# TO OUR
SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NASDAQ_SNES_2017/NASDAQ_SNES_2017.mmd` · pages 2-8_

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TO OUR
SHAREHOLDERS

![](images/2_0.jpg)

Dr. Loretta Mayer
Founder, Chief Executive
Officer and Chairman of
the Board

![](images/2_1.jpg)

Dr. Cheryl Dyer
Founder, Chief Research
Officer

## BUILDING A COMPANY

The building of a company is a complex process requiring vision, resilience, teamwork, enormous energy and a dedication to succeed. To transition to a commercial company, there are a number of things that have to be accomplished before the commencement of revenue. You've got to build the right team; you have to develop a commercial level EPA inspected manufacturing facility; you've got to develop the right marketing strategy including product definition, pricing, customer identification, and development of a value proposition in all market segments. In 2017, we took a quantum leap forward in completing the build-out of the necessary infrastructure – physical and personnel – to effectively market and sell our innovative ContraPest \( ^{®} \)  technology for managing rodent populations through fertility control; and positioning SenesTech for long-term success. While 2017 was about setting the stage, 2018 will be about execution, customer acquisition, and revenue generation.

From a marketing standpoint, we have adjusted our product messaging and market outreach to attract new professional pest management (PMP) customers. ContraPest can be a highly effective solution whether as a fertility-control anchor to magnify the success of an Integrated Pest Management (IPM) program, or as a standalone, non-lethal solution for customers looking to reduce or eliminate the use of lethal methodologies. IPM is an ecosystem-based strategy that focuses on long-term prevention of pests and their damage through a combination of techniques, such as biological control, habitat manipulation, modification of environmental factors.

Rodenticides, or poisons, are used only after monitoring indicates they are needed according to established guidelines and treatments are made with the goal of removing only the target organism. Pest control materials are selected and applied to minimize risk to the human health and non-target organisms in the environment. In this context, ContraPest is ideally suited as a complementary tool to supplement traditional pest control strategies as it addresses the problem where it starts: reproduction. This messaging has been well received and we are beginning to gain traction with PMPs and national pest control distributors alike.

## KEY DISTRIBUTION AGREEMENTS

During 2017, we established key distribution agreements with Univar and Target Specialty Products to create market access to many of the leading PMPs around the United States. In conjunction with providing this expanded distribution access, we have continued to develop relationships with key PMPs, who are now expanding their deployment

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# ContraPest \( ^{®} \) , SenesTech's flagship product, targets the reproductive capabilities of Norway and roof rats. The highly-palatable formulation promotes sustained consumption, reducing fertility in male and female rats, magnifying IPM success.

of ContraPest. These early PMP relationships are just the tip of the iceberg for what we believe will be the opportunity for ContraPest, but they are also crucial as the change leaders in an industry that has been hesitant to change. In addition to establishing these initial distributor, and PMP relationships, we are significantly expanding our marketing campaigns to build a strong brand and to share how ContraPest can support IPM protocols, while also learning how we can best support them as they fight their toughest and persistent rodent infestations. Additionally, we continue to work with municipal and government customers to support their transition from trial to commercial deployment.

Through these PMPs, we can see the successful results of ContraPest in a variety of customer types, such as housing units, hospitals, agriculture, commercial, etc.

## EVOLVING MARKET DEVELOPMENTS

As we progress in the development of ContraPest and future products, there are a number of external factors that are driving change and potential opportunities in our market.

There are a number of cities and counties in the U.S. that have banned poison deployment altogether; and we expect that number to grow. Continued efforts in the California Legislature to ban the use of lethal poisons statewide are gaining traction and increased legislative support and Massachusetts is close behind. Globally, New Zealand has made the commitment to be pest free by 2050 and in Europe, where poisons have been used longer than in the United States, rodents are developing resistance to the active ingredients as only the resistant individuals are selected to reproduce. The World Food Program has estimated their grain transit losses rising to over 33% due to rodent grain damage and consumption. Also consider some of the natural disasters we've witnessed during the hurricane seasons of recent years. Be aware that as water levels rise, rats can swim. They can swim up to 10 miles and when the power is shut off, foods spoil and that becomes a banquet for them in addition to loss of sanitation systems and spread of leptospirosis.

There are other significant health risks, such as the rat lungworm disease in tropical areas, island ecology, not to mention the infrastructure damage that they inflict. Rats are the most successful mammalian species on earth because they can adapt to almost anything that nature, or humans, throw at them. They can breed their way out of many problems.

We may not be able to solve each of these challenges, but they are ones that we need to keep in mind as we grow and evolve.

As we head into 2018, we do so with great optimism. We believe that most of the heavy lifting has been done to position SenesTech for success in the coming years. We believe that 2018 will bring our first meaningful revenues and set the stage for consistent growth. I cannot adequately express my appreciation to our loyal shareholders for their support and patience as we have progressed across the continuum from a research and development stage company to a full-fledged commercial company. All of us at SenesTech are dedicated to growing your company and to dramatically enhancing the value of your investment.

Best regards,

Dr. Loretta Mayer

Chrystin

Dr. Cheryl Dyer

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