What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-31 compared with 2021-03-29 · 203 added, 326 removed, 105 unchanged (83% of the section changed)

Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock has been listed on the

Nasdaq Global Market under the symbol SBTX since December 4, 2020.

Our common stock has been listed on the Nasdaq Global Market under the symbol “SBTX”

since December 4, 2020.

Prior to that date, there was no public market for our common stock.

of Common Stock

As of February 28, 2021, there were 34,894,423 shares of common stock issued and held by approximately 61 stockholders of

The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

Holders of Common Stock

As of March 15, 2022, there were approximately eight holders of record of our common stock.

Because most of our common stock is held by brokers, nominees, and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Securities Authorized for Issuance Under Equity Compensation Plans

Information about securities authorized for issuance under our equity compensation plans is incorporated herein by reference to Item 12 of Part III of

this Annual Report on Form 10-K.

Information about securities authorized for issuance under our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock.

We currently intend to retain all available funds and any future earnings to

support our operations and finance the growth and development of our business.

We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business.

We do not intend to pay cash dividends on our common stock for the foreseeable future.

Any future determination related to our dividend policy will be made at the

discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem

Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.

Recent Sales of Unregistered Securities

During the year ended December 31, 2020, we issued and sold the following unregistered securities:

In March 2020, we entered into a Series B Preferred Stock Purchase Agreement with various investors, pursuant to which we

issued and sold to such investors an aggregate of 10,027,666 shares of our Series B redeemable convertible preferred stock at a purchase price of $2.16 per share, and received gross proceeds of $21.5 million and 4,673,388 shares upon conversion

of then outstanding convertible notes.

In July 2020, pursuant to the March 2020 Series B Preferred Stock Purchase Agreement with various investors, we issued

and sold to such investors an aggregate of 10,669,834 shares of our Series B redeemable convertible preferred stock at a purchase price of $2.16 per share, and received gross proceeds of $23.0 million.

In September 2020, pursuant to the March 2020 Series B Preferred Stock Purchase Agreement with various investors, we

issued and sold to such investors an aggregate of 11,063,028 shares of our Series B redeemable convertible preferred stock at a purchase price of $2.16 per share, and received gross proceeds of $23.9 million.

In September 2020, we entered into a Series C Preferred Stock Purchase Agreement with various investors, pursuant to

which we issued and sold to such investors an aggregate of 24,926,685 shares of our Series C redeemable convertible preferred stock at a purchase price of $3.41 per share, and received gross proceeds of $84.9 million.

From January 1, 2020 through December 2, 2020, which is the day before we priced our initial public offering,

we granted stock options to purchase an aggregate of 3,213,541 shares of our common stock at a weighted average exercise price of $3.67 per share, to certain of our employees and directors in connection with services provided to us by such persons.

Of these, 131,266 options have been exercised and 5,772 options have been cancelled through December 31, 2020.

of securities described above in paragraphs (1) through (4) were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) (or Regulation D promulgated thereunder) in that the issuance of securities to

the accredited investors did not involve a public offering.

The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and

appropriate legends were affixed to the securities issued in these transactions.

Each of the recipients of securities in these transactions was an accredited investor under Rule 501 of Regulation D.

No underwriters were involved in these

transactions.

The issuance of securities described above in paragraph (5) was deemed to be exempt from registration under the Securities Act

in reliance on either Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701 or Section 4(a)(2) in that the issuance of securities to the accredited investors

did not involve a public offering.

The recipients of such securities were our employees and directors and received the securities under our 2016 Equity Incentive Plan.

Use of Proceeds

On December 3, 2020, we commenced our

initial public offering pursuant to a registration statement on Form S-1 (File No.

333-250009) that was declared effective by the SEC on December 3, 2020,

for 11,500,000 shares of our common stock for sale to the public at a price of $21.00 per share.

In addition, in December 2020, the underwriters exercised their over-allotment option to purchase 1,725,000 additional shares of our common stock in the

initial public offering at the public offering price of $21.00 per share, such that the aggregate offering price of our initial public offering was $277.7 million.

The net offering proceeds to us, after deducting underwriting discounts and

commissions and offering costs, were $255.3 million.

No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10% or more of any class of our equity securities or to any

other affiliates.

On December 3, 2020, we commenced our initial public offering (IPO) pursuant to a registration statement on Form S-1 (File No.

333-250009) that was declared effective by the SEC on December 3, 2020, for 11,500,000 shares of our common stock for sale to the public at a price of $21.00 per share.

In addition, in December 2020, the underwriters exercised their over-allotment option to purchase 1,725,000 additional shares of our common stock in the initial public offering at the public offering price of $21.00 per share, such that the aggregate offering price of our initial public offering was $277.7 million.

The net offering proceeds to us, after deducting underwriting discounts and commissions and offering costs, were $255.3 million.

No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10% or more of any class of our equity securities or to any other affiliates.

The underwriters for our initial public offering were Goldman Sachs & Co.

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Wainwright & Co., LLC.

Upon receipt, the net proceeds from our IPO were held in cash and cash equivalents, primarily in treasury money market accounts.

Through December 31,

2020, we have not used any of the net proceeds from our IPO.

There has been no material change in the use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b)(4) on

December 4, 2020.

The net proceeds from our IPO are held in cash and cash equivalents, primarily in treasury money market accounts, and

investments, primarily in U.S.

Treasury securities.

Through December 31, 2021, we have used approximately $45.0 million of the net proceeds from our IPO.

The following information updates the planned use of proceeds information from our IPO that we previously disclosed in the final prospectus filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act on December 4, 2020:

we intend to use the remaining net proceeds from the IPO, together with our existing cash and cash equivalents, to fund the development of our SBT8230 program for cHBV, including IND-enabling studies, a Phase 1 SAD study, and a Phase 1 MAD study.

We intend to use the remainder to fund our other research and development activities, including activities related to our internal discovery programs, as well as for working capital and other general corporate purposes.

We may also use a portion of the net proceeds from the IPO to in-license, acquire or invest in complementary businesses, technologies, products or assets.

However, we have no current commitments or obligations to do so.

Issuer Purchases of Equity Securities

Not applicable.

Financial Data.

Not applicable.

Managements Discussion and Analysis of Financial Condition and

Results of Operations.

You should read the following discussion and analysis together with our financial statements and related notes

included in Item 8.

Financial Statements and Supplementary Data in this Annual Report on Form 10-K.

The following discussion contains forward-looking statements that involve risks and

uncertainties.

For a complete discussion of forward-looking statements, see the section above entitled Forward Looking Statements. Our actual results could differ materially from those expressed or implied in any forward-looking

statements as a result of various factors, including those set forth under the caption Item 1A.

Risk Factors.

We are a clinical-stage biopharmaceutical company with one product candidate in a Phase 1/1b clinical trial, and we are focused on leveraging our

proprietary ImmunoTAC technology platform to develop systemically delivered, tissue targeted therapeutics for the treatment of cancer, chronic viral infections, and other serious diseases.

Our platform enables us to strategically pair proprietary

linker-payloads that modulate key disease-modifying pathways with monoclonal antibodies directed to specific disease sites.

Initially, we are applying our platform to create a new class of targeted immuno-oncology agents that direct a myeloid cell

activator to the tumor microenvironment in solid tumors to promote cancer cell killing.

Our lead product candidate, SBT6050, is comprised of a TLR8 agonist linker-payload conjugated to a HER2-directed monoclonal antibody that targets tumors such as

certain breast, gastric and non-small cell lung cancers.

SBT6050 is currently in a Phase 1/1b clinical trial as a monotherapy and in combination with pembrolizumab, in patients with advanced or metastatic

HER2-expressing solid tumors.

In this trial, we have observed changes in pharmacodynamic markers in the first dose cohort, and we anticipate providing an update on interim data from the Phase 1 single agent dose-escalation cohorts in the second

half of 2021.

SBT6290 is our second product candidate, expanding on the potential of a TLR8 agonist as a payload.

SBT6290 is a TLR8 linker-payload conjugated to a monoclonal antibody that targets Nectin4, which is expressed in certain bladder,

triple negative breast, head and neck, and non-small cell lung cancers.

We anticipate submitting an investigational new drug application for SBT6290 in the fourth quarter of 2021.

Our third TLR8 program,

SBT8230, is comprised of a TLR8 linker-payload conjugated to an ASGR1 monoclonal antibody that is under development for the treatment of cHBV.

We are also developing agents that localize therapies to modulate important pathways in additional

oncology and fibrosis indications using TLR8 and other linker-payloads.

Our ImmunoTAC platform drives our development pipeline of tissue targeted therapeutic candidates as

summarized in the chart below:

Management’s Discussion and Analysis o f Financial Condition and Results of Operations

You should read the following discussion and analysis together with our financial statements and related notes included in “Item 8.

Financial Statements and Supplementary Data”

in this Annual Report on Form 10-K.

The following discussion contains forward-looking statements that involve risks and uncertainties.

For a complete discussion of forward-looking statements, see the section above entitled “Forward Looking Statements.”

Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A.

Risk Factors.”

We are a biopharmaceutical company focused on leveraging our proprietary ImmunoTAC technology platform to develop systemically delivered, tissue targeted therapeutics for the treatment of chronic viral infections, cancer, and other serious diseases.

Our ImmunoTAC platform is the result of a focused effort to discover ways to systemically deliver disease-modifying small molecules in a directed fashion to sites of disease.

Our platform enables us to strategically pair proprietary linker-payloads that modulate key disease-modifying pathways with monoclonal antibodies directed to specific disease sites.

Many potentially promising systemic therapies fail to maximize their therapeutic potential due to toxicities in healthy tissues.

Our approach is designed to expand the therapeutic window and avert unacceptable toxicities by directly targeting specific disease sites where our therapeutics are locally active.

In July 2020, we initiated clinical development of our first ImmunoTAC product candidate, a TLR8 agonist conjugated to a HER2 antibody, SBT6050.

Preclinical data suggested that we would be able to demonstrate a therapeutic window and advance SBT6050 through clinical development as a monotherapy and in combination with standard-of-care agents that had a complementary mechanism-of-action.

Our Phase 1/1b program was designed to measure safety and tolerability, PK, PD and anti-tumor activity as monotherapy and in combination with pembrolizumab.

On March 28, 2022, we made the decision to discontinue our clinical development program for SBT6050 due to limited monotherapy activity and dose-limiting adverse events when used in combination with pembrolizumab.

SBT6290, comprised of the same linker payload conjugated to a Nectin4 antibody was expected to show a similar clinical profile and, therefore, we also terminated this program prior to dosing patients.

We have prioritized our resources to focus on the development of SBT8230 and early-stage discovery programs.

Our understanding of TLR8 conjugates in preclinical species and in the clinic guides our interpretation of the preclinical characteristics of SBT8230, an ASGR1 antibody conjugated to a TLR8 agonist linker payload for the treatment of cHBV, which is currently in preclinical development.

ASGR1 is highly expressed in liver and is restricted in its expression to this organ.

Other ASGR1-directed agents, such as those used in RNAi therapies, have shown robust liver localization.

SBT8230 shows biodistribution profiles in NHP consistent with these agents, which is distinct from SBT6050 and SBT6290.

We believe that efficient liver targeting of SBT8230 via ASGR1 binding has the potential to lead to markedly lower serum exposures of SBT8230 in patients compared to those observed with SBT6050 in the clinic at any dose evaluated.

We believe the preclinical to clinical experience for SBT6050, coupled with the NHP PK, PD, and tolerability data for SBT8230, suggest that the clinical safety, PK and PD profiles for SBT8230 has the potential to be notably different than those for SBT6050, given the large differences in serum exposures and overall conjugate disposition for SBT8230 that are expected in patients due to its efficient liver targeting.

SBT8230 is designed to elicit an anti-viral immune response by targeting TLR8 activation to the liver.

The anti-viral immune response is achieved through activation of myeloid cells and subsequent activation of immune cells that drive an IFNγ

signal, which has been observed in the clinic with SBT6050.

This has been shown by others to drive seroconversion, an important determinant of a functional cure.

We see a significant opportunity in liver-localized immunotherapies as a potential way of achieving durable responses in these patients.

We are focused on advancing SBT8230, our liver-targeted conjugate designed to potently activate human myeloid cells in the liver for the treatment of cHBV.

Further support for investigating TLR8 agonism for the treatment of cHBV comes from selgantolimod (GS-9688), an existing untargeted, orally administered TLR8 agonist being developed by Gilead Sciences.

Selgantolimod has generated anti-viral immune responses in a cHBV animal model.

The clinical development of this untargeted TLR8 agonist has shown promise, but we believe that toxicity prevented the use of a sufficient dose to elicit optimal clinical activity.

We believe liver-localized TLR8 agonism could better realize the potential for effective therapy and potentially lead to functional cure, which is defined as sustained loss of HBsAg in the blood, in patients suffering from cHBV.

We presented a preclinical update on SBT8230 in the fourth quarter of 2021.

In the first quarter of 2022, we began a Phase 1-enabling toxicology study.

We plan to complete a P hase 1 regulatory submission in the fourth quarter of 2022 and begin a Phase 1 SAD study in healthy volunteers in the first half of 2023.

After completing the SAD study, we anticipate initiating a Phase 1 MAD study in patients with chronic HBV, who are virally suppressed on NRTI therapy.

In addition, our internal discovery programs are focused on evaluating and developing new antigen binding domains specific for targets of interest (including antibodies), next-generation linker technologies, and both agonist and antagonist small molecule payloads, that may be combined to create novel tissue-targeted antibody conjugates.

The integration of medicinal chemistry, bioconjugation, protein engineering, bioinformatics, pharmacology, and translational medicine expertise focused on developing tissue-targeted therapies allows us to leverage key learnings from our previous clinical program to bring forward the next generation of therapeutics.

We anticipate providing an update on our discovery pipeline in the fourth quarter of 2022.

Our ImmunoTAC platform drives our development pipeline of tissue targeted therapeutic candidates as summarized in the chart below:

We have incurred significant operating losses since our inception.

As of December 31, 2020, we had an

accumulated deficit of $96.7 million.

As of December 31, 2021, we had an accumulated deficit of $186.2 million.

Our net losses were $89.5 million and $32.9 million for the years ended December 31, 2021 and 2020, respectively.

Our losses have resulted primarily from costs incurred in connection with

raising capital, research and development activities and general and administrative expenses.

Our losses have resulted primarily from research and development activities and general and administrative expenses.

We do not have any products approved for sale and have not generated any revenue from product sales or otherwise.

We expect our expenses will increase substantially and that we will continue to incur significant losses for the foreseeable future as we continue our

development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products, seek to expand our product pipeline, invest in our organization and technology platform, as well as incur expenses associated

with operating as a public company.

We expect we will continue to incur significant losses for the foreseeable future as we continue our development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products, seek to expand our product pipeline, invest in our organization and technology platform, as well as incur expenses associated with operating as a public company.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on a variety of factors including the timing and scope of our preclinical studies and clinical trials.

Accordingly, until such time as we can generate significant revenue from

sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources.

In December 2020, we completed our initial public offering in which we sold 13,225,000 shares of our common stock at $21.00 per share and received net

proceeds, after underwriting discounts and offering costs, of $255.3 million.

Further, in March, July, and September 2020, we raised net proceeds of $153.3 million from the sale of our redeemable convertible preferred stock.

Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses or other similar arrangements.

On March 28, 2022, our board of directors approved a corporate restructuring plan to discontinue our clinical development programs for SBT6050 and SBT6290 and to prioritize resources on the development of SBT8230 and early-stage discovery programs (the Restructuring Plan).

In connection with the Restructuring Plan, our workforce will be reduced by 27%, with substantially all of the reduction in personnel expected to be completed by July 15, 2022.

We initiated the reduction in force on March 31, 2022 and expect to provide severance payments, continuation of group health insurance coverage, and other benefits for a specified period to the affected employees.

We currently estimate that we will incur costs of approximately $2.0 million for termination benefits related to the Restructuring Plan, all of which will be cash expenditures paid in 2022.

Components of Our Results of Operations

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Research and Development

Our research and development expenses consist primarily of direct and indirect costs incurred in connection with the development of our ImmunoTAC

technology platform, product candidates, discovery efforts and preclinical studies and clinical trial activities related to our program pipeline, including our lead product candidate, SBT6050.

Our research and development expenses consist primarily of direct and indirect costs incurred in connection with the development of our ImmunoTAC technology platform, product candidates, discovery efforts and preclinical studies and clinical trial activities related to our program pipeline.

Our direct costs include:

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Our indirect costs include:

personnel-related expenses, consisting of employee salaries, bonuses, benefits, and stock-based compensation expense and

recruiting costs for personnel engaged in research and development activities;

facility and equipment related expenses, consisting of indirect and allocated expenses for rent, depreciation, and

equipment maintenance;

other unallocated research and development expenses incurred in connection with our research and development programs,

including laboratory materials and supplies and license fees.

personnel-related expenses, consisting of employee salaries, bonuses, benefits, and stock-based compensation expense and recruiting costs for personnel engaged in research and development activities;

facility and equipment related expenses, consisting of indirect and allocated expenses for rent, depreciation, and equipment maintenance;

other unallocated research and development expenses incurred in connection with our research and development programs, including laboratory materials and supplies and license fees.

We expense research and development costs as incurred.

Non-refundable advance payments for goods and services that will be used over time for research and development are capitalized and recognized as goods are delivered or as the related services are performed.

In-licensing fees and other costs to acquire technologies used in research and development that have not yet received regulatory approval and that are not expected to have an alternative future use

are expensed when incurred.

Advance payments for goods and services that will be used over time for research and development are capitalized and recognized as goods are delivered or as the related services are performed.

In-licensing fees and other costs to acquire technologies used in research and development that have not yet received regulatory approval and that are not expected to have an alternative future use are expensed when incurred.

We track direct costs by stage of program, clinical or preclinical.

However, we do not track indirect costs on a program specific or stage of program basis because these costs are deployed across multiple programs

and, as such, are not separately classified.

We expect that our research and development expenses will substantially increase for the foreseeable

future as we continue the clinical development of SBT6050 and discovery and development of our other development candidates and discovery programs and development, particularly as our product candidates move into later stages of

development which increases costs considerably.

We cannot reasonably determine the timing of initiation, the duration or the completion costs of future clinical trials and preclinical studies of IND and development candidates due to the inherently

unpredictable nature of preclinical and clinical development.

However, we do not track indirect costs on a program specific or stage of program basis because these costs are deployed across multiple programs and, as such, are not separately classified.

We expect that our research and development expenses will decrease in 2022 due to discontinuation of the clinical development of SBT6050 and SBT6290 and the Restructuring Plan.

However, following 2022, we expect that our research and development expenses will begin to increase again for the foreseeable future as we continue the development of our preclinical and discovery programs, particularly as they move into later stages of development which increases costs considerably.

We cannot reasonably determine the timing of initiation, the duration or the completion costs of these future preclinical studies and clinical trials due to the inherently unpredictable nature of preclinical and clinical development.

Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations.

We anticipate that we will make determinations as

to which development candidates and discovery programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials,

regulatory developments and our ongoing assessments as to each product candidates commercial potential.

We anticipate that we will make determinations as to which development candidates and discovery programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses, including employee salaries, bonuses, benefits, and

stock-based compensation, and recruiting costs for

personnel in executive, finance, and other administrative functions.

Other significant general and administrative expenses include legal fees relating to intellectual property and corporate

matters, professional fees for accounting, tax and consulting services, insurance costs, travel expenses and facility related expenses.

that our general and administrative expenses will substantially increase for the foreseeable future as we continue to increase our general and administrative headcount to support our continued research and development activities and, if any product

candidates receive marketing approval, commercialization activities, as well as to support our operations generally.

We also expect to incur increased expenses associated with operating as a public company, including costs related to accounting,

audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs, and investor and public

relations costs.

General and administrative expenses consist primarily of personnel-related expenses, including employee salaries, bonuses, benefits, and stock-based compensation, and recruiting costs for personnel in executive, finance, and other administrative functions.

Other significant general and administrative expenses include legal fees relating to intellectual property and corporate matters, professional fees for accounting, tax and consulting services, insurance costs, travel expenses, and facility related expenses.

We expect that our general and administrative expenses will decrease in 2022 due to the Restructuring Plan.

However, following 2022, we expect that our general and administrative expenses will begin to increase again to the extent needed to support growth in our research and development activities.

We also expect to continue to incur increased expenses associated with operating as a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs, and investor and public relations costs.

Interest Income (Expense), Net

Interest income (expense), net includes interest earned on our cash and cash equivalents carried at fair value, and interest expense on our borrowings.

Interest income (expense), net includes interest earned on our cash, cash equivalents, and long-term investments carried at fair value, and interest expense on our borrowings.

Results of Operations

Comparison of the Years Ended

December 31, 2020 and 2019

Comparison of the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020:

(in thousands)

Years Ended December 31,

(in thousands, except percentages)

Operating expenses:

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Interest income (expense), net

Net loss and comprehensive loss

* Not meaningful

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The following table summarizes our research and development expenses for the years ended December 31, 2021 and 2020:

(in thousands)

Years Ended December 31,

(in thousands, except percentages)

Direct costs:

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Indirect costs:

Personnel-related expenses, including stock-based compensation

Personnel-related expenses, including stock-based

Facility and equipment related expenses

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Total research and development expenses

Research and development expenses were $24.6 million and $21.5 million for the years ended December 31,

2020 and 2019, respectively.

The increase of $3.2 million was due primarily to an increase in preclinical programs of $3.8 million as we began advancing certain pipeline programs, including SBT6290 and SBT8230, into preclinical

The increase was also due to increases in personnel-related expenses of $3.1 million, and facility and equipment related expenses of $0.2 million.

These increases were partially offset by a decrease of $4.0 million in

research and manufacturing expenses related to the development of SBT6050 as the program completed manufacturing activities and initiated a Phase 1/1b clinical trial in the second half of 2020.

An investigational new drug application for SBT6290 was cleared by the FDA in the fourth quarter of 2021 and we opened enrollment for a Phase 1 clinical trial of SBT6290 in the first quarter of 2022, which is now discontinued.

As a result, we have separated direct costs for the development of SBT6290 from preclinical programs for the year ended December 31, 2021 and, for comparability purposes, the year ended December 31, 2020.

This change had no effect on net loss, total research and development expenses, stockholders' equity, or cash flows as previously reported.

Research and development expenses were $61.5 million and $24.6 million for the years ended December 31, 2021 and 2020, respectively.

The increase of $36.9 million was due primarily to an increase of $10.4 million in direct costs related to the development of SBT6050 as we continued to advance the program through a Phase 1/1b clinical trial.

The increase was also due to an increase of $6.2 million in direct costs related to the development of SBT6290 as we advanced the program through FDA clearance of its investigational new drug application and prepared to initiate a Phase 1 clinical trial in the first quarter of 2022 and due to an increase in direct costs for our preclinical programs of $4.9 million as we continued to advance SBT8230 and other preclinical research efforts.

The remaining increase was due to increases in personnel-related expenses of $13.4 million resulting from increased headcount during the year ended December 31, 2021 as well as increases in salaries, bonuses, stock-based compensation, and recruiting expenses.

To a lesser extent, the increase in research and development expenses was due to facility and equipment related expenses of $0.5 million, and other unallocated research and development expenses of $1.5 million.

General and Administrative Expenses

and administrative expenses were $8.3 million and $2.6 million for the years ended December 31, 2020 and 2019, respectively.

The increase of $5.8 million was due primarily to an increase of $3.9 million in personnel-related

expenses due to increased headcount in 2020, including new executives, as well as increases in salaries, bonuses, and stock-based compensation.

To a lesser extent, the increase in general and administrative expenses was due to an increase in legal

fees of $0.8 million, professional fees of $0.7 million, and $0.4 million in other various general and administrative expenses as we prepared to become a public company.

General and administrative expenses were $28.1 million and $8.3 million for the years ended December 31, 2021 and 2020, respectively.

The increase of $19.7 million was due primarily to an increase of $13.5 million in personnel-related expenses due to increased headcount during the year ended December 31, 2021, including executives that were new in 2020 being present for a full year in 2021, as well as increases in salaries, bonuses, stock-based compensation, and recruiting expenses.

To a lesser extent, the increase in general and administrative expenses was due to an increase in professional fees of $5.4 million primarily attributable to legal, insurance, and outside consultant costs, and $0.8 million in other various general and administrative expenses as we operated as a public company for the full year of 2021.

Interest Income (Expense), Net

income (expense), net was ($29,000) and $0.1 million for the years ended December 31, 2020 and 2019, respectively.

The change of $0.1 million was primarily due to a decrease in interest earned on our cash and cash equivalents due to

changes in interest rates.

Interest income (expense), net was $0.1 million and $(29,000) for the years ended December 31, 2021 and 2020, respectively.

The change of $0.1 million was primarily due to a decrease in principal on our notes payable and an increase in our cash balance.

Also contributing to the change was the investment in higher interest-bearing assets during the period.

Liquidity and Capital Resources

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the

foreseeable future.

Since our inception, we have funded our operations almost exclusively with proceeds from the sale and issuance of shares of our redeemable convertible preferred stock and debt financings.

We will need to raise substantial

additional capital in the future.

In 2020, we raised net proceeds, after deducting underwriting discounts and commissions and offering costs, of $255.3 million from our initial public

offering in December 2020 and net proceeds of $153.3 million from the sale of our redeemable convertible preferred stock in March, July, and September 2020.

As of December 31, 2020, we had $386.6 million in cash and cash equivalents.

The following table sets forth a summary of the net cash flow

activity for the years ended December 31, 2020 and 2019:

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future.

Since our inception, we have funded our operations almost exclusively with proceeds from the sale and issuance of shares of our redeemable convertible preferred stock and common stock, and debt financings.

We will need to raise substantial additional capital in the future.

As of December 31, 2021, we had $319.1 million in cash, cash equivalents, restricted cash, and investments.

The following table sets forth a summary of the net cash flow activity for the years ended December 31, 2021 and 2020:

Years Ended December 31,

(in thousands)

Net cash provided by (used in):

Net cash (used in) provided by:

Operating activities

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During the year ended December 31, 2021, net cash used in operating activities was $66.8 million.

This consisted primarily of a net loss of

$32.9 million and an increase in our operating assets and liabilities of $2.6 million, partially offset by non-cash charges of $4.4 million.

charges primarily consisted of stock-based compensation expense of $2.6 million, non-cash lease expense of $1.1 million, and depreciation expense of $0.6 million.

The increase in our operating

assets and liabilities was primarily due to an increase in prepaid expenses and other assets of $3.5 million and a decrease in our lease liability of $0.9 million, partially offset by an increase in accounts payable and accrued expenses of

$1.8 million after adjusting for non-cash items.

The increase in prepaid expenses and other assets was primarily due to the purchase of $2.6 million in prepaid insurance.

This consisted primarily of a net loss of $89.5 million, partially offset by non-cash charges of $21.2 million and a decrease in our operating assets and liabilities of $1.5 million.

The non-cash charges primarily consisted of stock-based compensation expense of $19.2 million, non-cash lease expense of $1.2 million, and depreciation expense of $0.8 million.

The decrease in our operating assets and liabilities was primarily due to an increase in accounts payable and accrued expenses of $6.0 million.

The decrease was partially offset by a decrease in lease liability of $1.1 million and an increase in prepaid expenses and other assets of $3.4 million.

During the year ended December 31, 2020, net cash used in operating activities was $31.2 million.

This consisted primarily of a net loss of

$24.0 million, partially offset by a decrease in our operating assets and liabilities of $3.3 million and non-cash charges of $1.8 million.

charges primarily consisted of non-cash lease expense of $1.0 million, depreciation expense of $0.5 million, stock-based compensation expense of $0.2 million, and amortization of debt issuance

costs of $0.1 million.

The decrease in our operating assets and liabilities was primarily due to an increase in accounts payable and accrued expenses of $4.0 million and a decrease in prepaid expenses and other assets of $0.1 million,

partially offset by a decrease in our lease liability of $0.8 million.

This consisted primarily of a net loss of $32.9 million and an increase in our operating assets and liabilities of $2.6 million, partially offset by charges of $4.4 million.

The charges primarily consisted of stock-based compensation expense of $2.6 million, lease expense of $1.1 million, and depreciation expense of $0.6 million.

The increase in our operating assets and liabilities was primarily due to an increase in prepaid expenses and other assets of $3.5 million and a decrease in our lease liability of $0.9 million, partially offset by an increase in accounts payable and accrued expenses of $1.8 million after adjusting for items.

The increase in prepaid expenses and other assets was primarily due to the purchase of $2.6 million in prepaid insurance.

Investing Activities

During the year ended December 31, 2020, cash used in investing activities was $0.9 million due to purchases of property and equipment.

During the year ended December 31, 2021, cash used in investing activities was $66.5 million.

This consisted of purchases of U.S.

Treasury Securities of $65.1 million and purchases of property and equipment of $1.4 million.

During the year ended December 31, 2020, cash used in investing activities was $0.9 million due to purchases of property and equipment.

Financing Activities

During the year ended

December 31, 2020, cash provided by financing activities was $408.5 million.

This consisted primarily of net proceeds received from the issuance of our common

stock in connection with our initial public offering of $255.7 million, net proceeds received from the issuance of shares of our redeemable convertible preferred stock of

$153.4 million, and proceeds from the exercise of common stock options of $0.2 million, which were partially offset by principal payments on term loan payable of $0.7 million.

During the year ended December 31, 2021, cash provided by financing activities was $0.6 million.

This consisted primarily of net proceeds

received from the issuance of our convertible notes of $10.0 million, which was partially offset by principal payments on term loan payable of $1.4 million.

This was primarily driven by proceeds from the exercise of common stock options and the employee stock purchase plan of $1.5 million, which was partially offset by $0.8 million of principal payments on the term loan payable.

During the year ended December 31, 2020, cash provided by financing activities was $408.5 million.

This consisted primarily of net proceeds received from the issuance of our common stock in connection with our initial public offering of $255.7 million, net proceeds received from the issuance of shares of our redeemable convertible preferred stock of $153.4 million, and proceeds from the exercise of common stock options of $0.2 million, which were partially offset by principal payments on the term loan payable of $0.7 million.

Future Funding Requirements

We believe that our cash

and cash equivalents of $386.6 million at December 31, 2020 will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 24 months.

However, our forecast of the period of time through

which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

We have based this estimate on assumptions that may prove to be

wrong, and we could deplete our capital resources sooner than we expect.

We believe that our cash, cash equivalents, restricted cash, and investments of $319.1 million at December 31, 2021 will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2026 following the Restructuring Plan.

However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

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

Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Our future capital requirements will depend on many factors, including:

the initiation, trial design, progress, timing, costs and results of drug the discovery, preclinical studies and clinical

trials of our product candidates, and in particular the clinical trials for SBT6050;

the initiation, trial design, progress, timing, costs and results of drug discovery, preclinical studies and clinical trials of our product candidates, and in particular future clinical trials for SBT8230;

the number and characteristics of product candidates that we pursue;

the length of our clinical trials;

the outcome, timing and costs of seeking FDA, EMA and any other regulatory approvals;

the costs of manufacturing our product candidates, in particular for clinical trials in preparation for marketing approval

and in preparation for commercialization;

the costs of any third-party products used in our combination clinical trials that are not covered by such third party or

other sources;

the costs associated with hiring additional personnel and consultants as our preclinical, manufacturing and clinical

activities increase;

the receipt of marketing approval and revenue received from any commercial sales of any of our product candidates, if

the cost of commercialization activities for any of our product candidates, if approved, including marketing, sales

and distribution costs;

the costs of manufacturing our product candidates and commercial manufacturing activities;

the costs associated with hiring additional personnel and consultants as our preclinical, manufacturing and clinical activities increase;

the receipt of marketing approval and revenue received from any commercial sales of any of our product candidates, if approved;

the cost of commercialization activities for any of our product candidates, if approved, including marketing, sales and distribution costs;

the emergence of competing therapies and other adverse market developments;

the ability to establish and maintain strategic collaboration, licensing or other arrangements and the financial terms of

such agreements;

the ability to establish and maintain strategic collaboration, licensing or other arrangements and the financial terms of such agreements;

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

the amount and timing of any payments we may be required to make pursuant to our current or future license agreements;

the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims,

including litigation costs and the outcome of such litigation;

the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;

our need and ability to retain key management and hire scientific, technical, business, and medical personnel;

our implementation of additional internal systems and infrastructure, including operational, financial and management

information systems;

or costs associated with expanding our facilities or building out our laboratory space;

the effects of the recent disruptions to and volatility in the credit and financial markets in the United States and

worldwide from the COVID-19 pandemic;

our implementation of additional internal systems and infrastructure, including operational, financial and management information systems;

our costs associated with expanding our facilities or building out our laboratory space;

the effects of the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide from the COVID-19 pandemic;

the costs of operating as a public company.

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through

public or private equity offerings, debt financings, or other capital sources which may include strategic collaborations, licensing arrangements or other arrangements with third parties.

To the extent that we raise additional capital through the

sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common

stockholders.

Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring

may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce

or terminate our product development or future commercialization efforts.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial

markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic or otherwise.

Because of the numerous risks and uncertainties associated with product development, we cannot predict the

timing or amount of increased expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Contractual Obligations and Commitments

The following table

summarizes our contractual obligations and commitments at December 31, 2020:

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses or other similar arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.

If we raise funds through strategic collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to our platform technology, future revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic or otherwise.

Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Material Cash Requirements

Our material cash requirements include the following contractual and other obligations as of December 31, 2021:

Payments Due by Period

(in thousands)

Less than 1 year

More than 5 years

Operating lease obligations (1)

Term loan payable (1)(2)

Refer to Notes 6 and 7 to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Payments due for the term loan include both principal and interest portions calculated using the interest rate at

December 31, 2020 of 1.75%.

Under our license agreements, we have payment obligations that are contingent upon future events such

as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sales of products developed under those agreements.

As of December 31, 2020 and 2019, we were

unable to estimate the timing or likelihood of achieving the milestones or making future product sales and, therefore, any related payments are not included in the table above.

For additional details regarding these agreements, see Part I, Item 1 of

this Annual Report on Form 10-K under the section titled License Agreement.

In November 2016,

we entered into a loan and security agreement with SVB that allowed borrowings up to $5.0 million in two tranches, the first that was immediately drawn and the second to be drawn before December 31, 2017 if certain financing milestones

We drew $3.5 million in the first tranche, and the second tranche expired undrawn.

The outstanding principal amount of the term loan accrues interest at an annual rate of 1.75% per annum.

At closing, we incurred de minimis debt

issuance costs and owed a final payment fee of $0.3 million, both of which are amortized to interest expense over the remaining term of the debt under the effective interest method.

The effective interest rate of our term loan is 5.14%.

April 2020, SVB amended our term loan to defer principal payments for six months and extend the maturity date to May 1, 2021, which we determined to be a debt modification.

Technology) to make, use, sell, offer for sale and import developed through the use of the WuXi Bio Licensed Technology (the WuXi Bio Licensed Product).

In consideration for the license, we paid a license fee of $100,000 to WuXi Bio which was

recorded in research and development expense in 2019.

(1) Refer to Note 6 to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Under our license agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sales of products developed under those agreements.

As of December 31, 2021 and 2020, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales and, therefore, any related payments are not included in the table above.

For additional details regarding these agreements, see Part I, Item 1 of this Annual Report on Form 10-K under the section titled “License Agreement”.

In October 2019, we entered into a cell line license agreement with WuXi Biologics (Hong Kong) Limited (WuXi Bio), pursuant to which we received a non-exclusive, worldwide, sublicensable license under certain of WuXi Bio’s intellectual property rights, know-how and biological materials (the WuXi Bio Licensed Technology) to make, use, sell, offer for sale and import developed through the use of the WuXi Bio Licensed Technology (the WuXi Bio Licensed Product).

In consideration for the license, we paid a license fee of $100,000 to WuXi Bio which was recorded in research and development expense in 2019.

In 2020 we incurred an additional license fee of $50,000 to WuXi Bio which was recorded in research and development expense in 2020.

Additionally, if we do not engage WuXi Bio to manufacture the

WuXi Bio Licensed Products for our clinical and commercial supplies, we are required to make aggregate milestone payments of up to $10.8 million to WuXi Bio upon the achievement of certain sales milestones.

To date, other than the license fee,

no payments have been made under this agreement.

We enter into contracts in the normal course of business with clinical supply manufacturers and

with vendors for preclinical studies, research supplies and other services and products for operating purposes.

These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts and not included in the

Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and

regulations of the SEC.

Additionally, if we do not engage WuXi Bio to manufacture the WuXi Bio Licensed Products for our clinical and commercial supplies, we are required to make aggregate milestone payments of up to $10.8 million to WuXi Bio upon the achievement of certain sales milestones.

To date, other than the license fee, no payments have been made under this agreement.

We enter into contracts in the normal course of business with vendors for clinical studies, preclinical studies, research supplies and other services and products for operating purposes.

These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts and not included in the table above.

Critical Accounting Policies and Significant Judgments and Estimates

Our managements discussion and analysis of our financial condition and results of operations are based on our financial statements, which have

been prepared in accordance with U.S.

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

generally accepted accounting principles (GAAP).

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and

expenses and the disclosure of contingent assets and liabilities in our financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, stock-based compensation, and valuation

allowances for deferred tax assets.

We base our estimates on historical experience, known trends and events, and various other factors that are believed to be

reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, stock-based compensation, and valuation allowances for deferred tax assets.

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

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

While our significant accounting policies are described

in more detail in Note 2 to our audited financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K, we believe the following accounting policies and estimates to be most critical to

the preparation of our financial statements.

Our significant accounting policies are more fully described in Note 2 to our audited financial statements appearing in Part II, Item 8 of this Annual Report on Form-10-K.

Not all of our significant accounting policies require that we make estimates and assumptions that we believe are critical accounting estimates.

Our estimates relating to research and development expenses, stock-based compensation, and income taxes have had or are reasonably likely to have a material impact on our financial statements and we consider them to be our critical accounting policies and critical accounting estimates.

Research and Development Expenses

All research and development costs are expensed in the period incurred.

Advance payments, including nonrefundable amounts, for goods or services that

will be used or rendered for future research and development activities are capitalized until such goods are delivered or the related services are performed, or such time when we do not expect the goods to be delivered or services to be performed.

Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future research and development activities are capitalized until such goods are delivered or the related services are performed, or such time when we do not expect the goods to be delivered or services to be performed.

We estimate the period over which such services will be performed and the level of effort to be expended in each period.

If actual timing of performance or the level of effort varies from the estimate, we will adjust the amounts recorded

If actual timing of performance or the level of effort varies from the estimate, we will adjust the amounts recorded accordingly.

We have not experienced any material differences between accrued or prepaid costs and actual costs since our inception.

Stock-Based Compensation

We recognize stock-based compensation expense for stock options on a straight-line basis over the requisite service period and account for

forfeitures as a reduction of stock-based compensation expense as they occur.

We recognize stock-based compensation expense for stock options on a straight-line basis over the requisite service period and account for forfeitures as a reduction of stock-based compensation expense as they occur.

Our stock-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes option pricing model.

The Black-Scholes option pricing model utilizes inputs which are highly subjective assumptions and generally require significant judgment.

assumptions include:

These assumptions include:

Fair Value of Common Stock .

For all periods prior to our initial public offering, the fair value of the shares of

common stock underlying our share-based awards was estimated on each grant date by our board of directors.

To determine the fair value of our common stock underlying option grants, our board of directors considered, among other things, input from

management, valuations of our common stock prepared by unrelated third-party valuation firms in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of

Privately-Held-Company Equity Securities Issued as Compensation (the Practice Aid).

Following the closing of our initial public offering, the fair market value of our common stock is based on its closing price as reported on the primary stock

exchange on which our common stock is traded.

For all periods prior to our initial public offering, the fair value of the shares of common stock underlying our share-based awards was estimated on each grant date by our board of directors.

To determine the fair value of our common stock underlying option grants, our board of directors considered, among other things, input from management, valuations of our common stock prepared by unrelated third-party valuation firms in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the Practice Aid).

Following the closing of our initial public offering, the fair market value of our common stock is based on its closing price as reported on the primary stock exchange on which our common stock is traded.

Expected Term .

The expected term represents the period that the options granted are expected to be outstanding.

expected term of stock options issued is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as we have concluded that our stock option

exercise history does not provide a reasonable basis upon which to estimate expected term.

The expected term of stock options issued is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as we have concluded that our stock option exercise history does not provide a reasonable basis upon which to estimate expected term.

Expected Volatility .

Given our limited historical stock price volatility data, we derived the expected volatility

from the average historical volatilities over a period approximately equal to the expected term of comparable publicly traded companies within our peer group that were deemed to be representative of future stock price trends as we have limited

trading history for our common stock.

Given our limited historical stock price volatility data, we derived the expected volatility from the average historical volatilities over a period approximately equal to the expected term of comparable publicly traded companies within our peer group that were deemed to be representative of future stock price trends as we have limited trading history for our common stock.

We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

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The risk-free interest rate is based on the U.S.

zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the options.

Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the options.

Expected Dividend Yield .

We have never paid dividends on our common stock and do not anticipate paying any dividends

in the foreseeable future.

We have never paid dividends on our common stock and do not anticipate paying any dividends in the foreseeable future.

Therefore, we used an expected dividend yield of zero.

We recognize deferred income taxes for the future tax consequences attributable to differences between the financial statement carrying amounts of

existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.

In evaluating our valuation allowance, we consider all available positive and negative evidence, including scheduled reversals of

deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance.

Due to our lack of earnings history and uncertainties surrounding our ability to generate future taxable income, the net deferred

tax assets have been fully offset by a valuation allowance.

As of December 31, 2020, we had net operating loss carryforwards for income tax

purposes of approximately $89.7 million.

We recognize deferred income taxes for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.

In evaluating our valuation allowance, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance.

Due to our lack of earnings history and uncertainties surrounding our ability to generate future taxable income, the net deferred tax assets have been fully offset by a valuation allowance.

As of December 31, 2021, we had net operating loss carryforwards for income tax purposes of approximately $160.3 million.

If not used, $18.2 million of this carryforward will begin to expire in 2036 and $142.1 million has no expiration.

We also have research and development tax credits of approximately

$1.5 million which will begin to expire in 2037 if left unused.

Under Sections 382 and 383 of the Code, substantial changes in our ownership

may limit the amount of NOL and research and development credit carryforwards that could be used annually in the future to offset taxable income.

The tax benefits related to future utilization of federal and state NOL carryforwards, credit

carryforwards, and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50% within any three-year period.

We have not completed a Section 382/383 analysis under the Code regarding the limitation of NOL and

credit carryforwards.

We also have research and development tax credits of approximately $2.7 million which will begin to expire in 2037 if left unused.

Under Sections 382 and 383 of the Code, substantial changes in our ownership may limit the amount of NOL and research and development credit carryforwards that could be used annually in the future to offset taxable income.

The tax benefits related to future utilization of federal and state NOL carryforwards, credit carryforwards, and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50% within any three-year period.

We have not completed a Section 382/383 analysis under the Code regarding the limitation of NOL and credit carryforwards.

If a change in ownership were to have occurred, the annual limitation may result in the expiration of NOL carryforwards and credits before utilization.

As of December 31, 2020, we did not have any liabilities for unrecognized income tax benefits associated with uncertain tax positions, including

any interest and penalties.

As of December 31, 2021, we did not have any liabilities for unrecognized income tax benefits associated with uncertain tax positions, including any interest and penalties.

Recent Accounting Pronouncements

See Note 2 to our audited financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K

for additional information.

See Note 2 to our audited financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Emerging Growth Company Status

We are an emerging growth company, as defined in the JOBS Act.

For so long as we remain an emerging growth company, we are permitted and intend to rely

on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of

the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden

parachute payments not previously approved.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards

issued subsequent to the enactment of the JOBS Act until such time as those standards

apply to private companies.

We have elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public

and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our financial

statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We have elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest to occur of:

(i) the last day of the fiscal year in which we have at least

$1.07 billion in annual revenue;

(ii) the last day of the fiscal year in which we are deemed to be a large accelerated filer, as defined in Rule 12b-2 under the Exchange Act;

(i) the last day of the fiscal year in which we have at least $1.07 billion in annual revenue;

(ii) the date upon which we are deemed to be a “large accelerated filer,”

as defined in Rule 12b-2 under the Exchange Act;

(iii) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period;

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Quantitative and Qualitative Disclosures About Market Risk

Not applicable to a smaller reporting company as defined under Item 10(f)(1) of Regulation S-K of the

Securities Act.

Not applicable to a “smaller reporting company”

as defined under Item 10(f)(1) of Regulation S-K of the Securities Act.

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 5. Market for Registrant’s Common Equity