Good day, and welcome to the SenesTech, Inc. Second Quarter Fiscal Year 2020 Financial Results. 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, sir.

Thanks so much, Cole, and thank you all for joining us today. On today’s call, we will discuss SenesTech’s second quarter 2020 financial results for the period ended June 30, 2020. With us on the call today are Mr. Ken Siegel, the company’s Chief Executive Officer; and Mr. Tom Chesterman, the company’s Chief Financial Officer. At the conclusion of today’s prepared remarks, we will open the call for a question-and-answer session. Before we begin with prepared remarks, 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 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 risks 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 our filings with the Securities and Exchange Commission. All forward-looking statements contained during this conference call speak only as of the date in 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. With that said, let me turn the call over to Ken Siegel, Chief Executive Officer of SenesTech. Ken, please proceed.

Great. Thank you, Robert. Good afternoon, everyone. Thanks for joining us. I hope you’re all doing well in these very trying times. Despite the severe headwinds caused by COVID-19 and the economic downturn, SenesTech continues to make slow and steady progress. Tom will discuss the numbers with you shortly, but I’m pleased to say that we continue to show quarter-over-quarter growth despite the economic strain in our commercial and governmental verticals. Second quarter marked our highest revenue quarter over the past six quarters. Although the numbers are still small, we are seeing continued expansion in new accounts and gradual acceptance of our monthly subscription model. The second quarter marks the end of my first year at SenesTech. I want to share with you some of my learnings over the past year and hopefully give you some perspective on the challenges we’ve faced and how we’ve addressed them over the past 12 months. I think you’ll see that in many ways, you’re now looking at a completely different company than the one that was founded some years ago. As a reminder, the challenges we faced, first off, we were a science-led organization with no commercial experience. As the company embarked on its initial commercialization efforts, it found itself constantly pivoting from a distributor-led model, to a PMP-led model, to a replacement for rodenticides model, to a green model, to an animal-friendly model, and there were many iterations in between. In certain instances, we’ve even chosen to fight the industry that we would depend on for our long-term success, the pest control industry. We also tried to address every possible industry segment and shiny object without a focused approach. Perhaps most importantly, we had no commercial level data on long-term effectiveness and on the value of ContraPest. We simply had lab and…

Thank you, Ken. We have posted the press release, it’s available on our website, if you don’t have a copy of it handy. In it, you’ll see that revenue for the quarter was $71,000 compared to $24,000 in the second quarter of 2019 and $37,000 in the first quarter of 2020. A couple of notes with respect to these revenue numbers. First, the revenue for the quarter now includes a service component. Historically, we did not bill for general technical services. But with the increase in requests for technical services, the level of service provided by our technician and the recognition by our customers of the value these services add to an effective deployment, we have now implemented service fees on large installations. This is as yet a small component, but hopefully, one that will grow. Second, for the first six months of the year, total revenue was $108,000. Revenue for the first-half of 2019 was $43,000. So while obviously starting at – from a small base, that is still 150% growth year-over-year and 90% growth sequentially from the first quarter. A lot of the growth is from our e-commerce channel, both to do it yourselfers and to smaller pest management professionals who prefer to buy direct. We think that revenues, particularly to the PMP community, might have been even higher, if not for the restrictions that COVID-19 placed on their operations, but that is difficult to prefer or calculate. Moving to costs and expenses. Cost of goods sold has improved significantly over last year. This trend has been driven by a variety of initiatives, less scrap, larger batch sizes and improved raw material handling. We expect and are working towards even better gross margins as sales volumes increase. While on manufacturing, I would also like to point out that…

And we will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Ian Gilson with Zacks Investment Research. Please go ahead.

Good afternoon, gentlemen. It’s nice…

Hey, Ian.

…to be moving in the right direction. You had announced and expanded deployment in San Francisco in the Recreation and Forest Department?

Correct.

But you didn’t announce anything about size, longevity, dollars realized, the implementation of that. Can you give us a little bit more color?

Ian, you’ll have to wait a little bit. We’re waiting for clearance from San Francisco to be able to announce some of those details, which is – so as soon as we have that, we’ll issue a release.

That’s fine. [indiscernible] on October fiscal year, state…

Correct.

….and federal. AB1788 southern was dormant. And really, there is not a great deal of time to reintroduce that bill. And if it is reintroduced, the probability of it passing without being changed, it seems to be low. I know you are not directly involved in writing that bill. But is there any sort of subscale bottle rumors running around in Sacramento as to why it was sort of unvaried or pulled out of limbo?

We’ve got calls into all of our various contacts, have not gotten information yet. What I will tell you is, the amendments gave the authorities the ability to create exemptions from the prohibitions, which I think was intended to modify some of the concerns of the traditional industry. So, from my standpoint, again, and this is really surmise, they’re moving it in a direction that they think would be more likely to be acceptable. But again, we haven’t gotten direct insight from the folks in Sacramento to be sure. So our purpose was really just to point out that it’s live again, but we’re not sure what the future prospects are.

Okay. And when – I presume there is going to be some sort of department – government department releases that bill are the reissue of the details of the bill or an issue of the amendments. Is that correct?

That’s correct. They actually – they published the amended form. I can actually – or we’ll have somebody internally send that to you so you can see what the actual test – text is.

Okay, great. I appreciate that.

Great.

I see. You mentioned that once we get a better handle on COVID-19, your headcount would move back up. That sort of is rather heavy on the income statement. Why does it have to move up? Why can’t you sort of stabilize it? And until you get post the cash break-even?

Yes, Tom, let me handle that one at the outset, and then I’ll turn it over to you.

Yes.

What we would be adding would be revenue-producing positions. So the additions would be to bring in the sales reps that I mentioned. We’re going to try to avoid adding anything to general administrative. So we would not intend to add anybody that wouldn’t contribute more than his or her salary, that’s really the direction.

Oh, good, good. Thank you very much. That’s it for me.

Great.

And this will conclude our question-and-answer session. I’d like to turn the conference back over to Ken Siegel for any closing remarks.

Great. Thanks, Cole. Again, thank you all for attending the call. Thanks for your attention. I appreciate your support of the company, and really do look forward to the next call and hopefully, the beginning at the end of COVID, so that we can begin to take more advantage of the opportunities that we identified in this conference. But again, be well, stay safe and look forward to talking to you in a few months.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.