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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 001-37798
Selecta Biosciences, Inc.
(Exact name of registrant as specified in its charter)
Delaware
26-1622110
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer Identification No.)
65 Grove Street, Watertown, MA
02472
(Address of principal executive offices)
(Zip Code)

(617) 923-1400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par value per shareSELBThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerýSmaller reporting companyý
Emerging growth companyý
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No ý
As of May 7, 2021, the registrant had 113,193,597 shares of common stock, par value $0.0001 per share, outstanding.



TABLE OF CONTENTS
Item 2.
Item 3.
Item 4.
Item 1. 
Item 1A. 
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or the Quarterly Report, contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, the plans and objectives of management for future operations and future results of anticipated products, the impact of the COVID-19 pandemic on our business and operations and our future financial results, and the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under the sections in this Quarterly Report titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as the following:
our status as a development-stage company and our expectation to incur losses in the future;
our future capital needs and our need to raise additional funds;
our ability to build a pipeline of product candidates and develop and commercialize such pipeline;
our unproven approach to therapeutic intervention;
our ability to enroll patients in clinical trials, timely and successfully complete those trials and receive necessary regulatory approvals;
our ability to access manufacturing facilities and to receive or manufacture sufficient quantities of our product candidates;
our ability to maintain our existing or future collaborations or licenses;
the continuing impact of the COVID-19 pandemic on our operations, the continuity of our business, including our preclinical studies and clinical trials, and general economic conditions;
our ability to protect and enforce our intellectual property rights;
federal, state, and foreign regulatory requirements, including FDA regulation of our product candidates;
our ability to obtain and retain key executives and attract and retain qualified personnel;
developments relating to our competitors and our industry, including the impact of government regulation; and
our ability to successfully manage our growth.
Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.
You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
3

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

Selecta Biosciences, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except share data and par value)
 March 31,December 31,
 20212020
 (Unaudited) 
Assets  
Current assets:  
Cash and cash equivalents$125,407 $138,685 
Marketable securities22,405  
Accounts receivable8,342 7,224 
Prepaid expenses and other current assets6,971 5,434 
Total current assets163,125 151,343 
Property and equipment, net1,301 1,395 
Right-of-use asset, net10,676 10,948 
Long-term restricted cash1,379 1,379 
Other assets265 370 
Total assets$176,746 $165,435 
Liabilities and stockholders’ (deficit) equity   
Current liabilities:  
Accounts payable$594 $443 
Accrued expenses6,847 8,146 
Loan payable460  
Lease liability942 908 
Deferred revenue75,764 72,050 
Total current liabilities84,607 81,547 
Non-current liabilities:
Loan payable, net of current portion24,551 24,793 
Lease liability9,403 9,647 
Deferred revenue32,301 38,746 
Warrant liabilities45,455 28,708 
Total liabilities196,317 183,441 
Commitments and contingencies (Note 17)
Stockholders’ (deficit) equity:  
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2021 and December 31, 2020
  
Common stock, $0.0001 par value; 200,000,000 shares authorized; 112,977,004 and 108,071,249 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
11 11 
Additional paid-in capital414,214 391,175 
Accumulated deficit(429,226)(404,629)
Accumulated other comprehensive loss(4,570)(4,563)
Total stockholders’ (deficit) equity (19,571)(18,006)
Total liabilities and stockholders’ (deficit) equity $176,746 $165,435 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
4

Table of Contents

Selecta Biosciences, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(Amounts in thousands, except share and per share data)

 Three Months Ended March 31,
 20212020
(Unaudited)
Grant and collaboration revenue$11,050 $ 
Operating expenses:
Research and development13,004 14,724 
General and administrative5,204 4,098 
Total operating expenses18,208 18,822 
Loss from operations(7,158)(18,822)
Investment income12 240 
Foreign currency transaction gain, net7 82 
Interest expense(711)(273)
Change in fair value of warrant liabilities(16,747)(846)
Other income (expense), net (1)
Net loss(24,597)(19,620)
Other comprehensive loss:
Foreign currency translation adjustment(6)(60)
Unrealized (losses) on marketable securities(1) 
Total comprehensive loss$(24,604)$(19,680)
Net loss per share:
Basic and diluted$(0.22)$(0.21)
Weighted average common shares outstanding:
Basic and diluted110,742,150 94,723,513 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
5

Table of Contents

Selecta Biosciences, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ (Deficit) Equity
(Amounts in thousands, except share data)
(Unaudited)
     Accumulated
   Additional otherStockholders’
 Common stockpaid-inAccumulatedcomprehensive(Deficit)
 SharesAmountcapitaldeficitlossEquity
Balance at December 31, 2020108,071,249 $11 $391,175 $(404,629)$(4,563)$(18,006)
Issuance of common stock under Employee Stock Purchase Plan34,696 — 72 — — 72 
Issuance of common stock upon exercise of options153,278 — 244 — — 244 
Issuance of vested restricted stock units10,937 — — — —  
Issuance of common stock through at-the-market offering, net4,706,844 — 20,943 — — 20,943 
Stock-based compensation expense— — 1,780 — — 1,780 
Currency translation adjustment— — — — (6)(6)
Unrealized (losses) on marketable securities— — — — (1)(1)
Net loss— — — (24,597)— (24,597)
Balance at March 31, 2021
112,977,004 $11 $414,214 $(429,226)$(4,570)$(19,571)

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Selecta Biosciences, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ (Deficit) Equity
(Amounts in thousands, except share data)
(Unaudited)
     Accumulated 
   Additional otherStockholders’
 Common stockpaid-inAccumulatedcomprehensive(Deficit)
 SharesAmountcapitaldeficitlossEquity
Balance at December 31, 201986,325,547 $9 $348,664 $(335,753)$(4,523)$8,397 
Issuance of common stock under Employee Stock Purchase Plan78,583 — 114 — — 114 
Issuance of common stock upon exercise of options5,128 — 3 — — 3 
Issuance of vested restricted stock units10,937 — — — —  
Issuance of common stock through at-the-market offering, net598,977 — 1,141 — — 1,141 
Other financing fees— — (147)— — (147)
Stock-based compensation expense— — 1,409 — — 1,409 
Currency translation adjustment— — — — (60)(60)
Net loss— — — (19,620)— (19,620)
Balance at March 31, 202087,019,172 $9 $351,184 $(355,373)$(4,583)$(8,763)

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Selecta Biosciences, Inc. and Subsidiaries 
Consolidated Statements of Cash Flows
(Amounts in thousands)
 Three Months Ended March 31,
20212020
(Unaudited)
Cash flows from operating activities
Net loss$(24,597)$(19,620)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization207 231 
Amortization of premiums and discounts on marketable securities14  
Non-cash lease expense272 366 
Loss on disposal of property and equipment
 1 
Stock-based compensation expense1,780 1,409 
Non-cash interest expense387 123 
Warrant liabilities revaluation16,747 846 
Changes in operating assets and liabilities:
Accounts receivable(1,118)5,000 
Prepaid expenses, deposits and other assets(1,512)(61)
Accounts payable151 836 
Deferred revenue(2,728) 
Accrued expenses and other liabilities(1,736)(829)
                    Net cash (used in) operating activities(12,133)(11,698)
Cash flows from investing activities
Purchases of marketable securities(22,420) 
Purchases of property and equipment(25)(135)
                    Net cash (used in) investing activities(22,445)(135)
Cash flows from financing activities
Repayments of principal on outstanding debt (2,100)
Net proceeds from issuance of common stock- at-the-market offering20,991 1,141 
Issuance costs paid for December 2019 financing (4,381)
Other financing fees (147)
Proceeds from exercise of stock options244 3 
Proceeds from issuance of common stock under Employee Stock Purchase Plan72 114 
                    Net cash provided by (used in) financing activities21,307 (5,370)
Effect of exchange rate changes on cash(7)(84)
Net change in cash, cash equivalents, and restricted cash(13,278)(17,287)
Cash, cash equivalents, and restricted cash at beginning of period140,064 91,551 
Cash, cash equivalents, and restricted cash at end of period$126,786 $74,264 
Supplement cash flow information
Cash paid for interest$494 $232 
Noncash investing and financing activities
Purchase of property and equipment not yet paid$10 $10 
Equity offering costs in accrued liabilities$48 $42 
Unrealized (losses) on marketable securities$(1)$ 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Selecta Biosciences, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)

1. Nature of the Business and Basis of Presentation
Selecta Biosciences, Inc., or the Company was incorporated in Delaware on December 10, 2007, and is based in Watertown, Massachusetts. The Company is a clinical-stage biopharmaceutical company leveraging its ImmTOR™ immune tolerance platform with the goals of amplifying the efficacy of biologics, including enabling the re-dosing of life-saving gene therapies, and restoring self-tolerance in autoimmune diseases. The Company’s ImmTOR platform encapsulates rapamycin, also known as sirolimus, an immunomodulator, in biodegradable nanoparticles and is designed to induce antigen-specific immune tolerance. The Company believes ImmTOR has the potential to enhance the efficacy without compromising the safety of biologic therapies, improve product candidates under development, and enable novel therapeutic modalities. Since inception, the Company has devoted its efforts principally to research and development of its technology and product candidates, recruiting management and technical staff, acquiring operating assets, and raising capital.
The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.
The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.
Unaudited Interim Financial Information
The accompanying unaudited consolidated financial statements for the three months ended March 31, 2021 and 2020 have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 12, 2021. The unaudited interim financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments that are necessary for a fair statement of the Company’s financial position as of March 31, 2021 and consolidated results of operations and cash flows for the three months ended March 31, 2021. Such adjustments are of a normal and recurring nature. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.
Liquidity and Management’s Plan
The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain profitable operations. The Company is subject to a number of risks similar to other early-stage life science companies, including, but not limited to, successful development of its product candidates, raising additional capital with favorable terms, protection of proprietary technology and market acceptance of any approved future products. The successful development of product candidates requires substantial working capital which may not be available to the Company on favorable terms or at all.
To date, the Company has financed its operations primarily through the initial public offering of its common stock, private placements of its common stock, issuances of common and preferred stock, debt, research grants and research collaborations. The Company currently has no source of product revenue, and it does not expect to generate product revenue for the foreseeable future. To date, all of the Company’s revenue has been collaboration and grant revenue. The Company has devoted substantially all of its financial resources and efforts to developing its ImmTOR platform, identifying potential product candidates and conducting preclinical studies and its clinical trials. The Company is in the early stages of development of its product candidates, and it has not completed development of any ImmTOR-enabled therapies.
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As of March 31, 2021, the Company’s cash, cash equivalents, restricted cash and marketable securities were $149.2 million, of which $1.4 million was restricted cash related to lease commitments and $0.3 million was held by its Russian subsidiary designated solely for use in its operations. The Company believes the cash, cash equivalents, restricted cash and marketable securities as of March 31, 2021 will enable it to fund its operating expenses and capital expenditure requirements into the second quarter of 2023. The Company has incurred losses and negative cash flows from operating activities since inception. As of March 31, 2021, the Company had an accumulated deficit of $429.2 million. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research, development of its product candidates, conducting preclinical studies and clinical trials, and its administrative organization. The Company will require substantial additional financing to fund its operations and to continue to execute its strategy, and the Company will pursue a range of options to secure additional capital.
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 the Company’s 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, travel restrictions and social distancing in the United States and other countries, business closures or business 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.
Guarantees and Indemnifications
As permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees for certain events or occurrences that happen by reason of the relationship with, or position held at, the Company. Through March 31, 2021, the Company had not experienced any losses related to these indemnification obligations, and no claims were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

2. Summary of Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2021, as compared to the significant accounting policies disclosed in Note 2 – Summary of Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Recent Accounting Pronouncements
Recently Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The Company adopted the new standard effective January 1, 2021, and there was no impact on its consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. The Company adopted the new standard effective January 1, 2021, and there was no impact on its consolidated financial statements.
Not Yet Adopted
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than January 1, 2021. The Company is assessing the impact this standard will have on its consolidated financial statements and disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. Subsequently, in November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses. ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses. This ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is assessing the impact this standard will have on its consolidated financial statements and disclosures.

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3. Marketable Securities
The following table summarizes the marketable securities held as of March 31, 2021 (in thousands):
Amortized costUnrealized gainsUnrealized lossesFair value
March 31, 2021
Corporate bonds$2,032 $ $(1)$2,031 
Commercial paper20,374   20,374 
Total$22,406 $ $(1)$22,405 
All marketable securities held at March 31, 2021 had maturities of less than 12 months when purchased and are classified as short-term marketable securities on the accompanying consolidated balance sheet. During the three months ended March 31, 2021, there were no marketable securities adjusted for other than temporary declines in fair value.
As of December 31, 2020, the Company held no marketable securities.

4. Net Loss Per Share
The Company has reported a net loss for the three months ended March 31, 2021 and 2020. For this reason basic and diluted net loss per share are the same for all periods presented. The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per-share data):
 Three Months Ended March 31,
 20212020
Numerator:
Net loss attributable to common stockholders$(24,597)$(19,620)
Denominator:
Weighted-average common shares and pre-funded warrants outstanding—basic and diluted110,742,150 94,723,513 
Net loss per share attributable to common stockholders —basic and diluted$(0.22)$(0.21)

All potential dilutive common shares have been excluded from the computation of the diluted net loss per share for all periods presented, as the effect would have been anti-dilutive. Potential dilutive common share equivalents consist of the following:
 March 31,
 20212020
Stock options to purchase common stock10,187,394 7,745,936 
Unvested restricted stock units544,313 170,313 
Warrants to purchase common stock12,378,016 23,084,120 
Total23,109,723 31,000,369 
 
5. Fair Value Measurements
The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 (in thousands):
March 31, 2021
Total(Level 1)(Level 2)(Level 3)
Assets:
     Money market funds$58,158 $58,158 $ $ 
Marketable securities:
     Corporate bonds2,031  2,031  
     Commercial paper20,374  20,374  
Total assets$80,563 $58,158 $22,405 $ 
Liabilities:
     Warrant liabilities$45,455 $ $ $45,455 
Total liabilities$45,455 $ $ $45,455 
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December 31, 2020
Total(Level 1)(Level 2)(Level 3)
Assets:
     Money market funds$80,576 $80,576 $ $ 
Total assets$80,576 $80,576 $ $ 
Liabilities:
     Warrant liabilities$28,708 $ $ $28,708 
Total liabilities$28,708 $ $ $28,708 

There were no transfers within the fair value hierarchy during the three months ended March 31, 2021 or the year ended December 31, 2020.

Cash and Cash Equivalents
As of March 31, 2021 and December 31, 2020, the money market funds were classified as cash and cash equivalents on the accompanying consolidated balance sheets as they mature within 90 days from the date of purchase.
As of March 31, 2021, the Company had restricted cash balances relating to a secured letter of credit in connection with its lease for the Company’s headquarters (see Note 8 included elsewhere in this Quarterly Report). The Company’s consolidated statement of cash flows includes the following as of March 31, 2021 and 2020 (in thousands):
March 31,
20212020
Cash and cash equivalents$125,407 $72,606 
Short-term restricted cash 279 
Long-term restricted cash1,379 1,379 
Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows$126,786 $74,264 

Marketable Securities
As of March 31, 2021, marketable securities classified as Level 2 within the valuation hierarchy consist of corporate bonds and commercial paper. Marketable securities represent holdings of available-for-sale marketable debt securities in accordance with the Company’s investment policy. The Company estimates the fair values of these marketable securities by taking into consideration valuations that include market pricing based on real-time trade data for the same or similar securities, and other observable inputs. The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to the earliest call date for premiums or to maturity for discounts.
Loans Payable
At March 31, 2021, given the recent issuance of the Term A Loan under the 2020 Term Loan, the Company believes the carrying value approximates the fair value of the loan.
Common Warrants
In December 2019, the Company issued common warrants in connection with a private placement of common shares. Pursuant to the terms of the common warrants, the Company could be required to settle the common warrants in cash in the event of certain acquisitions of the Company and, as a result, the common warrants are required to be measured at fair value and reported as a liability on the balance sheet. The Company recorded the fair value of the common warrants upon issuance using the Black-Scholes valuation model and is required to revalue the common warrants at each reporting date with any changes in fair value recorded in the statement of operations. The valuation of the common warrants is considered under Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable. The significant unobservable inputs used in the fair value measurement of the warrant liabilities were the volatility rate and the estimated term of the warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement. The change in
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the fair value of the Level 3 warrant liability is reflected in the statement of operations for the three months ended March 31, 2021 and 2020.
The estimated fair value of warrants is determined using Level 3 inputs inherent in the Black-Scholes simulation valuation.
Estimated fair value of the underlying stock. The Company estimates the fair value of the common stock based on the closing stock price at the end of each reporting period.
Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury at the valuation date commensurate with the expected remaining life assumption.
Dividend rate. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.
Expected life. The expected life of the warrants is assumed to be equivalent to their remaining contractual term which expires on December 23, 2024.
Volatility. The Company estimates stock price volatility based on the Company’s historical volatility and the historical volatility of peer companies for a period of time commensurate with the expected remaining life of the warrants.
A summary of the Black-Scholes pricing model assumptions used to record the fair value of the warrant liability is as follows:
March 31,
 2021
Risk-free interest rate0.35 %
Dividend yield 
Expected life (in years)3.73
Expected volatility101.13 %
Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis
The following table reflects a roll-forward of fair value for the Company’s Level 3 warrant liabilities (see Note 10), for the three months ended March 31, 2021 (in thousands):
Warrant liabilities
Fair value as of December 31, 2020
$28,708 
     Change in fair value16,747 
Fair value as of March 31, 2021
$45,455 

6. Property and Equipment
Property and equipment consists of the following (in thousands):
 March 31,December 31,
 20212020
Laboratory equipment$4,429 $4,427 
Computer equipment and software694 532 
Leasehold improvements38 38 
Furniture and fixtures327 327 
Office equipment163 163 
Construction in process30 163 
Total property and equipment5,681 5,650 
Less accumulated depreciation(4,380)(4,255)
Property and equipment, net$1,301 $1,395 

Depreciation expense was $0.1 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

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7. Accrued Expenses
Accrued expenses consist of the following (in thousands):
 March 31,December 31,
 20212020
Payroll and employee related expenses$1,840 $3,049 
Collaboration and licensing1,350 1,350 
Accrued patent fees471 534 
Accrued external research and development costs2,010 2,029 
Accrued professional and consulting services802 798 
Accrued interest170 170 
Other204 216 
     Accrued expenses$6,847 $8,146 

8. Leases
65 Grove Street Lease
In July 2019, the Company entered into a lease for 25,078 square feet of laboratory and office space located at 65 Grove Street, Watertown, Massachusetts, or the Headquarters Lease. As part of the Headquarters Lease, the Company incurred $0.8 million in non-reimbursable construction costs. The lease began in March 2020, consistent with when the Company took control of the office space, and the lease term is 8 years. The discount rate of 8.9% was determined based on the Company’s incremental borrowing rate adjusted for the lease term including any reasonably certain renewal periods. In connection with the Headquarters Lease, the Company secured a letter of credit from Silicon Valley Bank, or SVB, for $1.4 million, recognized as long-term restricted cash, as of March 31, 2021 and December 31, 2020, respectively, which automatically renews each year.
Moscow, Russia Lease
The Company has a month-to-month facility agreement for its Moscow, Russia office. Rent expense is recognized as incurred.
As of March 31, 2021 and December 31, 2020, the components of the operating leases were as follows (in thousands):
March 31,December 31,
20212020
Assets:
   Right-of-use asset, net$10,676 $10,948 
Liabilities:
   Current operating lease liabilities$942 $908 
   Non-current operating lease liabilities9,403 9,647 
Total operating lease liabilities$10,345 $10,555 

For the three months ended March 31, 2021 and 2020 the components of lease costs were as follows (in thousands):
March 31,
20212020
Operating lease cost$444 $472 
Variable lease cost288 199 
Short-term lease cost3 2 
Total lease cost$735 $673 

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The maturity of the Company’s operating lease liabilities as of March 31, 2021 were as follows (in thousands):
March 31,
2021
2021 (remainder)$1,368 
20221,866 
20231,922 
20241,980 
20252,039 
Thereafter4,945 
     Total future minimum lease payments14,120 
Less imputed interest3,775 
     Total operating lease liabilities$10,345 

The supplemental disclosure for the statement of cash flows related to operating leases were as follows (in thousands):
March 31,
20212020
Cash paid for amounts included in the measurement of lease liabilities:$444 $487 

Other than the initial recording of the right-of-use asset and lease liability for the Headquarters Lease, which is non-cash, the changes in the Company’s right-of-use asset and lease liability for the three months ended March 31, 2021 and 2020 are reflected in the non-cash lease expense and accrued expenses and other liabilities, respectively, in the consolidated statements of cash flows.
The following summarizes additional information related to operating leases:
March 31,
20212020
Weighted-average remaining lease term7.1 years8.0 years
Weighted-average discount rate8.9 %8.9 %

9. Debt
2020 Term Loan
On August 31, 2020, the Company entered into a term loan of up to $35.0 million, or the 2020 Term Loan, 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, or the Loan Agreement, between the Company and Oxford Finance LLC, or Oxford, as Collateral Agent and a Lender, and SVB, as a Lender. The Term A Loan was funded in full on August 31, 2020, or the Funding Date.
The Term B Loan will be available, subject to Collateral Agent’s discretion and customary terms and conditions, during the period commencing on the date the Company has delivered to the Collateral Agent and the Lenders evidence: (i) the Company or one of the Company’s collaboration partners has enrolled its first patient for a Phase 1 clinical trial evaluating the treatment of methylmalonic acidemia, or MMA, and (ii) the Company has 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 30 days following the date the Second Draw Period Milestone is achieved, (ii) September 30, 2021 (iii) and the occurrence of an event of default, other than an event of default that has been waived in writing by Collateral Agent and the Lenders in their sole discretion, with such period referred to as the Second Draw Period.
The 2020 Term Loan will mature on August 1, 2025. Each advance under the Term Loan accrues interest at a floating per annum rate equal to the greater of (a) 7.90%, and (b) the lesser of (x) the sum of (i) the prime rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, and (ii) 4.65% and (y) 10.00%. The Term Loan provides for interest-only payments on a monthly basis until April 1, 2022; provided however, if the Company has delivered to the Collateral Agent and the Lenders prior to September 30, 2021 evidence that Borrower has achieved the Second Draw Period Milestone, the Term Loan provides for interest-only payments on a monthly basis until October 1, 2022. Thereafter, amortization payments will be payable monthly in equal installments of principal and interest to fully amortize the outstanding principal over the remaining term of the loan, subject to recalculation upon a change in the prime rate. The Company may prepay the Term Loan in full but not in part provided that the Company (i) provides ten days’ prior written notice to Collateral Agent, (ii) pays on the date of such prepayment (A) all outstanding principal plus
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accrued and unpaid interest, and (B) a prepayment fee of between 3.0% and 1.0% of the aggregate original principal amount advanced by the lender depending on the timing of the prepayment. Amounts outstanding during an event of default are payable upon SVB’s demand and shall accrue interest at an additional rate of 5.0% per annum of the past due amount outstanding. At the end of the loan term (whether at maturity, by prepayment in full or otherwise), the Company shall make a final payment to the lender in the amount of 9.0% of the aggregate original principal amount advanced by the lender. The final payment fee totaling $2.3 million is recorded as a loan discount.
The Term Loan is secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property. The Company has also granted the Collateral Agent a negative pledge with respect to its intellectual property.
The Loan Agreement contains customary covenants and representations, including but not limited to financial reporting obligations and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. The Loan Agreement also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rights for the benefit of the Collateral Agent.
The events of default under the Loan Agreement include, but are not limited to, the Company’s failure to make any payments of principal or interest under the Loan Agreement or other transaction documents, the Company’s breach or default in the performance of any covenant under the Loan Agreement or other transaction documents, the occurrence of a material adverse change, the Company making a false or misleading representation or warranty in any material respect under the Loan Agreement, the Company’s insolvency or bankruptcy, any attachment or judgment on the Company’s assets of at least $0.5 million, or the occurrence of any default under any agreement or obligation of the Company involving indebtedness in excess of $0.5 million. If an event of default occurs, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.
The Company incurred $0.4 million in debt issuance costs in connection with the closing of the 2020 Term Loan. Debt issuance costs are presented in the consolidated balance sheet as a direct deduction from the associated liability and amortized to interest expense over the term of the related debt.
The Company assessed all terms and features of the 2020 Term Loan to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the 2020 Term Loan, including any put, call, and contingent features. The Company determined that the interest rate collar and prepayment call option did not require bifurcation; whereas the contingent put option and default (contingent) interest rate feature met bifurcation criteria resulting in immaterial amounts.
Warrants
On August 31, 2020, in connection with the 2020 Term A Loan, the Company issued warrants to the Lenders to purchase an aggregate of 196,850 shares of its common stock at an exercise price equal to $2.54 per share. In accordance with ASC 815-40, these warrants are classified as permanent equity in the accompanying consolidated balance sheets and will expire ten years from the date of issuance. The initial grant date fair value of the warrants was $0.4 million as determined by the Black-Scholes valuation model and recorded to shareholders' equity, with the SVB portion allocated to the reacquisition price of the 2017 Term Loan and the Oxford fair value portion as a loan discount to the Term A Loan.
Additionally, on August 31, 2020, pursuant to the terms of a Warrant Side Letter agreement among the Company and the Lenders, the Company agreed to issue to the Lenders, on the date the Company draws the Term B Loan and in accordance with each party’s respective pro rata share with respect to the Term B Loan, one or more warrants to purchase an aggregate number of shares of its common stock that is equal to $200,000 divided by the average closing price of the Company’s common stock on The Nasdaq Stock Market LLC for the ten consecutive trading days ending the day before such issuance, rounded down to the nearest whole number of shares, and having an exercise price equal to the Term B Warrant Price.
Payoff
On the Funding Date, the Company entered into a payoff letter with SVB, pursuant to which the Company utilized $13.7 million of the 2020 Term Loan to pay off all outstanding obligations under the previous term loan, consisting of the principal payment, final prepayment and accrued interest. During the three months ended September 30, 2020, the Company recognized a loss on extinguishment of debt in the amount of $0.5 million determined as the difference between the reacquisition price and carrying value at August 31, 2020.
As of March 31, 2021 and December 31, 2020, the outstanding principal balance under the 2020 Term Loan was $25.0 million.
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Future minimum principal and interest payments on the 2020 Term Loan as of March 31, 2021 are as follows (in thousands):
2021 (remainder)$1,509 
20227,343 
20238,611 
20248,027 
20257,274 
Total minimum debt payments32,764 
Less: Amount representing interest(5,514)
Less: Debt discount and deferred charges(2,239)
Less: Current portion of loan payable(460)
Loan payable, net of current portion$24,551 

10. Equity
Equity Financings
August 2020 Shelf Registration Statement
On August 6, 2020, the Company filed an updated universal shelf registration statement on Form S-3 (Reg. No. 333-241692) with the SEC to sell an aggregate amount of up to $200.0 million of certain of its securities. The shelf registration statement was declared effective by the SEC on August 14, 2020.
“At-the-Market” Offerings
In August 2017, the Company entered into a sales agreement, or the 2017 Sales Agreement, with Jefferies LLC, as sales agent, to sell shares of its common stock with an aggregate value of up to $50.0 million in an “at the market offering.” On August 6, 2020, concurrent with the filing of the updated shelf registration statement, the Company entered into a sales agreement, or the 2020 Sales Agreement with Jefferies LLC, as sales agent, pursuant to which the Company may, from time to time, issue and sell common stock with an aggregate value of up to $50.0 million in an “at the market offering.” The 2017 Sales Agreement terminated pursuant to its terms in August 2020.
Sales of common stock, if any, pursuant to the 2020 Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through the Nasdaq Stock Market or on any other existing trading market for the Company’s common stock. The Company intends to use the proceeds from the offering for working capital and other general corporate purposes. The Company may suspend or terminate the 2020 Sales Agreement at any time.
During the year ended December 31, 2020, the Company sold 1,069,486 shares of its common stock pursuant to the 2020 and 2017 Sales Agreements 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.
During the three months ended March 31, 2021, the Company sold 4,706,844 shares of its common stock pursuant to the 2020 Sales Agreement at an average price of approximately $4.59 per share for aggregate net proceeds of $20.9 million, after deducting commissions and other transaction costs.
June 2020 Sobi Stock Purchase
On June 11, 2020, the Company entered into a stock purchase agreement with Sobi, pursuant to which the Company sold an aggregate of 5,416,390 shares of its common stock at a purchase price equal to $4.6156 per share, which represented 120% of the 10-day volume-weighted average price of the Company’s common stock prior to signing, for aggregate gross proceeds of $25.0 million, or the Sobi Private Placement. The closing of the Sobi Private Placement occurred on July 31, 2020. The shares of common stock acquired in the Sobi Private Placement are subject to a one-year lock-up from closing, during which time Sobi is prohibited from selling or otherwise disposing of such shares.
In accordance with ASC 815, this forward sale treatment qualified as equity classification as the shares are not within the scope of ASC 480. The gross proceeds of $25.0 million were determined to include a premium to the fair value of the Company’s shares as of July 28, 2020 of approximately $14.5 million. As a result, such amount was included in the transaction price for revenue recognition of the Sobi License. See Note 12 for details.
Also on June 11, 2020, the Company entered into a registration rights agreement (as amended by that certain letter agreement, dated as of November 4, 2020) with Sobi, pursuant to which the Company agreed to prepare and file a registration statement with respect to the resale of the shares of common stock acquired in the Sobi Private Placement. The Company will be required to file this resale registration statement within 30 days following receipt by the Company of a written request from
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Sobi to file such resale registration statement, and to have the registration statement declared effective within 10 business days after the SEC informs the Company that no review of such resale registration statement will be made or that the SEC has no further comments on such resale registration statement.
December 2019 Financing
On December 18, 2019, the Company entered into a securities purchase agreement, or the 2019 Purchase Agreement, with a group of institutional investors and certain members of the board of directors. Pursuant to the 2019 Purchase Agreement, the Company sold an aggregate of 37,634,883 shares of its common stock at a purchase price of $1.46 per share, warrants to purchase an aggregate of 22,988,501 shares of common stock at a purchase price of $0.125 per share underlying each common warrant, and pre-funded warrants to purchase an aggregate of 8,342,128 shares of common stock at a purchase price of $1.46 per share, all with five year terms, or the 2019 PIPE. The closing of the 2019 PIPE occurred on December 23, 2019. The exercise price of the pre-funded warrants is $0.0001 per share and the exercise price for the common warrants is $1.46 per share. In the event of a certain sale of the Company, the terms of the common warrants require us to make a payment to such common warrant holders based on a Black-Scholes valuation (using variables as specified in the warrants). This provision does not apply to the pre-funded warrants. Therefore, the Company is required to account for the common warrants as liabilities and record them at fair value, while the pre-funded warrants met the criteria to be classified as permanent equity.
The Company recorded the fair value of the common warrants of $40.7 million upon issuance using the Black-Scholes valuation model. Issuance costs were allocated between the equity component with an offset to additional paid-in capital and the liability component recorded as expense on a relative fair value basis. Total net proceeds from the equity offering was $65.6 million, after deducting transaction costs and commissions of $4.4 million which was paid in the three months ended March 31, 2020.
The common warrants were revalued as of March 31, 2021 at $45.5 million. During the three months ended March 31, 2021 and 2020, the Company recorded losses on the increases in the fair value of the warrants of $(16.7) million and $(0.8) million, respectively, in the unaudited consolidated statements of operations.

Warrants
During the three months ended March 31, 2021 and 2020, there were no warrants issued, exercised, or canceled.
Number of Warrants
Equity
 classified
Liability classifiedTotalWeighted average
exercise price
Outstanding at March 31, 2021292,469 12,085,547 12,378,016 $1.60 

Common Stock
As of March 31, 2021, the Company had 200,000,000 shares of common stock authorized for issuance, $0.0001 par value per share, with 112,977,004 shares issued and outstanding. The voting, dividend and liquidation rights of the common stockholders are subject to and qualified by the rights, powers and preferences of the preferred stock. The common stock has the following characteristics:
Voting
The common stockholders are entitled to one vote for each share of common stock held with respect to all matters voted on by the stockholders of the Company.
Dividends
The common stockholders are entitled to receive dividends, if and when declared by the Board of Directors. Through March 31, 2021, no dividends have been declared or paid on common stock.
Liquidation
Upon liquidation of the Company, the common stockholders are entitled to receive all assets of the Company available for distribution to such stockholders.

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Reserved Shares
The Company has authorized shares of common stock for future issuance as follows:
 Period ended
 March 31, 2021December 31, 2020
Exercise of common warrants12,378,016 12,378,016 
Shares available for future stock incentive awards7,719,817 4,916,374 
RSUs reserved for issuance98,750  
Unvested restricted stock units544,313 87,500 
Outstanding common stock options10,187,394 7,775,249 
Total30,928,290 25,157,139 
 
11. Stock Incentive Plans
The Company maintains the 2008 Stock Incentive Plan, or the 2008 Plan, for employees, consultants, advisors, and directors. The 2008 Plan provided for the granting of incentive and non-qualified stock option and restricted stock awards as determined by the Board.
In June 2016, the Company’s stockholders approved the 2016 Incentive Award Plan, or the 2016 Plan, which authorized 1,210,256 shares of common stock for future issuance under the 2016 Plan and ceased granting awards under the 2008 Plan. Upon the effective date of the 2016 Plan, awards issued under the 2008 Plan remain subject to the terms of the 2008 Plan. Awards granted under the 2008 Plan that expire, lapse or terminate become available under the 2016 Plan as shares available for future grants.
Additionally, pursuant to the terms of the 2016 Plan, the Board is authorized to grant awards with respect to common stock, and may delegate to a committee of one or more members of the Board or executive officers of the Company the authority to grant options and restricted stock units. On December 9, 2020, the Board established a Stock Option Committee authorized to grant awards to certain employees and consultants subject to conditions and limitations within the 2016 Plan. In January 2021 and 2020, the number of shares of common stock that may be issued under the 2016 Plan was increased by 4,322,850 and 3,453,022 shares, respectively. As of March 31, 2021, 3,248,520 shares remain available for future issuance under the 2016 Plan.
In September 2018, the Company’s 2018 Employment Inducement Incentive Award Plan, or the 2018 Inducement Incentive Award Plan was adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules, which authorized 1,175,000 shares of its common stock for issuance. In March 2019, the Board approved the amendment and restatement of the 2018 Inducement Incentive Award Plan to reserve an additional 2,000,000 shares of the Company’s common stock for issuance thereunder. As of March 31, 2021, there are 1,358,333 shares available for future grant under the 2018 Inducement Incentive Award Plan.
Stock-based Compensation Expense
Stock-based compensation expense by classification included within the condensed consolidated statements of operations and comprehensive loss was as follows (in thousands):
 Three Months Ended March 31,
 20212020
Research and development$754 $623 
General and administrative1,026 786 
     Total stock-based compensation expense$1,780 $1,409 

Stock Options
Employees
The estimated grant date fair values of employee stock option awards granted under the 2016 Plan and the 2018 Inducement Incentive Award Plan were calculated using the Black-Scholes option pricing model, based on the following weighted-average assumptions:
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Three Months Ended March 31,
 20212020
Risk-free interest rate0.44 %1.73 %
Dividend yield  
Expected term5.286.08
Expected volatility83.26 %87.96 %
Weighted-average fair value of common stock$3.13 $2.30 

The weighted average grant date fair value of stock options granted to employees during the three months ended March 31, 2021 and 2020 was $1.99 and $1.69, respectively.
As of March 31, 2021 total unrecognized compensation expense related to unvested employee stock options was $11.8 million, which is expected to be recognized over a weighted average period of 2.7 years.

Non-employee consultants
As of March 31, 2021, there was no unrecognized compensation expense related to non-employee consultants stock options.
The following table summarizes the stock option activity under the 2008 Plan, 2016 Plan, and 2018 Inducement Incentive Award Plan:
   Weighted-average 
  remainingAggregate
 Number ofWeighted-averagecontractual termintrinsic value
 optionsexercise price ($)(in years)(in thousands)
Employees    
Outstanding at December 31, 20207,302,176 $3.98 8.43$4,456 
Granted2,628,000 $3.13   
Exercised(153,278)$1.47   
Forfeited(62,577)$5.19   
Outstanding at March 31, 20219,714,321 $3.78 8.65$15,665 
Vested at March 31, 20213,064,130 $5.46 7.63$4,313 
Vested and expected to vest at March 31, 20218,920,548 $3.88 8.59$14,231 
Non-employee consultants    
Outstanding at December 31, 2020473,073 $5.89 5.23$86 
Granted $ 
Exercised $ 
Forfeited $ 
Outstanding at March 31, 2021473,073 $5.89 4.98$366 
Vested at March 31, 2021462,186 $5.82 4.92$366 
Vested and expected to vest at March 31, 2021473,073 $5.89