What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-12 compared with 2020-03-12 · 525 added, 441 removed, 887 unchanged (52% of the section changed)

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Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020.

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Our board of directors has adopted a written Code of Business Conduct and Ethics applicable to all officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

We have posted a current copy of our Code of Business Conduct and Ethics on our website at www.selectabio.com in the “Investors & Media” section under “Corporate Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics, as well as Nasdaq’s requirement to disclose waivers with respect to directors and executive officers, by posting such information on our website at the address and location specified above.

We have posted a current copy of our Code of Business Conduct and Ethics on our website at www.selectabio.com in the “Investors & Media” section under “Corporate Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics, as well as the Nasdaq Stock Market LLC’s requirement to disclose waivers with respect to directors and executive officers, by posting such information on our website at the address and location specified above.

The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K.

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Executive Compensation

The information required by this Item regarding executive compensation will be included in our definitive Proxy Statement for the 2020 Annual Meeting of Stockholders under the headings “Executive and Director Compensation” and “Compensation Committee Interlocks and Insider Participation” and is incorporated herein by reference, as applicable.

The information required by this Item regarding executive compensation will be included in our definitive Proxy Statement for the 2021 Annual Meeting of Stockholders under the headings “Executive and Director Compensation” and “Compensation Committee Interlocks and Insider Participation” and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Changes in Stockholders' (Deficit) Equity for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018

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Incorporated by Reference

Exhibit Description

Number Exhibit Description Form File No.

Exhibit Filing

Restated Certificate of Incorporation of Selecta Biosciences, Inc.

8-K 001-37798 3.1 6/29/2016

Amended and Restated By-laws of Selecta Biosciences, Inc.

Fifth Amended and Restated Investors' Rights Agreement, dated as of August 26, 2015, by and between the Registrant and each of the stockholders party thereto, as amended by Amendment No.

1 to Fifth Amended and Restated Investors Rights Agreement, dated as of June 7, 2016

8-K 001-37798 3.2 6/29/2016

Specimen Stock Certificate evidencing the shares of common stock

S-1 333-211555 4.2 5/24/2016

Form of Warrant to Purchase Shares of Series D Preferred Stock, dated August 9, 2013 or July 25, 2014, issued by the Registrant to Oxford Finance LLC and Square One Bank, together with a schedule of warrant holders

S-1 333-211555 4.5 5/24/2016

Form of Warrant to Purchase Shares of Series E Preferred Stock, dated December 31, 2015, issued by the Registrant to Oxford Finance LLC and Square One Bank, together with a schedule of warrant holders

S-1 333-211555 4.6 5/24/2016

Common Stock Purchase Warrant, dated June 27, 2017, by and between the Registrant and Timothy Springer, Ph.D.

Registration Rights Agreement, dated June 27, 2017, by and among the Registrant and the Investors named therein.

8-K 001-37798 4.1 6/28/2017

Registration Rights Agreement, dated December 23, 2019, by and among the Registrant and the Investors named therein

8-K 001-37798 10.2 12/26/2019

Registration Rights Agreement, dated as of June 11, 2020, by and between the Registrant and Swedish Orphan Biovitrum AB (Publ)

10-Q 001-37798 4.1 8/6/2020

Registration Rights Agreement, dated as of June 11, 2020, by and between the Registrant and Swedish Orphan Biovitrum AB (Publ), as amended on November 4, 2020

10-Q 001-37798 4.2 11/5/2020

Form of Common Stock Purchase Warrant, dated December 23, 2019

8-K 001-37798 4.1 12/26/2019

Form of Pre-Funded Common Stock Purchase Warrant, dated December 23, 2019

8-K 001-37798 4.2 12/26/2019

Form of Warrant to Purchase Stock, dated August 31, 2020, issued by Selecta Biosciences, Inc.

to Oxford Finance LLC and Silicon Valley Bank, together with a schedule of warrants.

8-K 001-37798 4.1 9/3/2020

Description of Securities

2016 Incentive Award Plan and form of award agreements thereunder

S-1/A 333-211555 10.2 6/8/2016

2016 Employee Stock Purchase Plan

S-1/A 333-211555 10.3 6/8/2016

2018 Employment Inducement Incentive Award Plan, amended and restated, and forms agreement thereunder

S-8 333-230501 10.1 3/25/2019

2008 Stock Incentive Plan and form of award agreements thereunder

S-1/A 333-211555 10.1 6/20/2016

Non-Employee Director Compensation Program

10-Q 001-37798 10.1 5/7/2020

Form of Indemnification Agreement for Directors and Officers

S-1 333-211555 10.5 5/24/2016

Exclusive Patent License Agreement, dated as of November 25, 2008, by and between the Registrant and the Massachusetts Institute of Technology

S-1 333-211555 10.7(a) 5/24/2016

First Amendment to Exclusive Patent License Agreement, dated as of January 12, 2010, by and between the Registrant and the Massachusetts Institute of Technology

S-1 333-211555 10.7(b) 5/24/2016

Letter Agreement, dated as of November 27, 2012, by and among the Registrant, Massachusetts Institute of Technology and Sanofi

S-1 333-211555 10.7(c) 5/24/2016

Letter Amendment, dated as of November 27, 2012, by and between the Registrant and the Massachusetts Institute of Technology

S-1 333-211555 10.7(d) 5/24/2016

Second Amendment to Exclusive Patent License Agreement, dated as of August 29, 2013, by and between the Registrant and the Massachusetts Institute of Technology

S-1 333-211555 10.7(e) 5/24/2016

Third Amendment to Exclusive Patent License Agreement, entered into on November 21, 2016 and effective as of November 18, 2016, by and between the Massachusetts Institute of Technology and the Registrant

8-K/A 001-37798 10.3(a) 12/14/2016

Letter Agreement, dated as of December 2, 2016, by and between the Massachusetts Institute of Technology and the Registrant

8-K/A 001-37798 10.3(b) 12/14/2016

Letter Agreement, dated as of December 2, 2016, by and among Spark Therapeutics, Inc., the Massachusetts Institute of Technology and the Registrant

8-K/A 001-37798 10.3(c) 12/14/2016

Fourth Amendment to Exclusive Patent License Agreement, entered into on December 13, 2019, by and between the Massachusetts Institute of Technology and the Registrant

10-K 001-37798 10.7(i) 3/12/2020

Fifth Amendment to Exclusive Patent License Agreement, dated as of May 15, 2020, by and between the Registrant and the Massachusetts Institute of Technology

10-Q 001-37798 10.1 8/6/2020

Amended and Restated License Agreement, dated as of May 31, 2017, by and between the Registrant and Shenyang Sunshine Pharmaceutical Co., Ltd.

10-Q 001-37798 10.6 8/11/2017

Manufacturing Services Agreement, dated as of August 1, 2014, by and between the Registrant and Shenyang Sunshine Pharmaceutical Co., Ltd.

S-1 333-211555 10.10 5/24/2016

Lease, dated as of September 30, 2008, as amended by the First Amendment, dated as of July 12, 2011, the Second Amendment, dated as of October 11, 2011 and the Third Amendment, dated as of April 6, 2015, by and between the Registrant and ARE-480 Arsenal Street, LLC

S-1 333-211555 10.13 5/24/2016

Fourth Amendment to Lease, dated August 21, 2016, by and between ARE-480 Arsenal Street LLC and Selecta Biosciences, Inc.

8-K 001-37798 10.1 9/14/2016

Lease Agreement by and between BRE-BMR Grove LLC and Selecta Biosciences, Inc.

dated July 23, 2019

10-Q 001-37798 10.3 11/8/2019

Employment Agreement, dated as of September 25, 2018, by and between the Registrant and Carsten Brunn, Ph.D.

8-K 001-37798 10.2 9/27/2018

Employment Agreement, dated as of June 6, 2016, by and between the Registrant and Takashi Kei Kishimoto

S-1/A 333-211555 10.18 6/8/2016

Employment Agreement, dated as of June 6, 2016, by and between the Registrant and Lloyd P.

Johnston, Ph.D.

S-1/A 333-211555 10.21 6/8/2016

Employment Agreement, dated as of August 12, 2019, by and between the Registrant and Bradford D.

Employment Agreement, dated as of June 21, 2019, by and between the Registrant and Alison D.

Schecter, M.D

Employment Agreement, dated as of March 19, 2019, by and between the Registrant and Elona Kogan

Employment Agreement, dated October 26, 2017, by and between the Registrant and Stephen Smolinski

License and Option Agreement, dated as of December 2, 2016, by and between Spark Therapeutics, Inc.

and the Registrant

10-Q 001-37798 10.1 11/8/2019

Employment Agreement, dated as of July 31, 2020, by and between the Registrant and Peter G.

10-Q 001-37798 10.1 11/5/2020

Stock Purchase Agreement, dated as of December 2, 2016, by and between Spark Therapeutics, Inc.

and the Registrant

Letter Agreement, dated June 6, 2017, by and between the Registrant and Spark Therapeutics, Inc.

8-K/A 001-37798 10.2 12/14/2016

Feasibility Study and License Agreement by and between Asklepios BioPharmaceutical, Inc.

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dated August 6, 2019

10-Q 001-37798 10.2 11/8/2019

License and Development Agreement, dated as of June 11, 2020, by and between the Registrant and Swedish Orphan Biovitrum AB (Publ)

10-Q 001-37798 10.2 8/6/2020

Securities Purchase Agreement, dated June 26, 2017, by and between the Registrant and Timothy Springer, Ph.D.

8-K 001-37798 10.2 6/28/2017

Stock Purchase Agreement, dated August 19, 2019, by and among the Registrant and the Investors named therein

8-K 001-37798 10.1 8/20/2019

Securities Purchase Agreement, dated December 18, 2019, by and among the Registrant and the Investors named therein

Loan and Security Agreement, dated September 12, 2017, by and between the Registrant and Silicon Valley Bank

8-K 001-37798 10.1 12/26/2019

Stock Purchase Agreement, dated as of June 11, 2020, by and between the Registrant and Swedish Orphan Biovitrum AB (Publ)

10-Q 001-37798 10.3 8/6/2020

Loan and Security Agreement, dated August 31, 2020, between Selecta Biosciences, Inc., Oxford Finance LLC, as Collateral Agent and as a lender, and Silicon Valley Bank, as a lender.

8-K 001-37798 10.1.1 9/3/2020

Subsidiaries of Selecta Biosciences, Inc.

S-1 333-211555 21.1 5/24/2016

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

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Section 1350 Certification of Chief Financial Officer

Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.INS Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document ***

101.SCH Inline XBRL Taxonomy Extension Schema Document ***

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document ***

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document ***

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document ***

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document ***

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) ***

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature Title Date

/s/ Carsten Brunn, Ph.D.

President and Chief Executive Officer, and Director

March 12, 2020

President and Chief Executive Officer, and Director March 12, 2021

Carsten Brunn, Ph.D.

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/s/ Bradford D.

Chief Financial Officer

March 12, 2020

(Principal Financial and Accounting Officer)

Dahms Chief Financial Officer March 12, 2021

Dahms (Principal Financial and Accounting Officer)

/s/ Carrie S.

March 12, 2020

Cox Director March 12, 2021

Director March 12, 2021

/s/ Timothy C.

March 12, 2020

/s/ Amir Nashat, Ph.D

March 12, 2020

Amir Nashat, Ph.D

/s/ Aymeric Sallin

March 12, 2020

Barabe Director March 12, 2021

Myers Director March 12, 2021

/s/ Aymeric Sallin Director March 12, 2021

Aymeric Sallin

/s/ Timothy Springer, Ph.D.

March 12, 2020

Director March 12, 2021

Timothy Springer, Ph.D.

/s/ Patrick Zenner

March 12, 2020

/s/ Patrick Zenner Director March 12, 2021

Patrick Zenner

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Selecta Biosciences, Inc.

To the Stockholders and Board of Directors of Selecta Biosciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Selecta Biosciences, Inc.

and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ (deficit) equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has recurring losses from operations and insufficient cash resources and has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Adoption of ASU No.

As discussed in Note 12 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018 due to the adoption of ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) and the related amendments.

Adoption of ASU No.

As discussed in Note 8 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842) and the related amendments.

Basis for Opinion

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(Amounts in thousands, except share data and par value)

December 31, December 31,

Current assets:

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Long-term restricted cash 1,379 1,379

Liabilities and stockholders’ equity (deficit)

Other assets 370 —

Total assets $ 165,435 $ 99,569

Liabilities and stockholders’ (deficit) equity

Current liabilities:

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Accrued expenses 8,146 13,492

Loan payable — 18,905

Lease liability 908 372

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Non-current liabilities:

Loan payable, net of current portion 24,793 —

Lease liability 9,647 —

Deferred revenue 38,746 14,680

Warrant liabilities 28,708 41,549

Other long‑term liabilities

Total liabilities 183,441 91,172

Commitments and contingencies (Note 17)

Stockholders’ equity (deficit):

Stockholders’ (deficit) equity:

Preferred stock, $ 0.0001 par value;

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Accumulated other comprehensive loss ( 4,563 ) ( 4,523 )

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

Total stockholders’ (deficit) equity ( 18,006 ) 8,397

Total liabilities and stockholders’ (deficit) equity $ 165,435 $ 99,569

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

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Year Ended December 31,

2020 2019 2018

Grant and collaboration revenue $ 16,597 $ 6,677 $ 903

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Loss on extinguishment of debt ( 461 ) — —

Foreign currency transaction (loss), net

Foreign currency transaction gain (loss), net 56 ( 47 ) 120

Interest expense ( 1,556 ) ( 1,519 ) ( 1,494 )

Change in fair value of warrant liabilities ( 10,443 ) ( 857 ) —

Other (expense), net

Other income (expense), net 89 ( 1,306 ) 10

Net loss ( 68,876 ) ( 55,350 ) ( 65,336 )

Other comprehensive loss:

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and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

(Amounts in thousands, except share data)

Stockholders’

comprehensive

Additional other Stockholders’

Common stock paid-in Accumulated comprehensive (Deficit)

Shares Amount capital deficit loss Equity

Balance at December 31, 2017 22,343,254 $ 3 $ 273,128 $ ( 216,897 ) $ ( 4,420 ) $ 51,814

Adoption of new accounting principle — — — 1,830 — 1,830

Issuance of common stock under Employee Stock Purchase Plan 24,738 — 196 — — 196

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Stock-based compensation expense — — 5,714 — — 5,714

Issuance of common stock, license agreement

Issuance of common stock through private placement, net of issuance costs

Currency translation adjustment — — — — ( 153 ) ( 153 )

Unrealized gains on securities — — — — 16 16

Net loss — — — ( 65,336 ) — ( 65,336 )

Balance at December 31, 2018 22,471,776 $ 3 $ 279,539 $ ( 280,403 ) $ ( 4,557 ) $ ( 5,418 )

Adoption of new accounting principle

Issuance of common stock under Employee Stock Purchase Plan 17,205 — 28 — — 28

Issuance of common stock upon exercise of options 125,600 — 150 — — 150

Issuance of vested restricted stock units 93,750 — — — — —

Issuance of common stock, net 22,188,706 2 30,940 — — 30,942

Issuance of common stock through at-the-market offering, net 615,453 — 1,006 — — 1,006

Issuance of common stock through private placement 3,178,174 — 5,715 — — 5,715

Issuance of common stock, pre-funded warrants and warrants through private placement 37,634,883 4 26,125 — — 26,129

Stock-based compensation expense — — 5,161 — — 5,161

Currency translation adjustment — — — — 34 34

Unrealized gains on securities

Net loss — — — ( 55,350 ) — ( 55,350 )

Balance at December 31, 2019 86,325,547 $ 9 $ 348,664 $ ( 335,753 ) $ ( 4,523 ) $ 8,397

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Issuance of vested restricted stock units 93,750 — — — — —

Issuance of common stock, net of issuance costs

Issuance of common stock through at-the-market offering, net of issuance costs

Issuance of common stock through private placement, net of issuance costs

Issuance of common stock, pre-funded warrants and warrants through private placement, net of issuance costs

Issuance of common stock through at-the-market offering, net 1,069,486 — 2,108 — — 2,108

Issuance of common stock through private placement 5,416,390 — 10,268 — — 10,268

Issuance of common stock upon exercise of pre-funded warrants 8,342,128 1 — — — 1

Issuance of common stock upon exercise of common warrants 6,637,608 1 24,262 — — 24,263

Other financing fees — — ( 370 ) — — ( 370 )

Issuance of common warrants with long-term debt, net — — 444 — — 444

Stock-based compensation expense — — 5,422 — — 5,422

Currency translation adjustment — — — — ( 40 ) ( 40 )

Net loss — — — ( 68,876 ) — ( 68,876 )

Balance at December 31, 2020 108,071,249 $ 11 $ 391,175 $ ( 404,629 ) $ ( 4,563 ) $ ( 18,006 )

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Year Ended December 31,

2020 2019 2018

Cash flows from operating activities

Net loss $ ( 68,876 ) $ ( 55,350 ) $ ( 65,336 )

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of premiums (accretion of discounts) on investments

Amortization of right-of-use assets

Loss (gain) on disposal of property and equipment

Depreciation and amortization 734 726 975

Accretion of discounts on investments — ( 154 ) ( 101 )

Non-cash lease expense 1,127 1,301 —

(Gain) loss on disposal of property and equipment

( 52 ) 104 ( 81 )

Stock-based compensation expense 5,422 5,161 5,714

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Accrued expenses and other liabilities ( 2,761 ) ( 2,397 ) 2,467

Net cash used in operating activities

Net cash provided by (used in) operating activities 34,881 ( 51,435 ) ( 59,161 )

Cash flows from investing activities

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Proceeds from the sale of property and equipment 74 122 99

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities ( 741 ) 229 25,272

Cash flows from financing activities

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Net proceeds from issuance of common stock- private placement 10,268 5,715 —

Net proceeds from issuance of common stock, common warrants, and pre-funded warrants

Issuance costs paid for December 2019 financing ( 4,381 ) — —

Other financing fees ( 343 ) — —

Net proceeds from exercise of pre-funded and common warrants 979 70,000 —

Proceeds from exercise of stock options 193 150 501

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Noncash investing and financing activities

Cashless warrant exercise $ 21,790 $ — $ —

Reclassification of warrant liability to equity upon exercise of warrants $ 1,494 $ — $ —

Fair value of warrants issued in connection with issuance of long-term debt $ 444 $ — $ —

Purchase of property and equipment not yet paid $ 4 $ — $ 145

Issuance costs in connection with common stock, common warrants, and pre-funded warrants in accrued liabilities

Equity offering costs in accrued liabilities $ 27 $ 4,381 $ —

Unrealized gain on marketable securities $ — $ — $ 16

Debt issuance costs in accrued liabilities $ 2 $ — $ —

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

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(the “Company”) was incorporated in Delaware on December 10, 2007, and is based in Watertown, Massachusetts.

The Company is a clinical-stage biotechnology company focused on unlocking the full potential of biologic therapies based on its immune tolerance technology (ImmTOR™) platform.

The Company plans to combine ImmTOR with a range of biologic therapies for rare and serious diseases that require new treatment options due to high immunogenicity of existing therapies.

The Company is a clinical-stage biopharmaceutical company leveraging its ImmTOR™ immune tolerance platform with the goals of amplifying the efficacy of biologics, including enabling the re-dosing of life-saving gene therapies, and restoring self-tolerance in autoimmune diseases.

The Company's ImmTOR platform encapsulates rapamycin, also known as sirolimus, an immunomodulator, in biodegradable nanoparticles and is designed to induce antigen-specific immune tolerance.

The Company believes ImmTOR has the potential to enhance the efficacy without compromising the safety of biologic therapies, improve product candidates under development, and enable novel therapeutic modalities.

Since inception, the Company has devoted its efforts principally to research and development of its technology and product candidates, recruiting management and technical staff, acquiring operating assets, and raising capital.

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In addition, the Company is dependent upon the services of its employees and consultants.

The accompanying financial statements have been prepared on a basis that assumes the Company is a going concern, and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from any uncertainty related to its ability to continue as a going concern.

Liquidity and Management's Plan

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The successful development of product candidates requires substantial working capital which may not be available to the Company on favorable terms or at all.

To date, the Company has financed its operations primarily through the initial public offering of its common stock, a private placement of its common stock, issuances of common and preferred stock, debt, research grants and research collaborations.

To date, the Company has financed its operations primarily through the initial public offering of its common stock, private placements of its common stock, issuances of common and preferred stock, debt, research grants and research collaborations.

The Company currently has no source of product revenue, and it does not expect to generate product revenue for the foreseeable future.

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As of December 31, 2020, the Company’s cash, cash equivalents and restricted cash were $ 140.1 million, of which $ 1.4 million was restricted cash related to lease commitments and $ 0.3 million was held by its Russian subsidiary designated solely for use in its operations.

The Company believes the cash, cash equivalents, and restricted cash as of December 31, 2020 will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2023.

The Company has incurred losses and negative cash flows from operating activities since inception.

As of December 31, 2019 and December 31, 2018 , the Company had an accumulated deficit of $ 335.8 million and $ 280.4 million , respectively.

As of December 31, 2020, the Company had an accumulated deficit of $ 404.6 million.

The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research, development of its product candidates, conducting preclinical studies and clinical trials, and its administrative organization.

The Company will require substantial additional financing to fund its operations and to continue to execute its strategy, and the Company will pursue a range of options to secure additional capital.

These conditions raise

substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.

Management is actively exploring licenses and other strategic collaborations that have the potential to provide non-dilutive capital and accelerate the development of new or existing product candidates incorporating the Company’s ImmTOR platform.

Additionally, the Company may seek to fund its operations through issuances of equity and other securities.

If the Company enters into strategic collaborations and alliances, which may include existing collaboration partners, the Company may have to relinquish valuable rights to its technologies or product candidates, or grant licenses on terms that are not favorable to the Company.

To the extent that the Company raises additional capital through the sale of equity, the ownership interest of its existing shareholders will be diluted and other preferences may be necessary that adversely affect the rights of existing shareholders.

The Company requires additional external sources of capital to complete the planned Phase 3 clinical program for SEL-212.

If the Company is unable to raise sufficient capital through strategic collaborations and the sale of equity or other securities, it intends to curtail expenses contemplated by the current operating plan, and the Company may be required to delay, limit, reduce or terminate its product development efforts or grant rights to develop and market product candidates that it would otherwise prefer to develop and market itself.

Because of the uncertainty in securing additional capital and the insufficient amount of capital resources at December 31, 2019 , management has concluded that substantial doubt exists with respect to the Company's ability to continue as a going concern within one year after the date of the filing of this Annual Report on Form 10-K .

All amounts due under the 2017 Term Loan (see Note 9) have been classified as a current liability as of December 31, 2019 due to the considerations discussed above and the assessment that the material adverse change clause under the 2017 Term Loan is not within the Company's control.

The Company has not been notified of an event of default by the Lender as of the date of the filing of this Annual Report on Form 10-K .

At this time, there is significant uncertainty relating to the trajectory of the COVID-19 pandemic and the impact of related responses.

Any impact of COVID-19 on our business, revenues, results of operations and financial condition will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and

other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

Guarantees and Indemnifications

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Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Selecta RUS, LLC (“Selecta (RUS)”), a Russian limited liability corporation, and Selecta Biosciences Security Corporation, a Massachusetts Security Corporation.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Selecta (RUS), LLC, or Selecta (RUS), a Russian limited liability corporation, and Selecta Biosciences Security Corporation, a Massachusetts Security Corporation.

All significant intercompany accounts and transactions have been eliminated.

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Assets and liabilities of Selecta (RUS) are translated at period-end exchange rates, while revenues and expenses are translated at average exchange rates for the period.

Translation gains and losses are reflected in accumulated other comprehensive loss within stockholders’ equity (deficit).

Translation gains and losses are reflected in accumulated other comprehensive loss within stockholders’ (deficit) equity.

Foreign currency transaction gains or losses are reflected in the consolidated statements of operations and comprehensive loss.

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In preparing these consolidated financial statements, management used significant estimates in the following areas, among others:

revenue recognition, accounting for stock-based compensation, the valuation of its warrant liabilities and estimating accrued research and development expenses.

revenue recognition, the valuation of its warrant liabilities and estimating accrued research and development expenses.

The Company assesses the above estimates on an ongoing basis;

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The Company views its operations and manages its business in one operating segment, the research and development of nanoparticle immunomodulatory drugs for the treatment and prevention of human diseases.

Cash Equivalents, Short-term Investments and Restricted Cash

Cash Equivalents, Investments and Restricted Cash

Cash equivalents include all highly liquid investments maturing within 90 days from the date of purchase.

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The cost of securities sold is determined based on the specific identification method for purposes of recording realized gains and losses.

During the year ended December 31, 2019 , there were de minimis realized losses on sales of investments, and no investments were adjusted for other than temporary declines in fair value.

As of December 31, 2019 , the Company had restricted cash balances relating to secured letters of credit in connection with its current Headquarters Lease and New Headquarters Lease (as defined in Note 8).

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the consolidated statement of cash flows:

During the year ended December 31, 2020, there were no realized losses on sales of investments, and no investments were adjusted for other than temporary declines in fair value.

As of December 31, 2020, the Company had restricted cash balances relating to a secured letter of credit in connection with its Headquarters Lease (as defined in Note 8).

The following table provides a reconciliation of cash, cash equivalents, and

restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the consolidated statement of cash flows:

Year Ended December 31,

2020 2019 2018

Cash and cash equivalents $ 138,685 $ 89,893 $ 37,403

Restricted cash

Short-term restricted cash — 279 —

Long-term restricted cash 1,379 1,379 279

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The carrying amounts of cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their estimated fair value due to their short-term maturities.

At December 31, 2019 , the carrying amount of the Company's loan payable approximates its estimated fair value due to the short-term nature of the instrument.

At December 31, 2020, given the recent issuance of the Term A Loan under the 2020 Term Loan (each, as defined below), the Company believes the carrying value approximates the fair value of the loan.

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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Issuance costs paid to third parties that are the direct result of the debt issuance are capitalized as a direct deduction from the face amount of the related debt.

Debt issuance costs are amortized over the term of the related debt using the interest method and recorded as interest expense.

Costs and fees paid to third parties are expensed as incurred.

Debt issuance costs are amortized over the term of the related debt using the effective interest method and recorded as interest expense.

Accumulated Other Comprehensive Income (Loss)

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(i) all components of net loss and (ii) all components of comprehensive loss other than net loss, referred to as other comprehensive loss.

Other comprehensive loss is comprised of foreign currency translation adjustments and the unrealized gains and losses recognized through net income.

The components of accumulated other comprehensive income (loss), net of tax, were as follows (in thousands):

Foreign currency translation adjustment

Unrealized gains (losses) on marketable securities

Accumulated other comprehensive income (loss)

Balance at December 31, 2016

Other comprehensive income during the year

Balance at December 31, 2017

Other comprehensive income (loss) during the year

Balance at December 31, 2018

Other comprehensive income during the year

Balance at December 31, 2019

Other comprehensive loss is comprised of foreign currency translation adjustments.

Revenue Recognition

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The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

For example, certain performance obligations associated with Spark and AskBio (see Note 12) will be satisfied over time, and revenue will be recognized using the output method, based on the proportion of actual deliveries to the total expected deliveries over the initial term.

For example, certain performance obligations associated with Swedish Orphan Biovitrum (“Sobi”), Asklepios Biopharmaceutical, Inc.

(“AskBio”), Sarepta Therapeutics, Inc.

(“Sarepta”), and Spark Therapeutics, Inc.

(“Spark”) (see Note 12) will be satisfied over time, and revenue will be recognized using the output method, based on the proportion of actual deliveries to the total expected deliveries over the initial term.

Collaboration and Grant Revenue:

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To the extent the collaboration agreement is within the scope of ASC 808, the Company also assesses whether any aspects of the agreement are within the scope of other accounting literature (specifically ASC 606).

The Company early adopted ASU No.

The Company early adopted

2018-18, Collaborative Arrangements (Topic 808):

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(ii) milestone payments related to the achievement of development, regulatory, or commercial goals;

(iii) royalties on net sales of licensed

(iii) royalties on net sales of licensed products;

(iv) reimbursements or cost-sharing of research and development (R&D) expenses;

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Costs incurred in the research and development of the Company’s products are expensed as incurred.

Research and development expenses include costs incurred in performing research and development activities, including salaries and benefits, facilities cost, overhead costs, contract services, supplies and other outside costs.

Research and development expenses include costs incurred in performing research and development activities, including salaries and benefits, stock-based compensation expenses, facilities cost, overhead costs, contract services, supplies and other outside costs.

Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

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Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as a prepaid asset or accrued clinical trial cost.

These third party agreements are generally cancelable, and related costs are recorded as research and development expenses as incurred.

These third party agreements are generally cancellable, and related costs are recorded as research and development expenses as incurred.

Non-refundable advance clinical payments for goods or services that will be used or rendered for future R&D activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed.

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When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs.

Significant judgments and estimates may be made in determining the accrued balances at the end of any

reporting period.

Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period.

Actual results could differ from the estimates made by the Company.

The historical clinical accrual estimates made by the Company have not been materially different from the actual costs.

On June 11, 2020, we and Sobi entered into a license and development agreement (the “Sobi License”).

Pursuant to the Sobi License, clinical trial costs incurred to complete development of SEL-212, including but not limited to costs incurred while conducting and completing the Phase 3 DISSOLVE trials, will be reimbursed by Sobi.

These costs, when reimbursed, will be recognized as revenue consistent with the revenue recognition methodology disclosed in Footnote 12.

The reimbursable costs exclude any costs of additional development activities required that are related to ImmTOR and that are unrelated to SEL-212.

The Company provides deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse.

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Stock-based compensation is measured at the grant date fair value and is recognized over the requisite service period of the awards, usually the vesting period, on a straight-line basis, net of estimated forfeitures.

The Company reduces recorded stock‑based compensation for estimated forfeitures.

To the extent that actual forfeitures differ from the Company’s estimates, the differences are recorded as a cumulative adjustment in the period the estimates were adjusted.

Stock‑based compensation expense recognized in the consolidated financial statements is based on awards that are ultimately expected to vest.

To the extent that actual forfeitures differ from the Company’s estimates, the differences are recorded as a cumulative adjustment in the period the estimates were

Stock-based compensation expense recognized in the consolidated financial statements is based on awards that ultimately vest.

Net Loss Per Share

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With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter.

As of December 31, 2019 and December 31, 2018 , the Company was not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

Under ASC Topic 842, Leases (ASC 842) , which was adopted January 1, 2019, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.

The Company accounts for its leases in accordance with ASC Topic 842, Leases (ASC 842) , and determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.

Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities.

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common area maintenance, consumables, etc.), and non-components (e.g.

property taxes, insurance, etc.) Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components.

property taxes, insurance, etc.).

Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components.

Although separation of lease and non-lease components is required, the Company elected the practical expedient to not separate lease and non-lease components.

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See Note 8 for details.

Under prior guidance, rent expense and lease incentives from operating leases were recognized on a straight‑line basis over the lease term.

The difference between rent expense recognized and rental payments was recorded as deferred rent in the accompanying consolidated balance sheets.

Recent Accounting Pronouncements

Recently Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

(“ASU”) 2016-02, Leases (Topic 842).

ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability.

Leases are classified as either operating or finance based on criteria similar to current lease accounting, with the classification affecting the pattern and classification of expense recognition in the statement of operations.

Subsequently, in July 2018, the FASB issued ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements (ASU 2018-11) , which includes certain amendments to ASU 2016-02 intended to provide relief in implementing the new standard.

Among these amendments is the option to not restate comparative periods presented in the financial statements.

The Company has elected this transition approach, using a cumulative-effect adjustment on the effective date of the standard, with comparative periods presented in accordance with the existing guidance in ASC 840.

The Company adopted the new standard as of the required effective date of January 1, 2019 resulting in the recognition of a net additional lease liability and right-of-use asset.

The standard did not impact the Company's consolidated net loss.

See Note 8 for details.

In November 2018, the FASB issued ASU No.

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18), which provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for with revenue under Topic 606.

The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years with early adoption permitted.

The Company early adopted the new standard effective September 30, 2019, and there was no impact on its consolidated financial statements.

See Note 14 for details.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13) which changes the fair value measurement disclosure requirements of ASC 820.

Entities will no longer be required to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy of timing of transfers between levels of the fair value hierarchy and the valuation processes for Level 3 fair value measurements.

The Company adopted the new standard effective January 1, 2020, and there was no impact on its consolidated financial statements.

Not Yet Adopted

In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations.

This ASU is effective for public entities for fiscal years beginning after December 15, 2020.

The Company is assessing the impact this standard will have on its consolidated financial statements and disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) .

ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

This ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than January 1, 2021.

The Company is assessing the impact this standard will have on its consolidated financial statements and disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in

This ASU is effective for public entities for fiscal years beginning after December 15, 2020.

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The Company is assessing the impact this standard will have on its consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13) which changes the fair value measurement disclosure requirements of ASC 820.

This ASU is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted.

The Company is assessing the impact this standard will have on its consolidated financial statements and disclosures.

Marketable Securities

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For this reason basic and diluted net loss per share are the same for all periods presented.

Since the shares underlying the 8,342,128 pre-funded warrants are issuable for little or no consideration, they are considered outstanding for both basic and diluted earnings per share.

Since the shares underlying the 8,342,128 pre-funded warrants were issuable for little or no consideration, they were considered outstanding for both basic and diluted earnings per share.

During the second quarter 2020, all 8,342,128 pre-funded warrants were exercised, but had no effect on basic and diluted shares at exercise because all were included in both basic and diluted from the period of issuance.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per-share data):

Year Ended December 31,

2020 2019 2018

Net loss attributable to common stockholders $ ( 68,876 ) $ ( 55,350 ) $ ( 65,336 )

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Year Ended December 31,

2020 2019 2018

Stock options to purchase common stock 7,775,249 6,796,669 4,093,979

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Stock warrants to purchase common stock 12,378,016 23,084,120 95,619

Total 20,240,765 30,062,039 4,364,598

Fair Value Measurements

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December 31, 2020

Total (Level 1) (Level 2) (Level 3)

Money market funds $ 80,576 $ 80,576 $ — $ —

Total $ 80,576 $ 80,576 $ — $ —

Warrant liabilities $ 28,708 $ — $ — $ 28,708

Total $ 28,708 $ — $ — $ 28,708

December 31, 2019

Total (Level 1) (Level 2) (Level 3)

Money market funds $ 50,401 $ 50,401 $ — $ —

At each of December 31, 2019 and December 31, 2018 , the money market funds were classified as cash and cash equivalent on the accompanying consolidated balance sheet as they mature within 90 days from the date of purchase.

Total $ 50,401 $ 50,401 $ — $ —

Warrant liabilities $ 41,549 $ — $ — $ 41,549

Total $ 41,549 $ — $ — $ 41,549

As of December 31, 2020 and December 31, 2019, the money market funds were classified as cash and cash equivalents on the accompanying consolidated balance sheets as they mature within 90 days from the date of purchase.

Assumptions Used in Determining Fair Value of Common Warrants

In December 2019, we issued common warrants in connection with our private placement of common shares.

Pursuant to the terms of the common warrants, we could be required to settle the common warrants in cash in the event of certain acquisitions of the Company and, as a result, the common warrants are required to be measured at fair value and reported as a liability on the balance sheet.

We recorded the fair value of the common warrants upon issuance using the Black-Scholes valuation model and are required to revalue the common warrants at each reporting date with any changes in fair value recorded on our statement of operations.

In December 2019, the Company issued common warrants in connection with a private placement of common shares.

Pursuant to the terms of the common warrants, the Company could be required to settle the common warrants in cash in the event of certain acquisitions of the Company and, as a result, the common warrants are required to be measured at fair value and reported as a liability on the balance sheet.

The Company recorded the fair value of the common warrants upon issuance using the Black-Scholes valuation model and is required to revalue the common warrants at each reporting date with any changes in fair value recorded in the statement of operations.

The valuation of the common warrants is considered under Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable.

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The Company estimates stock price volatility based on the Company’s historical volatility and the historical volatility of peer companies for a period of time commensurate with the expected remaining life of the warrants.

A summary of the Black Scholes pricing model assumptions used to record the fair value of the warrants is as follows:

Issued on December 23,

Year Ended December 31,

A summary of the Black-Scholes pricing model assumptions used to record the fair value of the warrant liability is as follows:

Risk-free interest rate 0.36 %

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Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis

The following table reflects the change in the Company’s Level 3 warrant liabilities, (see Note 10), for the year ended December 31, 2019 (in thousands):

The following table reflects a roll-forward of fair value for the Company’s Level 3 warrant liabilities (see Note 10), for the year ended December 31, 2020 (in thousands):

Warrant liabilities

Fair value as of December 31, 2019 $ 41,549

Warrants issued in connection with December 2019 private placement

Exercises ( 23,284 )

Change in fair value 10,443

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Property and equipment consists of the following (in thousands):

December 31, December 31,

Laboratory equipment $ 4,427 $ 4,836

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Depreciation expense was $ 0.6 million, $ 0.7 million and $ 1.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company recorded accelerated depreciation costs of $ 0.04 million in the reported property and equipment for the year ended December 31, 2019 relating to the upcoming new corporate headquarters move in 2020.

During the fourth quarter of 2020, capitalized website development costs of $ 0.1 million were recorded within construction in process.

The Company recorded accelerated depreciation costs of less than $ 0.1 million in the reported property and equipment for the year ended December 31, 2020 relating to the new corporate headquarters move in 2020.

Accrued Expenses

Accrued expenses consist of the following (in thousands):

December 31, December 31,

Payroll and employee related expenses $ 3,049 $ 2,235

Current portion of deferred rent and lease incentive

Collaboration and licensing 1,350 1,050

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Accrued professional and consulting services 798 468

Accrued grant refund

Accrued interest 170 82

Issuance costs, December 2019 financing — 4,381

Other 216 410

Accrued expenses $ 8,146 $ 13,492

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The Company determines if an arrangement qualifies as a lease at its inception.

As a practical expedient permitted under ASC 842, the Company has elected to account for the lease and non-lease components as a single lease component for all leases of which it is the lessee.

Lease payments, which may include lease and non-lease components, are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable amounts that depend on a rate or index as stipulated in the lease contract.

As a practical expedient permitted under ASC 842, the Company elected to account for the lease and non-lease components as a single lease component for all leases of which it is the lessee.

Lease payments, which may include lease and non-lease components, were included in the measurement of the Company’s lease liabilities to the extent that such payments were either fixed amounts or variable amounts dependent upon on a rate or index as stipulated in the lease contract.

When the Company cannot readily determine the rate implicit in the lease, the Company determines its incremental borrowing rate by using the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.

On January 1, 2019, the discount rate used on existing operating leases at adoption, which had remaining lease terms of 15 months, was 10.0 %.

For new or renewed leases starting in 2020, the discount rate is determined based on the Company’s incremental borrowing rate adjusted for the lease term including any reasonably certain renewal periods.

The Company enters into lease agreements with terms generally ranging from 2 - 8 years.

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Leases with renewal options allow the Company to extend the lease term typically between 1 and 5 years.

When determining the lease term, renewal options

reasonably certain of being exercised are included in the lease term.

When determining the lease term, renewal options reasonably certain of being exercised are included in the lease term.

When determining if a renewal option is reasonably certain of being exercised, the Company considers several economic factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, underlying contractual obligations, or specific characteristics unique to that particular lease that would make it reasonably certain that the Company would exercise such option.

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the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

For lease agreements entered into or reassessed after the adoption of ASC 842, lease and non-lease components are combined.

The Company has a non‑cancellable operating lease for its laboratory and office space located at 480 Arsenal Way, Watertown, Massachusetts ("Headquarters Lease").

As part of the Headquarters Lease agreement, the landlord provided the Company a tenant improvement allowance of up to $ 0.7 million , which the Company fully utilized during 2012.

The leasehold improvements are capitalized as a component of property and equipment.

In connection with the Headquarters Lease, the Company secured a letter of credit for $ 0.3 million which renews automatically each year and is classified in restricted cash.

In August 2016, the Company signed an amendment to the Headquarters Lease, which extends the term through March 31, 2020.

In October 2017, the Company entered into a lease for approximately 5,100 square feet of additional office space located at 75 North Beacon Street, Watertown, Massachusetts (the “75 North Beacon Lease”).

On January 11, 2019, the Company vacated 75 North Beacon Street, Watertown, MA and consolidated all employees at its corporate headquarters at 480 Arsenal Way, Watertown, MA.

The right-of-use asset carrying amount of $ 0.2 million attributable to the 75 North Beacon Lease was written down to zero during the first quarter of 2019.

480 Arsenal Way Lease

The Company had a non-cancellable operating lease for its laboratory and office space located at 480 Arsenal Way, Watertown, Massachusetts, or the Prior Headquarters Lease.

Pursuant to the Prior Headquarters Lease, the landlord provided the Company a tenant improvement allowance of up to $ 0.7 million, which the Company fully utilized during 2012.

The leasehold improvements were capitalized as a component of property and equipment.

In connection with the Prior Headquarters Lease, the Company had a letter of credit for $ 0.3 million which renewed automatically each year and was classified in restricted cash.

In August 2016, the Company signed an amendment to the Prior Headquarters Lease, which extended the term through March 31, 2020.

In March 2020, the Company signed an amendment to extend the lease term one additional month to April 30, 2020.

The right-of-use asset and lease liability were remeasured and recorded based on the change in the lease term in which the net impact was immaterial.

75 North Beacon Street Lease

In October 2017, the Company entered into a lease for approximately 5,100 square feet of additional office space located at 75 North Beacon Street, Watertown, Massachusetts, or the 75 North Beacon Lease for a term through March 31, 2020.

On January 11, 2019, the Company vacated 75 North Beacon Street, Watertown, MA and consolidated all employees at its then- corporate headquarters at 480 Arsenal Way, Watertown, MA.

The right-of-use asset with carrying amount of $ 0.2 million attributable to the 75 North Beacon Lease was written down to zero during the first quarter of 2019.

65 Grove Street Lease

In July 2019, the Company entered into a lease for 25,078 square feet of laboratory and office space located at 65 Grove Street, Watertown, Massachusetts, or the Headquarters Lease.

As part of the Headquarters Lease, the Company incurred $ 0.8 million in non-reimbursable construction costs.

The lease began in March 2020, consistent with when the Company took control of the office space and the lease term is 8 years.

The discount rate of 8.9 % was determined based on the Company’s incremental borrowing rate adjusted for the lease term including any reasonably certain renewal periods.

Rent payments began in May 2020, and the base rent for the first year is $ 0.2 million per month.

In connection with the Headquarters Lease, the Company secured a letter of credit from Silicon Valley Bank for $ 1.4 million which renews automatically each year.

The Company recorded the right-of-use asset and operating lease liabilities of $ 11.8 million during the three months ended March 31, 2020 as control of the premises was transferred to the Company.

Moscow, Russia Lease

The Company has a month-to-month facility agreement for its Moscow, Russia office.

Rent expense is recognized as incurred.

As of December 31, 2018 and prior to the adoption of ASC 842, the aggregate future minimum lease payments related to leases are as follows (in thousands):

Year ending December 31,

Total minimum lease payments

In July 2019, the Company entered into a lease for 25,078 square feet of laboratory and office space located at 65 Grove Street, Watertown, Massachusetts (the “New Headquarters Lease”).

The Company estimates that it will incur $ 0.8 million in non-reimbursable lessee-paid construction costs for lessor assets.

None of these costs were incurred as of December 31, 2019.

The lease begins in March 2020, consistent with when the Company takes control of the office space and the expected lease term is 8 years, therefore the right-of-use asset and lease liability is not recorded on the balance sheet as of December 31, 2019 .

Rent payments are expected to occur in May 2020, and the base rent for the first year is $ 0.2 million per month.

The total minimum rental commitments for the New Headquarters Lease are $ 15.8 million .

In connection with the New Headquarters Lease, the Company secured a letter of credit from Silicon Valley Bank for $ 1.4 million which renews automatically each year.

The Company's total minimum rental commitments for the New Headquarters Lease as of December 31, 2019 are as follows (in thousands):

Total New Headquarters Lease commitment

The right-of-use asset and lease liability has not been recorded as of December 31, 2019 as lease commencement will occur in 2020.

Rent expense for the years ended December 31, 2020, 2019 and 2018 was $ 2.7 million, $ 2.1 million and $ 2.0 million, respectively.

For the year ended December 31, 2019 , the components of lease costs were as follows (in thousands):

Operating lease expense

Variable lease expense

Short-term lease expense

Total lease expense

As of December 31, 2020 and 2019, the components of the operating leases were as follows (in thousands):

Right-of-use asset, net $ 10,948 $ 301

Current operating lease liabilities $ 908 $ 372

Non-current operating lease liabilities 9,647 —

Total operating lease liabilities $ 10,555 $ 372

For the years ended December 31, 2020 and 2019 the components of lease costs were as follows (in thousands):

Year Ended December 31,

Operating lease cost $ 2,096 $ 1,365

Variable lease cost 624 828

Short-term lease cost 10 16

Total lease cost $ 2,730 $ 2,209

The maturity of the Company's operating lease liabilities as of December 31, 2020 were as follows (in thousands):

Operating leases:

Thereafter 4,945

Total future minimum lease payments $ 14,564

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Total operating lease liabilities $ 10,555

Included in the condensed consolidated balance sheet:

Current operating lease liabilities

Non-current operating lease liabilities

Total operating lease liabilities

The following information represents supplemental disclosure for the statement of cash flows related to operating leases (in thousands):

Operating leases:

The supplemental disclosure for the statement of cash flows related to operating leases were as follows (in thousands):

Year Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

The changes in the Company’s right-of-use asset and lease liability for the year ended December 31, 2019 are reflected in the changes in prepaid expenses, deposits and other assets and accrued expenses and other liabilities, respectively, in the consolidated statements of cash flows.

$ 2,523 $ 1,482

Other than the initial recording of the right-of-use asset and lease liability for the Headquarters Lease, which is non-cash, the changes in the Company’s right-of-use asset and lease liability for the years ended December 31, 2020 and 2019 are reflected in the non-cash lease expense and accrued expenses and other liabilities, respectively, in the consolidated statements of cash flows.

The following summarizes additional information related to operating leases:

Operating leases:

Weighted-average remaining lease term

Weighted-average remaining lease term 7.4 years 0.3 years

Weighted-average discount rate 8.9 % 10 %

2020 Term Loan

On September 12, 2017, the Company entered into a term loan facility of up to $ 21.0 million (the “ 2017 Term Loan ”) with Silicon Valley Bank, a California corporation (“SVB”).

The 2017 Term Loan is governed by a loan and security agreement, dated September 12, 2017, between the Company and SVB (the “Loan Agreement”).

The 2017 Term Loan was funded in full on September 13, 2017 (the “Funding Date”).

On the Funding Date, the Company entered into a payoff letter with SVB, pursuant to which SVB utilized $ 10.0 million of the 2017 Term Loan to pay off all outstanding obligations under the 2015 Term Loan.

The Company recognized a loss on extinguishment of debt in the amount of $ 0.7 million during the three months ended September 30, 2017.

The Company incurred less than $ 0.1 million in debt issuance costs in connection with the closing of the 2017 Term Loan.

Debt issuance costs are presented in the consolidated balance sheet as a direct deduction from the associated liability and amortized to interest expense over the term of the related debt.

The 2017 Term Loan will mature on February 1, 2022.

Each advance under the 2017 Term Loan accrues interest at a floating per annum rate equal to one-half of one percent above the prime rate (as published in the money rates section of The Wall Street Journal).

The 2017 Term Loan provided for interest-only payments monthly until August 31, 2019.

On September 1, 2019, the Company began making amortization payments on the Term Loan, which will continue to be payable monthly in equal installments of principal and variable interest to fully amortize the outstanding principal over the remaining term of the loan.

The monthly interest is subject to recalculation upon a change in the prime rate.

The Company may prepay the 2017 Term Loan in full but not in part provided that the Company (i) provides five business days’ prior written notice to SVB, (ii) pays on the date of such prepayment for all outstanding principal plus accrued and unpaid interest, 1 % if prepaid after the second anniversary.

On August 31, 2020, the Company entered into a term loan of up to $ 35.0 million (the “2020 Term Loan”), consisting of term loans in an aggregate amount of $ 25.0 million (the “Term A Loan”) and term loans in an aggregate amount of $ 10.0 million (the “Term B Loan”), governed by a loan and security agreement between the Company and Oxford Finance LLC, a Delaware limited liability company (“Oxford”) as Collateral Agent and a Lender, and Silicon Valley Bank, a California corporation (“SVB”), as a Lender (the “Loan Agreement”).

The Term A Loan was funded in full on August 31, 2020 (the “Funding Date”).

The Term B Loan will be available, subject to Collateral Agent’s discretion and customary terms and conditions, during the period commencing on the date the Company has delivered to the Collateral Agent and the Lenders evidence:

(i) the Company or one of the Company’s collaboration partners has enrolled its first randomized patient for a Phase 1 clinical trial evaluating the treatment of methylmalonic acidemia (“MMA”), and (ii) the Company has enrolled the first patient in each of two Phase 3 pivotal trials evaluating SEL-212 (the “Second Draw Period Milestone”) and ending on the earliest of (i) the date which is thirty (30) days following the date the Second Draw Period Milestone is achieved, (ii) September 30, 2021 (iii) and the occurrence of an event of default, other than an event of default that has been waived in writing by Collateral Agent and the Lenders in their sole discretion (such period, the “Second Draw Period”).

The 2020 Term Loan will mature on August 1, 2025.

Each advance under the Term Loan accrues interest at a floating per annum rate equal to the greater of (a) 7.90 %, and (b) the lesser of (x) the sum of (i) the prime rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, and (ii) 4.65 % and (y) 10.00 %.

The Term Loan provides for interest-only payments on a monthly basis until April 1, 2022;

provided however, if the Company has delivered to the Collateral Agent and the Lenders prior to September 30, 2021 evidence that Borrower has achieved the Second Draw Period Milestone, the Term Loan provides for interest-only payments on a monthly basis until October 1, 2022.

Thereafter, amortization payments will be payable monthly in equal installments of principal and interest to fully amortize the outstanding principal over the remaining term of the loan, subject to recalculation upon a change in the prime rate.

The Company may prepay the Term Loan in full but not in part provided that the Company (i) provides ten days’ prior written notice to Collateral Agent, (ii) pays on the date of such prepayment (A) all outstanding principal plus accrued and unpaid interest, and (B) a prepayment fee of between 3.0 % and 1.0 % of the aggregate original principal amount advanced by the lender depending on the timing of the prepayment.

Amounts outstanding during an event of default are payable upon SVB’s demand and shall accrue interest at an additional rate of 5.0 % per annum of the past due amount outstanding.

The events of default under the Loan Agreement include, but are not limited to, the Company’s failure to make any payments of principal or interest under the Loan Agreement or other transaction documents, the Company’s breach or default in the performance of any covenant under the Loan Agreement or other transaction documents, the occurrence of a material adverse effect, the Company making a false or misleading representation or warranty in any material respect under the Loan Agreement, the Company’s insolvency or bankruptcy, any attachment or judgment on the Company’s assets in excess of approximately $ 0.3 million , or the occurrence of any default under any agreement or obligation of the Company involving indebtedness in excess of approximately $ 0.3 million .

If an event of default occurs, SVB is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.

The 2017 Term Loan is secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property.

The Company has also granted SVB a negative pledge with respect to its intellectual property.

The 2017 Term Loan does not include any financial covenants.

The 2017 Term Loan requires a final payment fee of 5 % on the aggregate principal amounts borrowed upon repayment at maturity, on a prepayment date, or upon default.

At the end of the loan term (whether at maturity, by prepayment in full or otherwise), the Company shall make a final payment to the lender in the amount of 9.0 % of the aggregate original principal amount advanced by the lender.

The final payment fee totaling $ 2.3 million is recorded as a loan discount.

Under the 2017 Term Loan , the Company is not required to maintain a minimum cash balance.

All deposits in operating, depository and securities accounts are required to be maintained with SVB in an amount equal to the lessor of (i) 100 % of the Company's cash balance or (ii) 105 % of the dollar amount of the then outstanding obligations.

In addition, the 2017 Term Loan contains a subjective acceleration clause whereby in an event of default, an immediate acceleration of repayment occurs if there is a material impairment of the lenders’ lien or the value of the collateral, a material adverse change in the business condition or operations, or a material uncertainty exists that any portion of the loan may not be repaid.

The Company assessed all terms and features of the 2017 Term Loan in order to identify any potential embedded features that would require bifurcation.

As part of this analysis, the Company assessed the economic characteristics and risks of the 2017 Term Loan , including any put and call features.

The Company determined that all features of the 2017 Term Loan were clearly and closely associated with the debt host and did not require bifurcation as a derivative liability, or the fair value of the embedded feature was immaterial to the Company's consolidated financial statements.

The Company reassesses the identified features on a quarterly basis to determine if they require bifurcation.

As of December 31, 2019 and December 31, 2018 , the outstanding principal balance under the 2017 Term Loan was $ 18.2 million and $ 21.0 million , respectively.

The Term Loan is secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property.

The Company has also granted the Collateral Agent a negative pledge with respect to its intellectual property.

The Loan Agreement contains customary covenants and representations, including but not limited to financial reporting obligations and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries.

The Loan Agreement also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rights for the benefit of the Collateral Agent.

The events of default under the Loan Agreement include, but are not limited to, the Company’s failure to make any payments of principal or interest under the Loan Agreement or other transaction documents, the Company’s breach or default in the performance of any covenant under the Loan Agreement or other transaction documents, the occurrence of a material adverse change, the Company making a false or misleading representation or warranty in any material respect under the Loan Agreement, the Company’s insolvency or bankruptcy, any attachment or judgment on the Company’s assets of at least $ 0.5 million, or the occurrence of any default under any agreement or obligation of the Company involving indebtedness in excess of $ 0.5 million.

If an event of default occurs, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.

The Company incurred $ 0.4 million in debt issuance costs in connection with the closing of the 2020 Term Loan.

Debt issuance costs are presented in the consolidated balance sheet as a direct deduction from the associated liability and amortized to interest expense over the term of the related debt.

The Company assessed all terms and features of the 2020 Term Loan to identify any potential embedded features that would require bifurcation.

As part of this analysis, the Company assessed the economic characteristics and risks of the 2020 Term Loan, including any put, call, and contingent features.

The Company determined that the interest rate collar and

prepayment call option did not require bifurcation;

whereas the contingent put option and default (contingent) interest rate feature met bifurcation criteria resulting in immaterial amounts.

On August 31, 2020, in connection with the 2020 Term A Loan, the Company issued warrants to the Lenders to purchase an aggregate of 196,850 shares of its common stock at an exercise price equal to $ 2.54 per share.

In accordance with ASC 815-40, these warrants are classified as permanent equity in the accompanying consolidated balance sheets and will expire ten years from the date of issuance.

The initial grant date fair value of the warrants was $ 0.4 million as determined by the Black-Scholes valuation model and recorded to shareholders' equity, with the SVB portion allocated to the reacquisition price of the 2017 Term Loan and the Oxford fair value portion as a loan discount to the Term A Loan.

Additionally, on August 31, 2020, pursuant to the terms of a Warrant Side Letter agreement among the Company and the Lenders, the Company agreed to issue to the Lenders, on the date the Company draws the Term B Loan and in accordance with each party’s respective pro rata share with respect to the Term B Loan, one or more warrants to purchase an aggregate number of shares of its common stock that is equal to $ 200,000 divided by the average closing price of the Company’s common stock on The Nasdaq Stock Market LLC for the ten consecutive trading days ending the day before such issuance, rounded down to the nearest whole number of shares, and having an exercise price equal to the Term B Warrant Price.

On the Funding Date, the Company entered into a payoff letter with SVB, pursuant to which the Company utilized $ 13.7 million of the 2020 Term Loan to pay off all outstanding obligations under the 2017 Term Loan (as defined below), consisting of the principal payment, final prepayment and accrued interest.

During the three months ended September 30, 2020, the Company recognized a loss on extinguishment of debt in the amount of $ 0.5 million determined as the difference between the reacquisition price and carrying value at August 31, 2020.

2017 Term Loan

On September 12, 2017, the Company entered into a term loan of up to $ 21.0 million (the “2017 Term Loan” and, together with the 2020 Term Loan, the “Term Loans”)) with Silicon Valley Bank.

The 2017 Term Loan was governed by a loan and security agreement, dated September 12, 2017, between the Company and SVB.

The 2017 Term Loan was funded in full on September 13, 2017.

The Company incurred less than $ 0.1 million in debt issuance costs in connection with the closing of the 2017 Term Loan.

Debt issuance costs were presented in the consolidated balance sheet as a direct deduction from the associated liability and amortized to interest expense over the term of the related debt.

Prior to the extinguishment of the 2017 Term Loan in August 2020 discussed in greater detail above, the 2017 Term Loan was secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien on substantially all assets included any rights to payments and proceeds from the sale, licensing or disposition of intellectual property.

The Company had also granted SVB a negative pledge with respect to its intellectual property.

Each advance under the 2017 Term Loan accrued interest at a floating per annum rate equal to one-half of one percent above the prime rate (as published in the money rates section of The Wall Street Journal).

The 2017 Term Loan provided for interest-only payments monthly through August 31, 2019.

The monthly interest was subject to recalculation upon a change in the prime rate.

As of December 31, 2020, the outstanding principal balance was $ 25.0 million under the 2020 Term Loan and as of December 31, 2019, the outstanding principal balance was $ 18.2 million under the 2017 Term Loan.

Future minimum principal and interest payments on the 2020 Term Loan as of December 31, 2020 are as follows (in thousands):

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Loan payable, net of current portion $ 24,793

All amounts due under the 2017 Term Loan have been classified as a current liability as of December 31, 2019 due to the considerations discussed in Note 1 and the assessment that the material adverse change clause under the 2017 Term Loan is not within the Company's control.

The Company has not been notified of an event of default by SVB as of the date of the filing of this Annual Report on Form 10-K .

During the years ended December 31, 2019 , 2018 and 2017, the Company recognized $ 1.5 million , $ 1.5 million and $ 1.2 million respectively of interest expense related to the 2017 Term Loan.

December 2019 Financing

On December 18, 2019, the Company entered into a private purchase agreement (the "2019 Purchase Agreement"), and closed the Offering on December 23, 2019.

Pursuant to the 2019 Purchase Agreement, the Company sold an aggregate of 37,634,883 shares of its common stock at a purchase price of $ 1.46 per share, warrants to purchase an aggregate of 22,988,501 shares of common stock at a purchase price of $ 0.125 per share underlying each common warrant, and pre-funded warrants to purchase an aggregate of 8,342,128 shares of common stock at a purchase price of $ 1.46 per share, all with five year terms.

The exercise price of the pre-funded warrants was $0.0001 per share and the exercise price for the common warrants is $ 1.46 per share.

In the event of a certain sale of the Company, the terms of the common warrants require us to make a payment to such common warrant holders based on a Black-Scholes valuation (using variables as specified in the warrants).

This provision does not apply to the pre-funded warrants.

Therefore, we are required to account for the common warrants as liabilities and record them at fair value, while the pre-funded warrants met the criteria to be classified as permanent equity.

We recorded the fair value of the common warrants of $ 40.7 million upon issuance using the Black-Scholes valuation model.

The common warrants were revalued as of December 31, 2019 at $ 41.5 million;

the change in fair value of $ 0.9 million was recorded in our statement of operations for the year ended December 31, 2019 .

Issuance costs were allocated between the equity component with an offset to additional paid-in capital and the liability component recorded as expense on a relative fair value basis.

Total net proceeds from the equity offering was $ 65.6 million, after deducting transaction costs and commissions of $ 4.4 million that were accrued at December 31, 2019 .

Pursuant to the Registration Rights Agreement, the Company agreed to prepare and file a registration statement with the Securities and Exchange Commission (the “SEC”) within 45 days after the closing of the Offering for purposes of registering the resale of the Shares, shares of Common Stock issuable upon exercise of the Warrants, and any shares of Common Stock issued as a dividend or other distribution with respect to the Shares or shares of Common Stock issuable upon exercise of the Warrants.

If the Company did not file such registration statement by the 45-day filing deadline, the Company would have been required to make pro-rata payments to each investor in an amount equal to 1% of the aggregate amount paid pursuant to the stock purchase agreement entered into by such investor for each 30-day period or pro-rata portion thereof following the filing deadline.

The Company filed a registration statement on Form S-3 on January 29, 2020, which became effective on February 6, 2020, so no such payments were required.

The Company agreed, among other things, to indemnify the Investors, their officers, directors, members, employees and agents, successors and assigns under the registration statement from certain liabilities and to pay all fees and expenses (excluding any legal fees of the selling holder(s), and any underwriting discounts and selling commissions) incident to the Company’s obligations under the Registration Rights Agreement.

August 2019 Financing

On August 19, 2019, the Company sold 3,178,174 shares of its common stock pursuant to a stock purchase agreement (the "2019 Private Placement") to individual investors, including certain executive officers and members of the board of directors of the Company for aggregate net proceeds of approximately $ 5.7 million, after deducting transaction costs, at a purchase price

equal to $ 1.81 per share, which was equal to the most recent consolidated closing bid price on the Nasdaq Global Market on August 19, 2019.

The shares in the 2019 Private Placement were issued as “restricted securities” (as defined in Rule 144 of the Securities Act) and carry no registration rights that require or permit the filing of any registration statement.

January 2019 Financing

On January 25, 2019 , the Company completed an underwritten public offering (the “2019 Follow-On”) of 20,000,000 shares of its common stock at a public offering price of $ 1.50 per share.

On January 29, 2019 , an additional 2,188,706 shares were sold at a public offering price of $ 1.50 per share pursuant to the underwriters’ exercise of an over allotment option.

The total net proceeds from the offering were $ 30.9 million , after deducting underwriting discounts, transaction costs and commissions.

During the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 1.6 million, $ 1.5 million and $ 1.5 million respectively of interest expense related to the 2020 and 2017 Term Loans.

Equity Financings

August 2020 Shelf Registration Statement

On August 6, 2020, the Company filed an updated universal shelf registration statement on Form S-3 (Reg.

333-241692) with the SEC to sell an aggregate amount of up to $ 200.0 million of certain of its securities.

The shelf registration statement was declared effective by the SEC on August 14, 2020.

“At-the-Market” Offerings

Concurrent with the filing of the shelf registration statement, the Company entered into a sales agreement (the “Sales Agreement”) with Jefferies LLC, as sales agent, pursuant to which the Company may, from time to time, issue and sell common stock with an aggregate value of up to $ 50 million in an "at-the-market" offering.

Sales of common stock, if any, pursuant to the Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through the Nasdaq Global Market or on any other existing trading market for the Company’s common stock.

In August 2017, the Company entered into a sales agreement (the “2017 Sales Agreement”), with Jefferies LLC, as sales agent, to sell shares of its common stock with an aggregate value of up to $ 50 million in an “at the market offering.” On August 6, 2020, concurrent with the filing of the updated shelf registration statement, the Company entered into a new sales agreement (the “2020 Sales Agreement”) with Jefferies LLC, as sales agent, pursuant to which the Company may, from time to time, issue and sell common stock with an aggregate value of up to $ 50 million in an “at the market offering.” The 2017 Sales Agreement terminated pursuant to its terms in August 2020.

Sales of common stock, if any, pursuant to the 2020 Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through the Nasdaq Stock Market or on any other existing trading market for the Company’s common stock.

The Company intends to use the proceeds from the offering for working capital and other general corporate purposes.

The Company may suspend or terminate the 2020 Sales Agreement at any time.

During the year ended December 31, 2019, the Company sold 615,453 shares of its common stock pursuant to the Sales Agreement at an average price of approximately $ 1.84 per share for aggregate net proceeds of $ 1.0 million , after deducting commissions and other transaction costs.

August 2017 Shelf Registration Statement

On August 10, 2017 , the Company filed a universal shelf registration statement on Form S-3 with the SEC to sell an aggregate amount of up to $ 200.0 million of certain of our securities.

The shelf registration statement was declared effective by the SEC on August 28, 2017 .

During the year ended December 31, 2019, the Company sold 615,453 shares of its common stock pursuant to the 2017 Sales Agreement at an average price of approximately $ 1.84 per share for aggregate net proceeds of $ 1.0 million, after deducting commissions and other transaction costs, pursuant to its shelf registration statement filed in August 2017.

During the year ended December 31, 2020, the Company sold 1,069,486 shares of its common stock pursuant to the 2017 Sales Agreement and the 2020 Sales Agreement, as applicable, at an average price of approximately $ 2.16 per share for aggregate net proceeds of $ 2.1 million, after deducting commissions and other transaction costs.

June 2020 Sobi Stock Purchase

On June 11, 2020, the Company entered into a stock purchase agreement with Swedish Orphan Biovitrum AB (Publ), pursuant to which the Company sold an aggregate of 5,416,390 shares of its common stock at a purchase price equal to $ 4.6156 per share, which represented 120 % of the 10-day volume-weighted average price of the Company’s common stock prior to signing, for aggregate gross proceeds of $ 25 million, the Sobi Private Placement.

The closing of the Sobi Private Placement occurred on July 31, 2020.

The shares of common stock acquired in the Sobi Private Placement are subject to a one-year lock-up from closing, during which time Sobi is prohibited from selling or otherwise disposing of such shares.

In accordance with ASC 815, this forward sale treatment qualified as equity classification as the shares are not within the scope of ASC 480.

The gross proceeds of $ 25 million were determined to include a premium to the fair value of the Company’s shares as of July 28, 2020 of approximately $ 14.5 million.

As a result, such amount was included in the transaction price for revenue recognition of the Sobi License.

See Note 12 for details.

Also on June 11, 2020, the Company entered into a registration rights agreement (as amended by that certain letter agreement, dated as of November 4, 2020, the “Sobi Registration Rights Agreement”) with Sobi, pursuant to which the Company agreed to prepare and file a registration statement with respect to the resale of the shares of common stock acquired in the Sobi Private Placement.

The Company will be required to file this resale registration statement within 30 days following receipt by the Company of a written request from Sobi to file such resale registration statement, and to have the registration statement declared effective within ten (10) Business Days after the SEC informs the Company that no review of such resale registration statement will be made or that the SEC has no further comments on such resale registration statement.

December 2019 Financing

On December 18, 2019, the Company entered into a securities purchase agreement (the “2019 Purchase Agreement”) with a group of institutional investors and certain members of the board of directors.

The closing of the 2019 PIPE occurred on December 23, 2019.

The exercise price of the pre-funded warrants is $ 0.0001 per share and the exercise price for the common warrants is $ 1.46 per share.

This provision does

not apply to the pre-funded warrants.

Therefore, the Company is required to account for the common warrants as liabilities and record them at fair value, while the pre-funded warrants met the criteria to be classified as permanent equity.

The Company recorded the fair value of the common warrants of $ 40.7 million upon issuance using the Black-Scholes valuation model.

Issuance costs were allocated between the equity component with an offset to additional paid-in capital and the liability component recorded as expense on a relative fair value basis.

Total net proceeds from the equity offering was $ 65.6 million, after deducting transaction costs and commissions of $ 4.4 million which was paid in the three months ended March 31, 2020.

The common warrants were revalued as of December 31, 2020 at $ 28.7 million.

During the years ended December 31, 2020 and 2019, the Company recorded losses on the increases in the fair value of the warrants of $( 10.4 ) million and $( 0.9 ) million, respectively, in the consolidated statements of operations.

On December 23, 2019, in connection with the 2019 PIPE, the Company entered into a registration rights agreement (the “2019 Registration Rights Agreement”), pursuant to which the Company agreed to prepare and file a registration statement with the SEC within 45 days after the closing of the 2019 PIPE for purposes of registering the resale of the shares of common stock issued and sold in the 2019 PIPE, shares of common stock issuable upon exercise of the warrants sold in the 2019 PIPE, and any shares of common stock issued as a dividend or other distribution with respect to the shares of common stock or shares of common stock issuable upon exercise of the warrants.

The 2019 PIPE registration statement was declared effective by the SEC on February 6, 2020.

The Company agreed, among other things, to indemnify the investors in the 2019 PIPE, and their officers, directors, members, employees and agents, successors and assigns, under the registration statement from certain liabilities and to pay all fees and expenses (excluding any legal fees of the selling holder(s), and any underwriting discounts and selling commissions) incident to the Company’s obligations under the 2019 Registration Rights Agreement.

June 2017 Financing

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Pursuant to the Springer Purchase Agreement, the Company sold to Dr.

Springer an aggregate of 338,791 shares of common stock at a purchase price equal to $ 17.71 per share, which was equal to the most recent consolidated closing bid price on the Nasdaq Global Market on June 23, 2017, and warrants to purchase up to 79,130 shares of common stock (“Warrant Shares”), exercisable at $ 17.71 per Warrant Share, and with a term of five years .

The purchase price for each warrant was equal to $ 0.125 for each Warrant Share, consistent with Nasdaq Global Market requirements for an “at the market” offering.

Springer an aggregate of 338,791 shares of common stock at a purchase price equal to $ 17.71 per share, which was equal to the most recent consolidated closing bid price on the Nasdaq Stock Market on June 23, 2017, and warrants to purchase up to 79,130 shares of common stock (“Warrant Shares”), exercisable at $ 17.71 per Warrant Share, and with a term of five years .

The purchase price for each warrant was equal to $ 0.125 for each Warrant Share, consistent with Nasdaq Stock Market requirements for an “at the market” offering.

Under the terms of the Common Stock Purchase Warrant, the warrants can be settled in unregistered shares.

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On June 27, 2017, in connection with the 2017 PIPE, the Company entered into a registration rights agreement (the “2017 Registration Rights Agreement”) with the Institutional Investors and Dr.

Pursuant to the Registration Rights Agreement, the Company agreed to prepare and file a registration statement with the SEC within 20 days after the closing of the 2017 PIPE for purposes of registering the resale of the shares of common stock issued and sold in the 2017 PIPE (the “Shares”), the Warrant Shares, and any shares of common stock issued as a dividend or other distribution with respect to the Shares or Warrant Shares.

Pursuant to the 2017 Registration Rights Agreement, the Company agreed to prepare and file a registration statement with the SEC within 20 days after the closing of the 2017 PIPE for purposes of registering the resale of the shares of common stock issued and sold in the 2017 PIPE, the Warrant Shares, and any shares of common stock issued as a dividend or other distribution with respect to the shares of common stock or Warrant Shares.

The 2017 PIPE registration statement was declared effective by the SEC on July 21, 2017.

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Springer, their officers, directors, members, employees and agents, successors and assigns under the registration statement from certain liabilities and to pay all fees and expenses (excluding any legal fees of the selling holder(s), and any underwriting discounts and selling commissions) incident to the Company’s obligations under the 2017 Registration Rights Agreement.

The following table summarizes warrant activity for the years ended December 31, 2019, 2018 and 2017 as follows:

During the year ended December 31, 2020, warrant holders exercised 10,233,154 common warrants on a cashless basis and received 5,967,808 shares of common stock.

In addition, warrant holders exercised 669,800 common warrants and 8,342,128 pre-funded warrants, and paid the exercise price in cash.

On August 31, 2020, in connection with the 2020 Term A Loan, 196,850 equity classified warrants were issued to the Lenders.

Number of Warrants

Equity classified

Liability classified

Weighted average

classified Liability classified Total Weighted average

exercise price

Outstanding at December 31, 2019 8,437,747 22,988,501 31,426,248 $ 1.12

Expirations/ cancellations

Outstanding at December 31, 2018

Expirations/ cancellations

Exercises ( 8,342,128 ) ( 10,902,954 ) ( 19,245,082 ) 0.83

Issuance 196,850 — 196,850 2.54

Outstanding at December 31, 2020 292,469 12,085,547 12,378,016 $ 1.60

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The Company has authorized shares of common stock for future issuance as follows:

Period ending

December 31, 2019

December 31, 2018

Exercise of common and pre-funded warrants

December 31, 2020 December 31, 2019

Exercise of common warrants 12,378,016 31,426,248

Shares available for future stock incentive awards 4,916,374 1,765,018

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Outstanding common stock options 7,775,249 6,796,669

Total 25,157,139 40,169,185

Stock Incentive Plans

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however, awards issued under the 2008 Plan remain subject to the terms of the 2008 Plan and the applicable 2008 Plan agreement.

Shares subject to awards that were granted under the 2008 Plan and that expire, lapse or terminate following the

effectiveness of the 2016 Plan become available under the 2016 Plan as shares available for future grants.

Shares subject to awards that were granted under the 2008 Plan and that expire, lapse or terminate following the effectiveness of the 2016 Plan become available under the 2016 Plan as shares available for future grants.

All unvested stock options granted under the 2008 Plan may be exercised into restricted stock subject to forfeiture upon termination prior to vesting.

On June 7, 2016, the Company’s stockholders approved the 2016 Incentive Award Plan (the “2016 Plan”), which became effective June 21, 2016.

The 2016 Plan provides for the granting of incentive and non‑qualified stock option, restricted stock and other stock and cash-based awards as determined by the Board.

Pursuant to the terms of the 2016 Plan, the Board is authorized to grant awards with respect to common stock, and may delegate to a committee of one or more members of the Board or executive officers of the Company the authority to grant options and restricted stock units.

On December 9, 2020, the Board established a Stock Option Committee authorized to grant awards to certain employees and consultants subject to conditions and limitations within the 2016 Plan.

Shares subject to awards that are granted under the 2016 Plan and that expire, lapse or terminate are available for future grants under the 2016 Plan.

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The fair value of each option award was estimated on the grant date using the Black-Scholes option pricing model.

Expected volatilities are based on historical volatilities from guideline companies because the Company's common stock has not traded for a period that is at least equal to the expected term of its stock option awards.

Expected volatilities are based on the Company’s historical volatility and the historical volatilities of peer companies because the Company's common stock has not traded for a period that is at least equal to the expected term of its stock option awards.

The Company uses the “simplified” method to estimate the expected life of options granted and are expected to be outstanding.

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The Company records stock-based compensation expense only on awards that are expected to vest.

Effective June 25, 2020, the Company entered into transition agreements with two executive officers, under which the right to exercise their vested options was extended for a period of two years following their respective separation dates.

The subsequent stock based compensation amount recognized in connection with the option modification in the second quarter was less than $ 0.1 million.

The estimated grant date fair values of employee stock option awards granted under the 2016 Plan and the 2018 Inducement Incentive Award Plan were calculated using the Black-Scholes option pricing model, based on the following weighted-average assumptions:

Year Ended December 31,

2020 2019 2018

Risk-free interest rate 1.11 % 1.86 % 2.85 %

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The weighted average grant date fair value of stock options granted to employees during the years ended December 31, 2020, 2019 and 2018 was $ 1.86 , $ 1.47 , and $ 6.17 respectively.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2019 , 2018 and 2017 was $ 0.1 million , $ 0.6 million , and $ 2.6 million respectively.

As of December 31, 2020 and December 31, 2019, total unrecognized compensation expense related to unvested employee stock options was $ 8.0 million and $ 9.8 million, respectively, which is expected to be recognized over a weighted average period of 2.3 years and 2.5 years, respectively.

Effective November 20, 2019, the Company amended the terms of the options granted to a non-employee director in connection with his resignation from the board of directors, whereby he was entitled to receive immediate vesting of his outstanding, unvested stock options ( 141,328 shares), provided that the options will become exercisable in accordance with their original vesting schedules irrespective of his termination of service, and an extension of the right to exercise each of his vested stock options ( 234,772 shares) until the final expiration date of the applicable option, resulting in a modification.

The subsequent stock-based compensation amount recognized as of December 31, 2019 was $0.1 million.

The estimated grant date fair values of non-employee stock option awards granted under the 2016 Plan were calculated using the Black-Scholes option pricing model, based on the following weighted-average assumptions:

Non-employee consultants

No stock option awards were granted to non-employee consultants during the year ended December 31, 2020.

The estimated grant date fair values of non-employee consultants stock option awards granted under the 2016 Plan were calculated using the Black-Scholes option pricing model, based on the following weighted-average assumptions:

Year Ended December 31,

2020 2019 2018

Risk-free interest rate — % 1.92 % 2.77 %

Dividend yield — — —

Expected life (in years)

Expected term 0.00 5.33 5.81

Expected volatility — % 88.60 % 85.86 %

The weighted average grant date fair value of stock options granted to non-employees during the years ended December 31, 2019 and 2018 was $ 1.32 and $ 6.78 , respectively.

As of December 31, 2019 and 2018 total unrecognized compensation expense related to unvested non‑employee stock options was less than $ 0.1 million and $ 1.1 million , respectively, which is expected to be recognized over a weighted average period of 0.4 years and 2.2 years, respectively.

The weighted average grant date fair value of stock options granted to non-employee consultants during the years ended December 31, 2019 and 2018 was $ 1.32 and $ 6.78 , respectively.

As of December 31, 2020, no unrecognized compensation expense related to unvested non-employee consultants stock options remained.

The following table summarizes the activity under the 2008 Plan, 2016 Plan, and 2018 Inducement Incentive Award Plan:

Weighted-average

contractual term

intrinsic value

exercise price ($)

(in thousands)

remaining Aggregate

Number of Weighted-average contractual term intrinsic value

options exercise price ($) (in years) (in thousands)

Employee awards

Outstanding at December 31, 2019 6,323,596 $ 4.91 8.71 $ 1,716

Granted 3,087,709 $ 2.49

Exercised ( 76,128 ) $ 2.57

Forfeited ( 2,033,001 ) $ 4.67

Outstanding at December 31, 2020 7,302,176 $ 3.98 8.43 $ 4,456

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Outstanding at December 31, 2019 473,073 $ 5.89 6.23 $ 38

Granted — $ —

Exercised — $ —

Forfeited — $ —

Outstanding at December 31, 2020 473,073 $ 5.89 5.23 $ 86

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Restricted Stock Units

During the first quarter of 2019, the Company awarded 100,000 restricted stock units under the Inducement Incentive Award Plan, of which 50,000 were determined to be granted and 50,000 were reserved for issuance consistent with ASC Topic 718, Compensation-Stock Compensation (ASC 718) .

The 50,000 granted restricted stock units had a fair value of $ 2.29 per share based on the closing price of the Company’s common stock on the date of grant.

These restricted stock units were valued at approximately $ 0.1 million , and will vest on the date an applicable performance condition is achieved on or prior to December

If the performance condition is not satisfied on or prior to December 31, 2020, the restricted stock units will be forfeited for no consideration.

The 50,000 reserved restricted stock units did not have defined performance criteria until August 6, 2019, at which time, they were deemed both granted and vested.

These restricted stock units had a fair value of $ 1.65 per share.

These restricted stock units were valued at approximately $ 0.1 million and fully expensed as of December 31, 2019 .

During the second quarter of 2020, the Company entered into a transition agreement with an executive officer under which previously awarded restricted stock units under the Inducement Incentive Award Plan remain eligible to vest in accordance with their terms, notwithstanding the requirement that the executive remain in continuous service with the Company through the applicable vesting date, if the administrator of the Inducement Incentive Award Plan determines the applicable performance conditions are achieved on or prior to December 31, 2020.

In accordance with ASC718, the restricted stock units granted were remeasured with a weighted average fair value of $ 2.92 per share based on the closing price of the Company’s common stock on the date the transition agreement was executed.

Since the performance condition is probable of achievement, the restricted stock units were re-valued, resulting in additional expense of less than $ 0.1 million.

Unrecognized compensation expense for the restricted stock units was $ 0.5 million as of December 31, 2020, which is expected to be recognized over a weighted average period of 1.9 years.

The following table summarizes the status of the Company’s restricted stock units:

Number of shares

Weighted average fair value ($)

Number of shares Weighted average

fair value ($)

Unvested at December 31, 2019 181,250 $ 5.00

Vested 93,750 4.07

Forfeited — —

Unvested at December 31, 2020 87,500 $ 6.03

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(i) 1 % of the number of shares of the Company’s common stock outstanding on the last day of the applicable preceding calendar year and (ii) such smaller number of shares as is determined by the Company’s Board of Directors.

During the year ended December 31, 2019 and 2018 , the number of shares of common stock that may be issued under the ESPP was increased by 224,717 shares and 223,432 shares, respectively.

During the years ended December 31, 2020 and 2019, the number of shares of common stock that may be issued under the ESPP was increased by 863,254 shares and 224,717 shares, respectively.

During the year ended December 31, 2020, the Company issued 110,212 shares of common stock under the ESPP.

As of December 31, 2020, 1,500,448 shares remain available for future issuance under the ESPP.

For each of the years ended December 31, 2019 and 2018 , the Company recognized less than $ 0.1 million of stock-based compensation expense under the ESPP.

For each of the years ended December 31, 2020 and 2019, the Company recognized $ 0.1 million of stock-based compensation expense under the ESPP.

The Company recorded stock-based compensation expense related to stock option awards, restricted stock units and the ESPP in the following expense categories of its consolidated statements of operations and comprehensive loss (in thousands):

Year Ended December 31,

2020 2019 2018

Research and development $ 2,271 $ 2,079 $ 2,453

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Revenue Arrangements

The Company adopted ASC 606 on January 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption.

The reported results for 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under the guidance of ASC 605, Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP" or the "previous guidance".

The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Company's services and will provide financial statement readers with enhanced disclosures.

Financial Statement Impact of Adopting ASC 606

The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018, was recorded as an adjustment to accumulated deficit as of the adoption date.

As a result of applying the modified retrospective method to adopt the new revenue guidance, the Company recorded an adjustment to long term deferred revenue and accumulated deficit totaling $ 1.8 million .

In connection with the adoption of ASC 606, the Company identified three collaboration/grant arrangements that required analysis to quantify the impact of adoption to its opening accumulated deficit balance as of January 1, 2018:

Spark Therapeutics, Inc., Skolkovo Foundation and National Institutes of Health.

Swedish Orphan Biovitrum

License and Development Agreement

On June 11, 2020, the Company and Sobi, entered into the Sobi License.

Pursuant to the Sobi License, the Company has agreed to grant Sobi an exclusive, worldwide (except as to Greater China) license to develop, manufacture and commercialize the Company’s SEL-212 drug candidate, which is currently in development for the treatment of chronic refractory gout.

The SEL-212 drug candidate is a pharmaceutical composition containing a combination of SEL-037 (the “Compound”) and ImmTOR.

Pursuant to the Sobi License, in consideration of the license, Sobi agreed to pay the Company a one-time, up-front payment of $ 75 million.

Sobi has also agreed to make milestone payments totaling up to $ 630 million to the Company upon the achievement of various development and regulatory milestones and, if commercialized, sales thresholds for annual net sales of SEL-212, and tiered royalty payments ranging from the low double digits on the lowest sales tier to the high teens on the highest sales tier.

Pursuant to the Sobi License, the Company has agreed to supply (at cost) quantities of the Compound and ImmTOR as necessary for completion of the two Phase 3 clinical trials of SEL-212 (DISSOLVE I and DISSOLVE II) and a 6-month placebo extension.

The Company is required to supply quantities of the Compound until all rights to the Compound and any materials needed to manufacture the Compound are transferred to Sobi.

Sobi has agreed to reimburse the Company for all budgeted costs incurred to complete development of SEL-212, including but not limited to costs incurred while conducting and completing the Phase 3 DISSOLVE trials, except for any costs of additional development activities required that are related to ImmTOR and that are unrelated to SEL-212.

Sobi will have control and responsibility over all regulatory filings, including any investigational drug applications (IND), biologics license applications (BLA), and marketing authorization applications (MAA) relating to the licensed product.

The transactions contemplated by the Sobi License were consummated on July 28, 2020 following the expiration or termination of the required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Sobi may terminate the Sobi License for any reason upon 180 days’ written notice to the Company, whereby all rights granted under the Sobi License would revert back to the Company.

In addition, if Sobi were to terminate the Sobi License, the Company has the option to obtain a license to all patents and know-how necessary to exploit SEL-212 in existence as of the termination date from Sobi in return for making an equitable royalty payment to Sobi.

Additionally, on June 11, 2020, the Company entered into the Sobi Purchase Agreement in connection with the Sobi License.

The closing of the Sobi Private Placement occurred on July 31, 2020, following the closing of the transactions contemplated under the Sobi License.

See Note 10 for details.

The Company determined that the Sobi License represents a service arrangement under the scope of ASC 606.

In addition, given the Sobi License and Sobi Purchase Agreement were executed contemporaneously and negotiated as a package with a single commercial objective, the Company will account for the two agreements as a single contract.

The term of the Sobi License commenced upon the effective date of July 28, 2020 and will continue on a product-by-product basis until the royalty terms for each country have expired.

The royalty term for a given product begins upon the first commercial sale of the product in a country and ends at the later of ten years from the first commercial sale, expiration of the last valid patent claim covering the product and expiration of all regulatory exclusivity periods for the product in a country.

Given the reversion of the rights under the Sobi License represents a penalty in substance for a termination by Sobi, the contract term would remain the stated term of the Sobi License.

The Company determined that the Sobi License contains three distinct performance obligations due to the nature of the promises in the contract, which includes conducting the Phase 3 DISSOLVE trials, Sobi’s option to set-up a second source supplier, and a combined obligation comprised of the delivery of the license to SEL-212, transfer of the know-how and the manufacturing and delivery of SEL-212 supply for development (the “Combined License Obligation”).

As the set-up of a second source supplier is optional for Sobi and the Company will be reimbursed at cost for its efforts in the subsequent set-up and technology transfer, the option for this future service was determined to be at a significant and incremental discount to its standalone selling price and treated as a material right in the arrangement, namely a distinct performance obligation.

In determining the transaction price, the Company concluded the upfront payment of $ 75 million and the $ 5 million development milestone associated with the dosing of the first patient in the Phase 3 DISSOLVE trials will be included in the transaction price.

All other development milestones will be fully constrained and only be included in the transaction price when the respective milestone is deemed probable of achievement.

Each of these variable consideration items was evaluated under the most likely amount method to determine whether such amounts were probable of occurrence, or whether such amounts should be constrained until they become probable.

As part of the evaluation of the constraint, the Company considered numerous factors, including that receipt of such milestones is outside the control of the Company and probability of success criteria is estimated.

The Company will re-evaluate the transaction price in each reporting period, as uncertain events are resolved.

In accordance with ASC 606, the Company will only recognize revenue associated with sales-based milestones and royalties when the subsequent sales thresholds are reached and underlying sales occur, respectively.

In connection with the Sobi Purchase Agreement, the Company determined that the gross proceeds of $ 25 million from the Sobi Private Placement included a premium to the fair value of the Company’s shares as of July 28, 2020 equal to approximately $ 14.5 million.

The premium amount will be included in the transaction price for revenue recognition.

The Company will estimate and include in the transaction price the total reimbursements to be received from Sobi for both the manufacturing and delivery of the Compound and ImmTOR as well as conducting the Phase 3 DISSOLVE trials.

The Company determined that a significant financing component does not exist in its arrangement with Sobi.

The Company allocated the transaction price based on the relative standalone selling prices of the three distinct performance obligations.

The Company estimated the standalone selling price of conducting the Phase 3 DISSOLVE trials by forecasting its anticipated costs and applying a margin reflective of the industry.

The Company must determine the standalone selling price of the second source supplier option by determining the discount given to Sobi multiplied by the likelihood that Sobi will exercise the option in the future.

Similar to the Phase 3 program estimate, the Company estimated the discount of the option by forecasting the set-up costs and applying a margin that is reflective of the industry.

As the Company will be providing the set-up and technology transfer services and the future supply at cost, the discount of the option is equal to the margin

The Company considered discussions with Sobi as well as probability of regulatory success of SEL-212 in determining the likelihood of exercise.

The Company estimated the standalone selling price of the Combined License Obligation by utilizing a discounted cash flow model.

The Company determined that the delivery of the supply to Sobi best represents the pattern of delivery of the Combined License Obligation as the supply is essential to the utility of the license and know-how.

The Company will recognize the revenue allocated to the Combined License Obligation by utilizing the output method.

The Company estimated the total supply of the Compound and ImmTOR to be required during the clinical trial period and will recognize revenue as this supply is shipped for use in the clinical trials.

The Company will recognize the revenue allocated to the conducting of the Phase 3 DISSOLVE trials obligation by utilizing the input method.

The Company estimated the total budgeted costs to be incurred over the Phase 3 DISSOLVE trials and will recognize revenue as these costs are incurred.

The Company’s costs best represent the pattern of transfer as these will capture all performance of the trials completed to date and can be readily measured.

The Company will recognize the revenue allocated to the second source supplier option when the future services and goods are transferred.

As of December 31, 2020, the Company recorded $ 68.3 million as a short-term contract liability and $ 24.2 million as a long-term contract liability representing deferred revenue associated with this agreement.

In addition, the Company has recorded $ 1.4 million of contract assets related to incremental costs that would not have been incurred if the Sobi License had not been obtained, of which $ 1.0 million is presented in prepaid expenses and other current assets and $ 0.4 million is in other assets in the accompanying Consolidated Balance Sheets.

Amortization of contract assets was $ 0.1 million for the year ended December 31, 2020.

As of December 31, 2020, the Company recorded a total outstanding receivable of $ 6.9 million, representing billings for the Phase 3 DISSOLVE program that are subject to reimbursement by Sobi.

Revenue of $ 16.6 million related to the Sobi License was recognized during the year ended December 31, 2020.

Sarepta Therapeutics, Inc.

Research License and Option Agreement

On June 13, 2020, the Company and Sarepta entered into a Research License and Option Agreement (the “Sarepta Agreement”).

Pursuant to the Sarepta Agreement, the Company agreed to grant Sarepta a license under the Company’s intellectual property rights covering the Company’s antigen-specific biodegradable nanoparticle encapsulating ImmTOR to research and evaluate ImmTOR in combination with Sarepta’s adeno-associated virus gene therapy technology, or gene editing technology, using viral or non-viral delivery, to treat Duchenne Muscular Dystrophy and certain Limb-Girdle Muscular Dystrophy subtypes (the “Indications”).

Sarepta will have an option term of 24 months during which it can opt-in to obtain an exclusive license to further develop and commercialize the Product to treat at least one Indication, with a potential to extend the option term for an additional fee.

The Company will supply ImmTOR to Sarepta for clinical supply on a cost-plus basis.

Sarepta paid a $ 2.0 million up-front payment to the Company upon signing of the Sarepta Agreement, and the Company is eligible to receive additional preclinical payments during the option term.

If Sarepta opts-in to an exclusive license agreement, the Company could receive option exercise payments per Indication upon execution of the exclusive license, and the Company would be entitled to significant development and commercial milestone payments and tiered royalties ranging from the mid-to-high single digits based on net sales.

Pursuant to the Sarepta Agreement, the Company determined the Sarepta Agreement represents a service arrangement under the scope of ASC 606, with a 24 month contract duration.

Given the reversion of the rights under the Sarepta Agreement represents a penalty in substance for a termination by Sarepta, the contract term would remain the stated term of the Sarepta Agreement.

The Company determined that the Sarepta Agreement and Supply Obligation including the delivery of the Research License, the Licensed Know-How, the Manufactured Supply and delivery of materials represent a single promise and performance obligation to be transferred to Sarepta over time due to the nature of the promises in the contract.

The delivery of the Manufactured Supply is the predominant promise within the arrangement, as it is essential to the utility of the Licensed intellectual property.

As such, consideration in the initial transaction price will be allocated to the single performance obligation based on the contractual price.

In determining the transaction price, the Company concluded the payment associated with all the performance milestones will be fully constrained and only be included in the transaction price when the respective milestone is deemed probable of achievement.

As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of such study milestones is outside the control of the Company and probability of success criteria is estimated.

As of December 31, 2020, all milestones were constrained.

The Company will re-evaluate the transaction price in each reporting period, as uncertain

events are resolved.

The Company will recognize the revenue associated with the upfront payment and combined single performance obligation utilizing the output method, over the 24 month term as the Manufactured Supply is delivered to Sarepta.

The Company also determined the option to enter into a future commercial license agreement and extend the term of the option does not represent a material right since it was not priced at an incremental discount.

Sarepta may terminate the Sarepta Agreement for any reason upon 30 days’ written notice to the Company.

The Sarepta Agreement contains other customary terms and conditions, including representations and warranties, covenants, termination, and indemnification obligations in favor of each party.

During the year ended December 31, 2020, the Company and Sarepta entered into two amendments relating to an additional feasibility study.

Neither of the amendments had a material impact on deferred revenue or revenue recognition.

As of December 31, 2020, the Company recorded $ 2.0 million as a short-term contract liability representing deferred revenue associated with this agreement.

Revenue of $ 0.3 million related to the Sarepta Agreement was recognized during the third quarter and subsequently adjusted during the fourth quarter due to a change in the supply estimate, resulting in de minimis revenue recognition during the year ended December 31, 2020.

Asklepios Biopharmaceutical, Inc.

License Agreement for Pompe Disease

On December 17, 2019, the Company and AskBio entered into a License Agreement, referred to as the AskBio License Agreement.

On December 17, 2019, the Company and AskBio entered into a license agreement (the “AskBio License Agreement”).

Pursuant to the AskBio License Agreement, AskBio has exercised its option to exclusively license the Company’s intellectual property rights covering the Company’s ImmTOR platform to research, develop, and commercialize certain AAV gene therapy products utilizing ImmTOR, and targeting the GAA gene, or derivatives thereof, to treat Pompe Disease.

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Pursuant to the AskBio License Agreement, the Company will supply AskBio with its ImmTOR platform (“Supply Obligation”) and AskBio will be responsible for all preclinical, clinical and commercial manufacture and supply of licensed products (other than ImmTOR) and carry out all other activities related to the research, development, and commercialization of licensed products at its sole expense, including all regulatory activities related thereto.

The Company determined that the AskBio License was not capable of being distinct from the Supply Obligation.

The Company has concluded that AskBio cannot derive benefit from the license without the simultaneous transfer of the patent protected ImmTOR supply.

The Company determined that the AskBio License Agreement and Supply Obligation represent a single promise and performance obligation.

This is because AskBio cannot derive benefit from the license without the simultaneous transfer of the patent protected ImmTOR supply.

Therefore, the License Obligation and Supply Obligation represent the only promise in the arrangement and are combined as a single performance obligation (the “AskBio License and Supply Obligation”).

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Consideration related to sales-based milestones as well as royalties on net sales upon commercialization by AskBio, will be recognized when the related sales occur, as they were determined to relate predominantly to the intellectual property granted to AskBio and, therefore, have also been excluded from the transaction price in accordance with the royalty recognition constraint.

As of December 31, 2019, all milestones were constrained.

As of December 31, 2020 and December 31, 2019, all milestones were constrained.

The Company will re-evaluate the transaction price in each reporting period, as uncertain events are resolved, or as other changes in circumstances occur.

The total initial transaction price of the contract on the effective date is $ 7.0 million , which is comprised of the $ 2.0 million initial up-front payment upon agreement of terms, and $ 5.0 million initial up-front execution fee.

The $ 5.0 million execution fee became billable on the effective date and is recorded on the balance sheet as a receivable and a corresponding contract liability as of December 31, 2019.

As of December 31, 2019, the Company recorded $ 1.7 million as a short-term contract liability and $ 5.3 million as a long-term contract liability representing deferred revenue associated with this agreement.

The total initial transaction price of the contract on the effective date was $ 7.0 million, comprised of a $ 2.0 million initial up-front payment upon agreement of terms, and a $ 5.0 million initial up-front execution fee.

As of December 31, 2020 and December 31, 2019, the Company recorded $ 1.7 million as a short-term contract liability and $ 5.3 million as a long-term contract liability representing deferred revenue associated with this agreement.

Revenue will be recognized over the period in which the particles are delivered.

No revenue related to the AskBio License Agreement was recognized during the year ended December 31, 2020 as no deliveries were made during the period.

Spark Therapeutics, Inc.

Spark License Agreement

In December 2016, the Company entered into a License and Option Agreement (“Spark License Agreement”) with Spark Therapeutics, Inc.

(“Spark”) pursuant to which the Company and Spark agreed to collaborate on the development of gene therapies for certain targets utilizing the ImmTOR platform.

In December 2016, the Company entered into a license and option agreement (“Spark License Agreement”) with Spark pursuant to which the Company and Spark agreed to collaborate on the development of gene therapies for certain targets

utilizing the ImmTOR platform.

The Spark License Agreement provides Spark with certain exclusive, worldwide, royalty bearing licenses to the Company’s intellectual property, allowing Spark to develop and commercialize gene therapies in combination with ImmTOR for an initial identified target.

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Therefore, the Company concluded that the two agreements must be combined and evaluated as a single agreement.

While the Spark Purchase Agreement and the Spark License agreement are considered to be a single

agreement, the Company determined that the purchase of common stock and future acquisition rights are not within the scope of ASC 606.

The Company determined that the initial purchase of common stock combined with the embedded future stock Acquisition Rights had a fair value of $ 2.7 million and this amount was recorded in equity as of the effective date.

While the Spark Purchase Agreement and the Spark License agreement are considered to be a single agreement, the Company determined that the purchase of common stock and future acquisition rights are not within the scope of ASC 606.

The Company determined that the initial purchase of common stock combined with the embedded future

stock Acquisition Rights had a fair value of $ 2.7 million and this amount was recorded in equity as of the effective date.

The remaining $ 2.3 million of cash received in exchange for the stock and acquisition rights is included in allocable consideration, as this represents the premium paid by Spark on the purchase of common stock, and should be allocated to the remaining performance obligations.

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This is because Spark cannot derive benefit from the license without the simultaneous transfer of the patent protected ImmTOR supply.

The Company also determined that the Target Options, which includes the related Supply Obligation, provides the customer with a material right and is considered a performance obligation in the arrangement since it was priced at an incremental discount.

The Company also determined that the Option Obligation, which includes the related Supply Obligation, provides the customer with a material right and is considered a performance obligation in the arrangement since it was priced at an incremental discount.

Therefore, the Company determined that the Spark agreement contains five distinct performance obligations:

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The standalone selling price for the Combined License and Supply Obligation was determined using a discounted cash flow model.

The standalone selling price for the Target Options were determined based on the fair value of the license minus the strike price of the option (the probability of exercise was included in the valuation) as well as the estimated discount of the Supply Obligation.

The standalone selling prices for the target options were determined based on the fair values of the licenses minus the strike prices of the option (the probability of exercise was included in the valuation) as well as the estimated discount of the Supply Obligation.

The estimated proceeds expected to be received from the sale of the Supply Obligation were also included in the transaction price for the Combined License and Supply Obligation.

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In addition, during the year ended December 31, 2019, there were two deliveries resulting in less than $ 0.1 million of revenue recognized.

No revenue related to the Spark License Agreement was recognized during the year ended December 31, 2018.

As of December 31, 2019 , there was a contract liability of $ 9.2 million representing deferred revenue presented as non-current associated with this agreement.

As of December 31, 2018 , there was $ 14.7 million of deferred revenue related to this agreement.

No revenue related to the Spark License Agreement was recognized during the year ended December 31, 2020 as no deliveries were made during the period.

As of December 31, 2020 and December 31, 2019, there was a contract liability of $ 9.2 million representing deferred revenue presented as long-term associated with this agreement.

Spark Letter Agreement

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The May 2017 License Payment was received, and recorded as a liability as of June 30, 2017, of which some or all may potentially constitute the reimbursement described below.

The parties also agreed that Spark would be deemed to have delivered notice on May 31, 2017 exercising its right to purchase the shares pursuant to the First Acquisition Right.

The parties also agreed that Spark would be deemed to have delivered notice on May 31, 2017 exercising its

right to purchase the shares pursuant to the First Acquisition Right.

The Letter Agreement further outlines a cost reimbursement arrangement, pursuant to which the Company agreed to reimburse Spark for all costs and expenses, including the cost of materials provided by the Company, associated with the preclinical research and toxicology studies being performed by Spark for any licensed products for a specified amount of time (the “Reimbursement Period”), in an amount not to exceed $ 2.5 million.

Consistent with the First Acquisition Right, Spark purchased 324,362 shares of common stock pursuant to the Spark Purchase Agreement, as amended by the Letter Agreement, for an aggregate purchase price of $ 5.0 million, or $ 15.41 per share of common stock.

The purchase price per share represents an amount equal to 115.0 % of the average daily VWAP of the common stock during the thirty consecutive calendar days leading up to and ending on the day prior to the First Acquisition Right notification date.

The purchase price per share represented an amount equal to 115.0 % of the average daily VWAP of the common stock during the thirty consecutive calendar days leading up to and ending on the day prior to the First Acquisition Right notification date.

At the initial contract assessment, the Company allocated $ 2.7 million to equity (representing the fair value of the initial purchase of common stock combined with the embedded future stock Acquisition Rights).

Upon exercise of the First Acquisition Right, the Company recorded the purchase amount to stockholders ’ equity (deficit).

Upon exercise of the First Acquisition Right, the Company recorded the purchase amount to stockholders ’ (deficit) equity.

The Company determined that the Letter Agreement resulted in a modification to the original agreement.

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As of December 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 110.8 million.

The Company does not expect to recognize revenue on the remaining performance obligations over the next 12 months.

Contract Balances from Contracts with Customers ( AskBio, Spark and Skolkovo Foundation )

Contract Balances from Contracts with Customers ( Sobi, Sarepta, AskBio, Spark and Skolkovo Foundation )

The following table presents changes in the Company’s contract liabilities during the year ended December 31, 2020 (in thousands):

beginning of period

end of period

Year Ended December 31, 2019

Balance at Balance at

beginning of period Additions Deductions end of period

Twelve Months Ended December 31, 2020

Contract liabilities:

Deferred revenue $ 16,354 $ 104,158 $ ( 9,716 ) $ 110,796

Other liabilities (1)

Total contract liabilities $ 16,354 $ 104,158 $ ( 9,716 ) $ 110,796

(1) On June 5, 2019, the term of the Reimbursement Period under the Letter Agreement expired.

During the year ended December 31, 2019 , the Company updated its estimate of variable consideration included in the transaction price to include $ 1.2 million of unpaid reimbursements to Spark.

Related-Party Transactions

During the year ended December 31, 2019, the Company completed the 2019 Purchase Agreement, 2019 Private Placement, and the 2019 Follow-On.

The following tables set forth the number of shares of common stock, common warrants, and pre-funded warrants purchased by executive officers and members of the board of directors of the Company (and related parties thereto), as described in Note 10.

2019 Purchase Agreement

Shares of common

stock purchased

Common warrants

to be purchased

aggregate purchase price

TAS Partners, LLC

Timothy Barabe

2019 Private Placement

Shares of common

stock purchased

purchase price

Springer, Ph.D.

TAS Partners, LLC (affiliate of Timothy A.

Springer, Ph.D.)

Elona Kogan, J.D.

Patrick Zenner

Takashi Kei Kishimoto, Ph.D.

Carsten Brunn, Ph.D.

Stephen Smolinski

2019 Follow-On

Shares of common

stock purchased

purchase price

Springer, Ph.D.

Entities affiliated with Polaris

Chafen Lu (Timothy A.

Springer’s wife)

Jed Springer (Timothy A.

Springer’s brother)

Consulting Services

During 2018, the Company entered into an amended consulting agreement, (the "Consulting Agreement") with Dr.

Omid Farokhzad, a member of its Board of Directors.

The term of the amendment to the Consulting Agreement was April 1, 2018 to December 31, 2019, which extended the original consulting term for an additional nine months from March 31, 2019.

Compensation included a $ 85,000 payment for the period beginning January 1, 2019 and ending December 31, 2019.

The $ 85,000 was paid quarterly across the contract term in arrears beginning March 31, 2019.

Included within this agreement, a stock option award of 75,000 shares was granted, with a weighted average grant date fair value of $ 4.35 .

Effective November 20, 2019, Dr.

Farokhzad resigned as a member of its Board of Directors.

In addition, the Company incurred expenses for consulting services provided by its founders totaling $ 0.5 million, $ 0.2 million and $ 0.2 million during the years ended December 31, 2019 , 2018 and 2017, respectively.

The agreements associated with the above consulting services provided by its founders were terminated effective December 31, 2019.

The Company entered into new agreements with its founders to serve roles on its Scientific Advisory Board, effective January 1, 2020 to December 31, 2021, under which they will be paid quarterly for their services.

The Company incurred expenses for consulting services provided by its founders totaling $ 0.1 million, $ 0.5 million and $ 0.2 million during the years ended December 31, 2020, 2019 and 2018, respectively.

The Company entered into consulting agreements with its founders to serve on its Scientific Advisory Board, effective January 1, 2020 to December 31, 2021, under which they will be paid quarterly for their services.

Collaboration Agreements

Asklepios Biopharmaceutical, Inc.

Feasibility Study and License Agreement

On August 6, 2019, the Company entered into a Feasibility Study and License Agreement with AskBio, which is referred to as the AskBio Collaboration Agreement.

Pursuant to the AskBio Collaboration Agreement, the Company and AskBio agreed to license intellectual property rights to each other as part of a collaboration to research, develop, and commercialize certain adeno-associated virus (“AAV”) gene therapy products utilizing the Company’s ImmTOR platform to enable re-dosing of such AAV gene therapy products to treat serious rare and orphan genetic diseases for which there is a significant unmet medical need.

Pursuant to the AskBio Collaboration Agreement, the Company and AskBio agreed to conduct proof of concept studies to potentially validate the use of ImmTOR in conjunction with AAV for the treatment of methylmalonic acidemia (MMA), based on the Company’s product candidate SEL-302, to mitigate the formation of neutralizing anti-AAV capsid antibodies (the POC Studies).

On August 6, 2019, the Company entered into a feasibility study and license agreement with AskBio (the “AskBio Collaboration Agreement”).

Pursuant to the AskBio Collaboration Agreement, the Company and AskBio agreed to license intellectual property rights to each other as part of a collaboration to research, develop, and commercialize certain AAV gene therapy products utilizing the Company’s ImmTOR platform to enable re-dosing of such AAV gene therapy products to treat serious rare and orphan genetic diseases for which there is a significant unmet medical need.

Pursuant to the AskBio Collaboration Agreement, the Company and AskBio agreed to conduct proof of concept studies to potentially validate the use of ImmTOR in conjunction with AskBio's AAV gene therapy, or MMA-101, for the treatment of MMA, to mitigate the formation of neutralizing anti-AAV capsid antibodies (the “POC Studies”).

If the POC Studies are successful, or the parties otherwise elect to do so, the parties will proceed with a collaboration to pursue the development and commercialization of AAV gene therapy product candidates utilizing ImmTOR for the treatment of certain agreed serious rare and orphan genetic diseases.

If the POC Studies fail to demonstrate a proof-of-concept, and the parties do not mutually agree in writing to proceed with the collaboration, the AskBio Collaboration Agreement will expire.

The SEL-399 program combines an empty AAV capsid (EMC-101), which is an AAV capsid containing no transgene, with ImmTOR and is being conducted in partnership with AskBio.

Building on the preclinical data we have generated showing ImmTOR’s effect on mitigating or reducing the formation of neutralizing antibodies to AAV gene therapies, we have commenced a clinical trial of SEL-399 in healthy adult volunteers in Belgium.

The goal of the SEL-399 clinical trial is to demonstrate the appropriate dose of ImmTOR in humans to mitigate the formation of antibodies to AAV capsids used in gene therapies.

The Company and AskBio will share responsibility for the research, development and commercialization of products developed under this collaboration.

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The AskBio Collaboration Agreement is considered to be within the scope of ASC 808, as both parties are active participants and exposed to the risks and rewards of the collaborative activity.

The Company evaluated the terms of the AskBio Collaboration Agreement and have identified the following promises in the arrangement (1) conducting research and development activities to develop and commercialize products under the collaboration, (the “R&D Services”), (2) granting a non-exclusive, non-transferable, royalty-free, fully paid up, worldwide license to certain intellectual property of the Company, (the “IP Rights”) for the purpose of performing the POC Studies, (the “Research License”), (3) granting an exclusive, nontransferable, worldwide license to the IP Rights for use in certain indications (the” Collaboration License”), (4) providing manufactured supply of preclinical and clinical ImmTOR, (the “Manufactured Supply”), (5) participation on identified steering committees responsible for the oversight of the collaboration, (the “JSC Participation”), and (6) granting an exclusive option to obtain a license under the IP Rights to research, develop and commercialize Licensed Products.

manufactured supply of preclinical and clinical ImmTOR, (the “Manufactured Supply”), (5) participation on identified steering committees responsible for the oversight of the collaboration, (the “JSC Participation”), and (6) granting an exclusive option to obtain a license under the IP Rights to research, develop and commercialize Licensed Products.

The Company determined that the R&D Services, Research License, Collaboration License, Manufactured Supply, and JSC Participation were not capable of being distinct, and therefore must be combined into a single performance obligation.

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As such, the Company determined that the entire arrangement would be accounted for within the scope of ASC 808.

In accordance with ASC 808, collaboration expenses are recognized within R&D expense and selling, general and administrative expense on our condensed consolidated statements of operations.

For the year ended December 31, 2019 , the

Company did not recognize any collaboration expense or record a receivable under the AskBio Collaboration Agreement in which actual costs incurred by both parties are an approximated 50% cost share.

In accordance with ASC 808, collaboration expenses are recognized within R&D expense and selling, general and administrative expense on the Company's condensed consolidated statements of operations.

For the year ended December 31, 2020, the Company recognized $ 3.8 million, of collaboration expense under the AskBio Collaboration Agreement in which actual costs incurred by both parties approximate a 50 % cost share.

Under certain collaborative arrangements, the Company is entitled to reimbursement of certain R&D expense.

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Rather, the Company analogizes to the guidance in ASC 730, which requires that reimbursements from counterparties be recognized as an offset to the related costs.

In accordance with ASC 730, the Company records reimbursement payments received from collaboration partners as reductions to R&D expense.

In accordance with ASC 730, the Company records reimbursement payments received from collaborators as reductions to R&D expense.

Massachusetts Institute of Technology

On December 13, 2019, the Company entered into the Fourth Amendment (the MIT Amendment) to the Exclusive Patent License Agreement by and between the Company and the Massachusetts Institute of Technology (MIT) (the MIT Agreement).

Pursuant to the MIT Amendment, a provision of the MIT Agreement under which the Company was obligated to initiate a Phase 3 clinical trial for a licensed product by a specified date in the fourth quarter of 2019 is tolled until the earlier of (i) a specified date in the second quarter of 2020 or (ii) the effective date of a written amendment to the MIT Agreement.

Further, pursuant to the MIT Amendment, the parties agreed to negotiate in good faith to enter into a future amendment to the MIT Agreement after the Company provides MIT with an amended diligence plan.

On November 25, 2008, the Company entered into an Exclusive Patent License agreement with MIT, which is referred to as the Exclusive Patent License.

On November 25, 2008, the Company entered into an exclusive patent license agreement (the “MIT License”) with the Massachusetts Institute of Technology (“MIT”).

The Company received an exclusive royalty-bearing license to utilize patents held by MIT in exchange for upfront consideration and annual license maintenance fees.

Such fees are expensed as incurred and have not been material to any period presented.

As of December 31, 2019 , and in connection with the execution of the Spark License Agreement, the Company has made contractual payments pursuant to the Exclusive Patent License totaling $ 2.2 million for the sublicense granted to Spark, and $ 0.4 million relative to the calculated premium paid by Spark for the equity investments made under the Spark Purchase Agreement.

On June 12, 2020, the Company entered into a Fifth Amendment (the “MIT Amendment”) to the MIT License, which is effective as of May 15, 2020.

Pursuant to the MIT Amendment, certain of the Company’s diligence obligations were extended, including a diligence obligation to commence a Phase 3 trial for a licensed product by a specific date in the second quarter of 2021.

Additionally, certain of the Company’s development and regulatory milestones and payments upon achievement of such milestones were adjusted.

As of December 31, 2020, and in connection with the execution of the Spark License Agreement, the Company has made contractual payments pursuant to the MIT License totaling $ 2.2 million for the sublicense granted to Spark, and $ 0.4 million relative to the calculated premium paid by Spark for the equity investments made under the Spark Purchase Agreement.

The Company made no additional payments during the year ended December 31, 2020.

Shenyang Sunshine Pharmaceutical Co., Ltd

In May 2014, the Company entered into a license agreement with Shenyang Sunshine Pharmaceutical Co., Ltd.

(“3SBio”), which is referred to as the 3SBio License.

In May 2014, the Company entered into a license agreement (the “3SBio License”) with Shenyang Sunshine Pharmaceutical Co., Ltd.

The Company has paid to 3SBio an aggregate of $ 7.0 million in upfront and milestone-based payments under the 3SBio License as of December 31, 2020.

We are required to make future payments to 3SBio contingent upon the occurrence of events related to the achievement of clinical and regulatory approval milestones of up to an aggregate of $ 21.0 million for products containing our ImmTOR platform, and up to an aggregate of $ 41.5 million for products without our ImmTOR platform.

Massachusetts Eye and Ear Infirmary and The Schepens Eye Research Institute, Inc.

In May 2016, the Company entered into a license agreement with the Massachusetts Eye and Ear Infirmary and The Schepens Eye Research Institute, Inc.

(collectively, “MEE”), which is referred to as the MEE License.

On September 16, 2019, in accordance with the terms of the MEE License, the Company notified MEE of its intention to terminate the MEE License, effective December 15, 2019.

In connection with the termination, the Company has accrued less than $ 0.1 million for final license fees as of December 31, 2019 .

Through December 31, 2019 , the Company paid a total of $ 0.4 million in license fees due under the MEE License.

The Company is required to make future payments to 3SBio contingent upon the occurrence of events related to the achievement of clinical and regulatory approval milestones of up to an aggregate of $ 15.0 million for products containing the Company's ImmTOR platform.

The Company provides for income taxes under ASC 740.

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Year Ended December 31,

2020 2019 2018

Statutory U.S.

federal rate 21.0 % 21.0 % 21.0 %

State income taxes - net of federal benefit 5.8 % 6.3 % 7.0 %

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Research tax credits/other 1.0 % 1.1 % 1.6 %

Change in enacted rates

Valuation allowance, net ( 23.6 %) ( 26.3 %) ( 29.1 %)

Stock Compensation ( 1.3 %) — % — %

Effective income tax rate — % — % — %

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Stock-based compensations expense 2,919 2,516

Deferred rent and other expenses

Other expenses 788 812

Deferred revenue 26,699 4,468

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Deferred Tax Liabilities

Depreciation $ ( 11 ) $ ( 57 )

Operating lease right-of-use asset ( 2,991 ) ( 82 )

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The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and concluded that it is more likely than not that the Company will not realize the benefit of its deferred tax assets.

The valuation allowance increased by $ 14.6 million and $ 18.5 million for the years ended December 31, 2019 and 2018, respectively, primarily as a result of an increase in net operating loss.

The valuation allowance increased by $ 16.3 million for the year ended December 31, 2020, primarily as a result of an increase in deferred revenue.

The valuation allowance increased by $ 14.6 million for the year ended December 31, 2019, primarily as a result of an increase in net operating loss.

In 2014, the Company's Russian subsidiary was granted a 10 year tax holiday in Russia.

The Company's foreign operations continue to benefit from the tax holiday, which is set to expire on December 31, 2023, however the Company is in the process of closing down operations in Russia and does not expect any tax liability.

At December 31, 2019, the Company had federal and state net operating loss carryforwards of $ 262.2 million and $ 256.5 million , respectively, which will expire at various times through 2037 .

Of the federal net operating loss carryforwards, $ 99.7 million can be carried forward indefinitely.

The Company also has federal and state research and development tax credit carryforwards of $ 4.2 million and $ 3.0 million , respectively, available to reduce future tax liabilities, which will expire at various times through 2039 .

At December 31, 2020, the Company has federal and state net operating loss carryforwards of $ 234.5 million and $ 228.5 million, respectively, which will expire at various times beginning 2028.

Of the federal net operating losses, $ 99.6 million can be carried forward indefinitely.

The Company has $ 4.9 million and $ 3.5 million, respectively, of federal and state research and development tax credit carryforwards, which will expire at various times through 2040.

Utilization of the net operating loss and research and development credit carryforwards may be subject to a substantial annual limitation under Section 382 and 383 of the Internal Revenue Code due to ownership change limitations that have occurred previously, or that could occur in the future.

These ownership changes may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

As of December 31, 2019, the Company completed a Section 382 study, noting that an ownership change occurred during 2017.

However, the Company has determined that all net operating losses would be available in the future.

As a result, the deferred tax assets related to the federal and Massachusetts net operating losses and credit carryforwards are not currently limited.

As of December 31, 2020, the Company completed a Section 382 study, noting that an ownership change occurred

The Company has determined that all of the $ 234.5 million of net operating losses are available in the future, with approximately $ 36.5 million of that total limited under Section 382 and therefore available for future use through 2028.

The Company applies ASC 740, Income Taxes to uncertain tax positions.

As of the adoption date on January 1, 2010 and through December 31, 2019, the Company had no unrecognized tax benefits or related interest and penalties accrued.

As of December 31, 2020 and 2019, the Company had no unrecognized tax benefits or related interest and penalties accrued.

The Company has not, as of yet, conducted a study of its research and development credit carryforwards.

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however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position.

A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance.

As a result, there would be no impact to the consolidated balance sheets, statements of operations and comprehensive loss, or cash flows if an adjustment was required.

Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying statement of operations.

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All matching contributions vest ratably over 4 years and participant contributions vest immediately.

Contributions by the Company totaled $ 0.1 million , $ 0.2 million and $ 0.2 million during each of the years ended December 31, 2019 , 2018 and 2017.

Contributions by the Company totaled $ 0.1 million, $ 0.1 million and $ 0.2 million during each of the years ended December 31, 2020, 2019 and 2018, respectively.

Commitments and Contingencies

As of December 31, 2019 , the Company had operating lease agreements for offices in Watertown, MA.

As of December 31, 2020, the Company has an operating lease agreement for an office in Watertown, MA.

See Note 8 for additional information regarding the Company's leases.

As of December 31, 2020 and December 31, 2019, the Company was not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

On August 4, 2020, a putative stockholder of Selecta filed a stockholder derivative action, purportedly on behalf of Selecta and against certain current and former members of the Company’s Board of Directors, as well as one affiliated company owned by a current board member, in the Court of Chancery of the State of Delaware, namely Franchi v.

Barabe, et al.

The complaint alleges that the individual defendants breached their fiduciary duties and committed corporate waste when they authorized a private placement transaction, announced on December 19, 2019, at a price allegedly below fair value.

The complaint further alleges that the four defendant directors who participated in the private placement were unjustly enriched in connection with the transaction.

On September 25, 2020, the defendants filed a motion to dismiss the lawsuit.

On November 6, 2020, the plaintiff filed an amended complaint, and the defendants filed a second motion to dismiss on January 8, 2021.

On December 31, 2020, we received a litigation demand letter from two other putative stockholders relating to the same private placement transaction.

At this time, the Company has not accrued a liability for this matter, as any liability has been determined to be either not estimable or probable.

As permitted under Delaware law, the Company indemnifies its directors for certain events or occurrences while the director is, or was, serving at the Company’s request in such capacity.

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The Company does not believe that the resolution of these matters will have a material adverse effect the Company's business, financial position, results of operations or cash flows.

Selected Quarterly Financial Data (Unaudited)

The following table summarizes unaudited quarterly financial data for the years ended December 31, 2019 and 2018 (in thousands, except per share data).

Three Months Ended (unaudited)

September 30,

Grant and collaboration revenue

Operating expenses

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders, basic and diluted

Three Months Ended (unaudited)

September 30,

Grant and collaboration revenue

Operating expenses

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders, basic and diluted

Subsequent Events

“At-the-Market” Offerings

Subsequent to December 31, 2020 through March 5, 2021, the Company sold 4,119,613 shares of its common stock pursuant to the 2020 Sales Agreement, at an average price of approximately $ 4.59 per share for aggregate net proceeds of $ 18.3 million, after deducting commissions and other transaction costs of $ 0.6 million which was paid in the three months ended December 31, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures