NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
Note 1 - Organization and Description of Business
SenesTech, Inc. (referred to
in this report as “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, initially rat populations, through fertility control.
Although myriad tools
are available to fight rat infestations, communities, food producers, zoos and sanctuaries and others continue to face challenges in controlling today’s infestations. Infestations
result in significant infrastructure damage, as well as pose additional risks to the health and food security of communities. In
addition to these challenges, the pest management industry and Pest Management Professionals (PMPs) are being increasingly asked
for new solutions to help solve the problem. With growing concerns about rat resistance to rodenticides and a growing interest
in non-lethal options, it is becoming increasingly important for PMPs to have new tools at their disposal. Our goal is to provide
customers with not only a solution to 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 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. On August 23, 2015, the
United States Environmental Protection Agency (EPA) granted registration approval for ContraPest as a Restricted Product Due to
Professional Expertise (referred to in this report as a “Restricted Use designation”), effective August 2, 2016. On
October 18, 2018, the EPA approved the removal of the Restricted Use designation. 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 United States, we must obtain registration from the various state regulatory agencies prior to selling in each state. As
of the date of this report, we have received registration for ContraPest in all 50 states and the District of Columbia, 43 of
which have approved the removal of the Restricted Use designation.
We expect to continue to pursue regulatory approvals
and amendments to existing registration in the United States for ContraPest, and if ContraPest begins to generate sufficient revenue,
regulatory approvals for any additional jurisdictions beyond the United States. The Company also continues to develop other potential
additional fertility control and animal health products for additional species.
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 to prepare and launch commercialization of our first product, ContraPest. We have primarily funded
our operations to date through the sale of equity securities, including convertible preferred stock, common stock and warrants
to purchase common stock.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
Note 1 - Organization and Description of Business –
(continued)
We have also raised capital through debt financing,
consisting primarily of convertible notes; and, to a lesser extent, payments received in connection with product sales, research
grants and licensing fees.
Through June 30, 2019, we had received net proceeds
of $63.6 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and other promissory
notes, an aggregate of $1.7 million from licensing fees and an aggregate of $0.4 million in net product sales. At June 30, 2019,
we had an accumulated deficit of $90.5 million and cash and cash equivalents of $2.6 million.
Our ultimate success depends upon the outcome of
a combination of factors, including: (i) successful commercialization of ContraPest and ongoing regulatory approvals of our other
product candidates, (ii) market acceptance, commercial viability and profitability of ContraPest and other products; (iii) the
ability to market our products and establish an effective sales force and marketing infrastructure to generate significant revenue;
(iv) the success of our research and development; (v) our 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 at June 30, 2019, in combination with anticipated revenue, net proceeds of $3.6 million from the public offering
completed on July 16, 2019 and any additional sales of our equity securities, will be sufficient to fund our current operations
for at least the next 12 months. However, if anticipated revenue targets and margin targets are not achieved and we are unable
to raise necessary capital through the sale of our securities, we may seek to reduce operating expenses and take other measures
that could impair our ability to be successful and operate as a going concern. In any event, we 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 commercialization and development 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 (“U.S. 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 June 30, 2019, the Company’s operating results for the three and six months ended June 30, 2019 and 2018,
and the Company’s cash flows for the six months ended June 30, 2019 and 2018. The accompanying financial information as
of December 31, 2018 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, as amended by Form 10-K/A, for the year ended December 31, 2018, both filed with the SEC on March
29, 2019. All amounts shown in these financial statements and accompanying notes are in thousands, except percentages and per
share and share amounts.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with
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.
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 less than $1 at June 30, 2019 and at December 31,
2018.
Inventories
Inventories are stated at the lower of cost or market value,
using the first-in, first-out convention. Inventories consist of raw materials, work in progress and finished goods.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
Note 2 - Summary of Significant Accounting Policies –
(continued)
Components of inventory are:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Raw materials
|
|
$
|
1,071
|
|
|
$
|
1,111
|
|
Work in progress
|
|
|
4
|
|
|
|
—
|
|
Finished goods
|
|
|
260
|
|
|
|
154
|
|
Total inventory
|
|
|
1,335
|
|
|
|
1,265
|
|
Less:
|
|
|
|
|
|
|
|
|
Reserve for obsolete
|
|
|
(4
|
)
|
|
|
(4
|
)
|
Total net inventory
|
|
$
|
1,331
|
|
|
$
|
1,261
|
|
Prepaid Expenses
Prepaid expenses consist primarily of payments
made for director and officer insurance, director compensation, rent, legal and inventory purchase deposits and seminar fees to
be expensed in the current year.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Equipment held under capital leases are stated at the present value of minimum lease payments less accumulated amortization.
Depreciation on property and equipment is computed using the
straight-line method over the estimated useful lives of the respective assets. The cost of leasehold improvements is amortized
over the life of the improvement or the term of the lease, whichever is shorter. Equipment held under capital leases is amortized
over the shorter of the lease term or estimated useful life of the asset. The Company incurs 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. The performance
obligations identified by the Company under Accounting Standards Codification (“ASC”) Topic 606, Revenue From Contracts
With Customers, are straightforward and similar to the unit of account and performance obligation determination under ASC Topic
605,
Revenue Recognition
. There was no impact on the Company’s financial statements as a result of adopting ASC 606
for the three months or six months ended June 30, 2019 and 2018, respectively.
The Company recognizes revenue when it leaves their
dock at a fixed selling price and payment terms of 30 to 120 days from invoicing. The Company recognizes other revenue earned
from pilot studies upon the performance of specific services under the respective service contract.
The Company derives revenue primarily from commercial sales
of products.
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.
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 stock options is measured using the Black-Scholes option pricing model. The Company expenses the grant
date fair value of its stock options on a straight-line basis over their respective vesting periods. Performance-based awards
are expensed over the performance period when the related performance goals are probable of being achieved.
For equity instruments issued to non-employees, the stock-based
consideration is measured using a fair value method. The measurement of the stock-based compensation is subject to re-measurement
as the underlying equity instruments vest.
The stock-based compensation expense recorded for the three
and six months ended June 30, 2019 and 2018, is as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
1
|
|
|
$
|
29
|
|
|
$
|
10
|
|
|
$
|
58
|
|
General and administrative
|
|
|
218
|
|
|
|
2,008
|
|
|
|
461
|
|
|
|
2,677
|
|
Total stock-based compensation expense
|
|
$
|
219
|
|
|
$
|
2,037
|
|
|
$
|
471
|
|
|
$
|
2,735
|
|
See Note 11 for additional discussion on stock-based compensation.
Income Taxes
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 statement 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 currently maintains a full allowance
against its deferred tax assets.
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 June 30, 2019 or December
31, 2018 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 and six months ended June 30, 2019 and 2018. Therefore, basic
and diluted loss per share attributable to common stockholders are the same for each period presented.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
Note 2 - Summary of Significant Accounting Policies –
(continued)
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):
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Common stock purchase warrants
|
|
|
9,621,125
|
|
|
|
6,090,035
|
|
Restricted stock unit
|
|
|
117,465
|
|
|
|
209,579
|
|
Common stock options
|
|
|
2,435,177
|
|
|
|
1,719,771
|
|
Total
|
|
|
12,173,767
|
|
|
|
8,019,385
|
|
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.
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.
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 was permitted, and the new standard had been adopted using a modified retrospective approach
and provides for certain practical expedients.
On January 1, 2019, the Company adopted
the new leasing standard and all related amendments. The Company elected the optional transition method provided by the FASB in
ASU 2018-11,
Leases (Topic 842): Targeted Improvements
, and as a result, has not restated its condensed consolidated
financial statements for prior periods presented. The Company has elected the practical expedients upon transition to retain the
lease classification and initial direct costs for any leases that existed prior to adoption. The Company has also not reassessed
whether any contracts entered into prior to adoption are leases.
The standard did not have a material impact
on the Company’s Condensed Consolidated Statements of Comprehensive Income. The cumulative effect of the changes made to
the Company’s Consolidated Balance Sheet as of January 1, 2019 for the adoption of the new leasing standard was as follows:
|
|
Balance @
December 31, 2018
|
|
|
Adjustment Due to ASC 842
|
|
|
Balance @
January 1,
2019
|
|
Right to Use Asset - Long Term
|
|
|
—
|
|
|
$
|
87
|
|
|
$
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Liability – Long Term
|
|
|
—
|
|
|
$
|
(87
|
)
|
|
$
|
(87
|
)
|
At June 30, 2019, the balance remaining
in Right to Use Asset-Long Term and Lease Liability-Long Term was $65,000 and ($65,000) respectively.
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 determines if an arrangement
is a lease at lease inception. Operating lease right-of-use (ROU) assets and operating lease liabilities are recognized based
on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s
lease contracts do not include an implicit rate, the Company uses its incremental borrowing rate based on information available
at commencement date in determining the present value of future payments. The incremental borrowing rate is estimated to approximate
the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset
is located. The operating lease ROU asset also includes any initial direct costs and lease payments made prior to lease commencement
and excludes lease incentives incurred.
The Company’s lease terms may include
options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense
for minimum lease payments is recognized on a straight-line basis over the lease term. The Company has certain lease agreements
that contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset
classes.
See Note 12, Commitments and Contingencies,
for future minimum lease payments and maturities.
Accounting Standards Issued but Not Yet Adopted
In August 2018, the FASB issued authoritative guidance intended
to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service
contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is
a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
The guidance also requires presentation of the capitalized implementation costs in the statement of financial position and in
the statement of cash flows in the same line item that a prepayment for the fees of the associated hosting arrangement would be
presented, and the expense related to the capitalized implementation costs to be presented in the same line item in the statement
of operations as the fees associated with the hosting element (service) of the arrangement. This guidance is effective for annual
periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption permitted.
We are currently evaluating the potential impact on our financial position, results of operations and statement of cash flows
upon adoption of this guidance, which will result in the change in presentation of capitalized implementation costs related to
hosting arrangements from properties to other assets on the consolidated balance sheet, as well as the expense related to such
costs no longer being classified as depreciation expense and cash flows related to those costs no longer being presented as investing
activities.
Other than the items noted above, there have been no new accounting
pronouncements not yet effective or adopted in the current year that we believe have a significant impact, or potential significant
impact, to our unaudited condensed consolidated interim financial statements.
Note 3 - Fair Value Measurements
The Company issued common stock
warrants to purchase shares of common stock in June of 2015 (see Note 11 — Stock-based Compensation for more details) that
contain a cash settlement provision resulting in a common stock warrant liability that is revalued at the end of each reporting
period.
We value these warrant derivatives 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.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
Note 3 - Fair Value Measurements – (continued)
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 common stock warrant liabilities are classified
as Level 3 because there is limited activity or less transparency around the inputs to valuation.
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):
|
|
June 30, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrant liability (1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
|
December 31, 2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate fixed income debt securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrant liability (1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1)
|
The change in the fair value of the common stock warrant for the three and six months ended June 30, 2019 was recorded as a decrease to other income (expense) of $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.
Note 4 - Credit Risk
The Company is potentially subject to concentrations of credit
risk in its accounts receivable. Credit risk with respect to receivables is limited due to the number of companies comprising
the Company’s customer base. Although the Company is directly affected by the financial condition of its customers, management
does not believe significant credit risks exist at June 30, 2019 or December 31, 2018. The Company does not require collateral
or other securities to support its accounts receivable.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
Note 5 - Prepaid Expenses
Prepaid expenses consist of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Director compensation
|
|
$
|
-
|
|
|
$
|
100
|
|
Director and officer insurance
|
|
|
159
|
|
|
|
121
|
|
NASDAQ fees
|
|
|
28
|
|
|
|
|
|
Legal retainer
|
|
|
25
|
|
|
|
25
|
|
Marketing programs and conferences
|
|
|
56
|
|
|
|
53
|
|
Professional services retainer
|
|
|
8
|
|
|
|
8
|
|
Rent
|
|
|
19
|
|
|
|
19
|
|
Equipment service deposits
|
|
|
5
|
|
|
|
3
|
|
Foreign patent registration
|
|
|
22
|
|
|
|
-
|
|
Engineering, software licenses and other
|
|
|
7
|
|
|
|
13
|
|
Total prepaid expenses
|
|
$
|
329
|
|
|
$
|
342
|
|
Note 6 - Property and Equipment
Property and equipment, net consist of the following:
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
|
Useful Life
|
|
2019
|
|
|
2018
|
|
Research and development equipment
|
|
|
|
5 years
|
|
$
|
1,580
|
|
|
$
|
1,552
|
|
Office and computer equipment (1)
|
|
|
|
3 years
|
|
|
739
|
|
|
|
742
|
|
Autos
|
|
|
|
5 years
|
|
|
54
|
|
|
|
54
|
|
Furniture and fixtures
|
|
|
|
7 years
|
|
|
37
|
|
|
|
37
|
|
Leasehold improvements
|
|
|
|
*
|
|
|
283
|
|
|
|
283
|
|
|
|
|
|
|
|
|
2,693
|
|
|
|
2,668
|
|
Less accumulated depreciation and amortization
|
|
|
|
|
|
|
(1,778
|
)
|
|
|
(1,585
|
)
|
Total
|
|
|
|
|
|
$
|
915
|
|
|
$
|
1,083
|
|
|
*
|
Shorter of lease term or estimated useful life
|
|
(1)
|
In April and May 2019, the Company disposed of obsolete
computer equipment with a net book value of $2 resulting in a $2 loss on the disposal of fixed assets.
|
Depreciation and amortization expense was approximately $102
and $107 for the three months ended June 30, 2019 and 2018, respectively, and $213 and $224 for six months ended June 30, 2019
and 2018, respectively.
Note 7 - Accrued Expenses
Accrued expenses consist of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Compensation and related benefits
|
|
$
|
266
|
|
|
$
|
479
|
|
Accrued Litigation
|
|
|
507
|
|
|
|
269
|
|
Board Compensation
|
|
|
9
|
|
|
|
23
|
|
Other
|
|
|
8
|
|
|
|
—
|
|
Total accrued expenses
|
|
$
|
790
|
|
|
$
|
771
|
|
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
Note 8 - Borrowings
A summary of the Company’s borrowings, including capital
lease obligations, is as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Short-term debt:
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
134
|
|
|
|
219
|
|
Total short-term debt
|
|
$
|
134
|
|
|
$
|
219
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
$
|
194
|
|
|
$
|
232
|
|
Other promissory notes
|
|
|
136
|
|
|
|
248
|
|
Total
|
|
|
330
|
|
|
|
480
|
|
Less: current portion of long-term debt
|
|
|
(134
|
)
|
|
|
(219
|
)
|
Total long-term debt
|
|
$
|
196
|
|
|
$
|
261
|
|
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 July 2023 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 9 - Common Stock Warrants and Common Stock Warrant
Liability
The table summarizes the common stock warrant activity as of
June 30, 2019 as follows:
Common Stock Warrants
|
|
Number of
Warrants
|
|
|
Date
Issued
|
|
Term
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
6,431,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued
|
|
|
1,133,909
|
|
|
June 2018
|
|
5 Years
|
|
$
|
1.82
|
|
Common Stock Offering Warrants Issued
|
|
|
5,357,052
|
|
|
August 2018
|
|
5 Years
|
|
$
|
1.15
|
(1)
|
Common Stock Offering - Dealer Manager Warrants
|
|
|
267,853
|
|
|
August 2018
|
|
5 Years
|
|
$
|
1.725
|
|
Warrants exercised
|
|
|
(1,475,659
|
)
|
|
|
|
|
|
|
|
|
Expired Warrants
|
|
|
(488,119
|
)
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
11,226,821
|
|
|
|
|
|
|
|
|
|
Warrants Exercised
|
|
|
(1,293,696
|
)
|
|
August 2018
|
|
|
|
$
|
1.15
|
|
Warrants Exercised
|
|
|
(312,000
|
)
|
|
August 2018
|
|
|
|
$
|
0.95
|
|
Outstanding at June 30, 2019
|
|
|
9,621,125
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The common stock warrants issued in November 2017 with an initial exercise price of $1.50 per share adjusted downward
to $0.95 per share effective July 24, 2018 in connection with our Rights Offering (as defined in Note 9 below), and may be subject
to further downward adjustments, pursuant to antidilution price adjustment protection contained within those warrants.
|
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL
STATEMENTS
(In thousands, except share and per
share data)
Note 9 - Common Stock Warrants and Common Stock Warrant
Liability – (continued)
On November 21, 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. The initial exercise price of these warrants was $1.50 per share, which adjusted downward to $1.47 on July 24, 2018,
the record date of the Right’s Offering and downward to $0.95 per share on August 13, 2018, the date of the Rights Offering,
pursuant to antidilution price adjustment protection contained within these warrants. Per guidance of ASC 260, the Company recorded
a deemed dividend of $333 on the 3,181,841 unexercised warrants that contained this antidilution price adjustment protection provision
and was calculated as the difference between the fair value of the warrants immediately prior to downward exercise price adjustment
and immediately after the adjustment using a Black Scholes model based on the following significant inputs: On July 24, 2018:
Common stock price of $1.38; comparable company volatility of 72.4%; remaining term 4.33 years; dividend yield of 0% and risk-free
interest rate of 2.83. On August 13, 2018: Common stock price of $1.02; comparable company volatility of 74.0%; remaining term
4.25 years; dividend yield of 0% and risk-free interest rate of 2.75.
On June 20, 2018, the Company entered
into an agreement with a holder of 1,133,909 of the November 2017 warrants to exercise its original warrant representing 1,133,909
shares of Common Stock for cash at the $1.50 exercise price for gross proceeds of $1.7 million and the Company issued to holder
a new warrant to purchase 1,133,909 shares of Common Stock at an exercise price of $1.82 per share. The new warrant did not contain
the antidilution price adjustment protection that was contained within the exercised warrants. In June 2018, the Company recorded
stock compensation expense of $1.7 million representing the fair value of the of 1,133,909 inducement warrants issued. The Company
estimated the fair value of the common stock warrants, exercisable at $1.82 per share, to be $1.7 million using a Black Scholes
model based on the following significant inputs: Common stock price of $2.11; comparable company volatility of 72.6%; remaining
term 5 years; dividend yield of 0% and risk-free interest rate of 2.8%. Also, in June 2018, an additional 341,750 of the November
8, 2017 warrants that were in the money at the time of exercise, were exercised for gross proceeds of $513.
On August 13, 2018, in connection with a rights offering of 5,357,052
shares of its common stock (the “Rights Offering”), the Company issued 5,357,052 warrants to purchase shares of its
common stock at an exercise price of $1.15 per share. The Company estimated the fair value of the common stock warrants, exercisable
at $1.15 per share, to be $3.6 million using a Monte Carlo model based on the following significant inputs: common stock price
of $0.94; comparable company volatility of 159.0%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of
2.77%.
In connection with the closing of the Rights Offering, the
Company issued a warrant to purchase 267,853 shares of common stock to Maxim Partners LLC, an affiliate of the dealer-manager
of the Rights Offering. The Company estimated the fair value of the common stock warrants, exercisable at $1.725 per share, to
be $169 using a using a Monte Carlo model based on the following significant inputs: common stock price of $0.94; comparable company
volatility of 159.0%; remaining term 5 years; dividend yield of 0% and risk-free interest rate of 2.77%.
The estimated fair value of the derivative warrant liability
was $1 at June 30, 2019. 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 ($5) and $4 for the three and six months ended June 30, 2019 and was recorded
in other income (expense) in the accompanying statements of operations and comprehensive loss.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
Note 10 - Stockholders’ Deficit
Capital Stock
The Company was organized under the laws of the state of Nevada
on July 27, 2004 and was subsequently reincorporated under the laws of the state of Delaware on November 10, 2015. In connection
with the reincorporation, as approved by the stockholders, the Company changed its authorized capital stock to consist of (i)
100 million shares of common stock, $.001 par value, and (ii) 2 million shares of preferred stock, $0.001 par value, designated
as Series A convertible preferred stock. In December 2015, the Company amended its Certificate of Incorporation to change its
authorized capital stock to provide for 15 million authorized shares of preferred stock of which 7,515,000 was designated as Series
B convertible preferred stock, par value $.001 per share.
Common Stock
The Company had 25,227,475 and 23,471,999 shares of common
stock issued and outstanding as of June 30, 2019 and December 31, 2018, respectively.
During the six months ended June 30, 2019, the Company issued
an aggregate of 1,755,476 shares of common stock as follows:
|
●
|
an aggregate of 1,605,696
shares for the exercise of outstanding warrants for gross proceeds of $1.8 million
|
|
●
|
An aggregate of 86,216 shares for service as a result of the vesting of restricted stock
units
|
|
|
|
|
●
|
3,022 shares for the exercise of stock options
|
|
|
|
|
●
|
21,962 shares for the cashless exercise of stock options and
|
|
●
|
an aggregate of 38,580
shares to certain employees in net settlement of bonus compensation totaling $32.
|
Note 11 - Stock-based Compensation
On June 12, 2018, the Company’s stockholders approved
the 2018 Equity Incentive Plan (the “2018 Plan”) to replace the Company’s 2015 Equity Incentive Plan (the “2015
Plan”). The 2018 Plan authorizes the issuance of 1,000,000 shares of our common stock. In addition, up to 2,874,280 shares
of our common stock reserved for issuance under the 2015 Plan became available for issuance under the 2018 Plan to the extent
such shares were available for issuance under the 2015 Plan as of June 12, 2018 or cease to be subject to awards outstanding under
the 2015 Plan, such as by expiration, cancellation, or forfeiture of such awards.
Stock options are generally issued with an exercise price equal
to no less than fair value at the date of grant. Options granted under the 2018 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 2018 Plan. Unvested shares issued for options exercised early may be subject to a repurchase by
the Company if the participant terminates, at the original exercise price. Options under the 2018 Plan generally have a contractual
term of five years. Certain stock option awards provide for accelerated vesting upon a change in control.
As of June 30, 2019, the Company had 929,936 shares of common
stock available for issuance under the 2018 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 will 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 six months ended June 30, 2019 were as follows:
|
|
|
Employee
|
|
|
|
Non-Employee
|
|
Expected volatility
|
|
|
79.7%-80.6
|
%
|
|
|
N/A
|
|
Expected dividend yield
|
|
|
—
|
|
|
|
N/A
|
|
Expected term (in years)
|
|
|
3.0-6.0
|
|
|
|
N/A
|
|
Risk-free interest rate
|
|
|
1.80% -2.48
|
%
|
|
|
N/A
|
|
The weighted average grant date fair value of options granted
during the six months ended June 30, 2019 was $1.10 per share, as per the table below.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
Note 11 - Stock-based Compensation – (continued)
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
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 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 interest rate is determined 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 following table summarizes the stock option activity, for
both equity 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, 2018
|
|
|
1,721,771
|
|
|
$
|
1.57
|
|
|
|
4.0
|
|
|
$
|
—
|
|
Granted
|
|
|
855,406
|
|
|
$
|
1.41
|
|
|
|
4.9
|
|
|
$
|
—
|
|
Exercised
|
|
|
(63,990
|
)
|
|
$
|
0.65
|
|
|
|
—
|
|
|
$
|
—
|
|
Forfeited
|
|
|
(59,500
|
)
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Expired
|
|
|
(18,510
|
)
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding at June 30, 2019
|
|
|
2,435,177
|
|
|
$
|
1.46
|
|
|
|
4.0
|
|
|
$
|
—
|
|
Exercisable at June 30, 2019
|
|
|
1,536,173
|
|
|
$
|
1.56
|
|
|
|
3.4
|
|
|
$
|
—
|
|
|
(1)
|
The aggregate intrinsic value
in the table was calculated based on the difference between the estimated fair market value of the Company’s stock and the
exercise price of the underlying options. The estimated stock values used in the calculation was $1.80 and $0.59 per share for
the six months ended June 30, 2019 and the year ended December 31, 2018, respectively.
|
Restricted Stock Units
The following table summarizes restricted stock unit activity
for the six months ended June 30, 2019:
|
|
Number of
Units
|
|
|
Weighted Average
Grant-Date Fair
Value Per Unit
|
|
Outstanding as of December 31, 2018
|
|
|
136,245
|
|
|
$
|
0.98
|
|
Granted
|
|
|
123,727
|
|
|
$
|
1.51
|
|
Vested
|
|
|
(142,507
|
)
|
|
$
|
1.10
|
|
Forfeited
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding as of June 30, 2019
|
|
|
117,465
|
|
|
$
|
1.42
|
|
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
Note 11 - Stock-based Compensation – (continued)
The stock-based compensation expense was recorded as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
1
|
|
|
$
|
29
|
|
|
$
|
10
|
|
|
$
|
58
|
|
General and administrative
|
|
|
218
|
|
|
|
2,008
|
|
|
|
461
|
|
|
|
2,677
|
|
Total stock-based compensation expense
|
|
$
|
219
|
|
|
$
|
2,037
|
|
|
$
|
471
|
|
|
$
|
2,735
|
|
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 June 30, 2019, the total compensation cost related to restricted
stock units and unvested options not yet recognized was $1,234, which will be recognized over a weighted average period of 36
months, assuming the employees and non-employee
s
complete their service period required for vesting.
Note 12 - 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 lawsuit against the Company and Roth Capital Partners, LLC (“Roth”) in the U.S.
District Court for the District of Arizona (the “Court”). The complaint 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; failed to register New Enterprises’ requested transfer; breached stock certificates and the
lock-up contract; tortuously interfered with prospective business advantage; and conversion. New Enterprises is seeking
monetary damages, including compensatory damages, punitive damages, and attorney’s fees. On December 3, 2018, the Court
issued its order granting the Company’s and Roth’s motions to dismiss all of New Enterprises’ claims but
gave them leave to file a motion to amend the complaint. On January 25, 2019, New Enterprises moved for leave to file
an amended complaint, alleging similar claims against the Company and Roth and a court hearing on those motions is scheduled for August 13, 2019. The Company and Roth have filed motions to
dismiss the amended complaint and those motions are under advisement with the Court as of May 15, 2019. Roth has made a claim
for indemnification to the Company based on contractual indemnification agreements, but to date, the Company has not accepted
Roth’s indemnification demand.
On April 20, 2018, the Company’s former Executive Vice
President and Chief Operating Officer Andrew Altman filed a charge of employment discrimination with the Equal Employment Opportunity
Commission (EEOC) against the Company. Mr. Altman claimed that he was terminated after he expressed opposition to an email Cheryl
Dyer, Chief Research Officer, had sent out to the management team, in which she criticized a Mormon newspaper. The Company filed
a position statement on May 21, 2018. No substantive action has been taken since then, and the Company has not heard anything
further either from the EEOC or Mr. Altman’s attorneys.
Lease Commitments
The Company is obligated under capital leases for certain research
and computer equipment that expire on various dates through July 2023. At June 30, 2019, the gross amount of office and computer
equipment, and research equipment and the related accumulated amortization recorded under the capital leases was $500 and $229,
respectively.
In February 2012, the Company entered into an operating lease
for its corporate headquarters. The lease was due to expire in January 2015. In December 2013, the Company amended its lease to
expand into the remaining area in the building and extended the term to December 31, 2019. In February 2014, the Company further
amended the lease to expand into an adjacent building. The lease requires escalating rental payments over the lease term. Minimum
rental payments under the operating lease are recognized on a straight-line basis over the term of the lease and accordingly,
the Company records the difference between the cash rent payments and the recognition of rent expense as a deferred rent liability.
The lease is guaranteed by the President of the Company. We are currently in discussions to extend the current lease.
SENESTECH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
Note 12 - Commitments and Contingencies –
(continued)
On November 16, 2016, we leased an additional 1,954 square
feet of research and development space, also in Flagstaff. This lease expired on November 15, 2018 but was extended for an additional
24 months, through November 2020. A subsequent amendment to the lease allows for the Company to cancel the lease at any time through
the lease term with 30-day notice.
The lease extension requires fixed rental payments over the
lease term. Minimum rental payments under the operating lease are recognized on a straight-line basis over the term of the lease
as expense, and accordingly, the Company recorded no deferred rent liability under this lease.
Rent expense was $127 and $121 for the six months ended June
30, 2019 and June 30, 2018, respectively. The future minimum lease payments under non-cancellable operating lease and future minimum
capital lease payments as of June 30, 2019 are as follows:
|
|
Capital
Leases
|
|
|
Operating
Lease
|
|
Years Ending December 31,
|
|
|
|
|
|
|
2019
|
|
|
48
|
|
|
|
135
|
|
2020
|
|
|
78
|
|
|
|
45
|
|
2021
|
|
|
63
|
|
|
|
—
|
|
2022
|
|
|
33
|
|
|
|
—
|
|
2023
|
|
|
3
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
225
|
|
|
$
|
180
|
|
|
|
Capital
Leases
|
|
|
|
|
|
Less: amounts representing interest (6.39%, ranging from 10.48% to 11.56%)
|
|
$
|
31
|
|
|
|
|
|
|
Present value of minimum lease payments
|
|
|
194
|
|
|
|
|
|
|
Less: current installments under capital lease obligations
|
|
|
75
|
|
|
|
|
|
|
Total long-term portion
|
|
$
|
119
|
|
Note 13 - Subsequent Events
In July 2019, the Company net issued 19,258
shares of common stock to certain employees in net settlement of restricted stock units that vested during the period. The
shares of common stock withheld were used to satisfy required withholding tax liability in connection with the vesting of shares.
Also in July 2019, the Company issued an
aggregate of 3,580 shares of commons stock for the exercise of certain warrants. The net proceeds to the Company for these exercises
was $4.
On July 16, 2019, the Company issued
3,037,038 shares of common stock, including 696,296 shares to the Company’s chief executive officer and 7,408 shares to
an employee of the Company, in a public offering of shares of the Company’s common stock at $1.35 per share,
resulting in net proceeds of approximately $3.6 million after deducting certain fees due to the placement agent and other
transaction expenses. In addition, the Company issued a warrant to purchase 166,667 shares of the Company’s common
stock to the placement agent at an exercise price of $1.6875 per share.
The Company has evaluated
subsequent events from the balance sheet date through August 14, 2019, 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.