (6.39%, ranging from 10.48% to 11.56%)	$	59
Present value of minimum lease payments		265
Less: current installments under capital lease obligations		73
Total long-term portion	$	192

23

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 16 - Subsequent Events

In April 2018, the Company net issued 25,464 shares of common stock for the net settlement of restricted stock units that vested during the period. 

The Company has evaluated subsequent events from the balance sheet date through May 15, 2018, the date at which the financial statements were issued, and determined that there were no other items that require adjustment to or disclosure in the financial statements.

24

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

As used in this Quarterly Report on Form 10-Q, “SenesTech,” the “Company,” “we,” “us,” or “our” 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 report 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, the effect of new accounting standards on our financial results, our expectations regarding our current operating plan, our beliefs regarding certain tax positions, the sufficiency of our liquidity and capital resources, our beliefs regarding ongoing litigation, our expectations regarding product development, statements about our plans, objectives, expectations and intentions and other statements that are not historical facts. 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 for the year ended December 31, 2017, 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.

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 generated minimal revenue from product sales to date. We have primarily 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 March 31, 2018, we had received net proceeds of $47.2 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, licensing fees and sales of products.  

We have incurred significant operating losses every year since our inception. Our net losses were $2.7 million and $12.3 million for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively. As of March 31, 2018, we had an accumulated deficit of $76.3 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.

25

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 the three months ended March 31, 2018 and March 31, 2017, was $0.7 million and $1.1 million, respectively, which represented 26.0% and 30.1%, respectively, of our total operating expenses for those periods.

Components of our Results of Operations

Revenue

For the three months ended March 31, 2018 and 2017, we generated revenue from product sales of $19,000 and $7,000, respectively. The increase in our product sales revenue was a result of increased sales of ContraPest. Prior to 2017, all of our revenue was derived from payments received in connection with research grants and licensing fees received under the former license agreement with Neogen. We recognized $0 revenue for the three months ended March 31, 2018 and March 31, 2017, respectively, for services performed under NIH grants and in licensing fees under our former license agreement with Neogen. 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 research and development of ContraPest and our other 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.

We continue to investigate other 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. At this time, we cannot reasonably estimate the costs for further 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.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, sales, marketing and administrative functions. Selling, 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 selling, general and administrative expenses may increase in the future as we increase our headcount to support commercialization of ContraPest 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.

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We plan to continue to hire employees to support our commercialization of ContraPest 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 selling, 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. Prior to 2017, our interest income has not been significant due to nominal cash and investment balances and low interest earned on invested balances. For the three months ended March 31, 2018 and 2017, we recorded $6,000 and $10,000 of interest income on our cash and short term, highly liquid investments. The decrease in interest income was primarily due to a decrease in investments.

Interest Expense. Interest expense for the three months ended March 31, 2018 and the year ended December 31, 2017 consists primarily of interest accrued on our capital lease and note commitments. For the three months ended March 31, 2018 and 2017, we recorded $22,000 and $13,000 of interest expense, respectively. The increase in interest expense was primarily due to an increase in note commitments during 2017.

Other Income (Expense), Net. Other income (expense), net, consists primarily of recognized change in value of short-term investments and income (expense) related to the year-over-year fair market value adjustment of our derivative warrant. We recorded $13,000 and $8,000 of other income, net, for the three months ended March 31, 2018 and 2017, respectively. The increase in other income was primarily due to lower expense related to the fair market value adjustment of our derivative warrant.

Income Taxes

Deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company’s effective tax rate for the three months ended March 31, 2018 and the year ended December 31, 2017 has been affected by the valuation allowance on the Company’s deferred tax assets.

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 March 31, 2018, we had federal net operating loss carryforwards of $46.7 million which begin to expire in 2023 and state net operating loss carryforwards of $36.0 million which began to expire in 2016, unless utilized.

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Comparison of the Three Months Ended March 31, 2018 and 2017

The following table summarizes our results of operations for the three months ended March 31, 2018 and 2017:

	Three Months Ended  March 31,
	2018			2017
	(in thousands)
Revenue	$	19		$	7
Cost of sales		19			4
Gross profit		—			3
Operating expenses:
Research and development		634			823
Selling, general and administrative		2,028			2,639
Total operating expenses		2,662			3,462
Loss from operations		(2,662	)		(3,459	)
Interest expense		(16	)		(4	)
Loss on extinguishment debt		—			—
Other income (expense), net		13			8
Net loss	$	(2,665	)	$	(3,455	)

Revenue

Revenue was $19,000 for the three months ended March 31, 2018, compared to $7,000 for three months ended March 31, 2017 due to increased sales of ContraPest, primarily through our distribution network.

Cost of Sales

Cost of sales was $19,000 for the three months ended March 31, 2018, compared to $4,000 for the three months ended March 31, 2017 due to an increase in sales volume and an adjustment for scrap/obsolete inventory.

Research and Development Expenses

	Three Months Ended March 31,				Increase  (Decrease)
	2018		2017
	(in thousands)
Direct research and development expenses:
Unallocated expenses:
Personnel related (including stock-based compensation)	$	386	$	512	$	(126)
Facility-related		58		71		(13)
Other		190		240		(50)
Total research and development expenses	$	634	$	823	$	(189)

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Research and development expenses were $634,000 for the three months ended March 31, 2018, compared to $823,000 for the same period in 2017. The $189,000 decrease in research and development expenses was primarily due to a decrease of $126,000 in personnel-related costs, including stock-based compensation expense of $65,000 and research and development salaries of $61,000 due to headcount reductions in 2018. Facility-related expense decreased $13,000 due to the expiration of a temporary lease for a facility to support technical services on the east coast. The decrease in other research and development expenses was primarily due to a decrease of $7,000 in state registration and filing fees as we have now filed for registration in all 50 states and the District of Columbia, a decrease in lab expenses of $32,000 due to nonrecurring lab related activities in preparation for our commercial launch of ContraPest, and an increase of $8,000 for travel related costs.

We continue to investigate other 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.

Selling, general and Administrative Expenses

Selling, general and administrative expenses were approximately $2.0 million for the three months ended March 31, 2018, as compared to approximately $2.6 million for the three months ended March 31, 2017. The decrease of $612,000 in selling, general and administrative expenses was due to a decrease of $390,000 in net salary costs, a decrease of $156,000 in professional service fees, primarily related to reduced Board related and consulting fees, a $37,000 reduction in office supplies and non-capitalized IT equipment and a $29,000 reduction in depreciation expense. The reduction in salary costs was comprised of a $300,000 reduction in stock compensation, a $58,000 reduction in payroll taxes and related payroll filing fees and a $36,000 reduction in recruitment expenses. 

Interest Expense, Net

We recorded $16,000 of interest expense, net, for the three months ended March 31, 2018, as compared to $4,000 for the same period in 2017. The $12,000 increase in interest expense was a result of increased interest on capital leases and promissory notes entered into during 2017 and lower interest income as a result of lower investment balances.

Other Income (Expense)

We recorded $13,000 of other income, net, for the three months ended March 31, 2018, compared to $8,000 of other income for the same period in 2017. The $5,000 net increase in other income was primarily due to recognized changes in value of short-term investments and reduced expense related to the year-over-year fair market value adjustment of our derivative warrant. The increase in other income was primarily due to lower expense related to the fair market value adjustment of our derivative warrant.  

Liquidity and Capital Resources

Since our inception we have sustained significant operating losses in the course of our research and development activities and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under our former license agreement with Neogen. In 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 through the sale of convertible preferred stock and common stock, including an initial public offering of 1,875,000 shares of our common stock on December 8, 2016 with warrants to purchase an additional 187,500 shares issued to Roth Capital Partners, LLC as underwriter, a second offering on November 21, 2017 of 5,860,000 shares of our common stock at $1 per share with warrants issued to investors to purchase an additional 4,657,500 shares of our common stock at $1.50 per share, and warrants issued to Roth Capital Partners, LLC, as underwriter, to purchase an additional 945,000 shares at $1.50 per share, debt financing, consisting primarily of convertible notes and, to a lesser extent, payments received in connection with research grants and licensing fees. Through March 31, 2018, we had received net proceeds of $54.4 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. At March 31, 2018, we had an accumulated deficit of $76.3 million and cash and cash equivalents and highly liquid investments of $4.8 million.

Our ultimate success depends upon the outcome of a combination of factors, including: (i) the success of our research and development; (ii) ongoing regulatory approval and successful commercialization of ContraPest and our other product candidates; (iii) market acceptance, commercial viability and profitability of ContraPest and other products; (iv) the ability to market our 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 our business; and (vi) our ability to meet our working capital needs.

Based upon our current operating plan, we expect that cash and cash equivalents and highly liquid, short term investments at March 31, 2018, in combination with anticipated revenue, will be sufficient to fund our current operations for the near future. However, if anticipated revenue targets are not achieved, we may seek to reduce operating expenses and are likely to require additional capital in order to fund our operating losses and research and development activities until we become profitable. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate development and commercialization efforts.

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Additional Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we advance field studies of our product candidates in development. In addition, we will continue to 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 additional 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, and generate sales of, our products;

● Expand our research and development activities and advance the research 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:

	Three Months Ended March 31,
	2018			2017
Cash used in operating activities	$	(2,318	)	$	(3,374	)
Cash provided by (used in) investing activities		795			(3,087	)
Cash (used in) provided by financing activities		(50	)		(2	)
Net increase (decrease) in cash and cash equivalents	$	(1,573	)	$	(6,463	)

Operating Activities.

During the three months ended March 31, 2018, operating activities used $2.3 million of cash, primarily resulting from our net loss of $2.7 million and by changes in our operating assets and liabilities of $455,000, partially offset by non-cash charges of $802,000, consisting primarily of stockbased compensation, depreciation and amortization. Our net loss was primarily attributable to research and development activities and our selling, 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 three months ended March 31, 2017 consisted primarily of a decrease in receivables of $9,000 and a decrease in deposits of $2,000 offset by an increase in inventories of $247,000, a net decrease in accrued expenses and accounts payable of $138,000 and an increase in prepaid expenses of $75,000.

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During the three months ended March 31, 2017, operating activities used $3.4 million of cash, primarily resulting from our net loss of $3.5 million and by changes in our operating assets and liabilities of $1.0 million, partially offset by non-cash charges of $1.1 million. Our net loss was primarily attributable to research and development activities and our selling, 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 three months ended March 31, 2017 consisted primarily of a decrease in prepaid expenses and receivables of $94,000, and an increase in deferred rent of $5,000 offset by a net decrease in accrued expenses and accounts payable of $875,000, an increase in inventories of $54,000, and an increase in deposits of $196,000. The decrease in accrued expenses and accounts payable was primarily due to the payment of the $1.0 million contract cancellation settlement accrual offset by an increase in net accounts payable and accrued expenses due to better vendor terms and vendor payment management.

Investing Activities.

For the three months ended March 31, 2018, we generated $795,000 in net cash related to investing activities consisting of $798,000 of proceeds from the sale of securities held to maturity offset by $3,000 in purchases of property and equipment.

For the three months ended March 31, 2017, we used $3.1 million in investing activities consisting of $3.0 million of purchases in securities to be held to maturity and $130,000 in purchases of property and equipment.

Financing Activities.

During the three months ended March 31, 2018, net cash used by financing activities was $50,000 as a result of payments of $32,000 related to notes payable and notes payable, related party and $18,000 in payments of capital lease obligations.

During the three months ended March 31, 2017, net cash used by financing activities was $2,000 as a result of $21,000 of proceeds from the issuance notes payable offset by payments of $16,000 related to notes payable and related party notes payable and $7,000 in payments of capital lease obligations.

Off-Balance Sheet Arrangements

None 

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, assumptions 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.

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.

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Revenue Recognition

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (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.

There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three months ended March 31, 2018 and 2017, or the twelve months ended December 31, 2017. 

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 $698,000 and $1.1 million for the three months ended March 31, 2018 and 2017, 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.

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● 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. Before the consummation of our initial public offering, and in the absence of an active market for our common stock, we 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  December 31,
	2018		2017
	(in thousands)
Selling, general and administrative expenses	$	669	$	967
Research and development expense		29		94
Total stock-based compensation expense	$	698	$	1,061

The intrinsic value of stock options outstanding as of March 31, 2018 was $0 

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.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”)), under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this report. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted 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 management, including the principal executive and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes to the Legal Proceedings set forth in in the risk factors set forth in Part I, Item 3 “Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2017

Item 1A. Risk Factors

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 for the year ended December 31, 2017.

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

None

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Item 6.  Exhibits

INDEX TO EXHIBITS

Exhibit		Filed or Furnished		Incorporated by Reference
Number	Description	Herewith	Form		Filing Date	Exhibit	File No.
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		10-Q		5/15/2018	101.INS	001-37941
101.SCH	XBRL Taxonomy Extension Schema		10-Q		5/15/2018	101.SCH	001-37941
101.CAL	XBRL Taxonomy Extension Calculation Linkbase		10-Q		5/15/2018	101.CAL	001-37941
101.DEF	XBRL Taxonomy Extension Definition Linkbase		10-Q		5/15/2018	101.DEF	001-37941
101.LAB	XBRL Taxonomy Extension Label Linkbase		10-Q		5/15/2018	101.LAB	001-37941
101.PRE	XBRL Taxonomy Extension Presentation Linkbase		10-Q		5/15/2018	101.PRE	001-37941

35

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: May 15, 2018	By:	/s/ Loretta P. Mayer, Ph.D.
		Loretta P. Mayer, Ph.D.
		Chair of the Board, Chief Executive Officer and Chief Scientific Officer
Dated: May 15, 2018	By:	/s/ Thomas C. Chesterman
		Thomas C. Chesterman
		Chief Financial Officer and Treasurer

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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: May 15, 2018	/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: May 15, 2018	/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: May 15, 2018	/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: May 15, 2018	/s/ Thomas C. Chesterman
	Thomas C. Chesterman
	Chief Financial Officer and Treasurer

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 14, 2018
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	Mar. 31, 2018
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		16,537,710
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2018

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CONDENSED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash	$ 528	$ 2,101
Investment in securities held to maturity	4,243	5,023
Accounts receivable	2	16
Prepaid expenses	245	170
Inventory	787	540
Deposits	17	19
Total current assets	5,822	7,869
Property and equipment, net	1,350	1,454
Total assets	7,172	9,323
Current liabilities:
Short-term debt	182	177
Accounts payable	369	391
Accrued expenses	473	589
Notes payable, related parties	6	12
Total current liabilities	1,030	1,169
Long-term debt, net	552	591
Deferred rent	35	41
Total liabilities	1,617	1,801
Commitments and contingencies (See note 15)
Stockholders' equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 16,512,246 and 16,404,195 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	17	16
Additional paid-in capital	81,792	81,103
Stock subscribed, but not issued	8
Accumulated deficit	(76,262)	(73,597)
Total stockholders' equity	5,555	7,522
Total liabilities and stockholders' equity	$ 7,172	$ 9,323

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CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
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	16,512,246	16,404,195
Common stock shares outstanding	16,512,246	16,404,195

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CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue:
Sales	$ 19	$ 7
Cost of sales	19	4
Gross profit (loss)		3
Operating expenses:
Research and development	634	823
Selling, general and administrative	2,028	2,639
Total operating expenses	2,662	3,462
Net operating loss	(2,662)	(3,459)
Other income (expense):
Interest income	6	10
Interest expense	(22)	(13)
Interest expense, related parties		(1)
Other income (expense)	13	8
Total other income (expense)	(3)	4
Net loss	$ (2,665)	$ (3,455)
Weighted average common shares outstanding - basic and fully diluted (in shares)	16,496,385	10,160,917
Net loss per common share - basic and fully diluted (in dollars per shares)	$ (0.16)	$ (0.34)

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CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (2,665)	$ (3,455)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on investments held to maturity	(18)	(9)
Amortization of discounts on investments held to maturity		5
Bad debts expense	5
Depreciation and amortization	117	59
Stock-based compensation	698	1,061
Amortization of debt discount		(9)
(Increase) decrease in current assets:
Accounts receivable	9	4
Prepaid expenses	(75)	90
Inventory	(247)	(54)
Deposits	2	(196)
Increase (decrease) in current liabilities:
Accounts payable	(22)	(166)
Accrued contract cancellation settlement		(1,000)
Accrued expenses	(116)	291
Deferred rent	(6)	5
Net cash used in operating activities	(2,318)	(3,374)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities held to maturity		(2,957)
Proceeds received on sale of securities held to maturity	798
Purchase of property and equipment	(3)	(130)
Net cash provided by (used in) investing activities	795	(3,087)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of notes payable		21
Repayments of notes payable	(26)	(6)
Repayments of notes payable, related parties	(6)	(10)
Repayments of capital lease obligations	(18)	(7)
Net cash used in financing activities	(50)	(2)
NET CHANGE IN CASH	(1,573)	(6,463)
CASH AT BEGINNING OF PERIOD	2,101	11,826
CASH AT END OF PERIOD	528	5,363
SUPPLEMENTAL INFORMATION:
Interest paid	22	14
Income taxes paid
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchases of equipment under capital lease obligations	$ 10

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Organization and Description of Business

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of Business

Note 1 - Organization and Description of Business

SenesTech, Inc. (“SenesTech,” the “Company,” “we” or “us”) was formed in July 2004 and incorporated in the state of Nevada. The Company subsequently reincorporated in the state of Delaware in November 2015. Our corporate headquarters is in Flagstaff, Arizona. We have developed and are commercializing a global, proprietary technology for managing animal pest populations, primarily rat populations, through fertility control.

Although there is a myriad of tools available to fight rat infestations, pest management professionals (PMPs) continue to face challenges in controlling infestations. Not only do these infestations result in incredible infrastructure damage, but rats also pose additional risks to the health and food security of our communities. In addition to these challenges, PMPs are being increasingly asked for new solutions to help them solve the infestation problem. With growing interest in non-lethal options, it is becoming increasingly important for PMPs to have new tools at their disposable. Our goal is to provide PMPs with a proven solution to not only combat their most difficult infestations, but also offer a non-lethal option to serve customers that are looking to decrease or remove the amount of poison used in their integrated pest management programs.

Our first fertility control product, ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide (“VCD”) and triptolide. When consumed, ContraPest targets reproduction, limiting fertility in male and female rats beginning with the first breeding cycle following consumption. ContraPest is being marketed for use in controlling rat populations, specifically Norway and roof rats. We submitted ContraPest for registration with the EPA on August 23, 2015, and the EPA granted registration approval for ContraPest effective August 2, 2016. We expect to continue to pursue regulatory approvals and amendments to existing registration in the United States for ContraPest, including additional species and additional jurisdictions.

We believe ContraPest is the first and only non-lethal, fertility control product approved by the EPA for the management of rodent populations. In addition to the EPA registration of ContraPest in the U.S., we must obtain registration from the various state regulatory agencies prior to selling in each state. To date, we have received registration for ContraPest in 49 states and the District of Columbia. Registration in California is currently pending.

Potential Need for Additional Capital

Since our inception, we have sustained significant operating losses in the course of our research and development activities, and expect such losses to continue for the near future. We have generated limited revenue to date from product sales, research grants and licensing fees received under our former license agreement with Neogen. In 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 through the sale of convertible preferred stock and common stock, including an initial public offering of 1,875,000 shares of our common stock on December 8, 2016 with warrants to purchase an additional 187,500 shares issued to Roth Capital Partners, LLC as underwriter, and a second offering on November 21, 2017 of 5,860,000 shares of our common stock at $1 per share with warrants issued to investors to purchase an additional 4,657,500 shares of our common stock at $1.50 per share, and warrants issued to Roth Capital Partners, LLC, as underwriter, to purchase an additional 945,000 shares at $1.50 per share; debt financing, consisting primarily of convertible notes; and, to a lesser extent, payments received in connection with research grants and licensing fees. Through March 31, 2018, we had received net proceeds of $54.4 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. At March 31, 2018, we had an accumulated deficit of $76.3 million and cash and cash equivalents and highly liquid investments of $4.8 million. 

Our ultimate success depends upon the outcome of a combination of factors, including: (i) the success of our research and development; (ii) ongoing regulatory approval and successful commercialization of ContraPest and our other product candidates; (iii) market acceptance, commercial viability and profitability of ContraPest and other products; (iv) the ability to market our 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 our business; and (vi) our ability to meet our working capital needs. 

Based upon our current operating plan, we expect that cash and cash equivalents and highly liquid, short term investments at March 31, 2018, in combination with anticipated revenue, will be sufficient to fund our current operations for the near future. However, if anticipated revenue targets are not achieved, we may seek to reduce operating expenses and are likely to require additional capital in order to fund our operating losses and research and development activities until we become profitable. We may never achieve profitability or generate positive cash flows, and unless and until we do, we will need to continue to need to raise capital through equity or debt financing. If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit or terminate development and commercialization efforts. 

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 March 31, 2018, the Company’s operating results for the three months ended March 31, 2018 and 2017, and the Company’s cash flows for the three months ended March 31, 2018 and 2017. The accompanying financial information as of December 31, 2017 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 for the year ended December 31, 2017. All amounts shown in these financial statements and accompanying notes are in thousands, except percentages and per share and share amounts.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

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 and classification of assets and liabilities, 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 preferred stock, 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 material impact on net earnings, financial position or cash flows.

Cash and Cash Equivalents

The Company considers money market fund investments to be cash equivalents. The Company had cash equivalents of $51 and $3 at March 31, 2018 and December 31, 2017, 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 $5 as of March 31, 2018 and $0 at December 31, 2017.

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 March 31, 2018 and December 31, 2017, the Company had inventories of $787 and $540, respectively.

Prepaid Expenses

Prepaid expenses consist primarily of payments made for director compensation as well as payments made for director and officer insurance, rent and legal deposits 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 repair and maintenance costs on its major equipment, which 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

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (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 the fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three months ended March 31, 2018 and 2017, or the twelve months ended December 31, 2017.

The Company derives revenue primarily from commercial sales of products.

For the three months ended March 31, 2018 and March 31, 2017, the Company generated net revenues of $19 and $7, respectively, from the sale of ContraPest.

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, 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 months ended March 31, 2018 and 2017, is as follows:

	Three Months Ended March 31,
	2018		2017
Research and development	$	29	$	94
Selling, general and administrative		669		967
Total stock-based compensation expense	$	698	$	1,061

See Note 13 for additional discussion on stock-based compensation.

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.

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 March 31, 2018 or December 31, 2017 and as such, no interest or penalties were recorded in income tax expense.

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, 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 months ended March 31, 2018 and 2017. Therefore, basic and diluted loss per share attributable to common stockholders are the same for each period 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):

	March 31,
	2018		2017
Common stock purchase warrants		6,431,785		829,284
Restricted stock unit		237,885		855,430
Common stock options		1,629,967		1,502,300
Total		8,299,637		3,187,014

Adoption of New Accounting Standards:

In May 2014 the FASB issued ASU 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. Effective January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers” using the modified retrospective method to all contracts that were not completed as of the date of adoption. The results of operations for reported periods after January 1, 2018 are presented under this amended guidance, while prior period amounts are reported in accordance with ASC 605 — Revenue Recognition. There was no material impact on our financial position, results of operations, or cash flows. See Note 2 — Summary of Significant Accounting Policies — Revenue Recognition.

In March 2016, the FASB issued ASU 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. The Company has adopted the provisions of ASU 2016-09 on its financial statements. There was no material impact on our financial position, results of operations, or cash flows

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): 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. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company has adopted the provisions of ASU 2016-15 on its financial statements. There was no material impact on our financial position, results of operations, or cash flows.

In January 2016, the FASB issued ASU 2016-01, 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 the first quarter of 2018. The Company has adopted the provisions of ASU 2016-01 on its financial statements. There was no material impact on our financial position, results of operations, or cash flows.

 Accounting Standards Issued But Not Yet Adopted:

In February 2016, the FASB issued ASU 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 February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The new guidance allows an entity to reclassify the income tax effects of the Public Law 115-97 “An Act to Provide Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018”, commonly known as the Tax Cuts and Job Act of 2017 (the “2017 Tax Act”) on items within accumulated other comprehensive income/(loss) to retained earnings. This new guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The new standard must be adopted retrospectively to each period in which a taxpayer recognizes the effect of the change in the U.S. federal corporate income tax rate from the 2017 Tax Act. The Company is currently assessing the impact of ASU 2018-02 on our consolidated financial statements and related disclosures.] 

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Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 3 - Fair Value Measurements

We invest in various short term, highly liquid financial instruments, which may include municipal debt securities, corporate bonds, U.S. agency securities and commercial paper. We value these instruments at fair value. The accounting guidance for fair value, among other things, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The framework for measuring fair value consists of 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.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:

A. Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

B. Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

C. Income approach: Techniques to convert future amounts to a single present amount based upon market expectations, including present value techniques, option-pricing and excess earnings models.

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):

	March 31, 2018
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	51	$	—	$	—	$	51
Corporate fixed income debt securities		—		4,243		—		4,243
Total	$	51	$	4,243	$	—	$	4,294
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—
	December 31, 2017
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	3	$	—	$	—	$	3
Corporate fixed income debt securities		—		5,023		—		5,023
Total	$	3	$	5,023	$	—	$	5,026
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—

(1) The change in the fair value of the common stock warrant and convertible notes payable for the three months ended March 31, 2018 was recorded as a decrease to other income (expense) and interest expense of less than $1, 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

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Investments In Securities Held To Maturity

Note 4 - Investments in Securities Held to Maturity

As of March 31, 2018, investment in securities held to maturity primarily consisted of corporate fixed income securities 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 plus or minus market fluctuation and gains and losses are recognized as the sale or redemption of the securities is 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. For the three months ended March 31, 2018, the Company recorded $18 net 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 March 31, 2018:

		March 31, 2018
	Contractual Maturity (in months)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market  Value
Mutual funds		$	—	$	—	$	—	$	—
Corporate fixed income securities	Less than 12 months		4,237		6		—		4,243
Total investments		$	4,237	$	6	$	—	$	4,243

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Prepaid Expenses

3 Months Ended

Mar. 31, 2018

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

Prepaid Expenses

Note 5 - Prepaid Expenses

Prepaid expenses consist of the following:

	March 31,		December 31,
	2018		2017
Director compensation	$	37	$	66
Director and officer insurance		82		33
NASDAQ fees		41		—
Legal retainer		25		25
Inventory purchase deposits		20		20
Professional services retainer		8		8
Rent		17		—
Equipment service deposits		5		7
Engineering, software licenses and other		10		11
Total prepaid expenses	$	245	$	170

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Property and Equipment

3 Months Ended

Mar. 31, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment

Note 6 - Property and Equipment

Property and equipment, net consist of the following:

		March 31,			December 31,
	Useful Life	2018			2017
Research and development equipment	5 years	$	1,349		$	1,349
Office and computer equipment	3 years		686			672
Autos	5 years		305			305
Furniture and fixtures	7 years		34			34
Leasehold improvements	*		283			283
			2,657			2,643
Less accumulated depreciation and amortization			(1,307	)		(1,189	)
Total		$	1,350		$	1,454

* Shorter of lease term or estimated useful life

Depreciation and amortization expense was approximately $117 and $59 for the three months ended March 31, 2018 and 2017, respectively.

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Accrued Expenses

3 Months Ended

Mar. 31, 2018

Payables and Accruals [Abstract]

Accrued Expenses

Note 7 - Accrued Expenses

Accrued expenses consist of the following:

	March 31,		December 31,
	2018		2017
Compensation and related benefits	$	198	$	304
Accrued Litigation		269		269
Board Compensation		—		16
Other		6		—
Total accrued expenses	$	473	$	589

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Accrued Contract Cancellation Settlement

3 Months Ended

Mar. 31, 2018

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 a 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 — Commitments and Contingencies for further details.

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Borrowings

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Borrowings

Note 9 - Borrowings

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

	March 31,			December 31,
Short-term debt:	2018			2017
Current portion of long-term debt		182			177
Total short-term debt	$	182		$	177
Long-term debt:
Capital lease obligations	$	263		$	272
Other promissory notes		471			496
Total		734			768
Less: current portion of long-term debt		(182	)		(177	)
Total long-term debt	$	552		$	591

Capital Lease Obligations 

Capital lease obligations are for computer and lab equipment leased through GreatAmerica Financial Services, Thermo Fisher Scientific, Navitas Credit Corp. and ENGS Commercial Finance Co. These capital leases expire at various dates through April 2022 and carry interest rates ranging from 6.4% to 11.6%.

Other Promissory Notes

Also included in the table above are three notes payable to Direct Capital, one note to M2 Financing and one note to Fidelity Capital, all for the financing of fixed assets. These notes expire at various dates through June 2022 and carry interest rates ranging from 4.3% to 13.8%.

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Notes Payable, Related Parties

3 Months Ended

Mar. 31, 2018

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:

	March 31,		December 31,
	2018		2017
Unsecured promissory note, interest rate of 4.25% and 8% per annum	$	6	$	12
Total notes payable, related parties		6		12
Less: current portion of notes payable, related parties		6		12
Total notes payable, long-term	$	—	$	—

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 May 2018. The deferred salary obligation requires monthly payments of $1 and matures in June 2018.

Amounts outstanding on these obligations were $6 and $12 at March 31, 2018 and December 31, 2017, respectively.

Interest expense on the notes payable, related parties, was $0 and $1 for the three months ended March 31, 2018 and the year ended December 31, 2017 respectively.

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Common Stock Warrants and Common Stock Warrant Liability

3 Months Ended

Mar. 31, 2018

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 March 31, 2018 as follows:

	Number
	of		Date
Common Stock Warrants	Warrants		Issued	Term		Exercise Price
Outstanding at December 31, 2016		829,285
Common Stock Offering Warrants Issued		4,657,500	November 2017		5 years	$	1.50
Common Stock Offering Underwriter Warrants		945,000	November 2017		5 years	$	1.50
Outstanding at December 31, 2017		6,431,785
Warrants issued		—
Warrants exercised		—
Outstanding at March 31, 2018		6,431,785

Common Stock Warrants Issued to Participants in Offering of the Company’s Common Stock

On November 8, 2017, the Company issued a total of 4,657,500 detachable common stock warrants issued with the second public offering of 5,860,000 shares of its common stock at $1.00 per share. The common stock warrant is exercisable until five years from the date of grant. The common shares of the Company’s stock and detachable warrants exist independently as separate securities. As such, the Company estimated the fair value of the common stock warrants, exercisable at $1.50 per share, to be $661 using a lattice model based on the following significant inputs: Common stock price of $1.00; comparable company volatility of 73.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 1.87%.

Common Stock Warrant Issued to Underwriter of Common Stock Offering

In November 2017, the Company issued to Roth Capital Partners, LLC, as underwriter, a warrant to purchase 945,000 shares of common stock at an exercise price of $1.50 per share as consideration for providing services in connection with our common stock offering. The warrant was fully vested and exercisable on the date of issuance. The common stock warrant is exercisable until five years from the date of grant. The Company estimated the fair value of the common stock warrants, exercisable at $1.50 per share, to be $134 using a lattice model based on the following significant inputs: Common stock price of $1.00; comparable company volatility of 73.8%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 1.87%.

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 $0 at March 31, 2018. 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 was 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 less than $1 for the three months ended March 31, 2018 and was recorded in other income (expense) in the accompanying statements of operations and comprehensive loss.

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Stockholders' Deficit

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Stockholders' Deficit

Note 12 - Stockholders’ Deficit

Common Stock

The Company had 16,512,246 and 16,404,195 shares of common stock issued and outstanding as of March 31, 2018 and December 31, 2017, respectively. 

During the three months ended March 31, 2018, the Company issued an aggregate of 108,051 shares of common stock as follows: 13,900 shares for the cashless exercise of stock options, 32,625 shares to a former employee for the net settlement of restricted stock units whose vesting accelerated upon the termination of their employment contract, 37,162 shares to a Board member in net settlement of Board compensation totaling $28 and 24,364 shares for the net settlement of restricted stock units that vested during the period.

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Stock-based Compensation

3 Months Ended

Mar. 31, 2018

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

Stock-based Compensation

Note 13 - Stock-based Compensation 

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, effective September 26, 2016. 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 March 31, 2018, the Company had 1,008,928 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 three months ended March 31, 2018, were as follows:

	Employee			Non-Employee
Expected volatility		71.0% -72.3	%		N/A
Expected dividend yield		—			N/A
Expected term (in years)		3.5			N/A
Risk-free interest rate		1.58%-2.44	%		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, 2017		1,651,800		$	1.67		5.0	$	—
Granted		34,167		$	0.65		5.0	$	—
Exercised		(56,000	)	$	0.50		—	$	—
Forfeited		—		$	—		—	$	—
Expired		—		$	—		—	$	—
Outstanding at March 31, 2018		1,629,967		$	1.69		4.5	$	—
Exercisable at March 31, 2018		1,276,596		$	1.31		4.3	$	—

(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 $0.51 and $0.72 per share for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively.

The stock-based compensation expense was recorded as follows:

	Three Months Ended March 31,
	2018		2017
Research and development	$	29	$	94
Selling, general and administrative		669		967
Total stock-based compensation expense	$	698	$	1,061

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

At March 31, 2018, the total compensation cost related to unvested options not yet recognized was $1,425, which will be recognized over a weighted average period of four years, assuming the employees complete their service period required for vesting.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the three months ended March 31, 2018:

	Number of  Units			Weighted Average Grant-Date Fair Value Per Units
Outstanding as of December 31, 2017		287,885		$	1.86
Granted		—		$	—
Vested		(50,000	)(1)	$	6.00
Forfeited		—		$	—
Outstanding as of March 31, 2018		237,885		$	0.99

(1) In February 2018, the Company net issued 32,625 shares of common stock to a former employee of the Company under the employee’s separation agreement, which accelerated the vesting of certain restricted stock units.

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License and Other Agreements

3 Months Ended

Mar. 31, 2018

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”), which agreement was subsequently terminated in January 2017. Under the terms of the license agreement, 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. Under the terms of the licensing agreement, the Company was required to submit an application to the United States Environmental Protection Agency (“EPA”) for approval of ContraPest, complete two agricultural field trials that support commercial feasibility for use of the product, and submit such studies and results to Neogen for their approval. The application to the EPA was submitted in August 2015, and the EPA granted registration approval for ContraPest effective August 2, 2016. The first field trial was completed, but never approved by Neogen. With respect to the second trial, the EPA indicated to the Company that it would be more efficient to wait until the product was approved rather than applying for an additional experimental use permit. Given that the EPA has granted registration approval, the Company is now preparing to commence the second field trial.

The Company received nonrefundable, upfront license fee payments, totaling $488. The remaining license fee of $162 was to be paid when Neogen formally accepted the Company’s report on its study of the field trials. The Company has determined that the license does not have stand-alone value, therefore, the license fees of $488 are deferred and recognized, on a straight-line basis, from May 2014, the effective date of the agreement, over the estimated related period of performance through December 2016, which includes the acceptance by Neogen of the Company’s study for the field trials that support commercial feasibility for use of the product.

The Company did not recognize any revenue for the three months ended March 31, 2018 or the year ended December 31, 2017 under the licensing agreement.

In addition, Neogen was obligated under the licensing agreement to pay additional consideration to the Company consisting of future fixed-amount of contingent milestone payments (i.e. post-regulatory approval license fees) of up to an aggregate of $3.0 million, and sales-based royalties on the net sales of licensed products by Neogen, as well as its affiliates and sub licensees. The Company did not receive or earn these potential contingent consideration payments as the milestone events to receive such post-approval license fees and sales based royalties were not achieved prior to the termination of the agreement. The agreement was to expire upon the later of (i) the expiration of last patent included in the licensed IP; or (ii) the tenth anniversary of the effective date of the agreement (i.e. May 2024).

On January 23, 2017 we entered into a termination agreement (the “Settlement Agreement”) with 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 $1.0 million in settlement of all claims.

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 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. These agreements were renewed for an additional year, through January 2019.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

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.

On February 20, 2018, New Enterprises, Ltd. (“New Enterprises”), filed suit in the U.S. District Court for the District of Arizona against the Company and Roth Capital Partners, LLC. The suit alleges nine counts against the Company, including that the Company engaged in common law fraud and securities fraud to induce the chairman of New Enterprises into investing in the Company; that the Company breached the lock-up agreement and tortuously interfered with prospective business advantage. New Enterprises is seeking monetary damages, including compensatory damages, punitive damages, and attorney’s fees. The Company believes there is no basis to any of the claims, and intends to vigorously defend itself, including seeking appropriate counterclaims.

Neogen Settlement Agreement

On January 23, 2017, the Company entered into an 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 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”), 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. Prior to the notice of filing received by SenesTech, the Company was unaware that any action was contemplated or actioned and was proceeding with all elements of the agreement in good faith. All communications prior to the complaint indicated that Neogen also was proceeding in good faith to execute on the agreement.

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. Both Neogen and the Company further agreed to drop any and all legal complaints, claims or threat of litigation for failure to perform under the previous contractual relationship.

Although notice of the legal action by Neogen and the subsequent agreement to terminate existing agreements with Neogen, occurred after December 31, 2016, as per the provisions of FAS 5 Loss Contingency, included in the financial statements of the Company at December 31, 2016 is a $1,000 charge to selling, general and administrative expenses and a corresponding accrual of contract cancellation settlement agreement related to this agreement.

Lease Commitments

Rent expense was $61 and $78 for the three months ended March 31, 2018 and March 31, 2017, respectively. The future minimum lease payments under non-cancellable operating lease and future minimum capital lease payments as of March 31, 2018 are as follows:

	Capital Leases		Operating  Lease
Years Ending December 31,
2018		76		192
2019		92		221
2020		71		—
2021		57		—
2022		28		—
Total minimum lease payments	$	324	$	413

	Capital Leases
Less: amounts representing interest (6.39%, ranging from 10.48% to 11.56%)	$	59
Present value of minimum lease payments		265
Less: current installments under capital lease obligations		73
Total long-term portion	$	192

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Subsequent Events

3 Months Ended

Mar. 31, 2018

Subsequent Events [Abstract]

Subsequent Events

Note 16 - Subsequent Events

In April 2018, the Company net issued 25,464 shares of common stock for the net settlement of restricted stock units that vested during the period. 

The Company has evaluated subsequent events from the balance sheet date through May 15, 2018, the date at which the financial statements were issued, and determined that there were no other items that require adjustment to or disclosure in the financial statements.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

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 and classification of assets and liabilities, 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 preferred stock, 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 material impact on net earnings, financial position or cash flows.

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 $51 and $3 at March 31, 2018 and December 31, 2017, 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 $5 as of March 31, 2018 and $0 at December 31, 2017.

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 March 31, 2018 and December 31, 2017, the Company had inventories of $787 and $540, respectively.

Prepaid Expenses

Prepaid Expenses

Prepaid expenses consist primarily of payments made for director compensation as well as payments made for director and officer insurance, rent and legal deposits 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 repair and maintenance costs on its major equipment, which 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

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (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 the fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three months ended March 31, 2018 and 2017, or the twelve months ended December 31, 2017.

The Company derives revenue primarily from commercial sales of products.

For the three months ended March 31, 2018 and March 31, 2017, the Company generated net revenues of $19 and $7, respectively, from the sale of ContraPest.

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, 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.

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, 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 months ended March 31, 2018 and 2017, is as follows:

	Three Months Ended March 31,
	2018		2017
Research and development	$	29	$	94
Selling, general and administrative		669		967
Total stock-based compensation expense	$	698	$	1,061

See Note 13 for additional discussion on stock-based compensation.

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.

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 March 31, 2018 or December 31, 2017 and as such, no interest or penalties were recorded in income tax expense.

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, 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 months ended March 31, 2018 and 2017. Therefore, basic and diluted loss per share attributable to common stockholders are the same for each period 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):

	March 31,
	2018		2017
Common stock purchase warrants		6,431,785		829,284
Restricted stock unit		237,885		855,430
Common stock options		1,629,967		1,502,300
Total		8,299,637		3,187,014

Adoption of New Accounting Standards:

Adoption of New Accounting Standards:

In May 2014 the FASB issued ASU 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. Effective January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers” using the modified retrospective method to all contracts that were not completed as of the date of adoption. The results of operations for reported periods after January 1, 2018 are presented under this amended guidance, while prior period amounts are reported in accordance with ASC 605 — Revenue Recognition. There was no material impact on our financial position, results of operations, or cash flows. See Note 2 — Summary of Significant Accounting Policies — Revenue Recognition.

In March 2016, the FASB issued ASU 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. The Company has adopted the provisions of ASU 2016-09 on its financial statements. There was no material impact on our financial position, results of operations, or cash flows

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): 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. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company has adopted the provisions of ASU 2016-15 on its financial statements. There was no material impact on our financial position, results of operations, or cash flows.

In January 2016, the FASB issued ASU 2016-01, 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 the first quarter of 2018. The Company has adopted the provisions of ASU 2016-01 on its financial statements. There was no material impact on our financial position, results of operations, or cash flows.

Accounting Standards Issued But Not Yet Adopted:

 Accounting Standards Issued But Not Yet Adopted:

In February 2016, the FASB issued ASU 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 February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The new guidance allows an entity to reclassify the income tax effects of the Public Law 115-97 “An Act to Provide Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018”, commonly known as the Tax Cuts and Job Act of 2017 (the “2017 Tax Act”) on items within accumulated other comprehensive income/(loss) to retained earnings. This new guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The new standard must be adopted retrospectively to each period in which a taxpayer recognizes the effect of the change in the U.S. federal corporate income tax rate from the 2017 Tax Act. The Company is currently assessing the impact of ASU 2018-02 on our consolidated financial statements and related disclosures.]

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Schedule of employee stock-based compensation expense

The stock-based compensation expense recorded for the three months ended March 31, 2018 and 2017, is as follows:

	Three Months Ended March 31,
	2018		2017
Research and development	$	29	$	94
Selling, general and administrative		669		967
Total stock-based compensation expense	$	698	$	1,061

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):

	March 31,
	2018		2017
Common stock purchase warrants		6,431,785		829,284
Restricted stock unit		237,885		855,430
Common stock options		1,629,967		1,502,300
Total		8,299,637		3,187,014

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

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):

	March 31, 2018
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	51	$	—	$	—	$	51
Corporate fixed income debt securities		—		4,243		—		4,243
Total	$	51	$	4,243	$	—	$	4,294
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—
	December 31, 2017
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	3	$	—	$	—	$	3
Corporate fixed income debt securities		—		5,023		—		5,023
Total	$	3	$	5,023	$	—	$	5,026
Financial Liabilities:
Common stock warrant liability (1)	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—

(1) The change in the fair value of the common stock warrant and convertible notes payable for the three months ended March 31, 2018 was recorded as a decrease to other income (expense) and interest expense of less than $1, in the statements of operations and comprehensive loss.

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Investment in Securities Held to Maturity (Tables)

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Summary of held to maturity securities

The following is a summary of held to maturity securities at March 31, 2018:

		March 31, 2018
	Contractual Maturity (in months)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market  Value
Mutual funds		$	—	$	—	$	—	$	—
Corporate fixed income securities	Less than 12 months		4,237		6		—		4,243
Total investments		$	4,237	$	6	$	—	$	4,243

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Prepaid Expenses (Tables)

3 Months Ended

Mar. 31, 2018

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

Schedule of prepaid expenses

Prepaid expenses consist of the following:

	March 31,		December 31,
	2018		2017
Director compensation	$	37	$	66
Director and officer insurance		82		33
NASDAQ fees		41		—
Legal retainer		25		25
Inventory purchase deposits		20		20
Professional services retainer		8		8
Rent		17		—
Equipment service deposits		5		7
Engineering, software licenses and other		10		11
Total prepaid expenses	$	245	$	170

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2018

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment, net consist of the following:

		March 31,			December 31,
	Useful Life	2018			2017
Research and development equipment	5 years	$	1,349		$	1,349
Office and computer equipment	3 years		686			672
Autos	5 years		305			305
Furniture and fixtures	7 years		34			34
Leasehold improvements	*		283			283
			2,657			2,643
Less accumulated depreciation and amortization			(1,307	)		(1,189	)
Total		$	1,350		$	1,454

* Shorter of lease term or estimated useful life

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Accrued Expenses (Tables)

3 Months Ended

Mar. 31, 2018

Payables and Accruals [Abstract]

Schedule of accrued expenses

Accrued expenses consist of the following:

	March 31,		December 31,
	2018		2017
Compensation and related benefits	$	198	$	304
Accrued Litigation		269		269
Board Compensation		—		16
Other		6		—
Total accrued expenses	$	473	$	589

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Borrowings (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Schedule of capital lease obligations

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

	March 31,			December 31,
Short-term debt:	2018			2017
Current portion of long-term debt		182			177
Total short-term debt	$	182		$	177
Long-term debt:
Capital lease obligations	$	263		$	272
Other promissory notes		471			496
Total		734			768
Less: current portion of long-term debt		(182	)		(177	)
Total long-term debt	$	552		$	591

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Notes Payable, Related Parties (Tables)

3 Months Ended

Mar. 31, 2018

Related Party Transactions [Abstract]

Schedule of notes payable, related parties

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

	March 31,		December 31,
	2018		2017
Unsecured promissory note, interest rate of 4.25% and 8% per annum	$	6	$	12
Total notes payable, related parties		6		12
Less: current portion of notes payable, related parties		6		12
Total notes payable, long-term	$	—	$	—

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Common Stock Warrants and Common Stock Warrant Liability (Tables)

3 Months Ended

Mar. 31, 2018

Warrants and Rights Note Disclosure [Abstract]

Schedule of common stock warrant activity

The table summarizes the common stock warrant activity as of March 31, 2018 as follows:

	Number
	of		Date
Common Stock Warrants	Warrants		Issued	Term		Exercise Price
Outstanding at December 31, 2016		829,285
Common Stock Offering Warrants Issued		4,657,500	November 2017		5 years	$	1.50
Common Stock Offering Underwriter Warrants		945,000	November 2017		5 years	$	1.50
Outstanding at December 31, 2017		6,431,785
Warrants issued		—
Warrants exercised		—
Outstanding at March 31, 2018		6,431,785

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Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

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 three months ended March 31, 2018, were as follows:

	Employee			Non-Employee
Expected volatility		71.0% -72.3	%		N/A
Expected dividend yield		—			N/A
Expected term (in years)		3.5			N/A
Risk-free interest rate		1.58%-2.44	%		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, 2017		1,651,800		$	1.67		5.0	$	—
Granted		34,167		$	0.65		5.0	$	—
Exercised		(56,000	)	$	0.50		—	$	—
Forfeited		—		$	—		—	$	—
Expired		—		$	—		—	$	—
Outstanding at March 31, 2018		1,629,967		$	1.69		4.5	$	—
Exercisable at March 31, 2018		1,276,596		$	1.31		4.3	$	—

(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 $0.51 and $0.72 per share for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively.

Schedule of stock-based compensation expense

The stock-based compensation expense was recorded as follows:

	Three Months Ended March 31,
	2018		2017
Research and development	$	29	$	94
Selling, general and administrative		669		967
Total stock-based compensation expense	$	698	$	1,061

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

The following table summarizes restricted stock unit activity for the three months ended March 31, 2018:

	Number of  Units			Weighted Average Grant-Date Fair Value Per Units
Outstanding as of December 31, 2017		287,885		$	1.86
Granted		—		$	—
Vested		(50,000	)(1)	$	6.00
Forfeited		—		$	—
Outstanding as of March 31, 2018		237,885		$	0.99

(1) In February 2018, the Company net issued 32,625 shares of common stock to a former employee of the Company under the employee’s separation agreement, which accelerated the vesting of certain restricted stock units.

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2018

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 March 31, 2018 are as follows:

	Capital Leases		Operating  Lease
Years Ending December 31,
2018		76		192
2019		92		221
2020		71		—
2021		57		—
2022		28		—
Total minimum lease payments	$	324	$	413

	Capital Leases
Less: amounts representing interest (6.39%, ranging from 10.48% to 11.56%)	$	59
Present value of minimum lease payments		265
Less: current installments under capital lease obligations		73
Total long-term portion	$	192

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Organization and Description of Business (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
	Nov. 21, 2017	Dec. 08, 2016	Mar. 31, 2018	Dec. 31, 2017
Number of shares issued			108,051
Proceeds from issuance and sale of common stock, preferred stock, convertible and other promissory notes			$ 54,400
Proceeds from licensing fees			1,600
Accumulated deficit			(76,262)	$ (73,597)
Cash, cash equivalents and short-term investments			$ 4,800
Second Public Offering [Member]
Number of shares issued	5,860,000
Shares issued per share (in dollars per share)	$ 1.00
Initial Public Offering [Member]
Number of shares issued		1,875,000
Warrant [Member] | Second Public Offering [Member] | Investor [Member]
Number of shares issued	4,657,500
Shares issued per share (in dollars per share)	$ 1.50
Warrant [Member] | Second Public Offering [Member] | Roth Capital Partners, LLC [Member]
Number of shares issued	945,000
Shares issued per share (in dollars per share)	$ 1.50
Warrant [Member] | Initial Public Offering [Member]
Number of shares issued		1,875,000

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Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Total stock-based compensation expense	$ 698	$ 1,061
Research and Development Expense [Member]
Total stock-based compensation expense	29	94
General and Administrative Expense [Member]
Total stock-based compensation expense	$ 669	$ 967

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Summary of Significant Accounting Policies (Details 1) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Total	8,299,637	3,187,014
Common Stock Purchase Warrants [Member]
Total	6,431,785	829,284
Restricted Stock Units [Member]
Total	237,885	855,430
Employee Stock Options [Member]
Total	1,629,967	1,502,300

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Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Accounting Policies [Abstract]
Cash equivalents, at carrying value	$ 51		$ 3
Allowance for doubtful trade receivables	5		0
Inventory, net	787		$ 540
Net revenues	$ 19	$ 7

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Financial Assets:
Held-to-maturity Securities, Fair Value	$ 4,243
Fair Value Measurements, Recurring [Member]
Financial Assets:
Total	4,294	$ 5,026
Financial Liabilities:
Common stock warrant liability
Total
Fair Value Measurements, Recurring [Member] | Corporate Fixed Income Debt Securities [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value	4,243	5,023
Fair Value Inputs, Level 1 [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Total	51	3
Financial Liabilities:
Common stock warrant liability
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	4,243	5,023
Financial Liabilities:
Common stock warrant liability
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	4,243	5,023
Fair Value Inputs, Level 3 [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Total
Financial Liabilities:
Common stock warrant liability
Total
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	51	3
Money Market Funds [Member] | Fair Value Inputs, Level 1 [Member] | Fair Value Measurements, Recurring [Member]
Financial Assets:
Held-to-maturity Securities, Fair Value	51	3
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

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Fair Value Measurements (Details Narrative) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)
Fair Value Disclosures [Abstract]
Fair value adjustment of warrants	$ 1

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Investment in Securities Held to Maturity (Details) $ in Thousands	Mar. 31, 2018 USD ($)
Schedule of Held-to-maturity Securities [Line Items]
Cost	$ 4,237
Gross Unrealized Gains	6
Gross Unrealized Losses
Fair Market Value	4,243
Corporate Fixed Income Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost	4,237
Gross Unrealized Gains	6
Gross Unrealized Losses
Fair Market Value	4,243
Mutual Funds [Member]
Schedule of Held-to-maturity Securities [Line Items]
Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Market Value

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Investment in Securities Held to Maturity (Details Narrative) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)
Investments, Debt and Equity Securities [Abstract]
Net gain (loss) on investents	$ 18

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Prepaid Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Director compensation	$ 37	$ 66
Director and officer insurance	82	33
NASDAQ fees	41
Legal retainer	25	25
Inventory purchase deposits	20	20
Professional services retainer	8	8
Rent	17
Equipment service deposits	5	7
Engineering, software licenses and other	10	11
Total prepaid expenses	$ 245	$ 170

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Property and Equipment (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment, Gross		$ 2,657	$ 2,643
Less accumulated depreciation and amortization		(1,307)	(1,189)
Total		1,350	1,454
Research and Development Equipment [Member]
Property, Plant and Equipment, Gross		$ 1,349	1,349
Property, Plant and Equipment, Useful Life		5 years
Office and Computer Equipment [Member]
Property, Plant and Equipment, Gross		$ 686	672
Property, Plant and Equipment, Useful Life		3 years
Autos [Member]
Property, Plant and Equipment, Gross		$ 305	305
Property, Plant and Equipment, Useful Life		5 years
Furniture and Fixtures [Member]
Property, Plant and Equipment, Gross		$ 34	34
Property, Plant and Equipment, Useful Life		7 years
Leasehold Improvements [Member]
Property, Plant and Equipment, Gross	[1]	$ 283	$ 283

[1] Shorter of lease term or estimated useful life.

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Property and Equipment (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense	$ 117	$ 59

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Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Payables and Accruals [Abstract]
Compensation and related benefits	$ 198	$ 304
Accrued Litigation	269	269
Board Compensation		16
Other	6
Total accrued expenses	$ 473	$ 589

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Accrued Contract Cancellation Settlement (Details Narrative) $ in Thousands	Jan. 23, 2017 USD ($)
Accrued Contract Cancellation Settlement Disclosure [Abstract]
Accrued contract cancellation settlement liabilities	$ 1,000

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Borrowings (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Short-term debt:
Current portion of long-term debt	$ 182	$ 177
Total short-term debt	182	177
Long-term debt:
Capital lease obligations	263	272
Other promissory notes	471	496
Total	734	768
Less: current portion of long-term debt	(182)	(177)
Total long-term debt	$ 552	$ 591

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Borrowings (Details Narrative)	3 Months Ended
	Mar. 31, 2018
Capital Lease Obligations [Member]
Description of borrowings expiration period	Various dates through April 2022
Capital Lease Obligations [Member] | Minimum [Member]
Interest rate on borrowings	6.40%
Capital Lease Obligations [Member] | Maximum [Member]
Interest rate on borrowings	11.60%
Other Promissory Notes [Member]
Description of borrowings expiration period	Various dates through June 2022
Other Promissory Notes [Member] | Minimum [Member]
Interest rate on borrowings	4.30%
Other Promissory Notes [Member] | Maximum [Member]
Interest rate on borrowings	13.80%

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Notes Payable, Related Parties (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Related Party Transactions [Abstract]
Unsecured promissory note, interest rate of 4.25% and 8% per annum	$ 6	$ 12
Total notes payable, related parties	6	12
Less: current portion of notes payable, related parties	6	12
Total notes payable, long-term

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Notes Payable, Related Parties (Details Narrative) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		12 Months Ended
	Apr. 30, 2013	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Settlement of outstanding obligations	$ 40	$ 6		$ 12
Due to Employees	$ 72
Interest expense related party			$ 1	$ 1
Salary Obligation [Member]
Debt interest rate	4.25%
Debt instrument payment	$ 1
Debt instrument maturity date	Jun. 30, 2018
Unsecured Promissory Note [Member]
Debt interest rate	8.00%
Debt instrument payment	$ 1
Debt instrument maturity date	May 31, 2018

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Common Stock Warrants and Common Stock Warrant Liability (Details) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Outstanding at beginning	6,431,785	829,285
Warrants issued
Warrants exercised
Outstanding at end	6,431,785	6,431,785
Common Stock Offering Warrants Issued [Member]
Warrants issued		4,657,500
Date Issued		2017-11
Term		5 years
Exercise Price (in dollars per share)		$ 1.50
Common Stock Offering Underwriter Warrants [Member]
Warrants issued		945,000
Date Issued		2017-11
Term		5 years
Exercise Price (in dollars per share)		$ 1.50

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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
	Nov. 08, 2017	Nov. 30, 2017	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2015
Share price (in dollars per share)			$ 0.51	$ 0.72
Fair value adjustment of warrants			$ 1
Second Public Offering [Member]
Number of shares purchased	5,860,000
Exercise price (in dollars per share)	$ 1.00
Common Stock Warrants Issued To Participants in Offering of the Company's Common Stock [Member]
Number of shares purchased	4,657,500
Exercise price (in dollars per share)	$ 1.50
Warrant term	5 years
Description of method used	Lattice model
Share price (in dollars per share)	$ 1.00
Fair value of common stock warrant	$ 661
Expected volatility rate	73.80%
Expected term	5 years
Expected dividend rate	0.00%
Risk free interest rate	1.87%
Common Stock Warrant Issued to Underwriter of Common Stock Offering [Member]
Number of shares purchased		945,000
Exercise price (in dollars per share)		$ 1.50
Warrant term		5 years
Description of method used		Lattice model
Share price (in dollars per share)		$ 1.00
Fair value of common stock warrant		$ 134
Expected volatility rate		73.80%
Expected term		5 years
Expected dividend rate		0.00%
Risk free interest rate		1.87%
University of Arizona Common Stock Warrant [Member]
Number of shares purchased					15,000
Exercise price (in dollars per share)			$ 7.91		$ 7.50
Warrant term			5 years
Description of method used			Monte Carlo option pricing model
Expected volatility rate			77.70%
Expected dividend rate			0.00%
Risk free interest rate			1.93%
Derivative liability			$ 0		$ 53
Fair value adjustment of warrants			$ 1

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Stockholders' Deficit (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Common stock, shares, issued	16,512,246	16,404,195
Common stock, shares, outstanding	16,512,246	16,404,195
Aggregate number of common stock issued	108,051
Cashless exercise of vested stock options	56,000
Restricted Stock Units [Member]
Cashless exercise of vested stock options	13,900
Number of restricted stock units vested during the period	24,364
Former Employee [Member]
Number of restricted stock units vested during the period	32,625
Board Member [Member]
Number of restricted stock units vested during the period	37,162
Settlement of compensation	$ 28

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Stock-based Compensation (Details) - Employee [Member]	3 Months Ended
	Mar. 31, 2018
Expected volatility, Minimum	71.00%
Expected volatility, Maximum	72.30%
Expected dividend yield	0.00%
Expected term (in years)	3 years 6 months
Risk-free interest rate, Minimum	1.58%
Risk-free interest rate, Maximum	2.44%

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Stock-based Compensation (Details 1)	3 Months Ended
	Mar. 31, 2018 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at beginning | shares	1,651,800
Granted | shares	34,167
Exercised | shares	(56,000)
Forfeited | shares
Expired | shares
Outstanding at ending | shares	1,629,967
Exercisable at ending | shares	1,276,596
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding at beginning | $ / shares	$ 1.67
Granted | $ / shares	0.65
Exercised | $ / shares	0.50
Forfeited | $ / shares
Expired | $ / shares
Outstanding at ending | $ / shares	1.69
Exercisable at ending | $ / shares	$ 1.31
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Life [Roll Forward]
Outstanding at beginning	5 years
Granted	5 years
Outstanding at ending	4 years 6 months
Exercisable at ending	4 years 3 months 18 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Aggregate Intrinsic Value [Roll Forward]
Outstanding at beginning | $		[1]
Outstanding at ending | $		[1]
Exercisable at ending | $		[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 $0.51 and $0.72 per share for the three months ended March 31, 2018 and the year ended December 31, 2017, respectively.

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Stock-based Compensation (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Allocated Share-based Compensation Expense	$ 698	$ 1,061
Research and Development Expense [Member]
Allocated Share-based Compensation Expense	29	94
General and Administrative Expense [Member]
Allocated Share-based Compensation Expense	$ 669	$ 967

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Stock-based Compensation (Details 3) - Restricted Stock Units [Member]	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward]
Balance at beginning | shares	287,885
Granted | shares
Vested | shares	(50,000)	[1]
Forfeited | shares
Balance at ending | shares	237,885
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Balance at beginning | $ / shares	$ 1.86
Granted | $ / shares
Vested | $ / shares	6.00
Forfeited | $ / shares
Balance at ending | $ / shares	$ 0.99

[1] In February 2018, the Company net issued 32,625 shares of common stock to a former employee of the Company under the employee's separation agreement, which accelerated the vesting of certain restricted stock units.

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Stock-based Compensation (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended		3 Months Ended	9 Months Ended
	Feb. 28, 2018	Jul. 31, 2015	Mar. 31, 2018	Sep. 30, 2017	Dec. 31, 2017
Share price			$ 0.51		$ 0.72
Aggregate number of common stock issued			108,051
Employee's Separation Agreement [Member] | Restricted Stock Units [Member]
Aggregate number of common stock issued	32,625
Stock Option Plan 2008-2009 [Member]
Compensation cost not yet recognized			$ 1,425
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			1,008,928

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License and Other Agreements (Details Narrative) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended
	Jan. 23, 2017	May 31, 2014	Mar. 31, 2018
Contingent milestone payments			$ 300
Neogen Corporation [Member]
Litigation settlement, amount	$ 1,000
Licencing revenue		$ 488
License fee receivable		$ 162

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Capital Leases
2018	$ 76
2019	92
2020	71
2021	57
2022	28
Total minimum lease payments	324
Capital Leases
2018	192
2019	221
2020
2021
2022
Total minimum lease payments	413
Less: amounts representing interest (6.39%, ranging from 10.48% to 11.56%)	59
Present value of minimum lease payments	265
Less: current installments under capital lease obligations	73
Total long-term portion	$ 263	$ 272

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Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Rent expense	$ 61	$ 78
Settled Litigation [Member] | Neogen Settlement Agreement [Member] | Selling, General and Administrative Expenses [Member]
One-time payment			$ 1,000

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Subsequent Events (Details) - shares	1 Months Ended	3 Months Ended
	Apr. 30, 2018	Mar. 31, 2018
Subsequent Event [Line Items]
Number of shares issued		108,051
Subsequent Event [Member]
Subsequent Event [Line Items]
Number of shares issued	25,464