Good afternoon and welcome to the SenesTech, Inc. Second Quarter Fiscal Year 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

Thank you, Austin, and thank you for joining us today to discuss SenesTech's financial results and corporate developments for the second quarter of 2018 ended [September] [ph] 30, 2018. With us on the call representing the Company today are Dr. Loretta Mayer, Chair, Chief Executive Officer and Co-Founder of SenesTech, and Tom Chesterman, Chief Financial Officer and Head of Commercialization. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. Please note that listeners, both on the live portion of the call as well as Webcast, will be able to ask questions. If you are on the Webcast, you can type your question into the question box and press Submit. We will take as many questions as time will permit for. If you are dialled in, you will ask questions by pressing the *1 button, as usual. Before beginning with management's comments, we submit for the record the following statement. Statements made by the management team of SenesTech during the course of this conference call may contain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and the Section 21E of the Securities Exchange Act of 1934, as amended, and such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results, or strategies, and are generally preceded by words such as, may, future, plan or planned, will or should, expected, anticipates, draft, eventually, or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risk that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the Company's filings with the Securities and Exchange Commission. All forward-looking statements contained during this conference call speak only as of the date on which they were made and are based on management's assumptions and estimates as of such date. The Company does not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events, or otherwise. We'll begin today with remarks from Tom Chesterman, Chief Financial Officer and Head of Commercialization, after which we will hear from Dr. Loretta Mayer, Chair, Chief Executive Officer and Co-Founder of SenesTech. Tom, please proceed.

Thank you, Robert, and good morning to all of you. We appreciate you joining us today for this call. We just released our second quarter financial results. If you need a copy, please visit our Web-site. We expect to file our 10-Q tomorrow and you can get a copy of it from our Web-site or from the SEC directly. SenesTech is now ready to take the next step in its development. Since our last quarterly call, ContraPest has been approved for sales and use in the state of California, we entered into two new distribution agreements, and added a number of new pest management professionals to our roster of customers. I can unequivocally state that the last three months have been the most active and exciting months in the history of the Company. We have known for a long time that there would be a tipping point for this product and it is our strong belief that we have in fact reached that tipping point. For everyone who had made that comment that it was a matter of when, not if, that 'when' is now. Let's go into a few reasons why we believe this. First, we began our commercialization campaign in April of this year, focusing initially on acquiring customers, getting pest management professionals, or PMPs, to try out ContraPest as a part of their integrated pest management plans. It takes time to get PMPs to adopt something, so we did not expect immediate revenue results in the second quarter. We were instead building the base, and this approach resulted in strong results in July. As we announced back on August 1st, we generated more than $50,000 in the month of July, our best month so far. Second, we received approval for sales in the state of California. California…

Thank you, Tom, or should I say mahalo. These are indeed exciting times and I want to thank you for your commercialization lead and watchful eye on the opportunities ahead. It's been my pleasure to not only have co-founded the technology, but focus on the building of the business. The potential and future of our technology is very large and the successful approach is to move with the innovation of the product. Today, that product is ContraPest. Let me illustrate what I mean by this with a few examples. California is indeed of great interest to us, or I like to think of it as, as we pull our chair up to one of the largest economic tables in the world, we must carefully and methodically approach this banquet. The opportunities are many and the customer profile is varied. Cities – these cities are not unlike New York, Chicago, Boston, and Washington DC, there are enormous agriculture opportunities for us there, wildlife, recreation, tourism, large clean high-tech industries, and an overlay of environmental and wildlife consciousness. I sound like the Chamber of Commerce for California. In full disclosure, it is my native state. Indeed, however, a lot of off-ramps on those freeways exist and we must be disciplined when we are building for the long haul. And I believe this is where Tom and his commercialization team have put in a great deal of effort, and I think it will be proven to be extremely valuable as we mount our numbers in the coming months and quarters. Our approach is measured and focused on our customer model, the PMPs if you will, and building their value proposition. What do they need to improve their jobs, what is the pain they are feeling, and what is an opportunity to gain in…

[Operator Instructions] Our first question will come from Kevin Ellich with. Please go ahead.

I guess starting off with the record revenue in California in July, and congrats, it seems like things are progressing very nicely there, just wondering how we should think about the ramp from July, kind of how that's going to build over the coming months and how the orders are coming in from California?

To some extent I have to remind you that in order to get a good projection, you need to have a long history so that you can extend and extrapolate the progress. We don't have that. We just started up in April, and so we have very limited data upon which to give a consonant ramp as to, we'll go this amount in this month and this amount in that month. I think it will be premature for us to do that until we get a couple of more quarters under our belt. What I will say is that we have continued to acquire customers. We have continued to add those customers. We have programs in place. And so, we do believe that we have both the growth from existing customers as well as the beginnings of the multiplier effect, as others are seeing the early successes in the implementation of ContraPest. So, I think we'll be in a much better position to provide guidance after some more data points. In terms of your question about California specifically, we do continue to see the interest growing there as anticipated. But I hasten to add, the majority of the business in July was not from California. It was from outside of California, from programs that we had in effect prior to the approval in California.

Excellent. That's really helpful, Tom. And just one financial question before I jump to Hawaii, G&A expense was a pretty big increase sequentially from $2 million in Q1 to about $3.5 million in Q2. Is this kind of a new run rate level that we should be thinking about and was there anything unusual this quarter, Tom?

No. I think there are some unusual facts in there and I do not see this as a significant increase to the cost structure of the Company. But as you'll see more detail when we file the Q tomorrow, there were some unusual events and unusual charges in there that really don't have to do with – we have not gone on a big hiring spree or anything to that nature. We have however put in place a number of product promotions and marketing promotions that you will begin to see effects in the overall operating expense. So, that will seem to look like an increase in expenses, but really when it comes down to it, what we're investing in is the growth of ContraPest, not in massive expansion of overhead.

Okay, that's helpful. And then, Loretta, you gave a lot of good detail on Hawaii. Could you give us a little bit more color on the Hawaiiana Property Management discussions, how they are going, and I guess what's the timeframe in terms of how long you think it will take to realize that? I think you said high millions of opportunity with them.

Sure. We were invited into Hawaiiana to address their top executives. So, the way they are structured, there are key company executives that manage groups of property managers, and the property managers interact with the pest management professionals. So, the key here is that we are working with an extremely large company who is helping us understand the sales process. Typically we sell directly to PMP or to distributors who distribute to PMPs. In this particular case, you will have an extra piece, which is that homeowners association. And so, with that piece, we have to serve not only the customer who is the end user but also the customer who is the pest management professional who is servicing the property. We are anticipating, and again this is very premature because we just presented on July 27 and we then met with Hawaiiana on the 28th, so we haven't collected a great deal of data, but our plan shows that by securing the first two to three, we'd like to concentrate on Oahu. Yes, there are opportunities on the other islands, but serving the first two or three will allow us to have a learning that will take us approximately six months. From there, then we'll go for a scale-up of our commercialization teams, and I think we will start to be hitting on growing that business in the first part of 2019, up through the second quarter. So, I hope that gives you some detail that you are looking for.

Yes, that's very helpful. And since I have got you, as well kind of last question, the EPA with the label change, seems like that could be a pretty big positive for the Company as well. Do you have a timeframe on that, and I guess how the discussions or indications from PMPs have gone? I think did you say in your prepared remarks, it could increase your opportunity with the PMPs by 50%?

Right. So, on your first question, how do I think it will go and where are we in timing? We have been working directly with the EPA and they have at least probably another one to two months worth of review. It could be faster but I would never speak for an agency that is doing so much with so few people now. As far as the increase from our pest manager, many of these large PMPs have submitted supporting letters to the EPA requesting we make this label change. I think that's indicative of the demand that would be out there. Really a restricted-use product means a lot of paperwork, a lot of record-keeping, a lot of additional steps, licensing, et cetera, that our product, which is a non-lethal, doesn't really require. So, this is not only a very common-sense move but it is also a market expanding move.

Sounds good. Thank you much.

And at this time, I would like to turn the floor back to Robert Blum to answer any additional questions.

Thank you, Austin. Folks with a couple of questions online here. The first one here, have you conducted trials of feeding rats which have consumed your product to birds of prey in captivity or controlled environment, as they may be susceptible to chemicals? Do you have any other evidence of its safety in eliminating rats while protecting other species and what sort of reassurances can you provide on this topic?

Perfect. Have we fed birds of prey rats that have been treated with ContraPest? No, we have not done that because the data that we have shows the concentration is so low, think about 125 gram rat, the concentration is so low of the active ingredient and the metabolism is so fast – so, from the moment a rat consumes ContraPest, in approximately 14 minutes it has completely broken it into inactive ingredients. So, the likelihood that a raptor or a cat would consume enough rats to have a concentration in their bodies significant to have any effect on them whatsoever is extremely low. This likelihood is so low, that's why the EPA did not require this study. Are we concerned about birds? You bet. Have we done a study? We have engaged a study, we have paid for it, and I can tell you it will be part of comprehensive data sets that we will submit to the EPA for our outdoor use, but I will tell you there is absolutely no adverse [indiscernible] effect to birds who have been forcefully devoured with our product. As far as any other information, when you think of other species, you may think of dogs, categories; in other countries, wallabies, brushtail possum, pig. I can tell you that we have directly used our product in these other species and there is no lethal effect.

All right. Our next question here, and this was sort of came a couple of different directions, are there near term or future opportunities to introduce [indiscernible] ContraPest in European or Asian markets?

Someone read the Wall Street Journal article this morning about Paris. Of course there are. We have begun looking into the opportunities in Europe. Of course we have spoken with municipal leaders in Paris. We have also been asked to consider transit opportunities in Hong Kong. We are currently preparing to deploy a project in the British Virgin Islands. And so, we are definitely considering our global expansion. Our business plan has called for us to secure ourselves in the U.S. markets, do a tremendous amount of product learning, secure our regulatory status, and then expand into these larger global opportunities. So, we are on point, we are on time, and I think Paris would be a great place to start. However, the British Virgin Islands sounds pretty good to me too.

All right. Our next question here is, curious as to the ability to talk about whether there is participation from the Board and management in the rights offering?

Yes, there was participation, not just from Board members and management, reporting management, there also was participation from quite a few employees. In terms of the specific participation of Board members and reporting officers like Loretta and myself, that will be part of the required Form 4. So, all of that will come out within three days' time of the rights offering.

And I'll dovetail that question here, Tom. There was an investor talking about getting some paperwork later, is there opportunity to invest and still receive part of the warrant?

Unfortunately, there is not. It was, when we offer the rights offering out, how quickly it gets to the investors really is very dependent on which brokerage house they hold their shares through. Those that hold are what are called registered shareholders, one is that hold it directly in paper, they get the notification almost immediately. Those in other brokerage houses, we had some experiences I know where they got the notification within a day or two, but there are others that also are a lot slower, and unfortunately there was nothing we could do to really change that other than put out as many press releases as we could, putting out as much information as we could, so that people could call directly and kind of jump around their own brokerage house to have it happen. Unfortunately, the rules are though that once we have closed it, we will not be able to reopen it. Sorry about that.

All right. And last question here is, could you provide any color as to the non-recurring G&A this quarter?

I guess this is really a follow-up to the earlier question and I didn't mean to be vague about it. There was one specific very, very large non-cash transaction during the quarter. We alluded to this in the press release. And further detail about it will be in the 10-Q tomorrow. But we did have what's called an inducement, and that is where we approach a large warrant holder and we provide them inducement in order to get them to exercise the warrant and get some more cash into the Company. That's exactly what we did here. We approached one shareholder, or warrant holder, and we induced them to exercise that warrant. We got cash out of it. But unlike other ways of recognizing it, this shows up as an expense, a non-cash expense, called an inducement expense. And so, it's really not something that would be in the ordinary course of business like other operating expenses might. Again, I think that probably a more full-some discussion will be in the 10-Q, and if anybody has questions about that and wants to understand more about it, certainly we can take those calls.

All right. Thank you very much, Tom. With no further questions, I'll turn it back over to management for any closing remarks.

Thank you very much, Robert. I want to thank everyone for joining us today. I know it takes time, and time is precious, but it's a good investment. I will speak with you again next quarter, if Tom and I don't see you before that. Have a good evening and rest of your day. Back to you, Austin.

And thank you everyone. At this time, the conference has concluded. We thank you for attending today's presentation and you may disconnect your lines at this time.