What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-11 compared with 2023-05-09 · 210 added, 133 removed, 456 unchanged (43% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, December 31,

June 30, December 31,

Cash and cash equivalents $ 36,752 $ 57,621

24 unchanged sentences

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized at March 31, 2023 and December 31, 2022;

zero shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

10,000,000 shares authorized at June 30, 2023 and December 31, 2022;

zero shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Common stock, $ 0.0001 par value;

500,000,000 shares authorized at March 31, 2023 and December 31, 2022;

44,075,194 and 44,062,534 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

500,000,000 shares authorized at June 30, 2023 and December 31, 2022;

44,465,006 and 44,062,534 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 308,117 300,544

Other comprehensive income 3 1

Accumulated other comprehensive income — 1

Accumulated deficit ( 210,705 ) ( 173,286 )

5 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Contract revenue $ 687 $ 1,108 $ 1,723 $ 1,962

9 unchanged sentences

Change in fair value of contingent earnout liability 148 8,878 207 8,878

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

Other income (expense) ( 4 ) 25 ( 12 ) ( 30 )

2 unchanged sentences

Other comprehensive loss

Unrealized gain on investments 2 —

Unrealized loss on investments ( 3 ) — ( 1 ) —

Comprehensive loss $ ( 18,700 ) $ ( 11,552 ) $ ( 37,420 ) $ ( 23,360 )

6 unchanged sentences

Redeemable Convertible

Preferred Stock Common Stock Additional Paid-in Capital Other Comprehensive Income Accumulated

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated

Deficit Total

10 unchanged sentences

19,517,988 171,833 3,288,539 — 5,077 — ( 126,884 ) ( 121,807 )

Conversion of redeemable convertible preferred stock into common stock in connection with the Reverse Recapitalization, net of transaction cost ( 19,517,988 ) ( 171,833 ) 19,517,988 2 171,833 — — 171,835

Issuance of common stock upon Reverse Recapitalization, net of transaction costs — — 19,975,963 2 112,180 — — 112,182

Contingent earnout liability recognized upon closing of the Reverse Recapitalization — — — — ( 9,688 ) — — ( 9,688 )

Cancellation and exchange of convertible note in connection with PIPE financing — — 517,500 — 5,184 — — 5,184

Gain recognized on fair value of embedded derivative on SPAC merger date — — — — ( 1,289 ) — — ( 1,289 )

Exercise of common stock options — — 27,233 — 74 — — 74

Vesting of early exercise of common stock options — — 41,047 — 102 — — 102

Stock-based compensation expense — — — — 9,225 — — 9,225

Net loss — — — — — — ( 11,552 ) ( 11,552 )

Balance as of June 30, 2022

— $ — $ 43,368,270 $ 4 $ 292,698 $ — $ ( 138,436 ) $ 154,266

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

Redeemable Convertible

Preferred Stock Common Stock Additional Paid-in Capital Other Comprehensive Income Accumulated

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated

Deficit Total

6 unchanged sentences

Stock-based compensation expense — — — 3,763 — — 3,763

Unrealized gain on investments — — — — — 2 — 2

Unrealized gain (loss) on investments — — — — — 2 — 2

Net loss — — — — — — ( 18,722 ) ( 18,722 )

1 unchanged sentence

— — 44,075,194 4 304,341 3 ( 192,008 ) 112,340

Vesting of early exercise of common stock options — — 12,660 — 34 — — 34

Issuance of common stock under Employee Stock Purchase Plan (ESPP) — — 377,152 — 308 — — 308

Stock-based compensation expense — — — — 3,434 — — 3,434

Unrealized gain (loss) on investments — — — — — ( 3 ) — ( 3 )

Net loss — — — — — — ( 18,697 ) ( 18,697 )

Balance as of June 30, 2023

— $ — 44,465,006 $ 4 $ 308,117 $ — $ ( 210,705 ) $ 97,416

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

4 unchanged sentences

Accretion of discount on short-term investments ( 952 ) —

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

Change in fair value of contingent earnout liability ( 207 ) ( 8,878 )

Stock-based compensation expense 7,197 9,886

Loss on write-off of fixed assets — 12

Interest income accrued and not received ( 30 ) —

Other non-cash charges ( 5 ) 21

Changes in assets and liabilities:

12 unchanged sentences

Cash flows from financing activities

Proceeds from Merger and related PIPE financing, net of transaction costs — 112,464

Proceeds from issuance of common stock upon exercise of stock options — 521

Proceeds from issuance of common stock under Employee Stock Purchase Plan (ESPP) 308 —

Proceeds from issuance of convertible notes — 5,175

Principal finance lease payments ( 62 ) —

Payment of deferred transaction costs related to Merger — ( 595 )

Net cash from financing activities 246 118,160

9 unchanged sentences

Merger and related PIPE financing costs included in accounts payable and accrued expenses $ — $ 263

Receivables in transit from issuance of common stock upon exercise of stock options $ — $ 306

The accompanying notes are an integral part of these condensed consolidated financial statements.

17 unchanged sentences

The Company has devoted substantially all of its efforts to organizing and staffing, business planning, raising capital, and conducting preclinical studies and has not realized substantial revenues from its planned principal operations.

To date, the Company 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 government grants.

At March 31, 2023 and December 31, 2022, the Company had an accumulated deficit of $ 192.0 million and $ 173.3 million , respectively.

The Company’s net losses were $ 18.7 million and $ 11.8 million for the three months ended March 31, 2023 and 2022, respectively.

To date, the Company raised aggregate gross proceeds of $ 299.5 million from the Merger and PIPE Financing, the issuance of shares of our common stock, the issuance of shares of our redeemable convertible preferred stock, the issuance of convertible notes and, to a less extent, through collaboration agreements and government grants.

At June 30, 2023 and December 31, 2022, the Company had an accumulated deficit of $ 210.7 million and $ 173.3 million , respectively.

The Company’s net losses were $ 37.4 million and $ 23.4 million for the six months ended June 30, 2023 and 2022, respectively.

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

The Company expects to incur substantial operating losses and negative cash flows from operations for the foreseeable future as the Company advances its preclinical activities and clinical trials for its product candidates in development .

As of March 31, 2023 and December 31, 2022, the Company had cash, cash equivalents and short-term investments of $ 76.1 million and $ 98.6 million, respectively.

As of May 9, 2023, the issuance date of the condensed consolidated financial statements as of for the three months ended March 31, 2023, there is uncertainty about whether the Company’s combined cash, cash equivalents, and short-term investments will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, beyond twelve months from the issuance date of these financial statements and therefore the Company concluded that substantial doubt existed about the Company’s ability to continue as a going concern.

As of June 30, 2023 and December 31, 2022, the Company had cash, cash equivalents and short-term investments of $ 59.6 million and $ 98.6 million, respectively.

As of August 11, 2023, the issuance date of the condensed consolidated financial statements as of and for the three and six months ended June 30, 2023, there is uncertainty about whether the Company’s combined cash, cash equivalents, and short-term investments will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, beyond twelve months from the issuance date of these financial statements and therefore the Company concluded that substantial doubt existed about the Company’s ability to continue as a going concern.

On August 10, 2023, the Company announced a transaction with GeneFab, LLC (“GeneFab”), a new independent contract manufacturing and synthetic biology biofoundry focused on next-generation cell and gene therapies.

The transaction provided the Company with additional capital and reduced longer-term operating expenses.

Refer to Note 13, Subsequent Events, for further details of the GeneFab transaction.

The Company’s continued existence is dependent upon management’s ability to raise capital and develop profitable op erations.

Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that the Company’s efforts will be successful.

No assurance can be given that management’s actions will result in profitable operations or the meeting of ongoing liquidity needs.

Management is devoting substantially all of its efforts to developing its business and raising capital, which included the framework agreement with GeneFab, and there can be no assurance that the Company’s

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

efforts will be successful.

No assurance can be given that management’s actions will result in profitable operations or the meeting of ongoing liquidity needs.

Summary of Significant Accounting Policies

10 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the valuation of stock-based awards, the accrual for research and development expenses, the valuation of contingent earnout, the valuation of convertible notes, the valuation of common and redeemable convertible preferred stock, the valuation of preferred stock tranche liability, standalone selling price (“SSP”) and the determination of the incremental borrowing rate.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the valuation of stock-based awards, the accrual for research and development expenses, the valuation of contingent earnout, the valuation of convertible notes, the valuation of common and redeemable convertible preferred stock, standalone selling price (“SSP”) and the determination of the incremental borrowing rate.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate.

2 unchanged sentences

The accompanying interim condensed consolidated financial statements and the related footnote disclosures are unaudited.

These unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2023 and its results of operations for the three months ended March 31, 2023 and 2022, and cash flows for the three months ended March 31, 2023 and 2022.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ended December 31, 2023 or any other period.

These unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2023 and its results of operations for the three and six months ended June 30, 2023 and 2022, and cash flows for the six months ended June 30, 2023 and 2022.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ended December 31, 2023 or any other period.

The December 31, 2022 year-end condensed consolidated balance sheet was derived from audited annual financial statements but does not include all disclosures from the annual financial statements.

2 unchanged sentences

Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022 and the related notes included in the Company’s Form 10-K, filed with the SEC on March 22, 2023, which provides a more complete discussion of the Company’s accounting policies and certain other information.

There have been no material changes to the Company’s significant accounting policies as of and for the three months ended March 31, 2023, as compared to the significant accounting policies described in the Company’s audited annual consolidated financial statements as of and for the year ended December 31, 2022, except as discussed below.

There have been no material changes to the Company’s significant accounting policies as of and for the three and six months ended June 30, 2023, as compared to the significant accounting policies described in the Company’s audited annual consolidated financial statements as of and for the year ended December 31, 2022.

Recent Accounting Standards

4 unchanged sentences

The following tables summarize the estimated value of cash equivalents and restricted cash (in thousands):

March 31, 2023

June 30, 2023

Adjusted Cost Unrealized Gain Unrealized Loss Estimated Fair Value Cash and cash equivalents Restricted cash Short-term investments

26 unchanged sentences

Change in fair value included in other income (expense) 207

Fair value as of March 31, 2023

Fair value as of June 30, 2023

The fair value of the Contingent Earnout Liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

1 unchanged sentence

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

Refer to Note 6, Stockholders’ Equity (Deficit) , for further details of the Contingent Earnout.

Refer to Note 6, Stockholders’ Equity (Deficit) , for further details of the Contingent Earnout Liability.

Other Financial Statement information

1 unchanged sentence

Prepaid expenses and other current assets consisted of the following (in thousands):

March 31, December 31,

June 30, December 31,

Prepaid expenses (including prepaid rent) $ 1,874 $ 1,871

4 unchanged sentences

Property and equipment, net consisted of the following (in thousands):

March 31, December 31,

Lab equipment $ 8,474 $ 8,265

June 30, December 31,

Leasehold improvements $ 46,748 $ 1,869

Computer equipment and software 390 389

Lab equipment 13,336 8,265

Furniture and fixtures 583 326

Computer equipment and software 383 389

Construction in progress 2,029 48,273

2 unchanged sentences

Property and equipment, net $ 58,940 $ 56,136

Depreciation totaled $ 0.5 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively.

Buildout of the current good manufacturing practice (cGMP) facility in Alameda was completed in June 2023 and the assets were placed in service.

On August 10, 2023, the Company announced a transaction with GeneFab, a new independent contract manufacturing and synthetic biology biofoundry.

As part of the transaction the Company subleased it’s cGMP facility in Alameda, CA to GeneFab.

Refer to Note 13, Subsequent Events, for further details of the GeneFab transaction.

Depreciation totaled $ 0.8 million and $ 0.3 million for the three months ended June 30, 2023 and 2022, respectively, and $ 1.2 million and $ 0.5 million for the six months ended June 30, 2023 and 2022, respectively.

SENTI BIOSCIENCES, INC.

2 unchanged sentences

Accrued expenses and other liabilities consisted of the following (in thousands):

March 31, December 31,

Accrued professional and service fees related to facility construction $ 3,990 $ 7,342

June 30, December 31,

Accrued employee-related expenses $ 2,099 $ 3,743

Accrued professional and service fees related to facility construction 1,615 7,342

Accrued professional and service fees other 1,245 1,750

2 unchanged sentences

Operating Leases

The Company’s operating leases are primarily for its corporate headquarters located in South San Francisco, California (“HQ lease”) and for additional office and laboratory space located in Alameda, California (“Alameda lease”) that commenced on July 30, 2021, and is expected to be placed into service in June 2023.

The corporate headquarters lease has an initial term of eight years expiring in 2027, with an option to renew for an additional eight years unless canceled by either party thereafter.

5 unchanged sentences

The Company estimated the timing of tenant improvement reimbursements at the lease commencement date and upon receipt of the cash incentives, the Company recognized the cash received as an increase in the lease liability.

On August 10, 2023, the Company announced a transaction with GeneFab, a new independent contract manufacturing and synthetic biology biofoundry.

As part of the transaction the Company subleased the cGMP facility in Alameda to GeneFab.

Refer to Note 13, Subsequent Events, for further details of the GeneFab transaction.

A summary of total lease costs and other information for the period relating to the Company’s operating leases is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Operating lease cost $ 1,320 $ 1,325 $ 2,629 $ 2,650

2 unchanged sentences

Total lease cost $ 1,723 $ 1,534 $ 3,307 $ 3,033

Three Months Ended March 31,

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Six Months Ended June 30,

Other information:

3 unchanged sentences

Weighted-average discount rate 9.1 % 9.1 %

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

For the three months ended March 31, 2023 and 2022, the Company received $ 1.0 million and $ 2.5 million, respectively, of the $ 17.5 million tenant improvement allowance.

Through March 31, 2023, the Company utilized $ 15.1 million of the tenant improvement allowance inception-to-date.

As of March 31, 2023 and 2022, amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.

Maturities of the Company’s lease liabilities as of March 31, 2023, were as follows (in thousands):

For the three months ended June 30, 2023 and 2022, the Company received $ 1.0 million and $ 5.6 million, respectively, of $ 17.5 million tenant improvement allowance.

For the six months ended June 30, 2023 and 2022, the Company received $ 2.0 million and $ 8.1 million, respectively, of the $ 17.5 million tenant improvement allowance.

Through June 30, 2023, the Company received $ 16.2 million of the tenant improvement allowance inception-to-date.

As of June 30, 2023 and 2022, amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.

Maturities of the Company’s lease liabilities as of June 30, 2023, were as follows (in thousands):

2023, for the remainder of the year $ 3,560

8 unchanged sentences

Common stock is subordinate to the preferred stock with respect to dividend rights and rights upon liquidation, winding up, and dissolution of the Company;

although, no preferred stock is outstanding as of March 31, 2023 and December 31, 2022.

Through March 31, 2023, no cash dividends have been declared or paid.

At March 31, 2023 and December 31, 2022, the Company was authorized to issue 500,000,000 shares of common stock, all at a par value of $ 0.0001 per share, and had reserved the following shares for future issuance:

March 31, December 31,

although, no preferred stock is outstanding as of June 30, 2023 and December 31, 2022.

Through June 30, 2023, no cash dividends have been declared or paid.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

At June 30, 2023 and December 31, 2022, the Company was authorized to issue 500,000,000 shares of common stock, all at a par value of $ 0.0001 per share, and had reserved the following shares for future issuance:

June 30, December 31,

Common Stock Purchase Agreement 8,327,049 8,327,049

Common stock options issued and outstanding 12,056,731 9,875,675

RSUs issued and outstanding 388,322 447,948

Restricted Stock Units (RSUs) issued and outstanding 335,884 447,948

Common stock shares available for future issuance under equity plans 3,087,881 2,948,472

6 unchanged sentences

Voting powers, designations, powers, preferences and relative, participating, optional, special and other rights shall be stated and expressed in such resolutions.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

10,000,000 shares designated as preferred stock and none were outstanding as of March 31, 2023 and December 31, 2022.

There were 10,000,000 shares designated as preferred stock and none were outstanding as of June 30, 2023 and December 31, 2022.

Common Stock Purchase Agreement

6 unchanged sentences

Upon execution of the Purchase Agreement, the Company recognized an expense of $ 0.7 million within general and administrative expenses in the Company’s 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 of the Company’s common stock to Chardan, the Company issued 300,000 Class A common stock shares 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.

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

There were no shares issued within six months ended June 30, 2023.

Contingent Earnout Equity

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.

The first and second tranches are issuable if the closing volume weighted average price (“VWAP”) per share of common stock quoted on the Nasdaq (or the exchange on which the shares of common stock are then listed) is greater or equal to $ 15.00 and $ 20.00 , respectively over any twenty trading days within any thirty-day trading period.

The first and second tranches are issuable if the closing volume

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

weighted average price (“VWAP”) per share of common stock quoted on the Nasdaq (or the exchange on which the shares of common stock are then listed) is greater or equal to $ 15.00 and $ 20.00 , respectively over any twenty trading days within any thirty-day trading period.

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

3 unchanged sentences

The remaining balance of $ 0.1 million relates to holders of Legacy Senti common stock that are subject to repurchase were accounted for as stock-based compensation expense and recorded as an expense, as there was no remaining service period.

The Contingent Earnout Liability was remeasured to fair value as of March 31, 2023, resulting in the recording of a non-cash gain of $ 0.1 million for the three months ended March 31, 2023, classified within change in fair value of contingent earnout liability in the condensed consolidated statements of operations and comprehensive loss.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

The Contingent Earnout Liability was remeasured to fair value as of June 30, 2023, resulting in the recording of a non-cash gain of $ 0.1 million for the three months ended June 30, 2023, and a non-cash gain of $ 0.2 million for the six months ended June 30, 2023, classified within change in fair value of contingent earnout liability in the condensed consolidated statements of operations and comprehensive loss.

Assumptions used in the valuation are described below:

March 31, December 31,

June 30, December 31,

Current stock price $ 0.63 $ 1.41

9 unchanged sentences

The Company expected to complete the research program over a two -year period.

In December 2022, the Company amended the research collaboration and license agreement to allow for an increase in budget and a two-month extension of the research program.

As there were no changes to performance obligations and the services to be provided are not distinct from those already transferred, the transactions was accounted for as a contract modification and a cumulative catch-up of $( 0.7 ) million was recognized in December 2022.

As of March 31, 2023 and December 31, 2022, there was a total of $ 0.4 million and $ 0.8 million, respectively, remaining of the upfront payment to be recognized over the remaining period of the research program.

The Company assessed this agreement in accordance with ASC 606, Revenue Recognition (“ASC 606”) and concluded that the contract counterparty, Spark, is a customer.

2 unchanged sentences

Pursuant to the agreement, once the research program is completed and the Company delivers a data package to Spark, Spark has 24 months (the “Evaluation Period”) to determine whether Spark will exercise its options to obtain field-limited, royalty-bearing licenses to develop, manufacture and commercialize promoters corresponding to each of the five specified promoters being researched.

For each licensed promoter option that is exercised, the Company is eligible to receive a license fee, potential research, development and commercial milestone payments and royalties on product sales.

For each licensed promoter option that is exercised, the Company is eligible to receive a license fee, potential research, development and commercial milestone payments and royalties

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

on product sales.

Spark may generally terminate the agreement upon 90 days prior written notice or 180 days prior written notice if the licensed promoter is in clinical trials or is being commercialized at the time of termination.

4 unchanged sentences

The Company determined the transaction price, inclusive of the upfront payment and reimbursement of costs and expenses incurred for the research program, is commensurate with SSP for the research being conducted given the specialized nature and reliance on proprietary technology.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

concluded that the license option does not provide Spark with an incremental discount and therefore does not constitute a material right.

Based on the Company’s assessment of the optional consideration and the qualitative factors of feasibility and probability of development combined with the quantitative assessment that research services are priced at their SSP, the Company concluded that the license option does not provide Spark with an incremental discount and therefore does not constitute a material right.

The transaction price associated with the research services in this agreement consists of the fixed upfront amount of $ 3.0 million and variable consideration.

1 unchanged sentence

The Company believes that the cost-based input method is the best measure of progress because other measurements would not reflect how the Company transfers the control related to the performance obligation to our customers.

For the three months ended March 31, 2023 and 2022, the Company recorded revenue, which was previously included in deferred revenue at the beginning of each period, of $ 0.4 million and $ 0.4 million, respectively.

Contract asset balances related to unbilled revenue for our collaboration agreements were zero as of March 31, 2023 and 2022, and are presented within prepaid expenses and other current assets on the condensed consolidated balance sheets.

In December 2022, the Company amended the research collaboration and license agreement with Spark to allow for an increase in budget and a two -month extension of the research program.

In May 2023, the Company amended the research collaboration and license agreement with Spark to allow for an increase in budget and additional two -month extension of the research program.

As of June 30, 2023 and December 31, 2022, there was a total of $ 0.2 million and $ 0.8 million, respectively, remaining of the upfront payment to be recognized over the remaining period of the research program.

For the three months ended June 30, 2023 and 2022, the Company recorded revenue, which was previously included in deferred revenue at the beginning of each period, of $ 0.2 million and $ 0.5 million, respectively.

For the six months ended June 30, 2023 and 2022, the Company recorded revenue, which was previously included in the deferred revenue at the beginning of each period, of $ 0.6 million, and $ 1.0 million respectively.

Contract asset balances related to unbilled revenue for our collaboration agreements were zero as of June 30, 2023 and 2022, and are presented within prepaid expenses and other current assets on the condensed consolidated balance sheets.

In 2021, the Small Business Innovation Research (“SBIR”) awarded the Company a grant in the amount of $ 2.0 million over two years subject to meeting certain terms and conditions.

1 unchanged sentence

Grant income was recognized when qualified research and development costs were incurred and the Company obtained reasonable assurance that the terms and conditions of the grant were met.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Entity-wide information

During the three months ended March 31, 2023, Customers A and B accounted for 81 % and 19 %, respectively, of revenue.

During the three months ended March 31, 2022, Customers A and B accounted for 77 % and 23 %, respectively, of revenue.

All revenues were generated in the United States for the three months ended March 31, 2023 and 2022.

During the three months ended June 30, 2023, Customers A and B accounted for 73 % and 27 %, respectively, of revenue.

During the three months ended June 30, 2022, Customers A and B accounted for 82 % and 18 %, respectively, of revenue.

During the six months ended June 30, 2023, Customers A and B accounted for 78 % and 22 %, respectively, of revenue.

During the six months ended June 30, 2022, Customers A and B accounted for 80 % and 20 %, respectively, of revenue.

All revenues were generated in the United States for the three and six months ended June 30, 2023 and 2022.

Stock-Based Compensation

11 unchanged sentences

With respect to a 10 % stockholder, the exercise price of an option granted shall not be less than 110 % of the fair value of the common stock share on the date of grant.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Stock options granted under the 2022 Plan generally vest over four years and expire no later than ten years after the grant date.

2 unchanged sentences

In addition, the shares underlying any award granted under the 2016 Plan that are forfeited back to or repurchased or reacquired by the Company, will revert to and again become available for issuance under the 2022 Plan.

As of March 31, 2023, the total number of shares of common stock available for issuance under the 2022 Plan is 2,168,837 .

As of June 30, 2023, the total number of shares of common stock available for issuance under the 2022 Plan is 1,942,991 .

2022 Inducement Equity Plan

On August 5, 2022, the Company adopted a 2022 Inducement Equity Plan (the “2022 Inducement Plan”).

The 2022 Plan provides for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to persons not previously an employee of the Company and its affiliates.

The 2022 Plan provides for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards,

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

restricted stock unit awards, performance awards and other forms of awards to persons not previously an employee of the Company and its affiliates.

The exercise price of an option granted under the 2022 Inducement Plan shall not be less than the fair market value of a common stock share on the date of grant.

1 unchanged sentence

The Company initially reserved 2,000,000 shares of common stock for issuance under the 2022 Inducement Plan.

As of March 31, 2023, the total number of shares of common stock available for issuance under the 2022 Inducement Plan is 1,130,429 .

As of June 30, 2023, the total number of shares of common stock available for issuance under the 2022 Inducement Plan is 1,144,890 .

2022 Employee Stock Purchase Plan

4 unchanged sentences

On the first day of each year commencing January 1, 2023, the 2022 Plan will automatically increase by 1 % of the outstanding number of shares of common stock of the Company on the last day of the preceding calendar year or such lesser number of shares as approved by the Company’s Board of Directors prior to the effective date of the annual increase.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

As of March 31, 2023, the total number of shares of common stock available for issuance under the ESPP is 923,307 .

As of June 30, 2023, the total number of shares of common stock available for issuance under the ESPP is 546,155 .

Stock options

6 unchanged sentences

Forfeited ( 411,588 ) $ 3.55

Outstanding at March 31, 2023

Outstanding at June 30, 2023

6,574,434 $ 2.50 9.0 $ 2

Vested and exercisable at March 31, 2023

Vested and exercisable at June 30, 2023

1,247,904 $ 3.63 7.9 $ 2

The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2023 and 2022 were $ 1.30 and none , respectively.

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2023 and 2022 were none and $ 1.2 million, respectively.

As of March 31, 2023, the unrecognized stock-based compensation expense related to stock options was approximately $ 9.5 million, expected to be recognized over a weighted-average period of 2.8 years.

The weighted-average grant date fair values of stock options granted during the six months ended June 30, 2023 and 2022 were $ 1.18 and none , respectively.

The aggregate intrinsic values of stock options exercised during the six months ended June 30, 2023 and 2022 were none and $ 0.5 million, respectively.

As of June 30, 2023, the unrecognized stock-based compensation expense related to stock options was approximately $ 8.6 million, expected to be recognized over a weighted-average period of 2.6 years.

Early Exercise of Stock Options into Restricted Stock

For the three months ended March 31, 2023 and 2022, the Company issued zero shares of common stock upon exercise of unvested stock options.

As of March 31, 2023 and December 31, 2022, 92,840 and 105,500 shares were held by employees subject to repurchase at an aggregate price of $ 0.2 million and $ 0.3 million, respectively.

For the six months ended June 30, 2023 and 2022, the Company issued zero shares of common stock upon exercise of unvested stock options.

As of June 30, 2023 and December 31, 2022, 80,180 and 105,500 shares were held by employees subject to repurchase at an aggregate price of $ 0.2 million and $ 0.3 million, respectively.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Performance Awards

9 unchanged sentences

Forfeited ( 201,952 ) $ 9.92

Outstanding at March 31, 2023

Outstanding at June 30, 2023

5,166,549 $ 9.92 8.4 $ —

Vested and exercisable at March 31, 2023

Vested and exercisable at June 30, 2023

1,436,378 $ 9.92 8.1 $ —

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

The were no performance based options granted or exercised during the three months ended March 31, 2023 and 2022.

As of March 31, 2023, the unrecognized stock-based compensation expense related to performance based options was approximately $ 10.4 million, expected to be recognized over a weighted-average period of 1.8 years.

There were no performance based options granted or exercised during the six months ended June 30, 2023, and there were 6,796,074 performance based options granted and no performance based options exercised during the six months ended June 30, 2022.

As of June 30, 2023, the unrecognized stock-based compensation expense related to performance based options was approximately $ 7.8 million, expected to be recognized over a weighted-average period of 1.8 years.

Market Awards

7 unchanged sentences

Upon the Merger, the Company increased the number of shares authorized and 315,748 awards were granted on June 8, 2022.

Through June 30, 2023 , these market awards did not meet the vesting thresholds.

Refer to Note 6, Stockholders’ Equity (Deficit), for further details of the shares of common stock authorized.

The were no market based options granted or exercised during the three months ended March 31, 2023 and 2022.

As of March 31, 2023, the unrecognized stock-based compensation expense related to market based options was approximately $ 0.6 million, expected to be recognized over a weighted-average period of 1.1 years.

The were no market based options granted or exercised during the six months ended June 30, 2023, and there were 315,748 market based options granted and no market based options exercised during the six months ended June 30, 2022.

As of June 30, 2023, the unrecognized stock-based compensation expense related to market based options was approximately $ 0.5 million, expected to be recognized over a weighted-average period of 0.9 years.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Restricted Stock Units

4 unchanged sentences

Forfeited ( 112,064 ) $ 2.50

Outstanding at March 31, 2023

Outstanding at June 30, 2023

335,884 $ 2.50

As of March 31, 2023, the unrecognized stock-based compensation expense related to restricted stock units was approximately $ 0.7 million, expected to be recognized over a weighted-average period of 1.5 years.

As of June 30, 2023, the unrecognized stock-based compensation expense related to restricted stock units was approximately $ 0.5 million, expected to be recognized over a weighted-average period of 1.2 years.

Stock-Based Compensation Expense

4 unchanged sentences

As of the closing of the Merger and going forward, the fair value of common stock will be based on the publicly traded market value.

Expected Term — The expected term represents the period that the Company’s stock options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

and the end of the contractual term).

The expected term for the ESPP purchase rights is the length of the purchase period.

5 unchanged sentences

The assumptions used to determine the grant date fair value of non-market based, stock options granted were as follows, presented on a weighted-average basis:

Three Months Ended March 31,

Six Months Ended June 30,

Expected term (in years) 5.9 5.8

2 unchanged sentences

Dividend yield — —

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Total stock-based compensation expense was as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

General and administrative $ 3,081 $ 7,863 $ 6,320 $ 8,322

1 unchanged sentence

Total stock-based compensation expense $ 3,434 $ 9,225 $ 7,197 $ 9,886

No provision for income taxes was recorded for the three months ended March 31, 2023 and 2022, respectively.

No provision for income taxes was recorded for the three and six months ended June 30, 2023 and 2022, respectively.

Deferred tax assets generated from the Company’s net operating losses have been fully reserved, as the Company believes it is not more likely than not that the benefit will be realized due to the Company’s cumulative losses generated to date.

1 unchanged sentence

A reconciliation of net loss available to common stockholders and the number of shares in the calculation of basic and diluted loss per share is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Net loss $ ( 18,697 ) $ ( 11,552 ) $ ( 37,419 ) $ ( 23,360 )

2 unchanged sentences

$ ( 0.42 ) $ ( 0.86 ) $ ( 0.85 ) $ ( 2.80 )

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

The following potential common stock securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (on an as-converted basis):

Three Months Ended March 31,

Series A and B redeemable convertible preferred stock — 19,517,988

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Stock options to purchase common stock 12,056,731 8,779,368 12,056,731 8,779,368

3 unchanged sentences

Total 14,472,795 11,068,175 14,472,795 11,068,175

The potential common stock securities above do not reflect 19,633,444 of potentially dilutive securities as a result of the option issued to GeneFab, as announced on August 10, 2023.

Refer to Note 13, Subsequent Events, for further details of the GeneFab transaction.

Commitments and Contingencies

1 unchanged sentence

On June 3, 2021, the Company entered into a lease agreement for a new cGMP facility in Alameda, California to support planned initial clinical trials for our product candidates.

The lease will expire in 2032 with future

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

undiscounted operating lease payments of $ 46.0 million over an initial lease period of eleven years .

Refer to Note 5, Operating Leases , for further details of the leases.

The lease will expire in 2032 with future undiscounted operating lease payments of $ 46.0 million over an initial lease period of eleven years .

In 2021, the Company began construction of the cGMP facility.

As of March 31, 2023 the Company paid $ 37.5 million in construction costs of the $ 42.2 million purchase commitment.

Buildout of the cGMP facility was completed in June 2023.

As of June 30, 2023 the Company paid $ 40.0 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.

1 unchanged sentence

In 2021, the Company entered into a three-year collaboration and option agreement with BlueRock Therapeutics LP (“BlueRock”) under which the Company granted BlueRock an option to acquire an exclusive or non-exclusive license to develop, manufacture and commercialize cell therapy products.

Refer to Note 12, Related Parties , for further details of the related parties.

Refer to Note 12, Related Parties , for details into the BlueRock agreement.

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

As of March 31, 2023, purchase commitments related to sponsored research agreements amounted to approximately $ 0.8 million.

As of June 30, 2023, purchase commitments related to sponsored research agreements amounted to approximately $ 0.7 million.

The Company has entered into license agreements under which they are obligated to make annual maintenance payments of $ 0.1 million and specified milestone and royalty payments.

Future milestone and royalty payments under these agreements are not considered contractual obligations since the payments under these agreements are contingent upon future events, such as the Company’s achievement of specified development, regulatory, and sales milestones, or generating product sales.

As of March 31, 2023, the Company is unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.

As of June 30, 2023, the Company is unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.

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.

2 unchanged sentences

The Company is subject to claims and assessments from time to time in the ordinary course of business but does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Indemnification

8 unchanged sentences

Related Parties

NEA held 4,429,725 and 4,429,725 shares, respectively, of common stock as of March 31, 2023 and December 31, 2022, respectively.

NEA held one of the seven seats on the Company’s Board of Directors as of March 31, 2023 and December 31, 2022.

NEA held 4,429,725 shares of the Company’s common stock as of June 30, 2023 and December 31, 2022.

NEA held one of the six seats on the Company’s Board of Directors as of June 30, 2023 and December 31, 2022.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

Bayer Healthcare LLC

On May 19, 2022, Legacy Senti issued to Bayer a $ 5.2 million unsecured convertible promissory note.

On June 8, 2022, the May 2022 Note was automatically cancelled and exchanged for 517,500 shares of Class A Common Stock at a price of $ 10.00 per share.

On May 19, 2022, Legacy Senti issued to Bayer a $ 5.2 million unsecured convertible promissory note (“the “May 2022 Note”).

On June 8, 2022, the May 2022 Note was automatically cancelled and exchanged for 517,500 shares of Common Stock at a price of $ 10.00 per share.

On May 21, 2021, the Company entered into a collaboration and option agreement (“BlueRock Agreement”) with BlueRock, a wholly-owned subsidiary of Bayer, pursuant to which the Company granted to BlueRock an option (“BlueRock Option”), on a collaboration program-by-collaboration program basis, to obtain an exclusive or non-exclusive license to develop, manufacture and commercialize cell therapy products that contain cells of specified types and which incorporate an option gene circuit from such collaboration program or a closely related derivative gene circuit.

5 unchanged sentences

Under the BlueRock Agreement, the specific financial terms for milestone payments and royalties will be negotiated and agreed to only after the option is exercised.

As of March 31, 2023 and December 31, 2022, Bayer held 5,878,488 and 5,878,488 shares, respectively, of the Company’s common stock.

As of March 31, 2023 and December 31, 2022, Bayer held one of the seven seats on the Board of Directors of the Company.

Bayer’s parent company is Bayer AG, which served as the lead investor in our Series B financing through its Leaps by Bayer unit.

Bayer held 5,878,488 shares, of the Company’s common stock as of June 30, 2023 and December 31, 2022.

Bayer held one of the six seats on the Company’s Board of Directors as of June 30, 2023 and December 31, 2022.

Bayer’s parent company is Bayer AG, which served as the lead investor in our Series B financing prior to the Merger through its Leaps by Bayer unit.

Accordingly, Bayer is considered a related party.

In January 2023, the Company received lab automation equipment purchased from Seer, Inc.

In January 2023, the Company acquired lab automation equipment purchased from Seer, Inc.

(“Seer”) (NASDAQ:

Omid Farokhzad, a member of the Company’s board of directors is the Chief Executive Officer

Omid Farokhzad, a member of the Company’s board of directors is the Chief Executive Officer for Seer.

The consideration of $ 0.2 million, plus interest, will be paid over a two-year period, and title will transfer to the Company upon final payment.

The transaction was classified as a finance lease in accordance with ASC 842.

GeneFab, LLC.

In August 2023, the Company entered into a framework agreement with GeneFab and Valere Bio, Inc., a Delaware corporation and the parent company of GeneFab (“Valere”), which is wholly owned by Celadon Partners, LLC, pursuant to which the Company, subject to the terms and conditions therein, (i) shall sell, assign and transfer its rights, title and interest in certain of the assets and contractual rights, including all of Company’s equipment and leasehold improvements at the Company’s facilities in Alameda (the “Alameda Facility”) and certain of the Company’s intellectual property related to the schematics for and design of the Alameda Facility, and (ii) sublease to GeneFab its premises under the lease for the Alameda Facility.

In addition, the Company has agreed to grant a license to GeneFab under certain of its intellectual property rights to conduct manufacturing services and to research, develop, manufacture and commercialize products outside of oncology, pursuant to a license agreement under negotiation.

As part of this transaction, the Company entered into a transition services agreement with GeneFab whereby certain services are to be provided by each party to the other party during a transition period beginning on the closing of the transaction.

On August 7, 2023, Philip Lee, Ph.D., the Company’s former Chief Technology Officer, notified the Company of his resignation as an employee and as Chief Technology Officer of the Company, effective on August 7, 2023, to join GeneFab as its Chief Executive Officer.

Lee’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

The consideration of $ 200,000 , plus interest, will be paid over a two-year period, and title will transfer to the Company upon final payment.

The transaction was classified as a finance lease

Subsequent Events

On April 26, 2023, Mr.

Epstein, informed the board of directors (the “Board”) of the Company of his intention to resign as a director, effective as of the close of business on June 16, 2023.

Epstein has resigned in order to minimize potential conflict or the appearance of conflict with his role as Chief Executive Officer of Seagen, Inc.

(an oncology company) rather than because of any disagreement relating to any of Senti’s operations, policies or practices.

GeneFab, LLC.

On August 10, 2023, the Company announced the transaction with GeneFab, a new independent contract manufacturing and synthetic biology biofoundry focused on next-generation cell and gene therapies.

The Company sold, assigned and transferred its rights, title and interest in certain of the assets and contractual rights, including all of the Company’s equipment and leasehold improvements at the Company’s facilities in Alameda and certain of the Company’s intellectual property related to the schematics for and design of the Alameda facility, and subleased to GeneFab its premises under the lease for the Alameda facility.

The transaction provided the Company with additional capital and reduced longer term operating expenses.

Under the terms of the agreement, the Company will receive $ 37.8 million in cash before the end of 2025.

Approximately $ 18.9 million was due at closing, which amount was netted against prepayment owed by the Company for manufacturing and support services to GeneFab.

The remaining $ 18.9 million will be paid to the Company in installments in 2024 and 2025.

The Company has agreed to prepay GeneFab $ 18.9 million for manufacturing and research activities.

In addition, the Company will receive $ 8.0 million of manufacturing credit from GeneFab for their services.

The Company subleased the cGMP facility in Alameda, CA to GeneFab, a portion of which will be subject to the satisfaction of certain conditions, which will support the clinical manufacturing of the Company’s chimeric antigen receptor natural killer (CAR-NK) programs, including SENTI-202.

The Company agreed to grant a license to GeneFab under certain of its intellectual property rights to conduct manufacturing services and to research, develop, manufacture and commercialize products outside of oncology, pursuant to a license agreement under negotiation.

Philip Lee, Ph.D., former Co-Founder and Chief Technology Officer of the Company, assumed the role of Chief Executive Officer of GeneFab.

GeneFab intends to extend offers of employment to approximately forty-six of the Company's employees currently employed in its research and development and manufacturing functions.

Employees that accept the offers of employment will continue to be actively engaged in the CMC and manufacturing components for the clinical manufacturing of the Company’s Gene Circuit products.

GeneFab was provided an option to purchase up to $ 20.0 million of the Company’s common stock at an exercise price of $ 1.01867 .

The Option is exercisable for a period of 36 months following the execution of the license agreement.

The Company and GeneFab entered into a seller economic share agreement (the “ SESA ”), pursuant to which the Company will be entitled to receive ten percent of the realized gains of GeneFab’s parent company arising and resulting from any cash or in-kind distributions from GeneFab in connection with the dividend or sale event, subject to the terms and conditions of the SESA.

As of June 30, 2023, the GeneFab transaction did not meet the assets held for sale classification as management had not committed to a plan to sell the long-term assets.

As a result of the signing of the transaction non-binding term sheet in June 2023 with GeneFab and the change in the manner in which the Company expects to recover the assets subject to the GeneFab transaction, the asset group used in the long-lived impairment assessment was changed to two asset groups as of June 30, 2023, the oncology and non-oncology asset group, with the non-oncology including all the assets expected to be transferred in the GeneFab transaction.

This asset group reassessment triggered a need to perform an impairment analysis for the non-oncology asset group that considered the final terms of the transaction and no impairment was deemed necessary.

NASDAQ Bid Price Compliance Notice

On August 7, 2023, the Company received written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC notifying the Company that, for the last 30 consecutive trading days, the closing bid price of the Company’s common stock had closed below the minimum bid price requirement of $1.00 per share for

SENTI BIOSCIENCES, INC.

Notes to Condensed Consolidated Financial Statements

continued listing on The Nasdaq Global Market.

The Company has been provided an initial compliance period of 180 calendar days, or until February 5, 2024, to regain compliance with the minimum bid price requirement.

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 1. Financial Statements