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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period from _______ to _______
Commission File Number 001-40440
_________________________
Senti Biosciences, Inc.
(Exact name of registrant as specified in its charter)
_________________________
Delaware86-2437900
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
2 Corporate Drive, First Floor
South San Francisco, CA 94080
(Address of principal executive offices and zip code)
(650) 239-2030
(Registrant’s telephone number, including area code)
Dynamics Special Purpose Corp.
2875 El Camino Real
Redwood City, CA 94061
(408) 212-0200
(Former name, former address and former fiscal year, if changed since last report)
_________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange
on which registered
Common stock, par value $0.0001 per shareSNTINasdaq Capital Market (NASDAQ)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 8, 2022 there were 43,386,900 shares of the registrant’s common stock, par value $0.0001 per share, were issued and outstanding.




Table of Contents
SENTI BIOSCIENCES, INC.
TABLE OF CONTENTS
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


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PART 1 - FINANCIAL INFORMATION
Item 1.    FINANCIAL STATEMENTS (UNAUDITED)
SENTI BIOSCIENCES, INC.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share and per share data)
June 30,December 31,
20222021
Assets
Cash and cash equivalents$139,800 $56,034 
Trade and other receivables573 483 
Prepaid expenses and other current assets3,546 3,676 
Total current assets143,919 60,193 
Restricted cash3,257 3,257 
Property and equipment, net35,505 12,368 
Operating lease right-of-use assets19,474 20,708 
Other long-term assets207 176 
Total assets$202,362 $96,702 
Liabilities and Stockholders’ Equity (Deficit)
Accounts payable$5,755 $5,187 
Early exercise liability, current portion297 626 
Deferred revenue833 1,656 
Accrued expenses and other current liabilities9,056 5,331 
Operating lease liabilities1,857 1,743 
Total current liabilities17,798 14,543 
Operating lease liabilities, net of current portion29,018 20,988 
Contingent earnout liability810  
Early exercise liability, net of current portion470 619 
Deferred revenue, net of current portion 176 
Total liabilities48,096 36,326 
Commitments and contingencies (Note 13)
Redeemable convertible preferred stock (A and B), $0.0001 par value; zero and 19,517,990 shares authorized at June 30, 2022 and December 31, 2021; zero and 19,517,988 shares issued and outstanding at June 30, 2022 and December 31, 2021; aggregate liquidation preference of zero and $163.8 million at June 30, 2022 and December 31, 2021, respectively
 171,833 
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value; 10,000,000 and zero shares authorized at June 30, 2022 and December 31, 2021; zero and zero shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
  
Common stock, $0.0001 par value; 500,000,000 and 27,006,600 shares authorized at June 30, 2022 and December 31, 2021; 43,368,270 and 2,972,409 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
4  
Additional paid-in capital292,698 3,619 
Accumulated deficit(138,436)(115,076)
Total stockholders’ equity (deficit)154,266 (111,457)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)$202,362 $96,702 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SENTI BIOSCIENCES, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
(in thousands, except share and per share data)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue
Contract revenue$1,108 $778 $1,962 $822 
Grant income250 15 500 43 
Total revenue1,358 793 2,462 865 
Operating expenses
Research and development9,247 5,235 16,849 10,138 
General and administrative13,882 4,554 19,141 8,865 
Total operating expenses23,129 9,789 35,990 19,003 
Loss from operations(21,771)(8,996)(33,528)(18,138)
Other income (expense)
Interest income, net27 2 31 2 
Change in fair value of contingent earnout liability8,878  8,878  
Gain on extinguishment of convertible notes1,289  1,289  
Change in preferred stock tranche liability (2,918) (14,742)
Other income (expense)25 (95)(30)(131)
Total other income (expense), net10,219 (3,011)10,168 (14,871)
Net loss and comprehensive loss$(11,552)$(12,007)$(23,360)$(33,009)
Net loss per share, basic and diluted$(0.86)$(4.13)$(2.80)$(11.45)
Weighted-average shares outstanding, basic and diluted13,446,622 2,909,105 8,336,451 2,883,582 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SENTI BIOSCIENCES, INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(unaudited)
(in thousands, except share data)
  Redeemable Convertible
Preferred Stock
Common StockAdditional Paid-in CapitalAccumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmount
Balance as of December 31, 2020
11,536,136$89,662 2,838,376 $ $1,044 $(59,757)$(58,713)
Issuance of Series B redeemable convertible preferred stock, net of preferred stock tranche liability of $33 thousand and issuance costs of $6 thousand
277,977 2,294 — — — — — 
Issuance of common stock— — 563,460 — 1,432 — 1,432 
Early exercise of common stock options— — (512,670)— (1,329)— (1,329)
Stock-based compensation— — — — 372 — 372 
Net loss— — — — — (21,002)(21,002)
Balance as of March 31, 2021
11,814,11391,956 2,889,166  1,519 (80,759)(79,240)
Issuance of Series B redeemable convertible preferred stock, including extinguishment of preferred stock tranche liability of $15.2 million
7,703,87579,877 — — — — — 
Issuance of common stock— 12,891 — 21 — 21 
Vesting of early exercise of common stock options— 13,099 — 28 — 28 
Stock-based compensation— — — 562 — 562 
Net loss— — — — (12,007)(12,007)
Balance as of June 30, 2021
19,517,988$171,833 2,915,156 $ $2,130 $(92,766)$(90,636)
The accompanying notes are an integral part of these condensed consolidated financial statements.


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SENTI BIOSCIENCES, INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(unaudited)
(in thousands, except share data)
  Redeemable Convertible
Preferred Stock
Common StockAdditional Paid-in CapitalAccumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmount
Balance as of December 31, 2021
19,517,988$171,833 2,972,409$ $3,619 $(115,076)$(111,457)
Issuance of common stock— 172,606— 422 — 422 
Vesting of early exercise of common stock options— 143,524— 375 — 375 
Stock-based compensation— — 661 — 661 
Net loss— — — (11,808)(11,808)
Balance as of March 31, 2022
19,517,988171,833 3,288,539 5,077 (126,884)(121,807)
Conversion of redeemable convertible preferred stock into common stock in connection with the Reverse Recapitalization, net of transaction costs(19,517,988)(171,833)19,517,9882 171,833 — 171,835 
Issuance of common stock upon Reverse Recapitalization, net of transaction costs— 19,975,9632 112,180 — 112,182 
Contingent earnout liability recognized upon closing of the Reverse Recapitalization— — (9,688)— (9,688)
Cancellation and exchange of convertible note in connection with Reverse Capitalization— 517,500— 5,184 — 5,184 
Gain recognized on fair value of embedded derivative after cancellation and exchange of convertible note— — (1,289)— (1,289)
Vesting of early exercised options— 41,047— 102 — 102 
Stock-based compensation— — 9,225 — 9,225 
Exercise of options of common stock— 27,233— 74 — 74 
Net loss— — — (11,552)(11,552)
Balance as of June 30, 2022
$ 43,368,270$4 $292,698 $(138,436)$154,266 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SENTI BIOSCIENCES, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six Months Ended June 30,
20222021
Cash flows from operating activities
Net loss$(23,360)$(33,009)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation512 347 
Amortization of operating lease right-of-use assets1,433 757 
Gain on extinguishment of convertible notes(1,289) 
Change in fair value of contingent earnout liability(8,878) 
Change in preferred stock tranche liability 14,742 
Stock-based compensation expense9,886 934 
Loss on write-off of fixed assets13  
Other non-cash charges8  
Changes in assets and liabilities:
Accounts receivable(90)(345)
Prepaid expenses and other assets(1,372)(779)
Accounts payable234 910 
Accrued expenses and other current liabilities203 649 
Deferred revenue(999)2,663 
Operating lease liabilities7,945 (728)
Net cash from operating activities(15,754)(13,859)
Cash flows from investing activities
Purchases of property and equipment(18,640)(626)
Net cash from investing activities(18,640)(626)
Cash flows from financing activities
Proceeds from Merger and related Pipe financing, net of transaction costs 112,464  
Proceeds from issuance of common stock upon exercise of stock options521 1,453 
Proceeds from issuance of convertible notes5,175  
Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs 66,952 
Payment of deferred offering costs (480)
Net cash from financing activities118,160 67,925 
Net change in cash and cash equivalents83,766 53,440 
Cash, cash equivalents, and restricted cash, beginning of the year59,291 31,034 
Cash, cash equivalents, and restricted cash, end of the year$143,057 $84,474 
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents139,800 82,942 
Restricted Cash3,257 1,532 
Total cash, cash equivalents and restricted cash143,057 84,474 
Supplemental disclosures of noncash financing and investing items
Purchase of property and equipment in accounts payable and accrued expenses9,371 427 
Recognition of Series B preferred stock tranche liability 33 
Extinguishment of Series B preferred stock tranche liability 15,210 
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Six Months Ended June 30,
20222021
Merger and related PIPE financing costs included in accounts payable and accrued expenses263  
Deferred transaction costs related to pending business combination in accounts payable and accrued expenses 1,161 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)


1. Organization and Description of Business
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 Bio has built a synthetic biology platform that enables it to program next-generation cell and gene therapies with what we refer 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. The Company is headquartered in South San Francisco, California.
On June 8, 2022 (the “Closing Date”), Dynamics Special Purpose Acquisition Corp. (“Dynamics”or “DYNS”) consummated a merger pursuant to which Explore Merger Sub, Inc. (“Merger Sub”), a Delaware corporation and wholly owned subsidiary of Dynamics, merged with and into Senti Sub I, Inc. (formerly named Senti Biosciences, Inc. (“Legacy Senti”), with Legacy Senti surviving as a wholly-owned subsidiary of Dynamics (such transactions, the “Merger,” and, collectively with the other transactions described in the merger agreement (as defined below, the “Reverse Recapitalization”). As a result of the Merger, Dynamics was renamed Senti Biosciences, Inc.
Refer to Note 3, Reverse Recapitalization, for further details of the Merger.
Liquidity and Going Concern
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 has financed its operations primarily through a Reverse Recapitalization, the sale of equity securities and convertible debt and, to a lesser extent, through collaboration agreements and governmental grants. At June 30, 2022 and December 31, 2021, the Company had an accumulated deficit of 138.4 million and 115.1 million, respectively. The Company’s net losses were $23.4 million and $33.0 million for the six months ended June 30, 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 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 June 30, 2022, the Company had cash, cash equivalents and restricted cash of $143.1 million. Based on the cash and cash equivalents on hand, the Company believes its combined cash and cash equivalents will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, for at least 12 months from the issuance date of these interim financial statements.
The Company’s continued existence is dependent upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that the Company’s efforts will be successful. No assurance can be given that management’s actions will result in profitable operations or the meeting of ongoing liquidity needs.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). The condensed consolidated financial statements include the accounts of Senti Biosciences, Inc., and its
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. We have one business activity and operate in one reportable segment.
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.
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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the valuation of stock-based awards, the accrual for research and development expenses, the valuation of contingent earnout, the valuation of convertible notes, the valuation of common and redeemable convertible preferred stock, the valuation of preferred stock tranche liability, standalone selling price (“SSP”) and the determination of the incremental borrowing rate. 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. Actual results could differ from those estimates.
Unaudited Interim Condensed Consolidated Financial Statements
The accompanying interim condensed consolidated financial statements and the related footnote disclosures are unaudited. These unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2022 and its results of operations for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or any other period. The December 31, 2021 year-end condensed consolidated balance sheet was derived from audited annual financial statements but does not include all disclosures from the annual financial statements.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021 and the related notes included in the Company’s Registration Statement on Form S-1, filed with the SEC on June 28, 2022, and amended on July 29, 2022, which provides a more complete discussion of the Company’s accounting policies and certain other information. There have been no material changes to the Company’s significant accounting policies as of and for the three and six months ended June 30, 2022, as compared to the significant accounting policies described in the Company’s audited annual consolidated financial statements as of and for the year ended December 31, 2021, except as discussed below.
Contingent Earnout Equity
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. 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 a component of other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss. A portion of
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

the earnout shares were granted to holders of Legacy Senti common stock that are subject to repurchase so was accounted for as stock-based compensation and as of the date of the Merger 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.
3. Reverse Recapitalization
On June 8, 2022, Merger Sub, a wholly-owned subsidiary of Dynamics, merged with Legacy Senti, with Legacy Senti surviving as a wholly-owned subsidiary of Dynamics. At the effective time of the Merger:
each outstanding share of Legacy Senti common stock was converted into approximately 0.1957 shares of the Company’s common stock;
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 approximately 0.1957;
each outstanding option to purchase Legacy Senti’s common stock was converted into an option to purchase a number of shares of the Company’s common stock equal to the number of shares of Legacy Senti common stock subject to such option multiplied by approximately 0.1957, rounded down to the nearest whole share, at an exercise price per share equal to the current exercise price per share for such option divided by approximately 0.1957, rounded up to the nearest whole cent; and
all shares of Dynamics Class A common stock were redesignated as common stock, par value $0.0001 per share, of the Company.
Former holders of the Legacy Senti common stock and preferred stock are eligible to receive up to an aggregate of 2.0 million additional shares of the Company’s common stock in the aggregate in two equal tranches of 1.0 million shares if the volume-weighted average closing sale price of the common stock is greater than or equal to $15.00 and $20.00, respectively, for any 20 trading days within any 30 consecutive trading day period. The first and second tranche term is two and three years, respectively, from the closing of the Merger. If there is a change of control within the three-year period following the closing of the Merger that results in a per share price equal to or in excess of the $15.00 and $20.00 share price milestones not previously met, then the Company shall issue the earnout shares to the holders of Legacy Senti common stock and preferred stock. Refer to Note 8, 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”). 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”). The PIPE Financing was consummated in connection with the Merger.
Concurrently with the closing of the Merger, the unsecured convertible promissory note (the “May 2022 Note”) in the principal amount of $5.2 million that was previously issued by Legacy Senti to Bayer Healthcare LLC (“Bayer”) on May 19, 2022 was automatically cancelled and exchanged for 517,500 shares of Class A Common Stock (the “Note Exchange”) at a price of $10.00 per share. 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.
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

The number of shares of the Company’s common stock outstanding immediately following the consummation of the Merger was:
Shares
Owned by Dynamics’ stockholders14,915,963
Issued to PIPE Investors5,060,000
Issued to Bayer in connection with convertible note cancellation and exchange517,500
Issued to Legacy Senti stockholders23,163,614(1)
Early exercised shares subject to repurchase(288,807)
Total shares of common stock immediately after Merger43,368,270
________________
(1) Includes 19,517,988 shares of common stock issued upon conversion of Legacy Senti’s redeemable convertible preferred stock.
The Merger is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Dynamics is treated as the acquired company for financial reporting purposes and Legacy Senti is treated as the acquiror. This determination is primarily based on the fact that subsequent to the Merger, the Legacy Senti stockholders hold a majority of the voting rights of the combined company, Legacy Senti comprises all of the ongoing operations of the combined company, Legacy Senti comprises a majority of the carryover governing body of the combined company, and Legacy Senti’s senior management comprises all of the senior management of the combined company. Accordingly, for accounting purposes, the Merger was treated as the equivalent of Legacy Senti issuing shares for the net assets of Dynamics, accompanied by a recapitalization. The net assets of Dynamics were stated at historical costs. No goodwill or other intangible assets were recorded. Operations prior to the Merger are those of Legacy Senti.
In connection with the Merger, the Company received $140.7 million in proceeds from the Merger and related PIPE Financing, including the Bayer convertible note cancellation and exchange. The Company incurred $23.3 million of transaction costs, consisting of banking, legal, and other professional fees, which was recorded as a reduction of proceeds to additional paid-in capital. In addition, there were $0.3 million of unpaid transaction costs included in accounts payable and accrued expenses as of June 30, 2022.
4. Fair Value Measurements
The following tables summarize the estimated value of cash equivalents and restricted cash (in thousands):
June 30, 2022
Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Cash equivalents:
Money market fund$139,800 $— $— $139,800 
Restricted cash:
Money market fund3,257 — — 3,257 
Total$143,057 $— $— $143,057 
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

December 31, 2021
Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Cash equivalents:
Money market fund$56,034 $— $— $56,034 
Restricted cash:
Money market fund3,257 — — 3,257 
Total$59,291 $— $— $59,291 
Financial assets and liabilities measured and recognized at fair value are as follows (in thousands):
June 30, 2022
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market fund$139,800 $ $ $139,800 
Restricted cash:
Money market fund3,257   3,257 
Total Assets$143,057 $ $ $143,057 
Liabilities:
Contingent earnout liability$ $ $810 $810 
Total Liabilities$ $ $810 $810 
December 31, 2021
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market fund$56,034 $ $ $56,034 
Restricted cash:
Money market fund3,257   3,257 
Total Assets$59,291 $ $ $59,291 
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.
The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):
Contingent Earnout Liability
Fair value as of December 31, 2021
$ 
Contingent earnout liability recognized upon the closing of the reverse recapitalization(9,688)
Change in fair value included in other income (expense)8,878 
Fair value as of June 30, 2022
$(810)
The fair value of the Contingent Earnout Liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

In determining the fair value of the Contingent Earnout Liability, the Company used the Monte Carlo simulation value model using a distribution of potential outcomes. 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 (see Note 8).
Preferred Stock Tranche Liability
The subsequent fair values of the preferred stock tranche liability recognized in connection with the issuance of Series B redeemable convertible preferred stock financing 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 OptionTranche 2 and 3 Forward Contracts
Estimated fair value of Series B redeemable convertible preferred stock(1)
$1.62$1.62
Discount rate0.11%0.11%
Time to liquidity (years)0.50.5
Expected volatility73.8%N/A
Probability of call option and forward contract10%90%
Strike Price$1.6427$1.6427
Value of each tranche feature$0.326$(0.023)
_______________
(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.
The following reflects the significant quantitative inputs used in the valuation of the preferred stock tranche liability as of March 31, 2021 using a Black-Scholes pricing model and a scenario analysis:
March 31, 2021
Tranche 2Tranche 3 (Public)Tranche 3 (Staying Private)
ForwardCallNo ValueCallForwardNo Value
Estimated fair value of Series B redeemable convertible preferred stock(1)
$2.0796$2.3386N/A$1.3023$1.3023N/A
Discount rate0.03%0.05%N/A0.06%0.06%N/A
Time to liquidity (years)0.080.5N/A0.750.75N/A
Probability of call option and forward contract100.0%25.0%75.0%45.0%5.0%50.0%
Strike price$1.6427$1.6427N/A$1.6427$1.6427N/A
Expected volatilityN/A80.00%N/A80.00%N/AN/A
Value of each tranche feature$0.437$0.873$$0.251$(0.340)$
Total value of tranche feature (in millions)$8.6$4.3$1.9
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

_______________
(1)Fair value of the Series B redeemable convertible preferred stock for Tranche 3 was estimated using guideline IPO transactions for the public scenario and the Black-Scholes based option pricing model for the staying-private scenario, and for Tranche 2 was based on a weighting of the public and staying-private scenarios used for Tranche 3.
The total value of Tranche 2 was determined as a forward contract for a total of $8.6 million. The value of Tranche 3 was determined using public company and staying-private scenarios for a total value of $4.3 million and $1.9 million, respectively. The Company applied a 75% weighting to the public scenario and a 25% weighting to the staying-private scenario, resulting in a value of Tranche 3 rights of $3.7 million.
The weighted average fair value of the tranche feature on a per share basis was $0.312 as of March 31, 2021 for a total preferred stock tranche liability of $12.3 million resulting in a change in fair value of the preferred stock tranche liability of $11.8 million for the three months ended March 31, 2021.
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 value of the tranche rights acquired on May 14, 2021 was determined using the current value method as both tranches were called by the Company on the valuation date. The following reflects the significant quantitative inputs used in the valuation of the preferred stock tranche liability as of May 14, 2021 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:
May 14, 2021
Tranches 2 and 3
Public ScenarioStaying Private Scenario
CallCall
Estimated fair value of Series B redeemable convertible preferred stock$2.18$1.58
Scenario weighting75.0%25.0%
Value of each tranche feature$1.637$0.395
Weighted-average value of Series B redeemable convertible preferred stock$2.032
The difference between the weighted-average value of Series B redeemable convertible preferred stock of $2.032 and the strike price of $1.6427 is the $0.3893 weighted-average fair value of the tranche feature on a per share basis as of May 14, 2021 for a total fair value of $15.2 million resulting in a change in fair value of the preferred stock tranche liability of $2.9 million for the three months ended June 30, 2021.
The following table provides a roll-forward of the change in the preferred stock tranche liability (in thousands):
Preferred Stock Tranche Liability
Balance as of December 31, 2020435
Recognition of tranche rights from January 2021 issuance33
Change in fair value14,742
Tranche liability extinguishment(15,210)
Balance as of December 31, 2021$ 
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

5. Other Financial Statement information
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
June 30,December 31,
20222021
Prepaid expenses (including prepaid rent)2,535 798 
Deposits983 1,157 
Reverse Recapitalization deferred offering costs 1,446 
Other 28 275 
Total prepaid expenses and other current assets$3,546 $3,676 
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
June 30,December 31,
20222021
Lab equipment$6,395 $4,988 
Leasehold improvements1,830 431 
Computer equipment and software342 262 
Furniture and fixtures294 294 
Construction in progress28,762 8,048 
Property and equipment at cost37,623 14,023 
Less: accumulated depreciation(2,118)(1,655)
Property and equipment, net$35,505 $12,368 
Depreciation totaled $0.5 million and $0.3 million for the six months ended June 30, 2022 and 2021, respectively and $0.3 million and $0.2 million for the three months ended June 30, 2022 and 2021, respectively.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following (in thousands):
June 30,December 31,
20222021
Accrued professional and service fees$7,234 $2,555 
Accrued employee-related expenses1,799 2,665 
Other accrued expenses23 111 
Total accrued expenses and other current liabilities$9,056 $5,331 
6. Operating Leases
The Company’s operating leases are primarily for its corporate headquarters located in South San Francisco, California and for additional office and laboratory space located in Alameda, California (“Alameda lease”) that commenced on July 30, 2021. The corporate headquarters lease has an initial term of eight years expiring in 2027, with an option to renew for an additional eight years unless canceled by either party thereafter. The Alameda lease has an initial term of eleven years expiring in 2032, with an option to renew the lease for up to two additional terms of five years. 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
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

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 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 is 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:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Operating lease cost$1,325 $679 $2,650 $1,359 
Short-term lease cost27  30  
Variable lease cost182 161 353 404 
Total lease cost$1,534 $840 $3,033 $1,763 

Six Months Ended June 30,
20222021
Other information:
Operating cash flows net inflows and (outflows) from operating lease$6,740 $(1,320)
Remeasurement of ROU and lease liabilities due to changes in the timing of receipt of lease incentives199  
Weighted-average remaining lease term8.2 years5.8 years
Weighted-average discount rate9.1 %8.9 %
As of June 30, 2022, the Company had received $8.1 million of the $17.5 million tenant improvements allowance.
As of June 30, 2022 and 2021, amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.
Maturities of the Company’s lease liabilities as of June 30, 2022, were as follows (in thousands):
2022, for the remainder of the year$1,394 
20236,272 
20247,265 
20257,489 
20267,723 
Thereafter30,230 
Total undiscounted lease payments60,373 
Less imputed interest(20,137)
Tenant improvement reimbursements(9,361)
Total lease liabilities$30,875 
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

7. Convertible Note
On May 19, 2022, in connection with the Merger, Legacy Senti issued $5.2 million in unsecured convertible promissory notes for the purchase price of $5.2 million. The May 2022 Note was due May 2024 and interest accrued at an annual rate of 3.0%.
The May 2022 Note was cancellable and exchangeable or convertible under any of the following circumstances:
Automatic conversion upon the closing of the Business Combination Agreement with Dynamics. The outstanding principal under this note shall be cancelled and exchanged automatically into that number of shares of Dynamics common stock as is equal to (a) the entire principal amount under this note divided by (b) $10.00. Upon conversion of this note, any and all accrued interest under this note shall immediately and automatically be cancelled and forgiven. The shares issued upon conversion of this note shall have the same rights and entitlements as the shares issued in connection with the PIPE by Dynamics.
Automatic conversion upon closing of a qualified Initial Public Offering (“IPO”). The note and any accrued unpaid interest shall be automatically converted into shares of the equity securities issued in the qualified IPO at a conversion price equal to the product of (a) 80%, and (b) the price per share of the Company’s common stock issued to the public in the qualified IPO.
Automatic conversion upon closing of non-qualified financing. The note and any accrued unpaid interest shall be automatically converted into shares of the Company’s equity securities issued in such non-qualified financing at a conversion price per share equal to the product of (a) 80%, and (b) the lowest per-share selling price of the equity securities issued to other investors in the non-qualified financing.
If the note has not been repaid or previously converted, on or after the maturity date, at the election of the holder, the outstanding balance shall either (a) be repaid in cash in an amount equal to the outstanding principal, or (b) be converted into that number of shares of Legacy Senti’s Series B Preferred Stock equal to the outstanding balance divided by the original issuance price of the Series B Preferred Stock.
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.
8. Stockholders’ Equity (Deficit)
Redeemable Convertible Preferred Stock
The Company’s redeemable convertible preferred stock consisted of the following as of December 31, 2021 (in thousands, except per share amounts):
December 31, 2021
Issue PriceShares Authorized
Shares Issued and Outstanding
Net Carrying Value
Aggregate Liquidation Preference
Series A$1.6427 6,888,563 6,888,563 $57,408 $57,822 
Series B$1.6427 12,629,427 12,629,425 $114,425 $106,012 
Total19,517,990 19,517,988 $171,833 $163,834 
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

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. Refer to Note 3, Reverse Recapitalization, for further details of the Merger.
Common Stock
Holders of common stock are entitled to one vote per share, and to receive dividends and, upon liquidation or dissolution, are entitled to receive all assets available for distribution to stockholders. The holders have no preemptive or other subscription rights, and there are no redemption or sinking fund provisions with respect to such shares. Common stock is subordinate to the redeemable convertible preferred stock with respect to dividend rights and rights upon liquidation, winding up, and dissolution of the Company. Through June 30, 2022, no cash dividends have been declared or paid.