Executive Summary / Key Takeaways

• SenesTech is undergoing a significant transformation driven by its Evolve product line, a soft bait fertility control solution for rodents, which is rapidly displacing its legacy ContraPest product.
• Evolve's superior characteristics (soft bait form factor, economical price, long shelf life, minimum risk EPA designation) are enabling penetration into high-growth channels like e-commerce, municipal, and international markets.
• The shift to Evolve has dramatically improved financial performance, with Q1 2025 revenue increasing 17% year-over-year, Evolve revenue growing 40%, and gross margins reaching a record 64.5%.
• Operational efficiency initiatives, including $2 million in annualized expense reductions implemented in late March 2025, combined with higher Evolve margins, have lowered the cash flow breakeven threshold to approximately $7 million annually.
• While liquidity remains a challenge, recent financing activities and anticipated growth in key channels position the company to pursue its goal of achieving cash flow breakeven in the near term, despite the ongoing need for additional capital.

The Rodent Problem and SenesTech's Unique Solution

The challenge of managing rodent populations is pervasive, impacting urban centers, agricultural operations, industrial facilities, and residential areas globally. Traditional methods, primarily relying on lethal poisons and traps, face increasing scrutiny due to environmental concerns, potential harm to non-target species, and diminishing effectiveness as rodents develop resistance or exhibit bait aversion. Furthermore, the sheer reproductive capacity of rodents – a pair of rats can theoretically produce up to 15,000 offspring in a single year – means that simply killing them often fails to keep pace with population growth.

SenesTech, Inc. offers a fundamentally different approach: fertility control. The company has developed and is commercializing products designed to manage pest populations by targeting their reproductive capacity. This strategy aims to address the root cause of infestations – uncontrolled breeding – rather than solely reacting to existing numbers. For years, the company's flagship product was ContraPest, a liquid bait targeting both male and female rat reproduction. While EPA-registered and effective, its liquid form factor and "restricted use" history presented distribution and adoption challenges.

Evolve: A Game-Changing Technology

The narrative for SenesTech fundamentally shifted with the launch of the Evolve product line, starting with Evolve Rat in January 2024, followed by Evolve Mouse in May 2024. Evolve is a soft bait formulation utilizing cottonseed oil as the active ingredient. This seemingly simple change in form factor has proven transformative. Evolve is highly palatable, encouraging sustained consumption necessary for fertility control. Crucially, it is designated by the EPA as a minimum risk pesticide under FIFRA Section 25b, exempting it from federal registration in many states and simplifying regulatory hurdles compared to ContraPest.

The technological advantage of Evolve lies in its combination of efficacy and practical benefits. An efficacy study for Evolve Rat demonstrated a 61% reduction in litter size after just one breeding cycle, projecting an 85% reduction in population over six months and over 90% after one year compared to untreated populations. This contrasts sharply with traditional poisons, which management notes are often less than 40% effective. Evolve's soft bait format is familiar and easy for pest management professionals (PMPs) and consumers to deploy, boasts a shelf life exceeding one year, and is offered at a competitive price point relative to traditional rodenticides. The company has also introduced enhanced packaging, including 1.5lb and 3lb pouches, which use 87% less plastic than traditional pails and contribute to improved gross margins.

The "so what" for investors is clear: Evolve provides a humane, environmentally conscious, and potentially more effective long-term solution to rodent control than traditional lethal methods. Its minimum risk designation and familiar format significantly broaden the potential market reach and ease of adoption, addressing key limitations of the legacy ContraPest product. The company's R&D focus has appropriately shifted to enhancing and commercializing the Evolve line, pausing new product development to concentrate resources on this core opportunity.

Competitive Positioning: A Unique Moat in a Crowded Market

The pest control market is dominated by large, established players like Rollins, Inc. (ROL) and Rentokil Initial (RTO), who primarily offer comprehensive pest management services utilizing a range of tools, including traditional chemical rodenticides and traps. Other competitors, like Neogen Corporation (NEOG), operate in related animal safety and biosecurity niches, sometimes offering non-lethal alternatives. Traditional chemical manufacturers also represent indirect competition.

While the company appears to lack proprietary, quantifiable technology differentiators, SenesTech's competitive positioning is unique: it is the only manufacturer of US EPA-registered and accepted products specifically for the reduction of reproductive capacity in rodents. This provides a distinct technological moat. While competitors like ROL and RTO benefit from extensive global networks, strong brand recognition, and scalable service models, their reliance on chemical-based solutions faces increasing regulatory pressure and public concern. Traditional poisons, while often cheaper upfront, carry risks of bioaccumulation and may be less effective in achieving sustained population control compared to fertility management, which targets the exponential growth factor.

Quantitatively, while ROL and RTO boast significantly larger market shares (estimated 15-20% and 10-15% respectively, compared to SNES's estimated 1-2%) and superior financial health (higher gross, operating, and net margins, positive cash flow, higher ROIC/ROE), SNES's technology offers a quantifiable advantage in efficacy for population reduction (85-90%+ vs. <40% for poisons) and environmental impact (no bioaccumulation risk). NEOG also focuses on non-lethal methods but may lag SNES in the specific efficacy of fertility control.

SenesTech's strategy directly leverages its unique technology to carve out market share by focusing on channels where Evolve's benefits are most compelling or where traditional methods are restricted or less desirable. This includes municipalities grappling with persistent infestations, agribusinesses needing humane solutions around food production, and consumers seeking safer alternatives. While SNES currently lags competitors in scale, profitability, and cash flow generation, its differentiated technology provides a strategic advantage in a market increasingly seeking sustainable and effective alternatives to lethal control. The company's challenge is to translate this technological moat into significant commercial scale and financial sustainability before larger players develop or acquire similar capabilities.

Strategic Execution and Financial Transformation

The introduction of Evolve has catalyzed a multi-channel commercialization strategy across six key verticals: e-commerce, international, agribusiness, pest management professionals (PMPs), industrial, and retail. This approach aims to leverage Evolve's broad appeal and suitability for diverse applications.

E-commerce has emerged as a particularly strong channel, with sales increasing by over 107% in Q1 2025 compared to Q1 2024, driven by expansion onto platforms like Amazon.com, Walmart.com, and TractorSupply.com, alongside the company's own site. This channel represented 61% of total Q1 2025 sales.

Municipal deployments are gaining significant traction in major U.S. cities. Following approval for a pilot program in New York City, deployment began in April 2025. Baltimore adopted Evolve in January 2025, and deployments have commenced in Chicago (Wicker Park), San Francisco, Los Angeles County, the Boston area, and Waukesha, Wisconsin. While currently deployed in small areas, the potential for expansion across entire cities represents a significant growth opportunity. Municipal sales saw a sevenfold increase in Q1 2025 compared to the prior year.

International expansion is another key driver, with distribution agreements signed in 12 countries and territories, including recent exclusive agreements in Indonesia and the Philippines. Initial shipments have occurred in Hong Kong, the UAE, the Maldives, and the Netherlands, with reorders expected. Larger, container-sized orders are anticipated later in 2025, particularly from Australia and New Zealand, pending regulatory approvals.

Progress in brick-and-mortar retail is slower but ongoing, with efforts focused on getting Evolve stocked in regional distribution centers for chains like ACE Hardware and pursuing opportunities with other major retailers through rep agencies targeting over 20,000 locations. The warehousing and distribution sector is also being targeted, particularly where poisons are unsuitable.

This strategic pivot to Evolve and the multichannel approach is directly impacting financial performance. Q1 2025 revenue increased 17% to $485,000 compared to $415,000 in Q1 2024. Evolve products constituted 79% of Q1 2025 revenue ($384,000), up from 60% ($250,000) in Q1 2024, while ContraPest revenue declined. The shift to the higher-margin Evolve product line resulted in a dramatic increase in gross margin to a record 64.5% in Q1 2025, up from 32.5% in Q1 2024. Gross profit dollars surged 132% to $313,000. Operating expenses remained relatively flat year-over-year in Q1 2025 at approximately $1.98 million, reflecting increased R&D (personnel, facilities) offset by lower SG&A (personnel, software, insurance), though consulting fees and board compensation increased. The net loss improved to $1.665 million in Q1 2025 from $1.832 million in Q1 2024.

Pathway to Profitability and Outlook

Despite the improved financial performance, SenesTech has incurred significant operating losses since inception, accumulating a deficit of $137.8 million as of March 31, 2025. The company's independent auditors have raised substantial doubt about its ability to continue as a going concern. As of March 31, 2025, cash and cash equivalents stood at $1.7 million, which management expects, combined with anticipated revenue and additional equity sales, to fund operations for at least the next four months. Additional financing is explicitly stated as necessary to reach anticipated revenue and margin targets and achieve profitability.

Recognizing the urgent need to reach sustainability, SenesTech implemented operational optimization initiatives in late March 2025, targeting $2 million in annualized expense reductions. These initiatives include pausing new product development to focus solely on Evolve commercialization, bringing certain functions like marketing and regulatory in-house, and optimizing sales efforts towards high-value customer acquisition and commission-only models. Management projects that these savings, coupled with the higher gross margins from Evolve, will reduce the cash flow breakeven revenue threshold to approximately $7 million annually, or roughly $1.5 million to $1.75 million per quarter.

The outlook is focused on achieving this reduced breakeven target. Management anticipates continued substantial growth in e-commerce and expects municipal deployments to become key contributors. A strong second half of 2025 is projected, driven by planned international shipments following regulatory approvals. The company is also increasing its manufacturing capacity and moving to a larger facility in Phoenix in the first half of 2025 to support anticipated demand growth.

To bridge the gap to profitability, the company is utilizing capital raising strategies. In March 2025, a warrant inducement transaction generated $1.1 million in gross proceeds by reducing the exercise price of certain warrants and issuing new short-term warrants. The company also uses an At-the-Market (ATM) equity facility, which was increased to approximately $2.0 million in April 2025. Management believes these methods balance the need for capital with minimizing stockholder dilution.

Key risks to this outlook include the ability to secure necessary additional financing, potential delays in commercialization or regulatory approvals (particularly internationally), intense competition from larger players, and the outcome of ongoing legal proceedings, such as the lawsuit filed by Liphatech Inc.

Conclusion

SenesTech is at a pivotal juncture, driven by the transformative potential of its Evolve product line. The shift from the legacy ContraPest to the more marketable and higher-margin Evolve soft bait is yielding tangible results, evidenced by accelerating revenue growth in key channels and a dramatic improvement in gross profitability. Coupled with aggressive operational efficiency initiatives, the company has significantly lowered the revenue target required to reach cash flow breakeven, bringing profitability within closer view.

While the company faces significant financial hurdles, including historical losses and the need for ongoing financing, the strategic focus on leveraging Evolve's unique technological advantages across expanding e-commerce, municipal, and international markets provides a credible pathway for growth. The success of this strategy hinges on continued execution in securing new customers and expanding existing deployments, realizing projected cost savings, and effectively managing liquidity until sustainable profitability is achieved. For investors, the story of SenesTech is one of a small, innovative company attempting to disrupt a large, traditional market with a differentiated technology, with the Evolve product line now serving as the central engine for its ambitious drive towards financial sustainability.