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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 March 31, 2024
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)

(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 shareSNTI
The Nasdaq Capital Market
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 May 6, 2024 there were 45,755,021 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.





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.


i





                    
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)
1





                    
March 31,December 31,
20242023
Assets
Cash and cash equivalents$23,723 $35,926 
Accounts receivable76 112 
GeneFab receivable - related party17,847 17,592 
GeneFab prepaid expenses - related party11,300 14,787 
Prepaid expenses and other current assets2,720 2,783 
Total current assets55,666 71,200 
Restricted cash4,028 3,522 
GeneFab receivable - related party, net of current portion383 1,119 
Property and equipment, net24,354 25,338 
Operating lease right-of-use assets15,797 16,274 
GeneFab Economic Share - related party1,871 1,816 
Other long-term assets86 215 
Total assets$102,185 $119,484 
Liabilities and Stockholders’ Equity
Accounts payable$1,624 $1,250 
Finance lease liabilities - related party, current portion 100 97 
Early exercise liability, current portion111 135 
GeneFab sublease deferred income - related party862 989 
Accrued expenses and other current liabilities2,734 5,927 
Operating lease liabilities4,178 4,031 
Current liabilities of discontinued operations 243 
Total current liabilities9,609 12,672 
Operating lease liabilities, net of current portion32,445 33,538 
Contingent earnout liability20 20 
GeneFab Option - related party4,017 6,331 
Early exercise liability, net of current portion 10 
Total liabilities46,091 52,571 
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at March 31, 2024 and December 31, 2023; zero shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
  
Common stock, $0.0001 par value; 500,000,000 shares authorized at March 31, 2024 and December 31, 2023; 45,712,821 and 45,700,161 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
5 5 
Additional paid-in capital312,544 311,252 
Accumulated other comprehensive income  
Accumulated deficit(256,455)(244,344)
Total stockholders’ equity56,094 66,913 
Total liabilities and stockholders’ equity$102,185 $119,484 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2





                    
SENTI BIOSCIENCES, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31,
20242023
Revenue
Contract revenue$ $1,036 
Grant income 250 
Total revenue 1,286 
Operating expenses
Research and development (included related party cost of $3,632 and $, respectively)
8,779 7,059 
General and administrative7,522 9,191 
Total operating expenses16,301 16,250 
Loss from operations(16,301)(14,964)
Other income (expense)
Interest income, net331 1,061 
Change in fair value of contingent earnout liability 59 
Change in fair value of GeneFab Note Receivable - related party29  
Change in fair value of GeneFab Economic Share - related party55  
Change in fair value of GeneFab Option - related party2,314  
GeneFab sublease income - related party1,461  
Other income (expense) (8)
Total other income, net4,190 1,112 
Net loss from continuing operations(12,111)(13,852)
Net loss from discontinued operations (4,870)
Net loss(12,111)(18,722)
Other comprehensive gain (loss)
Unrealized gain on investments 2 
Comprehensive loss$(12,111)$(18,720)
Net loss per share, basic and diluted
Net loss per share from continuing operations, basic and diluted$(0.26)$(0.31)
Net loss per share from discontinued operations, basic and diluted (0.11)
Net loss per share, basic and diluted$(0.26)$(0.42)
Weighted-average shares outstanding, basic and diluted45,708,601 44,070,974 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3





                    
SENTI BIOSCIENCES, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands, except share data)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2022
44,062,534 $4 $300,544 $1 $(173,286)$127,263 
Vesting of early exercise of common stock options12,660 — 34 — — 34 
Stock-based compensation expense— 3,763 — — 3,763 
Unrealized gain on investments— — — 2 — 2 
Net loss— — — — (18,722)(18,722)
Balance as of March 31, 2023
44,075,194 $4 $304,341 $3 $(192,008)$112,340 
Balance as of December 31, 2023
45,700,161 5 311,252  (244,344)66,913 
Vesting of early exercise of common stock options12,660 — 34 — — 34 
Stock-based compensation expense— — 1,258 — — 1,258 
Net loss— — — — (12,111)(12,111)
Balance as of March 31, 2024
45,712,821 $5 $312,544 $ $(256,455)$56,094 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4





                    
SENTI BIOSCIENCES, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Three Months Ended March 31,
20242023
Cash flows from operating activities
Net loss$(12,111)$(18,722)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation984 467 
Amortization of operating lease right-of-use assets477 462 
Accretion of discount on short-term investments (572)
Change in fair value of contingent earnout liability (59)
Change in fair value of GeneFab Note Receivable - related party(29) 
Change in fair value of GeneFab Economic Share - related party(55) 
Change in fair value of GeneFab Option - related party(2,314) 
Stock-based compensation expense1,258 3,763 
Other non-cash charges38 (30)
Changes in assets and liabilities:
Accounts receivable (135)
GeneFab receivable - related party21  
GeneFab prepaid expenses - related party3,487  
Prepaid expenses and other assets192 (402)
Accounts payable389 280 
Accrued expenses and other current liabilities(2,946)(1,846)
GeneFab sublease deferred income - related party(127) 
Deferred revenue (392)
Operating lease liabilities(946)882 
Net cash from operating activities(11,682)(16,304)
Cash flows from investing activities
Purchases of short-term investments (17,990)
Maturities of short-term investments 15,000 
Purchases of property and equipment(15)(6,507)
Net cash from investing activities(15)(9,497)
Cash flows from financing activities
Principal finance lease payments (35)
Net cash from financing activities (35)
Net decrease in cash and cash equivalents(11,697)(25,836)
Cash, cash equivalents, and restricted cash, beginning of period39,448 60,987 
Cash, cash equivalents, and restricted cash, end of period$27,751 $35,151 
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents$23,723 $31,600 
Restricted cash4,028 3,551 
Total$27,751 $35,151 
5





                    
Three Months Ended March 31,
20242023
Supplemental disclosures of noncash investing and financing and items
Purchases of property and equipment in accounts payable and accrued expenses$ $4,758 
Refer to Note 3. GeneFab Transaction for details of non-cash items
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

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 an early clinical stage biotechnology company developing next-generation cell and gene therapies engineered with its gene circuit platform technologies for patients living with incurable diseases. Senti’s mission is to create a new generation of smarter therapies that can outsmart complex diseases using novel and unprecedented approaches. Senti has built a synthetic biology platform that enables it to program next-generation cell and gene therapies with gene circuits. These gene circuits, which are created from novel and proprietary combinations of DNA sequences, reprogram cells with biological logic to sense inputs, compute decisions and respond to their cellular environments. The Company is headquartered in South San Francisco, California.
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 a result of the Merger, Dynamics was renamed Senti Biosciences, Inc.
On August 7, 2023, the Company completed a transaction with GeneFab, LLC (“GeneFab”), a contract manufacturing and synthetic biology biofoundry focused on next-generation cell and gene therapies. As part of that transaction, the Company disposed of its non-oncology business and in-house manufacturing services and subleased its manufacturing facility to GeneFab. Refer to Note 3. GeneFab Transaction, for further details of the GeneFab transaction, and to Note 13. Related Parties, for related party discussion.
Liquidity and Going Concern
These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.
The Company has devoted substantially all of its efforts to organizing and staffing, business planning, raising capital, and conducting preclinical and clinical studies and has not realized substantial revenues from its planned principal operations. To date, the Company has raised aggregate gross proceeds of $300.1 million from the Merger and a private placement completed concurrently with the Merger (the “PIPE Financing”), the issuance of shares of its 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 government grants.
At March 31, 2024 and December 31, 2023, the Company had an accumulated deficit of $256.5 million and $244.3 million, respectively. The Company’s net losses were $12.1 million and $18.7 million for the three months ended March 31, 2024 and 2023, respectively. Substantially all of the Company’s operating net losses resulted from costs incurred in connection with the Company’s research and development programs and from general and administrative costs associated with the Company’s operations. The Company expects to incur substantial operating losses and negative cash flows from operations for the foreseeable future as the Company advances its preclinical activities and clinical trials for its product candidates in development.
As of March 31, 2024 and December 31, 2023, the Company had cash and cash equivalents of $23.7 million and $35.9 million, respectively. As of May 9, 2024, the issuance date of the condensed consolidated financial statements as of and for the three months ended March 31, 2024, there is uncertainty about whether the Company’s combined cash and cash equivalents will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, beyond twelve months from the issuance date of these financial statements and therefore the Company concluded that substantial doubt existed about the Company’s ability to continue as a going concern.
7

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

The transaction with GeneFab provided the Company with additional capital in the form of a note receivable and rights to future manufacturing and research activities and reduced longer-term operating expenses. Refer to Note 3. GeneFab Transaction, for further details of the GeneFab transaction.
The Company’s continued existence is dependent upon management’s ability to raise capital and develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital, which included the framework agreement with GeneFab, and there can be no assurance that the Company’s 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.
NASDAQ Bid Price Compliance Notice
On August 7, 2023, the Company received written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (the “Listing Qualifications Department”) notifying the Company that, for the last 30 consecutive trading days, the closing bid price of the Company’s common stock had closed below the minimum bid price requirement of $1.00 per share for continued listing on The Nasdaq Global Market. The Company was provided an initial compliance period of 180 calendar days, or until February 5, 2024, to regain compliance with the minimum bid price requirement.
On January 23, 2024, the Company received written notice from the Listing Qualifications Department granting the Company its request to transfer the listing of its common stock from The Nasdaq Global Market tier to The Nasdaq Capital Market tier. The transfer of the listing of the Company’s common stock from The Nasdaq Global Market to The Nasdaq Capital Market took effect with the open of business on January 25, 2024.
On February 6, 2024, the Listing Qualifications Department granted the Company’s request for a second 180-calendar day period, or until August 5, 2024, to regain compliance with the $1.00 bid price requirement. To regain compliance with such minimum price requirement, the Company must evidence a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days.
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 wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company has one business activity and operates in one reportable segment within continuing operations.
The Company determined that the assets sold to GeneFab met the criteria for presentation as a discontinued operation. As a result, the Company has retrospectively restated its 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. The Company has chosen not to segregate the cash flows of the disposed business in the condensed consolidated statements of cash flows. Supplemental disclosures related to discontinued operations for the statements of cash flows have been provided in Note 3. GeneFab Transaction. Unless otherwise specified, the disclosures in these condensed consolidated financial statements refer to continuing operations only.
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
8

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

development expenses, the valuation of GeneFab Option, the valuation of GeneFab Economic Share, the valuation of the GeneFab Note Receivable, the discount rate used to discount future cash flows for the impairment of long-lived assets, and the determination of the incremental borrowing rate. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash and cash equivalents are maintained in checking and money market accounts at one financial institution, which at times, may exceed federally insured limits. As of March 31, 2024 and 2023, the Company has not experienced any credit losses in such accounts or investments.
As of March 31, 2024, the Company has prepaid future manufacturing and research services of $11.3 million under the development and manufacturing services agreement entered into with GeneFab, a related party. The Company also has a receivable from GeneFab under the framework agreement with a fair value of $17.3 million, subject to satisfaction of certain conditions. The prepaid expense and receivable balances from GeneFab potentially subject the Company to a significant concentration of credit risk if the Company is unable to realize these balances. Refer to Note 3. GeneFab Transaction, for further details of the GeneFab transaction.
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 March 31, 2024 and its results of operations for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or any other period. The December 31, 2023 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, 2023 and the related notes included in the Company’s Form 10-K, filed with the SEC on March 21, 2024, which provides a more complete discussion of the Company’s accounting policies and certain other information. There have been no material changes to the Company’s significant accounting policies as of and for the three months ended March 31, 2024, 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, 2023.
Recent Accounting Standards
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which improves income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively.
9

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

The Company believes that the impact of recently issued accounting standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
3. GeneFab Transaction
On August 7, 2023, the Company entered into a framework agreement with GeneFab and Valere Bio, Inc., a Delaware corporation and the parent company of GeneFab, which is wholly owned by Celadon Partners, LLC, pursuant to which the Company, subject to the terms and conditions therein, sold, assigned and transferred its rights, title and interest in certain of the assets and contractual rights, including all of the Company’s equipment at the Company’s facilities in Alameda and certain of the Company’s non-oncology license rights, intellectual property related to the schematics for and design of the Alameda facility, and subleased to GeneFab its premises under the lease for the Alameda facility. The transaction provided the Company with additional capital in the form of a note receivable and rights to future manufacturing and research activities performed by GeneFab at market rates and reduced longer term operating expenses.
Concurrently with the transaction, the Company and GeneFab entered into a development and manufacturing services agreement (the “services agreement”), pursuant to which GeneFab will provide certain services to the Company using the subleased Alameda facility and acquired equipment. As part of this transaction, the Company entered into a transition services agreement with GeneFab whereby certain services are to be provided by each party to the other party during a transition period beginning on the closing of the transaction.
Under the terms of the transaction, the Company is entitled to receive total consideration of $37.8 million before the end of 2025, of which $18.9 million was due at closing and was netted against prepayment due to GeneFab for future manufacturing and research activities. The remaining $18.9 million will be paid to the Company in installments in 2024 and 2025 (the “GeneFab Note Receivable”), subject to satisfaction of certain conditions. The Company elected to account for the GeneFab Note Receivable under the fair value option and recorded the GeneFab Note Receivable at its fair value of $16.6 million at the closing date of the transaction. The GeneFab Note Receivable will be remeasured each reporting period with changes from remeasurement included in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. Refer to Note 4. Fair Value Measurements.
The Company is entitled to $18.9 million in future manufacturing and research activities to be rendered by GeneFab under the services agreement, which are recorded in GeneFab prepaid expenses on the condensed consolidated balance sheet. The Company determined that the $18.9 million for future manufacturing and research activities, inclusive of the volume discount provided, was executed at market terms and does not result in any impact to the total consideration received from GeneFab for the disposal of the business.
As part of the transaction, the Company subleased the facility in Alameda, California to GeneFab which will support the clinical manufacturing of the Company’s chimeric antigen receptor natural killer (CAR-NK) programs, including SENTI-202. Refer to Note 6. Operating Leases for additional information on the sublease.
The Company agreed to grant a license to GeneFab under certain of its intellectual property rights to conduct manufacturing services and to research, develop, manufacture and commercialize products outside of oncology, pursuant to a license agreement under negotiation (the “Non-Oncology License”).
In connection with the transaction, Philip Lee, Ph.D., former Co-Founder and Chief Technology Officer of the Company, assumed the role of Chief Executive Officer of GeneFab. Additionally, GeneFab extended offers of employment to 45 of the Company's employees formerly employed in its research and development and manufacturing functions. All 45 employees accepted the offers of employment and are actively engaged in providing manufacturing and research activities to the Company.
GeneFab was granted an option to purchase up to 19,633,444 shares (i.e. up to $20.0 million worth) of the Company’s common stock at a per share purchase price of $1.01867 (the “GeneFab Option”). The GeneFab Option becomes exercisable upon the execution of the license agreement, no later than August 7, 2026. The GeneFab Option may be exercised in installments of common stock equal to no more than 19.9% of the Company’s outstanding shares of common stock as of the closing date of the transaction. The purchase of the remaining shares under the GeneFab Option requires approval by the Company’s stockholders. The Company determined that the GeneFab Option was a derivative as the terms of the instrument contain certain provisions that preclude equity
10

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

classification in accordance with ASC 815. As such, the GeneFab Option was recorded as a liability at its fair value of $9.6 million at the closing date of the transaction and subsequently remeasured with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. Refer to Note 4. Fair Value Measurements.
As additional consideration for the transaction, the Company and GeneFab entered into a seller economic share agreement (the “GeneFab Economic Share”), pursuant to which the Company will be entitled to receive ten percent of the realized gains of GeneFab’s parent company arising and resulting from any cash or in-kind distributions from GeneFab in connection with a dividend or sale event, subject to the terms and conditions of the GeneFab Economic Share. The Company elected to account for the GeneFab Economic Share under the fair value option and recorded the GeneFab Economic Share at its fair value of $1.8 million at the date of the transaction. The GeneFab Economic Share is remeasured each reporting period with changes from remeasurement included in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. Refer to Note 4. Fair Value Measurements.
The Company determined that GeneFab is a variable interest entity (“VIE”) since its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. The Company performed a qualitative analysis to determine if it is the primary beneficiary of GeneFab and determined it does not have the power to direct the significant activities of GeneFab. As a result, the Company determined it is not the primary beneficiary and therefore does not consolidate GeneFab.
Refer to Note 13. Related Parties for GeneFab related party considerations.
Gain on the Disposal of Business
As the assets and contractual rights transferred to GeneFab were determined to constitute a business as defined in ASC 805, Business Combinations, the Company accounted for the disposal by applying the derecognition guidance in ASC 810, Consolidation, which requires that a gain or loss be recognized for the difference between the carrying value of the assets sold and the fair value of the consideration received (or receivable).
As of August 7, 2023, the total fair value of the consideration was determined to be $37.3 million, including the GeneFab prepaid expenses of $18.9 million, the estimated fair value of the GeneFab Note Receivable of $16.6 million and the estimated fair value of the GeneFab Economic Share of $1.8 million. Out of the total consideration, $9.6 million was allocated to the GeneFab Option, representing its estimated fair value as of the closing date.
In connection with the sale, the Company recognized a gain on disposal in the amount of $21.9 million in net income from discontinued operations during the year ended December 31, 2023, representing the excess of the fair value of the consideration (net of the portion allocated to the GeneFab Option) over the carrying value of the assets sold of $5.5 million. The gain on disposal was primarily related to the transfer of the non-oncology intellectual property to GeneFab which had no carrying value.
Discontinued Operations
In accordance with ASC 205, Presentation of Financial Statements (“ASC 205”), the Company determined that the sale of the non-oncology business, including the equipment and transfer of in-house manufacturing activities in the Alameda facility, to GeneFab represented a strategic shift that will have a major effect on the Company’s operations and financial results, thus meeting the criteria to be reported as discontinued operations. Discontinued operations include the cost and depreciation of equipment and related deposits or liabilities, manufacturing personnel-related costs including costs arising as a result of the disposal such as equity award modifications and severance, and the gain from the disposal of the business. Refer to Note 9, Stock-Based Compensation, for further details of the award modifications.
11

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

The following table summarizes the major classes of assets and liabilities of the discontinued operations (in thousands):
March 31,December 31,
20242023
Accrued expenses and other current liabilities 243 
Total current liabilities of discontinued operations$ $243 
The following table summarizes the condensed operating results of the discontinued operations (in thousands):
Three Months Ended March 31,
20242023
Operating expenses:
Research and development$ $4,259 
General and administrative 611 
Total operating expenses 4,870 
Loss from discontinued operations (4,870)
Net income (loss) from discontinued operations$ $(4,870)
The following table summarizes the condensed cash flow information of the discontinued operations (in thousands):
Three months ended March 31,
20242023
Operating activities (noncash adjustments to net income):
Depreciation$ $34 
Stock-based compensation 176 
Investing activities:
Purchases of property and equipment (3,247)
Supplemental disclosures of noncash investing items:
Purchases of property and equipment in accounts payable and accrued expenses 697 
4. Fair Value Measurements
The following tables summarize the estimated value of cash equivalents and restricted cash (in thousands):
March 31, 2024
Adjusted CostEstimated Fair ValueCash and cash equivalentsRestricted cash
Cash$2,063 $2,063 $2,063 $ 
Level 1:
Money market funds25,688 25,688 21,660 4,028 
Subtotal25,688 25,688 21,660 4,028 
Total$27,751 $27,751 $23,723 $4,028 
12

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

December 31, 2023
Adjusted CostEstimated Fair ValueCash and cash equivalentsRestricted cash
Cash$4,205 $4,205 $4,205 $ 
Level 1:
Money market funds$35,243 $35,243 $31,721 $3,522 
Subtotal35,243 35,243 31,721 3,522 
Total$39,448 $39,448 $35,926 $3,522 
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.
GeneFab Note Receivable
The following table presents a summary of the changes in the fair value of the GeneFab Note Receivable (in thousands):
Note Receivable
Fair value as of December 31, 2023
$17,240 
Change in fair value included in other income (expense)29 
Fair value as of March 31, 2024
$17,269 
The fair value of the GeneFab Note Receivable is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The GeneFab Note Receivable is presented within GeneFab receivable on the condensed consolidated balance sheet.
The fair value of the GeneFab Note Receivable was determined by discounting future payments under multiple probability-weighted scenarios using the Company’s cost of borrowing, which was estimated at 12.53% as of December 31, 2023, to 12.87% as of March 31, 2024 based on published CCC-rated corporate bond yields.
GeneFab Option
The following table presents a summary of the changes in the fair value of the GeneFab Option (in thousands):
GeneFab Option
Fair value as of December 31, 2023
$(6,331)
Change in fair value included in other income (expense)2,314 
Fair value as of March 31, 2024
$(4,017)
The fair value of the GeneFab Option is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.
In determining the fair value of the GeneFab Option, the Company used a Black-Scholes option pricing model.
The significant assumptions utilized in the valuation are described below:
March 31,December 31,
20242023
Current stock price$0.38 $0.66 
Expected volatility128.5 %98.1 %
Risk-free interest rate4.62 %4.12 %
Expected term (years)2.52.5
13

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

GeneFab Economic Share
The following table presents a summary of the changes in the fair value of the GeneFab Economic Share (in thousands):
GeneFab Economic Share
Initial recognition as of December 31, 2023
$1,816 
Change in fair value included in other income (expense)55 
Fair value as of March 31, 2024
$1,871 
The fair value of the GeneFab Economic Share is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.
In determining the fair value of the GeneFab Economic Share, the Company used the option pricing method, which allocates total estimated enterprise value to various classes of equity using the Backsolve method.
The significant assumptions utilized in the valuation are described below:
March 31,December 31,
20242023
GeneFab equity value$35,448 $35,448 
Volatility67.6 %65.8 %
Risk free rate4.43 %3.93 %
Expected term44
5. Other Financial Statement information
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
March 31,December 31,
20242023
Prepaid expenses (including prepaid rent)2,628 2,546 
Deposits92 42 
Other  195 
Total prepaid expenses and other current assets$2,720 $2,783 
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
March 31,December 31,
20242023
Leasehold improvements$22,648 $22,648 
Lab equipment8,148 8,186 
Furniture and fixtures326 326 
Computer equipment and software338 360 
Property and equipment at cost31,460 31,520 
Less: accumulated depreciation(7,106)(6,182)
Property and equipment, net$24,354 $25,338 
14

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

Depreciation totaled $1.0 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following (in thousands):
March 31,December 31,
20242023
Accrued employee-related expenses$888 $3,555 
Accrued professional and service fees other1,843 2,363 
Other accrued expenses3 9 
Total accrued expenses and other current liabilities$2,734 $5,927 
6. Operating Leases
Lessee Accounting
The Company’s operating leases are primarily for its corporate headquarters located in South San Francisco, California (“HQ lease”) and for additional office and laboratory space located in Alameda, California (“Alameda lease”). The HQ 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 termination options was reasonably certain. The Alameda lease provided for a tenant improvement allowance of up to $17.5 million for the costs relating to the design, permitting and construction of the improvements, disbursed by the landlord by December 31, 2023. The Company was deemed to be the accounting owner of the tenant improvements primarily because the Company is the principal in the construction and design of the assets, is responsible for costs overruns and retains substantially all economic benefits from the leasehold improvements over their economic lives. Accordingly, the tenant improvement allowance was considered an incentive and was deducted from the initial measurement of the ROU asset and lease liability. The Company estimated the timing of tenant improvement reimbursements at the lease commencement date and upon receipt of the cash incentives, the Company recognized the cash received as an increase in the lease liability.
A summary of total lease costs and other information for the period relating to the Company’s operating leases is as follows (in thousands):
Three Months Ended March 31,
20242023
Operating lease cost$1,316 $1,309 
Short-term lease cost8 31 
Variable lease cost268 244 
Total lease cost$1,592 $1,584 

15

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

Three Months Ended March 31,
20242023
Other information:
Operating cash flows net inflows and (outflows) from operating lease$(1,784)$37
ROU assets obtained in exchange for operating lease obligations (including remeasurement of ROU and lease liabilities due to changes in the timing of receipt of lease incentives)$$(51)
Weighted-average remaining lease term (years)7.38.0
Weighted-average discount rate9.2%9.1%
For the three months ended March 31, 2023, the Company received $1.0 million of $17.5 million tenant improvement allowance. The Company received the full $17.5 million tenant improvement allowance through December 31, 2023.
As of March 31, 2024 and 2023, amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.
Maturities of the Company’s lease liabilities as of March 31, 2024, were as follows (in thousands):
2024, for the remainder of the year$5,470 
20257,478 
20267,712 
20275,769 
20284,855 
20295,000 
Thereafter14,529 
Total undiscounted lease payments50,813 
Less imputed interest(14,190)
Tenant improvement allowance remaining 
Total lease liabilities$36,623 
As of March 31, 2024 the Company held a letter of credit with JPMorgan Chase Bank in the amount of approximately $2.8 million related to the Alameda facility and a letter of credit with JPMorgan Chase Bank in the amount of approximately $0.5 million related to our HQ facility lease, which has been transferred from Silicon Valley Bank (SVB). As of March 31, 2024 the letter of credit held by SVB was yet to be released.
Lessor Accounting
In connection with the GeneFab transaction, on August 7, 2023, the Company entered into a sublease with GeneFab to sublease the facility included in the Alameda lease, expiring in September 2032. Total sublease income to be earned from this operating lease, in aggregate, will be approximately $44.1 million over the term of the sublease agreement. Sublease income was $1.2 million and variable sublease income was $0.3 million for the three months ended March 31, 2024. The Company records sublease income in other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
Refer to Note 13. Related Parties for GeneFab related party considerations.
Maturities of the Company’s sublease payments from GeneFab as of March 31, 2024, were as follows (in thousands):
16

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

2024, for the remainder of the year$3,280 
20254,476 
20264,610 
20274,748 
20284,891 
20295,037 
Thereafter13,258 
Total undiscounted sublease payments
$40,300 
7. Stockholders’ Equity
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 preferred stock with respect to dividend rights and rights upon liquidation, winding up, and dissolution of the Company; although, no preferred stock is outstanding as of March 31, 2024 and December 31, 2023. Through March 31, 2024, no cash dividends have been declared or paid.
At March 31, 2024 and December 31, 2023, the Company was authorized to issue 500,000,000 shares of common stock, all at a par value of $0.0001 per share, and had reserved the following shares for future issuance:
March 31,December 31,
20242023
Common Stock Purchase Agreement7,327,0497,327,049
Common stock options issued and outstanding 11,848,29511,582,938
Restricted Stock Units (RSUs) issued and outstanding979,139225,282
Common stock shares available for future issuance under equity plans 4,940,8133,672,276
Common stock shares available for future issuance under the 2022 Employee Stock Purchase Plan (the "ESPP") 793,870336,320
Contingent earnout common stock2,000,0002,000,000
GeneFab Option
19,633,44419,633,444
Unvested early exercised common stock 42,20054,860
Total47,564,81044,832,169
Preferred Stock
In connection with the close of the Merger, the Company’s Amended and Restated Certificate of Incorporation provides the Company’s board of directors with the authority to issue $0.0001 par value preferred stock in one or more series and to establish from time to time the number of shares to be included in each such series, by adopting a resolution and filing a certification of designations. Voting powers, designations, powers, preferences and relative, participating, optional, special and other rights shall be stated and expressed in such resolutions. There were 10,000,000 shares designated as preferred stock and none were outstanding as of March 31, 2024 and December 31, 2023.
Common Stock Purchase Agreement
On August 31, 2022, the Company entered into a Common Stock Purchase Agreement and a Registration Rights Agreement (collectively referred to as the “Purchase Agreement”) with Chardan Capital Markets LLC (“Chardan”). Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to sell to Chardan up to the lesser of (i) $50.0 million of newly issued shares of the Company’s common stock, and (ii) the Exchange Cap (as defined below) (subject to certain conditions and limitations), from time to time during the 36-
17

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

month term of the Purchase Agreement. Under the applicable NASDAQ rules, the Company may not issue to Chardan under the Purchase Agreement more than 8,727,049 shares of common stock, which number of shares is equal to 19.99% of the common shares outstanding immediately prior to the execution of the Purchase Agreement unless certain exceptions are met (the “Exchange Cap”). The purchase price of the shares of common stock will be determined by reference to the Volume Weighted Average Price (“VWAP”) of the common stock during the applicable purchase date, less a fixed 3% discount to such VWAP. However, the total shares to be purchased on any day may not exceed 20% of the trading volume, and the total purchase price on any day may not exceed $3.0 million. As consideration for Chardan’s commitment to purchase shares of common stock at the Company’s direction upon the terms and subject to the conditions set forth in the Purchase Agreement, upon execution of the Purchase Agreement, the Company issued 100,000 shares of its common stock to Chardan and paid a $0.4 million document preparation fee.
Other than the issuance of the commitment shares of the Company’s common stock to Chardan, the Company issued 1,300,000 common stock shares up until March 31, 2024 aggregating to net proceeds of $1.2 million, under the Purchase Agreement. There were no shares issued within three months ended March 31, 2024.
Contingent Earnout Equity
Following the closing of the Merger, former holders of Legacy Senti common stock and preferred stock may receive up to 2,000,000 additional shares of the Company’s common stock in the aggregate, in two equal tranches of 1,000,000 shares of common stock per tranche. The first and second tranches are issuable if the closing volume weighted average price (“VWAP”) per share of common stock quoted on the Nasdaq (or the exchange on which the shares of common stock are then listed) is greater or equal to $15.00 and $20.00, respectively over any twenty trading days within any thirty-day trading period. The first and second 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 Company shall issue the earnout shares to the holders of Legacy Senti common stock and preferred stock.
8. Revenue
The Company’s revenue consists of amounts received related to research services provided to customers.
The Company earned no revenue in the three months ended March 31, 2024.
Contract Revenue
In April 2021, the Company entered into a research collaboration and license agreement with Spark Therapeutics, Inc. (“Spark”). Under the agreement, the Company will be responsible for a research program, which includes designing, building and testing five cell type specific-synthetic promoters for use in developing certain gene therapies using the Company’s proprietary technology. The Company received an upfront payment from Spark of $3.0 million and Spark is obligated to reimburse the Company for costs and expenses incurred for the research program. The Company expected to complete the research program over a two-year period.
The Company assessed this agreement in accordance with ASC 606, Revenue Recognition (“ASC 606”) and concluded that the contract counterparty, Spark, is a customer. The Company identified only one combined performance obligation in the agreement, which is to perform research services, the related joint research plan and committees for the five specified promoters. The Company determined that the research activities for each of the five promoters are not distinct given there is one single research plan that is performed by the same research team and research results for one promoter may provide insights for other promoters.
Pursuant to the agreement, once the research program is completed and the Company delivers a data package to Spark, Spark has 24 months (the “Evaluation Period”) to determine whether Spark will exercise its options to obtain field-limited, royalty-bearing licenses to develop, manufacture and commercialize promoters corresponding to each of the five specified promoters being researched. For each licensed promoter option that is exercised, the Company is eligible to receive a license fee, potential research, development and commercial milestone payments and royalties on product sales. Spark may generally terminate the agreement upon 90 days prior written notice or 180 days prior written notice if the licensed promoter is in clinical trials or is being commercialized at the time of termination.
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

The Company evaluated Spark’s optional rights to license, develop, manufacture and commercialize each of the promoter profiles to determine whether they provide Spark with any material rights to purchase the promoter licenses at an incremental discount. The Company’s proprietary technology used to develop the promoters is in the early stages of development, so technological feasibility and probability of developing a product is highly uncertain. As a result, determining the SSP for the optional rights is subject to significant judgment. Given the subjectivity associated with determining the SSP for the right to a future license related to unproven technology at contract inception, the Company also evaluated whether the contract consideration associated with the research services represents the SSP for those services. The Company determined the transaction price, inclusive of the upfront payment and reimbursement of costs and expenses incurred for the research program, is commensurate with SSP for the research being conducted given the specialized nature and reliance on proprietary technology. Based on the Company’s assessment of the optional consideration and the qualitative factors of feasibility and probability of development combined with the quantitative assessment that research services are priced at their SSP, the Company concluded that the license option does not provide Spark with an incremental discount and therefore does not constitute a material right. The transaction price associated with the research services in this agreement consists of the fixed upfront amount of $3.0 million and variable consideration.
For Spark collaboration agreement, the Company recognized the transaction price as research and development services were provided, using a cost-based input method to measure the progress toward completion of its performance obligation and to calculate the corresponding amount of revenue to recognize each period. The Company believes that the cost-based input method is the best measure of progress because other measurements would not reflect how the Company transfers the control related to the performance obligation to our customers.
In December 2022, the Company amended the research collaboration and license agreement with Spark to allow for an increase in budget and a two-month extension of the research program. As there were no changes to performance obligations and the services to be provided are not distinct from those already transferred, the transaction was accounted for as a contract modification and a cumulative catch-up of $(0.7) million was recognized in December 2022.
In May 2023, the Company amended the research collaboration and license agreement with Spark to allow for an increase in budget and additional two-month extension of the research program. As there were no changes to performance obligations and the services to be provided are not distinct from those already transferred, the transaction was accounted for as a contract modification with no cumulative catch-up necessary.
In July 2023, the Company completed the research program under the research collaboration and license agreement with Spark and the remaining upfront payment was recognized.
In November 2023, the Company entered into a Collaboration and Option Agreement with Celest Therapeutics (Shanghai) Co. Ltd. (“Celest”). Subject to the terms and conditions of the Agreement, the Company and Celest will enter into a collaboration under which Celest will lead a pilot trial of a candidate product for the SENTI-301A program in mainland China, with certain technical support from the Company. In addition, the Company agreed to grant an exclusive option to enter a license agreement with Celest to research, develop, manufacture and commercialize SENTI-301A in mainland China, Hong Kong, Macau, and Taiwan. Outside of these jurisdictions, the Company would retain its rights in the SENTI-301A program. Pursuant to the Agreement, with the exercise of the option and entering into a license agreement, the Company may become eligible to receive certain option exercise fee and milestone payments, in an aggregate amount of $156.0 million, as well as certain tiered royalty payments.
For the three months ended March 31, 2024 and 2023, the Company recorded revenue, which was previously included in deferred revenue at the beginning of each period, of zero and $0.4 million, respectively.
Grant Income
In 2021, the Small Business Innovation Research (“SBIR”) awarded the Company a grant in the amount of $2.0 million over two years subject to meeting certain terms and conditions. The purpose of the grant is to support the further development of SENTI202 for acute myeloid leukemia towards clinical development.
Grant income was recognized when qualified research and development costs were incurred and the Company obtained reasonable assurance that the terms and conditions of the grant were met.
19

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

In August 2023, the Company completed the research and development project which was the subject of the SBIR grant.
Entity-wide information
The Company earned no revenue in the three months ended March 31, 2024 and during the three months ended March 31, 2023, Customers A and B accounted for 81% and 19% of revenue, respectively. All revenues were generated in the United States.
9. Stock-Based Compensation
2016 Stock Incentive Plan (as Amended and Restated)
The Company’s 2016 Stock Incentive Plan (the “2016 Plan”) provides for the grant of incentive stock options, non-qualified stock options and restricted stock awards to employees, directors, and consultants of the Company.
Stock options granted under the 2016 Plan generally vest over four years and expire no later than ten years after the grant date.
Following the Merger, the 2016 Plan was terminated. No additional stock awards will be granted under the 2016 Plan. All awards previously granted and outstanding as of the effective date of the Merger, were adjusted to reflect the impact of the Merger, but otherwise remain in effect pursuant to their original terms. The shares underlying any award granted under the 2016 Plan that are forfeited back to or repurchased or reacquired by the Company, will revert to and again become available for issuance under the 2022 Plan.
2022 Stock Incentive Plan
On June 8, 2022, upon the Merger, the Company adopted a 2022 Stock Incentive Plan (the “2022 Plan”). The 2022 Plan provides for the grant of incentive stock options to employees, and for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants.
The exercise price of an option granted under the 2022 Plan shall not be less than the fair market value of a common stock share on the date of grant. With respect to a 10% stockholder, the exercise price of an option granted shall not be less than 110% of the fair value of the common stock share on the date of grant.
Stock options granted under the 2022 Plan generally vest over four years and expire no later than ten years after the grant date.
The Company initially reserved 2,492,735 shares of common stock for issuance under the 2022 Plan. On the first day of each year commencing January 1, 2023, the 2022 Plan will automatically increase by 5% of the outstanding number of shares of common stock of the Company on the last day of the preceding calendar year or such lesser number of shares as approved by the Company’s Board of Directors prior to the effective date of the annual increase. In addition, the shares underlying any award granted under the 2016 Plan that are forfeited back to or repurchased or reacquired by the Company, will revert to and again become available for issuance under the 2022 Plan.
As of March 31, 2024, the total number of shares of common stock available for issuance under the 2022 Plan is 3,480,763.
2022 Inducement Equity Plan
On August 5, 2022, the Company adopted a 2022 Inducement Equity Plan (the “2022 Inducement Plan”). The 2022 Plan provides for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to persons not previously an employee of the Company and its affiliates.
The exercise price of an option granted under the 2022 Inducement Plan shall not be less than the fair market value of a common stock share on the date of grant.
20

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

Stock options granted under the 2022 Inducement Plan generally vest over four years and expire no later than ten years after the grant date.
The Company initially reserved 2,000,000 shares of common stock for issuance under the 2022 Inducement Plan.
As of March 31, 2024, the total number of shares of common stock available for issuance under the 2022 Inducement Plan is 1,460,050.
2022 Employee Stock Purchase Plan
On June 8, 2022, upon the Merger, the Company adopted a 2022 Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees to purchase shares of the Company's common stock at a price equal to 85% of the lower of the fair market values of the stock on the first day of an offering or on the date of purchase. The Company’s ESPP operates with rolling offering periods, which are generally 24 months. On November 15, 2023, upon termination of the then-current offering period in accordance with the terms of the ESPP, the Company suspended the ESPP and no new offering periods may commence under the ESPP until such time as later authorized by the Company.
The Company initially reserved 592,584 shares of common stock for issuance under the ESPP. On the first day of each year commencing January 1, 2023, the ESPP will automatically increase by 1% of the outstanding number of shares of common stock of the Company on the last day of the preceding calendar year or such lesser number of shares as approved by the Company’s Board of Directors prior to the effective date of the annual increase.
As of March 31, 2024, the total number of shares of common stock available for issuance under the ESPP is 793,870.
Stock-Based Compensation Expense
Total stock-based compensation expense was as follows (in thousands):
Three Months Ended March 31,
20242023
General and administrative$1,338 $3,239 
Research and development(80)348 
Total stock-based compensation expense$1,258 $3,587 
Total stock-based compensation expense from discontinued operations was zero and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.
10. Income Tax
The Company’s income tax provision for the three months ended March 31, 2024 and 2023 is zero, respectively. While the company is subject to federal and state income taxes in various jurisdictions, due to cumulative losses their current income tax liability is zero and deferred tax assets generated from the Company’s net operating losses have been subject to a full valuation allowance, as the Company believes it is not more likely than not that the benefit will be realized due to the Company’s losses generated to date.
11. Net Loss Per Share
A reconciliation of net loss available to common stockholders and the number of shares in the calculation of basic and diluted loss per share is as follows:
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SENTI BIOSCIENCES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Three Months Ended March 31,
20242023
Net loss from continuing operations$(12,111)$(13,852)
Net income (loss) from discontinued operations$ $(4,870)
Net loss$(12,111)$(18,722)
Weighted-average shares used in computing net loss per share, basic and diluted45,708,601 44,070,974 
Net loss per share from continuing operations, basic and diluted$(0.26)$(0.31)
Net income (loss) per share from discontinued operations, basic and diluted0.00(0.11)
Net loss per share attributable to common stockholders, basic and diluted$(0.26)$(0.42)
The following potential common stock securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (on an as-converted basis):
Three Months Ended March 31,
20242023
Stock options to purchase common stock11,848,29511,792,908
Unvested early exercised options42,20092,840
Restricted stock units outstanding979,139388,322
Contingent earnout common stock2,000,0002,000,000
GeneFab Option19,633,4440
Total34,503,07814,274,070
Refer to Note 3. GeneFab Transaction, for further details of the GeneFab transaction.
12. Commitments and Contingencies
In the ordinary course of business, the Company enters into contractual agreements with third parties that include non-cancelable payment obligations, for which the Company is liable in future periods.
On June 3, 2021, the Company entered into a lease agreement for a new cGMP facility in Alameda, California to support planned initial clinical trials for our product candidates. The lease will expire in 2032 with future undiscounted operating lease payments of $46.0 million over an initial lease period of eleven years. Refer to Note 6. Operating Leases, for further details of the leases.
In 2021, the Company entered into a three-year collaboration and option agreement with BlueRock Therapeutics LP (“BlueRock”) under which the Company granted BlueRock an option to acquire an exclusive or non-exclusive license to develop, manufacture and commercialize cell therapy products. Refer to Note 13. Related Parties, for details into the BlueRock agreement. In consideration for the option, the Company is responsible for up to $10.0 million in costs and expenses incurred over the three-year term.
Legal Proceedings
The Company is subject to claims and assessments from time to time in the ordinary course of business but does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.
22

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

Indemnification
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions and has never accrued any liabilities related to such obligations in its condensed consolidated financial statements. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has directors’ and officers’ insurance.
13. Related Parties
Bayer Healthcare LLC
On May 21, 2021, the Company entered into a collaboration and option agreement (“BlueRock Agreement”) with BlueRock, a wholly-owned subsidiary of Bayer, pursuant to which the Company granted to BlueRock an option (“BlueRock Option”), on a collaboration program-by-collaboration program basis, to obtain an exclusive or non-exclusive license to develop, manufacture and commercialize cell therapy products that contain cells of specified types and which incorporate an option gene circuit from such collaboration program or a closely related derivative gene circuit. The Company is responsible for up to $10 million in costs and expenses incurred in connection with the research plan and related activities to be conducted over a term of three years as specified in the collaboration and option agreement. If the Company and BlueRock agree to add new research activities to the research plan, then BlueRock will be obligated to reimburse the Company for the costs and expenses incurred that, together with costs and expenses incurred under the initial research plan, exceed $10 million.
The Company concluded that the Agreement is not within the scope of ASC 808, Collaborative Arrangements, because the Company did not receive any consideration and therefore, is not exposed to both significant risks and rewards for the arrangement. The Company also determined that the agreement is also not currently within the scope of ASC 606 because the BlueRock Agreement does not currently meet the criteria of a contract with a customer, and will not be within the scope of ASC 606 until any consideration is paid. Potential future milestone payments and royalties are subject to BlueRock’s exercise of the BlueRock Option and execution of a commercial license agreement by both parties. Under the BlueRock Agreement, the specific financial terms for milestone payments and royalties will be negotiated and agreed to only after the option is exercised.
Bayer held 5,878,488 shares, of the Company’s common stock as of March 31, 2024 and December 31, 2023. Accordingly, Bayer is considered a related party.
Seer, Inc.
In January 2023, the Company acquired lab automation equipment purchased from Seer, Inc. (“Seer”) (NASDAQ: SEER). Omid Farokhzad, a member of the Company’s board of directors is the Chief Executive Officer for Seer. The consideration of $0.2 million, plus interest, will be paid over a two-year period, and title will transfer to the Company upon final payment. The transaction was classified as a finance lease in accordance with ASC 842.
GeneFab, LLC.
As a result of the transaction with GeneFab (refer to Note 3. GeneFab Transaction), whereby Philip Lee, Ph.D., the former Co-Founder and Chief Technology Officer of the Company, assumed the role of Chief Executive Officer of GeneFab, GeneFab is a related party. In connection with the disposal of the business, the Company received the GeneFab Note Receivable and the GeneFab Economic Share and provided GeneFab with the GeneFab Option. Refer to Note 4. Fair Value Measurements.
The Company also subleased its manufacturing facility in Alameda to GeneFab and recorded sublease income of $1.5 million including variable costs charged for the three months ended March 31, 2024.
23

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

In connection with the services agreement entered into with GeneFab, the Company is entitled to $18.9 million for future services under the agreement, of which $11.3 million remained in GeneFab prepaid expenses as of March 31, 2024. Additionally, amounts due from GeneFab related to costs incurred by Senti on its behalf were $0.9 million as of March 31, 2024 and were recorded in GeneFab receivable on the condensed consolidated balance sheet. The Company incurred $3.6 million of research and development expenses under the services agreement during the three months ended March 31, 2024.
Based on the intricacies of the GeneFab Transaction noted above and in Note 3. GeneFab Transaction, we have determined that GeneFab is a related party.
14. Subsequent Events
Entry into a Sublease Agreement
On May 7, 2024, the Company entered into a sublease agreement, or the Sublease, with GeneFab, LLC, as the subtenant for approximately 7,177 rentable square feet, or RSF, of certain space located at our corporate headquarters, Two Corporate Drive, First Floor, South San Francisco, CA 94080. The term of Sublease will be effective on May 7, 2024, subject to the consent by the landlord, Britannia Biotech Gateway Limited Partnership and will expire April 30, 2027, subject to earlier termination in accordance with the terms of the Sublease. Under the Sublease, GeneFab was granted a right of first refusal to sublease additional space of approximately three thousand RSF of the premise as described in the Sublease under certain conditions. The Sublease contains customary events of default, representations, warranties and covenants. As part of a prior agreement with GeneFab, GeneFab was permitted to access certain portions of the subleased premises.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Senti Biosciences, Inc. (“Senti”) entered into a business combination agreement (the “Agreement”) with Dynamics Special Purpose Corp. (“DYNS”) on December 19, 2021. The transactions contemplated by the terms of the Agreement were completed on June 8, 2022 (the “Closing”), in conjunction with which DYNS changed its name to Senti Biosciences, Inc. (hereafter referred to, collectively with its subsidiaries, as “Senti,” the “Company,” “we,” “us,” or “our,” unless the context otherwise requires). The transactions contemplated in the Agreement are collectively referred to as the “Merger.”
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) as well as Senti’s audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”) and filed with the Securities and Exchange Commission (the “SEC”) on March 21, 2024. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10‑Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “explore,” “intend,” “estimate,” “seek,” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Annual Report and Part II, Item 1A of this Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. 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.
Overview
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,
25



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. We expect to continue to incur significant losses for the foreseeable future.
We anticipate that our expenses and operating losses will increase substantially over the foreseeable future. The expected increase in expenses will be driven in large part by our ongoing activities, if and as we:
continue to advance our gene circuit platform technologies;
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;
fund manufacturing of our current and future product candidates;
seek regulatory approval of our current and future product candidates;
expand our operational, financial, and management systems and increase personnel, including personnel to support our preclinical and clinical development, and commercialization efforts;
continue to develop, grow, maintain, enforce and defend our intellectual property portfolio; and
incur additional legal, accounting, or other expenses in operating our business, including the additional costs associated with operating as a public company.
Recent Developments
On August 7, 2023, we completed a transaction with GeneFab, LLC (“GeneFab”), a new independent contract manufacturing and synthetic biology biofoundry focused on next-generation cell and gene therapies. We sold, assigned and transferred rights, title and interest in certain of our assets and contractual rights, including all of our equipment at our facilities in Alameda and certain of our intellectual property related to the schematics for and design of the Alameda facility. We subleased our recently constructed 92,000 square foot current good manufacturing practice facility in Alameda, California to GeneFab which will support the clinical manufacturing of our CAR-NK programs, including SENTI-202. 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 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. The Company determined that the $18.9 million for future manufacturing and research activities, inclusive of the volume discount provided, was executed at market terms and does not result in any impact to the total consideration received from GeneFab for the disposal of the business.
We also agreed to grant a license to GeneFab under certain of our intellectual property rights to conduct manufacturing services and to research, develop, manufacture and commercialize products outside of oncology, pursuant to a license agreement under negotiation.
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 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.
As additional consideration for the transaction, we entered into a seller economic share agreement with GeneFab, pursuant to which we will be entitled to receive ten percent of the realized gains of GeneFab’s parent company arising and resulting from any cash or in-kind distributions from GeneFab in connection with a dividend or sale event, subject to the terms and conditions of the GeneFab Economic Share.
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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 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 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. Supplemental disclosures related to discontinued operations for the statements of cash flows have been provided in Note 3. GeneFab Transaction to our condensed consolidated financial statements. 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. Ltd. (“Celest”). 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
Total Revenue
We currently have no therapeutic products approved for sale, and we have never generated any revenue from the sale of any therapeutic products. Total revenue consists of contract revenue related to research services provided to customers and grant income which is research funding received from grants.
Our ability to generate product revenues will depend on our partners’ ability to replicate our results and the successful development and eventual commercialization of our product candidates, which we do not expect for the foreseeable future, if ever. We may also look to generate revenue from collaboration and license agreements in the future.
Operating Expenses
Our operating expenses consist of research and development expenses, general and administrative expenses, and impairment of long-lived assets.
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Research and Development Expenses
Research and development costs consist primarily of costs incurred for the discovery and preclinical development of our product candidates, which include:
employee-related expenses, including salaries, related benefits, and stock-based compensation expenses for employees engaged in research and development functions;
expenses incurred in connection with research, laboratory consumables and preclinical studies;
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;
costs related to regulatory compliance; and
the cost of annual license fees.
We have not historically tracked research and development expenses by program, with the exception of third-party research projects. 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 INDs and clinical development activities. Such expenses include third-party contract costs relating to manufacturing, clinical trial activities, translational medicine and toxicology activities. We do not allocate internal research and development costs which include personnel, facility costs, laboratory consumables and discovery and research related activities associated with our pipeline because these costs are deployed across multiple programs and our platform, and, as such, are not separately classified.
Our research and development expenses related to the assets sold to GeneFab are included in discontinued operations.
Research and development expenses consisted of the following (in thousands):
Three Months Ended
March 31,
20242023
(unaudited)(unaudited)
Personnel-related expenses, including share-based compensation$2,500 $2,391 
External services and supplies4,776 2,191 
Office and facilities1,297 2,223 
Other206 254 
Total$8,779 $7,059 
Research and development activities are central to our business model. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. In addition, future regulatory factors beyond our control may impact our preclinical development programs. 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
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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. This is due to numerous risks and uncertainties, including the following:
negative or inconclusive results from our preclinical studies or clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or requirement to conduct additional preclinical studies or clinical trials or abandon any or all of our programs;
product-related side effects experienced by participants in our clinical trials or by individuals using therapeutics similar to our product candidates;
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 FDA or other regulatory authorities regarding the scope or design of our clinical trials;
delays in enrolling research subjects in clinical trials;
high drop-out rates of research subjects;
inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of our clinical trials;
Chemistry, manufacturing and control (“CMC”) challenges associated with manufacturing and scaling up biologic product candidates to ensure consistent quality, stability, purity and potency among different batches used in clinical trials;
greater-than-anticipated clinical trial costs;
poor potency or effectiveness of our product candidates during clinical trials;
unfavorable FDA or other regulatory authority inspection and review of a clinical trial or manufacturing site;
failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all;
delays and changes in regulatory requirements, policies and guidelines; and
the FDA or other regulatory authorities interpret our data differently than we do.
A change in the outcome of any of these variables may significantly impact the costs and timing associated with the development of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant costs include legal fees relating to corporate matters, professional fees for accounting and consulting services and an allocation of facility-related costs.
Our general and administrative costs related to the assets sold to GeneFab are included in discontinued operations.
General and administrative expenses consisted of the following (in thousands):
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Three Months Ended
March 31,
20242023
(unaudited)(unaudited)
Personnel-related expenses, including share-based compensation$3,498 $6,758 
External services and supplies1,663 1,233 
Office and facilities998 334 
Depreciation & Amortization724 182 
Insurance467 505 
Other172 179 
Total$7,522 $9,191 
Other Income (Expense)
Interest Income, net
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 GeneFab Note Receivable - related party
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 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 $1.01867 per share.
GeneFab sublease Income - related party
Other income (expense) is primarily comprised of income from our sublease with GeneFab.
Net Income (Loss) from Discontinued Operations
Net income (loss) from discontinued operations includes the results of our manufacturing and research activities related to the Alameda facility through the disposition date of August 7, 2023.
Net income (loss) from discontinued operations is summarized below (in thousands):
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Three Months Ended March 31,
20242023
Operating expenses:
Research and development$— $4,259 
General and administrative— 611 
Total operating expenses— 4,870 
Loss from discontinued operations— (4,870)
Net income (loss) from discontinued operations$— $(4,870)
Results of Operations
Comparison of the Three Months Ended March 31, 2024 and 2023
The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended
March 31,
20242023Change
Revenue
Contract revenue$— $1,036 $(1,036)
Grant income— 250 (250)
Total revenue— 1,286 (1,286)
Operating expenses
Research and development (included related party cost of $3,632 and $—, respectively)
8,779 7,059 1,720 
General and administrative7,522 9,191 (1,669)
Total operating expenses16,301 16,250 51 
Loss from operations(16,301)(14,964)(1,337)
Other income (expense)
Interest income, net331 1,061 (730)
Change in fair value of contingent earnout liability— 59 (59)
Change in fair value of GeneFab Note Receivable - related party29 — 29 
Change in fair value of GeneFab Economic Share - related party55 — 55 
Change in fair value of GeneFab Option - related party2,314 — 2,314 
GeneFab sublease income - related party1,461 — 1,461 
Other income (expense)— (8)
Total other income, net4,190 1,112 3,078 
Net loss from continuing operations(12,111)(13,852)1,741 
Net loss from discontinued operations— (4,870)4,870 
Net loss$(12,111)$(18,722)$6,611 
Contract revenue. 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.
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Grant income. 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 $8.8 million and $7.1 million for the three months ended March 31, 2024 and 2023, respectively. The increase of $1.7 million was 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 $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. 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. 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 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. 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 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. Pursuant to the Purchase Agreement, we have the right, in our sole discretion, to sell to Chardan up to the lesser of: (i) $50.0 million of shares of our common stock; and (ii) 8,727,049 shares of common stock at 97% of the volume weighted average price (“VWAP”) of the common stock calculated in accordance with the Purchase Agreement, over a period of 36 months subject to certain limitations and conditions contained in the Purchase Agreement. 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. 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 March 31, 2024, we had $23.7 million in cash and cash equivalents, and an accumulated deficit of $256.5 million.
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We will need substantial additional funding to support our continuing operations and pursue our development strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, if at all. 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. 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. 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 consideration of $18.9 million will be received in installments during 2024 and 2025, subject to satisfaction of certain conditions. The Company determined that the $18.9 million for future manufacturing and research activities, inclusive of the volume discount provided, was executed at market terms and does not result in any impact to the total consideration received from GeneFab for the disposal of the business.
Cash Flows
The following table sets forth a summary of our cash flows from continuing and discontinued operations for each of the periods indicated (in thousands):
Three Months Ended
March 31,
20242023
Net cash from operating activities$(11,682)$(16,304)
Net cash from investing activities(15)(9,497)
Net cash from financing activities— (35)
Net change in cash and cash equivalents$(11,697)$(25,836)
Operating Activities
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 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.
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Financing Activities
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, 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. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. Our assumptions may prove to be inaccurate, and we could deplete our capital resources sooner than we expect. Additionally, the process of testing and manufacturing product candidates in preclinical studies and clinical trials is costly and the timing and expenses in these trials are uncertain.
Our future capital requirements will depend on many factors, including:
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;
the costs, timing and outcome of regulatory review of our product candidates;
the scope and costs of any commercial manufacturing activities;
the cost associated with commercializing any approved product candidates;
the cost and timing of developing our ability to establish sales and marketing capabilities, if any;
the costs of preparing, filing and prosecuting patent applications, maintaining, enforcing and protecting our intellectual property rights, defending intellectual property-related claims and obtaining licenses to third-party intellectual property;
the timing and amount of any milestone and royalty payments we are required to make under our present or future license agreements;
our ability to establish and maintain collaborations on favorable terms, if at all; and
the extent to which we acquire or in-license other product candidates and technologies and associated intellectual property.
In order to improve our liquidity, management is actively pursuing additional financing. 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. Although management continues to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.
Contractual Obligations and Commitments
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 total undiscounted operating lease payments of $46.0 million over an initial lease period of eleven years. See Note 6. 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
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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.
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, for further details of the contingent earnout.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules and regulations of the SEC.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. 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. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates and assumptions on historical experience, known trends and events, and various other factors that are believed to be reasonable and appropriate under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, we believe the following accounting policies and estimates to be most critical to the preparation of our consolidated financial statements. We define our critical accounting policies as those under U.S. 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 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
The Jumpstart Our Business Startups Act (“JOBS”) Act permits an emerging growth company to take advantage of an extended transition to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. The Company is an “emerging growth company” as defined in Section 2(a) of the Securities Act, and has elected to not take advantage of the benefits of this extended transition period.
We expect to remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of the Dynamics Initial Public Offering (“IPO”) (which occurred on May 25, 2021), (b) in which we have total annual revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of that fiscal year’s second fiscal quarter and our net sales for the year exceed $100 million; and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the preceding, rolling three-year period.
Smaller Reporting Company Status
The Company is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. 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
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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
We have one business activity and operate in one reportable segment.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company,” we are not required to provide this information.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, who also serves as our principal accounting officer and our principal financial officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As previously reported, in connection with our preparation and the audit of our consolidated financial statements as of and for the year ended December 31, 2023, we and our independent registered public accounting firm identified a material weakness, as defined under the Exchange Act and by the Public Company Accounting Oversight Board (United States), in our internal control over financial reporting. The material weakness related to a lack of sufficient and adequate resources in the finance and accounting function that resulted in ineffective process level control activities over non-routine, unusual or complex transactions. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.
Based on the remediation efforts described below, while substantial progress has been made related to the identified material weakness, further actions and testing are necessary before we can conclude full remediation. Remediation efforts include the following:
engaging a professional accounting services firm to assist with significantly complex, technical accounting transactions;
hiring personnel with appropriate levels of experience in accounting, technology, and internal controls; and
enhancing internal controls around complex transaction accounting areas.

While significant progress has been made to enhance our internal control over financial reporting, we are still in the process of building and enhancing our processes, procedures, and controls. Additional time is required to complete the remediation over ineffective process level control activities over non-routine, unusual and complex transactions to ensure the sustainability of these remediation actions. We believe the above actions, when complete, will be effective in the remediation of the material weakness described above.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
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In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company currently is not aware of any legal proceedings or claims that management believes will have, individually or in the aggregate, a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. Before you decide to invest in common stock, you should consider carefully the risks described below, together with the other information contained in the Annual Report on Form 10-K filed with the SEC on March 21, 2024,, including our financial statements and the related notes appearing in this Quarterly Report. We believe the risks described below are the risks that are material to us as of the date of this Quarterly Report. Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in this Item 1A below. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. If any of the following risks actually occur, our business, results of operations and financial condition would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose part or all of your investment.
Summary Risk Factors
The risk factors set forth below represent a summary of some of the principal risk factors which potential investors in our securities should be aware of. Although each of these risks is important, this list is not and is not intended to be a substitute for investors reviewing all of the information in this Quarterly Report, including all risk factors which follow this summary.
We are an early stage clinical biotechnology company with a history of losses. We expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
We have identified a material weakness in our internal control over financial reporting. If our remediation of the material weakness is not effective, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
Members of our management team have limited experience in managing the day-to-day operations of a public company and, as a result, we may incur additional expenses associated with the management of our company.
Our history of recurring losses and anticipated expenditures raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.
We may not achieve the intended objectives of our strategic prioritization plans announced in January 2023 and January 2024.
We received clearance of our IND for our first product candidate, SENTI-202, in December 2023, under our collaboration with Celest for the clinical development of our SENTI-301A program, we anticipate that Celest will begin dosing patients with a product candidate for our SENTI-301A program in the second quarter of 2024, and the rest of our current product candidates are in preclinical development and our product candidates have never been tested in humans. One or all of our current product candidates may fail in clinical development or suffer delays that materially and adversely affect their ability to receive regulatory approval or to attain commercial viability.
There can be no assurance that we will receive all anticipated payments under, or achieve all of the anticipated benefits of the transaction with GeneFab LLC and we could face unanticipated challenges.
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If any of our current or potential future product candidates is ever tested in humans, it may not demonstrate the safety, purity and potency, or efficacy, necessary to become approvable or commercially viable.
Our gene circuit platform technologies are based on novel technologies that are unproven and may not result in approvable or marketable products, which exposes us to unforeseen risks and makes it difficult for us to predict the time and cost of product development and potential for regulatory approval.
We may not be successful in our efforts to use and expand our gene circuit platform to expand our pipeline of product candidates.
The market, physicians, patients, regulators and potential investors may not be receptive to our current or potential future product candidates and may be skeptical of the viability and benefits of our gene circuit pipeline technology because it is based on a relatively novel and complex technology.
The occurrence of serious complications or side effects in connection with use of our product candidates, either in clinical trials or post-approval, could lead to discontinuation of our clinical development programs, refusal of regulatory authorities to approve our product candidates or, post-approval, revocation of marketing authorizations or refusal to approve applications for new indications, which could severely harm our business, prospects, operating results and financial condition.
We and our collaborators may not achieve projected discovery and development milestones and other anticipated key events in the time frames that we or they announce or otherwise anticipate, which could have an adverse impact on our ability to receive payments under our collaboration agreements, harm our business and cause our stock price to decline.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
If we decide to seek orphan drug designation for one or more of our product candidates, we may be unsuccessful or may be unable to maintain the benefits associated with orphan drug designation for our current or future product candidates that we may develop.
We may not be able to conduct, or contract with others to conduct, animal testing in the future, which could harm our research and development activities.
We rely on third parties to conduct our preclinical studies, and plan to rely on third parties to conduct clinical trials, and those third parties may not perform satisfactorily.
Supply of our product candidates for preclinical and clinical development may become limited or interrupted or may not be of satisfactory quantity or quality, and we could experience delays relying on third-party manufacturers.
We are exposed to a number of risks related to our supply chain for the materials required to manufacture our product candidates.
We face competition from companies that have developed or may develop product candidates for the treatment of the diseases that we may target, including companies developing novel therapies and platform technologies. If these companies develop platform technologies or product candidates more rapidly than we do, or if their platform technologies or product candidates are more effective or have fewer side effects, our ability to develop and successfully commercialize product candidates may be adversely affected.
Our business entails a significant risk of product liability, and our inability to obtain sufficient insurance coverage could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our business, operations and clinical development plans and timelines could be adversely affected by the impact of global economic and political developments, including high inflation and capital market disruption, the war in Ukraine, the current armed conflict in Israel and the Gaza Strip, economic sanctions and economic slowdowns or recession, including any lingering impact from the COVID-19 pandemic, or
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by the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we may conduct business, including our anticipated contract manufacturers, contract research organizations (“CROs”), shippers and others.

Risks Related to Our Limited Operating History and Financial Condition
We are an early stage clinical biotechnology company with a history of losses. We expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
We are an early clinical stage biotechnology company with a history of losses. Since our inception, we have devoted substantially all of our resources to research and development, preclinical studies, building our management team and building our intellectual property portfolio, and we have incurred significant operating losses. Our net losses were $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, the Company had an accumulated deficit of $256.5 million and $244.3 million, respectively. Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. To date, we have not generated any revenue from product sales, and we have not sought or obtained regulatory approval for any product candidate. Furthermore, we do not expect to generate any revenue from product sales for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of research and development, preclinical studies, clinical trials, manufacturing and the regulatory approval process for our current and potential future product candidates.
We expect our net losses to increase substantially as we:
continue to advance our gene circuit platform technologies;
commence clinical trials of our current and future product candidates;
continue preclinical development of our current and future product candidates and initiate additional preclinical studies;
acquire and in-license technologies aligned with our gene circuit platform technologies;
seek regulatory approval of our current and future product candidates;
expand our operational, financial, and management systems and increase personnel, including personnel to support our preclinical and clinical development, and commercialization efforts;
continue to develop, maintain, expand, and defend our intellectual property portfolio; and
incur additional legal, accounting, or other expenses in operating our business, including the additional costs associated with operating as a public company.
However, the amount of our future losses is uncertain. Our ability to achieve or sustain profitability, if ever, will depend on, among other things, successfully developing product candidates, obtaining regulatory approvals to market and commercialize product candidates, ensuring our product candidates are manufactured on commercially reasonable terms, entering into potential future alliances, establishing a sales and marketing organization or suitable third-party alternatives for any approved product and raising sufficient funds to finance business activities. If we, or our existing or potential future collaborators, are unable to commercialize one or more of our product candidates, or if sales revenue from any product candidate that receives approval is insufficient, we will not achieve or sustain profitability, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
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We will need substantial additional funding. If we are unable to raise capital when needed on acceptable terms, or at all, we may be forced to restructure our business or delay, reduce, or terminate our research and product development programs, future commercialization efforts or other operations.
We will need substantial additional funds to advance development of product candidates and our gene circuit platform, and we cannot guarantee that we will have sufficient funds available in the future to develop and commercialize our current or potential future product candidates and technologies.
The development of biotechnology product candidates is capital-intensive. If any of our current or potential future product candidates enter and advance through preclinical studies and clinical trials, we will need substantial additional funds to expand our development, regulatory, marketing and sales capabilities. We have used substantial funds to develop our gene circuit platform, SENTI-202, SENTI-301A, and other potential product candidates, and we will require significant funds to continue to develop our platform and conduct further research and development, including preclinical studies and clinical trials. In addition, we expect to incur significant additional costs associated with operating as a public company.
As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $23.7 million and $35.9 million, respectively. Our future capital requirements and the period for which our existing resources will support our operations may vary significantly from what we expect. Our monthly spending levels vary based on new and ongoing research and development and other corporate activities. Because the length of time and activities associated with successful research and development of platform technologies and product candidates are highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. Our future capital requirements and the timing and amount of our operating expenditures will depend largely on:
the timing and progress of preclinical and clinical development of our current and potential future product candidates;
the timing and progress of our development of our gene circuit platforms;
the number and scope of preclinical and clinical programs we decide to pursue;
the terms of any current third-party manufacturing contract or biomanufacturing partnership or future manufacturing contract or biomanufacturing partnership we may enter into;
our ability to maintain our current licenses and collaborations, conduct our research and development programs and establish new strategic partnerships and collaborations;
the progress of the development efforts of our existing strategic partners and third parties with whom we may in the future enter into collaboration and research and development agreements;
the costs involved in obtaining, maintaining, enforcing and defending patents and other intellectual property rights;
supply chain disruptions, global political and market conditions, and inflationary pressures on our business;
the cost and timing of regulatory approvals; and
our efforts to enhance operational systems and to hire and retain personnel, including personnel to support development of our product candidates and to satisfy our obligations as a public company.
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To date, we have primarily financed our operations through the sale of equity securities and the sale of assets related to our manufacturing operations. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, grants and other marketing and distribution arrangements. Any additional capital raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future product candidates, if approved.
We cannot assure you that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms acceptable to us, if at all. If we are unable to obtain adequate financing when needed, our business, financial condition and results of operations will be harmed, and we may need to significantly modify our operational plans, or else we may not be able to continue as a going concern beyond twelve months from the issuance date of this Form 10-Q. For example, 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 August 2023, we announced a transaction with GeneFab pursuant to which we transferred our in-house manufacturing operations and assets to GeneFab. In January 2024, we announced a strategic plan to focus our resource allocation to investment on clinical development of SENTI-202 and on partnership of our SENTI-301A program in China. In the future, we may have to delay, reduce the scope of or suspend one or more of our preclinical studies, clinical trials, research and development programs, or commercialization efforts. Further, if we are unable to continue as a going concern, we might have to liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial statements. Because of the numerous risks and uncertainties associated with the development and commercialization of our current and potential future product candidates and the extent to which we may enter into collaborations with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated preclinical studies and clinical trials, including related manufacturing costs.
To the extent that we raise additional capital through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our current and potential future product candidates, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we do raise additional capital through public or private equity or convertible debt offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Moreover, the issuance of additional securities by us, whether equity or debt, or the market perception that such issuances are likely to occur, could cause the market price of our common stock to decline.
We do not expect to realize revenue from product sales or royalties from licensed products for the foreseeable future, if at all, and unless and until our current and potential future product candidates are clinically tested, approved for commercialization and successfully marketed.
Our streamlining of business operations, including workforce reduction and re-prioritization plan announced in January 2024, may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.
In January 2024, we announced a reduction in workforce by approximately 37% in connection with streamlining our business operations to enable increased focus on SENTI-202 and to continue SENTI-301A program clinical development through a partnership in China. We have incurred certain one-time estimated severance and related costs as part of this resource allocation effort. We also cannot guarantee that we will not have to undertake additional workforce reductions or re-prioritization activities in the future. Further, we may not be able to enter into partnerships for programs that we do not intend to develop internally on acceptable terms or within the timeframes that we expect, or we may not realize the anticipated benefits of those partnerships we do secure, and we may be forced to dedicate additional time and resources to the maintenance of these programs or to our efforts to enter new or additional partnerships. Furthermore, our streamlined strategic business plan may be disruptive to our operations. For example, our workforce reductions could yield unanticipated consequences, such as attrition beyond planned staff reductions, increased difficulties in our day-to-day operations and reduced employee morale. In addition, if there are unforeseen expenses associated with such realignments in our business strategies, and we incur
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unanticipated charges or liabilities, then we may not be able to effectively realize the expected cost savings or other benefits of such actions which could have an adverse effect on our business, operating results and financial condition. If employees who were not affected by the workforce reduction seek alternate employment, this could result in us seeking contract support resulting in unplanned additional expense or harm our productivity. Our workforce reductions could also harm our ability to attract and retain qualified management, scientific, clinical, and manufacturing personnel who are critical to our business. Any failure to attract or retain qualified personnel could prevent us from successfully developing our product candidates in the future.
We identified a material weakness in our internal control over financial reporting. If our remediation of the material weakness is not effective, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of shares of our common stock.
As previously reported, in connection with our preparation and the audit of our consolidated financial statements as of and for the year ended December 31, 2023, we and our independent registered public accounting firm identified a material weakness, as defined under the Exchange Act and by the Public Company Accounting Oversight Board (United States), in our internal control over financial reporting. The material weakness related to a lack of sufficient and adequate resources in the finance and accounting function that resulted in ineffective process level control activities over non-routine, unusual or complex transactions.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.
We implemented a risk assessment process and measures designed to improve our internal control over financial reporting and remediate the control deficiencies that led to the material weakness, including hiring additional accounting personnel. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. Moreover, the rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing, and remediation. To maintain and improve the effectiveness of our financial reporting, we will need to commit significant resources, implement and strengthen existing disclosure processes controls, reporting systems, and procedures, train personnel and provide additional management oversight, all of which may divert attention away from other matters that are important to our business.
We cannot be certain that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. In addition, an independent registered public accounting firm has not yet performed an evaluation of our internal control over financial reporting, though such an evaluation will be required when we lose our status as an “emerging growth company” and become an “accelerated filer” or a “large accelerated filer.” When an evaluation by an independent registered public accounting firm is performed, such firm may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated, or reviewed.
Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. A material weakness in internal controls could result in our failure to detect a material misstatement of our annual or quarterly consolidated financial statements or disclosures. We may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. If we are unable to conclude that we have effective internal controls over financial reporting, investors could lose confidence in our reported financial information, which could have a material adverse effect on the trading price of the shares of our common stock.
We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or identify any additional material weaknesses, the accuracy and timing of our financial reporting may be negatively impacted, we may be unable to maintain
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compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm when required may issue an adverse opinion due to ineffective internal controls over financial reporting, and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our results of operations and cash flows.
Members of our management team have limited experience in managing the day-to-day operations of a public company and, as a result, we may incur additional expenses associated with the management of our company.
Members of our management team have limited experience in managing the day-to-day operations of a public company. As a result, we may need to obtain outside assistance from legal, accounting, i