What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2023-11-14 · 84 added, 190 removed, 229 unchanged (54% of the section changed)

18 unchanged sentences

Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Senti is a preclinical biotechnology company developing next-generation cell and gene therapies engineered with its gene circuit platform technologies to fight challenging diseases.

Senti’s mission is to create a new generation of smarter therapies that can outmaneuver complex diseases in ways previously not implemented by conventional medicines.

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

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

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

Senti’s lead product candidates utilize allogeneic chimeric antigen receptor (“CAR”) NK cells outfitted with its gene circuit technologies in several oncology indications with currently high unmet needs.

Senti remains on track for having the Investigational New Drug (IND) application for SENTI-202 cleared by the FDA in the fourth quarter of 2023..

We have incurred net losses of $14.9 million and $16.6 million for the three months ended September 30, 2023 and 2022, respectively and $52.3 million and $40.0 million for the nine months ended September 30, 2023 and

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.

To accomplish this mission, Senti has built a synthetic biology platform that it believes may enable it to program next-generation cell and gene therapies with gene circuits.

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

Using gene circuits, Senti’s product candidates are designed to precisely kill cancer cells, spare healthy cells, increase specificity to target cells and control the expression of drugs even after administration.

Senti is applying its gene circuit technologies to develop a pipeline of medicines that use off-the-shelf chimeric antigen receptor natural killer (“CAR-NK”) cells with the goal of addressing major challenges and providing potentially lifesaving treatments for people living with cancer.

Senti’s lead product candidates utilize off-the-shelf healthy adult donor derived NK cells to create CAR-NK cells outfitted with its gene circuit technologies in several oncology indications with high unmet need.

We have incurred net losses of $12.1 million and $18.7 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $23.7 million and $35.9 million, respectively, and an accumulated deficit of $256.5 million and $244.3 million,

respectively.

As of September 30, 2023 and December 31, 2022, we had cash, cash equivalents and short-term investments of $39.4 million and $98.6 million, respectively, and an accumulated deficit of $225.6 million and $173.3 million, respectively.

Net cash flows used in operating activities were $45.4 million and $25.9 million during the nine months ended September 30, 2023 and 2022, respectively.

Net cash flows used in operating activities were $11.7 million and $16.3 million during the three months ended March 31, 2024 and 2023, respectively.

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

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• continue preclinical development of our current and future product candidates and initiate additional preclinical studies;

• fund clinical development of our current product candidates;

• commence clinical studies of our current and future product candidates;

• acquire and license technologies aligned with our gene circuit platform technologies;

• fund manufacturing of our current and future product candidates;

• seek regulatory approval of our current and future product candidates;

7 unchanged sentences

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

In connection with the transaction, we are entitled to receive total consideration of $37.8 million before the end of 2025, of which $18.9 million was payable at closing and was netted against prepayment owed by us for manufacturing and research activities to GeneFab.

In connection with the transaction, we are 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 owed by us for manufacturing and research activities to GeneFab.

The remaining $18.9 million will be paid to us in installments in 2024 and 2025, subject to satisfaction of certain conditions.

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

up to $20.0 million worth) of our common stock at an exercise price of $1.01867 (the “GeneFab Option”).The GeneFab Option is exercisable for a period of 36 months following the execution of the license agreement.

up to $20.0 million worth) of our common stock at a per share exercise price of $1.01867 (the “GeneFab Option”).The GeneFab Option is exercisable for a period of 36 months following the execution of the license agreement.

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

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As the assets and contractual rights transferred to GeneFab were determined to constitute a business as defined in ASC 805, Business Combinations , we accounted for the disposal by applying the derecognition guidance in ASC 810, Consolidations , 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).

In connection with the sale, we recognized a gain on disposal in the amount of $21.9 million in net income from discontinued operations during the three and nine months ended September 30, 2023, representing the excess of the fair value of the consideration received and receivable (net of the portion allocated to the GeneFab Option) over the carrying value of the assets sold of $5.5 million.

In connection with the sale, we 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 received and receivable (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 grant of the non-oncology license to GeneFab which had no carrying value.

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

As a result, we have retrospectively restated our condensed consolidated balance sheet at December 31, 2022 and condensed consolidated statements of operations for the three and nine months ended September 30, 2022 to reflect the assets and liabilities and operating results, respectively, related to the disposed business in discontinued operations.

As a result, we have retrospectively restated our condensed consolidated balance sheet at December 31, 2022 and condensed consolidated statements of operations for the three months ended March 31, 2023 to reflect the assets and liabilities and operating results, respectively, related to the disposed business in discontinued operations.

We have chosen not to segregate the cash flows of the disposed business in the condensed consolidated statements of cash flows.

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Unless otherwise specified, the results of operations refer to continuing operations only.

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 product candidate for our 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, and beginning 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.

In January 2023, we announced a strategic plan to focus internal resources on SENTI-202 and SENTI-401, to develop gene circuits for other programs with potential partners, and to suspend research and development efforts for SENTI-301A.

In January 2024, we announced a strategic plan to streamline business operations and focus our resource allocation to investment on clinical development of SENTI-202, for which an Investigational New Drug (“IND”) application was cleared by the U.S.

Food and Drug Administration (“FDA”) in December 2023, and on the partnership of our SENTI-301A program in China with Celest.

Components of Results of Operations

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Operating Expenses

Our operating expenses consist of research and development expenses, general and administrative expenses, and impairment of property and equipment.

Our operating expenses consist of research and development expenses, general and administrative expenses, and impairment of long-lived assets.

Research and Development Expenses

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• expenses incurred in connection with research, laboratory consumables and preclinical studies;

• the cost of consultants engaged in research and development related services and the cost to manufacture drug products for use in our preclinical studies and clinical trials;

• the cost of consultants engaged in research and development, regulatory, and clinical related services

• the cost to develop our manufacturing process and manufacturing product candidates for use in our research, preclinical studies and clinical trials, including under agreements with third parties, such as consultants, contractors and CMOs;

• facilities, depreciation and other expenses, which include allocated expenses for rent and maintenance of facilities, insurance and supplies;

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We have not historically tracked research and development expenses by program, with the exception of third-party research projects.

We have various ongoing early-stage research and product candidate discovery projects and going forward, we expect to have various products undergoing clinical trials.

Our internal resources, employees and infrastructure are not directly tied to any one research or product candidate discovery project and are typically deployed across multiple projects.

As such, we do not maintain information regarding these costs incurred for these early-stage research and product candidate discovery programs on a project-specific basis.

Our direct external development program expenses reflect external costs attributable to our preclinical development candidates selected for further development as well as investigational new drug applications (“INDs”) and clinical development activities.

Our direct external development program expenses reflect external costs attributable to our preclinical development candidates selected for further development as well as INDs and clinical development activities.

Such expenses include third-party contract costs relating to manufacturing, clinical trial activities, translational medicine and toxicology activities.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

(unaudited) (unaudited)

Personnel-related expenses, including share-based compensation $ 2,500 $ 2,391

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

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

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

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

preclinical development of any of our product candidates.

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

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

3 unchanged sentences

• delays in submitting IND applications or comparable foreign applications, or delays or failures to obtain the necessary approvals from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;

• conditions imposed by the U.S.

Food and Drug Administration (“FDA”) or other regulatory authorities regarding the scope or design of our clinical trials;

• conditions imposed by the FDA or other regulatory authorities regarding the scope or design of our clinical trials;

• delays in enrolling research subjects in clinical trials;

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

(unaudited) (unaudited)

Personnel-related expenses, including share-based compensation $ 3,498 $ 6,758

1 unchanged sentence

Office and facilities 998 334

Depreciation & Amortization 724 182

Insurance 467 505

1 unchanged sentence

Total $ 7,522 $ 9,191

We expect our general and administrative expenses will increase for the foreseeable future to support our increased research and development, manufacturing activities, and preclinical and clinical activities and to reflect increased costs associated with operating as a public company.

These increased costs will likely include increased expenses for audit, legal, regulatory, tax and related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs.

Impairment of Property and Equipment

Impairment of property and equipment relates to the impairment of our leasehold improvements for the Alameda facility subleased to GeneFab as a result of our asset group reassessment which triggered a need to perform an impairment analysis following the closing of the GeneFab transaction.

Other Income (Expense)

1 unchanged sentence

Interest income, net consists of interest earned on our cash and cash equivalents, and short-term investments, if any, held during the year, net of interest expense.

Change in Fair Value of Contingent Earnout Liability

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

Change in Fair Value of GeneFab Note Receivable - related party

The change in fair value of GeneFab note receivable consists of the remeasurement to fair value of the deferred consideration due from GeneFab for which we have elected the fair value option.

The change in fair value of GeneFab Note Receivable consists of the remeasurement to fair value at each reporting period of the deferred consideration due from GeneFab for which we have elected the fair value option.

Change in Fair Value of GeneFab Economic Share - related party

The change in fair value of GeneFab Economic Share is a result of the change in the equity value of GeneFab.

The change in fair value of GeneFab Economic Share is a result of the change in the volatility at each reporting period.

Change in Fair Value of GeneFab Option - related party

The change in fair value of the GeneFab Option consists of the remeasurement to fair value of the derivative liability related to the option provided to GeneFab to acquire up to $20.0 million in shares of our common stock at a purchase price of $1.01867.

Gain on Extinguishment of Convertible Notes

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

GeneFab sublease Income - related party

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Net income (loss) from discontinued operations is summarized below (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Operating expenses:

3 unchanged sentences

Loss from discontinued operations — (4,870)

Other income (expense) (6) — (6) —

Gain on disposal of business 21,861 — 21,861 —

Net income (loss) from discontinued operations $ — $ (4,870)

Results of Operations

Comparison of the Three Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022 (in thousands):

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended

September 30,

2024 2023 Change

6 unchanged sentences

General and administrative 7,522 9,191 (1,669)

Impairment of property and equipment 25,691 — 25,691

Total operating expenses 16,301 16,250 51

8 unchanged sentences

Other income (expense) — (8) 8

Total other income (expense), net 7,261 445 6,816

Total other income, net 4,190 1,112 3,078

Net loss from continuing operations (12,111) (13,852) 1,741

Net income (loss) from discontinued operations 21,692 (2,337) 24,029

Net loss from discontinued operations — (4,870) 4,870

Net loss $ (12,111) $ (18,722) $ 6,611

Contract revenue .

For the three months ended September 30, 2023 and 2022, we generated revenue from contracts and license agreements of $0.3 million and $1.5 million, respectively.

The decrease of $1.3 million was primarily due to decline in services provided under the Spark collaboration agreement.

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

The Company earned no revenue in the three months ended March 31, 2024.

The decrease of $1.0 million was primarily due to completion of services provided under the Spark collaboration agreement in 2023 that did not occur in 2024.

Grant income .

For the three months ended September 30, 2023 and 2022, we generated revenue from grants of $0.1 million and $0.3 million, respectively, from the SBIR SENTI-202 grant funding.

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

The Company earned no revenue from grants in the three months ended March 31, 2024.

Research and development expenses .

Research and development expenses were $9.1 million and $6.5 million for the three months ended September 30, 2023 and 2022, respectively.

The increase o f $2.6 million w as primarily due to an increase of $0.9 million in personnel-related expenses and an increase of $1.7 million in professional services cost.

Research and development expenses were $8.8 million and $7.1 million for the three months ended March 31, 2024 and 2023, respectively.

The increase o f $1.7 million w as primarily due to an increase of $2.6 million in external services and supplies cost offset by a decrease of $0.9 million in office and facilities cost .

General and administrative expenses .

General and administrative expenses were $9.4 million and $10.0 million for the three months ended September 30, 2023 and 2022, respectively.

The decrease of $0.6 million was primarily due to a decrease of $0.3 million in personnel-related expenses and a decrease of $1.3 million in professional services costs, offset by an increase of $0.8 million in depreciation and amortization costs as well as an increase of $0.5 million in facilities costs.

Impairment of property and equipment:

Impairment of property and equipment was $25.7 million for the three months ended September 30, 2023 due to the impairment of our leasehold improvements related to the Alameda facility subleased to GeneFab as a result of our asset group reassessment which triggered a need to perform an impairment analysis following the closing of the GeneFab transaction.

Interest income, net .

Interest income was $0.6 million and $0.5 million for the three months ended September 30, 2023 and 2022, respectively, due to higher average cash balances, as well as an increase in interest rates in the relevant periods.

Change in fair value of contingent earnout liability .

For the three months ended September 30, 2023 and 2022, we recognized no gain and a gain of $0.1 million, respectively.

The decrease of $0.1 million related to the decrease in the fair value of our common stock.

Change in fair value of GeneFab Note Receivable - related party.

For the three months ended September 30, 2023, the change in fair value of GeneFab Note Receivable was a gain of $0.3 million primarily due to the change in the discount rate.

Change in fair value of GeneFab Economic Share - related party.

For the three months ended September 30, 2023, the change in fair value of GeneFab Economic Share was a loss of $0.1 million primarily due to the change in the equity value of GeneFab.

Change in fair value of GeneFab Option - related party.

For the three months ended September 30, 2023, the change in fair value of GeneFab Option was a gain of $5.6 million primarily due to the decrease in the fair value of our common stock, which is a significant input in the measurement of the GeneFab Option.

GeneFab sublease income - related party.

For the three months ended September 30, 2023, sublease income was $0.9 million from the sublease to GeneFab for the Alameda facility.

Net income (loss) from discontinued operations.

Net income from discontinued operations was $21.7 million for the three months ended September 30, 2023, compared to net loss from discontinued operations of $2.3 million for the three months ended September 30, 2022.

The increase was primarily due to the gain of $21.9 million on the disposal of the assets sold to GeneFab and a decrease of $2.3 million in stock-based compensation mainly due to the modification of equity awards for terminated employees.

Comparison of the Nine Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022 (in thousands):

Nine Months Ended

September 30,

2023 2022 Change

Contract revenue $ 1,978 $ 3,477 $ (1,499)

Grant income 583 750 (167)

Total revenue 2,561 4,227 (1,666)

Operating expenses

Research and development (included related party cost of $1,186 and $ -, respectively)

23,028 21,108 1,920

General and administrative 27,871 28,409 (538)

Impairment of property and equipment 25,691 — 25,691

Total operating expenses 76,590 49,517 27,073

Loss from operations (74,029) (45,290) (28,739)

Other income (expense)

General and administrative expenses were $7.5 million and $9.2 million for the three months ended March 31, 2024 and 2023, respectively.

The decrease of $1.7 million was primarily due to a decrease of $3.3 million in personnel-related expenses offset by an increase of $0.7 million in facilities costs, an increase of $0.5 million in depreciation and amortization costs as well as an increase of $0.4 million in professional services costs.

Interest income, net .

Change in fair value of contingent earnout liability 207 8,779 (8,572)

Change in fair value of GeneFab Note Receivable - related party 287 — 287

Change in fair value of GeneFab Economic Share - related party (123) — (123)

Interest income was $0.3 million and $1.1 million for the three months ended March 31, 2024 and 2023, respectively.The decrease is attributed to lower average cash balances in the relevant periods.

Change in fair value of GeneFab Option - related party.

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

GeneFab sublease income - related party 899 — 899

Other income (expense) (26) (28) 2

Total other income (expense), net 9,311 10,613 (1,302)

Net loss from continuing operations (64,718) (34,677) (30,041)

Net income (loss) from discontinued operations 12,376 (5,323) 17,699

Net loss $ (52,342) $ (40,000) $ (12,342)

Contract revenue .

For the nine months ended September 30, 2023 and 2022, we generated revenue from contracts and license agreements of $2.0 million and $3.5 million, respectively.

The decrease of $1.5 million was primarily due to decline in services provided under the Spark collaboration agreement.

Grant income .

For the nine months ended September 30, 2023 and 2022, we generated revenue from grants of $0.6 million and $0.8 million, respectively, from the SBIR SENTI-202 grant funding.

Research and development expenses .

Research and development expenses were $23.0 million and $21.1 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $1.9 million was primarily due to an increase of $1.0 million in personnel-related expenses, an increase of $0.8 million in facility costs, and an increase of $0.3 million in other costs, partially offset by a decrease of $0.1 million in professional services costs.

General and administrative expenses .

General and administrative expenses were $27.9 million and $28.4 million for the nine months ended September 30, 2023 and 2022, respectively.

The decrease of $0.5 million was primarily due to a decrease of $2.0 million in personnel-related expenses, a decrease of $0.9 million in professional services costs, offset by an increase of $0.6 million in insurance and an increase of $1.2 million in depreciation and amortization.

Impairment of Property and Equipment.

Impairment of property and equipment of $25.7 million for the nine months ended September 30, 2023 was due to the impairment of leasehold improvements related to our Alameda facility subleased to GeneFab as a result of our asset group reassessment which triggered a need to perform an impairment analysis following the closing of the GeneFab transaction.

Interest Income, net.

Interest income was $2.4 million and $0.6 million for the nine months ended September 30, 2023 and 2022, respectively, due to higher average cash balances, as well as an increase in interest rates in the relevant periods.

Change in fair value of contingent earnout liability .

For the nine months ended September 30, 2023 and 2022, we recognized a non-cash gain of $0.2 million and $8.8 million, respectively.

The decrease of $8.6 million related to the decrease in the fair value of our common stock.

Change in fair value of GeneFab Note Receivable.

For the nine months ended September 30, 2023, the change in fair value of GeneFab Note Receivable was a gain of $0.3 million primarily due to a change in the discount rate.

Change in fair value of GeneFab Economic Share.

For the nine months ended September 30, 2023, the change in fair value of GeneFab Economic Share was a loss of $0.1 million due to a change in the equity value of GeneFab.

Change in fair value of GeneFab Option.

For the nine months ended September 30, 2023, the change in fair value of GeneFab Option was a gain of $5.6 million primarily due to the decrease in the fair value of our common stock, which is a significant input in the measurement of the GeneFab Option.

Gain on extinguishment of convertible notes.

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

For the three months ended March 31, 2024, the change in fair value of GeneFab Option was a gain of $2.3 million primarily due to the decrease in the fair value of our common stock, which is a significant input in the measurement of the GeneFab Option.

GeneFab sublease income - related party.

For the nine months ended September 30, 2022, sublease income was $0.9 million from the sublease to GeneFab for the Alameda facility.

For the three months ended March 31, 2024, sublease income was $1.5 million from the sublease to GeneFab for the Alameda facility.

Net income (loss) from discontinued operations.

Net income from discontinued operations was $12.4 million for the nine months ended September 30, 2023, compared to net loss from discontinued operations of $5.3 million for the nine months ended September 30, 2022.

The increase was primarily due to the gain of $21.9 million on the disposal of the assets sold to GeneFab, a decrease of $2.6 million in stock-based compensation due to the modification of equity awards for terminated employees, partially offset by an increase in research and development expenses of $6.2 million.

For the three months ended March 31, 2023, net loss from discontinued operations was $4.9 million.

Discontinued operations relate to the transfer of in-house manufacturing activities in the Alameda facility, to GeneFab, and include the costs and depreciation of equipment and related deposits or liabilities, as well as manufacturing personnel-related costs.

Liquidity and Capital Resources

Sources of Liquidity

From inception to September 30, 2023, we raised aggregate gross proceeds of $299.5 million from the Merger and PIPE Financing, the issuance of shares of our common stock, the issuance of shares of our redeemable convertible preferred stock, the issuance of convertible notes and, to a lesser extent, through collaboration agreements and governmental grants.

From inception to March 31, 2024, we 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.

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

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

Purchase Agreement, we issued 100,000 shares of our common stock to Chardan and paid a $0.4 million document preparation fee.

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

Other than the issuance of the commitment shares of our common stock to Chardan we issued 300,000 shares of common stock up until September 30, 2023, for aggregate net proceeds of $0.7 million under the Purchase Agreement.

There were no shares issued within the nine months ended September 30, 2023.

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

Other than the issuance of the commitment shares of our common stock to Chardan, we issued 1,300,000 shares of common stock up until March 31, 2024 aggregating to net proceeds of $1.2 million, under the Purchase Agreement.

There were no shares issued within the three months ended March 31, 2024.

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

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

As of September 30, 2023, we had $39.4 million in cash, cash equivalents and short-term investments, and an accumulated deficit of $225.6 million.

As of March 31, 2024, we had $23.7 million in cash and cash equivalents, and an accumulated deficit of $256.5 million.

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

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Should we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of our product candidates or delay our efforts to expand our product pipeline.

We may also be required to sell or license to other parties rights to develop or commercialize our product candidates that we would prefer to retain.

As substantial doubt exists about the Company’s ability to continue as a going concern, we may also be required to sell or license to other parties rights to develop or commercialize our product candidates that we would prefer to retain.

The transaction with GeneFab, as described in “Recent Developments” above, provided us with additional capital in the form of a note receivable and rights to future manufacturing and research activities and reduced longer term operating expenses.

The remaining consideration of $18.9 million will be received in installments during 2024 and 2025, subject to satisfaction of certain conditions.

1 unchanged sentence

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

Nine Months Ended

September 30,

Three Months Ended

Net cash from operating activities $ (11,682) $ (16,304)

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Operating Activities

For the nine months ended September 30, 2023, net cash used in operating activities of $45.4 million was primarily due to our loss of $52.3 million with non-cash adjustments of $25.7 million for impairment of property and equipment, $21.9 million gain on disposal of business to GeneFab, $7.6 million for stock-based compensation expense, $5.6 million gain from change in fair value of the GeneFab Option, $4.0 million for depreciation and amortization of operating lease right-of-use-assets, $1.1 million for accretion of discount on short-term investments, $0.3 million gain for the change in fair value of the GeneFab receivable receivable, $0.2 million gain for the change in fair value of contingent earnout liability, and $0.1 million loss for the change in fair value of the GeneFab

Economic Share.

Other material changes comprised of $0.8 million decrease in deferred revenue, offset by $0.1 million increase in operating lease liabilities.

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

Other material changes comprised of $11.2 million increase in operating lease liabilities, a $1.6 million increase in accounts payable and accrued expenses and other current liabilities, and a 0.4 million decrease in accounts receivable, offset by a $1.8 million increase in prepaid expenses and other assets and a $1.7 million decrease in deferred revenue.

For the three months ended March 31, 2024, net cash used in operating activities of $11.7 million was primarily due to our loss of $12.1 million with non-cash adjustments of $2.3 million gain from change in fair value of the GeneFab Option, $1.5 million for depreciation and amortization of operating lease right-of-use-assets and $1.3 million for stock-based compensation expense.

Other material changes comprised of $3.5 million decrease in GeneFab prepaid expenses offset by $2.6 million decrease in accounts payable and accrues expenses and $0.9 million decrease in operating lease liabilities.

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

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

Investing Activities

For the nine months ended September 30, 2023, net cash provided by investing activities of $30.0 million was due to $60.0 million cash received upon maturity of short-term investments offset by $18.0 million purchases of short-term investments and $12.0 million purchases of property and equipment.

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

For the three months ended March 31, 2024, net cash used in investing activities was nominal.

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

Financing Activities

For the nine months ended September 30, 2023, $0.2 million cash was provided by financing activities primarily due to $0.3 million proceeds from the issuance of common stock under Employee Stock Purchase Plan (ESPP).

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

For the three months ended March 31, 2024, there was no cash provided by financing activities.

For the three months ended March 31, 2023, net cash used in financing activities was nominal.

Funding Requirements

Based upon our current operating plans, there is uncertainty about whether our existing cash, cash equivalents, and short-term investments will be sufficient to fund our operations, including clinical trial expenses and capital expenditure requirements, beyond twelve months from the date of this Quarterly Report.

Based upon our current operating plans, substantial doubt exists about whether our existing cash and cash equivalents will be sufficient to fund our operations, including clinical trial expenses and capital expenditure requirements, beyond twelve months from the date of this Quarterly Report.

We anticipate that we will continue to seek additional funding, though the precise timing of such may prove uncertain.

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Our future capital requirements will depend on many factors, including:

• the scope, rate of progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

• the scope, rate of progress, results and costs of drug discovery, clinical and preclinical development, laboratory testing and clinical trials for our product candidates;

• the number and development requirements of product candidates that we may pursue, and other indications for our current product candidates that we may pursue;

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In order to improve our liquidity, management is actively pursuing additional financing.

We expect our expenses to increase substantially in connection with ongoing activities, particularly as we advance our preclinical activities and clinical trials for our product candidates in development.

Accordingly, we will need to obtain substantial additional funding for continuing operations.

We will need to obtain substantial additional funding for continuing operations.

If we are unable to raise capital when needed, or on attractive terms, we could be forced to delay, reduce or eliminate our research or drug development programs or any future commercialization efforts.

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

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

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

Operating Leases for details on our lease obligations.

During the year ended December 31, 2021, we entered into a three-year collaboration and option agreement with BlueRock Therapeutics LP (“BlueRock”) under which we granted BlueRock an option to execute an exclusive or non-exclusive license to develop, manufacture and commercialize cell therapy products (See Part I, Item 1, Notes to Condensed Consolidated Financial Statements (Unaudited), Note 13.

Related Parties for details into the BlueRock agreement).

Related Parties for details into the

BlueRock agreement).

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

We have also entered into license agreements under which we are obligated to make annual maintenance payments of $0.1 million and specified milestone and royalty payments.

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

As of September 30, 2023, we were unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.

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

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

Refer to Note 7.

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

Stockholders’ Equity, for further details of the contingent earnout.

Off-Balance Sheet Arrangements

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generally accepted accounting principles, or GAAP.

The preparation of these consolidated financial statements requires us to make estimates and

judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes.

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes.

On an ongoing basis, we evaluate our estimates and judgments.

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

During the nine months ended September 30, 2023, there have not been any other significant changes to our critical accounting policies and estimates, except as noted below, from those presented in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that are of significance, or potential significance, to us.

Impairment of Long-Lived Assets

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 to GeneFab, the ROU asset and the related leasehold improvements became a separate asset group for the purposes of long-lived asset impairment assessment.

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

The Company tested the asset group for impairment and recognized an impairment loss in the amount of $25.7 million during the three and nine months ended September 30, 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.

GeneFab Note Receivable

We elected to account for the GeneFab Note Receivable from GeneFab under the fair value option in ASC 825, Financial Instruments (“ASC 825” ) .

The GeneFab Note Receivable was 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 condensed consolidated statements of operations and comprehensive loss until settlement.

We estimated the fair value by discounting future payments under multiple probability-weighted scenarios using our cost of borrowing based on published CCC-rated corporate bond yields.

GeneFab Economic Share

We elected to account for the GeneFab Economic Share under the fair value option in ASC 825.

The GeneFab Economic Share was 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 condensed consolidated statements of operations and comprehensive loss until settlement.

We estimated the fair value using the option pricing method, which allocates total estimated enterprise value to various classes of equity using the Backsolve method.

Significant assumptions used were the equity value of GeneFab, volatility, risk-free rate, expected term, and dividend yield.

GeneFab Option

The GeneFab Option meets the definition of a derivative under ASC 815, Derivatives and Hedging , and does not meet the criteria for equity classification.

The derivative liability was 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 condensed 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 incorporating assumptions such as the fair value of our common stock, the risk-free rate, volatility, expected term and dividend yield.

During the three months ended March 31, 2024, there have not been any other significant changes to our critical accounting policies and estimates, from those presented in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, that are of significance, or potential significance, to us.

Emerging Growth Company Status

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Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller reporting company if (1) the market value of our common stock held by non-affiliates is less than $250 million as of the last business day of the second fiscal quarter, or (2) our annual revenues in our most recent fiscal year completed before the last business day of our second fiscal quarter are less than $100 million and the market value of our common stock held by non-affiliates is less than $700 million as of the last business day of the second fiscal quarter.

We will remain a smaller reporting company if (1) the

market value of our common stock held by non-affiliates is less than $250 million as of the last business day of the second fiscal quarter, or (2) our annual revenues in our most recent fiscal year completed before the last business day of our second fiscal quarter are less than $100 million and the market value of our common stock held by non-affiliates is less than $700 million as of the last business day of the second fiscal quarter.

Segment Information

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis