Robert Blum - IR Dr. Loretta Mayer - Chair, CEO and Co-Founder Tom Chesterman - CFO Brandy Pyzyna - VP of Field and Tech Services Joe Malinowski - VP of Sales Elissa Calloway - VP of Manufacturing and Regulatory

Kevin Ellich - Craig-Hallum Jerry Sweeney - Roth capital Tony Kamin - Eastwood Partners Pete Enderlin - MAZ Partners

Thank you, Andrea, and thank all of you for joining us today to discuss SenesTech financial results for the period ended March 31, 2018 and corporate update conference call. With us on the call representing the Company today are Dr.

Loretta Mayer, Chair, Chief Executive Officer and Co-Founder of SenesTech; Tom Chesterman, our Chief Financial Officer; Brandy Pyzyna, our VP of Field and Tech Services; Joe Malinowski, our VP of Sales; and Elissa Calloway, our VP of Manufacturing and Regulatory. At the conclusion of today's prepared remarks, we’ll open the call for a question-and-answer session.

Please note that listener’s both on the live portion of the call as well as webcast will be able to ask questions. If you’re on the webcast, you can type your question into the box and press submits.

We’ll take as many questions as time will permit for. If you are dialed in, you’ll ask questions by pressing the star one button as usual.

Before beginning 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, planned results, or strategies and are generally preceded by words such as may future, plan or planned, will or should, expected, anticipate, 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 payments as a result of various factors and other risk 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 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 for the results of the receipt of new information, the occurrence of future events or otherwise.

With that said, let me turn the call over to Dr. Loretta Mayer, Chair, Chief Executive Officer and Co-Founder of SenesTech.

Loretta?

Thank you, Robert, and good afternoon to all of you. We truly appreciate you've taken the time to join us for this call.

In our press release today, I made a comment that there’s much to the whole story beyond the numbers. And with that said, those are embedded in our discussions of sales, operations, and team progress towards commercialization.

And with that, I am going to turn it over to Tom Chesterman, our Chief Financial Officer. Tom?

Thank you, Loretta, and good afternoon to all of you. We appreciate you joining us for this call today.

We just released our first quarter financial results. If you need a copy, please visit our website.

We expect to file our 10-Q tomorrow and you can get a copy of it from our website or from the SEC. To reiterate what Loretta just said, it's not really all about the numbers.

As we talked about on the last conference call, our challenge with the commercialization involves some critical steps. To reiterate, we need to build the right team, we need to develop commercial level manufacturing, we need to develop the right marketing strategy including products definition, pricing, customer identification, value proposition, et cetera.

We need to develop a distribution channel for fulfillment and we need to develop reference customers. While we certainly can talk about the first quarter numbers, they really do not tell the story where we are of these critical steps.

So, we’d like to talk first about our progress on these critical steps to commercial success/ First, build the right team. Starting at the tip of the spear we’ve now eight seasoned sales professionals, collectively have over 100 years in sales experience in the pest control and related industries.

By Joe Malinowski, our VP of sales, the sales force is mostly but not wholly focused geographically. The team includes Julia Menein, here at Flagstaff who handles our inbound inquiries.

Melinda Baker who handles for Southwest and Hawaii; Doug Mills, who handles the Eastern Seaboard; Carl Forhan who handles the Midwest; Jim Berry who handles Texas and the adjoining states, and Brian and Nick [indiscernible] who handles the Northwest. This team was complete in April, which is also in Tracey Hayes proceedings completed the revamp of our sales messaging and materials.

At this point, though Joe, maybe you can say a few words about the sales process and the recent results of the sales efforts.

Thanks, Tom. The sales team is really focused on two initiatives, working with distributors, existing and new, working with pest management professionals or PMPs to introduce ContraPest and how it can help the PMP improve their integrated pest management approaches.

We are now working with or through four distributors, two of which have been added within the last month. While we obviously start with the distributors, central office, that’s only the beginning of the effort.

We visit distribution centers, we hold teaching’s, we consult with them to identify PMPs who can benefit from ContraPest most and we develop incentive plans, then leveraging those efforts we then call an individual PMPs to more directly introduce ContraPest and explain how it can improve their business. ContraPest only works commercially when it meets the PMPs needs.

Tom?

Thank you, Joe. These efforts are making the difference in terms of customer acquisition.

We can’t see them in the first quarter numbers as we did not have all of this in place then, and you will not see it all of it in the second quarter financials though you will see it in terms of customer acquisition, can't shifts et cetera. Let’s turn now to the second point, develop commercial level manufacturing capability and capacity.

To talk about this, I'd like Elissa Calloway, our VP of Manufacturing and Regulatory to say a few words about the progress her team has made, and then perhaps a few words about regulatory matters.

Thank you, Tom. As I mentioned on the last call, our focus has been on feeding operational excellence.

Aspects of this include increasing by size and reducing cost of goods sold. I’d like to mention a few numbers to exemplify our progress.

We’ve now doubled the batch size to 30 liters, we’ve also improved the quality control processes and reduced the QC time and cost. Finally, we’ve negotiated both supply contracts that reduce costs but still retain flexibility.

As a result, we expect cost of goods solid to be reduced by these actions by over 20%. As we look forward to the rest of the year, I am targeting further improvements that may improve cost of goods sold by another 25%.

We’ve also made progress on the regulatory side. We’re continuing to experience advancement in our California application and hope that will lead to an approval in the summer.

The team said the regulatory process has numerous access while our marketing and sales teams are preparing for a positive result and we’ve so far been able to answer follow-up requests, we also feel it is important to recognize that there could be additional discussions prior to approval. One last comment on regulatory, as we’ve said before.

Our EPA registration is dynamic, one undergoing constant improvement. One example of our label evolution is when the EPA reviewed our acute toxicity information.

After finding ContraPest to have a lower hazard level, the signal word was reduced from warning, which indicate the higher risk to caution a level that reflects the lower toxicity. ContraPest was assigned a signal word caution due to a slight thermal irritation.

Another example is the change to clarify the ContraPest may be deployed around any manmade structure not just the building. Now that we have been out in the market for some months, we've heard some PMPs of additional features that they would like us to investigate.

Customer feedback is important to our success and we have collected a variety of request ranging from new features and benefits to expanded use application. The next step which we have begun is to evaluate these features and began the regulatory process to pursue them.

Thank you, Elissa. Let's turn now to the next point, develop reference customers and case studies.

We believe this is much about advancing the science as it is about sales references. And to talk about this, I’d like to turn it over to Brandy Pyzyna, our VP of Field and Tech Services.

Thank you, Tom. We have continued the work I outlined in the last conference call.

But to go beyond the work, let me share some specifics. In one trial we just completed, we demonstrated with scientific rigor that when used as part of an integrated pest management approach ContraPest helps lock the population rebound, giving pest management professionals a new tool to magnify the results of their IPM protocol.

This is compared to when the use of legal methods with alone. Cameras were used to monitor the rat population at an animal care facility throughout this trial.

The data showed in areas where ContraPest was used in conjunction with other tools, the rat populations were controlled or reduced while in areas that only used legal tools explosive population growths were seen. This is qualitatively the same results what we saw at our protein production facility where ContraPest plus rodenticide showed better efficacy than areas treated with rodenticide alone.

We have also listened to the customers and we are preparing a long-term field trial. Once understand more about how to deploy ContraPest in a diverse environment over the longer period and this trial will be deploying ContraPest in a new environment, one where urban and private areas interface.

Think of this as the first step towards optimizing or developing the best practices for citywide development. In addition, we are also continuing to support our customers, the pest management professionals, transit agencies et cetera.

We want to provide the best practices and training and as previously mentioned, this does include supporting commercial implementations in major urban transit settings and national retail chain and with our pest manager, pest master partners.

Thank you, Brandy. Let's turn out to metrics.

I had mentioned last time that there is a leading indicator for recognized revenue hitting the books, which is the number of distribution agreements we have. As was mentioned before, we have expanded ContraPest now the four distributors all four are either supplying from inventory or supplying via direct shipment from Flagstaff for those PMPs that just can't wait.

Another leading indicator is the number and scope of regional and national PMPs. We previously had six PMPs, all of whom have finished whatever assessment they needed within the last few months and now are expanding their deployment of ContraPest.

We just shipped the stocking order to another and we're in final negotiations with an APE. In the press release, we articulated some of this success stories we've gotten from these PMPs.

Thank you, Tom. We did a lot of hard work and I really appreciate this tremendous group of people here that attack this problem every day.

As I have said before, it's not a matter of gift it's a matter of win. To now adaption to the market is really the key and that we have a great deal of experience understanding adaptation because we work with the most successful mammalian species on earth, the rat.

The rat can adapt to almost any situation from flooding, to dehydration, to poisoning, to breeding you name it. The idea of what's the changing environment and adjust rapidly, as we've just heard it's about the voice of the customer.

The commercial development of ContraPest is now on a track of rapid learning, responding, learning with farming and we are now looking at success. I'm going to leave all of that to Tom and the commercial team.

They are doing a great job. While still supporting sale as our much needed components of this business, it's timely for me to lookout to the political and social landscape to form some strategic partnerships and funding for our next product.

We have to continue to see the demand whether it's through ContraPest or looking at other species. There are three states who are beginning to emerge as leaders in a public outcry pay greater attention to our wildlife and those would be Hawaii, California and Massachusetts.

They are looking to deal with a better understanding of the intersection between humans and wildlife through legislative processes. And I know this is probably not new to many people who have been involved in disruptive technologies such as ours, and it's very difficult.

But in this particular case, I think we're pretty lucky because both sides are very vocal. It helps us to see both sides of this coin.

Here at SenesTech, we view ourselves as travelling the gap and that's a gap between minding the use of lethal rodenticide in areas that are exposed through wildlife and domestic pets, and the other side which is managing the rodent infestations, damage and disease in areas such as our food production and home. So this is one of the things that I am dedicating myself to help bring both sides together so that ContraPest can be that anchor tool to bring both sides together.

Without diverting the organization from selling ContraPest, you may have noted in our recent press release that our patent issued on May 1st for reducing the reproductive capacity of all mammals, and now that opens a need to focus some attention on where we go next. How do we do so from an organizational and financial perspective?

There’s a lot of low hanging fruit and believe me I get calls and emails every day from folks who have interest in reducing the reproductive capacity of dogs, cats, feral pigs, great squirrels and other species of public interest. What we need to do is we need to find the partners, who are pushing that request and that demand, understand that the revenue opportunities and balance it with the public goods, and help harvest this first.

One of our board members, Marc Dumont recently said, SenesTech has reached the bottom of the J curve which is traditionally experienced when creating getting approval and introducing a disruptive technology product into an interesting market. SenesTech is manufacturing a patented product, approved by the EPA and is encountering resistance to innovation in the traditional identified world market.

The Company is spending time and money and making substantial efforts to get through with its disruptive technology and is determined to prevail. I really appreciate those comments from Marc because determination is really defined here at SenesTech everyday and we are absolutely certain that 2018 is indeed the win for SenesTech, not and if.

Andrea, let me turn the call over to you for any questions.

Tom, I just wanted to start off with the two new distributors, wondering if you could tell us who they are and have they placed any stocking orders yet?

These are distributors that don’t typically are in this case have stocking orders. What they do is they work with specific PMPs within their region.

They have preferred not to remain -- not to be named at this time. But we’re working with them and working with them both to market to their customers and also develop programs with them.

We certainly would hope that overtime they will progress to being a more public partner, but at this point, we’re just at the beginning with both of them.

Are they national in scale or more regional, what do you say?

These are both regional distributors.

And then in the press release, you guys really focused on I guess the strategic change in direction and the messaging to attract new customers. I guess, are you changing the mediums that you are using or is it really just the message going out to the PMPs?

It's both. We’ve started working through for example, Univar has its own in-house distribution system.

We are working through that. But we are also working through PCT Magazine and other forms that are directly attributable and then read by the PMPs.

So that is a very direct marketing campaign that Tracy went over little bit last time on the last conference call. And we, probably in the next conference call, will go into little more detail but we are beginning to see better recognition, and now we are entering into the education phase and to call the action phase to use the marketing jargon.

Was there enough in Q1 or this quarter effective G&A or is that something that we should be thinking about as we updating models going forward?

There is not a huge G&A hit to it, and but more and more what we tried to do is we tried to get to earned the media. That is to say stuff that we are not necessarily paying for, but which we have earned because it's newsworthy.

So, I wouldn't anticipate there will be a G&A impact from this effort.

Two more questions. The four new sales people that you've added over the last month and half.

Did they come from within the pest control industry or are they new to it?

They are far from new to it. They are all seasoned professionals with extensive experience in the pest control industry either having been PMPs themselves or having been supplying PMPs.

And then I guess putting a combination flexion in here. Can we get an update on your progress in cattle feedlots, and then going back to what we read last comments about potential strategic especially focusing on what maybe why Hawaii, California, Massachusetts in terms of dealing with wildlife?

What are the mammals and animals should we be thinking about?

So I’ll answer the first part of that but then turn it over to Loretta. In terms of cattle feedlots and other agriculture, as you can tell on messaging campaign and our current marketing and sales focus is very laser focus on the PMP market.

We need to develop and implement a separate approach in some cases, in many cases to agriculture, and that’s something we will be doing this quarter to come up with the best way of getting at that market. But right now, we pretty focused on the PMP market and is working.

So, we don't want to stop that or diluted it anyway.

So thanks so much for the question about next market. The obvious next species that we will add to our fertility control work will be mice, and I think that’s one that is kind of a natural and so that’s no big ideal there.

In the realm of next species, as I mentioned what we have to do is we have to look at where the demand is the greatest. So, clearly the highest financial return would be companion animals, but the time and cost to that product being ready to serve is extensive compared to some of the other species that cause a great deal of damage.

We have early data in pig, feral pigs and will be looking at that. Again, the real success here is combining the push.

For example some organization like HSUS would be looking at deer. Deer are a major cause of highly activist, but they are also carrying ticks and other diseases that are particularly concerned as a public.

So, what will be looking at will be along those lines. Mice is an absolute for sure that we will be addressing.

And then the next one I'll be able to update you on that, but it will probably be somewhere in the pig arena as next, but we may be doing parallel studies in canine because their metabolism is so close to pigs.

I was going to ask if you would have to run a separate study and the answer seems like it would be, yes. Is that right Loretta -- for canines because it doesn’t seem like you could just -- could you just jump into the canine markets for with your products?

Well, we are already have preliminary data in canine would one of our active ingredients and it was successful very successful. Every species that we look at however has to be formulated first and foremost to the reproductive strategy of the animal and for its physiologic needs.

For example, rodents have to drink up to 10% of their body weight a day. Mice some need to do that.

They get their liquid requirement from the food that they eat. So, again right there, you can see two differences in rodents alone.

Dogs are seasonal breeders. Pigs use a different strategy.

So for every single species, we have to do efficacy, formulation, regulatory and move it into the market. So for example companion animals requiring an FDA approval feral and stray dog for fertility control would be an EPA.

So for each one there is a fair amount of work that has to be done, but there is a tremendous group of foundations and animal welfare there groups that can provide us with that system. So that's why we are looking at partnership.

There is no doubt you've got to a steep learning curve to commercialization and it is what it is and it does appear you're cracking the code, obviously looking at both ends of inspection, we have the distributors and then the PMPs, like as the [indiscernible] you've talked about is the push and pull. But what do you think right now is the key to driving additional sales?

Is it more data? Is it more education?

Is it just being out there having more PMPs because obviously you do have some of the largest distributors in-house or on-board, just curious if you could get some more structure around that?

Yes, Jerry, I think it’s a great question and important to be very clear because it is consistency. We need -- now that we have what we believe the message that will work best with the PMP market.

We’ve to remain on that message and get out there, and get feet on the streets to make those meetings, and as long as we are consistently giving the same message to all of the PMPs and to all of the other parts of the distributors, et cetera. That's really the most important part is executing on the message.

And as you said, we are cracking the code. We are beginning to get those.

I think it might be instructive, Joe, if you might talk a little bit about the reception we've gotten because I think it’s very positive as we talk to PMPs about the value of integrating ContraPest into their integrated pest management, and it’s really indicative of where success is going to come from. Joe, would you?

Joe.

I'll be happy too. Jerry, great call.

Great question. First, I want to go back to what Tom referenced earlier.

First in the selection process of the team that we put on the field, we have a very-very seasoned regional account management team that either have experienced as a PMP or manufacturers rep or been in the distribution or even one individual that has worked for a competitor in the marketplace. So, we’ve a very seasoned team.

With respect to the message, thanks to Tracy and her team and the marketing message, it is as Tom pointed out, it is a very consistent pointed, laser focused message about adding ContraPest to an integrated pest management program. And the team is on the field is really driven with their connection with the distributors in the distribution network, but also the PMPs.

And they are truly after a very short time period our road warriors, they’re either meeting with the PMP or several PMPs on a daily basis, they’re holding meetings with the distributors where they will have anywhere from 15 to 25 to 50 PMPs in a training session. So, it's a combination of a laser focused message, education, follow-up and most importantly asking people to buy.

So, it's really a combination Jerry and hopefully I have answered your question to your satisfaction.

And do you think it is more of -- I mean there’s definitely a value proposition of adding ContraPest then with rodenticide keeping the rat population knocked down. So, do you think it’s for maybe the customers talking a little bit because ContraPest is sort of this annuity, a continuous cost, but longer term it obviously has the benefit keeping population down?

Is it a learning curve on the customers' aspect, the end customers' use or is it also -- or is it the actual PMP operator?

Jerry, it's both. I mean you definitely need to market to the PMP to show them how this is going to improve their business.

I mean we’re providing a product which is part of their service. And thanks to the -- Brandy was mentioning before, we can show them specifically how much better IPM works with ContraPest and without.

But at the same time you also need to get the customer to buy that service that includes our products and so that’s where you get the push pull. And the fees that you don't see yet, is really the groundswell of the overall PR campaign, but as Loretta has alluded to many, many times that’s happening and it's happening faster and faster and more and more.

Loretta, I think you have mentioned the three states in particular that are moving forward on this and maybe you talk a bit about the messages that we are hearing from the end user because you get most of those call.

I do think, Tom, I get a lot of calls from California. Again, what I can say to California is we are on our way.

And as soon as our registration is approved we will be able to help out there. Probably the state of Hawaii is where I get the biggest demand from customers and this ranges from a tropical environment where rats are favored their reproductive rates are extraordinary.

And again the use of lethal poison in and around the water is becoming problematic for the environment groups there. So, this again is where we have to bridge between the two.

So, it is the customer the end user, no we are not a silver bullet, we are not going to solve all of your problems but hand in hand with your PMP we will be able to move us all closer to a better environmental situation. So in that case its mostly getting the information out to the PMPs because the customers in these states they are pushing hard and rapidly.

Tom, you had mentioned that as you are thinking about metrics, people should look at the number of relationships you have got with distributors for example. So I guess in line with that line kind of that guidance but thing to look at as you're halfway through the third quarter now.

Do you anticipate having more distribution relationships that you will be able to talk about in the next quarterly call? And affiliated with what, where you've been doing trials for example what cities do you think that some of those will be wrapped up in a reasonable period of time so that those may also become new distribution points for you?

So as far as the first part in terms of distribution agreements and relationships, yes, we are still pursuing some others. We are working within the one we have with this -- some others, if Eric cover some areas that we would like to cover in more depth.

I think you are also going to see some further some further master agreements or overlying agreements with PMPs and large PMPs were continuing to pursue those, and we've had some good success now. But with the relationships we have the people you got on the street right now in the sales team I have no doubt that we will see some significant progress in that as well.

Turning to your question about the trials with the cities, some of that had already converted and some of them have now turned into commercial contracts, but we continue to have others going on. We're just now entering into a fairly large one with that's Brandy talked about, and there are also will probably be some smaller ones that are included.

We've got one that's concluded not that long ago that will probably end up being a publish paper and the science is so compelling on it. So, the answer is yes from all of these -- they will definitely be progressed.

Given I think the biggest concern I would think for everyone watching the Company is just be the level of revenue; however, you have been showing sort of some growth. Given that you're again that you are halfway through this quarter, I understand you probably want to be very careful in terms of guidance, but directionally do you think that you'll see an improvement over the quarter you just reported?

Yes, I'm not going to go over the guidance out of that so sorry. But in terms of progress again the -- what will be able to show is progress in terms of the metrics.

There may be some problem. We were talking -- Joe and I are talking about programs that may accelerate the customer acquisition, and the number of tank shipped to DSM specific new customer promotions.

Those don’t turn into revenue in the first quarter. So those -- so you may not see everything translated into revenue in the second quarter that you -- but you will see in terms of the other metrics, the tank shipped customers acquired et cetera.

In terms of the sort of the lag time between having this first metrics of distributors now that, do you have a sense of how many months it sort of takes before you are seeing those customers potentially order at a more stable kind of rate? Is it a -- is there a six month lag time or anything that you can identify?

It's not a really good track record in terms of having lots of data. The scientists in the room are definitely wouldn’t see this is a proper statistical analysis, and it varies.

Some PMPs are going to try it out. We had one that tried it out at one location and said that I'm doing this everywhere and I didn’t take a very long at all.

It was a month or so, a couple of months. What I will say is that you've got these two different types of usages.

When we -- last year, we had a lot of people that we're trying it out as a standalone product and there is definitely a lag because there as how long it takes for ContraPest to have an effect on population overtime. But with respect to the PMPs what they are seeing, what they're looking for is, as they implemented as part of IPM due to the populations stay down and that's a much quicker response because they know how long, how quickly rats rebound.

And so, they’re able to see much more quickly how much more effective their IPM is with ContraPest and without.

Okay.

I am sorry I don't have a real good and solid statistical trend here, but I actually think the trend is getting better as we become more integrated into the PMP business.

And then just one final question on the other side of things in terms of expenses. On the quick read, it looks like your EBITDA loss was lowered.

Is there anything else you can do internal while you’re waiting for that revenue to ramp to make sure you’re doing everything on the expense side that can rebound?

Yes, we definitely have to be very, very disciplined in expenses. And so in the current time everything has to translate to a revenue opportunity, and one of our senior managers, Kim Wolin, is really that’s a primary responsibility that she has is to be a final check to make sure that the expenses are truly translatable into revenue opportunities or cost of goods sold reductions.

So we are very focused on that. We’ll continue to be focused on that.

Everybody again looking around the room, everybody just try to go in with an expense request Kim’s office. It hasn’t been a positive experience unless you’re able to justify it.

In the press release, you have a comment about encountering resistance in the traditional rodenticide market. It's an interesting comment and I am wondering who is resisting.

Are you talking about obviously could be manufacturers of rodenticide and other similar products, PMPs or government? And what is the essence of their resistance at this point?

So, let me approach this in two ways. I am going to approach it from a tactical standpoint and I’ll let Loretta be strategic because that’s she is much better at that than I am.

From a tactical standpoint, it’s a resistance to something new and unknown. The PMPs have to be educated as to how do you put this into integrated pest management.

And that’s the focus of Joe and his team is just explaining how does it important as part of the business they’re already in, to some extent you got that with respect to the end-user as well, they have to understand then what are the expectations. But from a strategic standpoint, from the resistance that Mark was pointed and talking about it and Loretta has pointed out.

I am going to turn it over to Loretta to be strategic on this here.

I think when you understand that the PMP is kind of fulcrum here, the PMP takes the new innovation that we have created and our learning every single day to get best practices to them. So they know how to deliberate to their customer.

Their customer who is saying things that vary from the only good rat is a dead rat to oh, wow yes, birth controls the rat, so I get that. Oh, that’s much better.

So, the PMP is in the middle of learning curve with us. And when you find yourself in the middle of the learning curve, some people like to jump in and learn quickly, others want to put the exam off for a later day.

And so, I think that’s what we are looking at. And from a strategic position, we are trying to bridge that gap as I said earlier into helping the PMPs understand that, yes, you do something that you've never been able to do before.

And I think that’s critical, they never had a tool in their bag to stop the rapid rebound because as I said at the very beginning, rats are adaptive, it only takes two, they have been around longer than we have, and getting the PMPs to have the tools they need and know what they have is the challenge, but we are rising to that challenge and we are certainly here to help them.

And the comment was also that 2018 will show the results of the changes that you have been making, and I guess essentially that really means more of a focus on IPM rather than ContraPest as a standalone product. So the question that is, is what is the biggest gating factors besides, I guess just maybe organizational inertia?

Is it regulatory? Is it financial?

Is it training in the field? Why does it seem to take so long at this point?

Well, Pete, there is no gating factors anymore. We are out of the gate.

And that’s why I think we are trying to communicate here is that, it is working, it takes a while before translates into book revenue. But there is nothing holding us back other just how many hours there are in a day and how many PMPs per day shows team can visit.

So, it's there are no barriers now other than continuing to execute on the strategies we have got.

And by end user areas which would you think represent the best opportunities for a quicker ramp going forward starting in the second quarter, but especially in the second half?

That really depends on each PMP and that’s actually part of the discussion. The sales team has with the PMPs, who are your customers, which ones will be the most receptive to this.

Usually, it's the customer that’s complaining that they're not -- the PMP is not getting a handle on the infestation. So, it's the complaining customer, but it also might be the customer who is really, really resistance to having poisons on their property and wants to minimize the use of those.

So, it's going to be a very individual sales pitch type of approach.

Do you think that inventory stocking will be a significant factor in revenues in the second half of the year?

Yes, I’d think so. I’d think so as the demand keeps picking up.

Right now, we are filling the demand as needed, but it's accelerating and there will be -- stocking will be necessary to avoid shortfalls.

And is there any sense of how much that inventory stocking could add in the second half?

Not at this time.

Tom, what is plan B as far as funding the business development is concerned, if the ramp doesn’t accelerate sharply in the second half? I mean you guys would begin to run out of money at the end of the year if not sooner, so there must be some contingent planning going on.

More on a CFO, so there is always contingent planning going on. But frankly, yes, the focus is on the trend is and all of the pointers are moving towards the fact that we need to focus on executing what we have.

We do not at this point today need to trigger a plan B.

Could a plan B include some sort of licensing arrangements as have been noodle out in the past?

Sure, we've looked at that as well. There is a lot of different -- I mean we've got entire alphabet full of alternatives here Pete, but obviously I can't go into them in depth that would be way too forward-looking for our attorneys.

Yes, we've had a couple of questions here with the time that we have left. First question, do we have a guess as to when SenesTech might be approved in California and you have sales people doing preliminary works there now?

Yes, Elissa had mentioned that we expect it and hope forward in the summer, but we can't be more specific than that because this is the regulatory process and there so far has always been just as one last question that they've got and they've like the answer. So, we can't be a particularly forthcoming with the precise point estimate, but we can say is that, yes, we have already begun activities in California, planning activities in California.

We are very restricted. We cannot market the product in California.

And so, it is approved, so we are not doing any direct marketing. But we can do, we can educate, we can provide education generally about the process, we can begun to get ourselves signed up for conferences and to plan out on that happy day when we get approval from California to figure out.

How many people from the sales team are going to be in California the next day? And which part of California are they going to be in?

Our next question is, can you provide details of the R&D as well as SG&A expense?

Yes let me answer that more or less first from a qualitative standpoint. The R&D is as I've mentioned before all of our expenses are very specifically tied to what is the revenue implication.

And so, the R&D expenses are all tied to some extent to supporting that and to support the reduction and cost to goods sold. So when Elissa mentioned that we've make something's that have improved our expected cost of goods sold, those R&D dollars are winning to that.

When we talk about sending Brandy's team and to different places and to help with some of that, some of that is R&D as well, but it's very directly revenue based. So, but to get any more specific, I would say that we're going to be filing our 10-Q tomorrow and that the specific detail will be in that.

Our last question here is, do you have any comments on the recent New York post articles on rat control in the city?

Well, I guess my first comment is, I think we ought to be a little easier on Mayor, de Blasio. He is up against one of the biggest pest management issues that we’ve ever faced and we continue to face every day.

Yes, what they’re clearly up against in New York and in most major cities is the vast environment that’s created for rodents underground, the tremendous population modifying public behavior for trash work. And again, I think it’s another situation of we are there, we are expanding with PMPs in New York City, and it’s that you need an integrated test management system.

You need to work together with everything from sanitation to exclusion, to lethal strategies, but you got to stop -- you got to hit the route cause and that’s reproduction. Do not worry, Mr.

Mayor. We are there.

We are here to help you. I am not from the government, but I am here to help you.

That’s my comment.

With that, management any closing remarks?

No?

Well, I want to thank everybody for their time. We’re going to be very busy this quarter and we look forward to updating you on how that is resulted in terms of achievements at the next quarterly call.

So, thank you very much.