What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-03-10 compared with 2021-03-12 · 149 added, 144 removed, 187 unchanged (61% of the section changed)

5 unchanged sentences

“Risk Factors.” A discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019 has been reported previously in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 12, 2021, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We are a clinical-stage biopharmaceutical company leveraging our 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.

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

We believe 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.

We have developed a portfolio of proprietary and collaboration-driven applications of ImmTOR, and we plan to continue to develop proprietary compounds and pursue collaboration-driven development in certain disease areas, which could include strategic collaborations, out-licensing, and in-licensing transactions.

We are a clinical-stage biopharmaceutical company.

Our ImmTOR® platform encapsulates rapamycin, also known as sirolimus, an FDA approved immunomodulator, in biodegradable nanoparticles ImmTOR is designed to induce antigen-specific immune tolerance.

We continually seek to enhance ImmTOR.

In recent preclinical studies we have conducted, we have observed that ImmTOR may have synergistic activity with interleukin-2, or IL-2, molecules that have been engineered to be selective for regulatory T cells, or Tregs.

Treg-selective IL-2 mutant molecules, or IL-2 muteins, have been shown to transiently expand all pre-existing Tregs in preclinical studies conducted by others.

We have observed in preclinical studies that the combination of ImmTOR, a Treg-selective IL-2 mutein and an antigen elicited an approximately three-fold increase in antigen-specific Tregs beyond ImmTOR alone with evidence of enhanced durability of immune tolerance and the potential for ImmTOR dose sparing.

This combination of ImmTOR with a Treg selective IL-2 molecule represents an evolution of the ImmTOR platform, which we call ImmTOR-IL ™ .

We believe this combination has the potential to be a best-in-class therapy in diseases where expansion of total Tregs may prove beneficial.

We believe ImmTOR and ImmTOR-IL have the potential to enhance both the efficacy and safety of biologic therapies (including gene therapies), improve product candidates under development, and enable novel therapeutic modalities in autoimmune disease.

In clinical trials, ImmTOR has been observed to inhibit the formation of neutralizing antibodies to adeno-associated virus (AAV) capsids, potentially enabling re-dosing of gene therapies.

Additionally, based on preclinical data in AAV gene therapies, we believe that ImmTOR has the potential to improve efficacy and safety by increasing transgene expression, reducing hepatic inflammation and inhibiting undesired immune responses to both the AAV capsid and the transgene product that can occur with the first dose of gene therapy.

In biologic therapies, clinical activity of ImmTOR in humans has been observed with pegadricase, a highly immunogenic pegylated uricase enzyme being developed for the treatment of patients with chronic refractory gout to conventional therapy.

The combination of ImmTOR and pegadricase is currently being evaluated in a Phase 3 clinical trial that we are conducting on behalf of our partner Swedish Orphan Biovitrum AB, or Sobi.

We intend to pursue development of therapies for autoimmune diseases where expansion of either all Tregs or antigen-specific Tregs has been shown to, or we believe is, likely to have a beneficial effect.

We believe that ImmTOR and ImmTOR-IL have the potential to unlock antigen-specific therapies for autoimmune diseases and that ImmTOR-IL can further improve the efficacy and safety profile of biologic therapies beyond ImmTOR alone.

Impact of COVID-19

We are closely monitoring how COVID-19 is affecting our employees, business, preclinical studies and clinical trials.

In response to the spread of COVID-19, we have closed our executive offices with our administrative employees continuing their work outside of our offices and limited the number of staff in any given research and development laboratory.

We are closely monitoring how the COVID-19 pandemic is affecting our employees, business, preclinical studies and clinical trials.

In response to the spread of COVID-19, we have continued to have our administrative employees work outside of our offices and limited the number of staff in any given research and development laboratory.

Disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials, and the incurrence of unforeseen costs as a result of preclinical study or clinical trial delays.

While the COVID-19 pandemic has not had a material impact on our clinical programs as of the date of this Annual Report on Form 10-K, it could have an impact on our ability to complete the Phase 3 DISSOLVE clinical program of SEL-212, and our

ability to commence preclinical and clinical studies of our IgA nephropathy, gene therapy, and autoimmune disease programs, and our ability to obtain supply of both active drug substances and finished drug product as well as efficient execution of the overall supply chain for SEL-212 and our other programs.

We have been proactively working with our CRO, clinical sites, and principal investigators to provide patients with more convenient locations to have their SUA measured for the primary endpoint of the study, such as at local laboratories or their homes, as well as alternative sites to receive infusions of study drug.

We are also working with our primary and back-up suppliers for SEL-037 (pegadricase) and SEL-110 (ImmTOR) to ensure that we have adequate supply of our materials for both our clinical and preclinical programs.

As of the date of this Annual Report on Form 10-K, we believe we will have adequate supply of all material necessary to conduct our Phase 3 DISSOLVE clinical program of SEL-212 in chronic refractory gout and to begin our clinical trial in gene therapy under our collaboration with AskBio.

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.

See “Risk Factors⸻The outbreak of COVID-19 may continue to adversely impact our business, including our preclinical studies and clinical trials.” in Part I, Item 1A of this Annual Report on Form 10-K.

While the COVID-19 pandemic has not had a material impact on our clinical programs as of the date of this Annual Report, it could have an impact on our ability to complete the Phase 3 DISSOLVE clinical program of SEL-212, as the pandemic presents the potential to experience delays in enrollment as well as the inability of certain patients to complete the trial due to suffering from COVID-19, our ability to commence preclinical studies and clinical trials of our IgA nephropathy, gene therapy, and autoimmune disease programs, and our ability to obtain supply of both active drug substances and finished drug product as well as efficient execution of the overall supply chain for SEL-212 and our other programs.

At this time, 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 duration of the pandemic, the emergence of new virus variants, travel restrictions and social distancing in the United States and other countries, business closures or disruptions, supply chain 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.

Financial Operations

To date, we have financed our operations primarily through public offerings and private placements of our securities, funding received from research grants and collaboration arrangements and our credit facility.

To date, we have financed our operations primarily through public offerings and private placements of our securities, funding received from research grants, collaboration and license arrangements and our credit facility.

We do not have any products approved for sale and have not generated any product sales.

All of our revenue to date has been collaboration and grant revenue.

Since inception, we have incurred significant operating losses.

9 unchanged sentences

• add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts and to support our operations as a public company.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, license and collaboration agreements, and research grants.

Until we can generate substantial product revenues, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings, and license and collaboration agreements.

We may be unable to raise capital when needed or on reasonable terms, if at all, which would force us to delay, limit, reduce or terminate our product development or future commercialization efforts.

We will need to generate significant revenues to achieve profitability, and we may never do so.

We believe that our existing cash, cash equivalents, short term investments, 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.

We believe that our existing cash, cash equivalents, restricted cash, and marketable securities as of December 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2023.

We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

2 unchanged sentences

All intercompany accounts and transactions have been eliminated.

Collaboration and grant revenue

To date, we have not generated any product sales.

Our revenue consists of collaboration and grant revenue, which includes amounts recognized related to upfront and milestone payments for research and development funding under collaboration and license agreements.

In addition, we earn revenue under the terms of government contracts or grants, which require the performance of certain research and development activities.

We expect that any revenue we generate will fluctuate from quarter to quarter because of the timing and amount of fees, research and development reimbursements and other payments from collaborators.

Collaboration and license revenue

To date, we have not generated any revenue from product sales.

Our revenue consists primarily of collaboration and license revenue, which includes amounts recognized related to upfront and milestone payments for research and development funding under collaboration and license agreements.

We expect that any revenue we generate will fluctuate from quarter to quarter because of the timing and amounts of fees, research and development reimbursements and other payments from collaborators.

We do not expect to generate revenue from product sales for at least the next several years.

If we or our collaborators fail to complete the development of our product candidates in a timely manner or fail to obtain regulatory approval as needed, our ability to generate future revenue will be harmed, and will affect the results of our operations and financial position.

For a further description of the agreements underlying our collaboration and grant-based revenue, see Notes 2 and 12 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

For a further description of the agreements underlying our collaboration and license revenue, see Notes 2 and 12 to our consolidated financial statements included elsewhere in this Annual Report.

Research and development

1 unchanged sentence

Our internal research and development costs are often devoted to expanding our programs and are not necessarily allocable to a specific target.

We have incurred a total of $295.3 million in research and development expenses from inception through December 31, 2020, with a majority of the expenses being spent on the development of SEL-212 and a prior nicotine vaccine candidate, and the remainder being spent on our various discovery and preclinical stage product candidate programs and the general expansion of our technology.

In connection with our intention to focus on advancing our ImmTOR platform, we have ceased ongoing work on our immune stimulation programs SELA-070 and SEL-701, and currently do not have plans to move these programs forward or to perform any additional work on either of these programs.

We have incurred a total of $364.0 million in research and development expenses from inception through December 31, 2021, with a majority of the expenses being spent on the development of SEL-212 and the remainder being spent on our various discovery and preclinical stage product candidate programs and the general expansion of our technology.

We expense research and development costs as incurred.

7 unchanged sentences

2021 2020 2019

Research and development expenses (key projects and initiatives):

SEL-212 $ 31,446 $ 32,288 $ 25,489

AskBio collaboration 3,888 2,807 —

SELA-070 — 46 1,602

Discovery and preclinical stage product candidate programs, collectively 1,717 1,614 2,623

Preclinical stage product candidate programs 11,080 1,717 1,660

Other internal research and development expenses 22,322 17,693 15,594

Total research and development expenses $ 68,736 $ 54,505 $ 42,743

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

In June 2020, we and Sobi entered into 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.

These costs, when reimbursed, will be recognized as revenue consistent with the revenue recognition methodology disclosed in Note 12 to our consolidated financial statements included elsewhere in this Annual Report.

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

1 unchanged sentence

General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, business development and support functions.

Other general and administrative expenses include facility-related costs not otherwise allocated to research and development expenses, travel expenses for our general and

administrative personnel and professional fees for auditing, tax and corporate legal services, including intellectual property-related legal services.

Other general and administrative expenses include facility-related costs not otherwise allocated to research and development expenses, travel expenses for our general and administrative personnel and professional fees for auditing, tax and corporate legal services, including intellectual property-related legal services.

Investment income

Investment income consists primarily of interest income earned on our cash and cash equivalents and short-term investments.

Investment income consists primarily of interest income earned on our cash, cash equivalents and marketable securities.

Interest expense

1 unchanged sentence

Other income (expense)

Other income (expense) was de minimis during each the years ended December 31, 2020, and 2018, and for the year ended December 31, 2019 it consists primarily of issuance fees associated with warrant liabilities.

Other income was de minimis during the years ended December 31, 2021 and 2020, and for the year ended December 31, 2019 it consists primarily of issuance fees associated with warrant liabilities.

Change in fair value of warrant liabilities

5 unchanged sentences

dollars or other currencies.

As of December 31, 2020 and 2019, we maintained cash of $0.3 million and $0.4 million, respectively, in Russian banks, all of which was denominated in U.S.

As of December 31, 2021 and 2020, we maintained cash of $0.3 million in Russian banks, all of which was denominated in U.S.

The amounts denominated in U.S.

2 unchanged sentences

Comparison of the Years Ended December 31, 2021 and 2020

The following is a comparison of revenue for the years ended December 31, 2020 and 2019 (in thousands, except percentages):

Year Ended December 31, Increase

Collaboration and license revenue

The following is a comparison of collaboration and license revenue for the years ended December 31, 2021 and 2020 (in thousands, except percentages):

December 31, Increase

2021 2020 (decrease)

Collaboration revenue $ 16,597 $ 6,677 $ 9,920 149 %

During the year ended December 31, 2020, collaboration revenue increased by $9.9 million, or 149%, from collaboration revenue generated in 2019.

During the year ended December 31, 2020 we recognized $16.6 million under the license agreement with Sobi resulting from the shipment of clinical supply and the reimbursement of costs incurred for the Phase 3 DISSOLVE clinical program and a de minimis amount recognized for shipments under the collaboration agreement with Sarepta.

During the year ended December 31, 2019, we recognized $6.7 million in revenue upon expiration of the term for Spark to exercise additional target options that represented material rights and less than $0.1 million of revenue for two shipments to Spark under our collaboration agreement.

Collaboration and license revenue $ 85,077 $ 16,597 $ 68,480 413 %

During the years ended December 31, 2021 and 2020, we recognized $83.5 million and $16.6 million, respectively, under the license agreement with Sobi resulting from both the shipment of clinical supply and the reimbursement of costs incurred for the Phase 3 DISSOLVE clinical program.

The significant revenue increase is the result of the continued enrollment of the Phase 3 DISSOLVE clinical program that was initiated in the third quarter of 2020.

Additionally, during the year ended December 31, 2021, we recognized $1.0 million under the license agreement with Takeda, $0.4 million for shipments under the license agreement with Sarepta, and $0.1 million resulting from the expiration of the contractual audit term under the Skolkovo Foundation grant.

Research and development

The following is a comparison of research and development expenses for the years ended December 31, 2021 and 2020 (in thousands, except percentages):

Year Ended December 31, Increase

December 31, Increase

2021 2020 (decrease)

Research and development $ 54,505 $ 42,743 $ 11,762 28 %

SEL-212 $ 31,446 $ 32,288 $ (842) (3) %

AskBio collaboration 3,888 2,807 1,081 39 %

Preclinical stage product candidate programs 11,080 1,717 9,363 545 %

Other internal research and development expenses 22,322 17,693 4,629 26 %

Total research and development expenses $ 68,736 $ 54,505 $ 14,231 26 %

During the year ended December 31, 2021 , our research and development expenses increased by $14.2 million, or 26%, as com pared to 2020.

The increase in cost was primarily the result of expenses incurred for the Phase 3 DISSOLVE clinical program for SEL-212, the Phase 2 COMPARE trial for SEL-212 and for the AskBio Collaboration.

The increase in cost was primarily the result of expenses incurred for the preclinical programs, salaries for increases in headcount and AskBio collaboration costs.

Additionally, we paid Genovis and Ginkgo, $4.0 million and $0.5 million, respectively, for in-license agreements.

General and administrative

The following is a comparison of general and administrative expenses for the years ended December 31, 2021 and 2020 (in thousands, except percentages):

Year Ended December 31, Increase

December 31, Increase

2021 2020 (decrease)

1 unchanged sentence

During the year ended December 31, 2021, our general and administrative expenses increased by $2.0 million, or 11%, as compared to 2020.

The increase in costs was the result of expenses for patent and professional fees offset by reduced consulting fees and travel expenses.

The increase in costs was primarily the result of stock compensation and consulting fees, offset primarily by reduction in professional fees.

Investment income

Investment income was $0.3 million and $0.8 million for the years ended December 31, 2020 and 2019, respectively.

The decrease reflects reduced interest rates.

Investment income was de minimis for the years ended December 31, 2021 and 2020, respectively.

Loss on extinguishment of debt

1 unchanged sentence

Foreign currency transaction gain (loss)

We recognized minimal foreign currency gains of less than $0.1 million and minimal losses of less than $0.1 million during the years ended December 31, 2020 and 2019, respectively.

We recognized de minimis foreign currency gains during each of the years ended December 31, 2021 and 2020.

Interest expense

1 unchanged sentence

Change in fair value of warrant liabilities

For the year ended December 31, 2020, we recognized a $10.4 million charge for the increase in the fair value of warrant liabilities utilizing the Black-Scholes valuation methodology.

The increase in value was primarily driven by an increase in the share price and volatility (see Note 5).

For the year ended December 31, 2019, we recognized $0.9 million as a change in the fair value of warrant liabilities primarily driven by an increase in the share price from issuance.

For the year ended December 31, 2021, we recognized $2.3 million of loss from the change in the fair value of warrant liabilities utilizing the Black-Scholes valuation methodology.

The increase in value was primarily driven by a slight increase in the Company’s share price, offset by the decrease of outstanding warrants.

For the year ended December 31, 2020, we recognized $10.4 million change for the increase in the fair value of warrant liabilities primarily driven by an increase in the share price and volatility.

Other income (expense)

Other income (expense) was $0.1 million and ($1.3 million) for the years ended December 31, 2020 and 2019, respectively.

The other expense during 2019 was the result of fees incurred as a result of the issuance of liability classified common warrants in our December 2019 private placement.

Net loss for the year ended December 31, 2020 was $68.9 million compared to $55.4 million for the year ended December 31, 2019.

Other income (expense) was de minimis for each of the years ended December 31, 2021 and 2020.

For the year ended December 31, 2021, we recognized $16.0 million of expense for the income taxes primarily related to the license agreement with Sobi upon the Company’s election to opt out of the installment sale method of taxation.

As a result of this election, the Company has prepaid all taxes related to future Sobi License revenue streams.

Net loss for the year ended December 31, 2021 decreased to $25.7 million as compared to a net loss of $68.9 million in 2020 primarily due to increased revenue of $66.9 million under the license agreement with Sobi resulting from both the shipment of clinical supply and the reimbursement of costs incurred for the Phase 3 DISSOLVE clinical program, partially offset by increased research and development expenses on preclinical programs.

Liquidity and Capital Resources

2 unchanged sentences

We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, third-party funding and other collaborations and strategic alliances.

From our inception through December 31, 2020, we have raised an aggregate of $549.1 million to fund our operations, which includes $118.5 million from the sale of preferred stock, $11.1 million in government grant funding, $36.7 million from borrowings under our credit facility, $165.9 million from our collaborations and license agreements, $64.5 million in combined net proceeds from our initial public offering, $149.3 million in combined net proceeds from private placements and follow-on offerings of our common stock, and $3.1 million in aggregate net proceeds from “at-the-market” offerings of our common stock.

Collaborations

On October 8, 2020, we entered into the IGAN Agreement, and paid IGAN a $0.5 million one-time up-front payment.

On June 13, 2020, we entered into the Sarepta Agreement.

We received a $2.0 million upfront payment.

On June 11, 2020, we entered into the Sobi License.

Sobi paid us a one-time, up-front payment of $75 million, and upon the closing of the Sobi Private Placement, we received an additional $25 million from Sobi in consideration for Sobi’s purchase of our common stock at $4.6156 per share.

From our inception through December 31, 2021, we have raised an aggregate of $637.5 million to fund our operations, which includes $118.5 million from the sale of preferred stock, $11.1 million in government grant funding, $36.7 million from borrowings under our credit facilities past and present, $202.4 million from our collaborations and license agreements, $64.5 million in combined net proceeds from our initial public offering, $149.3 million in combined net proceeds from private placements and follow-on offerings of our common stock, and, through December 31, 2021, $55.0 million in aggregate net proceeds from “at-the-market” offerings of our common stock.

As of December 31, 2021, our cash, cash equivalents, restricted cash, and marketable securities were $129.4 million, of which $1.4 million was restricted cash related to lease commitments and $0.3 million was held by our Russian subsidiary designated solely for use in its operations.

Our Russian subsidiary cash is consolidated for financial reporting purposes.

In addition to our existing cash equivalents, we receive research and development funding pursuant to our collaboration and license agreements.

Currently, funding from payments under our collaboration and license agreements represent our only source of committed external funds.

Collaboration and License Agreements

In October 2021, we entered into the Ginkgo Agreement, and paid Ginkgo a $0.5 million one-time upfront payment and we entered into the Genovis Agreement, and paid Genovis a $4.0 million one-time upfront payment.

On September 7, 2021, we entered into the Cyrus Agreement, and purchased 2,326,934 shares of Cyrus’ Series B Preferred Stock, par value $0.0001 per share at a purchase price of $0.8595 per share for $2.0 million.

On October 1, 2021, we entered into the Takeda Agreement.

We received a $3.0 million upfront payment and are entitled to receive up to $1.124 billion in future additional payments over the course of the partnership that are contingent on the achievement of development or commercial milestones or Takeda’s election to continue its activities at specified development stages.

In June 2020, we entered into the Sobi License.

Sobi paid us a one-time, upfront payment of $75 million, and upon the closing of the Sobi Private Placement, we received an additional $25 million from Sobi in consideration for Sobi’s purchase of our common stock at $4.6156 per share.

We are eligible to receive $630 million in milestone payments upon the achievement of various development and regulatory milestones and 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.

Additionally, Sobi has agreed to fund the Phase 3 clinical program of SEL-212, which commenced in September 2020.

Sobi has agreed to fund the Phase 3 clinical program of SEL-212, which commenced in September 2020.

We expect this to substantially reduce our annual operating expenses.

On December 17, 2019, we entered into the AskBio License Agreement.

Additionally, in June 2020, we entered into the Sarepta Agreement.

Sarepta paid us a $2.0 million upfront payment upon closing, and a $3.0 million for the achievement of certain pre-clinical milestones in June 2021.

In December 2019, we entered into the AskBio License Agreement.

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

3 unchanged sentences

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 our common stock.

We intend to use the proceeds from the offering for working capital and other general corporate purposes.

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

From August 11, 2017, the date we entered into the 2017 Sales Agreement, to December 31, 2019, we sold 615,453 shares of our 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.

During the year ended December 31, 2020, we sold 1,069,486 shares of our common stock pursuant to the 2017 Sales Agreement and 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.

As of December 31, 2020, our 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 our Russian subsidiary designated solely for use in its operations.

Our Russian subsidiary cash is consolidated for financial reporting purposes.

In addition to our existing cash equivalents, we receive research and development funding pursuant to our collaboration agreements.

Currently, funding from payments under our collaboration agreements represent our only source of committed external funds.

On August 31, 2020, we entered into a term loan of up to $35.0 million, consisting of term loans in an aggregate amount of $25.0 million, or the Term A Loan, and term loans in an aggregate amount of $10.0 million, or the Term B Loan, governed by a loan and security agreement among us and Oxford, as collateral agent and a lender, and SVB, as a lender.

On October 8, 2021, we delivered notice to Jefferies LLC that we were terminating the 2020 Sales Agreement, with effect as of October 19, 2021.

On October 25, 2021, we entered into a Sales Agreement, or the 2021 Sales Agreement, with SVB Leerink LLC to sell shares of our common stock, from time to time, through an “at the market” equity offering program under which SVB Leerink will act as sales agent.

The shares of common stock sold pursuant to the 2021 Sales Agreement will be issued pursuant to our shelf registration statement on Form S-3 (File No.

333-241692), filed on August 6, 2020 with the Securities and Exchange Commission and related prospectus supplement, filed on October 25, 2021 with the Securities and Exchange Commission, for aggregate gross sales proceeds of up to $75.0 million.

During the year ended December 31, 2021, we sold 13,767,511 shares of our common stock pursuant to the 2021 and 2020 Sales Agreements, as applicable, for aggregate net proceeds of $51.9 million, after deducting commissions and other transaction costs.

During the year ended December 31, 2020, we sold 1,069,486 shares of our common stock pursuant to the 2020 and 2017 Sales Agreements, as applicable, for aggregate net proceeds of $2.1 million, after deducting commissions and other transaction costs.

On August 31, 2020, we entered into a term loan of up to $35.0 million, consisting of term loans in an aggregate amount of $25.0 million, or the Term A Loan, and term loans in an aggregate amount of $10.0 million, or the Term B Loan, governed by a loan and security agreement among us and Oxford Finance LLC, or Oxford, as collateral agent and a lender, and Silicon Valley Bank, or SVB, as a lender.

The Term A Loan was funded in full on August 31, 2020, the proceeds of which were used to repay our previously existing 2017 Term Loan and for general corporate and working capital purposes.

The Term B Loan will be available, subject to the collateral agent’s discretion and customary terms and conditions, during the period commencing on the date we have delivered to Oxford and SVB evidence:

(i) we or one of the our collaboration partners has enrolled its first randomized patient for a Phase 1 clinical trial evaluating the treatment of MMA, and (ii) we have enrolled the first patient in each of two Phase 3 pivotal trials evaluating SEL-212, or 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 Oxford and SVB in their sole discretion.

Because we have enrolled the first patient in each of our two Phase 3 trials for SEL-212, the Second Draw Period Milestone has been achieved, and we expect the Term B Loan will be available to be drawn, once we or AskBio enroll the first randomized patient in our planned Phase 1 clinical trial evaluating the treatment of MMA.

The second draw period expired on September 30, 2021 and the Term B Loan is no longer available to be drawn in the future.

The 2020 Term Loan is secured by a lien on substantially all of our assets, 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.

2 unchanged sentences

The 2020 Term Loan also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rights.

The events of default under the 2020 Term Loan include, but are not limited to, our failure to make any payments of principal or interest under the 2020 Term Loan or other transaction documents, our breach or default in the performance of any covenant under the 2020 Term Loan or other transaction documents, the occurrence of a material adverse event, making a false or misleading representation or warranty in any material respect under the 2020 Term Loan, our insolvency or bankruptcy, any attachment or judgment on our assets of at least approximately $0.5 million, or the occurrence of any default under any of our agreements or obligations involving indebtedness in excess of approximately $0.5 million.

agreements or obligations involving indebtedness in excess of approximately $0.5 million.

If an event of default occurs, Oxford and SVB are entitled to take enforcement action, including acceleration of amounts due under the 2020 Term Loan.

If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

For a further description of the 2020 Term Loan, see Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Plan of operations and future funding requirements

As of the date of this Annual Report on Form 10-K, we have not generated any product sales.

For a further description of the 2020 Term Loan, see Note 9 to our consolidated financial statements included elsewhere in this Annual Report.

Future funding requirements

As of the date of this Annual Report, we have not generated any revenue from product sales.

We do not know when, or if, we will generate revenue from product sales.

7 unchanged sentences

We will require substantial additional financing to fund our operations and to continue to execute our strategy, and we will pursue a range of options to secure additional capital.

We are exploring various sources of funding such as strategic collaborations and the issuance of equity to fund our operations.

We are continually evaluating various potential sources of additional funding such as strategic collaborations, license agreements and the issuance of equity to fund our operations.

If we raise additional funds through strategic collaborations and alliances, which may include existing collaboration partners, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

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

We believe that our existing 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.

We believe that our existing cash, cash equivalents, restricted cash, and marketable securities as of December 31, 2021 will enable us to fund our current planned operations into the third quarter of 2023, though we may realize additional cash resources upon the achievement of certain contingent collaboration milestones or it may pursue additional cash resources through public or private equity or debt financings or by establishing collaborations with other companies.

Management’s expectations with respect to our ability to fund current and long-term planned operations are based on estimates that are subject to risks and uncertainties.

If actual results are different from management’s estimates, we may need to seek additional strategic or financing opportunities sooner than would otherwise be expected.

However, there is no guarantee that any collaboration milestones will be achieved or that any of these strategic or financing opportunities will be executed on favorable terms, and some could be dilutive to existing stockholders.

If we are unable to obtain additional funding on a timely basis, we may be forced to significantly curtail, delay, or discontinue one or more of its planned research or development programs or be unable to expand our operations, meet long-term obligations or otherwise capitalize on our commercialization of our product candidates.

Additionally, while the potential economic impact brought by and the duration of the COVID-19 pandemic may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital as and when needed.

12 unchanged sentences

• the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates.

As noted above, the magnitude and duration of the COVID-19 pandemic and its impact on our liquidity future funding requirements is uncertain as of the filing date of this Annual Report on Form 10-K as this continues to evolve globally.

Summary of Cash Flows

1 unchanged sentence

(In thousands) 2021 2020 2019

Cash provided by (used in):

Cash (used in) and provided by:

Operating activities $ (60,382) $ 34,881 $ (51,435)

4 unchanged sentences

Operating activities

Net cash provided by operating activities for the year ended December 31, 2020 was $34.9 million compared to $51.4 million used in the same period in 2019.

The increase in net cash provided by operating activities was primarily due to the recognition of $94.1 million in deferred revenue, and a $2.8 million change in accounts receivable, offset by a $0.4 million change in accrued expenses and other liabilities, and $7.1 million changes in prepaid expenses, deposits and other assets and accounts payable when compared to the prior year and a $3.2 million increase in recorded net loss after adjusting for non-cash items.

Net cash used in operating activities for the year ended December 31, 2021 was $60.4 million compared to $34.9 million provided in the same period in 2020.

The decrease in net cash used in operating activities was primarily due to $12.2 million of net losses, adjusted for non-cash items, and uses of cash of approximately $48.2 million for changes in operating assets and liabilities.

Investing activities

Net cash used in investing activities for the year ended December 31, 2020 was $0.7 million compared to net cash provided by investing activities of $0.2 million in the same period in 2019.

Net cash used in investing activities for the year ended December 31, 2021 was $17.1 million compared to net cash used in investing activities of $0.7 million in the same period in 2020.

The net cash used in investing activities in 2021 was primarily to purchase marketable securities and to invest in Cyrus Biotechnology, offset by proceeds from the maturities of marketable securities.

The net cash used in investing activities in 2020 was to purchase property and equipment.

The net cash provided by investing activities in 2019 was the result of purchases of short-term investments of $18.2 million, offset by $16.4 million of maturities and $2.0 million of sales of short term investments.

Financing activities

Net cash provided by financing activities for the year ended December 31, 2021 was $52.9 million compared to net cash provided by financing activities of $14.4 million in the same period in 2020.

The net cash provided by financing activities in 2020 was the result of $10.3 million from the Sobi Private Placement, $24.7 million from the Term A Loan, $2.1 million net proceeds from “at-the-market” offerings, and $1.0 million proceeds from warrant exercises, offset by $4.4 million of issuance costs paid for December 2019 financing and $19.3 million principal payment on outstanding debt.

The net cash provided by financing activities in 2019 was the result of $30.9 million net proceeds from an underwritten follow-on offering of our common stock in January, $75.7 million net proceeds from private placement offerings in August and December and $1.0 million net proceeds from “at-the-market” offerings, offset by $2.8 million principal payment on outstanding debt.

The net cash provided by financing activities in 2021 was primarily the result of net proceeds from “ at-the-market ” offerings and from the exercise of stock options.

The net cash provided by financing activities in 2020 was the result of $10.3 million from the Sobi Private Placement, $24.7 million from the Term A Loan, $2.1 million net proceeds from sales of common stock in “at-the-market” offerings, and $1.0 million proceeds from warrant exercises, offset by $4.4 million of issuance costs paid for December 2019 financing and $19.3 million principal payment on outstanding debt.

Research and development contract obligations

3 unchanged sentences

Recent Accounting Pronouncements

For a discussion of recently adopted or issued accounting pronouncements please see Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

For a discussion of recently adopted or issued accounting pronouncements please see Note 2 to our consolidated financial statements included elsewhere in this Annual Report.

Off-Balance Sheet Arrangements

As of December 31, 2021, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the Securities and Exchange Commission.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities in our consolidated financial statements, as well as the reported revenues and expenses during the reporting periods.

These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future.

We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Changes in estimates are reflected in reported results for the period in which they become known.

Actual results may differ materially from these estimates under different assumptions or conditions.

Clinical Trial Costs

Clinical trial expenses are a significant component of research and development expenses, and we outsource a significant portion of these costs to third parties.

Third party clinical trial expenses include patient costs, clinical research organization costs and costs for data management.

The accrual for site and patient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, and other pass-through costs.

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 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 research and development activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed.

We also record accruals for estimated ongoing clinical research and development costs.

When evaluating the adequacy of the accrued liabilities, we analyze 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.

Actual results could differ from the estimates made by us.

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

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

The preparation of these consolidated financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in our consolidated financial statements.

Actual results may differ from these estimates under different assumptions or conditions and could have a material impact on our reported results.

While our significant accounting policies are more fully described in the Notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be the most critical in understanding the judgments and estimates we use in preparing our consolidated financial statements:

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

Pursuant to ASC 606, Revenue from Contracts with Customers (ASC 606) , a customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration.

Pursuant to ASC Topic 606, Revenue from Contracts with Customers (ASC 606) , a customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, we perform the following five steps:

5 unchanged sentences

We only apply the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct.

If a promised good or service is not distinct, it is combined with other performance obligations.

We then recognize 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 Sobi, AskBio, and Sarepta (see Note 12 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K) 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:

We currently generate our revenue through grants, collaboration and license agreements with strategic collaborators for the development and commercialization of product candidates.

Grants and license agreements with customers are accounted for in accordance with ASC 606.

We analyze collaboration arrangements by first assessing

whether they are within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808) , and evaluate whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities.

For example, certain performance obligations associated with Swedish Orphan Biovitrum, or Sobi, Asklepios Biopharmaceutical, Inc., or AskBio, Sarepta Therapeutics, Inc., or Sarepta, and Takeda Pharmaceuticals USA, Inc., or Takeda, (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 License Revenue:

We currently generate revenue through collaboration and license agreements with strategic collaborators for the development and commercialization of product candidates.

Collaboration and license agreements with customers are generally accounted for in accordance with ASC 606.

We analyze collaboration arrangements by first assessing whether they are within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808 ), and evaluate whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities.

Collaboration agreements with customers that are not within the scope of ASC 808 are accounted for in accordance with ASC 606.

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

We early adopted ASU No.

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 , which provides guidance on evaluating certain transactions between collaborative arrangement participants.

If we conclude that some or all aspects of the agreement are distinct and represent a transaction with a customer, we account for those aspects of the arrangement within the scope of ASC 606.

We recognize the shared costs incurred that are not within the scope of other accounting literature as a component of the related expense in the period incurred by analogy to ASC 730, Research and Development (ASC 730) , and record reimbursements from counterparties as an offset to the related costs.

We recognize the shared costs incurred that are not within the scope of other accounting literature as a component of the related expense in the period incurred by analogy to ASC Topic 730, Research and Development (ASC 730) , and record reimbursements from counterparties as an offset to the related costs.

In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under the agreements in accordance with ASC 606, we perform the five steps above.

1 unchanged sentence

We use key assumptions to determine the stand-alone selling price, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success.

The assumptions used to determine the stand-alone selling price and our satisfaction of performance obligations have a material effect on our collaboration and license revenue and may prove to be wrong.

The terms of our arrangements typically include one or more of the following:

(i) up-front fees;

(i) upfront fees;

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

(iii) royalties on net sales of licensed products;

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

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

and (v) profit/loss sharing arising from co-promotion arrangements.

Licenses of Intellectual Property:

If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

If not distinct, the license is combined with other performance obligations in the contract.

For licenses that are combined with other performance obligations, we assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue.

We evaluate the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Optional licenses are evaluated to determine if they are issued at a discount, and therefore, represent material rights and accounted for as separate performance obligations.

progress for purposes of recognizing revenue.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Optional licenses are evaluated to determine if they are issued at a discount, and therefore, represent material rights and should be accounted for as separate performance obligations.

Milestone Payments:

1 unchanged sentence

If the achievement of a milestone is considered a direct result of our efforts to satisfy a performance obligation or transfer a distinct good or service and the receipt of the payment is based upon the achievement of the milestone, the associated milestone value is allocated to that distinct good or service.

If the milestone payment is not specifically related to our effort to satisfy a performance obligation or transfer a distinct good or service, the amount is allocated to all performance obligations using the relative standalone selling price method.

We also evaluate the milestones to determine whether they are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method.

If the milestone payment is not specifically related to our efforts to satisfy a performance obligation or transfer a distinct good or service, the amount is allocated to all performance obligations using the relative standalone selling price method.

We also evaluate the milestone to determine whether they are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price to be allocated, otherwise, such amounts are constrained and excluded from the transaction price.

6 unchanged sentences

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied) in accordance with the royalty recognition constraint.

Clinical Trial Costs

Clinical trial expenses are a significant component of research and development expenses, and we outsource a significant portion of these costs to third parties.

Third party clinical trial expenses include patient costs, clinical research organization costs and costs for data management.

The accrual for site and patient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, and other pass-through costs.

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.

We also record accruals for estimated ongoing clinical research and development costs.

When evaluating the adequacy of the accrued liabilities, we analyze 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.

Actual results could differ from the estimates made by us materially affecting our results of operations.

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

Warrant Liabilities

In December 2019, we issued common warrants in connection with a securities purchase agreement between us and a group of institutional investors and certain members of our board of directors.

Pursuant to the terms of these common warrants,

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

Pursuant to the terms of these common warrants, we could be required to settle the common warrants in cash in the event of certain acquisitions of us 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 of $40.7 million 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.

Inputs used to determine estimated fair value of the common warrant liabilities include the estimated fair value of the underlying stock at the valuation date, the estimated term of the warrants, risk-free interest rates, expected dividends and the expected volatility of the underlying stock.

As of December 31, 2020, the fair value of the common warrants of $28.7 million was recorded as a long-term liability on our balance sheet, which resulted in a change in fair value of $10.4 million for the year ended December 31, 2020.

The estimates used to determine the fair value of these common warrants represent our best estimates, but may prove to be wrong.

Therefore, the change in fair value of warrant liabilities could be materially different in the future.

Stock-Based Compensation

We account for all stock-based compensation granted to employees and non-employees using a fair value method.

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

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

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.

To the extent that actual forfeitures differ from our 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 ultimately vest.

Emerging Growth Company Status

The JOBS Act permits an ‘‘emerging growth company’’ such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.

We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We will remain an emerging growth company until December 31, 2021, the last day of the fiscal year following the fifth anniversary of the closing of the initial public offering of our common stock.

However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.07 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

The assumptions used in determining the fair value of stock-based awards represent our best estimates, but the estimates involve inherent uncertainties and the application of our judgment.

As a result, if factors change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different in the future.

Smaller Reporting Company

We qualify as a “smaller reporting company” under the rules of the Securities Act and the Exchange Act.

As a result, in addition to the exemptions available to us as an “emerging growth company,” we may choose to take advantage of certain scaled disclosure requirements available specifically to smaller reporting companies.

Additionally, even if we cease to be an emerging growth company as noted above, as long as we continue to be a smaller reporting company, we may continue to rely on the reduced executive compensation disclosure obligations available to emerging growth companies.

We will remain a smaller reporting company until the last day of the fiscal year in which the aggregate market value of our common stock held by non-affiliated persons and entities, or our public float, was less than $250 million as of the last business day of our most recently completed second fiscal quarter, or the last day of the fiscal year in which we have at least $100 million in revenue and at least $700 million in public float as of the last business day of our most recently completed second fiscal quarter.

As a result, we may choose to take advantage of certain scaled disclosure requirements available specifically to smaller reporting companies.

We will remain a smaller reporting company until the last day of the fiscal year in which the aggregate market value of our common stock held by non-affiliated persons and entities, or our public float, is more than $700 million as of the last business day of our most recently completed second fiscal quarter, or the last day of the fiscal year in which we have at least $100 million in revenue and at least $250 million in public float as of the last business day of our most recently completed second fiscal quarter.

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 7. Management’s Discussion and Analysis