What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-21 compared with 2023-03-22 · 468 added, 257 removed, 739 unchanged (50% of the section changed)

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The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Emphasis of Matter

As discussed in Note 4 and 16 to the consolidated financial statements, the Company entered into a significant related party transaction with GeneFab, LLC that met the criteria to be reported as discontinued operations.

Our opinion with respect to this matter is not modified.

Basis for Opinion

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Accounts receivable 112 626

GeneFab receivable - related party 17,592 —

Short-term investments — 40,942

GeneFab prepaid expenses - related party 14,787 —

Prepaid expenses and other current assets 2,783 3,181

Current assets of discontinued operations — 209

Total current assets 71,200 102,579

Restricted cash 3,522 3,366

GeneFab receivable - related party, net of current portion 1,119 —

Property and equipment, net 25,338 51,361

Operating lease right-of-use assets 16,274 18,418

GeneFab Economic Share - related party 1,816 —

Other long-term assets 215 283

Noncurrent assets of discontinued operations — 4,785

Total assets $ 119,484 $ 180,792

Liabilities and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Accounts payable $ 1,250 $ 1,370

Finance lease liabilities - related party, current portion 97 —

Early exercise liability, current portion 135 135

Deferred revenue — 799

GeneFab sublease deferred income - related party 989 —

Accrued expenses and other current liabilities 5,927 12,576

Operating lease liabilities 4,031 1,988

Current liabilities of discontinued operations 243 1,185

Total current liabilities 12,672 18,053

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Contingent earnout liability 20 227

GeneFab Option - related party 6,331 —

Early exercise liability, net of current portion 10 146

Deferred revenue, net of current portion — 176

Total liabilities 52,571 53,529

Commitments and contingencies (Note 15)

Redeemable convertible preferred stock (A and B), $ 0.0001 par value;

zero and 19,517,990 shares authorized at December 31, 2022 and December 31, 2021;

zero and 19,517,988 shares issued and outstanding at December 31, 2022 and December 31, 2021;

aggregate liquidation preference of zero and $ 163.8 million at December 31, 2022 and December 31, 2021, respectively

Stockholders’ equity (deficit):

Preferred stock, $ 0.0001 par value;

10,000,000 and zero shares authorized at December 31, 2022 and December 31, 2021;

zero and zero shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

Stockholders’ equity:

Common stock, $ 0.0001 par value;

500,000,000 and 27,006,600 shares authorized at December 31, 2022 and December 31, 2021;

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

45,700,161 and 44,062,534 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 311,252 300,544

Other comprehensive income 1 —

Accumulated other comprehensive income — 1

Accumulated deficit ( 244,344 ) ( 173,286 )

Total stockholders’ equity (deficit) 127,263 ( 111,457 )

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $ 180,792 $ 96,702

Total stockholders’ equity 66,913 127,263

Total liabilities, redeemable convertible preferred stock and stockholders’ equity $ 119,484 $ 180,792

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

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Operating expenses

Research and development 34,067 21,957

Research and development (included related party cost of $ 3,113 and $ — , respectively)

32,150 28,145

General and administrative 37,176 38,225

Impairment of long-lived assets 25,962 —

Total operating expenses 95,288 66,370

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Change in fair value of contingent earnout liability 207 9,461

Change in fair value of GeneFab Note Receivable - related party 626 —

Change in fair value of GeneFab Economic Share - related party 16 —

Change in fair value of GeneFab Option - related party 3,318 —

Gain on extinguishment of convertible notes — 1,289

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

Loss on impairment of fixed assets — ( 22 )

GeneFab sublease income - related party 2,323 —

Other income (expense) ( 33 ) ( 32 )

Total other income (expense), net 9,321 12,419

Net loss from continuing operations ( 83,406 ) ( 49,665 )

Net income (loss) from discontinued operations 12,348 ( 8,545 )

Net loss ( 71,058 ) ( 58,210 )

Other comprehensive loss

Unrealized gain on investments 1 —

Other comprehensive gain (loss)

Unrealized gain (loss) on investments ( 1 ) 1

Comprehensive loss $ ( 71,059 ) $ ( 58,209 )

Net loss per share, basic and diluted

Net loss per share from continuing operations, basic and diluted $ ( 1.88 ) $ ( 1.90 )

Net income (loss) per share from discontinued operations, basic and diluted $ 0.28 $ ( 0.33 )

Net loss per share, basic and diluted $ ( 1.60 ) $ ( 2.23 )

Weighted-average shares outstanding, basic and diluted 44,372,223 26,110,785

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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 (Loss)

Deficit Total

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19,517,988 $ 171,833 2,972,409 $ — $ 3,619 0 $ ( 115,076 ) $ ( 111,457 )

Issuance of Series B redeemable convertible preferred stock, Issuance of Series B redeemable convertible preferred stock, including extinguishment of preferred stock tranche liability of $ 15.2 million, net of issuance costs of $ 6 thousand

7,981,852 82,171 — — — — — —

Exercise of common stock options — — 607,406 — 1,525 — — 1,525

Early exercise of common stock options — — ( 512,670 ) — ( 1,329 ) — — ( 1,329 )

Vesting of early exercise of common stock options — — 39,297 — 84 — — 84

Stock-based compensation expense — — — — 2,295 — — 2,295

Net loss — — — — — — ( 55,319 ) ( 55,319 )

Balance as of December 31, 2021

19,517,988 171,833 2,972,409 — 3,619 — ( 115,076 ) ( 111,457 )

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

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Stock-based compensation expense — — — — 16,392 — — 16,392

Unrealized gain on investments — — — — — 1 — 1

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

Net loss — — — — — — ( 58,210 ) ( 58,210 )

1 unchanged sentence

— $ — 44,062,534 $ 4 $ 300,544 $ 1 $ ( 173,286 ) $ 127,263

Common Stock Purchase Agreement settled in common stock, net of fees — — 1,000,000 1 527 — — 528

Vesting of early exercise of common stock options — — 50,640 — 136 — — 136

Issuance of common stock under Employee Stock Purchase Plan (ESPP) — — 586,987 — 375 — — 375

Stock-based compensation expense — — — — 9,670 — — 9,670

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

Net loss — — — — — — ( 71,058 ) ( 71,058 )

Balance as of December 31, 2023

— $ — 45,700,161 $ 5 $ 311,252 $ — $ ( 244,344 ) $ 66,913

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

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

Gain on disposal of business ( 21,862 ) —

Change in fair value of contingent earnout liability ( 207 ) ( 9,461 )

Change in preferred stock tranche liability — 14,742

Change in fair value of GeneFab Note Receivable - related party ( 626 ) —

Change in fair value of GeneFab Economic Share - related party ( 16 ) —

Change in fair value of GeneFab Option - related party ( 3,318 ) —

Impairment of long-lived assets 25,962 —

Stock-based compensation expense 9,670 16,392

Loss on write-off of fixed assets 12 22

Interest income accrued and not received ( 12 ) —

Issuance of common stock for Common Stock Purchase Agreement fee — 196

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Accounts receivable 507 ( 131 )

Prepaid expenses and other current assets ( 1,302 ) ( 1,642 )

GeneFab receivable - related party ( 1,436 ) —

GeneFab prepaid expenses - related party 4,113 —

Prepaid expenses and other assets 681 ( 1,302 )

Accounts payable ( 290 ) 186

Accrued expenses and other current liabilities 716 2,055

GeneFab sublease deferred income - related party 689 —

Deferred revenue ( 799 ) ( 1,033 )

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Purchases of short-term investments ( 17,990 ) ( 40,585 )

Maturity of short-term investments 60,000 —

Purchases of property and equipment ( 12,038 ) ( 41,374 )

Proceeds from sale of property and equipment 105 —

Net cash from investing activities 30,077 ( 81,959 )

Years Ended December 31,

Cash flows from financing activities

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Proceeds from issuance of convertible notes — 5,175

Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs — 66,952

Principal finance lease payments ( 108 ) —

Net cash from financing activities 779 118,551

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Cash, cash equivalents, and restricted cash, end of period 39,448 60,987

Years Ended December 31,

Reconciliation of cash, cash equivalents and restricted cash

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Purchases of property and equipment in accounts payable and accrued expenses and other current liabilities $ 15 $ 8,153

Recognition of Series B preferred stock tranche liability $ — $ 33

Extinguishment of Series B preferred stock tranche liability $ — $ 15,210

Merger and related PIPE financing costs included in accounts payable and accrued expenses and other current liabilities $ — $ 1,429

Receivables in transit from issuance of common stock upon exercise of stock options $ — $ 25

Refer to Note 4.

GeneFab Transaction for details of non-cash items

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

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Senti Biosciences, Inc.

and its subsidiaries (the “Company” or “Senti”), is a biotechnology company that was founded to create a new generation of smarter medicines that outmaneuver complex diseases using novel and unprecedented approaches.

Senti has built a synthetic biology platform that enables it to program next-generation cell and gene therapies with what the Company refers to as “gene circuits.” These gene circuits, which are created from novel and proprietary combinations of DNA sequences, reprogram cells with biological logic to sense inputs, compute decisions and respond to their cellular environments.

and its subsidiaries (the “Company” or “Senti”), is an early clinical stage biotechnology company developing next-generation cell and gene therapies engineered with its gene circuit platform technologies for patients living with incurable diseases.

Senti’s mission is to create a new generation of smarter therapies that can outsmart complex diseases using novel and unprecedented approaches.

Senti has built a synthetic biology platform that enables it to program next-generation cell and gene therapies with gene circuits.

These gene circuits, which are created from novel and proprietary combinations of DNA sequences, reprogram cells with biological logic to sense inputs, compute decisions and respond to their cellular environments.

The Company is headquartered in South San Francisco, California.

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

Refer to Note 3, Reverse Recapitalization, for further details of the Merger.

Refer to Note 3.

Reverse Recapitalization, for further details of the Merger.

On August 7, 2023, the Company completed a transaction with GeneFab, LLC (“GeneFab”), a contract manufacturing and synthetic biology biofoundry focused on next-generation cell and gene therapies.

As part of that transaction, the Company disposed of its non-oncology business and in-house manufacturing services and subleased its manufacturing facility to GeneFab.

Refer to Note 4.

GeneFab Transaction, for further details of the transaction, and to Note 16.

Related Parties, for related party discussion.

Liquidity and Going Concern

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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 governmental grants.

To date , the Company raised aggregate gross proceeds of $ 300.1 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 lesser extent, through collaboration agreements and governmental grants.

At December 31, 2023 and December 31, 2022, the Company had an accumulated deficit of $ 244.3 million and $ 173.3 million, respectively.

The Company’s net losses were $ 58.2 million and $ 55.3 million for the years months ended December 31, 2022 and 2021, 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’s net losses were $ 71.1 million and $ 58.2 million for the years ended December 31, 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, from general and administrative costs associated with the Company’s operations, and impairment of the Company’s long-lived assets.

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 December 31, 2023 and 2022, the Company had cash, cash equivalents, and short-term investments of $ 35.9 million and $ 98.6 million.

As of March 22, 2023, the issuance date of the consolidated financial statements as of and for the year ended December 31, 2022, 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 March 21, 2024 , the issuance date of the consolidated financial statements as of and for the year ended December 31, 2023, there is uncertainty about whether the Company’s combined cash,

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

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.

The transaction with GeneFab provided the Company with additional capital in the form of a note receivable and rights to future manufacturing and research activities and reduced longer-term operating expenses.

Refer to Note 4.

GeneFab Transaction , 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.

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

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

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 (“Listing Qualifications Department”) 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 continued listing on The Nasdaq Global Market.

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

Issuers listed on The Nasdaq Global Market are not eligible for a second 180-day grace period under the Nasdaq Listing Rules.

However, based upon the Company’s compliance with the various criteria required under Nasdaq Listing Rule 5810(c)(3)(A)(ii) to obtain a second 180-day grace period applicable to issuers listed on The Nasdaq Capital Market, the Company applied to transfer the listing of its Common Stock to The Nasdaq Capital Market.

Refer to Note 17.

Subsequent Events, for additional information on NASDAQ bid price compliance.

Summary of Significant Accounting Policies

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All intercompany balances and transactions have been eliminated in consolidation.

The Company has one business activity and operate in one reportable segment.

The Company has one business activity and operates in one reportable segment within continuing operations.

Unless otherwise noted, the Company has retroactively adjusted all common and preferred share and related price information to give effect to the exchange ratio established in the Merger Agreement.

The Company determined that the assets sold to GeneFab met the criteria for presentation as a discontinued operation.

As a result, the Company has retrospectively restated its consolidated balance sheet at December 31, 2022 and consolidated statements of operations and comprehensive loss for the year ended December 31, 2022 to reflect the assets and liabilities and operating results, respectively, related to the disposed business in discontinued operations.

The Company has chosen not to segregate the cash flows of the disposed business in the consolidated statements of cash flows.

Supplemental disclosures related to discontinued operations for the statements of cash flows have been provided in Note 4.

GeneFab Transaction .

Unless otherwise specified, the disclosures in these consolidated financial statements refer to continuing operations only.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Use of Estimates

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 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 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, the valuation of stock-based compensation expense, 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 GeneFab Option, the valuation of GeneFab Economic Share, the valuation of the GeneFab Note Receivable, the discount rate used to discount future cash flows for the impairment of long-lived assets, 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.

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As of December 31, 2023 and 2022 , the Company has not experienced any credit losses in such accounts or investments.

As of December 31, 2023, t he Company has prepaid future manufacturing and research services of $ 14.8 million under the development and manufacturing services agreement entered into with GeneFab, a related party.

The Company also has a receivable from GeneFab under the framework agreement with a fair value of $ 17.2 million, subject to satisfaction of certain conditions.

The prepaid expense and receivable balances from GeneFab potentially subject the Company to a significant concentration of credit risk if the Company is unable to realize these balances.

Refer to Note 4.

GeneFab Transaction , for further details of the GeneFab transaction.

Cash, Cash Equivalents, and Restricted Cash

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The restricted cash is presented separately from cash and cash equivalents and classified as non-current on the consolidated balance sheets, as the Company expects the cash to remain restricted for a period greater than one year.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that total to the amounts shown in the consolidated statements of cash flows for the Company:

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Investments in marketable securities with original maturities less than 12 months from the balance sheet date, if any, are classified as short-term investments.

Investments with original maturities of greater than 12 months from the balance sheet date, if any, are classified as long-term.

Investments with original maturities of greater than 12 months from

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

the balance sheet date, if any, are classified as long-term.

The Company classifies all of its investments as available-for-sale and records such assets at estimated fair value in the consolidated balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive loss within the consolidated statement of operations and comprehensive loss, and as a separate component of stockholders’ equity.

1 unchanged sentence

Government securities, asset-based securities, and commercial paper, which are subject to minimal credit and market risk.

The Company uses the specific identification method to determine the amount of realized gains or losses on sales of marketable securities.

Realized gains and losses on sales of securities and declines in the fair value of securities judged to be other than temporary are included in other income or expense.

Unrealized gains and losses are included in other comprehensive loss.

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The estimated fair values of the Company’s cash and cash equivalents, restricted cash, trade, and other receivables and accounts payable approximate their carrying values given their short-term nature.

The Company’s preferred stock tranche liability were carried at fair value from the date of issuance through their extinguishment in May 2021, and were determined using Level 3 inputs in the fair value hierarchy described above.

Fair Value Option

The Company elected to account for the deferred consideration (GeneFab Note Receivable) and contingent consideration receivable (GeneFab Economic Share) from the GeneFab transaction under the fair value option in ASC 825, Financial Instruments (“ASC 825”).

Accordingly, these instruments were recognized at their fair value at the closing of the transaction and are subsequently remeasured each reporting period with changes in fair value recorded in other income (expense) in the consolidated statements of operations and comprehensive loss until settlement.

The fair value of the GeneFab Note Receivable was determined by discounting future payments under multiple probability-weighted scenarios using GeneFab’s cost of borrowing.

The fair value of the GeneFab Option was determined using an option pricing method.

Refer to Note 4.

GeneFab Transaction , for further details of the GeneFab transaction.

SENTI BIOSCIENCES, INC.

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Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which are as follows:

Asset Classification

Estimated useful Life

Small equipment 2 years

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Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, such as property and equipment, net, for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable.

The Company evaluates its long-lived assets, such as property and equipment, net and lease ROU assets, for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable.

Recoverability of these assets is measured by comparing their carrying value to the future net undiscounted cash flows the assets are expected to generate over their remaining economic life.

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The Company has also elected not to apply the recognition requirement for leases with a term of 12 months or less.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Revenue Recognition

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(i) identify the contract with a customer;

(ii) identify the performance

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

obligations in the contract;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

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Grant payments received in excess of grant revenue earned are recognized as deferred revenue on the balance sheets, and grant income earned in excess of grant payments received is recognized as trade and other receivables on the consolidated balance sheets.

Research and Development

Research and development costs are expensed as incurred.

Research and development costs consist of salaries and other personnel-related expenses, including associated stock-based compensation expense, lab supplies and services, in-license and technology costs, consulting and sponsored research fees, facility costs and depreciation expense.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Research and Development

Research and development costs are expensed as incurred.

Nonrefundable advance payments for goods and services that will be used or received in future research and development activities are deferred and recognized as an expense in the period in which the related goods are delivered, or services are performed.

Similarly, GeneFab prepaid expenses are recognized as an expense in the period in which the related manufacturing or research activities are performed.

The Company has acquired and may continue to acquire the rights to gene circuit or other technologies from third parties.

The upfront payments to acquire a license, product, or rights, as well as any annual maintenance charges and future milestone payments, are immediately recognized as research and development expense provided that there is no alternative future use of the rights in other research and development projects.

Deferred Offering Costs

Deferred offering costs consists of incremental legal, accounting and other fees directly attributable to equity offerings.

Deferred offering costs are capitalized within prepaid expenses and other current assets on the consolidated balance sheets and are offset against proceeds of the offering in the consolidated statements of redeemable convertible preferred stock and stockholders’ equity as a reduction of additional paid-in capital upon the completion of the equity offering.

In the event the equity offering is terminated, all of the deferred offering costs are expensed within the Company’s consolidated statements of operations and comprehensive loss.

For the years ended December 31, 2022 and 2021, the Company expensed zero and $ 2.2 million, respectively, of previously deferred offering costs related to the suspended Initial Public Offering (“IPO”) within general and administrative expense on the consolidated statement of operations and comprehensive loss.

As of December 31, 2022 and 2021 , the Company recorded zero and $ 1.4 million, respectively, of deferred offering costs related to the SPAC merger.

The amount was included in prepaid expenses and other current assets on the Consolidated Balance Sheet.

GeneFab Option

The option granted to GeneFab as part of the GeneFab transaction meets the definition of a derivative under ASC 815, Derivatives and Hedging (“ASC 815”), and does not meet the criteria for equity classification.

The derivative liability is recorded at its fair value on issuance and subsequently remeasured each reporting period with changes in fair value recorded in other income (expense) in the consolidated statements of operations and comprehensive loss until settlement.

The fair value of the derivative liability was determined using a Black-Scholes option pricing model.

Commitments and Contingencies

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The Company has not recorded any such liabilities as of December 31, 2023 and 2022 .

Accretion and Classification of Redeemable Convertible Preferred Stock

The Company's redeemable convertible preferred stock was recorded based on proceeds received, net of the related preferred stock tranche liability and issuance costs, and is classified outside of stockholders' equity on the consolidated balance sheets because the holders of such shares have liquidation rights in the event of a deemed liquidation that, in certain situations, are not solely within the control of the Company and would require the redemption of the then-outstanding redeemable convertible preferred stock.

The Company's Series A and Series B redeemable convertible preferred stock were subject to liquidation, dissolution, or winding up of the Company, either voluntary or involuntary.

Refer to Note 8, Stockholders’ Equity (Deficit), for further details.

Preferred Stock Tranche Liability

The Company’s Series B redeemable convertible preferred stock included an obligation whereby the investors agreed to buy, and the Company agreed to sell additional shares at a fixed price in the event that certain agreed-upon milestones were achieved or at the election of investors.

This obligation was determined to be a freestanding financial instrument that should be accounted for as a liability at fair value (Note 4).

This preferred stock tranche liability was revalued at each reporting period through settlement with changes in the fair value recorded as a change in preferred stock tranche liability in the consolidated statements of operations and comprehensive loss.

The fair value at settlement was reclassified to redeemable convertible preferred stock at such time.

Contingent Earnout Equity

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Common Stock (the “Contingent Earnout Shares”), comprised of two separate tranches of 1,000,000 shares per tranche, for no consideration upon the achievement of certain share price milestones within a period of two and three years .

In connection with the Reverse Recapitalization and pursuant to the Merger dated as of June 8, 2022 by and among the Merger Sub and Legacy Senti, former holder of the Legacy Senti common stock and Legacy Senti preferred stock are entitled to receive as additional consideration of up to 2,000,000 shares of the Company’s Common Stock (the “Contingent Earnout Shares”), comprised of two separate tranches of 1,000,000 shares per tranche, for no consideration upon the achievement of certain share price milestones within a period of two and three years .

The Contingent Earnout Shares are a form of dividend for holders of Legacy Senti common stock and Legacy Senti preferred stock.

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

In accordance with ASC 815-40, Derivatives and Hedging , as certain terms of the contingent earnout shares were not indexed to the common stock, equity treatment is precluded and liability classification is required at the Reverse Recapitalization date and subsequently remeasured at each reporting date with changes in fair value recorded as Change in fair value of contingent earnout liability in the consolidated statements of operations and comprehensive loss.

In accordance with ASC 815 as certain terms of the contingent earnout shares were not indexed to the common stock, equity treatment is precluded and liability classification is required at the Reverse Recapitalization date and subsequently remeasured at each reporting date with changes in fair value recorded as Change in fair value of contingent earnout liability in the consolidated statements of operations and comprehensive loss.

A portion of the earnout shares were granted to holders of Legacy Senti common stock that are subject to repurchase, and as of the date of the Merger were accounted for as stock-based compensation expense and expensed as there was no remaining service period.

The estimated fair value of the Contingent Earnout Shares was determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over a three-year period prioritizing the most reliable information available.

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.

The assumptions utilized in the calculation were based on the achievement of certain stock

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

price milestones, including the current Company common stock price, expected volatility, risk-free rate, expected term and expected dividend yield.

Stock-Based Compensation Expense

The Company recognizes stock-based compensation expense related to employees and non-employees based on the grant date fair value of the awards.

For awards that vest solely based on continued service, stock-based compensation expense is recognized in the consolidated statements of operations using the straight-line method.

For awards that vest solely based on continued service, stock-based compensation expense is recognized in the consolidated statements of operations and comprehensive loss using the straight-line method.

For performance and market awards, stock-based compensation expense is recognized over the requisite service period using the accelerated attribution method.

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The two-class method requires loss available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in undistributed earnings as if all loss for the period had been distributed.

Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted net loss per share attributable to common stockholders is computed by adjusting net loss attributable to common stockholders for an allocation of the undistributed earnings and dividing it by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares.

For purposes of this

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

calculation, the Company's outstanding stock options, redeemable convertible preferred stock, and potential issuance of redeemable convertible preferred stock under existing preferred stock tranches, are considered potential dilutive common shares.

Basic earnings per share for both continuing and discontinued operations is computed by dividing net loss from continuing operations and net income (loss) from discontinued operations attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted earnings per share for both continuing and discontinued operations is computed by adjusting net earnings for both continuing and discontinued operations for an allocation of the undistributed earnings and dividing it by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares.

For purposes of this calculation, the Company's outstanding stock options, redeemable convertible preferred stock, and potential issuance of redeemable convertible preferred stock under existing preferred stock tranches, are considered potential dilutive common shares.

The Company's participating securities contractually entitle the holders of such securities to participate in dividends but do not contractually require the holders of such securities to participate in losses of the Company.

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In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

When the Company is reporting discontinued operations, it uses net loss from continuing operations as the control number in determining whether those potential dilutive securities are dilutive or anti-dilutive.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.

Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statement of operations in the period that includes the enactment date.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statement of operations and comprehensive loss in the period that includes the enactment date.

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized.

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2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas.

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The ASU was effective January 1, 2022, and had no material impact on the Company’s consolidated financial statements and related disclosures.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Recent Accounting Standards

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires an enhanced disclosure of significant segment expenses on an annual and interim basis.

This guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which improves income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

This guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

Upon adoption, the guidance can be applied prospectively or retrospectively.

The Company believes that the impact of recently issued accounting standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

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Refer to Note 9, Stockholders’ Equity (Deficit) , for further details of the contingent earnout liability.

In association with the Merger, Dynamics entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”), including S.

Peter Lee, the father of Senti’s Chief Technology Officer.

In association with the Merger, Dynamics entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”).

Pursuant to the Subscription Agreements, the PIPE Investors purchased an aggregate of 5,060,000 shares of the Company’s common stock (the “PIPE Shares”) in a private placement at a price of $ 10.00 per share for an aggregate purchase price of $ 50.6 million (the “PIPE Financing”).

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The shares of Class A Common Stock issued in the Note Exchange are entitled to the same registration rights granted to the PIPE Investors with respect to the PIPE Shares.

Refer to Note 7, Convertible Note , for further details of the convertible note.

Refer to Note 8.

Convertible Note , for further details of the convertible note.

The number of shares of the Company’s common stock outstanding immediately following the consummation of the Merger was:

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In addition, there were no unpaid transaction costs included in accounts payable and accrued expenses as of December 31, 2022.

GeneFab Transaction

On August 7, 2023, the Company entered into a framework agreement with GeneFab and Valere Bio, Inc., a Delaware corporation and the parent company of GeneFab, which is wholly owned by Celadon Partners, LLC, pursuant to which the Company, subject to the terms and conditions therein, sold, assigned and transferred its rights, title and interest in certain of the assets and contractual rights, including all of the Company’s equipment at the Company’s facilities in Alameda and certain of the Company’s non-oncology license, 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 will provide the Company with additional capital in the form of a note receivable and rights to future manufacturing and research activities performed by GeneFab at market rates and reduced longer term operating expenses.

Concurrently with the transaction, the Company and GeneFab entered into a development and manufacturing services agreement (the “Services Agreement”), pursuant to which GeneFab will provide certain services to the Company using the subleased Alameda facility and acquired equipment.

As part of this transaction, the Company entered into a transition services agreement (“Transition Services Agreement”) with GeneFab whereby certain

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

services are to be provided by each party to the other party during a transition period beginning on the closing of the transaction.

Under the terms of the transaction, the Company is entitled to receive total consideration of $ 37.8 million before the end of 2025, of which $ 18.9 million was due at closing and was netted against prepayment due to GeneFab for future manufacturing and research activities.

The remaining $ 18.9 million will be paid to the Company in installments in 2024 and 2025 (the “GeneFab Note Receivable”), subject to satisfaction of certain conditions.

The Company elected to account for the GeneFab Note Receivable under the fair value option and recorded the GeneFab Note Receivable at its fair value of $ 16.6 million at the closing date of the transaction.

The GeneFab Note Receivable will be remeasured each reporting period with changes from remeasurement included in other income (expense) in the consolidated statements of operations and comprehensive loss.

Refer to Note 5.

Fair Value Measurements .

The Company is entitled to $ 18.9 million in future manufacturing and research activities to be rendered under the services agreement, which are recorded in GeneFab prepaid expenses on the consolidated balance sheet.

The Company determined that the $ 18.9 million for future manufacturing and research activities, inclusive of the volume discount provided, was executed at market terms and does not result in any impact to the total consideration received from GeneFab for the disposal of the business.

As part of the transaction, the Company subleased the facility in Alameda, California to GeneFab which will support the clinical manufacturing of the Company’s chimeric antigen receptor natural killer (CAR-NK) programs, including SENTI-202.

Refer to Note 7.

Operating Leases for additional information on the sublease.

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 (the “Non-Oncology License”).

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

Additionally, GeneFab extended offers of employment to 45 of the Company's employees formerly employed in its research and development and manufacturing functions.

All 45 employees accepted the offers of employment and are actively engaged in providing manufacturing and research activities to the Company.

GeneFab was granted an option to purchase up to 19,633,444 shares (i.e.

up to $ 20.0 million worth) of the Company’s common stock at a purchase price of $ 1.01867 (the “GeneFab Option”).

The GeneFab Option becomes exercisable upon the execution of the license agreement, no later than August 7, 2026.

The GeneFab Option may be exercised in installments of common stock equal to no more than 19.9 % of the Company’s outstanding shares of common stock as of the closing date of the transaction.

The purchase of the remaining shares under the GeneFab Option require stockholder approval.

The Company determined that the GeneFab Option was a derivative as the terms of the instrument contain certain provisions that preclude equity classification in accordance with ASC 815.

As such, the GeneFab Option was recorded as a liability at its fair value of $ 9.6 million at the closing date of the transaction and subsequently remeasured with changes in fair value recorded in other income (expense) in the consolidated statements of operations and comprehensive loss.

Refer to Note 5.

Fair Value Measurements .

As additional consideration for the transaction, the Company and GeneFab entered into a seller economic share agreement (the “GeneFab Economic Share”), 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 a dividend or sale event, subject to the terms and conditions of the GeneFab Economic Share.

The Company elected to account for the GeneFab Economic Share under the fair value option and recorded the GeneFab Economic Share at its fair value of $ 1.8 million at the date of the transaction.

The GeneFab Economic Share is remeasured each reporting period with changes from remeasurement included in other income (expense) in the consolidated statements of operations and comprehensive loss.

Refer to Note 5.

Fair Value Measurements .

The Company determined that GeneFab is a variable interest entity (VIE) since its total equity at risk is not sufficient to finance its activities without additional subordinated financial support.

The Company performed a qualitative analysis to determine if it is the primary beneficiary of GeneFab and determined it does not have the

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

power to direct the significant activities of GeneFab.

As a result, the Company determined it is not the primary beneficiary and therefore does not consolidate GeneFab.

Refer to Note 16.

Related Parties for GeneFab related party considerations.

Gain on the Disposal of Business

As the assets and contractual rights transferred to GeneFab were determined to constitute a business as defined in ASC 805, Business Combinations , the Company accounted for the disposal by applying the derecognition guidance in ASC 810, Consolidation , which requires that a gain or loss be recognized for the difference between the carrying value of the assets sold and the fair value of the consideration received (or receivable).

As of August 7, 2023, the total fair value of the consideration was determined to be $ 37.3 million, including the GeneFab prepaid expenses of $ 18.9 million, the estimated fair value of the GeneFab Note Receivable of $ 16.6 million and the estimated fair value of the GeneFab Economic Share of $ 1.8 million.

Out of the total consideration, $ 9.6 million was allocated to the GeneFab Option, representing its estimated fair value as of the closing date.

In connection with the sale, the Company recognized a gain on disposal in the amount of $ 21.9 million in net income from discontinued operations during the year ended December 31, 2023, representing the excess of the fair value of the consideration (net of the portion allocated to the GeneFab Option) over the carrying value of the assets sold of $ 5.5 million.

The gain on disposal was primarily related to the transfer of the non-oncology intellectual property to GeneFab which had no carrying value.

Discontinued Operations

In accordance with ASC 205, Presentation of Financial Statements , the Company determined that the sale of the non-oncology business, including the equipment and transfer of in-house manufacturing activities in the Alameda facility, to GeneFab represented a strategic shift that will have a major effect on the Company’s operations and financial results, thus meeting the criteria to be reported as discontinued operations.

Discontinued operations include the cost and depreciation of equipment and related deposits or liabilities, manufacturing personnel-related costs including costs arising as a result of the disposal such as equity award modifications and severance, and the gain from the disposal of the business.

Refer to Note 9.

Stockholders’ Equity (Deficit), for further details of the award modifications.

The following table summarizes the major classes of assets and liabilities of the discontinued operations (in thousands):

Prepaid expenses and other current assets $ — $ 209

Total current assets of discontinued operations $ — $ 209

Property and equipment, net $ — $ 4,775

Other long-term assets — 10

Total non-current assets of discontinued operations $ — $ 4,785

Accounts payable $ — $ 897

Accrued expenses and other current liabilities 243 288

Total current liabilities of discontinued operations $ 243 $ 1,185

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

The following table summarizes the operating results of the discontinued operations (in thousands):

Years Ended December 31,

Operating expenses:

Research and development $ 10,003 $ 5,922

General and administrative ( 496 ) 2,623

Total operating expenses 9,507 8,545

Loss from discontinued operations ( 9,507 ) ( 8,545 )

Other income (expense) ( 6 ) —

Gain on disposal of business 21,861 —

Net income (loss) from discontinued operations $ 12,348 $ ( 8,545 )

General and administrative expenses were negative for the year ended December 31, 2023 due to the reversal of compensation expense for unvested awards that were cancelled due to the termination of employees subsequently hired by GeneFab.

Stockholders’ Equity (Deficit).

The following table summarizes the cash flow information of the discontinued operations (in thousands):

Years Ended December 31,

Operating activities (noncash adjustments to net income):

Depreciation $ 185 $ 31

Stock-based compensation expense ( 2,022 ) 830

Gain on disposal of business

Investing activities:

Purchases of property and equipment ( 4,079 ) ( 1,670 )

Supplemental disclosures of noncash investing items:

Purchases of property and equipment in accounts payable and accrued expenses — 3,135

________________

(1) The total consideration received of $ 37.8 million is a non-cash investing activity.

Fair Value Measurements

Cash Equivalents, Restricted Cash and Short-term Investments

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

Cash $ 4,205 $ — $ — $ 4,205 $ 4,205 $ — $ —

Money market funds $ 35,243 $ — $ — $ 35,243 $ 31,721 $ 3,522 $ —

Subtotal 35,243 — — 35,243 31,721 3,522 —

Total $ 39,448 $ — $ — $ 39,448 $ 35,926 $ 3,522 $ —

December 31, 2022

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

Money market funds $ 45,412 $ — $ — $ 45,412 $ 42,046 $ 3,366 $ —

Subtotal 45,412 — — 45,412 42,046 3,366 —

Treasury securities $ 14,866 $ 4 $ ( 3 ) $ 14,867 $ — $ — $ 14,867

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Total $ 101,928 $ 5 $ ( 4 ) $ 101,929 $ 57,621 $ 3,366 $ 40,942

December 31, 2021

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

Money market funds $ 59,291 $ — $ — $ 59,291 $ 56,034 $ 3,257 $ —

Total $ 59,291 $ — $ — $ 59,291 $ 56,034 $ 3,257 $ —

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

No securities have contractual maturities of longer than one year.

There were no transfers between Levels 1, 2, or 3 for any of the periods presented.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Contingent Earnout Liability

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Fair value as of December 31, 2022

Contingent earnout liability recognized upon the closing of the reverse recapitalization ( 9,688 )

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

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Refer to Note 8, Stockholders’ Equity (Deficit) , for further details of the Contingent Earnout.

Refer to Note 9.

Stockholders’ Equity (Deficit) , for further details of the Contingent Earnout.

GeneFab Note Receivable

The following table presents a summary of the changes in the fair value of the GeneFab Note Receivable (in thousands):

Note Receivable

Initial recognition as of August 7, 2023

Change in fair value included in other income (expense) 626

Fair value as of December 31, 2023

The fair value of the GeneFab Note Receivable is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

The GeneFab Note Receivable is presented within GeneFab receivable on the consolidated balance sheet.

The Company has elected to account for the GeneFab Note Receivable under the fair value option in ASC 825, with changes in fair value reported as a component of other income (expense) in the consolidated statements of operations and comprehensive loss.

The fair value of the GeneFab Note Receivable was determined by discounting future payments under multiple probability-weighted scenarios using the GeneFab’s cost of borrowing, which was estimated at 13.72 % as of the initial recognition date, to 12.53 % as of December 31, 2023 based on published CCC-rated corporate bond yields.

GeneFab Option

The following table presents a summary of the changes in the fair value of the GeneFab Option (in thousands):

GeneFab Option

Initial recognition as of August 7, 2023 $ ( 9,649 )

Change in fair value included in other income (expense) 3,318

Fair value as of December 31, 2023

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

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Preferred Stock Tranche Liability

The following table provides a roll-forward of the change in the preferred stock tranche liability (in thousands):

Preferred Stock Tranche Liability

Balance as of December 31, 2020 $ 435

Recognition of tranche rights from January 2021 issuance 33

Change in fair value 14,742

Tranche liability extinguishment ( 15,210 )

Balance as of December 31, 2021 $ —

The subsequent fair values of the preferred stock tranche liability recognized in connection with the issuance of Series B redeemable convertible preferred stock were determined with the assistance of a third-party valuation specialist using significant inputs not observable in the market which constitute Level 3 measurements within the fair value hierarchy.

The following reflects the significant quantitative inputs used in the valuation of the preferred stock tranche liability as of December 31, 2020 using a Monte Carlo valuation model and/or Black-Scholes option pricing model:

December 31, 2020

Subsequent Measurement Dates

Tranche Features 2 and 3 Call Option Tranche 2 and 3 Forward Contracts

Estimated fair value of Series B redeemable convertible preferred stock (1)

$ 1.62 $ 1.62

Discount rate 0.11 % 0.11 %

Time to liquidity (years) 0.5 0.5

Expected volatility 73.8 % N/A

Probability of call option and forward contract 10 % 90 %

Strike Price $ 1.6427 $ 1.6427

Value of each tranche feature $ 0.326 $( 0.023 )

In determining the fair value of the GeneFab Option, the Company used a Black-Scholes option pricing model.

The significant assumptions utilized in the valuation are described below:

December 31, August 7

Current stock price $ 0.66 $ 0.90

Expected volatility 98.1 % 86.0 %

Risk-free interest rate 4.12 % 4.44 %

Expected term (years) 2.5 3.0

GeneFab Economic Share

The following table presents a summary of the changes in the fair value of the GeneFab Economic Share (in thousands):

GeneFab Economic Share

Initial recognition as of August 7, 2023

Change in fair value included in other income (expense) 16

Fair value as of December 31, 2023

The fair value of the GeneFab Economic Share is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

The Company has elected to account for the GeneFab Economic Share under the fair value option in ASC 825, with changes in fair value reported as a component of other income (expense) in the consolidated statements of operations and comprehensive loss.

In determining the fair value of the GeneFab Economic Share, the Company used the option pricing method, which allocates total estimated enterprise value to various classes of equity using the Backsolve method.

The significant assumptions utilized in the valuation are described below:

December 31, August 7

GeneFab equity value (in thousands)

$ 35,448 $ 37,314

(1) Fair value of the Series B redeemable convertible preferred stock was estimated using the Backsolve method.

The weighted-average fair value of the tranche features on a per share basis was $ 0.012 as of December 31, 2020 for a preferred stock tranche liability of $ 0.4 million as of December 31, 2020.

In January 2021, the Company issued additional Series B redeemable convertible preferred stock and recorded an addition to the tranche liability of $ 33 thousand in recognition of the obligation to sell additional shares at a fixed price in the event that certain agreed-upon milestones are achieved or at the election of investors.

In April 2021, the Company’s Board of Directors determined that certain technical milestones within the Series B agreements had been achieved and approved the notice to call tranches 2 and 3, subject to requisite stockholders’ written election and related waivers.

The second and third closings occurred on May 14, 2021 and all shares of the Series B redeemable convertible preferred stock were acquired thereby extinguishing the preferred stock tranche liability.

The $ 15.2 million value of the preferred stock tranche liability as of May 14, 2021 was determined using the current value method as both tranches were called by the Company and were extinguished.

The following reflects the significant quantitative inputs used in the valuation of the preferred stock tranche liability as of May 14, 2021

Volatility 65.8 % 54.0 %

Risk free rate 3.93 % 4.23 %

Expected term 4.0 4.5

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

using a weighted comparable guideline IPO (high and low) and special purpose acquisition company (“SPAC”) transactions for the public scenario and the Black-Scholes pricing model for the staying-private scenario:

Tranches 2 and 3

Public Scenario Staying-Private Scenario

Estimated fair value of Series B redeemable convertible preferred stock $ 2.18 $ 1.58

Scenario weighting 75.0 % 25.0 %

Value of each tranche feature $ 1.637 $ 0.395

Weighted-average value of Series B redeemable convertible preferred stock $ 2.032

The extinguishment of the preferred stock tranche liability as of May 14, 2021 resulted in a gain of $ 14.7 million being recognized in the consolidated statement of operations and comprehensive loss.

Other Financial Statement information

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Deposits 42 1,209

Reverse Recapitalization deferred offering costs — 1,446

Other 195 101

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Property and equipment, net $ 25,338 $ 51,361

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

As a result of the change in the manner in which the Company expects to recover the assets associated with the lease on the Alameda facility (refer to Note 4.

GeneFab Transaction ), the ROU asset and the related leasehold improvements became a separate asset group for the purposes of long-lived asset impairment assessment as of August 7, 2023.

This asset group reassessment triggered a need to perform an impairment analysis.

The Company concluded that the asset group was not recoverable, as the carrying value of the asset group was less than the sum of undiscounted net cash flows expected to be generated from the use of the asset group.

The Company tested the asset group for impairment and recognized an impairment loss in the amount of $ 25.7 million during the year ended December 31, 2023, representing the difference between the carrying value of the asset group of $ 54.6 million and its estimated fair value of $ 28.9 million, determined based on the discounted cash flows expected to be generated from the use of the asset group through the sublease.

Further, the Company determined that the individual fair value of the ROU asset within the asset group exceeded its carrying value as of the impairment testing date.

Accordingly, the Company allocated the entire impairment loss to the leasehold improvements associated with the Alameda lease.

The adjusted carrying value of the leasehold improvements of $ 20.1 million will be amortized under the existing accounting policy under ASC 842, Leases (“ASC 842”) on a straight-line basis over the remaining lease term.

Depreciation totaled $ 3.4 million and $ 1.4 million for the years ended December 31, 2023 and 2022, respectively.

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Operating Leases

Lessee Accounting

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”).

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The exercise of these renewal options is not recognized as part of the ROU assets and lease liabilities, as the Company did not conclude, at the commencement date of the leases, that the exercise of renewal options or termination options was reasonably certain.

The Alameda lease provides for a tenant improvement allowance of up to $ 17.5 million for the costs relating to the design, permitting and construction of the improvements, to be disbursed by the landlord no later than December 31, 2023.

The Company is deemed to be the accounting owner of the tenant improvements primarily because the Company is the principal in the construction and design of the assets, is responsible for costs overruns and retains substantially all economic benefits from the leasehold improvements over their economic lives .

Accordingly, the tenant improvement allowance is considered an incentive and was deducted from the initial measurement of the ROU asset and lease liability.

The Alameda lease provided for a tenant improvement allowance of up to $ 17.5 million for the costs relating to the design, permitting and construction of the improvements, to be disbursed by the landlord no later than December 31, 2023.

The Company was deemed to be the accounting owner of the tenant improvements primarily because the Company is the principal in the construction and design of the assets, is responsible for costs overruns and retains substantially all economic benefits from the leasehold improvements over their economic lives .

Accordingly, the tenant improvement allowance was considered an incentive and was deducted from the initial measurement of the ROU asset and lease liability.

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.

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

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

Years Ended December 31,

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Total lease cost $ 6,488 $ 6,111

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Years Ended December 31,

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Weighted-average discount rate 9.2 % 9.1 %

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

For the year ended December 31, 2022, the Company received $ 14.1 million of the $ 17.5 million tenant improvement allowance.

For the years ended December 31, 2023 and 2022, the Company received $ 3.4 million and $ 14.1 million, respectively, of the $ 17.5 million tenant improvement allowance.

Through December 31, 2023, the Company has received the full $ 17.5 million tenant improvement allowance inception-to-date.

As of December 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.

3 unchanged sentences

Less imputed interest ( 15,028 )

Tenant improvement allowance remaining ( 3,344 )

Total lease liabilities $ 37,569

As of December 31, 2023, we had one letter of credit held with JPMorgan Chase Bank in the amount of approximately $ 2.9 million and one letter of credit with Silicon Valley Bank, or SVB, in the amount of approximately $ 0.5 million related to our facility leases.

Lessor Accounting

In connection with the GeneFab transaction, on August 7, 2023, the Company entered into a sublease with GeneFab to sublease the facility included in the Alameda lease, expiring in September 2032.

Total sublease income to be earned from this operating lease, in aggregate, will be approximately $ 44.1 million over the term of the sublease agreement.

Sublease income was $ 2.0 million for the year ended December 31, 2023.

Variable sublease income was $ 0.3 million for the year ended December 31, 2023.

The Company records sublease income in other income (expense) in the consolidated statements of operations and comprehensive loss.

Refer to Note 16.

Related Parties for GeneFab related party considerations.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Maturities of the Company’s sublease payments from GeneFab as of December 31, 2023, were as follows (in thousands):

Thereafter 18,295

Total undiscounted sublease payments $ 41,365

Convertible Note

12 unchanged sentences

On June 8, 2022, concurrently with the closing of the Merger, 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.

In accordance with the accounting guidance for an extinguishment of convertible debt instruments with a conversion feature that is separately accounted for as a derivative, the Company determined that the cancellation and exchange should be accounted for as an extinguishment of the May 2022 Note and a gain on extinguishment of $ 1.3 million was recorded at the closing of the Merger and all accrued interest at the time of the Merger was reversed and recorded to additional paid in capital.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Stockholders’ Equity (Deficit)

8 unchanged sentences

Total 19,517,990 19,517,988 $ 171,833 $ 163,834

In connection with the Merger, all previously issued and outstanding redeemable convertible preferred stock was converted into an equivalent number of shares of common stock of the Company on a one -to-one basis, then multiplied by the Exchange Ratio pursuant to the Merger Agreement.

In connection with the Merger, all previously issued and outstanding redeemable convertible preferred stock was converted on June 8, 2022 into an equivalent number of shares of common stock of the Company on a one -to-one basis, then multiplied by the Exchange Ratio pursuant to the Merger Agreement.

Refer to Note 3, Reverse Recapitalization, for further details of the Merger.

3 unchanged sentences

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

At December 31, 2022 and December 31, 2021, the Company was authorized to issue 500,000,000 and 27,006,600 shares of common stock, respectively all at a par value of $ 0.0001 per share, and had reserved the following shares for future issuance:

At December 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:

Series A and B redeemable convertible preferred stock — —

1 unchanged sentence

Common stock options issued and outstanding 11,582,938 9,875,675

Restricted stock units outstanding 225,282 447,948

Common stock shares available for future issuance under equity plans 3,672,276 2,948,472

Common stock shares available for future issuance under the 2022 Employee Stock Purchase Plan (the "ESPP") 336,320 481,627

Contingent earnout common stock 2,000,000 2,000,000

GeneFab Option 19,633,444 —

Unvested early exercised common stock 54,860 105,500

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On June 8, 2022, upon the Closing, all of the outstanding redeemable convertible preferred stock was converted to Common Stock pursuant to the conversion rate effective immediately prior to the Merger and the Exchange Ratio and the remaining amount was reclassified to additional paid-in capital.

Refer to Note 3, Reverse Recapitalization, for further details of the Merger.

Refer to Note 3.

Reverse Recapitalization, for further details of the Merger.

SENTI BIOSCIENCES, INC.

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

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

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

Common Stock Purchase Agreement

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

The Company recognized an expense of $ 0.7 million within general and administrative expenses in the Company’s 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 as of December 31, 2022 aggregating to net proceeds of $ 0.7 million under the Common Stock Purchase Agreement.

The Company recognized an expense of $ 0.7 million within general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss for the Chardan related costs and legal fees incurred in connection with the execution of the agreement.

Other than the issuance of the commitment shares of the Company’s common stock to Chardan, the Company issued 1,300,000 Class A common stock through December 31, 2023 aggregating to net proceeds of $ 1.2 million under the Common Stock Purchase Agreement.

Contingent Earnout Equity

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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 December 31, 2022, resulting in the recording of a

The Contingent Earnout Liability was remeasured to fair value, resulting in the recording of a non-cash gain of

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

non-cash gain of $ 9.5 million for the year ended December 31, 2022, classified within change in fair value of contingent earnout liability in the consolidated statements of operations and comprehensive loss.

$ 0.2 million for the year ended December 31, 2023 and non-cash gain of $ 9.5 million for the year ended December 31, 2022, classified within change in fair value of contingent earnout liability in the consolidated statements of operations and comprehensive loss.

Assumptions used in the valuation are described below:

June 08, 2022 December 31, 2022

Current stock price $ 0.66 $ 1.41

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Contract Revenue

In May 2019, the Company entered into a collaborative development agreement.

The Company determined that the agreement contained three distinct promises;

research and development, design services, and intellectual property, which will be accounted for as a single combined performance obligation of research and development services recognized over time.

The development agreement included $ 0.3 million of fixed consideration allocated to a single performance obligation and an additional $ 0.3 million of variable consideration.

At the inception of the development agreement, it was not probable that a significant reversal of revenue would not occur and therefore the variable consideration was fully constrained.

Throughout the development agreement period, several parameters of the research and development services were changed, which increased the uncertainty of achieving the remaining performance obligations.

Therefore, in December 2021, the contract asset of $ 0.3 million was reversed due to this increased uncertainty.

In April 2021, the Company entered into a research collaboration and license agreement with Spark Therapeutics, Inc.

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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 December 31, 2022, there is a total of $ 0.8 million 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.

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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

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

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 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.

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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.

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.

Based on the Company’s assessment of the optional consideration and the qualitative factors of feasibility and probability of

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

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.

For both collaboration agreements, the Company will recognize the transaction price as research and development services are provided, using a cost-based input method to measure the progress toward completion of its performance obligation and to calculate the corresponding amount of revenue to recognize each period.

For the Spark collaboration agreement, the Company will recognize the transaction price as research and development services are provided, using a cost-based input method to measure the progress toward completion of its performance obligation and to calculate the corresponding amount of revenue to recognize each period.

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 years ended December 31, 2022 and 2021, the Company recorded revenue, which was previously included in the deferred revenue at the beginning of each period, of $ 1.0 million and zero , respectively.

Contract asset balances related to unbilled revenue for our collaboration agreements were zero as of December 31, 2022 and 2021, and are presented within prepaid expenses and other current assets on the consolidated balance sheets.

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.

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 there were no changes to performance obligations and the services to be provided are not distinct from those already transferred, the transaction was accounted for as a contract modification with no cumulative catch-up necessary.

In July 2023, the Company completed the research program under the research collaboration and license agreement with Spark and the remaining upfront payment was recognized.

As of December 31, 2023 there was no remaining upfront payment and as of December 31, 2022 there was $ 0.8 million remaining of the upfront payment to be recognized over the remaining period of the research program.

In November 2023, the Company entered into a Collaboration and Option Agreement with Celest Therapeutics (Shanghai) Co.

Subject to the terms and conditions of the Agreement, the Company and Celest will enter into a collaboration under which Celest will lead a pilot trial of a candidate product for the SENTI-301A program in mainland China, with certain technical support from the Company.

In addition, the Company agreed to grant an exclusive option to enter a license agreement with Celest to research, develop, manufacture and commercialize SENTI-301A in mainland China, Hong Kong, Macau, and Taiwan.

Outside of these jurisdictions, the Company would retain its rights in the SENTI-301A program.

Pursuant to the Agreement, with the exercise of the option and entering into a license agreement, the Company may become eligible to receive certain option exercise fee and milestone payments, in an aggregate amount of $ 156.0 million, as well as certain tiered royalty payments.

For the years ended December 31, 2023 and 2022, the Company recorded revenue, which was previously included in the deferred revenue at the beginning of each period, of $ 0.8 million and $ 1.0 million, respectively.

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.

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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.

In August 2023, the Company completed the research and development project which was the subject of the SBIR grant.

Entity-wide information

During the years ended December 31, 2022, Customers A and B accounted for 77 % and 23 %, respectively, of revenue.

During the years ended December 31, 2021, when excluding the $ 0.3 million contract asset reversal for Customer C, Customers A and B accounted for 84 % and 16 %, respectively, of revenue.

During both years ended December 31, 2023 and 2022, Customers A and B accounted for 77 % and 23 %, respectively, of revenue.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

All revenues were generated in the United States for the years ended December 31, 2023 and 2022.

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The Company’s 2016 Stock Incentive Plan (the “2016 Plan”) provides for the grant of incentive stock options, non-qualified stock options and restricted stock awards to employees, directors, and consultants of the Company.

Stock options granted under the 2016 Plan generally vest over four years and expire no later than ten years after the grant date.

Following the Merger, the 2016 Plan was terminated.

No additional stock awards will be granted under the 2016 Plan.

All awards previously granted and outstanding as of the effective date of the Merger, were adjusted to reflect

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

the impact of the Merger as described in Note 3, Reverse Recapitalization, but otherwise remain in effect pursuant to their original terms.

All awards previously granted and outstanding as of the effective date of the Merger, were adjusted to reflect the impact of the Merger, but otherwise remain in effect pursuant to their original terms.

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.

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The exercise price of an options 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.

Awards granted under the 2022 Inducement Plan expire no later than ten years after the grant date.

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

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

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

As of December 31, 2023, the total number of shares of common stock available for issuance under the 2022 Inducement Plan is 1,252,913 .

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The Company’s ESPP operates with rolling offering periods, which are generally 24 months.

On November 15, 2023, upon termination of the then-current offering period in accordance with the terms of the ESPP, the Company suspended the ESPP and no new offering periods may commence under the ESPP until such time as later authorized by the Company.

The Company initially reserved 592,584 shares of common stock for issuance under the ESPP.

On the first day of each year commencing January 1, 2023, the 2022 Plan will automatically increase by 1 % of the outstanding

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

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.

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.

As of December 31, 2023, the total number of shares of common stock available for issuance under the ESPP is 336,320 .

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Granted 2,914,196 $ 1.60

Exercised ( 199,839 ) $ 2.49

Forfeited ( 869,943 ) $ 3.33

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Early Exercise of Stock Options into Restricted Stock

For the years ended December 31, 2022 and 2021, the Company issued zero and 512,670 shares of common stock upon exercise of unvested stock options, respectively.

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

As of December 31, 2023 and December 31, 2022, 54,860 and 105,500 shares were held by employees subject to repurchase at an aggregate price of $ 0.1 million and $ 0.3 million, respectively.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Performance Awards

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Upon the Merger, the Company increased the number of shares authorized and 6,796,074 awards were granted on June 8, 2022.

Refer to Note 8, Stockholders’ Equity (Deficit), for further details of the shares of common stock authorized.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Number of Options Weighted-Average Exercise Price Weighted-Average

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Outstanding at December 31, 2022

5,368,501 $ 9.92 9.0 $ —

Granted — $ —

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2,009,756 $ 9.92 7.3 $ —

The weighted-average grant date fair value of options granted during the year ended December 31, 2022 was $ 4.47 .

There were no performance based options granted or exercised during the year ended December 31, 2023, and there were 6,796,074 performance based options granted and no performance based options exercised during the year ended December 31, 2022.

As of December 31, 2023, the unrecognized stock-based compensation expense related to performance awards was approximately $ 3.6 million, expected to be recognized over a weighted-average period of 1.52 years.

Market Awards

In connection with the Business Combination Agreement with DYNS, on December 19, 2021, Legacy Senti approved 605,451 market awards to its co-founder and Chief Executive Officer, Dr.

In connection with the Merger, on December 19, 2021, Legacy Senti approved 605,451 market award options to its co-founder and Chief Executive Officer, Dr.

Timothy Lu, that vest contingent upon the satisfaction of all three of the following conditions:

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The market condition is achieved in four tranches, where 25 % of the options will vest when the trading price of the Company’s stock is above various thresholds of price per share.

The award and the associated recognition of stock-based compensation expense are contingent on the Merger being consummated.

The award and the associated recognition of stock-based compensation were contingent on the Merger being consummated.

The estimated fair value of the market awards at the grant date was based on a Monte Carlo simulation valuation model.

As of the approval date, Legacy Senti did not have sufficient common stock available for issuance to allow for exercise of the stock options.

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

Refer to Note 8, Stockholders’ Equity (Deficit), for further details of the shares of common stock authorized.

The weighted-average grant date fair value of options granted during the year ended December 31, 2022 was $ 3.77 .

Through December 31, 2023 , these market awards did not meet the vesting thresholds.

The were no market based options granted or exercised during the year ended December 31, 2023, and there were 315,748 market based options granted and no market based options exercised during the year ended December 31, 2022.

As of December 31, 2023, the unrecognized stock-based compensation expense related to market awards was approximately $ 0.2 million, expected to be recognized over a weighted-average period of 0.63 years.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Restricted Stock Units

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Outstanding at December 31, 2022

Granted 447,948 $ 2.50

447,948 $ 2.50

Forfeited ( 222,666 ) $ —

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As of December 31, 2023, the unrecognized stock-based compensation expense related to restricted stock units was approximately $ 0.2 million, expected to be recognized over a weighted-average period of 0.72 years.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Stock-Based Compensation Expense

In determining the fair value of the stock-based awards, the Company uses the assumptions below for the Black-Scholes option pricing model, which are subjective and generally require significant judgment.

The Company estimates the fair value of stock options using a Black-Scholes option-pricing model.

The fair value of restricted stock is based on the fair value of the Company’s common stock on the grant date.

The Company uses the assumptions below for the Black-Scholes option pricing model, which are subjective and generally require significant judgment.

Fair Value of Common Stock — The fair value of the shares of common stock has historically been determined by the Company’s board of directors as there was no public market for the common stock.

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Therefore, the Company uses an expected dividend yield of zero.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

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:

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Dividend yield — —

The assumptions used to determine the per-share fair value of shares to be granted under the ESPP were as follows:

Years Ended December 31,

Fair value per share $ 0.85 —

Fair value per share of Common Stock $ 1.63 —

Expected term (in years) 1.3 0

Expected volatility 88.2 % —

Risk-free interest rate 3.8 % —

Dividend yield — —

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

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

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Total stock-based compensation expense $ 11,692 $ 15,562

In August 2023, in connection with the GeneFab transaction, the Company’s board of directors approved the modification of equity awards as part of termination of employment for the Co mpany's employees transferred to GeneFab, including the Company’s Chief Technology Officer.

The award modifications included the acceleration of certain non-vested stock options and the extension of the post-termination exercise period of certain vested stock options.

The Company accounted for the award modifications under ASC 718, Compensation – Stock Compensation .

During year ended December 31, 2023, the Company recorded a one-time, noncash incremental compensation expense net of the required reversal of previously recognized compensation attributed to non-vested awards in the amount of $ 2.0 million related to the equity awards modifications of the employees that were extended offers of employment by GeneFab which was included in net income from discontinued operations in the consolidated statements of operations and comprehensive loss.

Total stock-based compensation expense from discontinued operations was $( 2.0 ) million and $ 0.8 million for the years ended December 31, 2023 and 2022, respectively.

The Company did not record any income tax expense or benefit during the years ended December 31, 2023 and 2022.

The Company has a net operating loss and has provided a valuation allowance against net deferred tax assets due to uncertainties regarding the Company’s ability to realize these assets.

For the calendar years ended December 31, 2022 and 2021, the tax effects of significant items comprising the Company's deferred taxes are as follows:

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

For the calendar years ended December 31, 2023 and 2022, the tax effects of significant items comprising the Company's deferred taxes are as follows (in thousands):

Years Ended December 31,

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Net operating losses $ 33,566 $ 25,249

Lease liability 7,789 6,350

Tax credits 6,053 4,915

Capitalized R&D Section 174 expense 10,146 5,131

Tax credits 9,237 6,053

Lease liability 6,005 7,789

Stock-based compensation 4,785 683

Accruals and reserves 724 756

Related Party Fair Value Adjustment 346 —

Fixed asset basis — 259

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For the years ended December 31, 2023 and 2022, the Company did not record an income tax provision.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Net operating losses and tax credit carryforwards as of December 31, 2023 are as follows (in thousands):

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Tax credits, state $ 5,605 Do Not Expire

Net operating losses, foreign $ 1,149 Do Not Expire

Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions.

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The Company has not performed an analysis to determine the limitation of our net operating loss carryforwards.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

The effective tax rate of the Company's provision (benefit) for income taxes differs from the federal statutory rate as follows:

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The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months.

The Company files income tax returns in the U.S.

federal and California tax jurisdictions.

The Company files income tax returns in federal and various state jurisdictions where a filing obligation has been determined.

The federal and state income tax returns from inception to December 31, 2023 remain subject to examination.

The Company had $ 2.1 million of unrecognized tax benefits as of December 31, 2023.

No liability related to uncertain tax positions is recorded on the financial statements as all uncertain tax positions are currently recorded as a reduction to the Company’s deferred tax assets, which are subject to a valuation allowance.

If recognized, none of the unrecognized tax benefits would affect the effective tax rate.

The Company does not anticipate the total amounts of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

No positions were settled with tax authorities in 2023 and no positions were reduced as a result of a lapse of applicable statutes of limitations.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes, as necessary.

The Company did not recognize any accrued interest and penalties related to gross unrecognized tax benefits related to the year ended December 31, 2023.

A reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2023 and 2022 is as follows (in thousands):

Years Ended December 31,

Balance at beginning of the year $ 1,643 $ 1,252

Decrease related to prior year tax positions ( 243 ) ( 109 )

Increase related to current year tax positions 676 500

Balance at end of the year $ 2,076 $ 1,643

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Net Loss Per Share

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:

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 (in thousands, except share and per share amounts):

Years Ended December 31,

Net loss from continuing operations $ ( 83,406 ) $ ( 49,665 )

Net income (loss) from discontinued operations 12,348 ( 8,545 )

Net loss $ ( 71,058 ) $ ( 58,210 )

Weighted-average shares used in computing net loss per share, basic and diluted 44,372,223 26,110,785

Net loss per share from continuing operations, basic and diluted $ ( 1.88 ) ( 1.90 )

Net income (loss) per share from discontinued operations, basic and diluted 0.28 ( 0.33 )

Net loss per share attributable to common stockholders, basic and diluted $ ( 1.60 ) $ ( 2.23 )

$ ( 2.23 ) $ ( 19.00 )

SENTI BIOSCIENCES, INC.

Notes to 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):

Years Ended December 31,

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

Stock options to purchase common stock 11,582,938 9,875,675

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Contingent earnout common stock 2,000,000 2,000,000

GeneFab Option 19,633,444 0

Total 33,496,524 12,429,123

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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.

Refer to Note 6, Operating Leases , for further details of the leases.

Refer to Note 7.

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 December 31, 2022 the Company paid $ 35.5 million in construction costs of the $ 42.1 million purchase commitment.

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

Upon termination, the Company will be responsible for payment for work performed to date.

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 15, Related Parties , for further details of the related parties.

Refer to Note 16.

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

Parties , for further details of the related parties.

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.

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

In connection with 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

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

1,000,000 shares of common stock per tranche.

Refer to Note 8, Stockholders’ Equity (Deficit), for further details of the contingent earnout liability.

Refer to Note 9.

Stockholders’ Equity (Deficit), for further details of the contingent earnout liability.

Legal Proceedings

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Related Parties

Preferred Stockholders

The Company issued Series A convertible redeemable preferred stock and Series B redeemable convertible preferred stock in February 2018 and October 2020, respectively, to certain related parties, including New Enterprise Associates 15, L.P.

and its affiliates (“NEA”) and 8VC and its affiliates (“8VC”).

In February 2018, the outstanding convertible notes held by NEA and 8VC, as well as Dr.

Timothy Lu, our Chief Executive Officer, converted into additional shares of Series A redeemable convertible preferred stock while in October 2020, the outstanding convertible notes held by NEA and 8VC converted into additional shares of Series B redeemable convertible preferred stock, both in accordance with the terms of the note agreements.

On June 8, 2022, in conjunction with the Merger, each outstanding share of preferred stock of Legacy Senti was cancelled and converted into the aggregate number of shares of the Company’s 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 the Exchange Ratio, rounded down to the nearest whole share.

As of December 31, 2022, no shares of preferred stock remain outstanding.

NEA held 4,429,725 and zero shares of common stock as of December 31, 2022 and December 31, 2021, respectively.

NEA held zero and 2,642,934 shares of outstanding Series A redeemable convertible preferred stock as of December 31, 2022 and December 31, 2021, respectively, as well as zero and 536,791 shares of outstanding Series B redeemable convertible preferred stock, respectively.

NEA held one of the seven seats on the Company’s Board of Directors as of December 31, 2022 and December 31, 2021.

NEA held 4,426,151 shares of common stock as of December 31, 2023 and 2022.

NEA held one of the six seats and one of the seven seats on the Company’s board of directors as of December 31, 2023 and 2022, respectively.

Bayer Healthcare LLC

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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.

Refer to Note 7, Convertible Note , for further details of the convertible note.

Refer to Note 8.

Convertible Note , for further details of the convertible note.

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.

The Company is responsible for up to $ 10 million in costs and expenses incurred in

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

The Company is responsible for up to $ 10 million in costs and expenses incurred in connection with the research plan and related activities to be conducted over a term of three years as specified in the collaboration and option agreement.

connection with the research plan and related activities to be conducted over a term of three years as specified in the collaboration and option agreement.

If the Company and BlueRock agree to add new research activities to the research plan, then BlueRock will be obligated to reimburse the Company for the costs and expenses incurred that, together with costs and expenses incurred under the initial research plan, exceed $ 10 million.

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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 December 31, 2022, Bayer held 5,878,488 shares of the Company’s common stock.

As of December 31, 2021, Bayer held 5,360,988 shares of Series B redeemable convertible preferred stock and held one of the seven seats on the Board of Directors of Legacy Senti.

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 December 31, 2023 and 2022.

Accordingly, Bayer is considered a related party.

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 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.

As a result of the transaction with GeneFab (refer to Note 4.

GeneFab Transaction ), the Company received the GeneFab Note Receivable and the GeneFab Economic Share and provided GeneFab with the GeneFab Option.

Refer to Note 5.

Fair Value Measurements.

The Company also subleased its manufacturing facility in Alameda to GeneFab and recorded sublease income of $ 2.3 million including variable costs charged for the year ended December 31, 2023.

As of December 31, 2023, the Company had $ 1.5 million of charges related to the Transition Services Agreement, sublease rent and other charges due from GeneFab which are included in GeneFab receivable on the consolidated balance sheet.

In connection with the services agreement entered into with GeneFab, the Company is entitled to $ 18.9 million for future services under the agreement, of which $ 14.8 million remained in GeneFab prepaid expenses as of December 31, 2023.

Additionally, amounts due from GeneFab related to costs incurred by the Company on its behalf were $ 1.4 million as of December 31, 2023 and were recorded in GeneFab receivable on the consolidated balance sheet.

The Company incurred $ 3.1 million of research and development expenses under the services agreement during the year ended December 31, 2023.

Based on the intricacies of the GeneFab Transaction noted above and in Note 4.

GeneFab Transaction , we have determined that GeneFab is a related party.

Subsequent Events

Reduction in Force

On January 5, 2024, the Company announced a reduction of approximately 37 % of its workforce in connection with the Company’s plans to streamline its business operations to enable increased focus on SENTI-202 and to

SENTI BIOSCIENCES, INC.

Notes to Consolidated Financial Statements

continue with the clinical development of its SENTI-301A program through a partnership in China.

The Company incurred certain one-time estimated severance and related costs as part of this resource allocation effort.

NASDAQ Bid Price Compliance Notice

On January 23, 2024, the Company received written notice from the Listing Qualifications Department granting the Company its request to transfer the listing of its common stock from The Nasdaq Global Market tier to The Nasdaq Capital Market tier, effective January 25, 2024.

On February 6, 2024, the Listing Qualifications Department granted the Company’s request for a second 180-calendar day period, or until August 5, 2024, to regain compliance with the $1.00 bid price requirement.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data