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What changed in SenesTech, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SenesTech, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+186 added−197 removedSource: 10-K (2024-02-21) vs 10-K (2023-03-17)

Top changes in SenesTech, Inc.'s 2023 10-K

186 paragraphs added · 197 removed · 160 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

57 edited+14 added−6 removed19 unchanged
Biggest changeCompetition Currently, we are unaware of any other non-lethal fertility control products targeting rats that are registered by the EPA. There is a non-registered product being sold online that claims to control rodent reproduction. We do not believe this to be a competitive product. Our principal competition is the substitution of other tools that PMPs use in their IPM.
Biggest changeThere are non-registered products being sold online that claim to control rodent reproduction. We do not believe these to be competitive products. Our principal competition are large corporations with greater resources that offer a wider range of products. Generally, these are lethal pest control products largely consisting of rodenticide-based products and other tools that PMPs use in their IPM.
Additionally, there is growing concern about the rise in reported cases of adverse effects that rodenticides have on children and pets due to accidental, and direct exposure. In November 2022, the EPA released an update to its Endangered Species Act workplan which intends to expand the mitigation efforts for 90 species potentially affected by rodenticides.
Additionally, there is growing concern about the rise in reported cases of adverse effects that rodenticides have on children and pets due to accidental, direct exposure. In November 2022, the EPA released an update to its Endangered Species Act workplan which intends to expand the mitigation efforts for 90 species potentially affected by rodenticides.
We remain open to the potential to license our technology to other strategic partners to explore its applicability to other mammalian species. Business Strategy Our goal is for ContraPest fertility control to be a standard tool utilized in pest management in IPM programs across all verticals. We will achieve this through the following: End User Awareness and Adoption.
We remain open to the potential to license our technology to other strategic partners to explore its applicability to other mammalian species. Business Strategy Our goal is for fertility control to be a standard tool utilized in pest management in IPM programs across all verticals. We will achieve this through the following: End User Awareness and Adoption.
As more rodenticides come to market to address rat populations, attention will be drawn to the impact other rodenticides may have to other species due to bioaccumulation, and the benefit of ContraPest having a low potential for bioaccumulation. Tailored Value Propositions.
As more rodenticides come to market to address rat populations, attention will be drawn to the impact other rodenticides may have to other species due to bioaccumulation, and the benefit of ContraPest and Evolve having a low potential for bioaccumulation. Tailored Value Propositions.
Through consumption and contamination, rats destroy at least 20% of the global stored food supply every year. Additionally, rats cause over $27 billion in damage to public and private infrastructure annually in the United States alone by burrowing beneath foundations and gnawing on electrical wiring, insulation, fire proofing systems, electronics and computer equipment.
Through consumption and contamination, rats destroy at least 20% of the global stored food supply every year. Additionally, rats cause over $27 billion in damage to public and private infrastructure annually in the United States alone by burrowing beneath foundations, as well as gnawing on electrical wiring, insulation, fire proofing systems, electronics and computer equipment.
Where You Can Find Additional Information We electronically file with the SEC our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
Where You Can Find Additional Information We electronically file with the SEC our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
We seek to protect our proprietary data and trade secrets with attention to data exchanges among employees, consultants, collaborators and research and trade partners. Patent Filings Our intellectual property portfolio supporting ContraPest consists of nine international patent filings (in the United States, Europe, Canada, Brazil, Russia, Japan, Mexico, South Korea, and Australia) addressing the ContraPest compound.
We seek to protect our proprietary data and trade secrets with attention to data exchanges among employees, consultants, collaborators and research and trade partners. 12 Table of Contents Patent Filings Our intellectual property portfolio supporting ContraPest consists of nine international patent filings (in the United States, Europe, Canada, Brazil, Russia, Japan, Mexico, South Korea, and Australia) addressing the ContraPest compound.
Because the pest industry in the United States has demonstrated a reluctance to adopt new technologies, the marketing of ContraPest has primarily been aimed at end-user awareness, creating pull through demand with Pest Management Providers (“PMP”) by applying pressure for PMPs to use ContraPest as part of their IPM.
Because the pest industry in the United States has demonstrated a reluctance to adopt new technologies, the marketing of fertility control has primarily been aimed at end-user awareness, creating pull through demand with Pest Management Providers (“PMP”) by applying pressure for PMPs to use fertility control as part of their IPM.
Thus, we are investigating other, less costly sources of triptolide. 10 Table of Contents Our manufacturing process involves the incorporation of our two active ingredients, in low concentrations, into several inactive ingredients. Once incorporated, the entire product goes through a proprietary process in order to stabilize the final formulation.
Thus, we are investigating other, less costly sources of triptolide. Our manufacturing process involves the incorporation of our two active ingredients, in low concentrations, into several inactive ingredients. Once incorporated, the entire product goes through a proprietary process in order to stabilize the final formulation.
Posing threats to human and animal health, food security, and infrastructure around the world, we have spent centuries trying to solve the problem. Rats carry or can spread at least 35 diseases, globally posing a dangerous risk to public health and safety and protein production.
Posing threats to human and animal health, food security, and infrastructure around the world, we have spent centuries trying to solve the problem. Rats carry or can spread at least 35 diseases, globally posing a dangerous risk to public health and safety and agriculture.
We own and maintain the ContraPest trademark and intend to register new trademarks for products from our evolving rodenticide product line and for products for mammalian species beyond rodentia. Data Sets We have exclusive use status with the EPA for the data sets we have developed and submitted to the EPA as part of our application for ContraPest.
We intend to register new trademarks for products from our evolving rodenticide product line and for products for mammalian species beyond rodentia. Data Sets We have exclusive use status with the EPA for the data sets we have developed and submitted to the EPA as part of our application for ContraPest.
Marketing and Sales Approach ContraPest is differentiated in what is otherwise a very crowded rodenticide market. It is the only product registered with the EPA that restricts fertility in both male and female rats and is designed to be non-lethal.
Marketing and Sales Approach ContraPest is differentiated in what is otherwise a very crowded pest control market. It is the only product registered with the EPA that restricts fertility in both male and female rats and is designed to be non-lethal.
Additionally, within our target verticals, agribusiness, commercial, distributors, e-commerce, pest management, municipalities, and zoos and sanctuaries, many large targets employ internal pest management teams as opposed to contracting with service providers. For these reasons, the end-user is our primary target in order to grow market penetration for ContraPest.
Additionally, within our target verticals, agribusiness, commercial, distributors, e-commerce, pest management, municipalities, and zoos and sanctuaries, many large targets employ internal pest management teams as opposed to contracting with service providers. For these reasons, the end-user is our primary target in order to grow market penetration for fertility control products.
Our value statements include, but are not limited to the following: • Product Development. The needs of customers in each vertical vary due to environment and limitations, requiring ongoing innovation, exploration of additional species, and the pursuit of additional regulatory approvals for ContraPest both in the United States and globally. • Strategic Partnerships.
Our approaches include, but are not limited to the following: • Product Development. The needs of customers in each vertical vary due to environment and limitations, requiring ongoing innovation, exploration of additional species, and the pursuit of additional regulatory approvals for ContraPest and Evolve both in the United States and globally. • Strategic Partnerships.
Our focus is educating end users on the rapid reproduction rate of rats, drawing attention to the complex issue of gaining control of an infestation if you do not have control of rat fertility.
Our focus is educating end users on the rapid reproduction rate of rats, which draws attention to the complex issue of gaining control of an infestation if you do not have control of rat fertility.
As first and second generation anti-coagulants come under increased scrutiny for bioaccumulation and impact on non-target species as they travel up the food chain, their use is being restricted or even banned in select areas across the United States and globally.
As first and second generation anti-coagulants come under increased scrutiny for non-target accidental consumption or for bioaccumulation with impact on non-target species as rodenticides travel up the food chain, their use is being restricted or even banned in select areas across the United States and globally.
While pain points and benefits are unique to each vertical, they have shared core value propositions. • ContraPest is effective.
While pain points and benefits are unique to each vertical, they have shared core value propositions. • Fertility control is effective.
The safety and efficacy of VCD, triptolide, and ContraPest are supported by considerable evidence. VCD and triptolide are rapidly metabolized by the rat, limiting the possibility of bioaccumulation or effect on non-target species. Further, based on our toxicology studies, ContraPest should not cause rats to become ill, or change their behavior.
The safety and efficacy of our active ingredients and products are supported by considerable evidence. The active ingredients are rapidly metabolized by the rat, limiting the possibility of bioaccumulation or effect on non-target species. Further, based on laboratory and toxicology studies, ContraPest and Evolve should not cause rats to become ill or change their behavior.
While the desire to achieve and maintain control of rat populations is universal among end users, each vertical has a specific pain point and therefore inherent value may be achieved through the use of ContraPest. By working with our existing customers and conducting field research, we are understanding and leveraging these unique opportunities in our sales strategies across verticals.
While the general desire to achieve and maintain control of rat populations is universal among end users, each vertical has a specific pain point which may be improved through the use of fertility control. By working with our existing customers and conducting field research, we are understanding and leveraging unique opportunities in our sales strategies across verticals.
Rats require 10% of their body weight in water per day.The high-fat content and sweet taste of ContraPest promotes sustained consumption even when other sought-after food sources are present. In both field and laboratory settings, consumption of ContraPest occurs even in the presence of abundant water sources and plentiful food choices, including animal feed, trash and other options.
The high fat content and sweet taste of ContraPest promotes sustained consumption even when other sought-after food sources are present. In both field and laboratory settings, consumption of ContraPest occurs even in the presence of abundant water sources and plentiful food choices, including animal feed, trash and other options.
If the food or rodenticide causes illness in rats but they do not die, they will avoid that food or rodenticide in the future. Resistance to traditional rodenticides creates challenges for rodent control programs. Rats are hard-wired to survive and some rats may develop a genetic mutation making them resistant to certain rodenticides.
If the food or rodenticide causes illness in rats but they do not die, they will avoid that food or rodenticide in the future. Resistance to traditional rodenticides creates challenges for rodent control programs. Rats, like all animals, are hard-wired to survive and some rats can be born with a genetic mutation making them resistant to certain rodenticides.
Rats reach sexual maturity at approximately nine weeks of age. Females can give birth to six litters per year, an average of five to ten offspring each. This rapid reproduction rate can cause populations to rebound quickly after implementing a lethal control program. Rat behavior, either learned or innate, can negatively affect pest control efforts.
Females can give birth to six litters per year, an average of five to ten offspring each. This rapid reproduction rate can cause populations to rebound quickly after implementing a lethal control program. Rat behavior, either learned or innate, can negatively affect pest control efforts.
The process for obtaining regulatory approval and compliance with appropriate federal, state and local regulations is rigorous and requires the expenditure of substantial time and financial resources. United States Review and Approval Processes In the United States, the EPA regulates the sale, distribution and use of any pesticide under the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”).
The process for obtaining regulatory approval and compliance with appropriate federal, state and local regulations is rigorous and requires the expenditure of substantial time and financial resources. 11 Table of Contents United States Review and Approval Processes In the United States, the EPA regulates the sale, distribution and use of any pesticide under FIFRA.
Over the centuries, the most prevalent response to rat infestations has been to try to eliminate them through the use of lethal tools such as traps and rodenticides. However, there are growing concerns about secondary exposure and bioaccumulation of rodenticides through documentation of rats becoming resistant to their lethal effects or learning to avoid them altogether.
Over the centuries, the most prevalent response to rat infestations has been to try to eliminate them through the use of lethal tools such as traps and rodenticides. However, there are growing concerns about secondary exposure and bioaccumulation of rodenticides.
Three core sales channels drive revenue allowing SenesTech to reach a wider customer base and target different segments of the market. • e-Commerce. Because ContraPest is not a retail product, e-commerce provides a hub to push end-users for further education as well as providing 24/7 availability for purchasing products and managing subscriptions. • Field Sales.
Three core sales channels drive revenue allowing SenesTech to reach a wider customer base and target different segments of the market. • e-Commerce. E-commerce provides a hub to push end-users for further education as well as providing 24/7 availability for purchasing products and managing subscriptions. • Field Sales. Field sales allow for personal interaction, consultation, and development of potential customers.
We protect these proprietary assets with a combination of confidentiality terms in all commercial agreements or stand-alone confidentiality agreements along with rights-ownership agreements and structured information transfer understandings prior to beginning any collaborative projects.
We protect these proprietary assets with a combination of confidentiality terms in all commercial agreements or stand-alone confidentiality agreements along with rights-ownership agreements and structured information transfer understandings prior to beginning any collaborative projects. We own and maintain the ContraPest trademark and have initiated registration for Evolve.
Triptolide is derived from the Thunder god vine, Tripterygium wilfordii, which is commonly cultivated and harvested wild in southeastern China and other Asian countries. Triptolide is available from a variety of sources, but the process to purify triptolide for use in ContraPest is expensive.
Currently, we source VCD from standard industrial chemical supply providers. Triptolide is derived from the Thunder god vine, Tripterygium wilfordii, which is commonly cultivated and harvested wild in southeastern China and other Asian countries. Triptolide is 10 Table of Contents available from a variety of sources, but the process to purify triptolide for use in ContraPest is expensive.
It has been reported that animals that prey on rats such as raptors and large cats, have significant levels of rodenticide present in their bodies due to persistence of the rodenticide in the rat tissue.
It has been reported that animals that prey on rats such as raptors, large cats, foxes, and other mammals of concern have significant levels of rodenticide present in their bodies due to persistence of the rodenticide in the rat tissue, which may also result in contamination of the food supply.
None of our employees are represented by labor unions or covered by collective bargaining agreements. Intellectual Property and Other Proprietary Rights Maintaining a strong position in the rodenticide market requires constant innovation along with a healthy research program to evolve product lines to remain competitive and relevant to the needs of the changing global marketplace.
Intellectual Property and Other Proprietary Rights Maintaining a strong position in the rodenticide market requires constant innovation along with a healthy research program to evolve product lines to remain competitive and relevant to the needs of the changing global marketplace.
We are continuously enhancing ContraPest to align with the unique needs and environments of our customers in our target verticals while simultaneously pursuing regulatory approvals and amendments to the existing U.S. registration to broaden its use and marketability.
We are continuously enhancing ContraPest to align with the unique needs and environments of our customers in our target verticals while simultaneously pursuing regulatory approvals and amendments to the existing U.S. registration to broaden its use and marketability. When regulatory and financial conditions permit, we will seek regulatory approval for additional jurisdictions beyond the United States.
ITEM 1. BUSINESS. Overview We have developed and are commercializing a global, proprietary technology for managing animal pest populations, initially rat populations, through fertility control. As far back as we can trace, rats have been foe to mankind.
ITEM 1. BUSINESS. Overview We have developed and are commercializing products for managing animal pest populations, initially rat populations, through fertility control. We currently have two product lines of fertility control products: ContraPest and Evolve. As far back as we can trace, rats have been foe to mankind.
Lab tests and field research demonstrate more than 90% reduction in rat populations when added to an IPM with sustained population suppression; • Our proprietary, patent-protected formulation and gravity feeding system optimizes consumption and provides targeted delivery for maximum efficacy; • ContraPest is specifically designed to minimize exposure hazard for handlers and non-targeted species such as wildlife, livestock, and pets; and • ContraPest can be used as an anchor or enhancement for an IPM program, or as a stand-alone solution to decrease reliance on lethal control options.
Lab tests and field research demonstrate more than 90% reduction in rat populations when added to an IPM with sustained population suppression; • Our proprietary formulations and feeding systems optimize consumption and provides targeted delivery for maximum efficacy; • ContraPest and Evolve are specifically designed to minimize exposure hazard for handlers and non-targeted species such as wildlife, livestock, and pets, with Evolve being designated by the EPA as a minimum risk product; and • Fertility control can be used as an anchor or enhancement for an IPM program, and as a solution to decrease reliance on poisons or other lethal control options.
While some of these challenges are new, the efficacy of the response to rat infestations has always been limited by the rat’s extraordinary reproduction. ContraPest®, our initial product, is novel liquid bait in the pest control industry.
While some of these challenges are of recent concern, the efficacy of the response to rat infestations has always been limited by the rat’s extraordinary reproductive rate. ContraPest®, our initial product, is a novel liquid bait in the pest control industry, containing the active ingredients 4-vinylcyclohexene diepoxide (“VCD”) and triptolide.
In certain cases, our registrations are conditional and require completion of testing. We continue to actively seek to comply with these requirements. On March 10, 2022, the EPA granted a sub-label for ContraPest allowing for an alternative delivery system in a hanging bait station designed to target roof rat habitats and infestations, currently marketed as Elevate Bait™.
On March 10, 2022, the EPA granted a sub-label for ContraPest allowing for an alternative delivery system in a hanging bait station designed to target roof rat habitats and infestations, currently marketed as Elevate Bait System™.
ContraPest is currently limited by EPA requirements to indoor use and to use within one foot of manmade structures. We intend to diligently pursue additional related regulatory approvals from the EPA to support our product evolution, including 11 Table of Contents seeking approval for full outdoor use, alternative formulations and for additional rodent species.
We intend to diligently pursue additional related regulatory approvals from the EPA to support our product evolution, including seeking approval for full outdoor use, alternative formulations and for additional rodent species.
ContraPest targets the reproductive systems of both male and female Norway and roof rats, which can lead to sustained reductions of the rat population. ContraPest is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide (“VCD”) and triptolide. ContraPest limits the reproduction of male and female rats beginning with the first breeding cycle following consumption.
ContraPest targets the reproductive systems of both male and female Norway and roof rats beginning with the first breeding cycle following consumption, which can lead to sustained reductions of the rat population. ContraPest is a highly palatable liquid formulation that reduces fertility in both male and female rats.
Current Challenges in Pest Control Methodologies Two base rats, a male and female, can produce 15,000 descendants in approximately 12 months. Lethal control measures such as traps and rodenticides are often at the forefront of rat control programs, but this reproduction rate, intelligence, and genetic resistance to the active ingredients in rodenticides can negatively impact results of traditional mitigation efforts.
Lethal control measures such as traps and rodenticides are often at the forefront of rat control programs, but this reproduction rate, intelligence, and genetic resistance to the active ingredients in rodenticides can negatively impact results of traditional mitigation efforts. Rats reach sexual maturity at approximately nine weeks of age.
An effective IPM program needs to reduce the existing rat population while preventing the population from rebounding. Based on company field research, the addition of ContraPest to an IPM program has demonstrated improved efficacy of more than 90% with sustained population suppression.
Based on company field research, the addition of a fertility control product to an IPM program has demonstrated improved efficacy of more than 90% with sustained population suppression.
These increasing restrictions and bans create an opportunity for ContraPest, as industry professionals are looking for effective tools to serve their customers and gain control of rat populations through nontraditional means.
These increasing restrictions and bans create an opportunity for ContraPest, as industry professionals are looking for effective tools to serve their customers and gain control of rat populations through nontraditional means. Like ContraPest, Evolve is also differentiated in the pest control market due to its unique approach to restrict fertility in rats as opposed to other lethal means.
Once the primordial follicles have become depleted, ovarian failure occurs, which terminates reproductive capability. VCD causes specific loss of small ovarian follicles (both primordial and primary). Triptolide causes specific loss of growing follicles (secondary and antral). In males, triptolide exerts a significant suppression of male fertility by preventing sperm maturation and impairing the movement of sperm.
The active ingredients in our products cause specific loss of small ovarian follicles (both primordial and primary) and growing follicles (secondary and antral). In males, the active ingredients in our products exert a significant suppression of male fertility by preventing sperm maturation and impairing the movement of sperm.
The license agreement, signed in 2005, will terminate with the last-to-expire patent claims, which have a term extending to 2026. 12 Table of Contents Trade Secrets and Trademarks Beyond our patent right holdings, we broaden our intellectual property position with trademark, trade secret, know-how and continuous scientific discovery to accompany our product development efforts.
Trade Secrets and Trademarks Beyond our patent right holdings, we broaden our intellectual property position with trademark, trade secret, know-how and continuous scientific discovery to accompany our product development efforts.
Furthermore, ContraPest is a contraceptive, not a sterilant, limiting fertility in male and female rats beginning with the first breeding cycle following consumption. The average duration of infertility post consumption ranges from 77 to over 180 days. Other Potential Products We have begun work on new formulations of ContraPest – particularly solid and semi-solid variants.
Furthermore, ContraPest and Evolve are contraceptives, not sterilants, limiting fertility in male and female rats beginning with the first breeding cycle following consumption. The average duration of infertility post consumption ranges from 42 to over 180 days.
Raw Materials and Manufacturing Process ContraPest contains two active ingredients, VCD, an industrial chemical, and Triptolide, a plant derived chemical. ContraPest also contains several other inactive, generally recognized as safe (“GRAS”), ingredients. Currently, we source VCD from standard industrial chemical supply providers.
Additionally, the logistics and marketing support offered through these partners reduces cost and effort required to expand our sales. Raw Materials and Manufacturing Process ContraPest contains two active ingredients, VCD, an industrial chemical, and Triptolide, a plant derived chemical. ContraPest also contains several other inactive, generally recognized as safe (“GRAS”), ingredients.
Field sales allows for personal interaction, consultation, and development of potential customers. Field sales representatives, in charge of regional territories across the United States, focus in the larger account segments, attending trade shows and educational opportunities within target verticals. • Distributors and resellers.
Field sales representatives, in charge of regional territories across the United States, focus in the larger account segments, attending trade shows and educational opportunities within target verticals. • Distributors and resellers. Distributors and resellers serve as an expansion of our sales team, increasing our reach by leveraging the established networks and connections of these third-party businesses.
We will maintain close contact with the EPA as their final draft of this policy is due November 2023 with an intended final biological evaluation due November 2024. 7 Table of Contents Integrated Pest Management and Fertility Control The most effective, long-term way to manage rats is by using a combination of tools that work together to magnify the efficacy of the pest management protocol; IPM is based upon this concept.
Integrated Pest Management and Fertility Control The most effective, long-term way to manage rats is by using a combination of tools that work together to magnify the efficacy of the pest management protocol; IPM is based upon this concept. An effective IPM program needs to reduce the existing rat population while preventing the population from rebounding.
The registration process with the United States Environmental Protection Agency (the “EPA”) for ContraPest began on August 23, 2015. On August 2, 2016, the EPA granted an unconditional registration for ContraPest as a Restricted Use Product (“RUP”), due to the need for applicator expertise for deployment.
On August 2, 2016, the EPA granted an unconditional registration for ContraPest as a Restricted Use Product (“RUP”), due to the need for applicator expertise for deployment. On October 18, 2018, the EPA approved the removal of the RUP designation and was reclassified as a general-use pesticide.
Country-specific regulatory laws have provisions that include requirements for certain labeling, safety, efficacy and manufacturers’ quality control procedures to assure the consistency of the product, as well as company records and reports. Some specific in-country studies will be required for particular countries, but others will generally accept an EPA or EU compliant dossier.
International Review and Approval Processes We are researching potential international markets and will evaluate the regulatory landscapes of each prospective market. Country-specific regulatory laws have provisions that include requirements for certain labeling, safety, efficacy and manufacturers’ quality control procedures to assure the consistency of the product, as well as company records and reports.
The EPA granted registration for ContraPest effective August 2, 2016. This initial EPA approval labeled ContraPest as a restricted-use product, due to the need for applicator expertise for deployment. On October 18, 2018, the EPA removed the Restricted Use designation, meaning that we can sell ContraPest to consumers who do not have applicator expertise.
The EPA granted registration for ContraPest effective August 2, 2016, and as of July 12, 2018, we have received registration for ContraPest in all 50 states, the District of Columbia, and five major U.S. territories. This initial EPA approval labeled ContraPest as a restricted-use product, due to the need for applicator expertise for deployment.
Personnel As of December 31, 2022, we had 29 full-time employees and one part-time employee. Within our workforce, eight employees are engaged in research and development and 21 employees are engaged in sales, business development, finance, regulatory, human resources, facilities, information technology and general management and administration.
Within our workforce, eight employees are engaged in research and development and 17 employees are engaged in sales, business development, finance, regulatory, human resources, facilities, information technology and general management and administration. None of our employees are represented by labor unions or covered by collective bargaining agreements.
In certain cases, our EPA and state registrations require completion of testing and certifications even after we have received approval for the product or its labeling. We continue to seek to comply with these requirements. International Review and Approval Processes We are researching potential international markets and will evaluate the regulatory landscapes of each prospective market.
In certain cases, our EPA and state registrations require completion of testing and certifications even after we have received approval for the product or its labeling. We continue to seek to comply with these requirements. The EPA has an exemption under FIFRA, Section 25(b) which exempts certain pesticides from federal registration based on six criteria for minimum risk.
Accordingly, it offers a new tool used in coordination with rodenticides as part of an integrated pest management program, or an alternative to traditional rodenticides altogether. It is an important option in the increasing number of jurisdictions that are restricting the use of second-generation anti-coagulant products.
Additionally, ContraPest can be successfully used as an alternative to traditional rodenticides altogether, an important option in the increasing number of jurisdictions that are restricting the use of second-generation anti-coagulant products. The registration process with the EPA for ContraPest began on August 23, 2015.
The accompanying financial statements and notes thereto give retrospective effect to the reverse stock split for all periods presented. All issued and outstanding common stock, options and warrants exercisable for common stock, restricted stock units, and per share amounts contained in our financial statements have been retrospectively adjusted.
In November 2023, we amended our amended and restated certificate of incorporation to effect a 1-for-12 reverse split of our issued and outstanding shares of common stock. The accompanying financial statements and notes thereto give retrospective effect to the reverse stock split for all periods presented.
On October 18, 2018, the EPA approved the removal of the RUP designation and was reclassified as a general-use pesticide. ContraPest is registered in all 50 states, 49 of which have approved the removal of the RUP designation, as well as the District of Columbia and five major U.S. territories.
ContraPest is registered in all 50 states, 49 of which have approved the removal of the RUP designation, as well as the District of Columbia and five major U.S. territories. In certain cases, our registrations are conditional and require completion of testing. We continue to actively seek to comply with these requirements.
Additionally, ContraPest does not cause illness in rats, and therefore, it does not change behavior or result in bait aversion. 8 Table of Contents (source: company studies) Other Applications While our proprietary technology is effective on rat species, our technology can be applied to other mammalian species.
Maintaining a fertility control program reduces the reproduction and therefore the risk of future population spikes, known in the industry as the rebound effect. 8 Table of Contents (source: company studies) Other Applications While our proprietary technology is effective on rat species, our technology can be applied to other mammalian species.
On December 8, 2016, we went public and are currently traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol SNES. In November 2022, we amended our amended and restated certificate of incorporation to effect a 1-for-20 reverse split of our issued and outstanding shares of common stock.
On November 12, 2015, we reincorporated in the state of Delaware. Our corporate headquarters and manufacturing site are in Phoenix, Arizona. On December 8, 2016, we went public and are currently traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol SNES.
Scientific Background Regarding our Product Female rats are born with a finite number of eggs, or oocytes, and remain fertile until death. Within the ovary, eggs develop within structures called follicles. The non-regenerating and least mature follicles are called primordial. The primordial follicles mature through primary, secondary and antral stages and ultimately ovulate.
Within the ovary, eggs develop within structures called follicles. The non-regenerating and least mature follicles are called primordial. The primordial follicles mature through primary, secondary and antral stages and ultimately ovulate. Once the primordial follicles have become depleted, ovarian failure occurs, which terminates reproductive capability.
This process allows ContraPest to be delivered to rats in a palatable, effective manner, and it is designed to be non-lethal. Currently, we have production scale capability in our facilities in Arizona to manufacture ContraPest. Our internal production capabilities allow us to meet our current and anticipated demand through 2023 for ContraPest.
Currently, we have production scale capability in our facilities in Arizona to manufacture ContraPest and Evolve. Our internal production capabilities allow us to meet our current and anticipated demand through 2024. Scientific Background Regarding our Product Female rats are born with a finite number of eggs, or oocytes, and remain fertile until death.
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When regulatory and financial conditions permit, we will seek regulatory approval for additional jurisdictions beyond the United States. 6 Table of Contents We were incorporated in the state of Nevada in July 2004. On November 12, 2015, we subsequently reincorporated in the state of Delaware. Our corporate headquarters and manufacturing site are in Phoenix, Arizona.
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Additionally, ContraPest does not cause illness in rats, and, therefore, it does not change behavior or result in bait aversion. Accordingly, ContraPest offers a new tool used in coordination with rodenticides as part of an integrated pest management program.
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Maintaining a ContraPest program reduces the reproduction and therefore the risk of future population spikes, known as the rebound effect. Ongoing monitoring of the program locations has indicated that there has been no rebound in the rodent population from the current low levels. ContraPest is a highly palatable liquid formulation that reduces fertility in both male and female rats.
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Evolve, our second product, is a novel soft bait product in the pest control industry. Evolve targets the reproductive systems of both male and female rats, which can lead to sustained reductions of the rat population. Evolve is a soft bait 6 Table of Contents containing the active ingredient cottonseed oil.
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Distributors and resellers serve as an expansion of our sales team, increasing our reach by leveraging the established networks and connections of these third-party businesses. Additionally, the logistics and marketing support offered through these partners reduces cost and effort required to expand our sales. Our current focus is successful commercialization of ContraPest in the United States.
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Evolve limits the reproduction of male and female rats within one to two breeding cycles following consumption. Evolve has not been registered by the EPA. Evolve qualifies for exemption from registration as a minimum risk pesticide under FIFRA Section 25(b). All applicable requirements for registration, manufacturing, selling, or distributing into designated states and territories have been met.
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Aware of the global need for effective rat fertility control, we evaluate requests and inquiries for licensing and manufacturing ContraPest in other regions on a regular basis. There is a sustained focus on building strategic partnerships now for future globalization of ContraPest.
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There are 10 states that accept the federal exemption for pesticide registration with the respective state. For those states that do not accept the federal exemption, we began the registration process for those states in October 2023. To date, we are authorized to sell Evolve in 30 states. We were incorporated in the state of Nevada in July 2004.
Removed
Although solid bait is not essential to our near-term plans, the non-liquid formulations may expand the potential uses and applications of ContraPest. Our plan is to accelerate the reformulation process through partnerships with others in the industry that will be able to give us access to proven technologies, thus reducing potential development time.
Added
All issued and outstanding common stock, options and warrants exercisable for common stock, restricted stock units, and per share amounts contained in our financial statements have been retrospectively adjusted. Current Challenges in Pest Control Methodologies Two base rats, a male and female, can produce 15,000 descendants in approximately 12 months.
Removed
License Agreements We have an exclusive patent license with the University of Arizona for background intellectual property that we plan to employ for future product development in the domestic animal fertility control market. The patent claims in the United States, Australia and New Zealand cover the use of 4-vinylcyclohexene diepoxide to deplete ovarian follicles in individual mammals and mammal populations.
Added
We will maintain 7 Table of Contents close contact with the EPA as their final guidance with respect to this policy was released in December 2023 with an intended final biological evaluation due November 2024.
Added
In addition, Evolve meets the EPA’s FIFRA Section 25(b) minimum risk pesticide conditions. Evolve is exempt from federal registration because it poses little to no risk to human health and the environment and is made from food ingredients, within tolerances of exemption for both food and nonfood applications, which allows it to be used in agricultural applications.
Added
This process allows ContraPest to be delivered to rats in a palatable, effective manner, and it is designed to be non-lethal. Evolve contains one active ingredient, cottonseed oil, a plant-derived food product. Evolve also contains several other inactive food ingredients. Currently, we source cottonseed oil from standard food suppliers, and it is available from a variety of sources.
Added
Our manufacturing process for Evolve involves the incorporation of our active ingredient, in low concentration, into several inactive ingredients. Once incorporated, the entire product is packaged inside of a casing and cut to length for sale. This process allows Evolve to be delivered to rats in a palatable, effective manner, and it is designed to be non-lethal.
Added
Other Potential Products We have begun work on the application of ContraPest and Evolve on other species, such as mice, and expect to introduce an additional product during 2024. Competition Currently, we are unaware of any other non-lethal fertility control products targeting rats that are registered by the EPA.
Added
On October 18, 2018, the EPA removed the Restricted Use designation, meaning that we can sell ContraPest to consumers who do not have applicator expertise. ContraPest is currently limited by EPA requirements to indoor use and to use within one foot of manmade structures.
Added
Evolve qualifies from registration as a minimum risk pesticide under FIFRA, Section 25(b). All applicable requirements for registration, manufacturing, selling, or distributing into designated sates and territories have been met. Evolve has not been registered by the EPA but is in the process for registration in all 50 states, the District of Columbia, and five major U.S. territories.
Added
There are 10 states that accept the federal exemption for pesticide registration within the respective state. For those states that do not accept the federal exemption, we began the registration process for those states in October 2023. To date, we are authorized to sell Evolve in 30 states.
Added
Some specific in-country studies will be required for particular countries, but others will generally accept an EPA or EU compliant dossier. Personnel As of December 31, 2023, we had 25 full-time employees and no part-time employees.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

64 edited+8 added−16 removed122 unchanged
Biggest changeWe are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing invasion of Ukraine by Russia. U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and Russia’s launch of a full-scale military invasion of Ukraine in February 2022.
Biggest changeMisuse of our products may cause an increased risk of injury to customers, which could harm our reputation in the marketplace, as well as lead to potential product liability lawsuits. We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing Russia-Ukraine and Israel-Hamas wars.
If the EPA or comparable foreign regulatory authorities become aware of new information after approval of ContraPest or any other product candidate, or we are unable to adequately complete required testing and certification requirements, a number of potentially significant negative consequences could result, including the following: • we may be forced to suspend marketing of such product; • regulatory authorities may withdraw their approvals of such product after certain procedural requirements have been met; • regulatory authorities may require additional warnings on the label that could diminish the usage or otherwise limit the commercial success of such product; • the EPA or other regulatory bodies may issue safety alerts, press releases or other communications containing warnings about such product; • the EPA may require the establishment or modification of restricted use, or a comparable foreign regulatory authority may require the establishment or modification of a similar strategy that may, for instance, restrict distribution of our product and impose burdensome implementation requirements on us; • we may be required to change the way the product is administered or conduct additional trials; • we could be sued and held liable for harm caused; • we may be subject to litigation or product liability claims; and • our reputation may suffer.
If the EPA or comparable foreign regulatory authorities become aware of new information after approval of ContraPest, Evolve, or any other product candidate, or we are unable to adequately complete required testing and certification requirements, a number of potentially significant negative consequences could result, including the following: • we may be forced to suspend marketing of such product; • regulatory authorities may withdraw their approvals of such product after certain procedural requirements have been met; • regulatory authorities may require additional warnings on the label that could diminish the usage or otherwise limit the commercial success of such product; • the EPA or other regulatory bodies may issue safety alerts, press releases or other communications containing warnings about such product; • the EPA may require the establishment or modification of restricted use, or a comparable foreign regulatory authority may require the establishment or modification of a similar strategy that may, for instance, restrict distribution of our product and impose burdensome implementation requirements on us; • we may be required to change the way the product is administered or conduct additional trials; • we could be sued and held liable for harm caused; • we may be subject to litigation or product liability claims; and • our reputation may suffer.
Our stock could be subject to wide fluctuation in response to many risk factors listed in this section, and others beyond our control, including the following: • market acceptance and commercialization of our products; • our being able to timely demonstrate achievement of milestones, including those related to revenue generation, cost control, cost effective source supply, and regulatory approvals; • our ability to remain listed on Nasdaq; • results and timing of our submissions with the regulatory authorities; • failure or discontinuation of any of our development programs; • regulatory developments or enforcements in the United States and non-U.S. countries with respect to our products or our competitors’ products; • failure to achieve pricing acceptable to the market; • regulatory actions with respect to our products or our competitors’ products; • actual or anticipated fluctuations in our financial condition and operating results or our continuing to sustain operating losses; • competition from existing products or new products that may emerge; • announcements by us or our competitors of significant acquisitions, strategic arrangements, joint ventures, collaborations or capital commitments; • issuance of new or updated research or reports by securities analysts; • announcement or expectation of additional financing efforts, particularly if our cash available for operations significantly decreases or if the financing efforts result in a price adjustment to certain outstanding warrants; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • entry by us into any material litigation or other proceedings; • sales of our common stock by us, our insiders, or our other stockholders; • exercise of outstanding warrants; 26 Table of Contents • market conditions for equity securities; and • general economic and market conditions unrelated to our performance.
Our stock could be subject to wide fluctuation in response to many risk factors listed in this section, and others beyond our control, including the following: • market acceptance and commercialization of our products; • our being able to timely demonstrate achievement of milestones, including those related to revenue generation, cost control, cost effective source supply, and regulatory approvals; • our ability to remain listed on Nasdaq; • results and timing of our submissions with the regulatory authorities; • failure or discontinuation of any of our development programs; • regulatory developments or enforcements in the United States and non-U.S. countries with respect to our products or our competitors’ products; • failure to achieve pricing acceptable to the market; • regulatory actions with respect to our products or our competitors’ products; • actual or anticipated fluctuations in our financial condition and operating results or our continuing to sustain operating losses; • competition from existing products or new products that may emerge; • announcements by us or our competitors of significant acquisitions, strategic arrangements, joint ventures, collaborations or capital commitments; • issuance of new or updated research or reports by securities analysts; • announcement or expectation of additional financing efforts, particularly if our cash available for operations significantly decreases or if the financing efforts result in a price adjustment to certain outstanding warrants; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; 27 Table of Contents • disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • entry by us into any material litigation or other proceedings; • sales of our common stock by us, our insiders, or our other stockholders; • exercise of outstanding warrants; • market conditions for equity securities; and • general economic and market conditions unrelated to our performance.
The commercial success of ContraPest will depend on a number of factors, including the following: • the execution of our commercial strategy and the successful expansion of our commercial organization; • our success in educating end users about the benefits, administration and use of ContraPest; • the effectiveness of our own or our potential strategic partners’ marketing, sales and distribution strategy and operations; • convincing PMPs to deploy ContraPest in quantity as an enhancement to, or replacement of, their current strategy of rodenticide use; • continued refinement of our pricing strategy; • our ability to manufacture quantities of ContraPest using commercially acceptable processes and at a scale sufficient to meet anticipated demand and enable us to reduce our cost of manufacturing; and • a continued acceptable safety profile of ContraPest.
The commercial success of ContraPest and Evolve will depend on a number of factors, including the following: • the execution of our commercial strategy and the successful expansion of our commercial organization; • our success in educating end users about the benefits, administration and use of ContraPest and/or Evolve; • the effectiveness of our own or our potential strategic partners’ marketing, sales and distribution strategy and operations; • convincing PMPs to deploy ContraPest and Evolve in quantity as an enhancement to, or replacement of, their current strategy of rodenticide use; • continued refinement of our pricing strategy; • our ability to manufacture quantities of ContraPest and Evolve using commercially acceptable processes and at a scale sufficient to meet anticipated demand and enable us to reduce our cost of manufacturing; and • a continued acceptable safety profile of ContraPest.
Future growth would impose significant added responsibilities on members of management, including the following: • identifying, recruiting, maintaining, motivating and integrating additional employees with the expertise and experience we will require; • managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties; • managing additional relationships with various strategic partners, suppliers and other third parties; • managing our trials effectively, which we anticipate being conducted at numerous field study sites; 19 • improving our managerial, development, operational, marketing, production and finance reporting systems and procedures; and • expanding our facilities.
Future growth would impose significant added responsibilities on members of management, including the following: • identifying, recruiting, maintaining, motivating and integrating additional employees with the expertise and experience we will require; • managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties; • managing additional relationships with various strategic partners, suppliers and other third parties; • managing our trials effectively, which we anticipate being conducted at numerous field study sites; • improving our managerial, development, operational, marketing, production and finance reporting systems and procedures; and • expanding our facilities.
Even following receipt of any regulatory approval for ContraPest or our product candidates, our products will be subject to ongoing requirements by the EPA and comparable state and foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information.
Even following receipt of any regulatory approval for ContraPest, Evolve, or our product candidates, our products will be subject to ongoing requirements by the EPA and comparable state and foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information.
The occurrence of any such event or penalty could limit our ability to market ContraPest or any other product candidates and generate revenue. In addition, the EPA strictly regulates the advertising and promotion of pest control products, and these pest control products may only be marketed or promoted for their EPA approved uses, consistent with the product’s approved labeling.
The occurrence of any such event or penalty could limit our ability to market ContraPest, Evolve, or any other product candidates and generate revenue. In addition, the EPA strictly regulates the advertising and promotion of pest control products, and these pest control products may only be marketed or promoted for their EPA approved uses, consistent with the product’s approved labeling.
In addition, reverse stock splits may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
In addition, the reverse stock splits increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
In particular, we expect to incur substantial and increased expenses as we perform the following: • attempt to achieve market acceptance for our products; • continue to establish an infrastructure for the sales, marketing and distribution of ContraPest and any other product candidates for which we may receive regulatory approval; • scale up manufacturing processes and quantities for the commercialization of ContraPest and any other product candidates for which we receive regulatory approval; • continue the research and development of ContraPest and our other product candidates, including engaging in any necessary field studies; • seek regulatory approvals for ContraPest in various jurisdictions and for our other product candidates; • expand our research and development activities and advance the discovery and development programs for other product candidates; • maintain, expand and protect our intellectual property portfolio; and • add operational, financial and management information systems and personnel, including personnel to support our clinical development and commercialization efforts and operations as a public company.
In particular, we expect to incur substantial and increased expenses as we perform the following: • attempt to achieve market acceptance for our products; • continue to establish an infrastructure for the sales, marketing and distribution of our products and product candidates for which we may receive regulatory approval; • scale up manufacturing processes and quantities for the commercialization of our products and product candidates for which we receive regulatory approval; • continue the research and development of products and product candidates, including engaging in any necessary field studies; • seek regulatory approvals for our products and product candidates; • expand our research and development activities and advance the discovery and development programs for other product candidates; • maintain, expand and protect our intellectual property portfolio; and • add operational, financial and management information systems and personnel, including personnel to support our clinical development and commercialization efforts and operations as a public company.
Market acceptance of any of our product candidates for which we receive approval depends on a number of factors, including the following: • the potential and perceived advantages of product candidates over alternative or complementary products; • the effectiveness of our sales and marketing efforts and those of our collaborators; • the efficacy and safety of such product candidates as demonstrated in trials; 13 Table of Contents • the uses, indications or limitations for which the product candidate is approved; • product labeling or product insert requirements of the EPA or other regulatory authorities; • the timing of market introduction of our products as well as future competitive or alternative products; • relative convenience and ease of use; and • unfavorable publicity relating to the product.
Market acceptance of any of our product candidates for which we receive approval depends on a number of factors, including the following: • the potential and perceived advantages of product candidates over alternative or complementary products; • the effectiveness of our sales and marketing efforts and those of our collaborators; • the efficacy and safety of such product candidates as demonstrated in trials; • the uses, indications or limitations for which the product candidate is approved; • product labeling or product insert requirements of the EPA or other regulatory authorities; • the timing of market introduction of our products as well as future competitive or alternative products; • relative convenience and ease of use; and • unfavorable publicity relating to the product.
If we encounter continued issues or delays in the commercialization of ContraPest or greater than anticipated expenses, our prior losses and expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern.
If we encounter continued issues or delays in the commercialization of our products or greater than anticipated expenses, our prior losses and expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future and continue as a going concern.
Our failure to accomplish any of these tasks could prevent us from successfully growing our business. Business or supply chain disruptions could seriously harm our future revenues and financial condition and increase our costs and expenses, particularly because we have limited suppliers and a critical ingredient is currently sourced from China.
Our failure to accomplish any of these tasks could prevent us from successfully growing our business. Business or supply chain disruptions could seriously harm our future revenues and financial condition and increase our costs and expenses, particularly because we have limited suppliers and a critical ingredient for ContraPest is currently sourced from China.
Our independent registered public accounting firm included in its opinion for the years ended December 31, 2022, and 2021 an explanatory paragraph referring to our net loss from operations and net capital deficiency and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available.
Our independent registered public accounting firm included in its opinion for the years ended December 31, 2023, and 2022 an explanatory paragraph referring to our net loss from operations and net capital deficiency and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available.
Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine, and subsequent military invasion in Ukraine have led to sanctions and other penalties being levied by the United States, the European Union, and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including the agreement by the U.S. and the EU to remove certain Russian financial 15 Table of Contents institutions from the Society for Worldwide Interbank Financial Telecommunication payment system.
Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine, and subsequent military invasion in Ukraine have led to sanctions and other penalties being levied by the United States, the European Union, and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including the agreement by the U.S. and the EU to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system.
The safety profile of any product will continue to be closely monitored by the EPA, state and comparable foreign regulatory authorities after approval. In addition, we may be required, from time to time, to provide further testing results and certifications to the EPA and state regulatory agencies for ContraPest.
The safety profile of any product will continue to be closely monitored by the EPA, state and comparable foreign regulatory authorities after approval. In addition, we may be required, from time to time, to provide further testing results and certifications to the EPA and state regulatory agencies for ContraPest or Evolve.
Our Annual Report on Form 10-K for the year ended December 31, 2022 does not include an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for smaller reporting companies.
Our Annual Report on Form 10-K for the year ended December 31, 2023 does not include an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for smaller reporting companies.
If we are unable to raise additional capital when required or on acceptable terms, we may be required to take certain actions, including the following: • significantly delay, scale back or discontinue the development or commercialization of our product candidates, including ContraPest; • seek strategic partners for the manufacturing, sales and distribution of ContraPest or any of our other product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; and 14 Table of Contents • relinquish, or license on unfavorable terms, our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.
If we are unable to raise additional capital when required or on acceptable terms, we may be required to take certain actions, including the following: • significantly delay, scale back or discontinue the development or commercialization of our product candidates, including ContraPest and Evolve; • seek strategic partners for the manufacturing, sales and distribution of ContraPest or Evolve or any of our other product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; and • relinquish, or license on unfavorable terms, our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.
Many of these factors are beyond our control. If we are unable to successfully commercialize ContraPest, we may not be able to earn sufficient revenues or profits to continue our business. We will require additional capital to fund our operations.
Many of these factors are beyond our control. If we are unable to successfully commercialize ContraPest and Evolve, we may not be able to earn sufficient revenues or profits to continue our business. We will require additional capital to fund our operations.
If we cannot successfully commercialize our products, especially ContraPest, we will not become profitable. If any of our approved product candidates fail to achieve sufficient market acceptance, we will not be able to generate significant revenues or become profitable.
If we cannot successfully commercialize our products, especially ContraPest and Evolve, we will not become profitable. If any of our approved product candidates fail to achieve sufficient market acceptance, we will not be able to generate significant revenues or become profitable.
Our existing internal manufacturing platform is adequate for meeting our current and near term forecasted demand for ContraPest. We may be required to spend significant time and resources to expand these manufacturing facilities to fully meet future demand.
Our existing internal manufacturing platform is adequate for meeting our current and near term forecasted demand for our products. We may be required to spend significant time and resources to expand these manufacturing facilities to fully meet future demand.
Failure to obtain regulatory approval in foreign jurisdictions would prevent ContraPest or any other product candidates from being marketed in those jurisdictions. To market and sell our products globally, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing.
Failure to obtain regulatory approval in foreign jurisdictions would prevent our products or product candidates from being marketed in those jurisdictions. To market and sell our products globally, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing.
Previously, on September 26, 2018, March 20, 2019, February 20, 2020 and, most recently, on March 2, 2022, we received a letter from the listing qualifications staff of Nasdaq providing notification that the bid price for our common stock had closed below $1.00 per share for the previous 30 consecutive business days and our common stock no longer met the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2).
Previously, on September 26, 2018, March 20, 2019, February 20, 2020, March 2, 2022, and, most recently, on August 25, 2023, we received a letter from the listing qualifications staff of Nasdaq (the “Staff”) providing notification that the bid price for our common stock had closed below $1.00 per share for the previous 30 consecutive business days and our common stock no longer met the minimum bid price requirement for continued listing under Nasdaq Listing Rule 5550(a)(2).
Additionally, 28 Table of Contents most of our warrants provide a Black Scholes value-based payment to the warrant holders in connection with certain transactions that may discourage, delay or prevent a merger or acquisition. We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law.
Additionally, most of our warrants provide a Black Scholes value-based payment to the warrant holders in connection with certain transactions that may discourage, delay or prevent a merger or acquisition. We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law.
Any of the above-mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the war, sanctions, and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described herein.
Any of the above-mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the war, 15 Table of Contents sanctions, and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described herein.
A protracted conflict between Ukraine and Russia, any escalation of that conflict, and the financial and economic sanctions and import and/or export controls imposed on Russia by the United States, the UK, the EU, Canada and others, and the above-mentioned adverse effect on our operations (both in this region and generally) and on the wider global economy and market conditions could, in turn, have a material adverse impact on our business, financial condition, cash flows and results of operations and could cause the market value of our common shares to decline.
A protracted conflict between Ukraine and Russia and Israel and Hamas, any escalation of those conflicts, and the financial and economic sanctions and import and/or export controls imposed by the United States, the UK, the EU, Canada and others, and the above-mentioned adverse effect on our operations (both in this region and generally) and on the wider global economy and market conditions could, in turn, have a material adverse impact on our business, financial condition, cash flows and results of operations and could cause the market value of our common shares to decline.
If we are unable to obtain and maintain protection for our technology and products, or if the scope of the protection obtained is not sufficient, our competitors could develop and commercialize technology and products similar or superior to ours, and our ability to successfully commercialize our technology and products may be adversely affected.
If we are unable to obtain 20 Table of Contents and maintain protection for our technology and products, or if the scope of the protection obtained is not sufficient, our competitors could develop and commercialize technology and products similar or superior to ours, and our ability to successfully commercialize our technology and products may be adversely affected.
Our financial statements as of December 31, 2022 and 2021 have been prepared under the assumption that we will continue as a going concern.
Our financial statements as of December 31, 2023 and 2022 have been prepared under the assumption that we will continue as a going concern.
As of December 31, 2022, we had 29 full-time employees. As our development and commercialization plans and strategies develop, we will need additional managerial, operational, sales, marketing, scientific and financial headcount and other resources. Our management, personnel, and systems currently in place may not be adequate to support this future growth.
As of December 31, 2023, we had 25 full-time employees. As our development and commercialization plans and strategies develop, we will need additional managerial, operational, sales, marketing, scientific and financial headcount and other resources. Our management, personnel, and systems currently in place may not be adequate to support this future growth.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects. Moreover, existing government regulations may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of ContraPest or any other product candidates.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects. Moreover, existing government regulations may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of product candidates requiring such approval.
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements or other marketing or distribution arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue 25 Table of Contents streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements or other marketing or distribution arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
For example, we have become aware that we were involved in a transaction in which an investor of the Company may have resold approximately 175,000 shares of our common stock pursuant to a registration statement that had not yet been declared effective by the Securities and Exchange Commission (SEC).
For example, we have become aware that we were involved in a transaction in which an investor of the Company may have resold approximately 175,000 shares of our common stock pursuant to a registration statement that had not yet been declared effective by the SEC.
The asserted claims and/or litigation could include claims against us, our licensors, or our suppliers alleging infringement of intellectual property rights with respect to our product 21 Table of Contents candidates or components of those products.
The asserted claims and/or litigation could include claims against us, our licensors, or our suppliers alleging infringement of intellectual property rights with respect to our product candidates or components of those products.
Furthermore, because of the potential for significant damage awards, which are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims resulting in large settlements.
Furthermore, because of the potential for significant damage awards, which are not necessarily predictable, it is not 21 Table of Contents unusual to find even arguably unmeritorious claims resulting in large settlements.
If we are unable to obtain approval of ContraPest or for any of our other product candidates by regulatory authorities in the world market, the commercial prospects of that product candidate may be significantly diminished and our business prospects could decline. Risks Related to our Operations and Supply Chain We depend on key personnel to operate our business.
If we are unable to obtain approval of our products or product candidates by regulatory authorities in the world market, the commercial prospects of that product candidate may be significantly diminished and our business prospects could decline. Risks Related to our Operations and Supply Chain We depend on key personnel to operate our business.
Any such setback in our pursuit of regulatory approval could have a material adverse effect on our business and prospects. 16 Table of Contents Even following receipt of any regulatory approval for ContraPest and our other product candidates, we will continue to face extensive regulatory requirements and our products may face future development and regulatory difficulties.
Any such setback in our pursuit of regulatory approval could have a material adverse effect on our business and prospects. Even following receipt of any regulatory approval for ContraPest, Evolve, and our other product candidates, requiring regulatory approval, we will continue to face extensive regulatory requirements and our products may face future development and regulatory difficulties.
We face an inherent risk of product liability exposure related to the use of ContraPest and any of our other products. If we cannot successfully defend ourselves against claims from our product users, we could incur substantial liabilities.
We face an inherent risk of product liability exposure related to the use of ContraPest and Evolve. If we cannot successfully defend ourselves against claims from our product users, we could incur substantial liabilities.
Risks Related to our Business Our success is dependent on the successful commercialization of ContraPest. The EPA granted registration approval for ContraPest effective August 2, 2016, and as of July 12, 2018, we have received registration for ContraPest in all 50 states and the District of Columbia.
Risks Related to our Business Our success is dependent on the successful commercialization of ContraPest and Evolve. The EPA granted registration approval for ContraPest effective August 2, 2016, and as of July 12, 2018, we have received registration for ContraPest in all 50 states, the District of Columbia, and five major U.S. territories.
For the years ended December 31, 2022 and 2021, we reported net losses of $9.7 million and $8.3 million, respectively. Thru December 31, 2022, we have accumulated deficits of $122.2 million since inception. Since inception, we have dedicated a majority of our resources to the discovery and development and marketing of our proprietary product candidates.
For the years ended December 31, 2023 and 2022, we reported net losses of $7.7 million and $9.7 million, respectively. Thru December 31, 2023, we have accumulated deficits of $129.9 million since inception. Since inception, we have dedicated a majority of our resources to the discovery and development and marketing of our proprietary product candidates.
If market demand for triptolide causes the price 19 Table of Contents to increase beyond our ability to market at a competitive price or causes the quality of the refined ingredient to be less than needed for our production, our ability to commercialize ContraPest could be limited or delayed, which would adversely affect our business, results of operations and financial condition.
If market demand for triptolide causes the price to increase beyond our ability to market at a competitive price or causes the quality of the refined ingredient to be less than needed for our production, our ability to commercialize ContraPest could be limited or delayed, which would adversely affect our business, results of operations and financial condition. 19 Table of Contents A variety of risks associated with marketing our product candidates internationally could materially adversely affect our business.
Our efforts could fail to receive approval from the EPA, with respect to ContraPest or our product candidates, or from a comparable foreign regulatory authority for many reasons, including the following: • disagreement over the design or implementation of our trials; • failure to demonstrate a product candidate is safe or works according to our claims; • failure to demonstrate a product candidate’s benefits outweigh its risks; • disagreement over our interpretation of data; • disagreement over whether to accept efficacy results from trials; • the insufficiency of data collected from trials to obtain regulatory approval; • irreparable or critical compliance issues relating to our manufacturing process; or • changes in the approval policies or regulations that render our data insufficient for approval.
Our efforts could fail to receive approval from the EPA, with respect to ContraPest or our product candidates, or from a comparable foreign regulatory authority for many reasons, including the following: • disagreement over the design or implementation of our trials; • failure to demonstrate a product candidate is safe or works according to our claims; • failure to demonstrate a product candidate’s benefits outweigh its risks; • disagreement over our interpretation of data; • disagreement over whether to accept efficacy results from trials; • the insufficiency of data collected from trials to obtain regulatory approval; • irreparable or critical compliance issues relating to our manufacturing process; or • changes in the approval policies or regulations that render our data insufficient for approval. 16 Table of Contents Any of these factors, some of which are beyond our control, could jeopardize our ability to obtain regulatory approval of submittals.
On October 12, 2022, our stockholders approved a reverse stock split of our common stock, par value $0.001 per share, at a ratio of not less than 1-for-5 and not more than 1-for-20, with the actual ratio to be determined by our board of directors.
On August 18, 2023, our stockholders approved a reverse stock split of our common stock, par value $0.001 per share, at a ratio of not less than 1-for-2 and not more than 1-for-12, with the actual ratio to be determined by our board of directors.
On October 12, 2022, our stockholders approved a reverse stock split of our common stock, par value $.001 per share, at a ratio of not less than 1-for-5 and not more than 1-for-20, with the actual ratio to be determined by our board of directors.
On August 18, 2023, our stockholders approved a reverse stock split of our common stock, par value $.001 per share, at a ratio of not less than 1-for-2 and not more than 1-for-12, with the actual ratio to be determined by our board of directors.
ContraPest is the first product we have marketed, and if we are unable to establish and maintain an effective sales force and marketing and distribution infrastructures, or enter into and rely upon acceptable third-party relationships, we may be unable to generate any revenue.
If we are unable to establish and maintain an effective sales force and marketing and distribution infrastructures, or enter into and rely upon acceptable third-party relationships, we may be unable to generate any revenue.
In the event that we are unable to establish compliance, or again become non-compliant, with Rule 5550(a)(2) and cannot re-establish compliance within the require timeframe, our common stock could be delisted from The Nasdaq Capital Market, which could have a material adverse effect on our financial condition and which would cause the value of our common stock to decline.
In the event that we are unable to establish compliance, or again become non-compliant, with any of the minimum financial and other continued listing requirements of Nasdaq and cannot re-establish compliance within the require timeframe, our common stock could be delisted from The Nasdaq Capital Market, which could have a material adverse effect on our 25 Table of Contents financial condition and which would cause the value of our common stock to decline.
However, we have not yet had significant sales of ContraPest, which is our only product to date that is available for commercialization and the generation of revenue. ContraPest and our other product candidates, if approved, may not achieve adequate market acceptance necessary for commercial success.
However, we have not yet had significant sales of ContraPest and Evolve, which are our only products to date that are available for commercialization and the generation of revenue. 13 Table of Contents ContraPest, Evolve, and our other product candidates may not achieve adequate market acceptance necessary for commercial success.
If ContraPest or any other product candidate does not gain or maintain sufficient regulatory approval, or if approved, fails to achieve market acceptance, we may never become profitable. Even if we 24 Table of Contents achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.
If our products or product candidates do not gain or maintain sufficient regulatory approval, or if approved, fails to achieve market acceptance, we may never become profitable. Even if we achieve 24 Table of Contents profitability in the future, we may not be able to sustain profitability in subsequent periods.
Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that a reverse stock split, including the one that we expect to implement shortly prior to the completion of this offering, will result in a share price that will attract new investors, including institutional investors.
Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that a reverse stock split will result in a share price that will attract new investors, including institutional investors.
Following such approval, we filed an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the reverse stock split, with an effective time of 11:59 p.m., Eastern Time on November 15, 2022.
Following such approval, we filed an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the reverse stock split, with an effective time of 4:01 p.m., Eastern Time on November 16, 2023.
If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline. If incorrect or misleading information is disseminated publicly by third parties about us, our stock price could decline.
If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and/or be subject to different marketing requirements or fines or enhanced government oversight and reporting obligations, which would adversely affect our business, prospects, and ability to achieve or sustain profitability.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and/or be subject to different marketing requirements or fines or enhanced government oversight and reporting obligations, which would adversely affect our business, prospects, and ability to achieve or sustain profitability. 17 Table of Contents Even following receipt of any regulatory approval or introduction of products or product candidates, we will continue to be subject to regulation of our manufacturing processes and advertising practices.
In order to market ContraPest and any other products that may be registered with the EPA and comparable foreign regulatory authorities, we must continue to build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services for which we would incur substantial costs.
In order to market products, we must continue to build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services for which we would incur substantial costs.
On November 15, 2022, the Reverse Split Committee of our Board of Directors approved a final split ratio of one-for-twenty (1:20) to regain compliance with the Nasdaq minimum bid price requirement.
On November 7, 2023, the Reverse Split Committee of our Board of Directors approved a final split ratio of 1-for-12 to regain compliance with the Nasdaq minimum bid price requirement. Prior to the November 2023 reverse stock split, we effected a reverse stock split in November 2022 with a ratio of 1-for-20.
Commercialization of ContraPest and developing further product candidates, including conducting experiments and field studies, obtaining and maintaining regulatory approval and commercializing any products approved for sale, is a time-consuming, expensive and uncertain process that takes years to complete. We expect our expenses to continue and to increase in connection with our ongoing activities, particularly as we advance our commercialization activities.
Commercialization of ContraPest and Evolve and developing further product candidates, including conducting experiments and field studies, obtaining and maintaining regulatory approval and commercializing any products approved for sale, is a time-consuming, expensive and uncertain process that takes years to complete.
Our various warrants contain other terms that may affect our fundraising. In connection with this offering, we may agree to amend the terms of certain of our outstanding warrants held by certain significant purchasers in this offering. Any such amendments may, among other things, decrease the exercise prices or increase the term of exercise of those warrants.
Our various warrants contain other terms that may affect our fundraising. In connection with this offering, we may agree to amend the terms of certain of our outstanding warrants held by certain significant purchasers in this offering.
In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve. Our corporate documents, Delaware law and certain warrants contain provisions that could discourage, delay or prevent a change in control of our company.
In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.
On November 15, 2022, the Reverse Split Committee of our Board of Directors approved a final split ratio of one-for-twenty (1:20).
On November 7, 2023, the Reverse Split Committee of our Board of Directors approved a final split ratio of 1-for-12 (the “November 2023 Reverse Split”).
Although the length and impact of the ongoing military conflict is highly unpredictable, the war in Ukraine has led to market disruptions, including significant volatility in commodity prices, credit, and capital markets.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and Russia’s launch of a full-scale military invasion of Ukraine in February 2022. Although the length and impact of the ongoing military conflict is highly unpredictable, the war in Ukraine has led to market disruptions, including significant volatility in commodity prices, credit, and capital markets.
If we are unable to develop full-scale manufacturing capabilities, we may not be able to meet demand 18 Table of Contents of our products without relying on third party manufacturers, which could adversely affect our operations or financial condition.
If we are unable to develop full-scale manufacturing capabilities, we may not be able to meet demand of our products without relying on third party manufacturers, which could adversely affect our operations or financial condition. 18 Table of Contents In addition, if our manufacturing operations fail or are disrupted for any reason, including because of labor, disasters, and/or equipment malfunctions, among others, our ability to timely produce our products may be adversely affected, which would harm our sales and reputation.
To regain compliance, the closing bid price of our common stock had to be $1.00 per share or more for a minimum of 10 consecutive business days at any time before the expiration of the initial compliance period. 27 Table of Contents In the event that we would have been unable to regain compliance with Rule 5550(a)(2) during the initial compliance, Nasdaq rules provide that we may be eligible for an additional 180 calendar day compliance period.
To regain compliance, the closing bid price of our common stock had to be $1.00 per share or more for a minimum of 10 consecutive business days at any time before the expiration of the initial compliance period.
As a result, the issuance, scope, validity, enforceability and commercial value of our patents, including those patent rights licensed to us by third parties, are highly uncertain. 20 Table of Contents The steps we have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, both inside and outside the United States.
The steps we have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, both inside and outside the United States.
The incurrence of indebtedness through credit facilities would result in increased fixed payment obligations and, potentially, the imposition of restrictive covenants.
Any such amendments may, among other things, decrease the exercise prices or increase the term of exercise of those warrants. 26 Table of Contents The incurrence of indebtedness through credit facilities would result in increased fixed payment obligations and, potentially, the imposition of restrictive covenants.
We may expand our operations, and as a result of many factors, some of which may be currently unknown to us, our expenses may be higher than expected. Securing additional financing may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates, including ContraPest.
We expect our expenses to continue and to increase in connection with our ongoing activities, particularly as we advance our commercialization activities. We may expand our operations, and as a result of many factors, some of which may be currently unknown to us, our expenses may be higher than expected.
In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.
Securing additional financing may divert our management from their day-to-day activities, which 14 Table of Contents may adversely affect our ability to develop and commercialize our product candidates, including ContraPest and Evolve. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.
Patent positions can be highly uncertain, involve complex legal and factual questions and be the subject of litigation.
Patent positions can be highly uncertain, involve complex legal and factual questions and be the subject of litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patents, including those patent rights licensed to us by third parties, are highly uncertain.
Removed
Even following receipt of regulatory approval for ContraPest or future regulatory approval of our other product candidates, such products may not gain market acceptance.
Added
Evolve, as a FIFRA 25(b) minimum risk pesticide, does not require federal registration with the EPA but is in the process of being registered in all 50 states, the District of Columbia, and five major U.S. territories. To date, we are authorized to sell Evolve in 30 states.
Removed
Misuse of our products may cause an increased risk of injury to customers, which could harm our reputation in the marketplace, as well as lead to potential product liability lawsuits. The coronavirus pandemic may continue to adversely affect our business, and other similar public health crises could result in similar or other harms.
Added
The conflict in Israel and surrounding areas has also created economic uncertainty and regional instability, including due to the risk of escalation into a wider regional conflict, and resulted in the imposition of sanctions targeting Hamas-affiliated individuals and entities.
Removed
The outbreak of the novel coronavirus (“COVID-19”) pandemic resulted in widespread travel and transportation restrictions and closures of commercial spaces, industrial facilities and other spaces and businesses in and across the United States and the world, including in the locations we operate or target sales.
Added
The broader consequences of these conflicts remain uncertain, but may include further sanctions, regional instability and geopolitical shifts, increased prevalence and sophistication of cyberattacks, potential retaliatory action against companies such as us, heightened regulatory scrutiny related to sanctions compliance, increased inflation, further increases or fluctuations in commodity and energy prices, decreases in global travel, further disruptions to the global supply chain and other adverse effects on macroeconomic conditions.
Removed
As a result, our business has been impacted and we could face continued or more adverse effects. In addition to any continuing effects of COVID-19 on our business, another public health crisis with similar effects could develop and harm our business, financial results and liquidity.
Added
In the event that we are unable to regain compliance with Rule 5550(a)(2) during the initial compliance, Nasdaq rules provide that we may be eligible for an additional 180 calendar day compliance period.
Removed
Our results and financial condition may be adversely affected by federal or state legislation, or other similar laws, regulations, orders or other governmental or regulatory actions or best practices, that would impose new restrictions on our ability to operate our business or customers to operate their businesses.
Added
However, even if a stock split has a positive effect on the market price for the common stock immediately following a reverse stock split, performance of our business and financial results, general economic conditions and the market perception of our business, and other adverse factors which may not be in our control, could lead to a decrease in the price of our common stock following the reverse stock split.
Removed
The degree to which the continuing effects of the COVID-19 pandemic or similar public health crises may impact our results of operations and financial condition is unknown at this time and will depend on future developments, including the ultimate severity and the duration of the public health impacts, and further actions that may be taken by governmental authorities or businesses or individuals on their own initiatives in response to a public health threat.
Added
While the bid price of our common stock has been at or above $1.000 per share for a minimum of 10 consecutive business days multiple times since the November 2023 Reverse Split, Nasdaq has used its discretion to monitor the bid price of our common stock for a longer period of time.
Removed
Any of these factors, some of which are beyond our control, could jeopardize our ability to obtain regulatory approval of submittals.
Added
We hope to receive from Nasdaq the additional 180-day compliance period in which to regain compliance. We intend to effect another reverse stock split within such additional 180-day compliance period, if necessary, in order to regain compliance.
Removed
Our future success may also be dependent on regulatory approval and commercialization of other product candidates. We are actively working on a semi-solid product and a product to control fertility in mice.
Added
If incorrect or misleading information is disseminated publicly by third parties about us, our stock price could decline. 28 Table of Contents Our corporate documents, Delaware law and certain warrants contain provisions that could discourage, delay or prevent a change in control of our company.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFor our manufacturing facility, we lease and occupy a separate facility with approximately 5,100 square feet of space pursuant to a lease that commenced on August 1, 2020 and expires on November 30, 2024. We believe that our existing facilities are adequate and meet our current needs for business, manufacturing and research.
Biggest changeWe believe that our existing facilities are adequate and meet our current needs for business, manufacturing and research.
ITEM 2. PROPERTIES. As of December 31, 2022, our corporate headquarters and manufacturing facility are located in Phoenix, Arizona. For our corporate headquarters, we lease and occupy approximately 5,500 square feet of office space pursuant to a lease that commenced on December 1, 2019 and expires on November 30, 2024.
ITEM 2. PROPERTIES. As of December 31, 2023, our corporate headquarters and manufacturing facility are located in Phoenix, Arizona. We lease and occupy approximately 5,100 square feet of office space for our corporate headquarters and approximately 7,700 square feet of separate facility space for our manufacturing facility pursuant to a lease that expires on November 30, 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders As of March 15, 2023, there were approximately 694 holders of record of our common stock. Because many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to determine the total number of beneficial owners represented by these holders of record.
Biggest changeHolders As of February 20, 2024, there were approximately 691 holders of record of our common stock. Because many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to determine the total number of beneficial owners represented by these holders of record.
Purchases of Equity Securities by the Company We withhold shares of common stock in connection with the vesting of restricted stock units to satisfy required tax withholding obligations when they occur. There were no purchases of our equity securities during the 12 months ended December 31, 2022.
Purchases of Equity Securities by the Company We withhold shares of common stock in connection with the vesting of restricted stock units to satisfy required tax withholding obligations when they occur. There were no purchases of our equity securities during the 12 months ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

35 edited+4 added−15 removed22 unchanged
Biggest changeWe have incurred significant operating losses every year since our inception. Our net losses were $9.7 million and $8.3 million for the years ended December 31, 2022 and 2021, respectively. We expect to continue to incur significant expenses and generate operating losses for at least the next 12 months.
Biggest changeAt December 31, 2023, we had an accumulated deficit of $129.9 million and cash and cash equivalents of $5.4 million. 30 Table of Contents We have incurred significant operating losses every year since our inception. Our net losses were $7.7 million and $9.7 million for the years ended December 31, 2023 and 2022, respectively.
Our ultimate success depends upon the outcome of a combination of factors, including the following: (i) successful commercialization of ContraPest and maintaining and obtaining regulatory approval of our products and 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) 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.
Our ultimate success depends upon the outcome of a combination of factors, including the following: (i) successful commercialization of ContraPest and Evolve and maintaining and obtaining regulatory approval of our products and product candidates; (ii) market acceptance, commercial viability and profitability of ContraPest, Evolve 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) 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.
Other Income (Expense), Net Other income (expense), net, consists of interest income and expense, as well as any recognized gains or losses related to the sale of fixed assets and other miscellaneous items.
Other Income (Expense), Net Other income (expense), net, consists of interest income and expense, as well as any gains or losses related to the sale of fixed assets and other miscellaneous items.
If we need more financing, including within the next 12 months, and we are unable to raise the necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern.
If we need more financing, including within the next nine months, and we are unable to raise the necessary capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful and operate as a going concern.
In particular, we expect to incur substantial and increased expenses as we: • work to maximize market acceptance for, and generate sales of, our products, including by conducting field demonstrations at potential lead customers; • explore strategic partnerships to enable us to penetrate additional target markets and geographical locations; • manage the infrastructure for sales, marketing and distribution of ContraPest and any other product candidates for which we may receive regulatory approval; • seek additional regulatory approvals for ContraPest, including to more fully expand the market and use for ContraPest and, if we believe there is commercial viability, for our other product candidates; • further develop our manufacturing processes to contain costs while being able to scale to meet future demand of ContraPest and any other product candidates for which we receive regulatory approval; • continue product development of ContraPest and advance our research and development activities and, as our operating budget permits, advance the research and development programs for other product candidates; • maintain and protect our intellectual property portfolio; and • add operational, financial and management information systems and personnel, including personnel to support our product development and commercialization efforts and operations as a public company.
In addition, we will continue to incur costs associated with operating as a public company. 33 Table of Contents In particular, we expect to incur substantial and increased expenses as we: • work to maximize market acceptance for, and generate sales of, our products, including by conducting field demonstrations at potential lead customers; • explore strategic partnerships to enable us to penetrate additional target markets and geographical locations; • manage the infrastructure for sales, marketing and distribution of ContraPest and Evolve and any other product candidates for which we may receive regulatory approval; • seek additional regulatory approvals, if any, for ContraPest and Evolve, including to more fully expand the market and use for ContraPest and Evolve and, if we believe there is commercial viability, for our other product candidates; • further develop our manufacturing processes to contain costs while being able to scale to meet future demand of ContraPest and Evolve and any other product candidates for which we receive regulatory approval; • continue product development of ContraPest and Evolve and advance our research and development activities and, as our operating budget permits, advance the research and development programs for other product candidates; • maintain and protect our intellectual property portfolio; and • add operational, financial and management information systems and personnel, including personnel to support our product development and commercialization efforts and operations as a public company.
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 32 Table of Contents administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, consulting, accounting and audit services.
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.
When there are changes to the assumptions used in the option-pricing model, including fluctuations in the market prices of our common stock, there will be variations in the calculated fair value of our 35 Table of Contents future stock option awards, which results in variation in the stock-based compensation expensed recognized.
When there are changes to the assumptions used in the option-pricing model, including fluctuations in the market prices of our common stock, there will be variations in the calculated fair value of our future stock option awards, which results in variation in the stock-based compensation expensed recognized.
We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ContraPest in the United States. However, if 33 Table of Contents anticipated revenue targets and margin targets are not achieved or expenses are more than we have budgeted, we may need to raise additional financing before that time.
We have evaluated and will continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ContraPest and Evolve in the United States. However, if anticipated revenue targets and margin targets are not achieved or expenses are more than we have budgeted, we may need to raise additional financing before that time.
Until these positions are sustained by the taxing authorities, we do not recognize the tax benefit resulting from such positions and report the tax effect for uncertain tax positions in our balance sheets. Off-Balance Sheet Arrangements None.
Until these positions are sustained by the taxing authorities, we do not recognize the tax benefit resulting from such positions and report the tax effect for uncertain tax positions in our balance sheets. Off-Balance Sheet Arrangements None. 35 Table of Contents
Through December 31, 2022, we had received net proceeds of $84.3 million from our sales of common stock, preferred stock and issuance of convertible and other promissory notes, an aggregate of $1.7 million from research grants and licensing fees and an aggregate of $2.5 million in product sales.
Through December 31, 2023, we had received net proceeds of $92.5 million from our sales of common stock, preferred stock and issuance of convertible and other promissory notes, an aggregate of $1.7 million from research grants and licensing fees and an aggregate of $3.7 million in product sales.
Through December 31, 2022, we had received net proceeds of $84.3 million from our sales of common stock, preferred stock and issuance of convertible and other promissory notes, an aggregate of $1.7 million from research grants and licensing fees and an aggregate of $2.5 million in product sales.
Through December 31, 2023, we had received net proceeds of $92.5 million from our sales of common stock, preferred stock and issuance of convertible and other promissory notes, an aggregate of $1.7 million from research grants and licensing fees and an aggregate of $3.7 million in product sales.
Net cash generated by changes in our operating assets and liabilities consisted primarily of a $188,000 increase in accrued expenses and accounts payable, a $148,000 decrease in net inventories, and a $44,000 increase in deferred revenue, offset by increases of $148,000 in prepaid expenses and $42,000 in accounts receivable.
Net cash generated by changes in 34 Table of Contents our operating assets and liabilities consisted primarily of a $188,000 increase in accrued expenses and accounts payable, a $148,000 decrease in inventory and a $44,000 increase in deferred revenue, offset by increases of $148,000 in prepaid expenses and $42,000 in accounts receivable.
Cash Flows The following table summarizes our sources and uses of cash for each of the years presented (in thousands): Years Ended December 31, 2022 2021 Cash and cash equivalents, beginning of year $ 9,326 $ 3,643 Net cash provided by (used in): Operating activities (8,577) (7,779) Investing activities (170) (99) Financing activities 4,196 13,561 Net change in cash and cash equivalents (4,551) 5,683 Cash and cash equivalents, end of year $ 4,775 $ 9,326 34 Table of Contents Cash Flows from Operating Activities— Cash flows from operating activities are generally determined by the amount and timing of cash received from customers and payments made to vendors, as well as the nature and amount of non-cash items, including depreciation and amortization and stock-based compensation included in operating results during a given period.
Cash Flows The following table summarizes our sources and uses of cash for each of the years presented (in thousands): Years Ended December 31, 2023 2022 Cash and cash equivalents, beginning of year $ 4,775 $ 9,326 Net cash provided by (used in): Operating activities (7,566) (8,577) Investing activities (149) (170) Financing activities 8,335 4,196 Net change in cash and cash equivalents 620 (4,551) Cash and cash equivalents, end of year $ 5,395 $ 4,775 Cash Flows from Operating Activities— Cash flows from operating activities are generally determined by the amount and timing of cash received from customers and payments made to vendors, as well as the nature and amount of non-cash items, including depreciation and amortization and stock-based compensation included in operating results during a given period.
During 2022, net cash flows used in operating activities consisted of our net loss of $9.7 million, offset by changes in our operating assets and liabilities of $191,000 and non-cash charges of $928,000.
During 2023, net cash flows used in operating activities consisted of our net loss of $7.7 million and by changes in our operating assets and liabilities of $545,000, offset by non-cash charges of $688,000.
Based upon our current operating plan, we expect that cash and cash equivalents at December 31, 2022, in combination with anticipated revenue and any additional sales of our equity securities, will be sufficient to fund our current operations for at least the next 12 months.
Based upon our current operating plan, we expect that cash and cash equivalents at December 31, 2023, in combination with anticipated revenue, will be sufficient to fund our current operations for at least the next nine months.
Cash Flows from Investing Activities— Cash flows used in investing activities primarily consist of the purchase of property and equipment, offset by any proceeds received in connection with sales of property and equipment. In 2022, our purchases were $74,000 higher than 2021, slightly offset by an increase of $3,000 in proceeds received on sales of property and equipment.
Cash Flows from Investing Activities— Cash flows used in investing activities primarily consist of the purchase of property and equipment, offset by any proceeds received in connection with sales of property and equipment. In 2023, our purchases were $25,000 lower than 2022, slightly offset by a decrease of $4,000 in proceeds received on sales of property and equipment.
Additionally, costs related to software licenses and marketing efforts for digital and social media outlets were higher in 2022 when compared to 2021, which was partially offset by lower costs related to the timing of personnel changes.
Additionally, costs related to software licenses and marketing efforts for digital and social media outlets were lower in 2023 when compared to 2022, combined with lower costs related to the timing of personnel changes.
For the year ended December 31, 2022, other expense, net largely consisted of a $28,000 loss realized on the sale of research and development equipment, while other income, net for the year ended December 31, 2021 largely consisted of the PPP loan forgiveness in the amount of $645,700.
For the year ended December 31, 2023, other income, net largely consisted of interest income of $26,000, while other expense, net for the year ended December 31, 2022 largely consisted of a loss realized on the sale of research and development equipment of $28,000.
We will need additional funding to continue to fund our operations, achieve profitability and become cash flow positive, we will continue to seek additional 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 or discontinue operations.
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 or discontinue operations.
The results of operations are as following for the years presented (dollars in thousands): Years Ended December 31, % Increase (Decrease) 2022 2021 Revenues, net $ 1,019 $ 600 70 % Cost of sales 555 356 56 % Gross profit 464 244 90 % Operating expenses: Research and development 1,859 1,954 (5) % Selling, general and administrative 8,279 7,224 15 % Total operating expenses 10,138 9,178 10 % Loss from operations (9,674) (8,934) 8 % Other income (expense), net (21) 666 (103) % Net loss $ (9,695) $ (8,268) 17 % 31 Table of Contents Revenues, net Sales, which are net of any discounts and promotions, were $1.0 million for the year ended December 31, 2022, compared to $576,000 for year ended December 31, 2021.
The results of operations are as following for the years presented (dollars in thousands): Years Ended December 31, % Increase (Decrease) 2023 2022 Revenues, net $ 1,193 $ 1,019 17 % Cost of sales 654 555 18 % Gross profit 539 464 16 % Operating expenses: Research and development 1,228 1,859 (34) % Selling, general and administrative 7,043 8,279 (15) % Total operating expenses 8,271 10,138 (18) % Loss from operations (7,732) (9,674) (20) % Other income (expense), net 22 (21) (205) % Net loss $ (7,710) $ (9,695) (20) % Revenues, net Sales, which are net of any discounts and promotions, were $1.2 million for the year ended December 31, 2023, compared to $1.0 million for the year ended December 31, 2022.
In 2022, personnel-related costs includes severance costs of $356,000 related to the termination of the former Chief Executive Officer, while 2021 includes severance-related costs related to certain employee terminations and bonuses.
In 2023, personnel costs includes severance costs of $191,000 related to the termination of our former Chief Revenue Officer, while 2022 includes severance costs of $356,000 related to the termination of our former Chief Executive Officer.
Cash Flows from Financing Activities— Financing activities provide cash for both day-to-day operations and capital requirements as needed. In 2022, net cash provided by financing activities consisted of $4.2 million in net proceeds from the issuance of common stock, partially offset by $32,000 of repayments related to notes payable and finance lease obligations.
Cash Flows from Financing Activities— Financing activities provide cash for both day-to-day operations and capital requirements as needed. In 2023, net cash provided by financing activities largely consisted of $5.4 million of net proceeds from issuances of common stock, $2.8 million from the exercise of warrants, and $114,000 from proceeds from notes payable.
Research and development expense consisted of the following (in thousands): Years Ended December 31, Increase (Decrease) 2022 2021 Personnel related, including stock-based compensation $ 996 $ 847 $ 149 Professional fees 284 371 (87) Facility related 108 99 9 Depreciation expense 128 258 (130) Other 343 379 (36) Total $ 1,859 $ 1,954 $ (95) Research and development expenses were $1.9 million for the year ended December 31, 2022, compared to $2.0 million for the year ended December 31, 2021.
Research and development expense consisted of the following (in thousands): Years Ended December 31, Increase (Decrease) 2023 2022 Personnel (including stock-based compensation) $ 636 $ 996 $ (360) Professional fees 156 284 (128) Facility 122 108 14 Depreciation 109 128 (19) Other 205 343 (138) Total $ 1,228 $ 1,859 $ (631) Research and development expenses were $1.2 million for the year ended December 31, 2023, compared to $1.9 million for the year ended December 31, 2022.
Our net loss was primarily attributed to research and development activities and our selling, general and administrative expenses, as we generated limited product sales and grant revenue during the year.
Our net loss was primarily attributed to expenses incurred related to selling, general and administrative as we continue efforts to commercialize our products, as well as research and development activities. Revenue from our product sales did not cover our operating expenses during the year.
The $1.1 million increase was driven by higher professional fees related to legal matters, consulting related to advertising and marketing and recruiting costs related to employee turnover.
The $1.2 million decrease was driven by lower professional fees related to legal matters, consulting related to advertising and marketing activities and recruiting costs related to employee turnover, partially offset by higher cost in 2023 related to the settlement of a legal matter.
Selling, general and administrative expense consisted of the following (in thousands): Years Ended December 31, Increase (Decrease) 2022 2021 Personnel related, including stock-based compensation $ 3,851 $ 3,940 $ (89) Professional fees 2,193 1,179 1,014 Marketing 631 584 47 Facility-related 155 156 (1) Depreciation expense 55 46 9 Other 1,394 1,319 75 Total $ 8,279 $ 7,224 $ 1,055 Selling, general and administrative expenses were $8.3 million for the year ended December 31, 2022, compared to $7.2 million for the year ended December 31, 2021.
Selling, general and administrative expense consisted of the following (in thousands): Years Ended December 31, Increase (Decrease) 2023 2022 Personnel (including stock-based compensation) $ 3,440 $ 3,851 $ (411) Professional fees 1,722 2,193 (471) Marketing 317 631 (314) Travel and related expenses 228 201 27 Facility 155 155 — Depreciation expense 27 55 (28) Other 1,154 1,193 (39) Total $ 7,043 $ 8,279 $ (1,236) 32 Table of Contents Selling, general and administrative expenses were $7.0 million for the year ended December 31, 2023, compared to $8.3 million for the year ended December 31, 2022.
Cost of Sales Cost of sales consist primarily of the cost of products sold, including scrap and reserves for obsolescence and was $555,000, or 54.5% of sales, for the year ended December 31, 2022, compared to $356,000, or 61.8% of sales, exclusive of grant revenue, for the year ended December 31, 2021.
Cost of Sales Cost of sales, consisting primarily of the cost of products sold, including scrap and reserves for obsolescence, was $654,000 for the year ended December 31, 2023, compared with $555,000 for the year ended December 31, 2022, an increase of $99,000, or 17.8%.
Net cash generated by changes in our operating assets and liabilities consisted primarily of a $215,000 increase in accrued expenses and accounts payable and a $12,000 decrease in other assets, offset by increases of $56,000 in net inventories, $52,000 in prepaid expenses and $52,000 in net accounts receivable.
Net cash used by changes in our operating assets and liabilities consisted primarily of a $583,000 decrease in accrued expenses and accounts payable, a $26,000 decrease in deferred revenue; and a $10,000 increase in prepaid expenses, offset by decreases of $58,000 in inventory and $20,000 in accounts receivable.
Research and Development Expenses Research and development expenses are expensed as incurred and consist primarily of costs incurred in connection with the research and development of ContraPest and our other product candidates.
However, gross profit margin was comparable year over year at 45.2% for 2023 compared with 45.5% for 2022. Research and Development Expenses Research and development expenses are expensed as incurred and consist primarily of costs incurred in connection with the research and development of ContraPest and Evolve and our other product candidates.
The $95,000 decrease was primarily driven by lower depreciation expense and lower legal fees related to research and development matters, offset by higher personnel costs, as personnel turnover was higher in 2022 compared to 2021, and higher utility costs related to increased production.
The $631,000 decrease was primarily driven by lower personnel costs and lower legal fees related to research and development matters, offset by higher costs related to increased and expanded product development efforts in the later part of 2023.
Liquidity and Capital Resources Since our inception, we have sustained significant operating losses in the course of our research and development activities and commercialization efforts 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 a former license.
Liquidity and Capital Resources Since our inception, we have sustained significant operating losses in the course of our research and development activities and commercialization efforts and expect such losses to continue for the near future. While we have generated $1.2 million of revenue in our most recent fiscal year, it is not sufficient to cover our base operating costs.
During 2021, net cash flows used in operating activities consisted of our net loss of $8.3 million, offset by changes in our operating assets and liabilities of $67,000 and non-cash charges of $422,000.
During 2022, net cash flows used in operating activities consisted of our net loss of $9.7 million, offset by changes in our operating assets and liabilities of $191,000 and non-cash charges of $928,000. Our net loss was primarily attributed to research and development activities and our selling, general and administrative expenses.
Specifically, our stock-based compensation expense for the year ended December 31, 2022 and December 31, 2021 was $0.7 million and $0.8 million, respectively, which represented 7.0% and 8.3%, respectively, of our total operating expenses for those periods.
Specifically, our stock-based compensation expense for the year ended December 31, 2023 and December 31, 2022 was $555,000 and $711,000, respectively, which represented 6.7% and 7.0%, respectively, of our total operating expenses for those periods. Results of Operations The following tables provide financial and operational information to be considered in conjunction with management’s discussion and analysis of results of operations.
In 2021, net cash provided by financing activities consisted of $12.4 million in net proceeds from the issuance of common stock and $1.3 million in proceeds from warrant exercises, partially offset by $93,000 of repayments related to notes payable and finance lease obligations.
In 2022, net cash provided by financing activities consisted of $4.2 million of net proceeds from the issuance of common stock, partially offset by $32,000 of repayments related to notes payable and finance lease obligations. Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.
Gross Profit Gross profit for the year ended December 31, 2022 was $464,200, or 45.5%, compared to a gross profit of $244,000, or 42.4%, excluding grant revenue, for the year ended December 31, 2021.
However, cost of sales as a percent of sales was comparable year over year, at 54.8% for 2023 compared with 54.5% for 2022. 31 Table of Contents Gross Profit Gross profit for the year ended December 31, 2023 was $539,000 compared with gross profit of $464,000 for the year ended December 31, 2022, an increase of $75,000, or 16.2%.
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At December 31, 2022, we had an accumulated deficit of $122.2 million and cash and cash equivalents of $4.8 million. 30 Table of Contents On April 15, 2020, we also received cash proceeds of $645,700 from the Paycheck Protection Program (or “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).
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We expect to continue to incur significant expenses and generate operating losses for at least the next 12 months. We will need additional funding to continue to fund our operations, achieve profitability and become cash flow positive, we will continue to seek additional financing.
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We used the proceeds from the PPP Loan to retain employees, maintain payroll and make lease, interest and utility payments. On June 18, 2021, the Company received notification from BMO Harris Bank National Association as the lender in a promissory note pursuant to the CARES Act, that such loan was forgiven in full under the terms of the program.
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Sales increased by $174,000 in 2023 driven by more than 70% increases in our agribusiness, commercial and distributor vertical markets, as we continue efforts at commercializing our products, slightly offset by a 10% decrease in e-commerce.
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While it is difficult to measure the effect and impact of the COVID-19 pandemic on revenue over time, the travel and other restrictions that started in March 2020 resulted in a significant slowdown in our proof-of-concept field studies and sales efforts.
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Interest income was higher in 2023 when compared with 2022, as interest rates continued to climb throughout 2022 and into 2023, which then leveled off. Interest expense was also higher in 2023 when compared with 2022 due to new notes entered into to finance the purchase of new manufacturing equipment.
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We continue to experience delays on certain projects with certain businesses and government entities that have not yet returned to pre-COVID-19 pandemic operations. We have concerns about distributor, pest control operator, individual consumer, and government entity spending as a result of continued financial strain on certain industries due to the COVID-19 pandemic.
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At December 31, 2023, we had an accumulated deficit of $129.9 million and cash and cash equivalents of $5.4 million.
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This may delay or impede near term purchases of our products by these potential consumers. Additionally, while we have stocked certain long lead time inventory raw material ingredients, any prolonged impact on the suppliers we rely on for the purchase of these items by the COVID-19 pandemic could impact future manufacturing operations.
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Results of Operations The following tables provide financial and operational information to be considered in conjunction with management’s discussion and analysis of results of operations.
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Sales increased by $443,000 in 2022 driven by an increase of $282,000, or 60%, from our e-commerce vertical market, combined with a $161,000, or 28%, increase driven by sales to pest management professionals and zoos and sanctuaries.
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Also included in revenues in 2021, was $24,000 of grant revenue for jobs created and related new employee training in the City of Phoenix, Arizona during the year.
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Higher costs of sales is driven by increased sales combined with the modification of our shipping policies in April 2022 to significantly reduce free shipping to customers.
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The increase in gross profit was primarily due to increased sales volume, which reflects price increases implemented in April 2022, and the impact related to the significant reduction of free shipping to customers both contributed to the improvement in gross profit margin.
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At December 31, 2022, we had an accumulated deficit of $122.2 million and cash and cash equivalents of $4.8 million. In April 2020, we received cash proceeds of $645,700 from the PPP of the CARES Act, which we used to retain employees, maintain payroll and make lease, interest and utility payments.
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This loan was fully forgiven under terms of the PPP in June 2021.
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Further, continuing effects of the COVID-19 pandemic may delay the completion of field studies and achievement of sales, which will further increase our need for financing. In addition, we will continue to incur costs associated with operating as a public company.
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Our net loss was primarily attributed to research and development activities and our selling, general and administrative expenses, as we generated limited product sales and grant revenue during the year.
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Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.

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