Good day, and welcome to the SenesTech, Inc. Second Quarter Fiscal Year 2021 Financial Results. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Robert Blum, Lytham Partners. Please go ahead.

All right. Thank you very much, Cole, and thank you all for joining us today. As Colementioned, on today's call, we will discuss SenesTech's second quarter 2021 financial results for the period ended June 30, 2021. With us on the call today are Mr. Ken Siegel, the company's Chief Executive Officer; Tom Chesterman, the company's Chief Financial Officer; and Nicole Williams, the company's Chief Strategy Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. As a note, the company has provided a slide presentation to accompany the prepared remarks today. If you are listening via the webcast, the presentation will be on your screen. For those on the live dial-in portion of the call, you can access a copy of the presentation from the Investor Relations portion of the company website at senestech.com. 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, which they are 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 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, everyone, and thank you all for joining us today. As Robert mentioned, for those of you that have followed the company over the past few years, we thought we'd try something different this quarter and include a slide presentation for you to follow along with as we deliver our remarks. We hope you all find it useful, especially as we walk through some of our new sales and marketing initiatives that we have in place. As you likely saw in the press release we issued after the close, the second quarter of 2021 showed continued improvement in the adoption of ContraPest with revenue up 125% from the year ago quarter and up 82% and from the first quarter. This was, in fact, a record quarter for SenesTech. However, while these improvements are good, they are still from a relatively small base, and we're highly focused on significantly expanding adoption in the quarters to come. Everyone on the management team knows that ContraPest offers customers and the PMPs that service them a powerful, effective and sustainable tool to control rat infestations. I personally believe that ContraPest will be a game changer in the industry, and we are highly focused on making it the success we know it can be. As we've discussed over the past several quarters, we've been laser-focused on putting together all of the building blocks to successfully drive our commercialization strategy. Last quarter helped us further advance our goals as we were finally able to get our team out on the road to meet directly with our channel partners and customers. We launched our new branding and marketing strategies and we significantly enhanced our sales and marketing capabilities. So let's briefly discuss some of the progress we made during the quarter against our core…

Thank you, Ken. As mentioned, this multichannel sales and marketing blitz with the internal code name operation rat race references the collective race to top of mind awareness, brand recognition and revenue throughout the remainder of 2021. Operation rat race focuses on our key market segments, agrobusiness, household, municipality, commercial professional, zoos and sanctuaries and additionally, treats California as its own market segment in light of opportunity created through the recent 1788 legislation. The common theme and a campaign is bold and unique as ContraPest, following months of building confidence in relationships within the pest management community and generating compelling real-world data we are now tasked with building awareness and driving demand among end users for an effective, environmentally responsible and for some customers, nonlethal solution to managing rat populations. We need customers asking their pest management professionals for ContraPest by name, and we intend to do that by letting target markets now, we support safe rat sex. That's right. Someone had to do it, so they won't, introducing ContraPest for what it is, a rat contraceptive. Going back to the shocking fact with two base rats, a male and female can result in more than 15,000 rats in just one year. How will we ever get control of that, managing the death rate alone, we won't. In order to get rat populations under control, we must make them less prolific by controlling the birth rate as well. And ContraPest is the only EPA-approved rat contraceptives on the market, a truly integrated pest management program pulls not one, but both levers of population control, ask first by name or by direct at contrapeststore.com. Having partnered with new marketing and PR agencies, you may have already heard about the effectiveness of ContraPest across the country via syndicated radio interviews with many…

Thanks, Nicole, for that overview. As Nicole pointed out, operation rat race puts together all the elements we've been creating over the past two years to drive a compelling and effective commercialization program. We plan to be agile in our approach, actively monitoring our progress tweaking it along the way, emphasizing what works and modifying what doesn't to build a strong foundation for the balance of this year and beyond. So as I hope you saw we have strong reasons to be very optimistic about the campaign and the unique way in which it will enable us to expand lead generation and sales opportunities across each of our key market segments. Before I turn it over to Tom to review the numbers, let me just say, if it's not clear already, we are laser-focused on accelerating sales and adoption of ContraPest. We believe we have a better understanding today of the strategies to help us get there. And for that matter, I think we have a good idea of what won't work as well, which can be equally important. We're looking to be aggressive in our approach and believe that now is the time to strike. But one thing I want to make abundantly clear and that's that we will continue to maintain financial and fiscal discipline throughout the organization. It's been one of the key topics I've talked about since I joined the organization, and it won't stop now. The strategies we are putting in place will all be measured against one thing and one thing only: accelerating sales and adoption of ContraPest. And with that, let me turn it over to Tom to review the financials.

Thank you, Ken. A reminder to our investors, the press release is available on our website in the investor relations section. Further, we will be filing our 10-Q tomorrow. So I will just try and touch on some of the high points today. Revenue during the second quarter was approximately $160,000 compared to approximately $71,000 in Q2 of 2020, an increase of 125%. As expected, we continue to see strong growth in California, and we expect that an enhanced and focused campaign as Nicole described will drive that growth even faster. Doubling revenue year-over-year is good of course, but we know we can do better. Direct sales also represented a key driver of growth for the quarter and our customer acquisition rate was high. Growth in this segment especially comes at a cost though. During the quarter, we had a number of promotions and bundling, which directly affects gross margin. We also provided free shipping to many customers as an incentive to introduce ContraPest. While these customer acquisition costs were significant, we do believe that the efforts will be rewarded by an increased recurring revenue stream by new and happy customers. In other segments, agriculture and municipalities, we've made progress in starting more and more of these customers into the sales cycle, but that is not yet reflected in the current quarter sales. The decision cycle in these segments is much longer than the direct sale and more data-driven based on efficacy. Net loss for the second quarter was $1.7 million compared with a net loss of $1.6 million for second quarter of last year. And the adjusted EBITDA loss, which is a non-GAAP measure of operating performance for the second quarter of 2021 was $2.1 million versus $1.4 million in the second quarter of 2020. This is a good…

We will now begin the question-and-answer session. [Operator Instructions]

Cole, while we're waiting for potential questioners here, let me just jump in guys if I could with something I came across in the news the other day. I noticed that there was, again, something coming out of British Columbia, Canada, where they impose a temporary ban on the widespread sale and use of some SCARs, sounds very California. Any color you can provide there.

Sure, Robert. Thanks for the question. So yes, the – excuse me, the environmental ministry in British Columbia has announced an 18 month ban on the use of SCARs similar to SCARs that are restricted in California for most uses. I mean, there's exceptions for essential services. There are some exceptions for agriculture. But the key piece here is they've really very significantly tightened down the ability to use poison for pest control. And they're going to take 18 months to assess what alternatives there are. So obviously, it's an interesting time for us to be going to talk to them about ContraPest. But I think it's indicative of a trend that's going to begin to accelerate in North America. As states, as provinces begin to take a strong look at the effect that poisons are having on other species and they're going to be looking to drive pest control professionals and the community more broadly to look for better, effective and less toxic solutions.

Perfect. Thank you for that. Cole, I'll turn it back over to you if there are any questions there.

We do. And our question will come from George Park, a Private Investor. Please go ahead.

Thanks guys. I’d like to report, could you give me an idea of what you think the sales level needs to be to achieve breakeven and become profitable?

Tom, let me turn that one over to you.

Well, let me first preface it by saying we don't provide any guidance here. But let me walk you through some relevant arithmetic. We have about – between $6 million and $8 million worth of operating expenses per year. It's been coming down a little bit, but that's a good range. Our gross margins are targeted at about 50%. We've been moving closer and closer to those, except for sales pushes, I think we're relatively confident that we can achieve that. So using that, you'd have to see some kind of revenue model of between $12 million and $16 million per annum to get you over that OpEx. I hope that gives you a little bit of guidance there.

It does. Thank you very much. I appreciate it.

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.

Again, I thank all of you for joining us today. Again, we're really excited about the fact that all the pieces are coming together. Look out for things that are coming on August 23, also look to see we're getting increasing coverage in the media. But 23 is the commencement of operation rat race. And hopefully you'll follow along with it, as we begin to really drive things here. So again, thank you for your time and attention, and we'll be speaking to you again next quarter.

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