What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-09 compared with 2022-11-10 · 47 added, 120 removed, 217 unchanged (43% of the section changed)

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(hereafter referred to, collectively with its subsidiaries, as “Senti”, the “Company”, “we”, “us” or “our”, unless the context otherwise requires).

The transactions contemplated in the Agreement are collectively referred to as the “Business Combination”.

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 September 12, 2022.

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

The transactions contemplated in the Agreement are collectively referred to as the “Merger”.

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 Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”) and filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2023.Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Statement Regarding Forward-Looking Statements

In This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected.

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected.

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.

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A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements.

For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Proxy Statement/Prospectus and Part II, Item 1A of this Quarterly Report on Form 10-Q filed with the U.S.

For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Annual Report and Part II, Item 1A of this Quarterly Report on Form 10-Q filed with the U.S.

Securities and Exchange Commission (the “SEC”).

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To accomplish this mission, Senti has built a synthetic biology platform that it believes may enable it to program next-generation cell and gene therapies with what it refers to as “gene circuits.” These gene circuits, which Senti created from novel and proprietary combinations of genetic parts, are designed to reprogram cells with biological logic to sense inputs, compute decisions and respond to their respective cellular environments.

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

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 $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 have incurred net losses of $18.7 million and $11.8 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023 and December 31, 2022, we had cash, cash equivalents and short-term investments of $76.1 million and $98.6 million, respectively, and an accumulated deficit of $192.0 million and

$173.3 million, respectively.

Net cash flows used in operating activities were $16.3 million and $10.1 million during the three months ended March 31, 2023 and 2022, respectively.

Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

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

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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Our manufacturing facility is designed to leverage the latest cell therapy process technologies as we strive to maximize scalability and minimize cost of goods.

We believe our cash and cash equivalents will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, for at least 12 months from the date of this Quarterly Report.

During 2021, widespread availability of COVID-19 vaccines in the United States and elsewhere in the world, combined with government assistance programs, fiscal policies and other factors, led to a rebound in the global economy as several states and countries began to re-open and loosen many COVID-19 related restrictions.

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

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.

These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted.

If the financial markets or the overall economy are impacted for an extended period, our business may be materially adversely affected.

Recent Developments

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.

In January 2023, we announced a strategic plan to focus internal resources on SENTI-202, SENTI-401 and, with potential partners, to continue to pursue the development of gene circuits for other programs, including solid tumors.

We do not intend to invest in the clinical development of SENTI-301A, for the treatment of hepatocellular carcinoma (“HCC”), on our own at this time;

however, we believe there is significant market opportunity for SENTI-301A, especially in territories within Asia where HCC is more prevalent than in the United States.

Accordingly, we are actively pursuing strategic geographic partnerships for clinical development of SENTI-301A.

This business realignment is intended to streamline internal efforts and is expected to extend our cash runway through at least the first quarter of 2024.

Components of Results of Operations

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Personnel-related expenses, including share-based compensation $ 4,808 $ 2,799

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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.

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.

The successful development of our current and future product candidates is highly uncertain.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Personnel-related expenses, including share-based compensation $ 7,176 $ 3,841

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The change in fair value of the contingent earnout liability that was accounted for as a liability as of the date of the Merger, and is remeasured to fair value at each reporting period, resulting in a non-cash gain or loss.

Gain on Extinguishment of Convertible Notes

Our convertible note was extinguished as part of the Merger and the change in fair value was recorded in earnings.

Change in Preferred Stock Tranche Liability

Our preferred stock tranche liability had been accounted for at fair value with changes in the fair value recorded in earnings at each reporting period through settlement on May 14, 2021.

Results of Operations

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):

Comparison of the Three Months Ended March 31, 2023 and 2022

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended

September 30,

2023 2022 Change

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Contract revenue .

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.

For the three months ended March 31, 2023 and 2022, we generated revenue from contracts and license agreements of $1.0 million and $0.9 million, respectively.

The increase of $0.2 million was primarily due to increased services provided for collaboration agreements.

Grant income .

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.

For the three months ended March 31, 2023 and 2022, we generated revenue from grants of $0.3 million and $0.3 million, respectively, from the SBIR SENTI-202 grant funding.

Research and development expenses .

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

Research and development expenses were $11.3 million and $7.6 million for the three months ended March 31, 2023 and 2022, respectively.

The increase of $3.7 million was primarily due to an increase of $2.0 million in personnel-related expenses, which includes a $0.3 million increase in stock-based compensation expense, an increase of $0.7 million in professional services costs and $0.8 million in facility costs.

General and administrative expenses .

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 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

Contract revenue $ 3,477 $ 1,748 $ 1,729

Grant income 750 220 530

Total revenue 4,227 1,968 2,259

Operating expenses:

Research and development 24,904 15,548 9,356

General and administrative 29,936 15,981 13,955

Total operating expenses 54,840 31,529 23,311

Loss from operations (50,613) (29,561) (21,052)

Other income (expense):

General and administrative expenses were $9.8 million and $5.3 million for the three months ended March 31, 2023 and 2022, respectively.

The increase of $4.5 million was primarily due to an increase of $3.3 million in personnel-related expenses, which includes a $2.8 million increase in stock-based compensation expense, an increase of $0.4 million in professional services costs, an increase in insurance of $0.5 million, and an increase of $0.2 million in facility costs.

Interest income net .

Change in fair value of contingent earnout liability 8,779 — 8,779

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

Change in preferred stock tranche liability — (14,742) 14,742

Other expense (28) (110) 82

Total other income (expense), net 10,613 (14,854) 25,467

Net loss $ (40,000) $ (44,415) $ 4,415

Contract revenue .

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 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 $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 $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.

Interest income was $1.1 million and nominal for the three months ended March 31, 2023 and 2022, 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 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 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 nine months ended September 30, 2021, we recognized a loss of $14.7 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 nine months ended September 30, 2022, as the preferred stock tranches were issued on May 14, 2021.

For the three months ended March 31, 2023, the increase of $0.1 million resulted from a non-cash gain related to the remeasurement of the contingent earnout liability.

Liquidity and Capital Resources

Sources of Liquidity

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.

From inception to March 31, 2023, we raised aggregate gross proceeds of $298.8 million from the Merger and PIPE Financing, the issuance of shares of our redeemable convertible preferred stock, the issuance of convertible notes and, to a less extent, through collaboration agreements and governmental grants.

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

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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.

Other than the issuance of the commitment shares of the Company’s common stock to Chardan we issued 300,000 shares of common stock up until December 31, 2022, aggregating to net proceeds of $0.7 million under the Purchase Agreement.

There were no shares issued within three months ended March 31, 2023.

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

As of March 31, 2023, we had $76.1 million in cash, cash equivalents and short-term investments, and an accumulated deficit of $192.0 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):

Nine Months Ended

September 30,

Three Months Ended

Net cash from operating activities $ (16,304) $ (10,059)

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Operating Activities

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.

For the three months ended March 31, 2023, net cash used in operating activities of $16.3 million was primarily due to our loss of $18.7 million with non-cash adjustments of $3.8 million for stock-based compensation expense, $0.9 million for depreciation and amortization of operating lease right-of-use-assets and $0.6 million for accretion of

discount on short-term investments.

Other material changes comprised of $1.6 million decrease in accounts payable and accrued expenses and other current liabilities, $0.4 million decrease in deferred revenue, $0.4 million increase in prepaid expenses and other assets offset by $0.9 million increase in operating lease liabilities.

For the three months ended March 31, 2022, net cash used in operating activities of $10.1 million was primarily due to our net loss of $11.8 million with non-cash adjustments of $1.0 million for depreciation and amortization of operating lease right-of-use assets and $0.7 million for stock-based compensation expense, as well as a $1.6 million for a decrease in accounts payable and accrued expenses and other current liabilities and $0.5 million decrease in deferred revenue, offset by an increase of $2.4 million in operating lease liabilities and an increase of $0.4 million in prepaid expenses and other current assets.

Investing Activities

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.

For the three months ended March 31, 2023, net cash used in investing activities of $9.5 million was due to $18.0 million purchases of short-term investments and $6.5 million purchases of property and equipment offset by $15.0 million cash received upon maturity of short-term investments.

For the three months ended March 31, 2022, net cash used in investing activities of $7.4 million, was entirely due to purchases of property and equipment.

Financing Activities

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.

For the three months ended March 31, 2023, $35 thousand cash was used by financing activities.

For the three months ended March 31, 2022, net cash used in financing activities of $0.5 million was primarily due to $0.6 million payment of deferred transaction costs related to the Merger partially offset by $0.1 million proceeds 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 September 30, 2022, we have paid $29.3 million in construction costs of the $35.5 million purchase commitment.

As of March 31, 2023, we have paid $37.5 million in construction costs of the $42.2 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).

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 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.

As of March 31, 2023, 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 $0.6 million and $0.2 million in 2023 and 2024, respectively.

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.

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GAAP that require us to make subjective estimates and judgments about matters that are inherently uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles.

Other than the new critical accounting policy and estimate discussed below, there have been no material changes to our critical accounting policies and estimates as compared to those described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Current Report on Form 8-K dated June 8, 2022, which was filed with the SEC on June 15, 2022.

Contingent Earnout Liability

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.

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.

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

The assumptions utilized in the calculation were based on the achievement of certain stock price milestones, including our current common stock price, expected volatility, risk-free rate, expected term and expected dividend yield.

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 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.

The risk-free rate was determined by reference to the U.S.

Treasury yield curve for time periods approximately equal to the expected term of the Contingent Earnout Shares.

The expected dividend yield was 0% based on the fact that we have never paid or declared dividends.

The risk free rate and expected volatility requires significant judgment and actual results can differ from assumed and estimated amounts.

During the three months ended March 31, 2023, there have not been any other significant changes to our critical accounting policies and estimates from those presented in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that are of significance, or potential significance, to us.

Emerging Growth Company Status

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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