UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-39980

Sensei Biotherapeutics, Inc.

(Exact name of Registrant as specified in its Charter)

Delaware	83-1863385
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1405 Research Blvd, Suite 125 Rockville, MD	20850
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (240) 243-8000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	SNSE	The Nasdaq Stock Market LLC
Series A Preferred Stock Purchase Rights		The Nasdaq Stock Market LLC

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 (§232.405 of this chapter) during the preceding 12 months (or for 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 filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller 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 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Registrant’s Common Stock outstanding as of May 4, 2023 was 30,980,841.

Table of Contents

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Common Stock and Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	64
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	64
Signatures		66

i

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

	March 31, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	8,109		$	17,795
Marketable securities		87,396			89,321
Prepaid expenses		2,649			1,129
Other current assets		454			344
Total current assets		98,608			108,589
Right of use assets - operating leases, net		5,297			5,355
Right of use assets - financing leases, net		2,133			2,319
Property and equipment, net		1,814			2,049
Other non-current assets		81			63
Total assets	$	107,933		$	118,375
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	4,715		$	4,473
Compensation and employee benefits liabilities		583			2,462
Operating lease liabilities, current		1,406			1,251
Financing lease liabilities, current		879			880
Total current liabilities		7,583			9,066
Operating lease liabilities, non-current		4,119			4,323
Financing lease liabilities, non-current		1,347			1,579
Other non-current liabilities		34			0
Total liabilities		13,083			14,968
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.0001 par value and 10,000,000 shares authorized as of March 31, 2023 and December 31, 2022; zero shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		—			—
Common stock, $0.0001 par value and 250,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 30,971,341 and 30,764,160 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		3			3
Additional paid-in capital		303,641			302,202
Accumulated deficit		(207,971	)		(197,794	)
Accumulated other comprehensive loss		(823	)		(1,004	)
Total stockholders’ equity		94,850			103,407
Total liabilities and stockholders’ equity	$	107,933		$	118,375

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

1

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

	For the Three Months Ended March 31,
	2023			2022
Operating expenses:
Research and development	$	5,204		$	7,455
General and administrative		5,804			5,032
Total operating expenses		11,008			12,487
Loss from operations		(11,008	)		(12,487	)
Other income (expense):
Interest income		969			310
Interest expense		(42	)		(243	)
Loss on asset disposal		(105	)		—
Other income, net		9			15
Net loss		(10,177	)		(12,405	)
Net loss per common share, basic and diluted	$	(0.33	)	$	(0.40	)
Weighted-average number of shares used in computing net loss per common share, basic and diluted		30,866,087			30,647,679
Comprehensive loss:
Net loss	$	(10,177	)	$	(12,405	)
Other comprehensive items:
Unrealized gain (loss) on marketable securities		181			(566	)
Total other comprehensive income (loss)		181			(566	)
Total comprehensive loss	$	(9,996	)	$	(12,971	)

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

2

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCK AND STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)

	Common Stock					Additional Paid-In			Accumulated			Accumulated Other			Total Stockholders’
	Shares			Amount		Capital			Deficit			Comprehensive Loss			Equity
Balance at December 31, 2021		30,609,029		$	3	$	296,049		$	(149,206	)	$	(333	)	$	146,513
Stock-based compensation expense		—			—		1,515			—			—			1,515
Exercise of options into common stock		73,784			—		237			—			—			237
Employee stock purchase plan expense		—			—		14			—			—			14
Unrealized loss on marketable securities		—			—		—			—			(566	)		(566	)
Net loss		—			—		—			(12,405	)		—			(12,405	)
Balance at March 31, 2022		30,682,813		$	3	$	297,815		$	(161,611	)	$	(899	)	$	135,308
Balance at December 31, 2022		30,764,160		$	3	$	302,202		$	(197,794	)	$	(1,004	)	$	103,407
Stock-based compensation expense		—			—		1,213			—			—			1,213
Issuance of equity in exchange for compensation		208,510			—		302			—			—			302
Surrender of shares for tax withholding		(50,343	)		—		(76	)		—			—			(76	)
Vesting of restricted stock shares		49,014			—		—			—			—			—
Unrealized loss on marketable securities		—			—		—			—			181			181
Net loss		—			—		—			(10,177	)		—			(10,177	)
Balance at March 31, 2023		30,971,341		$	3	$	303,641		$	(207,971	)	$	(823	)	$	94,850

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

3

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2023			2022
Operating activities
Net loss	$	(10,177	)	$	(12,405	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		1,213			1,515
Depreciation and amortization		161			157
Accretion on marketable securities		(348	)		197
Non-cash lease expense		316			291
Amortization of financing lease right-of-use assets		197			177
Realized gain on marketable securities		—			(15	)
Loss on fixed asset disposition		105			—
Gain on fixed asset disposition		(9	)		—
Changes in operating assets and liabilities:
Prepaid expenses		(1,580	)		(2,007	)
Other assets		(8	)		175
Accounts payable and accrued liabilities		242			2,644
Compensation and employee benefits		(1,577	)		(1,193	)
Operating lease liabilities		(307	)		(271	)
Other liabilities		36			(15	)
Net cash used in operating activities		(11,736	)		(10,750	)
Investing activities
Purchases of property and equipment		(151	)		(19	)
Purchases of short-term investments		(9,846	)		(8,017	)
Sales of short-term investments		—			12,365
Maturities of short-term investments		12,300			7,864
Proceeds from sale of property and equipment		9			—
Net cash provided by investing activities		2,312			12,193
Financing activities
Principle payments for financing leases		(186	)		(133	)
Proceeds from the exercise of common stock options		—			238
Payment of employee restricted stock tax withholdings		(76	)		—
Employee stock purchase plan proceeds		—			14
Net cash (used in) provided by financing activities		(262	)		119
Net (decrease) increase in cash and cash equivalents		(9,686	)		1,562
Cash and cash equivalents at beginning of period		17,795			7,159
Cash and cash equivalents at end of period	$	8,109		$	8,721
Supplemental disclosure of noncash financing information:
Property and equipment additions included in accounts payable and accrued liabilities	$	—		$	11
Property and equipment disposals included in other assets	$	(120	)	$	—
Issuance of equity in exchange for compensation included in compensation and employee benefits	$	302		$	—
Initial measurement of operating lease right-of-use assets	$	258		$	6,558
Initial measurement of operating lease liabilities	$	258		$	5,580
Initial measurement of finance lease right-of-use assets	$	—		$	411

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

4

SENSEI BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED consolidated FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND OPERATIONS

Business

Sensei Biotherapeutics, Inc. (the “Company” or “Sensei”) is an immuno-oncology company that was incorporated in 1999 as a Maryland corporation until incorporated in Delaware on December 1, 2017. The Company is focused on the discovery and development of next-generation therapeutics for cancer patients.

Liquidity and capital resources

Since its inception, the Company has devoted substantially all of its resources to advancing development of its portfolio of programs, establishing and protecting its intellectual property, conducting research and development activities, organizing and staffing the Company, business planning, raising capital and providing general and administrative support for these operations. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Since its inception, the Company has incurred substantial losses and had a net loss of $10.2 million for the three months ended March 31, 2023. As of March 31, 2023, the Company had an accumulated deficit of $208.0 million. The Company expects to generate operating losses and negative operating cash flows for the foreseeable future.

The Company expects that its cash, cash equivalents and marketable securities as of March 31, 2023 of $95.5 million will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these financial statements. The Company will need additional financing to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The Company has prepared the accompanying condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States (“US GAAP”). The condensed consolidated financial statements include those accounts of the Company and its subsidiaries after elimination of all intercompany accounts and transactions.

Unaudited interim financial information

The condensed consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from these condensed consolidated financial statements, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results for any interim period are not necessarily indicative of results for any future period.

5

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting periods presented. Estimates are used for, but are not limited to, depreciation of equipment, the Company’s enterprise value, fair value of financial instruments, the Company’s ability to continue as a going concern and contingencies. Actual results may differ from those estimates.

Cash and cash equivalents

Cash equivalents are highly liquid investments with an original maturity of 90 days or less at the date of purchase and consist of time deposits and investments in money market funds with commercial banks and financial institutions. At March 31, 2023, cash and cash equivalents included cash on deposit at commercial banks and a money market fund that invests in U.S. Government securities.

Marketable securities

Investments consist of marketable securities with original maturities greater than 90 days. The Company has classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of marketable securities to be available-for-sale. Accordingly, these investments are recorded at fair value (Level 2). Unrealized gains and losses are reported as the accumulated other comprehensive items in stockholders’ equity. Amortization and accretion of premiums and discounts are recorded in other income (expense). Realized gains or losses on debt securities are included in interest income or interest expense, respectively. If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is other than temporary and, if so, marks the investment to market on the Company’s statement of operations and comprehensive loss.

Property and Equipment

Property and equipment are recorded at cost and depreciated or amortized over the estimated useful lives of the assets. Repairs or maintenance costs are expensed as incurred. Depreciation is computed using the straight-line method over the following estimated useful lives:

Office equipment and furniture	3—7 years
Research equipment	1—7 years

Leases

Effective January 1, 2022, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASC 842”) using the modified retrospective method. At lease inception, the Company determines if an arrangement is or contains a lease, and if so, assesses the lease for classification as either an operating or finance lease. A lease is classified as a finance lease if any one of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the remaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or (v) the leased asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease. A lease is classified as an operating lease if it does not meet any of these criteria.

Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and current and non-current lease liabilities, as applicable. The Company elected not to separate lease and non-lease components for all underlying assets. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the options. For leases that existed prior to the adoption of ASC 842, the Company used the remaining lease term to determine the appropriate incremental borrowing rate.

Recently Issued Accounting Standards Updates

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. ASU 2016-13 also amends the

6

accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The guidance requires a modified retrospective transition method and early adoption is permitted. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses, Derivatives and Hedging, and Leases (“ASU 2019-10”), which defers the adoption of ASU 2016-13 for smaller reporting companies until periods beginning after December 15, 2022. The Company has adopted the new guidance as of January 1, 2023, and it did not have a material impact on its financial statements and related disclosures.

3. MARKETABLE SECURITIES

Marketable securities consist of the following as of March 31, 2023 (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Commercial paper	$	30,393	$	-	$	(31	)	$	30,362
Corporate bonds		49,225		-		(474	)		48,751
U.S. Government agencies		8,601		6		(324	)		8,283
Total	$	88,219	$	6	$	(829	)	$	87,396

As of March 31, 2023, all marketable securities held by the Company had remaining contractual maturities of one year or less, except for corporate bonds and U.S. government agencies securities with a fair value of $31.7 million that had maturities of one to three years.

As of March 31, 2023, $0.3 million and $0.5 million of unrealized losses were associated with marketable securities with contractual maturities of one year or less and more than one year, respectively.

There were no impairments of the Company’s assets measured and carried at fair value during the three months ended March 31, 2023.

4. PROPERTY AND EQUIPMENT, NET

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

	March 31, 2023			December 31, 2022
Research equipment	$	2,607		$	2,707
Office equipment and furniture		532			532
Leasehold improvement		253			253
Total property and equipment		3,392			3,492
Less accumulated depreciation and amortization		(1,578	)		(1,442	)
Property and equipment, net	$	1,814		$	2,049

Depreciation and amortization expense for the three months ended March 31, 2023 and 2022 was $161 thousand and $157 thousand, respectively.

Effective January 1, 2022, the Company adopted ASC 842 and reclassed capital leases that were previously classified as property and equipment, net were presented separately under right of use assets - financing leases, net on the Company's condensed consolidated balance sheet. $2.2 million relates to items previously classified under research equipment and $70 thousand relates to items previously classified under office equipment and furniture on the table above. These leases are further described in Note 6.

7

5. FAIR VALUE MEASUREMENTS

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):

	Fair value measurements at March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	5,850	$	-	$	-	$	5,850
Investments:
Commercial paper		-		30,362		-		30,362
Corporate bonds		-		48,751		-		48,751
U.S. Government agencies		-		8,283		-		8,283
Total	$	5,850	$	87,396	$	-	$	93,246

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

There were no transfers among Level 1, Level 2 or Level 3 categories in the three months ended March 31, 2023 and 2022.

6. COMMITMENTS AND CONTINGENCIES

Operating Leases

As of March 31, 2023, the Company leases office and laboratory facilities under operating leases, which expire at various dates through 2027. The Company has $678 thousand in letters of credit outstanding as security on certain of these leases. As part of its adoption of ASC 842, the Company recorded operating right-of-use assets and operating lease liabilities for these leases as of January 1, 2022.

The Company entered into an operating sublease agreement on January 18, 2023 (the "Sublease") with respect to part of its existing Boston office and laboratory facilities (the "Head Lease"). The Company accounted for the Head Lease and the Sublease as separate contracts and there was no effect on the right-of-use asset or lease liability associated with the Head Lease. The Sublease is long-term and has an effective end date of more than one year from March 31, 2023. The Head Lease rent expense is presented separately from income related to the Sublease and both are reported as components of operating expenses on the condensed consolidated statements of operations and comprehensive loss. The Company recorded $55 thousand of income related to the Sublease for the three months ended March 31, 2023.

Finance Leases

The Company leases research equipment and furniture under finance leases. The following table contains a summary of the lease costs recognized under ASC 842 pertaining to the Company’s finance and operating leases for the three months ended March 31, 2023 (in thousands):

	Three Months Ended March 31,
	2023
Lease Cost:
Amortization of finance right-of-use assets	$	197
Interest on finance lease liabilities		42
Operating lease cost		420
Variable lease cost		158
Total lease costs	$	817
Operating Sublease income		(55	)
Total lease costs, net	$	762

The following table contains a summary of other information pertaining to the Company’s finance and operating leases for the three months ended March 31, 2023 (in thousands, except lease term and discount rate):

8

Three Months Ended March 31,

2023