Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes☒No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares of Registrant’s Common Stock outstanding as of ~~November 5, 2021~~May 6, 2022 was ~~30,596,828.~~30,628,813.


	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	9,533		$	16,596		$	8,721		$	7,159
Marketable securities		147,129			—			127,503			140,462
Deferred offering costs		—			2,105
Prepaid expenses		1,199			1,375			2,554			547
Other current assets		301			—			199			374
Total current assets		158,162			20,076			138,977			148,542
Right of use assets - operating leases, net								6,267			—
Right of use assets - financing leases, net								2,551			—
Property and equipment, net		3,060			1,266			2,204			4,644
Deposits		27			86
Other non-current assets								39			39
Total assets	$	161,249		$	21,428		$	150,038		$	153,225
Liabilities, convertible preferred stock and stockholders’ equity (deficit)
Liabilities, convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	3,614		$	3,882		$	5,100		$	2,456
Other liabilities		1,650			948
Compensation and employee benefits liabilities								560			1,753
Operating lease liabilities, current								1,160			—
Financing lease liabilities, current								786			680
Total current liabilities		5,264			4,830			7,606			4,889
Debt		—			567
Operating lease liabilities, non-current								5,278			—
Financing lease liabilities, non-current								1,846			1,674
Other non-current liabilities		777			138			—			149
Total liabilities	$	6,041		$	5,535			14,730			6,712
Commitments and contingencies (Note 8)
Convertible preferred stock (Series AA) (Note 9)		—			61,411
Convertible preferred stock (Series BB) (Note 9)		—			10,925
Stockholders’ equity (deficit):
Common stock, $0.0001 par value; 1,230,000,000 shares authorized as of September 30, 2021, 30,588,495 shares and 1,875,422 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		3			—
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.0001 par value and 250,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 30,682,813 and 30,609,029 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively								3			3
Additional paid-in capital		295,114			55,969			297,815			296,049
Accumulated deficit		(139,840	)		(112,412	)		(161,611	)		(149,206	)
Accumulated other comprehensive loss		(69	)		—			(899	)		(333	)
Total stockholders’ equity (deficit)		155,208			(56,443	)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	161,249		$	21,428
Total stockholders’ equity								135,308			146,513
Total liabilities and stockholders’ equity							$	150,038		$	153,225

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


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
Operating expenses:
Research and development	$	6,443		$	3,576		$	15,706		$	8,629		$	7,455		$	3,365
General and administrative		3,873			1,788			12,363			5,007			5,032			4,604
Alvaxa IPR&D		—			—			—			738
Total operating expenses		10,316			5,364			28,069			14,374			12,487			7,969
Loss from operations		(10,316	)		(5,364	)		(28,069	)		(14,374	)		(12,487	)		(7,969	)
Other income (expense):
Realized gain on marketable securities														15			—
Interest income		278			—			466			—			310			—
Interest expense, including $0 and $645 with related parties in the three months and nine months ended September 30, 2021 and 2020, respectively		(214	)		(3	)		(364	)		(1,635	)
Fair value adjustments on embedded debt derivatives, including $0 and $575 with related parties in the three months and nine months ended September 30, 2021 and 2020, respectively		—			—			—			995
Loss on fixed asset disposition		—			—			(28	)		—
Gain on debt extinguishment		567			—			567			45
Interest expense														(243	)		(3	)
Net loss		(9,685	)		(5,367	)		(27,428	)		(14,969	)		(12,405	)		(7,972	)
Cumulative dividends on convertible preferred stock		—			—			—			(104	)
Net loss attributable to common stockholders	$	(9,685	)	$	(5,367	)	$	(27,428	)	$	(15,073	)	$	(12,405	)	$	(7,972	)
Net loss per common share, basic and diluted	$	(0.32	)	$	(3.00	)	$	(1.03	)	$	(9.82	)	$	(0.40	)	$	(0.42	)
Weighted-average number of shares used in computing net loss per common share, basic and diluted		30,588,495			1,787,124			26,736,745			1,535,033			30,647,679			18,904,853
Comprehensive loss:
Net loss	$	(9,685	)	$	(5,367	)	$	(27,428	)	$	(14,969	)	$	(12,405	)	$	(7,972	)
Other comprehensive items:
Unrealized gain (loss) on marketable securities		32			—			(69	)		—
Total other comprehensive gain (loss)		32			—			(69	)		—
Unrealized loss on marketable securities														(566	)		—
Total other comprehensive loss														(566	)		—
Total comprehensive loss	$	(9,653	)	$	(5,367	)	$	(27,497	)	$	(14,969	)	$	(12,971	)	$	(7,972	)

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

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

Convertible
Preferred Stock
(Series A-F)

Convertible
Preferred Stock
(Series AA)

Convertible
Preferred Stock
(Series BB)

Common Stock

Additional
Paid-In

Accumulated

Accumulated Other Comprehensive Income (Loss)

Total
Stockholders’

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

Amount

Equity (Deficit)

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

—

—

—

—

—

—

—

—

Issuance 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
)
Stock-based compensation expense

—

—

—

—

—

—

—

—

163

—

—

163

Issuance of common stock related to Alvaxa acquisition

—

—

—

—

—

—

304,376

—

541

—

—

541

Net loss

—

—

—

—

—

—

—

—

—

(4,910
)

—

(4,910
)
Balance at June 30, 2020

—

$
—

527,138,337

$
43,297

—

$
—

1,787,124

$
—

$
54,819

$
(101,914
)

$
—

$
(47,095
)
Stock-based compensation expense

—

—

—

—

—

—

—

—

781

—

—

781

Issuance of series AA preferred stock

—

—

103,453,774

8,491

—

—

—

—

—

—

—

—

Net loss

—

—

—

—

—

—

—

—

—

(5,367
)

—

(5,367
)
Balance at September 30, 2020

—

$
—

630,592,111

$
51,788

—

$
—

1,787,124

$
—

$
55,600

$
(107,281
)

$
—

$
(51,681
)

Balance at December 31, 2020

—

$
—

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

Issuance of series BB preferred stock

—

—

—

—

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

Issuance of common stock, net of issuance costs

—

—

—

—

—

—

8,030,295

1

138,488

—

—

138,489

Issuance of common stock warrants

—

—

—

—

—

—

1,648,709

—

1

—

—

1

Net loss

—

—

—

—

—

—

—

—

—

(7,972
)

—

(7,972
)
Balance at March 31, 2021

—

$
—

—

$
—

—

$
—

30,588,495

$
3

$
291,633

$
(120,384
)

$
—

$
171,252

Stock-based compensation expense

—

—

—

—

—

—

—

—

1,745

—

—

1,745

Unrealized loss on marketable securities

—

—

—

—

—

—

—

—

—

—

(101
)

(101
)
Net loss

—

—

—

—

—

—

—

—

—

(9,771
)

—

(9,771
)
Balance at June 30, 2021

—

$
—

—

$
—

—

$
—

30,588,495

$
3

$
293,379

$
(130,155
)

$
(101
)

$
163,125

Stock-based compensation expense

—

—

—

—

—

—

—

—

1,735

—

—

1,736

Unrealized gain on marketable securities

—

—

—

—

—

—

—

—

—

—

32

32

Net loss

—

—

—

—

—

—

—

—

—

(9,685
)

—

(9,685
)
Balance at September 30, 2021

—

$
—

—

$
—

—

$
—

30,588,495

$
3

$
295,114

$
(139,840
)

$
(69
)

$
155,208

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

For the Nine Months Ended September 30,

2021

2020

Operating activities

Net loss

$
(27,428
)

$
(14,969
)
Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense

4,831

1,138

Depreciation and amortization

356

139

Accretion on debt

-

1,578

Accretion on marketable securities

359

-

Fair value adjustments on embedded debt derivatives

-

(995
)
Interest on capital lease

6

8

Issuance of common stock for Alvaxa acquisition

-

541

Loss on fixed asset disposition

28

-

Gain on debt extinguishment

(567
)

(45
)
Changes in operating assets and liabilities:

Prepaid expenses and other current assets

(125
)

(445
)
Deposits

59

411

Accounts payable and accrued liabilities

(408
)

(2,477
)
Accrued interest

-

50

Other liabilities

498

41

Net cash used in operating activities

(22,391
)

(15,025
)
Investing activities

Purchases of property and equipment

(1,491
)

(890
)
Capital proceeds relating to property and equipment

293

-

Insurance proceeds relating to property and equipment

25

-

Purchases of short-term investments

(173,816
)

-

Maturities and sales of short-term investments

26,259

-

Alvaxa IPR&D acquisition

-

(197
)
Net cash used in investing activities

(148,730
)

(1,087
)
Financing activities

Proceeds from the PPP loan

-

567

Proceeds from the exercise of common stock warrants and options

1

-

Capital lease payments

(28
)

(31
)
Proceeds on the issuance of series AA convertible preferred stock

-

19,058

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

164,058

19,594

Net (decrease) increase in cash and cash equivalents

(7,063
)

3,482

Cash and cash equivalents at beginning of period

16,596

251

Cash and cash equivalents at end of period

$
9,533

$
3,733

Supplemental disclosure of noncash financing and investing information:

Property and equipment additions included in accounts payable and accrued liabilities

$
103

$
—

Issuance costs included in accounts payable and accrued liabilities

$
534

$
—

Interest on financing

$
6

$
8

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

$
95,826

$
—

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.

~~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 of the accounting for income taxes. 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. 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.

4. PROPERTY AND EQUIPMENT, NET

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


	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Research equipment	$	3,387		$	1,767		$	2,761		$	4,974
Office equipment and furniture		475			94			536			606
Leaseholder improvement		77			-			253			253
Total property and equipment		3,939			1,861			3,550			5,833
Less accumulated depreciation and amortization		(879	)		(595	)		(1,346	)		(1,189	)
Property and equipment, net	$	3,060		$	1,266		$	2,204		$	4,644

Depreciation and amortization expense for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was ~~$136~~$157 thousand and ~~$64~~$98 thousand, ~~respectively,~~respectively.

Effective January 1, 2022, the Company adopted ASC 842 and ~~for~~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 ~~nine months ended September 30, 2021~~Company's condensed consolidated balance sheet. $2.2 million relates to items previously classified under research equipment and ~~2020 was $356~~$70 thousand relates to items previously classified under office equipment and ~~$139 thousand, respectively.~~furniture on the table above. These leases are further described in Note 7.

~~5. Other current liabilities~~

5. Debt

~~Other current liabilities consist of the following (in thousands):~~

September 30,
2021

December 31,
2020

Compensation and benefits

$
1,615

$
916

Other

35

32

Total other current liabilities

$
1,650

$
948

~~6. 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. On August 6, 2021, the Small Business Administration approved the forgiveness for the full amount of the PPP Loan, which included principal of ~~$567~~$567 thousand, plus interest. The Company recognized a gain on debt extinguishment in ~~the Other~~other income (expense) on the Consolidated Statement of Operations and Comprehensive Loss for the ~~three and nine months~~year ended ~~September 30,~~December 31, 2021.

7.6. FAIR VALUE MEASUREMENTS

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


	Fair value measurements at September 30, 2021								Fair value measurements at March 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Money market funds	$	7,854	$	-	$	-	$	7,854	$	5,248	$	-	$	-	$	5,248
Investments:
Commercial paper		-		52,964		-		52,964		-		39,464		-		39,464
Corporate bonds		-		87,170		-		87,170		-		81,309		-		81,309
U.S. Government agencies		-		6,995		-		6,995		-		6,730		-		6,730
Total	$	7,854	$	147,129	$	-	$	154,983	$	5,248	$	127,503	$	-	$	132,751

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

The Company’s embedded debt derivatives during 2020 are measured at fair value using a probability-weighted discounted cash flow valuation methodology. The determination of the fair value of embedded debt derivatives includes inputs 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 of the fair value hierarchy.

The assumptions utilized to value the embedded debt derivatives during the nine months ended September 30, 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 nine months ended September 30, 2020, the Company recognized $1.0 million of income in the condensed consolidated statement of operations as other income—fair value adjustments on embedded debt derivatives. The fair value of the embedded debt derivate was 0 as of September 30, 2020 .

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

Amount

Balance at December 31, 2019

$
3,920

Change in fair value

(995
)
Settlement

(2,925
)
Balance at September 30, 2020

$
—

There were 0 transfers among Level 1, Level 2 or Level 3 categories in the three ~~or nine~~ months ended ~~September 30, 2021~~March 31, 2022 or ~~September 30, 2020~~2021..

8.7. COMMITMENTS AND CONTINGENCIES

Operating ~~Lease~~Leases

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

On May 14, 2021, the ~~three~~Company commenced a lease for approximately 10,082 square feet at 451 D Street in Boston, MA. This serves as the Company’s principal executive and administrative offices as well as laboratory space. The Company will pay a base monthly rent in the amount of $69 thousand during the first 12 months ~~ended~~ of the lease. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%.

On October 1, 2021, the Company commenced a lease for additional space of approximately 4,258 square feet at 451 D Street in Boston, MA. The Company will pay a base monthly rent in the amount of $33 thousand during the first 12 months of the lease. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%.

The lease terms for both leases at 451 D Street in Boston expire on September 30, ~~2021 and~~2026, with a one-time option to renew for a period of five years. The renewal periods are not included in the measurement of these leases as the Company is not reasonably certain of exercising them. Both leases are secured with a letter of credit for $628 thousand.

On November 1, 2020, ~~was $414~~the Company commenced a lease for approximately 7,643 square feet of space at 1405 Research Blvd in Rockville, MD. This serves primarily as laboratory space. The Company paid a base monthly amount of $25 thousand during the first 12 months. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. The lease is secured with a letter of credit for $50 thousand and ~~$295 thousand, respectively, and for~~ the ~~nine months ended September 30, 2021 and 2020 was $920 thousand and $995 thousand, respectively.~~ term expires on February 28, 2027.

~~The following table presents the future annual minimum payments required under noncancellable operating leases at September 30, 2021 (in thousands):~~Finance Leases

Remainder of 2021

$
391

2022

1,585

2023

1,606

2024

1,641

2025

1,688

2026

1,415

2027

59

Total operating lease obligations

$
8,385

As~~of September 30, 2021,the Company has letters~~of~~credit~~ ~~agreements~~ ~~outstandingtotaling $678 thousand as security for office facility operating leases.~~

~~Capital Lease~~

The Company leases research equipment and furniture under ~~a capital~~ finance ~~lease. The capital~~leases. As part of its adoption of ASC 842, the Company recorded financing right-of-use assets and financing lease ~~asset is classified within property and equipment, net within the Company’s condensed consolidated balance sheets.~~liabilities for these leases as of January 1, 2022.

On ~~June 11,~~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 purchase of equipment on an as needed basis. As of March 31, 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~~$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.

~~On June 29, 2021,~~The following table contains a summary of the ~~Company entered into~~lease costs recognized under ASC 842 pertaining to the Company’s finance and operating leases for the three months ended March 31, 2022 (in thousands):


	Three Months Ended March 31,
	2022
Lease Cost:
Amortization of finance right-of-use assets	$	177
Interest on finance lease liabilities		46
Operating lease cost		414
Variable lease cost		173
Total lease costs	$	810

The following table contains a ~~sale-leaseback arrangement with a third-party company (the “Buyer-lessor”)~~summary of other information pertaining to the Company’s finance and operating leases for the three months ended March 31, 2022 (in thousands, except lease term and discount rate):


	Three Months Ended March 31,
	2022
Other Operating Lease Information:
Operating cash flows for operating leases	$	392
Operating cash flows for finance leases	$	46
Financing cash flows from finance leases	$	133

Weighted average remaining lease term
Operating leases	4.6 years
Financing leases	3.7 years

Weighted average discount rate
Operating leases	7.6%
Financing leases	8.3%

The following table presents supplemental balance sheet information related to ~~specific equipment~~operating and financing leases as of the Company. The equipment was sold for $293 thousand and leased back over an initial term of four years. The monthly lease payments are $7 thousand until the equipment is repurchased or the lease is terminated. At the end of the initial term, the Company has the option to repurchase the equipment at fair market value, not to exceed 15% of the original equipment cost, or to renew the lease for an additional March 31, 2022 (in thousands):


	March 31, 2022
Operating leases
Right-of-use assets	$	6,267

Right-of-use lease liabilities, current	$	1,160
Right-of-use lease liabilities, noncurrent		5,278
Total operating lease liabilities	$	6,438

Financing leases
Right-of-use assets, net	$	2,551

Right-of-use lease liabilities, current	$	786
Right-of-use lease liabilities, noncurrent		1,846
Total financing lease liabilities	$	2,632

~~one- or two-year~~

~~period at a mutually agreed upon rate.~~

The following table presents the ~~future annual minimum payments under~~maturity of the ~~capitalized~~Company’s operating and finance lease ~~together with the present value~~liabilities as of ~~net minimum lease payments at~~ ~~September 30, 2021~~March 31, 2022 (in thousands):


	Operating		Financing
Remainder of 2022	$	1,196	$	609
2023		1,628		812
2024		1,640		714
2025		1,689		683
2026		1,413		80
Thereafter		59		—
Total future minimum lease payments	$	7,625	$	2,898
Less amount representing interest		1,187		266
Total lease liabilities	$	6,438	$	2,632

Remainder of 2021

$
94

2022

239

2023

239

2024

239

2025

139

Total capital lease obligations

$
950

Less amount representing interest

(52
)

Present value of minimum capital lease obligations

$
898

The following table presents operating lease commitments as reflected under 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

The following table presents finance lease commitments as reflected under ASC 840 as of 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

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

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 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 0 merit to the claims alleged against the Company and its former officers, including 0 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”~~("WHO") announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China 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 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 pandemic and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 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 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 during the remainder of ~~2021~~2022 and ~~2022.~~beyond.

9.8. 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 related to common stock warrants issued in conjunction with equity and debt fundraising events for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 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, 2021		412,262	$	9.81		5.71	$	723
Granted		—	$	—
Exercised		—	$	—
Expired		—
Outstanding at March 31, 2022		412,262	$	9.81		5.47	$	—

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 September 30, 2021

412,262

$
9.60

5.96

$
2,561

~~10.~~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 was 5,000,000, 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. There were 2,504,400 shares reserved for issuance pursuant to the 2021 Plan as of March 31, 2022.

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 this issuance under the 2021 ESPP, which will automatically increase on January 1 of each calendar

year, beginning on January 1, 2022 through January 1, 2031, by an amount equal to ~~1.0%~~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% of the shares of common stock outstanding on the applicable Evergreen Measurement Date and 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 shares of the Company’s common stock than would otherwise occur. year. The purchase price of the shares under the 2021 ESPP ~~in the absence of a contrary designation, will be 85%~~are at 85% of the lower of the fair market value of ~~our~~the Company’s common stock on the first trading day of the offering period or on the purchase date. As of ~~September 30, 2021,~~March 31, 2022, the Company had ~~not~~ issued ~~any~~11,700 shares under the 2021 ESPP. As of ~~September 30, 2021, 333,333~~March 31, 2022, 627,723 shares were available to be issued under the 2021 ESPP. The Company recognized 0 share-based compensation expense related to the ESPP ~~through September 30, 2021.~~for the three months ended March 31, 2022.

Stock Options

During ~~2021,~~2022, the Company granted options to purchase shares of common stock to employees, consultants, and nonexecutive directors pursuant to the ~~2018 Plan and~~ 2021 ~~Plan, respectively.~~Plan. The Company uses the Black-Scholes option-pricing model to estimate the fair value of the stock options on the grant dates at a weighted average fair value of ~~$12.58. There were 1,388,736 options available for grant under the 2021 Plan at September 30, 2021.~~$3.13 per share.

The following is a summary of the stock option award activity during the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 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, 2020		1,947,123		$	5.70			9.56	$	10,284
											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		1,620,159		$	16.51							681,704		$	4.05
Exercised		—		$	—							(73,784	)	$	3.22
Forfeited		(303,082	)	$	(5.91	)						(206,800	)	$	9.58
Expired		—		$	—							—		$	—
Outstanding at September 30, 2021		3,264,200		$	11.04			9.02	$	14,804
Exercisable at September 30, 2021		793,677		$	10.66			8.55	$	6,310
Options expected to vest as of September 30, 2021		2,470,523		$	11.16			9.23	$	8,494
Outstanding at March 31, 2022												3,427,584		$	9.73		8.58	$	—
Options expected to vest as of March 31, 2022												2,262,393		$	8.03		9.12	$	—
Exercisable at March 31, 2022												1,165,191		$	13.03		7.53	$	—

The aggregate intrinsic value of stock options exercised in the three months ended March 31, 2022 was $0.1 million.

The total fair value of options vested during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$2.5~~$4.1 million.

At ~~September 30, 2021,~~March 31, 2022, there was approximately ~~$19.7~~$15.2 million of unrecognized stock-based compensation expense associated with the stock options, which is expected to be recognized over a weighted-average period of ~~3.15~~2.87 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 three months ended March 31, 2022:


	Restricted Stock Units		Weighted- Average Grant Date Fair Value
Unvested at December 31, 2021		—		—
Granted		205,201	$	4.02
Unvested at March 31, 2022		205,201	$	4.02

Pursuant to the 2021 Plan, the Company granted restricted stock units which vest annually over a period of one, two or four years. NaN restricted stock units vested during the three months ended March 31, 2022.

At March 31, 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 3.63 years.

Common Stock Warrants

The following is a summary of the employee-issued common stock warrant activity during the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 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 September 30, 2021		57,212	$	7.62		2.89	$	269
Outstanding and exercisable at March 31, 2022										57,004	$	6.94		2.66	$	—

As of ~~September 30, 2021~~March 31, 2022 there was 0 unrecognized stock-based compensation expense associated with the common stock warrants.

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


	Three Months Ended March 31,
	2022	2021
Volatility	93.67%-95.8%	91.5%-98.04%
Expected life (years)	5.84-7	5.52-6.08
Risk-free interest rate	1.7%–2.4%	0.5%-0.1.0%
Dividend rate	—%	—%

Nine Months Ended September 30,

2021

2020

Volatility

89.31%-98.04%

90.0%

Expected life (years)

5.52-6.08

0.5-4.0

Risk-free interest rate

0.4%–1.2%

0.11%-0.18%

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.

•

~~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 ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


	Three Months Ended March 31,
	2022		2021
Research and development	$	555	$	509
General and administrative		960		840
Total stock-based compensation expense	$	1,515	$	1,349

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 ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the ~~Company accrued expense of $62~~Company's matching contributions were $106 thousand and ~~$26~~$29 thousand, respectively. ~~During the nine months ended September 30, 2021 and 2020, the Company accrued expenses of $167 thousand and $78 thousand, respectively.~~

The Company recorded 0 provision for income taxes for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 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.

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 “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.

We are ~~developing~~ a ~~pipeline~~biopharmaceutical company engaged in the discovery, development, and delivery of ~~medicines~~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 robust set of 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 block key immune checkpoints selectively within the ~~substantial potential of the immune system to defeat cancer and other diseases.~~tumor microenvironment. Our ~~research investment today is directed toward two immuno-oncology platforms, (i) our~~ ImmunoPhage™ ~~platform and Phortress™ library and (ii) our Tumor Microenvironment Antibody biologics, or TMAb platform:~~

~~Our proprietary 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 for to create powerful ~~self-adjuvanted~~rational drug combinations.

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

We believe that anti-VISTA antibodies have the potential to become the backbone of the next generation of cancer immunotherapy. ~~We use inactivated bacteriophage virus, which~~Based on our expertise and deep understanding of this myeloid checkpoint target, our human monoclonal antibody targeting VISTA is ~~ubiquitous~~designed to overcome the challenges of the previous generation of anti-VISTA monoclonal antibodies and has the potential to ~~induce~~become first anti-VISTA monoclonal antibody approved for as a ~~robust, focused~~therapeutic agent.

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

SNS-101 is a fully human monoclonal IgG1 antibody that has been designed to selectively binds 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 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, ~~as part~~in the MC38 syngeneic mouse model, SNS-101 has shown significant activity in combination with anti-PD-1.

Based on the totality of the preclinical data to date and the promising profile of this ~~platform,~~antibody, we have initiated both IND-enabling studies and GMP manufacturing for SNS-101. We expect to submit an IND in the first half of 2023.

VSIG-4 (V-set and Ig domain-containing 4; also known as CRIg, or complement receptor of the Ig superfamily) is a B7-related protein, which is highly expressed on macrophages, including TAMs. VSIG-4 has been shown to be a potent inhibitor of T cell proliferation and inhibits proinflammatory macrophage activity through metabolic reprogramming. 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 on-target/off-tumor toxicities. Taken together, these features make VSIG-4 a strong candidate for a TMAb-based approach.

We have generated antibodies and are ~~creating an expanding library~~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.

ENTPDase1 (also known as CD39, or ecto-nucleoside triphosphate diphosphohydrolase-1) is the upstream, rate-limiting enzyme, leading to the breakdown of ~~pre-manufactured immunophages,~~extracellular adenosine triphosphate, or ATP. Extracellular ATP represents a potent immunologic “danger signal”, which ~~we refer~~drives immune activation. The ultimate downstream product of this pathway, adenosine, has potent immunosuppressive activity through binding to ~~as our Phortress library. The versatility~~adenosine receptors. Upregulation of ~~our ImmunoPhage platform allows us~~CD39 by tumors is common and leads to ~~design product candidates~~decreased extracellular ATP and a diminished anti-tumor immune response.

Pharmacologic inhibition of CD39 activity has shown anti-tumor activity in a ~~modular, off-the-shelf fashion based~~variety of experimental tumor models. Several of these molecules are currently being evaluated as cancer therapeutics in early phase clinical trials. CD39, although upregulated in tumors, is also expressed in normal tissue on a ~~cocktail~~variety of ~~common~~different cell populations. The expression of CD39 on endothelial cells is particularly problematic, as this is anticipated to result in significant on-target/off-tumor binding, leading to TMDD, a poor PK profile and ~~patient-specific antigens built from~~potential toxicities.

We have initiated a TMAb antibody campaign aimed at developing an anti-CD39 inhibitory antibody with high selectivity for CD39 in the ~~Phortress library.~~

~~Our ImmunoPhage platform is designed~~tumor microenvironment, or TME, versus normal tissue environments. We expect to ~~deliver three distinct technological advantages over existing platforms: 1) the use of bacteriophage to deliver~~select a ~~highly immunogenic vaccine strategy; 2) gene transfer technology for exquisite targeting of antigen presenting cells, or APCs; and 3) speed-to-treatment capabilities via the Phortress library.~~product candidate in 2023.

SNS-401-NG, our multi-antigenic personalized ImmunoPhage candidate, is being developed in collaboration with the University of Washington. SNS-401-NG is being designed on an improved and proprietary bacteriophage construct based on learnings from our first-generation product candidate, SNS-301, which we discontinued development of in June 2021. We intend to initiate IND-enabling studies for this product candidate in the second half of 2022.

We intend to initially develop SNS-401-NG for the treatment of Merkel ~~Cell Carcinoma~~cell carcinoma 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 neck cancer, lung cancer, melanoma, and triple negative breast cancer based on the prevalence of Phortress antigens.

Our TMAb platform is comprised of human monoclonal antibodies and alpaca-derived nanobodies selectively active in the tumor microenvironment. We are initially focusing our research for this platform on an immune checkpoint regulator V-set Immunoglobulin Domain Ig Suppressor of T-cell activation, or VISTA, which may play a role in both intrinsic and acquired PD-1/PD-L1 resistance, and V-Set And Immunoglobulin Domain Containing 4, or VSIG4, a potent inhibitor of T-cell activity, often overexpressed on macrophages within the tumor microenvironment. Through the targeted use of this platform, we believe we can further enhance activity of cancer therapies either as a monotherapy or synergistic with PD-1/PD-L1 inhibition.

SNS-VISTA has been designed to selectively target pH-sensitive antibodies that bind only at the tumor site, as opposed to at the physiological site. Antibodies that bind at the physiological site in the tumor may encounter a “sink”, which may prevent effective binding and lead to toxicities.

We have identified a set of fully-human, highly selective pH-dependent anti-VISTA antibodies, which we are evaluating preclinically. In August 2021, we announced early in vivo data. In a human VISTA knock-in mouse model, these parental antibodies significantly enhanced ani-tumor responses in combination with PD-1 blockade compared to treatment with PD-1 blockade alone.

~~We plan to present preclinical data from the SNS-VISTA program at a scientific conference in 2021 and to initiate IND-enabling studies by the end of 2021.~~

VSIG4 is a B7-family related protein and a potent inhibitor of T-cell activity, often overexpressed on macrophages within the tumor microenvironment. VSIG4 may play a role in enforcing the immunosuppressive program in macrophage-rich tumors. Inhibition of VSIG4 activity could also enhance T-cell-mediated anti-tumor immune responses. We anticipate the selection of a product candidate from this program in 2023.

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 ~~$27.4~~$12.4 million and ~~$15.0~~$8.0 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. As of ~~September 30, 2021,~~March 31, 2022, we had an accumulated deficit of ~~$139.8~~$161.6 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:

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~~product.

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.

In March 2020, COVID-19 was declared a global pandemic by the World Health Organization and to date, 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 pre-clinical trials 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 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, we have, among other things, implemented various social distancing measures in our office and labs including replacing in-person meetings with virtual interactions, and are working remotely when possible. 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 our product candidate development 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.

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

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 preclinical studies and 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:

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 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 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 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.

On May 18, 2020, we acquired Alvaxa Biosciences, or Alvaxa, in a cash and stock purchase pursuant to a Stock Purchase Agreement. Under the terms of the Stock Purchase Agreement, we acquired Alvaxa’s existing camelid nanobodies and other biomaterials, or the Biomaterials, expertise in nanobody discovery, as well as a license agreement with a research organization. The former majority shareholder of Alvaxa is our current Chief Scientific Officer. Under the Stock Purchase Agreement, we paid $197 thousand to settle liabilities assumed from Alvaxa and issued 304,376 shares of our common stock to the shareholders of Alvaxa. We have evaluated the acquisition under ASC 805, Business Combinations and determined this to be an asset acquisition.

The 304,376 shares of common stock was valued at $1.78 per share, or $541 thousand in total, based on a valuation determined with the assistance of a third party. We determined that substantially all the value acquired in the transaction related to the Biomaterials and represents in-process research and development, or IPR&D. The liabilities of $197 thousand assumed were related to previously incurred employee costs as well as contractually required vendor payments. The consideration transferred in this transaction was recorded as an expense in the IPR&D line item within our Statement of Operations during the nine months ended September 30, 2020.

Our other 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.

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.

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

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

Research and development expenses were ~~$6.4~~$7.5 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$3.6~~$3.4 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase of ~~$2.9~~$4.1 million was primarily attributable to ~~$1.3 million of increased expenses relating toincreased headcount, $0.7 million of increased expenses for manufacturing contacts and $0.7~~$1.4 million of increased expenses relating to ~~lab supply purchases, all~~manufacturing contracts, $1.2 million of ~~which~~increased personnel cost, including stock-based compensation and incentives, to support our research, development and manufacturing ~~activities.~~activities, $1.0 million of additional expenses relating to lab supply purchases and equipment, $0.5 million of increased research fees and $0.2 million of higher facilities expense, partially offset by $0.3 million of lower expense associated with clinical trials.

General and administrative expenses were ~~$3.9~~$5.0 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$1.8~~$4.6 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase of ~~$2.1~~$0.4 million was primarily attributable to ~~$1.3~~$0.4 million of ~~increased personnel~~higher licenses and fees costs, ~~including stock-based compensation, to support our business, as well as $0.6~~$0.2 million of increased directors and officers insurance ~~costs.~~costs, $0.2 million of higher facilities expense and $0.1 million of increased personnel cost, including stock-based compensation and incentives, partially offset by $0.3 million of lower expense for legal fees and $0.2 million of lower consulting expenses.

Other income was ~~$0.6~~$0.1 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to other expense of $0.0 million for the three months ended ~~September 30, 2020.~~three months ended March 31, 2021. The ~~other income~~ increase was primarily attributable to ~~a gain on debt extinguishment relating to the Small Business Administration (“SBA”) approving the forgiveness for the full amount of the Paycheck Protection Program loan (“PPP Loan”).~~

~~The following sets forth our results of operations for the~~ ~~nine months ended September 30, 2021~~ ~~and 2020:~~

Research and development expenses were $15.7 million for the nine months ended September 30, 2021, compared to $8.6 million for the nine months ended September 30, 2020. The increase of $7.1 million was primarily attributable to $4.0$0.1 million of ~~increased expenses relating to~~increased headcount, including stock-based compensation and incentives, and $1.5 million of increased expenses relating to lab supply purchases, both to support our research, development, and manufacturing activities, $0.8 million relating to increased expenses for manufacturing contracts, as well as $0.6 million of higher consulting expensesinvestment related ~~to our product and candidate selection process.~~interest.

General and administrative expenses were $12.4 million for the nine months ended September 30, 2021, compared to $5.0 million for the nine months ended September 30, 2020. The increase of $7.4 million was primarily attributable to $4.2 million of increased personnel costs, including stock-based compensation and incentives, to support our business, as well as $1.8 million of higher costs for directors and officers insurance, $0.9 million of increased professional service fees and $0.2 million related to increased marketing and promotion expenses.

Other income was $0.6 million for the nine months ended September 30, 2021, compared to other expense of $0.6 million for the nine months ended September 30, 2020. The change of $1.2 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, which was primarily attributable to a $0.6 million loss on fair value adjustments of embedded derivative liabilities associated with certain convertible debt in 2020, as well a gain on debt extinguishment of $0.6 million relating to the SBA approving the forgiveness for the full amount of the PPP Loan, plus interest, in 2021.

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 ~~$27.4~~$12.4 million and ~~$15.0~~$8.0 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. As of ~~September 30, 2021,~~March 31, 2022, we had an accumulated deficit of ~~$139.8~~$161.6 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 ~~September 30, 2021,~~March 31, 2022, we had cash, cash equivalents and marketable securities of ~~$156.7~~$136.2 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 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.

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

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, our operating activities used ~~$22.4~~$10.8 million of cash, primarily resulting from our $12.4 million net ~~loss.~~loss and a $0.8 million decrease in our operating assets and liabilities, partially offset by increases in non-cash charges of $2.3 million. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, our operating activities used ~~$15.0~~$10.8 million of cash, primarily resulting from our $8.0 million net ~~loss. The increase~~loss and a $4.2 million decrease in our operating assets and liabilities, partially offset by increases in non-cash charges of $1.5 million.

During the three months ended March 31, 2022, net cash ~~used~~provided by investing activities was $12.2 million, primarily due to $20.2 million in ~~operating activities for~~sales and maturities of short-term investments, partially offset by $8.0 million in purchases of short-term investments. During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, as compared to the nine months ended September 30, 2020 is attributed to the increase in net loss. The increase in net cash used in operating activities for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020 is attributed to an increase in personnel and an increase in both our research and development and general and operating expenses.

~~During the nine months ended September 30, 2021 and 2020, our~~ net cash used in investing activities was ~~$148.7~~$0.5 million and $1.1 million, respectively. The $147.6 increase was primarily a result of investing our net proceeds from our initial public offering and Series AA and Series BB convertible preferred stock financings in short-term marketable securities. The $1.1 million of net cash used during the nine months ending September 30, 2020, was from the purchase of Alvaxa andrelated to purchases of property and equipment.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, net cash provided by financing activities was $0.1 million, primarily from $0.2 million of proceeds from the exercise of stock options, offset by principle payments for financing leases. During the three months ended March 31, 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 initial public offering, as well as proceeds from the issuance of Series BB convertible preferred stock prior to the initial public offering. ~~During~~

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.

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 March 31, 2022, we had operating lease payment obligations of $7.6 million, with $1.2 million payable for the ~~nine months ended September 30, 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.

We lease research equipment, furniture and a vehicle under finance leases. As part of its adoption of ASC 842, we recorded financing ~~activities was $19.6~~right-of-use assets and financing lease liabilities for these leases as of January 1, 2022. As of March 31, 2022, we had finance lease payment obligations of $2.9 million, ~~primarily from~~with $0.6 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.

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 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:

We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements at least into the first ~~half~~quarter of ~~2024.~~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:

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.

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 September 30, 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.

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.

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 months ended ~~September 30, 2021~~, March 31, 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.

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.

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 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.

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.

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 ~~September 30, 2021~~ March 31, 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~~ ~~September 30, 2021~~, our disclosure controls and procedures were ~~not effective.~~effective at the reasonable assurance level as of March 31, 2022.

~~Except as described below, there~~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 ~~September 30, 2021~~March 31, 2022 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have begun 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 recurring control processes 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. We are also in the process of working on several system related enhancements that will assist with these efforts.26

We intend to complete the implementation of our remediation plan during the remainder of 2021. Our management team will closely monitor and modify, as appropriate, the remediation plan to eliminate the identified material weakness.

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.

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.

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 occurred on February 8, 2021. We received net proceeds from the initial public offering 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.

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 dated as of February 3, 2021, and filed with the SEC on February 4, 2021 pursuant to Rule 424(b)(4).

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.


Delaware	83-1863385
(State or other jurisdiction of incorporation or organization)	~~(I.R.S. Employer~~ ~~Identification No.)~~

~~1405 Research Blvd, Suite 125~~ ~~Rockville, MD~~	~~20850~~(I.R.S. Employer Identification No.)

451 D Street, Suite 710 Boston, MA	02210
(Address of principal executive offices)	(Zip Code)


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


		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)	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	1517
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2526
Item 4.	Controls and Procedures	2526

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	2627
Item 1A.	Risk Factors	2627
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2627
Item 3.	Defaults Upon Senior Securities	2627
Item 4.	Mine Safety Disclosures	2627
Item 5.	Other Information	2627
Item 6.	Exhibits	2728
Signatures		2829

~~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).
10.1		Open Market Sales AgreementSM, dated March 15, 2022, by and between the Registrant and Jefferies LLC (incorporated by reference to Exhibit 1.2 to the Registrant’s Registration Statement on Form S-3 (File No. 333-263567), filed with the SEC on March 15, 2022).
10.2		Amended and Restated Employment Agreement, dated January 1, 2022, by and between the Registrant and Erin Colgan (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K (File No. 001-39980), filed with the SEC on March 15, 2022).
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.
101		The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended ~~September 30, 2021~~March 31, 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)


		Sensei Biotherapeutics, Inc.

Date:	~~November~~May 10, ~~2021~~2022	By:	/s/ John Celebi
			John Celebi
			President and Chief Executive Officer

		By:	/s/ Erin Colgan
			Erin Colgan
			Chief Financial Officer


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


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

	Convertible Preferred Stock (Series A-F)						Convertible Preferred Stock (Series AA)						Convertible Preferred Stock (Series BB)						Common Stock					Additional Paid-In			Accumulated			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount		Capital			Deficit			Amount			Equity (Deficit)
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			—			—			—			—		—			—			—			—
Issuance 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	)
Stock-based compensation expense		—			—			—			—			—			—			—			—		163			—			—			163
Issuance of common stock related to Alvaxa acquisition		—			—			—			—			—			—			304,376			—		541			—			—			541
Net loss		—			—			—			—			—			—			—			—		—			(4,910	)		—			(4,910	)
Balance at June 30, 2020		—		$	—			527,138,337		$	43,297			—		$	—			1,787,124		$	—	$	54,819		$	(101,914	)	$	—		$	(47,095	)
Stock-based compensation expense		—			—			—			—			—			—			—			—		781			—			—			781
Issuance of series AA preferred stock		—			—			103,453,774			8,491			—			—			—			—		—			—			—			—
Net loss		—			—			—			—			—			—			—			—		—			(5,367	)		—			(5,367	)
Balance at September 30, 2020		—		$	—			630,592,111		$	51,788			—		$	—			1,787,124		$	—	$	55,600		$	(107,281	)	$	—		$	(51,681	)

Balance at December 31, 2020		—		$	—			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
Issuance of series BB preferred stock		—			—			—			—			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
Issuance of common stock, net of issuance costs		—			—			—			—			—			—			8,030,295			1		138,488			—			—			138,489
Issuance of common stock warrants		—			—			—			—			—			—			1,648,709			—		1			—			—			1
Net loss		—			—			—			—			—			—			—			—		—			(7,972	)		—			(7,972	)
Balance at March 31, 2021		—		$	—			—		$	—			—		$	—			30,588,495		$	3	$	291,633		$	(120,384	)	$	—		$	171,252
Stock-based compensation expense		—			—			—			—			—			—			—			—		1,745			—			—			1,745
Unrealized loss on marketable securities		—			—			—			—			—			—			—			—		—			—			(101	)		(101	)
Net loss		—			—			—			—			—			—			—			—		—			(9,771	)		—			(9,771	)
Balance at June 30, 2021		—		$	—			—		$	—			—		$	—			30,588,495		$	3	$	293,379		$	(130,155	)	$	(101	)	$	163,125
Stock-based compensation expense		—			—			—			—			—			—			—			—		1,735			—			—			1,736
Unrealized gain on marketable securities		—			—			—			—			—			—			—			—		—			—			32			32
Net loss		—			—			—			—			—			—			—			—		—			(9,685	)		—			(9,685	)
Balance at September 30, 2021		—		$	—			—		$	—			—		$	—			30,588,495		$	3	$	295,114		$	(139,840	)	$	(69	)	$	155,208


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Commercial paper	$	52,965	$	3	$	(4	)	$	52,964	$	39,494	$	-	$	(30	)	$	39,464
Corporate bonds		87,233		14		(77	)		87,170		81,908	$	3	$	(602	)	$	81,309
U.S. Government agencies		7,000		-		(5	)		6,995		7,000	$	-	$	(270	)	$	6,730
Total	$	147,198	$	17	$	(86	)	$	147,129	$	128,402	$	3	$	(902	)	$	127,503

	September 30, 2021		December 31, 2020
Compensation and benefits	$	1,615	$	916
Other		35		32
Total other current liabilities	$	1,650	$	948

	Amount
Balance at December 31, 2019	$	3,920
Change in fair value		(995	)
Settlement		(2,925	)
Balance at September 30, 2020	$	—

Remainder of 2021	$	391
2022		1,585
2023		1,606
2024		1,641
2025		1,688
2026		1,415
2027		59
Total operating lease obligations	$	8,385

	Nine Months Ended September 30,
	2021	2020
Volatility	89.31%-98.04%	90.0%
Expected life (years)	5.52-6.08	0.5-4.0
Risk-free interest rate	0.4%–1.2%	0.11%-0.18%
Dividend rate	—%	—%

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	691	$	340	$	1,839	$	441
General and administrative		1,045		441		2,991		697
Total stock-based compensation expense	$	1,736	$	781	$	4,830	$	1,138


	Three Months Ended September 30,									Three Months Ended March 31,
(in thousands)	2021			2020			Change			2022			2021			Change
Operating expenses:
Research and development	$	6,443		$	3,576		$	2,867		$	7,455		$	3,365		$	4,090
General and administrative		3,873			1,788			2,085			5,032			4,604			428
Total operating expenses	$	10,316		$	5,364		$	4,952			12,487			7,969		$	4,518
Loss from operations		(10,316	)		(5,364	)		(4,952	)		(12,487	)		(7,969	)		(4,518	)
Total other income (expense)		631			(3	)		634			82			(3	)		85
Net loss	$	(9,685	)	$	(5,367	)	$	(4,318	)	$	(12,405	)	$	(7,972	)	$	(4,433	)

Large accelerated filer

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Non-accelerated filer

Smaller reporting company

Emerging growth company