Senti Biosciences Holdings, Inc. 10-Q

Item 1A. Risk Factors Investing in our common stock involves a high degree of risk. Before you decide to invest in common stock, you should consider carefully the risks in Part I, Item 1A of our fiscal year 2025 Annual Report on Form 10-K, together with the other information contained in the Annual Report, including our financial statements and the related notes appearing in this Quarterly Report. We believe the risks described below are the risks that are material to us as of the date of this Quarterly Report. Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in this Item 1A below. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. If any of the following risks actually occur, our business, results of operations and financial condition would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose part or all of your investment. Below we are providing, in supplemental form, new risk factors as well as material changes to our risk factors from those previously disclosed in Part I, Item 1A of our fiscal year 2025 Annual Report on Form 10-K. Our risk factors disclosed in Part I, Item 1A of our fiscal year 2025 Annual Report on Form 10-K provide additional discussion about these supplemental risks. Risks Related to our Notes Financing We have entered an agreement to incur indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, which may adversely affect our operations and financial results. In April 2026, we, together with two of our subsidiaries, entered into a securities purchase agreement (the “Securities Purchase Agreement”) with one accredited investor affiliated with our largest stockholder, pursuant to which our wholly owned subsidiary, Senti Holdings, Inc. (“Senti Holdings”), agreed to issue and sell in a private placement up to $40.0 million in aggregate principal amount of its Senior Secured Convertible Notes (the “Notes”) in up to two tranches, subject to the satisfaction of certain specified closing conditions. Upon issuance, the Notes may be converted for shares of Senti Holdings common stock or, subject to stockholder approval, exchanged for shares of our common stock, in each case, initially at a price of $0.6261 per share, which is subject to customary adjustments upon the occurrence of events specified in the Notes. We expect the first tranche of $10.0 million of Notes to be issued in May 2026, subject to the satisfaction of certain specified closing conditions. However, there can be no assurance that any tranche of Notes will be issued on the timeline we expect or at all. Upon issuance of the Notes, our indebtedness may: • limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes; • limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes; • require us to use a substantial portion of our cash flow from operations to make pay the principal of the Notes when they mature and, if required, interest on the Notes; • limit our flexibility to plan for, or react to, changes in our business and industry; 38 Table of Contents • place us at a competitive disadvantage compared to our less leveraged competitors; and • increase our vulnerability to the impact of adverse economic and industry conditions. If issued, the Notes will be Senti Holdings’ senior, secured indebtedness and are to be guaranteed by us and all our direct and indirect subsidiaries (other than Senti Holdings) pursuant to a guarantee in favor of the holder of the Notes. The Notes will be secured by a first priority lien, subject to certain permitted liens, in all of the current and future assets of Senti Holdings, of ours and of all direct and indirect subsidiaries of Senti Holdings, subject to certain customary exclusions. In certain circumstances, the holder of the Notes may be entitled to foreclose on the loan, and such foreclosure would be expected to result in a material, adverse effect on our business, results of operation, liquidity and prospects. In addition, the terms of the Notes and the Securities Purchase Agreement limit our ability to raise equity capital. We may experience a material adverse affect on our business to the extent we are unable to access available equity capital due to such limitations. Servicing our Notes may require a significant amount of cash. We may not have sufficient cash flow from our business to pay such debt, and we may not have the ability to raise the funds necessary to settle conversions of the Convertible Notes in cash or to repurchase the Convertible Notes upon a fundamental change, which could adversely affect our business and results of operations. The Notes will not bear any interest unless an event of default has occurred. If issued, the Notes will have a maturity date (the “Maturity Date”) on the date that is the first business day immediately following the date that is six months after the closing date of the Initial Notes. On the Maturity Date, if the Notes have not previously been converted or exchanged, Senti Holdings is required to pay an amount in cash equal to 200% of all outstanding principal and accrued and unpaid interest. Under certain circumstances, we may force the conversion or exchange of the Notes into shares of common stock prior to their maturity. Our ability to make scheduled payments of the principal of, and, if applicable, to pay interest on, any Notes we may issue, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business is not expected to generate cash flow from operations sufficient to service our indebtedness and make necessary capital expenditures. As a result, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to repay or refinance the Notes will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. Further, the Notes contain several customary events of default. In the case of events of default that relate to bankruptcy, the Company is required to redeem the Notes in cash, and in the case of other events of default, the Holders may require the Company to redeem their Notes in cash. The redemption price is the greater of (i) 200% of the outstanding principal amount of the Notes and (ii) the product of (x) the principal amount being redeemed and (y) the quotient obtained by dividing the greatest closing sale price of the Issuer common stock during the event of default by the lowest exchange price during such period. However, we may not have enough available cash, or be able to obtain sufficient financing, at the time we are required to redeem the Notes. Exchange of the Notes will dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock. Assuming the Notes are issued, the exchange of some or all of the Notes will dilute the ownership interests of stockholders as shares of our common stock are delivered upon such exchange. The Notes will be exchangeable at the option of their holders prior to their scheduled terms. Any sales in the public market of the common stock issuable upon such exchange could materially and adversely affect prevailing market prices of our common stock. In addition, the existence of the Notes may encourage short selling by market participants because the exchange of the 39 Table of Contents Notes could be used to satisfy short positions, or anticipated exchange of the Notes into shares of our common stock could depress the price of our common stock. In addition, assuming the Notes are issued, the conversion of some or all of the Notes into shares of Senti Holdings will dilute our ownership interests in Senti Holdings, the holding entity of our operating business Senti Biosciences, Inc. In the event that the maximum amount of Notes are sold under the Securities Purchase Agreement and such Notes are subsequently converted into equity of Senti Holdings, the Note holders would own more than a majority of the equity of Senti Holdings. Moreover, issuances of our common stock at a price below the conversion/exchange price then in effect would result in full-ratchet anti-dilution adjustments under the terms of the Notes. Such issuances would therefore result in additional dilution to our stockholders. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures None.