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, 2021~~June 30, 2022


☐	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,~~ 451 D Street, Suite ~~125~~710 ~~Rockville, MD~~Boston, MA	~~20850~~02210
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: ~~(240)~~ (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

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~~ Yes☒ NO 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~~ Yes☒ NO 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.

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~~ Yes☐ NO No☒

The number of shares of Registrant’s Common Stock outstanding as of ~~May 7, 2021~~August 5, 2022 was ~~30,588,495.~~30,720,291.

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 Convertible Preferred Stock, Common Stock and Stockholders’ Equity ~~(Deficit~~(Deficit))	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	1416
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2226
Item 4.	Controls and Procedures	2226

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	2327
Item 1A.	Risk Factors	2327
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2327
Item 3.	Defaults Upon Senior Securities	2327
Item 4.	Mine Safety Disclosures	2327
Item 5.	Other Information	2327
Item 6.	Exhibits	2428
Signatures		2529

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, 2021			December 31, 2020			June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	169,418		$	16,596		$	9,899		$	7,159
Deferred offering costs		—			2,105
Marketable securities								113,815			140,462
Prepaid expenses		3,307			1,375			3,484			547
Other current assets		60			—			293			374
Total current assets		172,785			20,076			127,491			148,542
Right of use assets - operating leases, net								5,971			—
Right of use assets - financing leases, net								2,417			—
Property and equipment, net		1,655			1,266			2,112			4,644
Deposits		36			86
Other non-current assets								45			39
Total assets	$	174,476		$	21,428		$	138,036		$	153,225
Liabilities, convertible preferred stock and stockholders’ equity (deficit)
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	2,002		$	3,882		$	2,423		$	2,456
Other liabilities		473			948
Compensation and employee benefits liabilities								1,019			1,753
Operating lease liabilities, current								1,194			—
Financing lease liabilities, current								798			680
Total current liabilities		2,475			4,830			5,434			4,889
Debt		567			567
Operating lease liabilities, non-current								4,967			—
Financing lease liabilities, non-current								1,719			1,674
Other non-current liabilities		182			138			—			149
Total liabilities		3,224			5,535			12,120			6,712
Commitments and contingencies (Note 7)
Convertible preferred stock (Series AA) (Note 8)		—			61,411
Convertible preferred stock (Series BB) (Note 8)		—			10,925
Stockholders’ equity (deficit):
Common stock, $0.0001 par value; 1,230,000,000 shares authorized as of March 31, 2021, 30,588,495 shares and 1,875,422 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		3			—
Stockholders’ equity:
Common stock, $0.0001 par value and 250,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 30,720,921 and 30,609,029 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively								3			3
Additional paid-in capital		291,633			55,969			299,271			296,049
Accumulated deficit		(120,384	)		(112,412	)		(172,146	)		(149,206	)
Total stockholders’ equity (deficit)		171,252			(56,443	)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	174,476		$	21,428
Accumulated other comprehensive loss								(1,212	)		(333	)
Total stockholders’ equity								125,916			146,513
Total liabilities and stockholders’ equity							$	138,036		$	153,225

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

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended March 31,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2022			2021			2022			2021
Operating expenses:
Research and development	$	3,365		$	2,195		$	6,393		$	5,898		$	13,848		$	9,263
General and administrative		4,604			1,908			4,319			3,886			9,351			8,490
Total operating expenses		7,969			4,103			10,712			9,784			23,199			17,753
Loss from operations		(7,969	)		(4,103	)		(10,712	)		(9,784	)		(23,199	)		(17,753	)
Other expense:
Interest expense, including $0 and $645 with related parties in the three months ended March 31, 2021 and 2020, respectively		(3	)		(1,629	)
Fair value adjustments on embedded debt derivatives, including $0 and $575 with related parties in the three months ended March 31, 2021 and 2020, respectively		—			995
Gain on debt extinguishment		—			45
Other income (expense):
Realized gain on marketable securities								—			—			15			—
Interest income								349			188			659			188
Interest expense								(172	)		(147	)		(415	)		(150	)
Loss on fixed asset disposition								—			(28	)		—			(28	)
Net loss		(7,972	)		(4,692	)		(10,535	)		(9,771	)		(22,940	)		(17,743	)
Cumulative dividends on convertible preferred stock		—			(104	)
Net loss attributable to common stockholders	$	(7,972	)	$	(4,796	)
Net loss per common share, basic and diluted	$	(0.42	)	$	(4.00	)	$	(0.34	)	$	(0.32	)	$	(0.75	)	$	(0.72	)
Weighted-average number of shares used in computing net loss per common share, basic and diluted		18,904,853			1,199,550			30,701,758			30,588,495			30,674,868			24,778,949


Comprehensive loss:
Net loss							$	(10,535	)	$	(9,771	)	$	(22,940	)	$	(17,743	)
Other comprehensive items:
Unrealized loss on marketable securities								(313	)		(101	)		(879	)		(101	)
Total other comprehensive loss								(313	)		(101	)		(879	)		(101	)
Total comprehensive loss							$	(10,848	)	$	(9,872	)	$	(23,819	)	$	(17,844	)

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

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK, COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

~~(Unaudited)~~(Unaudited)

(In thousands, except share data)

	Convertible Preferred Stock (Series A-F)						Convertible Preferred Stock (Series AA)						Convertible Preferred Stock (Series BB)						Common Stock					Additional Paid-In			Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount		Capital			Deficit			(Deficit)			Convertible Preferred Stock (Series AA)						Convertible Preferred Stock (Series BB)						Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
Balance at December 31, 2019		15,257,663		$	47,545			—		$	—			—		$	—			369,491		$	—	$	23,650		$	(92,312	)	$	(68,662	)
Stock-based compensation expense		—			—			—			—			—			—			—			—		194			—			194
Conversion of series A, B, C, D, E, F preferred stock into common stock		(15,257,663	)		(47,545	)		—			—			—			—			627,871			—		47,545			—			47,545
Conversion of common stock into series AA preferred stock		—			—			210,310,025			17,274			—			—			(148,732	)		—		(17,274	)		—			(17,274	)
Preferred stock issued in exchange for note redemption		—			—			188,173,050			15,456			—			—			—			—		—			—			—
Issuance of series AA preferred stock		—			—			128,655,262			10,567			—			—			—			—		—			—			—
Exercise of common stock warrants		—			—			—			—			—			—			634,118			—		—			—			—
Net loss		—			—			—			—			—			—			—			—		—			(4,692	)		(4,692	)
Balance at March 31, 2020		—		$	—			527,138,337		$	43,297			—		$	—			1,482,748		$	—	$	54,115		$	(97,004	)	$	(42,889	)
																																	Shares			Amount			Shares			Amount			Shares		Amount		Capital		Deficit			Loss			Equity (Deficit)
Balance at December 31, 2020		—		$	—			747,683,172		$	61,411			52,680,306		$	10,925			1,875,422		$	—	$	55,969		$	(112,412	)	$	(56,443	)		747,683,172		$	61,411			52,680,306		$	10,925			1,875,422	$	—	$	55,969	$	(112,412	)	$	—		$	(56,443	)
Stock-based compensation expense		—			—			—			—			—			—			—			—		1,349			—			1,349			—			—			—			—			—		—		1,349		—			—			1,349
Issuance of series BB preferred stock		—			—			—			—			113,275,902			23,491			—			—		—			—			—			—			—			113,275,902			23,491			—		—		—		—			—			—
Conversion of preferred stock to common stock upon closing of the initial public offering		—			—			(747,683,172	)		(61,411	)		(165,956,208	)		(34,416	)		19,034,069			2		95,826			—			95,828			(747,683,172	)		(61,411	)		(165,956,208	)		(34,416	)		19,034,069		2		95,826		—			—			95,828
Issuance of common stock upon closing of the initial public offering, net of issuance costs		—			—			—			—			—			—			8,030,295			1		138,488			—			138,489			—			—			—			—			8,030,295		1		138,488		—			—			138,489
Exercise of common stock warrants		—			—			—			—			—			—			1,648,709			—		1			—			1			—			—			—			—			1,648,709		—		1		—			—			1
Net loss		—			—			—			—			—			—			—			—		—			(7,972	)		(7,972	)		—			—			—			—			—		—		—		(7,972	)		—			(7,972	)
Balance at March 31, 2021		—		$	—			—		$	—			—		$	—			30,588,495		$	3	$	291,633		$	(120,384	)	$	171,252			—		$	—			—		$	—			30,588,495	$	3	$	291,633	$	(120,384	)	$	—		$	171,252
Stock-based compensation expense																																		—			—			—			—			—		—		1,745		—			—			1,745
Unrealized gains (loss) on marketable securities																																		—			—			—			—			—		—		—		—			(101	)		(101	)
Net loss																																		—			—			—			—			—		—		—		(9,771	)		—			(9,771	)
Balance at June 30, 2021																																		—		$	—			—		$	—			30,588,495	$	3	$	293,378	$	(130,155	)	$	(101	)	$	163,125


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
Stock-based compensation expense																																		—			—			—			—			—		—		1,396		—			—			1,396
Employee stock purchase plan expense																																		—			—			—			—			37,478		—		60		—			—			60
Unrealized loss on marketable securities																																		—			—			—			—			—		—		—		—			(313	)		(313	)
Net loss																																		—			—			—			—			—		—		—		(10,535	)		—			(10,535	)
Balance at June 30, 2022																																		—		$	—			—		$	—			30,720,291	$	3	$	299,271	$	(172,146	)	$	(1,212	)	$	125,916

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

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2022			2021
Operating activities
Net loss	$	(22,940	)	$	(17,743	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		2,934			3,095
Depreciation and amortization		301			220
Accretion on marketable securities		323			145
Interest on finance lease		—			5
Non-cash lease expense		587			—
Amortization of financing lease right-of-use assets		353			—
Realized gain on marketable securities		(15	)		—
Loss on fixed asset disposition		—			28
Changes in operating assets and liabilities:
Prepaid expenses		(2,936	)		(1,740	)
Other assets		74			86
Accounts payable and accrued liabilities		(33	)		(1,148	)
Compensation and employee benefits		(735	)		180
Operating lease liabilities		(546	)		—
Other liabilities		(16	)		58
Net cash used in operating activities		(22,649	)		(16,814	)
Investing activities
Purchases of property and equipment		(71	)		(1,103	)
Purchases of short-term investments		(43,269	)		(147,145	)
Sales of short-term investments		7,864			—
Maturities of short-term investments		60,865			—
Net cash provided by (used in) investing activities		25,389			(148,248	)
Financing activities
Principle payments from financing leases		(289	)		(21	)
Proceeds from the exercise of common stock options		238			1
Employee stock purchase plan expense		51			—
Proceeds on the issuance of series BB convertible preferred stock		—			23,491
Proceeds from issuance of common stock upon initial public offering, net of issuance costs		—			140,594
Net cash provided by financing activities		—			164,065
Net increase (decrease) in cash and cash equivalents		2,740			(997	)
Cash and cash equivalents at beginning of period		7,159			16,596
Cash and cash equivalents at end of period	$	9,899		$	15,599
Supplemental disclosure of noncash financing information:
Property and equipment additions included in accounts payable and accrued liabilities	$	—		$	56
Deferred offering costs included in accounts payable and accrued liabilities	$	—		$	534
Interest on financing	$	—		$	5
Conversion of series AA and BB convertible preferred stock into common stock	$	—		$	95,826
Initial measurement of operating lease right-of-use assets	$	6,558		$	—
Initial measurement of operating lease liabilities	$	5,580		$	—
Initial measurement of finance lease right-of-use assets	$	453		$	—

Three Months Ended March 31,

2021

2020

Operating activities

Net loss

$
(7,972
)

$
(4,692
)
Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense

1,349

194

Depreciation and amortization

98

23

Accretion on debt

—

1,578

Fair value adjustments on embedded debt derivatives

—

(995
)
Interest on capital lease

3

3

Gain on debt extinguishment

—

(45
)
Changes in operating assets and liabilities:

Prepaid expenses and other current assets

(1,992
)

(834
)
Deposits

50

(36
)
Accounts payable and accrued liabilities

(1,880
)

(1,104
)
Accrued interest

—

50

Other liabilities

(423
)

(602
)
Net cash used in operating activities

(10,767
)

(6,460
)
Investing activities

Purchases of property and equipment

(487
)

(52
)
Net cash used in investing activities

(487
)

(52
)
Financing activities

Proceeds from the exercise of common stock warrants and options

1

—

Capital lease payments

(10
)

(10
)
Proceeds on the issuance of series AA convertible preferred stock

—

10,567

Proceeds from issuance of common stock upon initial public offering, net of issuance costs

140,594

—

Proceeds on the issuance of series BB convertible preferred stock

23,491

—

Net cash provided by financing activities

164,076

10,557

Net increase in cash and cash equivalents

152,822

4,045

Cash and cash equivalents at beginning of period

16,596

251

Cash and cash equivalents at end of period

$
169,418

$
4,296

Supplemental disclosure of noncash financing and investing information:

Property and equipment additions included in accounts payable and accrued liabilities

$
15

$
5

Issuance costs included in accounts payable and accrued liabilities

$
534

$
—

Interest on financing

$
3

$
3

Conversion of series A, B, C, D, E, F convertible preferred stock into common stock

$
—

$
47,545

Conversion of series AA and BB convertible preferred stock into common stock

$
95,828

$
—

Conversion of common stock into series AA convertible preferred stock

$
—

$
17,274

Convertible preferred stock issued in exchange for note redemption

$
—

$
15,456

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

SENSEI BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED consolidated FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND OPERATIONS

Business

Sensei Biotherapeutics, Inc. (the “Company” or “Sensei”) is a ~~clinical-stage immunotherapy~~biopharmaceutical company that was incorporated in 1999 as a Maryland corporation until incorporated in Delaware on December 1, 2017. The Company is ~~engaged in~~focused on the discovery and development of next generation ~~therapies~~immunotherapies with an initial focus on treatments for cancer.

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 ~~$8.0~~$22.9 million for the ~~three~~six months ended ~~March 31, 2021.~~June 30, 2022. As of ~~March 31, 2021,~~June 30, 2022, the Company had an accumulated deficit of ~~$120.4~~$172.1 million. The Company expects to generate operating losses and negative operating cash flows for the foreseeable future.

In February 2021, the Company completed its initial public offering (“IPO”), in which the Company issued and sold 8,030,295 shares of its common stock at a public offering price of ~~$19.00~~$19.00 per share, for aggregate gross proceeds of ~~$152.6~~$152.6 million. The Company received ~~$138.5~~$138.5 million in net proceeds after deducting underwriting discounts and estimated offering expenses payable by the Company.

The Company expects that its cash, ~~and~~ cash equivalents and marketable securities as of ~~March 31, 2021~~June 30, 2022 of ~~$169.4~~$123.7 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.

Reverse stock split

On January 29, 2021, the Company effected a reverse stock split of the Company’s common stock on a 48-for-1 basis (the “Reverse Stock Split”). In connection with the Reverse Stock Split, the conversion ratio for the Company’s Series AA and Series BB convertible preferred stock was proportionately adjusted such that the common stock issuable upon conversion of such preferred stock was decreased in proportion to the Reverse Stock Split. Accordingly, all common stock share and per share amounts, as well as all preferred stock conversion ratios, for all periods presented in these financial statements have been retroactively adjusted, to reflect this reverse stock split and adjustment of the Series AA and BB convertible preferred stock conversion ratios.

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.

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 June 30, 2022, 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 loss 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.

Leases

Prior to January 1, 2022, the Company accounted for leases in accordance with ASC 840, Leases (“ASC 840”). At lease inception, the Company determined if an arrangement was an operating or capital lease. For operating leases, the Company recognized rent expense, inclusive of rent escalations, holidays and lease incentives, on a straight-line basis over the lease term. The difference between rent expense recorded and the amount paid was charged to deferred rent. The Company presented lease incentives as deferred rent and amortized the incentives as a reduction to rent expense on a straight-line basis over the lease term. The Company classified deferred rent as current and noncurrent liabilities based on the portion of the deferred rent that was scheduled to mature within the proceeding twelve months.

Effective January 1, 2022, the Company accounts for leases in accordance with Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”). At contract inception, the Company determines if an arrangement is or contains a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If determined to be or contain a lease, the lease is assessed for classification as either an operating or finance lease at the lease commencement date, defined as the date on which the leased asset is made available for use by the Company, based on the economic characteristics of the lease. For each lease with a term greater than twelve months, the Company records a right-of-use asset and lease liability.

A right-of-use asset represents the economic benefit conveyed to the Company by the right to use the underlying asset over the lease term. A lease liability represents the obligation to make lease payments arising from the lease. The Company elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets and therefore measures each lease payment as the total of the fixed lease and associated non-lease components. Lease liabilities are measured at lease commencement and calculated as the present value of the future lease payments in the contract using the rate implicit in the contract, when available. If an implicit rate is not readily determinable, the Company uses an incremental borrowing rate measured as the rate at which the Company could borrow, on a fully collateralized basis, a commensurate loan in the same currency over a period consistent with the lease term at the commencement date. Right-of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments, less lease incentives granted by the lessor. The lease term is measured as the noncancelable period in the contract, adjusted for any options to extend or terminate when it is reasonably certain the Company will extend the lease term via such options based on an assessment of economic factors present as of the lease commencement date. The Company elected the practical expedient to not recognize leases with a lease term of twelve months or less.

Components of a lease are split into three categories: lease components, non-lease components, and non-components. The fixed and in-substance fixed contract consideration (including any consideration related to non-components) are allocated, based on the respective relative fair values, to the lease components and non-lease components. The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets and allocate all of the contract consideration to the lease component only.

The Company’s operating and finance leases are presented in the consolidated balance sheet as lease right-of-use assets, classified as noncurrent assets, and lease liabilities, classified as current and noncurrent liabilities. Operating and finance lease expense is recognized on a straight-line basis over the lease term. Variable costs associated with a lease, such as maintenance and utilities, are not included in the measurement of the lease liabilities and right-of-use assets but rather are expensed when the events determining the amount of variable consideration to be paid have occurred.

ASC 842 provides several optional practical expedients in transition. The Company applied the ‘package of practical expedients’ which allow the Company to not reassess whether existing or expired arrangements contain a lease, the lease classification of existing or expired leases, or whether previous initial direct costs would qualify for capitalization under ASC 842.

The adoption of ASC 842 resulted in the recognition of operating lease liabilities of $6.7 million and operating right-of-use assets of $6.6 million, along with the write-off of certain deferred rent balances of $0.1 million within the Company’s condensed consolidated balance sheets as of January 1, 2022. Leases previously reported as capital leases are now referred to as finance leases. The adoption did not have a significant impact on the Company’s condensed consolidated statements of operations and comprehensive loss and condensed consolidated statements of cash flows.

Recently Issued Accounting Standards Updates

In ~~February~~June 2016, ~~the FASB issued Accounting Standards Updates (“ASU”) No. 2016-02,~~ ~~Leases (Topic 842)~~, as amended, with guidance regarding the accounting for and disclosure of leases. The update requires lessees to recognize the liabilities related to all leases, including operating leases on the balance sheet. This update also requires lessees and lessors to disclose key information about their leasing transactions. This update is effective for entities other than public business entities, including emerging growth companies that elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer is required to comply with such standards, for annual reporting periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the impact of adopting ASU No. 2016-02 on the condensed consolidated financial statements and related disclosures.

~~In August 2018,~~ the FASB issued ASU No. ~~2018-13,~~ ~~Fair Value~~2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement ( of Credit Losses on Financial Instruments,” which was subsequently amended in November 2018 through ASU No. 2018-19, “Codification Improvements to Topic ~~820), Disclosure Framework—Changes~~326, Financial Instruments—Credit Losses.” ASU No. 2016-13 will require entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financing receivables, debt securities and other instruments, which will result in earlier recognition of credit losses. Further, the ~~Disclosure Requirements~~new credit loss model will affect how entities in all industries estimate their allowance for ~~Fair Value Measurement. This update removed~~losses for receivables that are current with respect to their payment terms. As per the ~~following disclosure requirements: (1)~~latest ASU 2020-02, FASB deferred the ~~amount of~~timelines for certain small public and ~~reasons~~private entities, thus the new guidance will be adopted by the Company for ~~transfers between Level~~the annual reporting period beginning January 1, ~~and Level 2~~2023, including interim periods within that annual reporting period. The standard will apply as a cumulative-effect adjustment to retained earnings as of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. Additionally, this update added the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive income and loss for recurring Level 3 fair value measurements held at the endbeginning of the first reporting ~~period; (2)~~period in which the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.guidance is adopted. The Company ~~adopted ASU No. 2018-13 on January 1, 2020 and it did~~does not expect adoption of this new guidance to have a material ~~effect~~impact on ~~the condensed consolidated~~its results of operations, financial ~~statements~~condition, and ~~related~~financial statement disclosures.

~~In December 2019, the FASB issued ASU No. 2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~. ASU No. 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects

3. MARKETABLE SECURITIES

Marketable securities consist of the ~~accounting~~following as of June 30, 2022 (in thousands):


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Commercial paper	$	31,288	$	-	$	(41	)	$	31,247
Corporate bonds		76,739		-		(850	)	$	75,889
U.S. Government agencies		7,000		-		(321	)	$	6,679
Total	$	115,027	$	-	$	(1,212	)	$	113,815

As of June 30, 2022, all marketable securities held by the Company had remaining contractual maturities of one year or less, except for ~~income taxes. This update is effective for entities other~~corporate bonds and U.S. government agencies securities with a fair value of $51.1 million that had maturities of one to three years.

As of June 30, 2022, $255 thousand and $957 thousand of unrealized losses were associated with marketable securities with contractual maturities of one year or less and more than public business entities, including emerging growth companies that elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer is required to comply with such standards, for annual reporting periods beginning after December 15, 2021,one year, respectively.

There were 0 impairments of the Company’s assets measured and ~~interim periods within annual periods beginning after December 15,~~carried at fair value during the six months ended June 30, 2022. ~~The Company adopted ASU No. 2019-12 on January 1, 2020 and it did not have a material effect on the condensed consolidated financial statements and related disclosures.~~

3.4. PROPERTY AND EQUIPMENT, NET

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

	March 31, 2021			December 31, 2020
							June 30, 2022			December 31, 2021
Research equipment							$	2,813		$	4,974
Office equipment and furniture	$	121		$	94			536			606
Research equipment		2,227			1,767
Leaseholder improvement								253			253
Total property and equipment		2,348			1,861			3,602			5,833
Less accumulated depreciation and amortization		(693	)		(595	)		(1,490	)		(1,189	)
Property and equipment, net	$	1,655		$	1,266		$	2,112		$	4,644

Depreciation and amortization expense for the three months ended ~~March 31,~~June 30, 2022 and 2021 ~~and 2020~~ was ~~$98~~$144 thousand and ~~$23~~$122 thousand, respectively, and for the six months ended June 30, 2022 and 2021 was $301 thousand and $220 thousand, respectively.

~~4. Other current liabilities~~

~~Other current liabilities consist~~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 ~~following (in thousands):~~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 7.

March 31,
2021

December 31,
2020

Compensation and benefits

$
440

$
916

Other

33

32

Total other current liabilities

$
473

$
948

5. Debt

In May 2020, the Company received ~~$567~~$567 thousand in loan funding from the Paycheck Protection Program (“PPP”) pursuant to the Coronavirus Aid, Relief, and Economic Security Act, as amended by the Flexibility Act, and administered by the Small Business Administration. The unsecured loan (the “PPP Loan”) is with Silicon Valley Bank.

Under the terms of the PPP Loan, interest ~~accrues~~accrued on the outstanding principal at a rate of ~~1.0%~~1.0% per annum. ToOn August 6, 2021, the ~~extent~~Small Business Administration approved the forgiveness for the full amount of the PPP Loan, ~~amount is not~~which included principal of $567 thousand, plus interest. The Company recognized a gain on debt extinguishment once forgiven ~~under~~in other income (expense) on the ~~PPP Loan,~~Consolidated Statement of Operations and Comprehensive Loss for the Company is obligated to make equal monthly payments of principal and interest, beginning after determination of forgiveness by the lender. If the Company applies for forgiveness before August 2021 and forgiveness is not granted, principal and interest payments will be required beginning in May 2022. If the Company does not apply for loan forgiveness by August 2021, principal and interest will be required beginning in Augustyear ended December 31, 2021.

6. FAIR VALUE MEASUREMENTS

The ~~Company did not have any~~following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis ~~as of March 31, 2021~~ and ~~December 31, 2020.~~

~~The Company’s embedded debt derivatives during 2020 are measured at fair value using a probability-weighted discounted cash flow valuation methodology. The determination~~indicate the level of the fair value hierarchy used to determine such fair values (in thousands):


	Fair value measurements at June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	6,521	$	-	$	-	$	6,521
Investments:
Commercial paper		-		31,247		-		31,247
Corporate bonds		-		75,889		-		75,889
U.S. Government agencies		-		6,679		-		6,679
Total	$	6,521	$	113,815	$	-	$	120,336

When developing fair value estimates, the Company maximizes the use of ~~embedded debt derivatives includes~~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 observable in the market and as such, represents a Level 3 measurement. The methodology utilized requires inputs based on certain subjective assumptions, including probabilities of debt settlement scenarios and a discount rate. This approach results in the classification of these embedded debt derivatives as Level 3 ofavailable, the fair value ~~hierarchy.~~

~~The~~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 utilized to value the embedded debt derivatives during the three months ended March 31, 2020 prior to the settlement of such instruments included the actual outcome of the underling debt host contract, whether it was settled on a qualified financing prior to the contractual maturity date or settlement at the contractual maturity date. For the three months ended March 31, 2020,are not available, the Company ~~recognized $1.0 million of income in~~is required to make judgments about assumptions market participants would use to estimate the ~~condensed consolidated statement of operations as other income—~~fair value ~~adjustments on embedded debt derivatives.~~

~~The following table provides~~of a ~~reconciliation of embedded debt derivatives measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):~~financial instrument.

Amount

Balance at December 31, 2019

$
3,920

Change in fair value

(995
)
Settlement

(2,925
)
Balance at March 31, 2020

$
—

There were no0 transfers among Level 1, Level 2 or Level 3 categories in the ~~three~~six months ended ~~March 31, 2020.~~June 30, 2022 or 2021.

7. COMMITMENTS AND CONTINGENCIES

Operating ~~Lease~~Leases

As of ~~March 31, 2021,~~June 30, 2022, the Company leases office ~~facilities~~ and ~~other equipment~~laboratory facilities under operating leases, which expire at various dates through ~~2027. Lease expense~~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.

Finance Leases

The Company leases research equipment and furniture under finance leases. As part of its adoption of ASC 842, the Company recorded financing right-of-use assets and financing lease liabilities for these leases as of January 1, 2022.

On April 20, 2021, the Company entered into a finance lease agreement with a third-party company related to various research equipment and furniture, which included the Company selling specific equipment for $293 thousand, resulting in a gain on the sale of $20 thousand, and leasing it back for a four-year period. The associated lease facility includes up to $5 million for the ~~three~~purchase of equipment on an as needed basis. As of June 30, 2022, the Company had $2.7 million available for purchases under this arrangement. The Company has an option to purchase the equipment at fair market value, not to exceed 15% of the original equipment cost, or to renew the lease for an additional one- or two-year period at a mutually agreed upon rate.

On September 27, 2021, the Company commenced a lease for various research equipment. The terms of the four-year lease specify a monthly payment of $13 thousand, with the option to purchase the equipment for fair market value, to be determined by the lessor, at the end of the lease.

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 six months ended ~~March 31, 2021~~June 30, 2022 (in thousands):


	Six Months Ended June 30,
	2022
Lease Cost:
Amortization of finance right-of-use assets	$	353
Interest on finance lease liabilities		92
Operating lease cost		828
Variable lease cost		334
Total lease costs	$	1,607

The following table contains a summary of other information pertaining to the Company’s finance and ~~2020 was $234 thousand~~operating leases for the six months ended June 30, 2022 (in thousands, except lease term and ~~$304 thousand, respectively.~~discount rate):


	Six Months Ended June 30,
	2022
Other Operating Lease Information:
Operating cash flows for operating leases	$	787
Operating cash flows for finance leases	$	92
Financing cash flows from finance leases	$	289

Weighted average remaining lease term
Operating leases	4.3 years
Financing leases	3.4 years

Weighted average discount rate
Operating leases	7.6%
Financing leases	8.2%

The following table presents supplemental balance sheet information related to operating and financing leases as of June 30, 2022 (in thousands):


	June 30, 2022
Operating leases
Right-of-use assets	$	5,971

Right-of-use lease liabilities, current	$	1,194
Right-of-use lease liabilities, noncurrent		4,967
Total operating lease liabilities	$	6,161

Financing leases
Right-of-use assets, net	$	2,417

Right-of-use lease liabilities, current	$	798
Right-of-use lease liabilities, noncurrent		1,719
Total financing lease liabilities	$	2,517

The following table presents the ~~future annual minimum payments required~~maturity of the Company’s operating and finance lease liabilities as of June 30, 2022 (in thousands):


	Operating		Financing
Remainder of 2022	$	801	$	412
2023		1,628		825
2024		1,640		726
2025		1,689		696
2026		1,413		89
Thereafter		59		—
Total future minimum lease payments	$	7,230	$	2,748
Less amount representing interest		1,069		231
Total lease liabilities	$	6,161	$	2,517

The following table presents operating lease commitments as reflected under ~~noncancellable operating leases at March~~ASC 840 as of December 31, 2021 (in thousands):


	Operating
2022		1,585
2023		1,606
2024		1,641
2025		1,689
2026		1,413
2027		59
Total operating lease obligations	$	7,993

Remainder of 2021

$
796

2022

1,192

2023

1,201

2024

1,223

2025

1,259

2026

657

2027

59

Total operating lease obligations

$
6,387

~~As of March 31, 2021, the Company has letters of credit~~ ~~agreements~~ ~~outstanding totaling $515 thousand as security for office facility operating leases.~~

~~Capital Lease~~

The Company leases research equipment under a capital finance lease. The capital lease asset is classified within property and equipment, net within the Company’s condensed consolidated balance sheets.

The following table presents ~~the future annual minimum payments~~finance lease commitments as reflected under ~~the capitalized lease, together with the present value~~ASC 840 as of ~~net minimum lease payments at March~~December 31, 2021 (in thousands):


	Financing
2022	$	699
2023		674
2024		674
2025		553
2026		47
Total capital lease obligations		2,647
Less amount representing interest		(293	)
Present value of minimum capital lease obligations	$	2,354

Remainder of 2021

$
31

2022

41

2023

41

2024

14

Total capital lease obligations

127

Less amount representing interest

(16
)
Present value of minimum capital lease obligations

$
111

License Agreements

In the normal course of business, the Company enters into licensing agreements with various parties to obtain the right to make, use, and sell licensed products currently in development.

~~Litigation~~

Litigation

The Company records estimated losses from loss contingencies, such as a loss arising from a litigation, when it determines that it is probable a liability has been incurred and the amount of loss can be reasonably estimated. Litigation is subject to many factors that are difficult to predict so that there can be no assurance, in the event of a material unfavorable result in one or more claims, the Company will not incur material costs.

During 2017, the Company became actively involved in a matter pending in the Ontario (Canada) Superior Court of Justice which names, among multiple other defendants, the Company and ~~two~~2 former officers of the Company. The claims pending in this matter allege breach of contract by the Company and seek declaratory and other relief, including monetary damages from the Company, and the individual defendants, including the Company’s former officers. The claims by such plaintiffs were originally made in a lawsuit filed in Ontario during October 2011, but was not pursued by such plaintiffs in any material manner until 2017. The Company believes that there is no0 merit to the claims alleged against the Company and its former officers, including no0 alleged breach of contract by the Company, and intends to vigorously defend against the claims pertaining to the Company and its former officers. At the present stage of the suit, management believes the outcome in this matter is not likely to have any material impact on the Company’s results, cash flows, or financial position.

Coronavirus pandemic

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 ~~outbreak~~pandemic continues to evolve as of the date of these financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 ~~outbreak~~pandemic and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 ~~outbreak~~pandemic on its results of operations, financial condition, or liquidity. Although the Company cannot estimate the length or gravity of the impact of the COVID-19 ~~outbreak~~pandemic at this time, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity ~~in 2021.~~during the remainder of 2022 and beyond.

8. Equity

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the board of directors.

Series BB Convertible Preferred Stock Issuance

In January 2021, the Company issued and sold 113,275,902 shares of Series BB convertible preferred stock at ~~$0.207383~~$0.207383 per share in exchange for ~~$23.5~~$23.5 million in gross proceeds.

Initial Public Offering

In February 2021, the Company completed its IPO in which the Company issued and sold 8,030,295 shares of its common stock, including 1,030,243 shares pursuant to the partial exercise of the underwriters’ option to purchase additional shares, at a public offering price of ~~$19.00~~$19.00 per share, for aggregate gross proceeds of ~~$152.6~~$152.6 million. The Company received approximately ~~$138.5~~$138.5 million in net proceeds after deducting underwriting discounts and estimated offering expenses payable by the Company.

Upon closing of the IPO on February 8, 2021, all of the Company’s outstanding preferred stock converted into an aggregate of 19,034,069 shares of common stock.

On February 8, 2021, in connection with the IPO, the Company filed an Amended and Restated Certificate of Incorporation (the “Amended Certificate”) with the Secretary of State of the State of Delaware. The Amended Certificate, among other things: (i) authorized 250,000,000 shares of common stock; (ii) eliminated all references to the previously existing series of preferred stock; and (iii) authorized 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company’s board of directors in one or more series.

Common Stock Warrants

The following is a summary of the common stock warrant activity for the six months ended June 30, 2022 related to common stock warrants issued in conjunction with equity and debt fundraising ~~events for the three months ended March 31, 2021:~~events:


	Number of Common Stock Warrants		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021		412,262	$	9.81		5.71	$	723
Granted		—	$	—
Exercised		—	$	—
Expired		—
Outstanding at June 30, 2022		412,262	$	9.81		5.22	$	—

Number
of Common
Stock
Warrants

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value (in
thousands)

Outstanding at December 31, 2020

412,262

$
9.60

6.71

$
1,380

Granted

1,648,709

$
0.01

Exercised

(1,648,709
)

$
(0.01
)

Expired

—

$
—

Outstanding at March 31, 2021

412,262

$
9.60

6.47

$
4,122

9. STOCK-BASED COMPENSATION

2018 Equity Incentive Plan

The Company’s 2018 Stock Incentive Plan (the “2018 Plan”), provided for the Company to grant qualified incentive options, nonqualified options, stock grants and other stock-based awards to employees and non-employees to purchase the Company’s common stock. Upon the effectiveness of the 2021 Plan (as defined below), no further issuances will be made under the 2018 Plan.

2021 Stock Option and Incentive Plan

The 2021 Equity Incentive Plan (the “2021 Plan”) was approved by the board of directors on January 27, 2021, and the Company’s stockholders on January 28, 2021 and became effective on the execution of the underwriting agreement related to the ~~IPO.~~initial public offering. The 2021 Plan, which superseded the Company’s previous equity incentive plan, provides for the grant of incentive stock options to employees, including employees of any parent or subsidiary corporations, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors, and consultants, including employees and consultants of the Company’s affiliates. The number of shares initially reserved for issuance under the 2021 Plan was5,000,000, which ~~will~~began automatically ~~increase~~increasing on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to ~~4.0%~~4.0% of the total number of shares of the Company’s capital stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the board of directors. As of June 30, 2022, 2,463,559 shares remained available for issuance pursuant to the 2021 Plan.

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) was approved by the Company’s board of directors on January 27, 2021 and became effective on the execution of the underwriting agreement related to the ~~IPO.~~initial public offering. A total of 333,333 shares of common stock were initially reserved for issuance under ~~this plan,~~the 2021 ESPP, which will automatically increase on January 1 of each calendar year, beginning on January 1, 2022 through January 1, 2031, by ~~1.0%~~an amount equal to 1.0% of the total shares of common stock outstanding on December 31st of the preceding calendar year, or the Evergreen Measurement Date; provided, that the number of shares added to the share reserve will be reduced automatically to the extent necessary to avoid causing the share reserve to exceed a number of shares equal to 1.0%year. The purchase price of the shares under the 2021 ESPP are at 85% of ~~common stock outstanding on~~ the ~~applicable Evergreen Measurement Date and~~lower of the board of directors may act prior to the first day of any calendar year to provide that there will be no January 1 increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of sharesfair market value of the Company’s common stock ~~than would otherwise occur.~~on the first trading day of the offering period or on the purchase date. As of June 30, 2022, the Company had issued 49,178 shares under the 2021 ESPP. As of June 30, 2022, 590,245 shares were available to be issued under the 2021 ESPP. The Company recognized $9 thousand share-based compensation expense related to the ESPP for the six months ended June 30, 2022.

Stock Options

During ~~2021,~~2022, the Company has granted options to purchase shares of common stock to employees ~~consultants,~~ and nonexecutive directors pursuant to the ~~2018 Plan and~~ 2021 Plan ~~respectively.~~at a weighted average fair value of $2.62 per share. The Company uses the Black-Scholes option-pricing model to estimate the fair value of the stock options on the applicable grant ~~dates at a weighted average fair value of $13.84.~~dates.

The following is a summary of the stock option award activity during the ~~three~~six months ended ~~March 31, 2021:~~June 30, 2022:


	Number of Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021		3,026,464		$	10.84		8.51	$	6,403
Granted		999,554		$	3.39
Exercised		(73,784	)	$	3.22
Forfeited		(386,520	)	$	8.90
Expired		(113,360	)	$	14.12
Outstanding at June 30, 2022		3,452,354		$	8.95		8.62	$	97
Options expected to vest as of June 30, 2022		2,212,456		$	6.92		9.02	$	97
Exercisable at June 30, 2022		1,239,898		$	12.59		7.90	$	—

Number
of Stock
Options

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value
(in thousands)

Outstanding at December 31, 2020

1,947,123

$
5.70

9.56

$
10,284

Granted

1,253,825

$
18.06

Exercised

—

$
—

Forfeited

(43,749
)

$
(6.00
)

Expired

—

$
—

Outstanding at March 31, 2021

3,157,199

$
10.60

9.50

$
23,557

Exercisable at March 31, 2021

446,771

$
15.70

9.04

$
5,096

Options expected to vest as of March 31, 2021

2,710,428

$
9.76

9.62

$
18,461

The aggregate intrinsic value of stock options exercised in the six months ended June 30, 2022 was $0.1 million.

The ~~total~~grant date fair value of options vested during the ~~three~~six months ended ~~March 31, 2021~~June 30, 2022 was ~~$1.1~~$5.7 million.

At ~~March 31, 2021,~~June 30, 2022, there was approximately ~~$21.4~~$13.4 million of unrecognized stock-based compensation expense associated with the stock options, which is expected to be recognized over a weighted-average period of ~~3.55~~2.62 years.

Restricted Stock Units

The Company has granted restricted stock units with service vesting based conditions.

The following is a summary of the restricted stock unit activity during the six months ended June 30, 2022:


	Restricted Stock Units			Weighted- Average Grant Date Fair Value
Unvested at December 31, 2021		—		$	—
Granted		239,963		$	3.74
Forfeited		(14,133	)	$	4.30
Unvested at June 30, 2022		225,830		$	3.70

Pursuant to the 2021 Plan, the Company granted restricted stock units which vest annually over a period of one, two, three or four years. NaN restricted stock units vested during the six months ended June 30, 2022.

At June 30, 2022, there was approximately $0.8 million of unrecognized stock-based compensation expense associated with the restricted stock units which is expected to be recognized over a weighted-average period of 3.18 years.

Common Stock Warrants

The following is a summary of the employee-issued common stock warrant activity during the ~~three~~six months ended ~~March 31, 2021:~~June 30, 2022:

	Number of Common Stock Warrants		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2020		57,212	$	7.62		3.64	$	98
									Number of Common Stock Warrants		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021										57,004	$	6.94		2.91	$	2
Granted		—	$	—						—	$	—
Exercised		—	$	—						—	$	—
Expired		—	$	—						—	$	—
Outstanding and exercisable at March 31, 2021		57,212	$	7.62		3.39	$	495
Outstanding and exercisable at June 30, 2022										57,004	$	6.94		2.41	$	—

As of ~~March 31, 2021~~June 30, 2022 there was no0 unrecognized stock-based compensation expense associated with the common stock warrants.

For the ~~three~~six months ended ~~March 31, 2021 and 2020,~~June 30, 2022, the Company utilized the Black-Scholes option-pricing model for estimating the fair value of the stock options ~~and common stock warrants~~ granted. The following table presents the assumptions and the Company’s methodology for developing each of the assumptions used:

		~~Three Months Ended~~
		~~March 31, 2021~~
~~Volatility~~		~~91.5%-98.04%~~
~~Expected life (years)~~		~~5.52-6.08~~
~~Risk-free interest rate~~		~~0.5%–1.0%~~
~~Dividend rate~~		—%


	Six Months Ended June 30,
	2022	2021
Volatility	94%-97%	91%-98%
Expected life (years)	5.5-7	5.5-6.1
Risk-free interest rate	1.7%–3.2%	0.5%-1.1%
Dividend rate	—%	—%

•

Volatility—The Company estimates the expected volatility of its common stock at the date of grant based on the historical volatility of comparable public companies over the expected term.

•

Expected life—The expected life is estimated as the contractual term.

•

Risk-free interest rate—The risk-free rate for periods within the estimated life of the stock award is based on the U.S. Treasury yield curve in effect at the time of grant.

•

Dividend rate—The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future.

Stock-based compensation expense was recorded in the following line items in the condensed consolidated statements of operations for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 ~~and 2020~~ (in thousands):


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2022		2021		2022		2021
Research and development	$	509	$	51	$	480	$	639	$	1,035	$	1,148
General and administrative		840		143		916		1,106		1,876		1,946
Total stock-based compensation expense	$	1,349	$	194	$	1,396	$	1,745	$	2,911	$	3,094

10. EMPLOYEE RETIREMENT PLAN

The Company maintains a defined contribution 401(k) profit-sharing plan (the “Plan”) for all employees. Under the Plan, participants may make voluntary contributions up to the maximum amount allowable by law. The Plan is based on employees’ salary deferral, and the Company matches employees’ contributions up to 4%4% of the employees’ base salary. Employees are ~~100%~~100% vested in the Company’s match contributions. During the three months ended ~~March 31,~~June 30, 2022 and 2021, ~~and 2020,~~ the ~~Company accrued expense of $29~~Company's matching contributions were $77 thousand and ~~$26~~$76 thousand, respectively. During the six months ended June 30, 2022 and 2021, the Company's matching contributions were $183 thousand and $105 thousand, respectively.

11. RELATED-PARTY TRANSACTIONS

~~Debt~~Service Agreement

~~During March 2020, a principal owner of the Company purchased the 2019 Special Note directly from the original holder.~~

~~Consulting Agreement~~

During 2020, the Company entered into ana service agreement with Hope Farms at Disco Bay LLC ("Hope Farms") to provide animal vaccination testing and provide samples to the Company. The Company’s Chief Research and Development Officer is a ~~principal~~co-founder and partial owner of Hope Farms. Further, the CEO of Hope Farms is the spouse of the Company’s Chief Research and Development Officer.

Expenses recognized by the Company relating to ~~provide consulting services to~~this service agreement for the six months ended June 30, 2022 and 2021 were $75 thousand and $92 thousand, respectively. In the first quarter of 2022, the Company ~~in exchange for $1,500 thousand. Under~~also made a payment of $47 thousand to Hope Farms that was an outstanding obligation at the ~~terms~~end of ~~the agreement, the Company recorded expense of $1,125 thousand in 2020, with payment made in January~~ 2021. ~~The contract was completed and the remaining balance of $375 thousand under the agreement was recorded as an expense in January 2021.~~

12. INCOME TAXES

The Company recorded no0 provision for income taxes for the ~~three~~six months ended ~~March 31, 2021~~June 30, 2022 and ~~2020.~~2021.

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards and research and development credits. Under the applicable accounting standards, management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against the Company’s otherwise recognizable net deferred tax assets.

13. NET LOSS PER SHARE

Basic and diluted net loss per share attributable to common stockholders is calculated as follows (in thousands except share and per share amounts):


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net loss	$	(10,535	)	$	(9,771	)	$	(22,940	)	$	(17,743	)
Net loss per share—basic and diluted	$	(0.34	)	$	(0.32	)	$	(0.75	)	$	(0.72	)
Weighted-average number of shares used in computing net loss per share—basic and diluted		30,701,758			30,588,495			30,674,868			24,778,949

Three Months Ended March 31,

2021

2020

Net loss

$
(7,972
)

$
(4,692
)
Cumulative dividends on convertible preferred stock

—

(104
)
Net loss attributable to common stockholders

$
(7,972
)

$
(4,796
)
Net loss per share—basic and diluted

$
(0.42
)

$
(4.00
)
Weighted-average number of shares used in computing net loss per
share—basic and diluted

18,904,853

1,199,550

The following outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per share, as their effect is anti-dilutive:


	For the Six Months Ended June 30,
	2022		2021
Stock options to purchase common stock		3,452,354		3,214,117
Unvested restricted stock units		225,830		—
Warrants issued to employees and contractor to purchase common stock		57,004		57,212
Warrants issued related to convertible notes and other equity agreements		412,262		412,262

Three Months Ended March 31,

2021

2020

Convertible preferred stock

—

527,138,337

Stock options to purchase common stock

3,157,199

1,947,123

Warrants issued to employees and contractor to purchase common stock

57,212

57,420

Warrants issued related to convertible notes and other equity agreements

412,262

22,937

~~14. SUBSEQUENT EVENTS~~

Subsequent events have been evaluated through the date of filing of the unaudited condensed financial statements. The Company has concluded that no subsequent events have occurred that require disclosure.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words and phrases “designed to,” “may,” “might,” “can,” “will,” “to be,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “likely,” “continue,” “ongoing” or similar expressions, or the negative of such words, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below in this Quarterly Report on Form 10-Q and those in our Annual Report on Form 10-K, in each case under the caption “Risk Factors,” and in our other filings with the Securities and Exchange Commission, or SEC. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes for the year ended December 31, ~~2020,~~2021, which are included in our Annual Report on Form 10-K filed with the SEC on March ~~30, 2021.~~15, 2022.

Overview

We are ~~developing~~an immuno-oncology company focused on the discovery and development of next-generation immunotherapies with an initial focus on treatments for cancer. Our focus is to leverage well characterized biological targets to generate novel product candidates that incorporate next generation technologies or approaches. We have built a ~~pipeline~~robust set of ~~medicines~~R&D capabilities and infrastructure to support the discovery and advancement of our product candidates. Our goal is to efficiently develop these product candidates by incorporating state-of-the-art biomarker approaches and mechanistic understanding into clinical trial designs targeted to well-defined patient populations.

We have developed two platforms that are designed to ~~fulfill~~address resistance to immunotherapy. Our TMAb™ (Tumor Microenvironment Activated Biologics) platform generates next-generation antibodies that are designed to block key immune checkpoints selectively within the ~~substantial~~tumor microenvironment. Our ImmunoPhage™ platform is a pioneering approach to cancer therapy that utilizes and combines aspects of vaccine, gene therapy, and personalized medicine approaches. Both platforms are designed to work independently or have the potential to be combined to create powerful rational drug combinations.

Our Pipeline

We currently have four investigational products in various stages of early development:

•

SNS-101 is our monoclonal antibody targeting the immune ~~system~~checkpoint VISTA (V-domain Ig suppressor of T cell activation) and is currently in IND-enabling studies. In April 2022, we presented preclinical data at the World Vaccine Congress, held April 18-21, 2022, in Washington DC. In July 2022, we received pre-IND feedback from the FDA and expect to ~~defeat cancer and other diseases. We are utilizing two unique approaches. The~~submit an IND in the first half of 2023.

•

SNS-102 is our ~~ImmunoPhage™ platform, which~~monoclonal antibody targeting VSIG4 (V-Set and Immunoglobulin Domain Containing 4), an immune checkpoint often expressed on macrophages. We believe that VSIG4 is a ~~powerful, self-adjuvanted and highly differentiated immunotherapy approach that~~key player in macrophage polarization.

•

SNS-103 is our monoclonal antibody targeting ENTPDase1 (ecto-nucleoside triphosphate diphosphohydrolase-1), also known as CD39. ENTPDase1 is the rate-limiting enzyme in the breakdown of extracellular ATP, leading to the production of adenosine, a well-established immunosuppressive pathway.

•

SNS-401-NG is our ImmunoPhage candidate being developed initially for the treatment of patients with Merkel cell carcinoma, or MCC. SNS-401-NG is designed to ~~utilize bacteriophage to induce~~deliver a robust, focused and coordinated innate and adaptive immune response. We are engineering our ImmunoPhage product candidates to directly target antigen presenting cells, or APCs. We believe our ImmunoPhage platform has the potential to deliver on the promise of personalized ~~off-the-shelf product candidates tailored to a patient’s specific tumor. The versatility of our ImmunoPhage platform allows us to design product candidates in a modular fashion, based on a~~ cocktail of ~~common and patient-specific antigens built from our proprietary library of ImmunoPhages,~~off-the-shelf premanufactured bacteriophage, which we refer to as ~~Phortress.~~ ImmunoPhage, aimed at driving a patient-specific constellation of anti-tumor T cells.

SNS-101: Monoclonal Antibody Targeting VISTA

We believe that anti-VISTA antibodies have the potential to become the backbone of the next generation of cancer immunotherapy. Based on our expertise and deep understanding of this myeloid checkpoint target, our human monoclonal antibody targeting VISTA is designed to overcome the challenges of the previous generation of anti-VISTA monoclonal antibodies and we believe has the potential to become the first anti-VISTA monoclonal antibody approved as a therapeutic agent.

Based on the unique biology of VISTA, we believe that there are ~~currently conducting~~three critical design parameters required to achieve optimal biologic activity of inhibitory anti-VISTA antibodies:

Block the pH-dependent binding of VISTA to PSGL-1 (P-selectin glycoprotein ligand-1) on T cells at low pH;

Selectively bind VISTA at low pH to avoid target-mediated drug disposition, or TMDD, and on-target/off-tumor side effects; and

Utilize an Fc-competent IgG backbone to engage and activate FcgR+ myeloid cells within the tumor.

SNS-101 is a ~~60-patient Phase 1/2 clinical trial~~fully human monoclonal IgG1 antibody that has been designed to selectively bind active (low pH) VISTA, but not inactive VISTA in the blood. In preclinical studies, we have observed that SNS-101 binds to VISTA at low pH with a greater than 600-fold differential affinity compared to VISTA at physiological pH of ~~our most advanced product candidate, SNS-301,~~7.4. SNS-101 has shown favorable pharmacokinetic properties, demonstrating sustained higher serum drug concentrations of SNS-101 compared to anti-VISTA antibodies that bind blood elements at physiological pH. In addition, in the MC38 syngeneic mouse model, SNS-101 has shown significant activity in combination with anti-PD-1.

Based on the ~~PD-1 inhibitor pembrolizumab, as a potential treatment for squamous cell carcinoma~~totality of the ~~head~~preclinical data to date and ~~neck (SCCHN). As~~the promising profile of ~~March 9,~~this antibody, in 2021 ~~17 patients were enrolled~~we initiated both IND-enabling studies and GMP manufacturing for SNS-101. We received pre-IND feedback from the FDA in July 2022 and expect to submit an IND in the ~~trial. As~~first half of ~~December 10, 2020, we had evaluated ten for safety~~2023.

SNS-102: Monoclonal antibody targeting VSIG-4

VSIG-4 (V-set and ~~ten patients for efficacy. Treatment with SNS-301 was generally well tolerated. We observed disease control in seven~~Ig domain-containing 4; also known as complement receptor of the ~~patients evaluable~~Ig superfamily, or CRIg) is a B7-related protein, which is highly expressed on macrophages, including tumor-associated macrophages. VSIG-4 has been shown to be a potent inhibitor of T cell proliferation and inhibits proinflammatory macrophage activity through metabolic reprogramming. We believe these complementary immunosuppressive features of VSIG-4 make it an interesting and high-potential myeloid immunotherapeutic target.

Expression of VSIG-4 in normal tissues, chiefly on tissue-resident macrophage populations such as the Kupffer cells of the liver, suggest the presence of a large peripheral target sink and potential for ~~efficacy, including one patient with~~on-target/off-tumor toxicities. Taken together, we believe these features make VSIG-4 a ~~partial response (PR)~~strong candidate for a TMAb-based approach.

We have generated antibodies and are currently screening to identify a lead monoclonal antibody for SNS-102. We expect to select a product candidate and initiate IND-enabling studies in 2023.

SNS-103: Monoclonal antibody targeting ENTPDase1 (CD39)

ENTPDase1 (also known as CD39) is the upstream, rate-limiting enzyme that leads to the breakdown of extracellular adenosine triphosphate, or ATP. Extracellular ATP represents a potent immunologic “danger signal”, and two patients who have achieved longstanding stable disease (SD) for greater than 36 weeks following treatment. We anticipate reporting a substantial subset of data from this trial by the end of 2021. If the resultswhich drives immune activation. The ultimate downstream product of this ~~trial~~pathway, adenosine, has potent immunosuppressive activity through binding to adenosine receptors. Upregulation of CD39 by tumors is common and leads to decreased extracellular ATP and a diminished anti-tumor immune response.

Pharmacologic inhibition of CD39 activity has shown anti-tumor activity in a variety of experimental tumor models. Several of these molecules are ~~positive, we intend~~currently being evaluated as cancer therapeutics in early phase clinical trials. CD39, although upregulated in tumors, is also expressed in normal tissue on a variety of different cell populations. The expression of CD39 on endothelial cells is particularly problematic, as this is anticipated to ~~discuss~~result in significant on-target/off-tumor binding, leading to TMDD, a poor pharmacokinetic profile and potential toxicities.

We have initiated a TMAb antibody campaign aimed at developing an anti-CD39 inhibitory antibody with ~~the FDA the design of a randomized, registration-enabling trial~~high selectivity for ~~SNS-301. The second approach is our monoclonal antibody (mAb) and nanobody platform, which is comprised of human monoclonal antibodies and alpaca derived nanobodies selectively active~~CD39 in the tumor ~~microenvironment. Through~~microenvironment, or TME, versus normal tissue environments. We expect to select a product candidate in 2023.

ImmunoPhage product candidate: SNS-401-NG

SNS-401-NG, our multi-antigenic personalized ImmunoPhage candidate, is being developed in collaboration with the ~~targeted use~~University of ~~this platform, we believe we can further enhance therapeutic activity.~~Washington.

We ~~are leveraging the insights from our experience with SNS-301~~intend to ~~expand our development pipeline to include SNS-401~~initially develop SNS-401-NG for the treatment of ~~merkel~~Merkel cell carcinoma ~~(MCC)~~or MCC, an aggressive form of skin cancer commonly driven by the Merkel Cell Polyoma Virus. If clinical proof of concept is achieved, we plan to evaluate a broader basket study in patients with head and ~~a human mAb program targeting~~neck cancer, lung cancer, melanoma, and triple negative breast cancer based on the ~~novel immune checkpoint VISTA. Since~~prevalence of antigens found in our ~~inception, we have devoted the majority~~proprietary library of our efforts and financial resources to research and development activities related to our ImmunoPhage platform and our most advanced product candidate SNS-301, including raising capital, protecting our intellectual property portfolio and conducting preclinical studies and clinical trials. As our pipeline advances, we are dedicating more of our spend toward mAb and nanobody programs, including increased spend related to lead generation activities of our SNS-VISTA product candidate. ImmunoPhages.

We do not have any product candidates approved for sale, have not generated any revenue from product sales, and do not expect to generate any revenue from product sales for at least the next several years. We have largely funded our operations with proceeds from the sale of convertible preferred stock, common stock and convertible debt. Through the date of this report, we have raised an

aggregate of $123.4 million of gross proceeds from private placements of our equity and convertible debt securities and net proceeds of $138.5 million from our initial public offering, or IPO, in February 2021.

We have incurred significant operating losses over the last several years. Our net loss was ~~$8.0~~$22.9 million and ~~$4.7~~$17.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively. As of ~~March 31, 2021,~~June 30, 2022, we had an accumulated deficit of ~~$120.4~~$172.1 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

•

~~complete our Phase 1/2 clinical trial of SNS-301 and continue clinical development of SNS-301;~~

prepare to ~~file~~submit INDs and then initiate clinical development of ~~additional~~ product candidates, including ~~SNS-VISTA from our mAb program, and SNS-401 from our ImmunoPhage platform.~~

SNS-101;

•

continue the research and development of our other product candidates;

•

invest in our TMAb and ImmunoPhage ~~platform;~~

platforms;

•

seek to discover and develop additional product candidates or acquire or in-license drugs, product candidates or technologies;

•

seek regulatory approvals for any product candidates that successfully complete clinical trials;

•

ultimately establish a sales, marketing and distribution infrastructure and scale up manufacturing capabilities to commercialize any product candidates for which we may obtain regulatory approval;

•

manufacture our product candidates or otherwise secure the clinical and commercial supply of our product candidates;

•

hire additional research and development and selling, general and administrative personnel;

•

maintain, expand and protect our intellectual property portfolio; and

•

incur additional costs associated with operating as a public company.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued expenses. We expect to continue to incur net losses and negative cash flows for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. In particular, we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, as well as hire additional personnel, pay fees to outside consultants, lawyers and accountants, and incur other increased costs associated with being a public company. In addition, if we seek and obtain regulatory approval to commercialize any product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product.

~~Recent Security Issuances~~

From December 2020 through January 2021, we issued and sold 165,956,208 shares of our Series BB convertible preferred stock at a purchase price of $0.207383 per share for aggregate gross proceeds of $34.4 million, of which approximately $23.5 million was received in January 2021.

In February 2021, we issued and sold an aggregate of 8,030,295 shares of our common stock at a price to the public of $19.00 per share for aggregate gross proceeds of $152.6 million in our initial public offering.

Impact of COVID-19

~~In March 2020, COVID-19 was declared a global pandemic by the World Health Organization and to date, the~~The COVID-19 pandemic continues to present a substantial public health and economic challenge around the world. The length of time and full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and are difficult to predict. While we continue to conduct our research and development activities, the COVID-19 pandemic may cause disruptions that impact the timing of our planned and ongoing ~~and planned clinical~~preclinical trials ~~of SNS-301~~ and affect our ability to complete preclinical studies, future clinical trials or to procure items that are essential for our research and development activities.

In addition, a further recurrence ~~or “second wave”~~ of COVID-19 cases could cause other widespread or more severe impacts depending on where infection rates are highest. We plan to continue to closely monitor the ongoing impact of the COVID-19 pandemic on our employees and our business operations, as we deal with the disruptions and uncertainties relating to the COVID-19 pandemic. In an effort to provide a safe work environment for our employees, wethe majority of our employees, other than our laboratory staff, have ~~among other things, implemented various social distancing measures~~adopted a “hybrid” work schedule which is intended to limit the number of people in our office ~~and labs including replacing in-person meetings with virtual interactions, and are working remotely when possible.~~at any particular time. We expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and other business partners in light of the pandemic. To date, there has not been a significant impact on ~~the~~our product candidate development ~~of SNS-301~~ or on the rest of our pipeline; however we cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic could potentially have on our ongoing business plan, financial condition and operations.

Components of Our Results of Operations

Operating Expenses

Research and Development Expense

Our research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates. These expenses include:

•

expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical ~~trials and preclinical studies;~~

trials;

•

the cost of manufacturing our product candidates including the potential cost of contract manufacturing organizations, or CMOs, that manufacture product for use in our preclinical studies and planned clinical trials and perform analytical testing, scale-up and other services in connection with our development activities;

•

the cost of outsourced professional scientific development services;

•

employee-related expenses, including salaries, benefits and stock-based compensation for employees engaged in the research and development function;

•

expenses relating to regulatory activities, including filing fees paid to regulatory agencies;

•

fees for maintaining licenses and other amounts due under our third party licensing agreements;

•

laboratory materials and supplies used to support our research activities; and

•

allocated expenses for utilities and other facility-related costs.

We expense all research and development costs in the periods in which they are incurred. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.

Our direct external research and development expenses consist primarily of external costs, such as fees paid to CROs, CMOs, research/testing laboratories and outside consultants in connection with our preclinical development, process development, manufacturing and clinical development activities. We do not allocate these costs to specific product candidates because many of them are deployed across several of our development programs and, as such, are not separately classified. We use internal resources primarily to conduct research and manage our preclinical development, outsourced clinical trials, process development, manufacturing and clinical development activities. These employees work across multiple development programs and, therefore, we do not track their costs by program and, as such, are not separately classified. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase personnel costs, including stock-based compensation, conduct our ~~registration-enabling clinical trial of SNS-301 in patients with SCCHN, conduct other~~preclinical studies and planned clinical trials, and prepare regulatory filings for our product candidates.

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from any of our other product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:

•

the scope, progress, outcome and costs of our preclinical studies, ~~and clinical trials of SNS-301,~~ our ~~other~~current product candidates and any other product candidates we may acquire or develop;

•

manufacturing of our product candidates or making arrangements with potential third-party manufacturers for both clinical and commercial supplies of these product candidates;

•

successful patient enrollment in, and the initiation, duration and completion of clinical trials;

•

the cost of gaining regulatory approvals for our product candidates, subject to the successful outcome of ongoing and future clinical trials; and

•

the extent of any required post-marketing approval commitments to applicable regulatory authorities.

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in

achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our planned clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years and significant additional development costs.

General and Administrative Expense

General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include facility related costs, patent filing and prosecution costs and professional fees for legal, auditing and tax services, and insurance costs.

We anticipate that our general and administrative expenses will increase as a result of increased payroll, expanded infrastructure and higher consulting, legal and tax-related services associated with maintaining compliance with Nasdaq listing and SEC requirements, accounting and investor relations costs, and director and officer insurance premiums associated with being a public company.

Other ~~Expense~~Income (Expense)

Our other ~~expense~~income (expense) consists of changes in the fair value of our derivative liability related to an embedded derivative on certain convertible debt, realized gain or loss on short-term investments, gain on debt extinguishments, accretion expense on short-term investments and interest expense.

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each year, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credit carryforwards will not be realized.

Results of Operations

Comparison of the Three Months Ended ~~March 31,~~June 30, 2022 and 2021 ~~and 2020~~

The following sets forth our results of operations for the three months ended ~~March 31, 2021~~June 30, 2022 and ~~2020:~~2021:


	Three Months Ended March 31,									Three Months Ended June 30,
(in thousands)	2021			2020			Change			2022			2021			Change
Operating expenses:
Research and development	$	3,365		$	2,195		$	1,170		$	6,393		$	5,898		$	495
General and administrative		4,604			1,908			2,696			4,319			3,886			433
Total operating expenses		7,969			4,103			3,866			10,712			9,784			928
Loss from operations		(7,969	)		(4,103	)		(3,866	)		(10,712	)		(9,784	)		(928	)
Total other expense		(3	)		(589	)		586
Total other income											177			13			164
Net loss	$	(7,972	)	$	(4,692	)	$	(3,280	)	$	(10,535	)	$	(9,771	)	$	(764	)

Research and Development Expenses

Research and development expenses were ~~$3.4~~$6.4 million for the three months ended ~~March 31, 2021,~~June 30, 2022, compared to ~~$2.2~~$5.9 million for the three months ended ~~March 31, 2020.~~June 30, 2021. The increase of ~~$1.2~~$0.5 million was primarily attributable to $0.9 million of increased ~~headcount~~expenses relating to manufacturing contracts, $0.4 million of additional expenses relating to lab supply purchases and equipment, $0.3 million of higher facilities expense and $0.2 million of increased personnel cost, including stock-based compensation and incentives, to support our research, development and manufacturing ~~activities.~~activities, partially offset by a $0.7 million decrease in consulting fees, $0.5 million of lower expense associated with clinical trials and $0.2 million less expense for licensing agreements.

General and Administrative Expenses

General and administrative expenses were ~~$4.6~~$4.3 million for the three months ended ~~March 31, 2021,~~June 30, 2022, compared to ~~$1.9~~$3.9 million for the three months ended ~~March 31, 2020.~~June 30, 2021. The increase of ~~$2.7~~$0.4 million was primarily attributable to $0.4 million relating to higher recruiting costs, $0.2 million of increased public relations expense, $0.1 million increase relating to board fees, $0.1 million of higher licenses and fees costs, and $0.1 million relating to higher IT costs, partially offset by $0.2 million of decreased personnel ~~costs,~~cost, including stock-based compensation and incentives, and $0.2 million of lower consulting expenses.

Other Income

Other income was $0.2 million for the three months ended June 30, 2022, compared to other income of $13 thousand for the three months ended June 30, 2021. The increase was primarily attributable to $0.2 million of investment related interest.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following sets forth our results of operations for the six months ended June 30, 2022 and 2021:


	Six Months Ended June 30,
(in thousands)	2022			2021			Change
Operating expenses:
Research and development	$	13,848		$	9,263		$	4,585
General and administrative		9,351			8,490			861
Total operating expenses		23,199			17,753			5,446
Loss from operations		(23,199	)		(17,753	)		(5,446	)
Total other income		259			10			249
Net loss	$	(22,940	)	$	(17,743	)	$	(5,197	)

Research and Development Expenses

Research and development expenses were $13.8 million for the six months ended June 30, 2022, compared to $9.3 million for the six months ended June 30, 2021. The increase of $4.6 million was primarily attributable to $2.3 million of increased expenses relating to manufacturing contracts, $1.6 million of additional expenses relating to lab supply purchases and equipment, $1.4 million of increased personnel cost, including stock-based compensation and incentives, to support our ~~business, as well as~~research, development and manufacturing activities, $0.6 million of increased ~~professional service~~research fees and $0.5 million of higher facilities expense, partially offset by $0.8 million of lower expense associated with clinical trials, $0.8 million of lower consulting fees and $0.2 million less expense for licensing agreements.

General and Administrative Expenses

General and administrative expenses were $9.4 million for the six months ended June 30, 2022, compared to $8.5 million for the six months ended June 30, 2021. The increase of $0.9 million was primarily attributable to $0.6 million of higher licenses and fees costs, $0.5 million increased expense associated with recruitment, $0.3 million of increased public relations expense, $0.2 million of increased directors and officers insurance ~~costs.~~costs, $0.1 million increase relating to board fees, $0.1 million of higher facilities expense and $0.1 million of higher travel and entertainment expense, partially offset by $0.5 million of lower consulting expenses, $0.4 million of lower expense for legal fees and $0.1 million of decreased expenses for marketing.

Other ~~Expense~~Income

Other ~~expense decreased $0.6~~income was $0.3 million infor the ~~three~~six months ended ~~March 31, 2021~~June 30, 2022, compared to other income of $10 thousand for the ~~three~~six months ended ~~March 31, 2020, which~~June 30, 2021. The increase was primarily attributable to ~~fair value adjustments~~$0.3 million of ~~embedded derivative liabilities~~higher investment related interest income, offset by $0.1 million of higher interest expense associated with ~~certain convertible debt, as well as lower interest expense on debt due to the redemption of convertible debt in 2020.~~our finance leases.

Liquidity and Capital Resources

Sources of Liquidity

We have not generated any product revenue and have incurred net losses and negative cash flows from our operations. We have financed our operations through sales of our common stock, convertible preferred stock and convertible debt. Through the date of this report, we have raised an aggregate of $123.4 million of gross proceeds from private placements of our equity and convertible debt securities and net proceeds of $138.5 million from our ~~initial public offering, or~~ IPO in February 2021. Our net loss was ~~$8.0~~$22.9 million and ~~$4.7~~$17.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively. As of ~~March 31, 2021,~~June 30, 2022, we had an accumulated deficit of ~~$120.4~~$172.1 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

As of ~~March 31, 2021,~~June 30, 2022, we had cash, ~~and~~ cash equivalents and marketable securities of ~~$169.4~~$123.7 million. From December 2020 to January 2021, we issued and sold 165,956,208 shares of Series BB convertible preferred stock to a group of investors, in exchange for $34.4 million of new gross proceeds, of which approximately $23.5 million was received in January 2021. In February 2021, we issued an aggregate of 8,030,295 shares of common stock in our ~~initial public offering~~IPO at a price to the public of $19.00 per share, for aggregate gross proceeds of $152.6 million. We paid underwriting discounts and commissions of $10.7 million, and we also incurred expenses of $3.4 million in connection with the offering. As a result, the net offering proceeds to us, after deducting underwriting discounts and commissions and offering expenses, were $138.5 million.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods below:


	Three Months Ended March 31,						Six Months Ended June 30,
(in thousands)	2021			2020			2022			2021
Net cash used in operating activities	$	(10,767	)	$	(6,460	)	$	(22,649	)	$	(16,814	)
Net cash used in investing activities		(487	)		(52	)
Net cash provided by (used in) investing activities								25,389			(148,248	)
Net cash provided by financing activities		164,076			10,557			—			164,065
Net increase in cash and cash equivalents	$	152,822		$	4,045
Net increase (decrease) in cash and cash equivalents							$	2,740		$	(997	)

Operating Activities

During the ~~three~~six months ended ~~March 31, 2021,~~June 30, 2022, our operating activities used ~~$10.8~~$22.6 million of cash, primarily resulting from our $22.9 million net ~~loss.~~loss and a $4.2 million decrease in our operating assets and liabilities, partially offset by increases in non-cash charges of $4.5 million. During the ~~three~~six months ended ~~March 31, 2020,~~June 30, 2021, our operating activities used ~~$6.5~~$16.8 million of cash, primarily resulting from our $17.7 million net ~~loss. The increase~~loss and a $2.6 million decrease in our operating assets and liabilities, partially offset by increases in non-cash charges of $3.5 million.

Investing Activities

During the six months ended June 30, 2022, net cash ~~used~~provided by investing activities was $25.4 million, primarily due to $68.7 million in ~~operating activities for~~sales and maturities of short-term investments, partially offset by $43.3 million in purchases of short-term investments. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, ~~as compared to the three months ended March 31, 2020 is attributed to the increase in net loss.~~

~~Investing Activities~~

~~During the three months ended March 31, 2021 and 2020,~~ net cash used in investing activities was ~~$0.5~~$148.2 million ~~and $0.1 million, respectively, and~~primarily related to $147.1 million for purchases of short-term investments using the net proceeds of our IPO and Series AA and Series BB convertible preferred stock financings and $1.1 million for purchases of property and equipment.

Financing Activities

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, net cash provided by financing activities was $0 thousand, primarily from $0.2 million of proceeds from the exercise of stock options and $0.1 million relating to ESPP purchases, offset by $0.3 million of principal payments under our financing leases. During the six months ended June 30, 2021, net cash provided by financing activities was $164.1 million, primarily from the net proceeds from the issuance of common stock as part of our IPO of $140.6 million, as well as proceeds from the issuance of Series BB convertible preferred stock prior to the ~~IPO. During~~initial public offering of $23.5 million.

Material Cash Requirements

Our material cash requirements will have an impact on our future liquidity. Our material cash requirements represent material expected or contractually committed future payment obligations. We believe that we will be able to fund these obligations through cash from our existing balances of cash, cash equivalents and marketable securities.

Operating Leases

We have operating lease arrangements for our corporate offices, lab facilities and an executive residence. As part of its adoption of ASC 842, we recorded operating right-of-use assets and operating lease liabilities for these leases as of January 1, 2022. As of June 30, 2022, we had operating lease payment obligations of $7.2 million, with $0.8 million payable for the ~~three months ended March 31, 2020, net cash provided by~~remainder of 2022. See Note 7 in our condensed consolidated financial statements included elsewhere in this Form 10-Q for additional information.

Finance Leases

We lease research equipment, furniture and a vehicle under finance leases. As part of its adoption of ASC 842, we recorded financing ~~activities was $10.6~~right-of-use assets and financing lease liabilities for these leases as of January 1, 2022. As of June 30, 2022, we had finance lease payment obligations of $2.7 million, ~~primarily from~~with $0.4 million payable for the ~~issuance~~remainder of ~~Series AA convertible preferred stock.~~2022. See Note 7 in our financial statements included elsewhere in this Form 10-Q for additional information.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, ~~continue~~ or initiate clinical trials of, and potentially seek marketing approval for, our product candidates. In addition, we expect to continue to incur significant costs associated with operating as a newly public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. The timing and amount of our operating expenditures will depend largely on:

•

the initiation, progress, timing, costs and results of current and future preclinical studies and clinical trials for ~~SNS-301, SNS-401~~our current and ~~SNS-VISTA and our other~~future product candidates;

•

the cost and timing of the manufacture of additional clinical trial material as well as any costs related to the scale-up of manufacturing activities;

•

the costs to seek regulatory approvals for any product candidates that successfully complete clinical trials;

•

the extent to which we or any third-party service providers on whom we rely experience delays or interruptions to preclinical studies and clinical trials, or to our supply chain due to the COVID-19 pandemic;

•

the need to hire additional clinical, quality assurance, quality control and other scientific personnel;

•

the number and characteristics of product candidates that we develop or may in-license;

•

the outcome, timing and cost of meeting and maintaining compliance with regulatory requirements;

•

the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;

•

the terms of any collaboration agreements we may choose to enter into, including the achievement of milestones or occurrence of other developments that trigger payments under any license or collaboration agreements we might have at such time;

•

the cost associated with the expansion of our operational, financial and management systems and increased personnel, including personnel to support our operations as a public company; and

•

the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products, if approved, on our own.

We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements at least into the ~~second half~~first quarter of ~~2023.~~2025. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:

•

the scope, progress, results and costs of product discovery, preclinical studies and clinical trials;

•

the scope, prioritization and number of our research and development programs;

•

the costs, timing and outcome of regulatory review of our product candidates;

•

our ability to establish and maintain collaborations on favorable terms, if at all;

•

the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;

•

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

•

the extent to which we acquire or in-license other product candidates and technologies;

•

the costs of securing manufacturing arrangements for commercial production;

•

the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates; and

•

the impact of the COVID-19 pandemic and the corresponding responses of businesses and governments.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred

equity financing, if available, may involve agreements that include restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in fixed payment obligations.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

~~Internal Control Over Financial Reporting~~

During the audit of our financial statements for the year ended December 31, 2020, material weaknesses were identified in our internal control over financial reporting. Under standards established by the PCAOB, a “material weakness” is a deficiency, or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

We are in the process of implementing a number of measures to address the material weaknesses and deficiencies that have been identified including: (i) hiring additional accounting and financial reporting personnel with generally accepted accounting principles in the United States, or US GAAP, and SEC reporting experience, (ii) developing, communicating and implementing an accounting policy manual for our accounting and financial reporting personnel for recurring transactions and period-end closing processes, and (iii) establishing effective monitoring and oversight controls for non-recurring and complex transactions to ensure the accuracy and completeness of our company’s consolidated financial statements and related disclosures.

These additional resources and procedures are designed to enable us to broaden the scope and quality of our internal review of underlying information related to financial reporting and to formalize and enhance our internal control procedures. With the oversight of senior management and our audit committee, we have begun taking steps and plan to take additional measures to remediate the underlying causes of the material weaknesses.

We intend to complete the implementation of our remediation plan during the remainder of 2021. Although we believe that our remediation plan will improve our internal control over financial reporting, additional time may be required to fully implement it and to make conclusions regarding the effectiveness of our internal control over financial reporting. Our management will closely monitor and modify, as appropriate, the remediation plan to eliminate the identified material weakness.

If our remediation of the material weaknesses is not effective, or if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.

We, and our independent registered public accounting firm, were not required to report on our evaluation of the Company’s internal control over financial reporting as of March 31, 2021 in accordance with the provisions of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting as required by reporting requirements under Section 404 of the Sarbanes-Oxley Act.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the U.S. Securities and Exchange Commission.

Critical Accounting Policies and Significant Judgements and Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which are prepared in accordance with US GAAP. The preparation of our financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, costs and expenses. We base our estimates

and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are 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~~six months ended ~~March 31, 2021,~~June 30, 2022, there were no significant changes to our critical accounting policies disclosed in our audited financial statements for the year ended December 31, ~~2020,~~2021, which are included in our Annual Report on Form 10-K, as filed with the SEC on March ~~30, 2021.~~15, 2022.

Recent Accounting Pronouncements

See ~~note~~Note 2 in our condensed consolidated financial statements included elsewhere in this Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements. Other than as disclosed in our financial statements, we do not expect that any recently issued accounting standards will have a material impact on our financial statements or will otherwise apply to our operations.

Emerging Growth Company and Smaller Reporting Company Status

We qualify as an EGC, as defined in the JOBS Act. As an EGC, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions until the last day of the fiscal year following the fifth anniversary of our initial public offering or such earlier time that we are no longer an emerging growth company. We would cease to be an EGC earlier if we have more than $1.07 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or we issue more than ~~$1.0~~

$1.0 billion of non-convertible debt securities over a three-year period. For so long as we remain an EGC, we are permitted, and intend, to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs. We may choose to take advantage of some, but not all, of the available exemptions.

In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an EGC. Therefore, the reported results of operations contained in our consolidated financial statements may not be directly comparable to those of other public companies.

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million.

If we are a smaller reporting company at the time we cease to be an EGC, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to EGCs, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Item 3. Quantitative and ~~Qualitati~~veQualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Item 10 of Regulation S-K and are not required to provide the information otherwise required under this item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits 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 such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation of our Chief Executive Officer and ~~Senior Vice President of Finance and Administration,~~Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of ~~March 31, 2021.~~ June 30, 2022. Based on this evaluation, ~~and due to the material weaknesses described elsewhere in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, the~~our Chief Executive Officer and ~~Senior Vice President of Finance~~ ~~and Administration~~Chief Financial Officer concluded that ~~as of March 31, 2021,~~ our disclosure controls and procedures were ~~not effective.~~effective at the reasonable assurance level as of June 30, 2022.

Changes in Internal Control over Financial Reporting:

There were no material changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended ~~March 31, 2021~~June 30, 2022 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently a party to any material legal proceedings. From time to time, we may become involved in other litigation or legal proceedings relating to claims arising from the ordinary course of business.

Item 1A. Risk Factors.

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. Such risks may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, filed with the Securities and Exchange Commission on March ~~30, 2021.~~15, 2022. There have been no material changes to the risk factors described in that report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Recent Sales of Unregistered Equity Securities

None.

(b) Use of Proceeds from Initial Public Offering of Common Stock

On February 3, 2021, our Registration Statement on Form S-1, as amended (File No. 333-252704) was declared effective in connection with our ~~initial public offering, or~~ IPO, pursuant to which we sold 8,030,295 shares of our common stock, including the partial exercise of the underwriters’ option to purchase additional shares, at a price to the public of $19.00 per share. The initial closing of our ~~initial public offering~~IPO occurred on February 8, 2021. We received net proceeds from the ~~initial public offering~~IPO of $138.5 million (after deducting underwriters’ discounts and commissions and additional offering related costs of $14.1 million). Citigroup, Piper Sandler & Co. and Berenberg acted as joint book-running managers for the IPO. Oppenheimer & Co. acted as the lead manager for the ~~IPO~~.IPO.

No expenses incurred by us in connection with our initial public offering were paid directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities, or (iii) any of our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors as compensation for board or board committee service.

There has been no material change in the planned use of proceeds from our initial public offering from those disclosed in the final prospectus for our ~~initial public offering~~IPO dated as of February 3, 2021, and filed with the SEC on February 4, 2021 pursuant to Rule 424(b)(4).

None.

Item 3. Defaults Upon Senior Securities.

~~Not applicable.~~None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~Not applicable.~~None.

Item 6.6. Exhibits, ~~Financi~~alFinancial Statement Schedules.

(3) Exhibits

~~(3)~~Exhibit

Number

~~Exhibits~~

~~Exhibit~~ ~~Number~~		Description
3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-39980), filed with the SEC on February 11, 2021).
3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-39980), filed with the SEC on February 11, 2021).
31.110.1^		Employment Agreement, dated May 5, 2022, by and between the Registrant and Patrick Gallagher.
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.
101		The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended ~~March 31, 2021,~~June 30, 2022, formatted in Inline Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Convertible Preferred Stock, Common Stock and Stockholders’ Equity (Deficit), (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements (filed herewith)
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	~~Filed herewith.~~

This certification is being furnished solely to accompany this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

~~SIGNATURES~~

* Filed herewith.

** This certification is being furnished solely to accompany this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

^ Indicates management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Sensei Biotherapeutics, Inc.

Date:	~~May 13, 2021~~August 9, 2022	By:	/s/ John Celebi
			John Celebi
			President and Chief Executive Officer
			Principal Executive Officer

		By:	/s/ Erin Colgan
			Erin Colgan
			Chief Financial Officer
			Principal Financial and Accounting Officer

2529

	March 31, 2021		December 31, 2020
Compensation and benefits	$	440	$	916
Other		33		32
Total other current liabilities	$	473	$	948

	Amount
Balance at December 31, 2019	$	3,920
Change in fair value		(995	)
Settlement		(2,925	)
Balance at March 31, 2020	$	—

Remainder of 2021	$	796
2022		1,192
2023		1,201
2024		1,223
2025		1,259
2026		657
2027		59
Total operating lease obligations	$	6,387

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company