What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-10 compared with 2022-08-15 · 77 added, 78 removed, 260 unchanged (37% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) as well as Senti’s audited consolidated financial statements and notes thereto included in the final prospectus and definitive proxy statement, dated May 13, 2022 (the “Proxy Statement/Prospectus”) and filed with the SEC.

In addition, you should refer to our audited consolidated financial statements and the related notes for the year ended December 31, 2021 and the section entitled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” included in the Company’s Registration Statement on Form S-1, filed with the SEC on June 28, 2022 and amended on July 29, 2022.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

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All statements, other than statements of historical fact included in this Form 10‑Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.

Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements.

Words such as “expect,” “believe,” “anticipate,” “explore,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements.

Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available.

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Senti aims to design and optimize gene circuits through its Design-Build-Test-Learn Engine or DBTL Engine, to improve the “intelligence” of cell and gene therapies in order to enhance their therapeutic effectiveness against a broad range of diseases that conventional medicines are unable to address.

Senti’s gene circuit platform technologies can be applied in a modality-agnostic manner, with applicability to natural killer (NK) cells, T cells, tumor-infiltrating lymphocytes

(“TILs”), stem cells including Hematopoietic Stem Cells (“HSCs”), in vivo gene therapy and messenger ribonucleic acid (mRNA).

Senti’s gene circuit platform technologies can be applied in a modality-agnostic manner, with applicability to natural killer (NK) cells, T cells, tumor-infiltrating lymphocytes (“TILs”), stem cells including Hematopoietic Stem Cells (“HSCs”), in vivo gene therapy and messenger ribonucleic

All of Senti’s current product candidates are in preclinical development.

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Senti expects to file investigational new drug applications (“INDs”) for multiple product candidates starting in 2023.

We have incurred net losses of $11.6 million and $12.0 million for the three months ended June 30, 2022 and 2021, respectively, and $23.4 million and $33.0 million for the six months ended June 30, 2022 and 2021, respectively.

We have incurred net losses of $16.6 million and $11.4 million for the three months ended September 30, 2022 and 2021, respectively, and $40.0 million and $44.4 million for the nine months ended September 30, 2022 and 2021, respectively.

We expect to continue to incur significant losses for the foreseeable future.

As of June 30, 2022, we had cash and cash equivalents of $139.8 million, and an accumulated deficit of $138.4 million.

As of September 30, 2022, we had cash and cash equivalents of $114.9 million, and an accumulated deficit of $155.1 million.

We anticipate that our expenses and operating losses will increase substantially over the foreseeable future.

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• expand our operational, financial, and management systems and increase personnel, including personnel to support our preclinical and clinical development, manufacturing and commercialization efforts;

• continue to develop, grow, perfect, and defend our intellectual property portfolio;

• continue to develop, grow, maintain, enforce and defend our intellectual property portfolio;

• incur additional legal, accounting, or other expenses in operating our business, including the additional costs associated with operating as a public company.

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Nonetheless, the COVID-19 pandemic remains a global health crisis and continues to evolve.

As of June 30, 2022, we were operating at pre-pandemic levels, although we cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic will have on our business, financial condition and operations, including planned preclinical studies, clinical trials and clinical development timelines.

As of September 30, 2022, we were operating at pre-pandemic levels, although we cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic will have on our business, financial condition and operations, including planned preclinical studies, clinical trials and clinical development timelines.

The impact of the COVID-19 pandemic on our financial performance will depend on future developments, including the duration and spread of the pandemic, its impact on our IND-enabling studies, clinical trial enrollment, trial sites and other third parties with whom we do business, its impact on regulatory authorities and our key scientific and management personnel, and related governmental advisories and restrictions.

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Recent Developments

Merger with Dynamics Special Purpose Corp.

On June 8, 2022 (the “Closing Date”), Dynamics Special Purpose Acquisition Corp.

(“Dynamics” or “DYNS”) consummated a merger pursuant to which Explore Merger Sub, Inc.

(“Merger Sub”), a Delaware corporation and wholly owned subsidiary of Dynamics, merged with and into Senti Sub I, Inc.

(formerly named Senti Biosciences, Inc.) (“Legacy Senti”), with Legacy Senti surviving as a wholly-owned subsidiary of Dynamics (such transactions, the “Merger,” and, collectively with the other transactions described in the merger agreement (as defined below, the “Reverse Recapitalization”).

As a result of the Merger, Dynamics was renamed Senti Biosciences, Inc.

Pursuant to the terms of the merger agreement, at the effective time of the Merger (the “Effective Time”), (1) each outstanding share of common stock of Legacy Senti was cancelled and converted into the right to receive approximately 0.1957 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and (2) each outstanding share of preferred stock of Legacy Senti was cancelled and converted into the aggregate number of shares of Common Stock that would be issued upon conversion of the shares of Legacy Senti preferred stock based on the applicable conversion ratio immediately prior to the Effective Time, multiplied by approximately 0.1957, resulting in the issuance of a total of 23,163,614 shares of Common Stock.

Prior holders of shares of Legacy Senti common stock and Legacy Senti preferred stock also received the contingent right to receive certain Earnout Shares (as defined below), for each share owned by each such Legacy Senti stockholder that was outstanding immediately prior to the closing of the Merger (the “Closing”).

In addition, certain investors purchased an aggregate of 5,060,000 shares of Common Stock (such investors, the “PIPE Investors”) in a private placement that closed concurrently with the Closing for an aggregate purchase price of $50.6 million (the “PIPE Financing”).

Additionally, at the Closing, 14,915,963 shares of Common Stock were issued to Dynamics stockholders (reflecting actual redemptions by Dynamics public stockholders).

Additionally, an unsecured convertible promissory note in the aggregate principal amount of $5,175,000 that was previously issued by Senti to Bayer Healthcare LLC for a purchase price of $5,175,000 on May 19, 2022 was automatically cancelled and exchanged for 517,500 shares of Common Stock.

Pursuant to the terms of the merger agreement, at the Effective Time of the Merger, options to purchase shares of Legacy Senti common stock were converted into options to purchase an aggregate of 1,667,546 shares of Common Stock.

Following the Closing Date, former holders of Legacy Senti common stock and preferred stock may receive up to 2,000,000 additional shares of Common Stock (“Earnout Shares”) in the aggregate in two equal tranches if the volume-weighted average closing sale price of our Common Stock is greater than or equal to $15.00 and $20.00, respectively, for any 20 trading days within any 30 consecutive trading day period.

The first and second tranche term is two and three years, respectively, from the closing of the Merger.

If there is a change of control within the three-year following the closing of the Merger that results in a per share price equal to or in excess of the $15.00 and $20.00 share price milestones not previously met, then Company shall issue the earnout shares to the holders of Legacy Senti common stock and preferred stock.

On August 31, 2022, we entered into a Common Stock Purchase Agreement and a Registration Rights Agreement (collectively referred to as the “Purchase Agreement”) with Chardan Capital Markets LLC (“Chardan”) to sell to Chardan up to the lesser of:

(i) $50.0 million of shares of the Company’s common stock over a period of 36 months;

and (ii) 8,727,049 shares of common stock, subject to certain limitations and conditions contained in the Purchase Agreement.

Refer to Liquidity and Capital Resources below for further information.

Components of Results of Operations

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Operating Expenses

Our operating expenses consist of research and development expense and general and administrative expenses.

Our operating expenses consist of research and development expenses and general and administrative expenses.

Research and Development Expenses

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Product candidates in clinical development generally have higher development costs than those in preclinical stages of development, primarily due to the increased size and duration of clinical trials.

At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the

preclinical development of any of our product candidates.

At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical development of any of our product candidates.

However, we expect that our research and development expenses and manufacturing costs will increase substantially in connection with our planned preclinical and clinical development activities in the near term and in the future.

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This is due to numerous risks and uncertainties, including the following:

• negative or inconclusive results from our preclinical or clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or requirement to conduct additional preclinical studies or clinical trials or abandon any or all of our programs;

• negative or inconclusive results from our preclinical studies or clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or requirement to conduct additional preclinical studies or clinical trials or abandon any or all of our programs;

• product-related side effects experienced by participants in our clinical trials or by individuals using therapeutics similar to our product candidates;

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Office and facilities 385 461 1,028 1,167

Insurance 447 33 649 98

Other 395 120 871 305

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Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021 (in thousands):

Comparison of the Three Months Ended September 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended

September 30,

2022 2021 Change

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Change in fair value of contingent earnout liability (99) — (99)

Gain on extinguishment of convertible notes 1,289 — 1,289

Change in preferred stock tranche liability — (2,918) 2,918

Other expense 2 21 (19)

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Contract revenue .

For the three months ended June 30, 2022 and 2021, we generated revenue from contracts and license agreements of $1.1 million and $0.8 million, respectively.

The increase of $0.3 million was due primarily to a new collaboration agreement entered into in May 2021.

For the three months ended September 30, 2022 and 2021, we generated revenue from contracts and license agreements of $1.5 million and $0.9 million, respectively.

The increase of $0.6 million was primarily due to increased services provided for collaboration agreements.

Grant income .

For the three months ended June 30, 2022 and 2021, we generated revenue from grants of $0.3 million and less than $0.1 million, respectively.

For the three months ended September 30, 2022 and 2021, we generated revenue from grants of $0.3 million and $0.2 million, respectively.

The increase of $0.1 million was primarily due to the recognition of revenue related to the Small Business Innovation Research (“SBIR”) SENTI-202 grant funding.

Research and development expenses .

Research and development expenses were $9.2 million and $5.2 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $4.0 million was primarily due to an increase of $2.0 million in personnel-related expenses, which includes $1.3 million rise of stock-based compensation expense, $1.0 million in professional services costs and $0.9 million in facility costs.

Research and development expenses were $8.1 million and $5.4 million for the three months ended September 30, 2022 and 2021, respectively.

The increase of $2.6 million was primarily due to an increase of $1.1 million in personnel-related expenses, which includes a $0.5 million increase in stock-based compensation expense, an increase of $0.9 million in professional services costs and $0.6 million in facility costs.

General and administrative expenses .

General and administrative expenses were $13.9 million and $4.6 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $9.3 million was primarily due to an increase of $9.0 million in personnel-related expenses, which includes $7.4 million rise of stock-based compensation expense.

General and administrative expenses were $10.8 million and $7.1 million for the three months ended September 30, 2022 and 2021, respectively.

The increase of $3.7 million was primarily due to an increase of $2.6 million in personnel-related expenses, which includes a $1.2 million increase in stock-based compensation expense, an increase of $0.5 million in professional services costs related to our Common Stock Purchase Agreement, an increase in insurance of $0.4 million, and an increase of $0.3 million in other costs.

Interest income net .

Interest income was $0.5 million and nominal for the three months ended September 30, 2022 and 2021, respectively due to a higher cash balances as well as an increase in interest rates in the relevant periods.

Change in fair value of contingent earnout liability .

For the three months ended June 30, 2022, the increase of $8.9 million resulted from a non-cash gain related to the remeasurement of the contingent earnout liability.

Gain on extinguishment of convertible notes.

For the three months ended June 30, 2022, we recognized a gain of $1.3 million upon extinguishment of convertible notes.

Change in preferred stock tranche liability .

For the three months ended June 30, 2021, we recognized a loss of $2.9 million as an adjustment to the preferred stock tranche liability.

The adjustment stems primarily from the increase, since the December 31, 2020 measurement date, in management’s estimate of the fair value of our Series B redeemable convertible preferred stock resulting from a decrease in time to liquidity as we drew nearer to completing an exit strategy.

There was no equivalent activity for the three months ended June 30, 2022, as the preferred stock tranches were issued on May 14, 2021.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021 (in thousands):

Six Months Ended

For the three months ended September 30, 2022, the decrease of $0.1 million resulted from a non-cash loss related to the remeasurement of the contingent earnout liability.

Comparison of the Nine Months Ended September 30, 2022 and 2021

The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021 (in thousands):

Nine Months Ended

September 30,

2022 2021 Change

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Contract revenue .

For the six months ended June 30, 2022 and 2021, we generated revenue from contracts and license agreements of $2.0 million and $0.8 million, respectively.

For the nine months ended September 30, 2022 and 2021, we generated revenue from contracts and license agreements of $3.5 million and $1.7 million, respectively.

The increase of $1.7 million was due primarily to a new collaboration agreement entered into in May 2021.

Grant income .

For the six months ended June 30, 2022 and 2021, we generated revenue from grants of $0.5 million and less than $0.1 million, respectively.

For the nine months ended September 30, 2022 and 2021, we generated revenue from grants of $0.8 million and $0.2 million, respectively.

The increase of $0.5 million was primarily due to the recognition of revenue related to the SBIR SENTI-202 grant funding.

Research and development expenses .

Research and development expenses were $16.8 million and $10.1 million for the six months ended June 30, 2022 and 2021, respectively.

The increase of $6.7 million was primarily due to an increase of $3.1 million in personnel-related expenses, which includes $1.4 million rise of stock-based compensation expense, $1.8 million in professional services costs and $1.7 million in facility costs.

Research and development expenses were $24.9 million and $15.5 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase of $9.4 million was primarily due to an increase of $4.2 million in personnel-related expenses, which includes a $2.0 million increase in stock-based compensation expense, $2.7 million in professional services costs and $2.3 million in facility costs.

General and administrative expenses .

General and administrative expenses were $19.1 million and $8.9 million for the six months ended June 30, 2022 and 2021, respectively.

The increase of $10.3 million was primarily due to increases of $10.8 million in personnel-related expenses, which includes $7.5 million rise of stock-based compensation expense, partially offset by a decrease of $0.8 million related to professional, legal and accounting services expenses.

General and administrative expenses were $29.9 million and $16.0 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase of $14.0 million was primarily due to increases of $13.4 million in personnel-related expenses, which includes an $8.7 million increase in stock-based compensation expense, an increase in insurance of $0.6 million and $0.6 million in other corporate expenses, partially offset by a decrease of $0.4 million related to professional, legal and accounting services expenses.

Change in fair value of contingent earnout liability .

For the six months ended June 30, 2022, the increase of $8.9 million resulted from a non-cash gain related to the remeasurement of the contingent earnout liability.

For the nine months ended September 30, 2022, the increase of $8.8 million resulted from a non-cash gain related to the remeasurement of the contingent earnout liability.

Gain on extinguishment of convertible notes.

For the six months ended June 30, 2022, we recognized a gain of $1.3 million upon extinguishment of convertible notes.

For the nine months ended September 30, 2022, we recognized a gain of $1.3 million upon extinguishment of convertible notes.

Change in preferred stock tranche liability.

For the six months ended June 30, 2021, we recognized a loss of $14.7 million as an adjustment to the preferred stock tranche liability.

For the nine months ended September 30, 2021, we recognized a loss of $14.7 million as an adjustment to the preferred stock tranche liability.

There was no equivalent activity for the six months ended June 30, 2022, as the preferred stock tranches were issued on May 14, 2021.

There was no equivalent activity for the nine months ended September 30, 2022, as the preferred stock tranches were issued on May 14, 2021.

Liquidity and Capital Resources

Sources of Liquidity

From inception to June 30, 2022, we raised aggregate gross proceeds of $158.1 million from the issuance of shares of our redeemable convertible preferred stock and the issuance of convertible notes.

In connection with the Merger, the Company received $140.7 million in proceeds from the Merger and related PIPE Financing, including the Bayer convertible note cancellation and exchange.

From inception to September 30, 2022, we raised aggregate gross proceeds of $158.1 million from the issuance of shares of our redeemable convertible preferred stock and the issuance of convertible notes and in connection with the Merger and PIPE Financing,, the Company received $140.7 million in proceeds, including the Bayer convertible note cancellation and exchange.

On August 31, 2022, we entered into the Purchase Agreement with Chardan.

Pursuant to the Purchase Agreement, we have the right, in our sole discretion, to sell to Chardan up to the lesser of:

(i) $50.0 million of shares of our common stock;

and (ii) 8,727,049 shares of common stock at 97% of the volume weighted average price (“VWAP”) of the common stock calculated in accordance with the Purchase Agreement, over a period of 36 months subject to certain limitations and conditions contained in the Purchase Agreement.

Sales and timing of any sales of common stock are solely at our election, and we are under no obligation to sell any securities to Chardan under the Purchase Agreement.

As consideration for Chardan’s commitment to purchase shares of our common stock at our direction upon the terms and subject to the conditions set forth in the Purchase Agreement, upon execution of the Purchase Agreement, we issued 100,000 shares of our common stock to Chardan and paid a $0.4 million document preparation fee.

We recognized an expense of $0.7 million within general and administrative expenses in our Condensed Consolidated Statements of Operations and Comprehensive Loss for the Chardan related costs and legal fees incurred in connection with the agreement.

Other than the issuance of the commitment shares we issued to Chardan (as described in the paragraph above), we had not issued any shares of our common stock to raise capital under the Purchase Agreement as of September 30, 2022.

Subsequent to September 30, 2022, and through the date of this quarterly report, we issued 100,000 shares of common stock, aggregating to a net proceeds of $0.4 million.

We do not have any products approved for sale and have not generated any revenue from product sales or otherwise.

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future.

As of June 30, 2022, we had $139.8 million in cash and cash equivalents, and an accumulated deficit of $138.4 million, respectively.

As of September 30, 2022, we had $114.9 million in cash and cash equivalents, and an accumulated deficit of $155.1 million, respectively.

We will need substantial additional funding to support our continuing operations and pursue our development strategy.

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The following table sets forth a summary of our cash flows for each of the periods indicated (in thousands):

Six Months Ended

Nine Months Ended

September 30,

Net cash from operating activities $ (25,890) $ (22,664)

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Operating Activities

For the six months ended June 30, 2022, net cash used in operating activities of $15.8 million was primarily due to our loss of $23.4 million with non-cash adjustments of $9.9 million for stock-based compensation expense, $8.9 million for the change in fair value of the contingent earnout liability, $1.9 million for depreciation and amortization of operating lease right-of-use-assets and $1.3 million for gain on extinguishment of convertible notes.

Other material changes comprised of $7.9 million increase in operating lease liabilities, offset by $1.4 million decrease in accounts payable and accrued and other current liabilities and as well as a $1.0 million decrease in deferred revenue.

For the six months ended June 30, 2021, net cash used in operating activities of $13.9 million was primarily due to our net loss of $33.0 million with non-cash adjustments of $14.7 million for an increase in our preferred stock tranche liability, $2.7 million increase in deferred revenue and $1.6 million for an increase in accounts payable and accrued expenses.

For the nine months ended September 30, 2022, net cash used in operating activities of $25.9 million was primarily due to our loss of $40.0 million with non-cash adjustments of $12.2 million for stock-based compensation expense, $8.8 million for the change in fair value of the contingent earnout liability, $3.0 million for depreciation and amortization of operating lease right-of-use-assets and $1.3 million for gain on extinguishment of convertible notes.

Other material changes comprised of $11.2 million increase in operating lease liabilities, $1.6 million increase in accounts payable and accrued expenses and other current liabilities offset by $1.8 million increase in prepaid expenses and other assets and as well as a $1.7 million decrease in deferred revenue.

For the nine months ended September 30, 2021, net cash used in operating activities of $22.7 million was primarily due to our net loss of $44.4 million with non-cash adjustments of $14.7 million for an increase in our preferred stock tranche liability, $2.0 million for depreciation and amortization of operating lease right-of-use assets and $1.6 million for stock-based compensation expense, as well as a $2.2 million increase in deferred revenue, $4.1 million for an increase in accounts payable and accrued expenses and other current liabilities, offset by a decrease of $1.0 million in operating lease liabilities, an increase of $1.6 million in prepaid and other assets and an increase of $0.3 million in accounts receivable.

During the nine months ended September 30, 2021 the Company expensed $2.2 million of deferred offering costs related to the suspended IPO, of which $0.9 million was paid and is included in the net cash used in operating activities.

Investing Activities

For the six months ended June 30, 2022 and 2021, net cash used in investing activities of $18.6 million and $0.6 million respectively, was entirely due to purchases of property and equipment.

For the nine months ended September 30, 2022 and 2021, net cash used in investing activities of $32.8 million and $1.6 million respectively, was entirely due to purchases of property and equipment.

Financing Activities

For the six months ended June 30, 2022, net cash provided by financing activities of $118.2 million was primarily due to $112.5 million proceeds received from Merger and related PIPE financing activities, net of transaction cost, $5.2 million from issuance of convertible notes and $0.5 million from the issuance of common stock upon exercise of stock options.

For the six months ended June 30, 2021, net cash provided by financing activities of $67.9 million was primarily due to proceeds received of $67.0 million from the issuance of our Series B redeemable convertible preferred stock, $1.5 million from the issuance of common stock upon exercise of stock options and $0.5 million from the payment of deferred offering costs.

For the nine months ended September 30, 2022, net cash provided by financing activities of $117.7 million was primarily due to $112.0 million proceeds received from Merger and related PIPE financing activities, net of transaction cost, $5.2 million from issuance of convertible notes and $0.5 million from the issuance of common stock upon exercise of stock options.

For the nine months ended September 30, 2021, net cash provided by financing activities of $68.4 million was primarily due to proceeds received of $67.0 million from the issuance of our Series B redeemable convertible preferred stock and $1.5 million from the issuance of common stock upon exercise of stock options.

Funding Requirements

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Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

Our assumptions may prove to be inaccurate, and we could deplete our capital resources sooner than we expect.

Our assumptions may prove

to be inaccurate, and we could deplete our capital resources sooner than we expect.

Additionally, the process of testing and manufacturing product candidates in preclinical studies and clinical trials is costly and the timing and expenses in these trials are uncertain.

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In 2021, we began construction of the cGMP facility.

As of June 30, 2022, we have paid $17.9 million in construction costs of the $35.5 million purchase commitment.

As of September 30, 2022, we have paid $29.3 million in construction costs of the $35.5 million purchase commitment.

The agreements with the construction company provide for termination following a certain period after notice.

Upon termination we will be responsible for payment for work performed to date.

During the year ended December 31, 2021, we entered into a three-year collaboration and option agreement with BlueRock Therapeutics LP (“BlueRock”) under which the Company granted BlueRock an option to execute an exclusive or non-exclusive license to develop, manufacture and commercialize cell therapy products (See Part I, Item 1, Notes to Condensed Consolidated Financial Statements (Unaudited), Note 14 - Related Parties for details into the BlueRock agreement).

into the BlueRock agreement).

In consideration for the option, the Company is responsible for up to $10.0 million in research and development costs and expenses associated with the collaboration plan incurred over the three-year term.

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Milestone and royalty payment obligations under these agreements are contingent upon future events, such as our achievement of specified development, regulatory, and sales milestones, or generating product sales.

As of June 30, 2022, we were unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.

As of September 30, 2022, we were unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.

We have entered into sponsored research agreements under which we are obligated to pay $0.2 million, $0.8 million and $0.3 million in 2022, 2023 and 2024, respectively.

Following the Closing, former holders of Legacy Senti common stock and preferred stock may receive up to 2,000,000 additional shares of the Company’s common stock in the aggregate, in two equal tranches of 1,000,000 shares of common stock per tranche.

Following the closing of the Merger, former holders of Legacy Senti common stock and preferred stock may receive up to 2,000,000 additional shares of the Company’s common stock in the aggregate, in two equal tranches of 1,000,000 shares of common stock per tranche.

Refer to Note 3, Stockholders’ Equity (Deficit), for further details of the contingent earnout.

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Contingent Earnout Liability

In connection with the Reverse Recapitalization, Legacy Senti equity holders are entitled to receive as additional merger consideration of up to 2,000,000 shares of our common stock in the aggregate, in two equal tranches of 1,100,000 shares of common stock per tranche, for no consideration upon the occurrence of certain triggering events, including a change of control event.

In accordance with ASC 815-40, Derivatives and Hedging , as certain terms of the Contingent Earnout Shares were not indexed to the common stock, they were accounted for as a liability at the Reverse Recapitalization date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

In connection with the Reverse Recapitalization, Legacy Senti equity holders are entitled to receive as additional merger consideration up to 2,000,000 shares of our common stock in the aggregate, in two equal tranches of 1,000,000 shares of common stock per tranche, for no consideration upon the occurrence of certain triggering events, including a change of control event.

recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

The estimated fair value of the Contingent Earnout Shares was determined using a Monte Carlo simulation valuation model using a distribution of potential outcomes.

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The common stock price was based on the closing price of our common stock as reported on the date at the Reverse Recapitalization and each reporting date.

Historically, we have been a private company and lack company-specific and implied volatility information of our common stock.

Historically, we have been a private company and lacked company-specific and implied volatility information for our common stock.

Therefore, we estimated our expected volatility based on the historical volatility of a representative group of public companies in the biotechnology industry for the expected terms.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis