Good day, and welcome to the SenesTech Inc Reports Third Quarter Fiscal Year 2020 Financial Results. All participants will be in listen-only mode. [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.

Thank you very much, Cole, and thank you all for joining us today. On today’s call, we will discuss SenesTech’s third quarter 2020 financial results for the period ended September 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. Ken, please proceed.

Thanks, Robert. Good afternoon. Thank all of you for joining us today. Before I talk about the operating results, let me start with our most recent announcement that we've added three members to the board. It was an interesting and extremely encouraging process. We had intended to recruit only two new board members to replace our former chairperson and to accommodate Julie Williams desire to take a more passive role. But in the recruitment process, unique and complimentary individuals were identified, and in the end, we decided to expand the board to accommodate an additional director. These three have very specific skills to best support the company and our current commercial growth strategies. They all share a passion for our business, and recognize the unique value of ContraPest as an effective and sustainable solution to an age old problem. Phil Grandinetti is Founder and Chief Customer Officer of WITHit, a growth leader in wearable tech accessories, with prior executive sales experience at GSM products and LightWedge. Phil brings a deep background in the commercialization of innovative consumer products and a track record of leading exponential growth. K.C. Kavanagh is the Chief Communications Officer at Bacardi, with prior executive communications experience of Starwood Hotels and Resorts. K.C. has particular expertise in messaging, including strategic, brand and product messaging, taking complex messages and making them understandable and exciting. Jake Leach is the Chief Technology Officer at Dexcom, a leader in glucose monitoring technology, and known for pairing technology with an exceptional user experience. This pairing of technology and user experience is expected to have direct relevance to the commercial development and deployment of ContaPest. Although Julie Williams is stepping down from her board role, she will continue to provide our expertise and assistance as a Director Emeritus and Board Observer. As you…

Thank you, Ken. Just as a reminder for our listeners and investors, we will be filing our 10-Q within a day or two with all of the detail. So right now, we'll just limit ourselves to the summary numbers. Revenue for the quarter was $77,000 compared with $71,000 last quarter and $36,000 in the third quarter of 2019. As activity in this industry tends to be seasonal, this represents an impressive growth rate of over 100%, but from a small base, of course. Over one-third of the revenue is coming in from California right now, which we expect to continue to grow with the passage of the bill, as Ken mentioned in our current sales focus. Revenues continue to be a mixture of distributor sales, PMP direct and direct-to-consumer. I should note that we can't always tell the difference between PMP direct and direct-to-consumer as the PMPs can and do order from the website just as consumers do. We think that revenues, particularly to the municipal customers might have been higher, if not for the budgetary issues COVID-19 has placed on their operations, but it's very difficult to confirm or calculate precisely. Moving to costs and expenses. Cost of goods sold have 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. Our goal is to get to a gross margin of 50% or better. And we are on track to achieving that. While on manufacturing, our relocation to our new space in Phoenix is nearly complete. We probably won't get to full production there until the end of the year. But we have restarted limited production already. Operating expenses were $1.9 million in the quarter, a significant reduction versus $2.6 million in the third…

[Operator Instructions] And our first question today will come from Pete Enderlin with Maz Partners. Please go ahead.

Really, I just have one sort of big question, which is you've talked a lot about the change strategically shifting from copper pest as a replacement for what you might call the PMP's legacy programs to -- and where, as you mentioned, they sort of saw a ContraPest as a competitive threat to ContraPest as a part of their integrated pest management programs. So the question that I have that I don't fully understand at this point is how will the PMPs combine ContraPest with the other tools as Ken mentioned, and what are those other tools that they're going to continue to use in combination with ContraPest?

Great question, Pete. Make sure I was on mute. The -- there are several different modalities they use. There are lethal modalities, which include traps also includes the poisons and the like. There is exclusion, which is a common thing, just to make sure that they don't come back. And various ancillary methods that are included. So one thing that we are essentially saying to them is they can continue to use their existing methods and their existing methods will achieve some level of knockdown of the population, particularly if they continue to use lethal methodologies. What we can demonstrate to them, though, is once they get to that level of knockdown, they can deploy ContraPest either simultaneously with or immediately after, and ContraPest will take the knockdown down the incremental 60% to 90% that we're seeing. And the critical piece of it is it will keep it down. And so as opposed to having the historic issue that the PMPs experience and that end user's experience is that because the traditional methods don't work over a long term period, you're achieving knockdown and then three to six months later, the population is back again. So what this does is it achieves a knockdown and takes it down further and keeps it there. It doesn't eliminate the rodents entirely. Nobody can ever do that, but it takes it down to a very low level, and it's sustained. What we also then say to the PMPs as opposed to having your episodic deployment, which is you come in on month one and then six months later, you come back and do it again. Because ContraPest is a contraceptive and not a sterilant, the way to maximize efficacy is continued deployment. So they end up with a model now that as opposed…

Okay. And under California's 1788, are there still other rodenticides, not the anticoagulant type, but others that they can continue to use?

So let me turn that over to Tom, who's more of our California expert. Go ahead, Tom.

Yes. There are other rodenticides that they can use. There are certainly first generation anticoagulants. There are also others that have a different mechanism of action, some of which are known to be less effective and some of which are actually known to be more dangerous. So there are some other possibilities that they can use. And that's one of the reasons why we really have to use to see this as an opportunity to show the advantages of ContraPest as they also look at those other alternatives.

Right. But then how do they achieve the initial knockdown? Some of these other rodenticides are less effective or maybe more dangerous in some ways. I mean, you could still have scavengers and predators eating dead rats with poison in them.

Yes. That is very definitely an issue. And some of them will actually move to trapping, which is -- and to other trapping like activities that can also achieve that. The disadvantage of that is that they are more labor intensive. And so it really then behooves them to put as much ContraPest in as possible to augment those and bring down those labor costs.

Do any of those very active PMPs in California use the dry ice method of eliminating them on an initial go around? Or is that sort of not only -- is that typically only used in New York City?

We have anecdotal information from one PMP that they have booked at it, but they don't find it to be particularly effective in their practice. We really have not heard a whole lot about its widespread use anywhere else.

Okay. And then Ken, you sort of slipped and said mice and then rats, but that obviously raises the question of applying CP to other species, mice or something beyond that. What's the outlook for that going forward?

So we have submitted to EPA the amendments to add mice to the label. And so they're currently in the process of reviewing it. So I would tell you that the normal process is in the six-month plus or minus. We've had positive experiences with the EPA in the past. So we're hopeful that by mid next year, we'll be adding mice, and we've already demonstrated that it's highly effective in mouse control. So optimistic that for 2021.

This will conclude our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Well, thank you for your attention. If you have any questions, we would encourage you to send them to us via the Contact Us section of our website or call us at 928 779-4143. We appreciate your continued interest and support. This concludes our call. Good day.

The conference is no the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.