10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 ________________________________

FORM 10-Q

 ________________________________

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

For the quarterly period ended September 30, 2021

OR

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

Commission File Number: 001-33958

SELLAS Life Sciences Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-8099512
(State of incorporation)	(I.R.S. Employer Identification No.)

7 Times Square, Suite 2503, New York, NY 10036

(646) 200-5278

(Address, including zip code, and telephone number, including

area code, of registrant's principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	SLS	The 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  ☒    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 time that the registrant was required to submit such files).   Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

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

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

As of November 11, 2021, SELLAS Life Sciences Group, Inc. had outstanding 15,885,542 shares of common stock.

SELLAS LIFE SCIENCES GROUP, INC.

FORM 10-Q - Quarterly Report

For the Quarter Ended September 30, 2021

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1	Financial Statements	3
	Unaudited Consolidated Balance Sheets As of September 30, 2021 and December 31, 2020	3
	Unaudited Consolidated Statements of Operations For the Three and Nine Months Ended September 30, 2021 and 2020	4
	Unaudited Consolidated Statements of Stockholders' Equity For the Three and Nine Months Ended September 30, 2021 and 2020	5
	Unaudited Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2021 and 2020	6
	Unaudited Notes to Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4	Controls and Procedures	31
	PART II - OTHER INFORMATION
Item 1	Legal Proceedings	33
Item 1A	Risk Factors	33
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3	Defaults Upon Senior Securities	33
Item 4	Mine Safety Disclosures	33
Item 5	Other Information	33
Item 6	Exhibits	33
	Signatures

The names “SELLAS Life Sciences Group, Inc.,” “SELLAS,” the SELLAS logo, and other trademarks or service marks of SELLAS Life Sciences Group, Inc. appearing in this Quarterly Report on Form 10-Q are the property of SELLAS Life Sciences Group, Inc. Other trademarks, service marks or trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. We do not intend the use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of or by either of, these other companies.

Unless the context otherwise indicates, references in these notes to the “Company,” “we,” “us” or “our” refer to SELLAS Life Sciences Group, Inc. and its wholly owned subsidiaries.

1

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements that reflect our current views with respect to our development programs, business strategy, business plan, financial performance and other future events. These statements include forward-looking statements both with respect to us, specifically, and our industry, in general. Such forward-looking statements include the words "expect," "intend,” "plan," "believe," "project," "estimate,” "may,” "should," "anticipate," "will" and similar statements of a future or forward-looking nature identify forward-looking statements.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. The COVID-19 pandemic has caused a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could impact our operating results. We expect the COVID-19 pandemic to continue to have both a direct and an indirect impact on our business operations and financial results, however, the extent of the impact on our clinical development and regulatory efforts, our corporate development objectives, our financial position and the value of and market for our common stock will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, the emergence of new variants of COVID-19, the emergence of new geographic hotspots where the coronavirus is spreading more rapidly, travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, as well as the effectiveness of actions taken globally to contain and treat the disease, including the availability of safe and effective vaccines and the uptake thereof, and whether existing vaccines are effective with respect to new variants. There are or will be important factors that could cause actual results to differ materially from those indicated in these statements. These factors include, but are not limited to, those factors set forth in the sections captioned "Business – Overview,” “Risk Factors,” “Legal Proceedings,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission ("SEC") on March 23, 2021 ("2020 Annual Report") and in our other public filings with the SEC, all of which you should review carefully. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

2

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SELLAS LIFE SCIENCES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

(Unaudited)

	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	26,281	$	35,302
Restricted cash and cash equivalents	100		100
Contract asset	—		1,128
Prepaid expenses and other current assets	2,593		395
Total current assets	28,974		36,925
Operating lease right-of-use asset	767		896
In-process research and development	5,700		5,700
Goodwill	1,914		1,914
Deposits and other assets	597		614
Total assets	$	37,952	$	46,049
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,545	$	4,657
Accrued expenses and other current liabilities	2,584		1,913
Operating lease liability	190		166
Deferred revenue	—		5,600
Total current liabilities	5,319		12,336
Operating lease liability, non-current	667		825
Deferred tax liability	239		239
Warrant liability	84		55
Contingent consideration	5,036		4,633
Total liabilities	11,345		18,088
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; Series A convertible preferred stock, 17,500 shares designated; no shares issued and outstanding at September 30, 2021 and December 31, 2020	—		—
Common stock, $0.0001 par value; 350,000,000 shares authorized, 15,874,131 and 14,254,554 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	2		1
Additional paid-in capital	158,610		145,864
Accumulated deficit	(132,005)		(117,904)
Total stockholders’ equity	26,607		27,961
Total liabilities and stockholders’ equity	$	37,952	$	46,049

See accompanying notes to these unaudited consolidated financial statements.

3

SELLAS LIFE SCIENCES GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020				2021		2020
Licensing revenue	$	—	$	—			$	7,600	$	—
Operating expenses:
Cost of licensing revenue	—		—				200		—
Research and development	4,541		2,367				12,281		6,511
General and administrative	2,436		2,125				8,794		6,312
Total operating expenses	6,977		4,492				21,275		12,823
Operating loss	(6,977)		(4,492)				(13,675)		(12,823)
Non-operating income (expense), net:
Change in fair value of warrant liability	30		6				(29)		25
Change in fair value of contingent consideration	(140)		13				(403)		(268)
Interest income	2		—				6		25
Total non-operating income (expense), net	(108)		19				(426)		(218)
Net loss	(7,085)		(4,473)				(14,101)		(13,041)
Deemed dividend arising from warrant modifications	—		—				—		(78)
Net loss attributable to common stockholders	$	(7,085)	$	(4,473)	$	—	$	(14,101)	$	(13,119)
Per share information:
Net loss per common share attributable to common stockholders, basic and diluted	$	(0.45)	$	(0.53)			$	(0.92)	$	(1.83)
Weighted-average common shares outstanding, basic and diluted	15,874,076		8,418,038				15,344,210		7,174,859

See accompanying notes to these unaudited consolidated financial statements.

4

SELLAS LIFE SCIENCES GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)

	Three Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	Shares	Amount
Balance at June 30, 2021	15,873,941	$	2	$	158,333	$	(124,920)	$	33,415
Issuance of common stock upon exercise of warrants	190	—		2		—		2
Stock-based compensation	—	—		275		—		275
Net loss	—	—		—		(7,085)		(7,085)
Balance at September 30, 2021	15,874,131	$	2	$	158,610	$	(132,005)	$	26,607
	Nine Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2020	14,254,554	$	1	$	145,864	$	(117,904)	$	27,961
Issuance of common stock, net of issuance costs	786,927	—		9,005		—		9,005
Issuance of common stock upon exercise of warrants	832,650	1		3,018		—		3,019
Stock-based compensation	—	—		723		—		723
Net loss	—	—		—		(14,101)		(14,101)
Balance at September 30, 2021	15,874,131	$	2	$	158,610	$	(132,005)	$	26,607

	Three Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	Shares	Amount
Balance at June 30, 2020	6,717,900	$	1	$	113,497	$	(109,715)	$	3,783
Issuance of common stock and common stock warrants, net of issuance costs	2,744,078	—		8,492		—		8,492
Stock-based compensation	—	—		146		—		146
Net loss	—	—		—		(4,473)		(4,473)
Balance at September 30, 2020	9,461,978	$	1	$	122,135	$	(114,188)	$	7,948
	Nine Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2019	5,080,100	$	1	$	107,239	$	(101,147)	$	6,093
Issuance of common stock and common stock warrants, net of issuance costs	3,933,078	—		14,455		—		14,455
Issuance of common stock upon exercise of pre-funded warrants	448,800	—		4		—		4
Stock-based compensation	—	—		437		—		437
Net loss	—	—		—		(13,041)		(13,041)
Balance at September 30, 2020	9,461,978	$	1	$	122,135	$	(114,188)	$	7,948

See accompanying notes to these unaudited consolidated financial statements.

5

SELLAS LIFE SCIENCES GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	For the Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(14,101)	$	(13,041)
Adjustment to reconcile net loss to net cash used in operating activities:
Non-cash stock-based compensation	723		437
Change in operating lease right of use assets	—		98
Change in fair value of common stock warrants	29		(25)
Change in fair value of contingent consideration	403		268
Changes in operating assets and liabilities:
Contract asset	1,128		—
Prepaid expenses and other assets	(2,181)		(588)
Accounts payable	(2,112)		(2,123)
Accrued expenses and other current liabilities	666		1,133
Deferred revenue	(5,600)		—
Net cash used in operating activities	(21,045)		(13,841)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of offering costs	9,005		14,455
Collection of stock subscription receivable	—		308
Net proceeds from exercise of warrants	3,019		4
Net cash provided by financing activities	12,024		14,767
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents	(9,021)		926
Cash, cash equivalents, restricted cash, and restricted cash equivalents at the beginning of period	35,402		7,377
Cash, cash equivalents, restricted cash, and restricted cash equivalents at the end of period	$	26,381	$	8,303
Supplemental disclosure of cash flow information:
Cash received during the period for interest	$	6	$	25
Supplemental disclosure of non-cash investing and financing activities:
Operating right of use asset and current and non-current lease liability	$	—	$	976

See accompanying notes to these unaudited consolidated financial statements.

6

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business

Overview

SELLAS Life Sciences Group, Inc. (the "Company" or "SELLAS") is a late-stage clinical biopharmaceutical company focused on novel cancer immunotherapeutics for a broad range of cancer indications. SELLAS’ lead product candidate, galinpepimut-S ("GPS"), is a cancer immunotherapeutic agent licensed from Memorial Sloan Kettering Cancer Center ("MSK") and targets the Wilms Tumor 1 ("WT1") protein, which is present in 20 or more cancer types. Based on its mechanism of action as a directly immunizing agent, GPS has potential as a monotherapy or in combination with other immunotherapeutic agents to address a broad spectrum of hematologic, or blood, cancers and solid tumor indications. SELLAS’ second product candidate, nelipepimut-S ("NPS"), is a cancer immunotherapy targeting the human epidermal growth factor receptor 2 ("HER2") expressing cancers with potential for the treatment of patients with early stage breast cancer with low to intermediate HER2 expression, otherwise known as HER2 1+ or 2+, which includes triple negative breast cancer ("TNBC") patients, following standard of care.

As used in this Quarterly Report on Form 10-Q, the words the "Company," and "SELLAS" refer to SELLAS Life Sciences Group, Inc. and its consolidated subsidiaries following the completion of the business combination with Galena Biopharma, Inc., a Delaware corporation ("Galena"), and SELLAS Life Sciences Group, Ltd., a privately held Bermuda exempted company ("Private SELLAS"), in December 2017. This business combination is referred to as the Merger. Upon completion of the Merger, the Company's name changed from "Galena Biopharma, Inc." to "SELLAS Life Sciences Group, Inc." and the Company's financial statements became those of Private SELLAS.

On March 11, 2020, the World Health Organization declared the outbreak of a new coronavirus to be a “pandemic”. The COVID-19 pandemic continues to present substantial public health and economic challenges around the world which have impacted, and will continue to impact, millions of individuals and businesses worldwide. Efforts to contain the spread of the coronavirus since March 2020 have led to travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. The Company is continuously monitoring the impact of the pandemic on its clinical development programs. The full extent to which the COVID-19 pandemic directly or indirectly impacts the Company's business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and cannot be predicted with confidence, including the actions taken to contain or treat COVID-19, the ultimate overall duration of the pandemic, the emergence of new variants of COVID-19, the emergence of new geographic hotspots where the coronavirus is spreading more rapidly, and continued or new travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, as well as the effectiveness of actions taken globally to contain and treat the coronavirus, including the availability of safe and effective vaccines and the uptake thereof and whether existing vaccines are effective with respect to new variants. In particular, the continued spread of the coronavirus globally could adversely impact the Company's clinical trial operations and could have an adverse impact on our business and the financial results.

7

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

2. Liquidity

Since inception, the Company has incurred recurring losses and negative cash flows from operations and, as of September 30, 2021, has an accumulated deficit of $132.0 million. During the nine months ended September 30, 2021, the Company used $21.0 million of cash in operations which included a net loss of $14.1 million, a $2.2 million increase in prepaid expenses and other assets primarily for insurance and prepaid clinical trial costs, a $5.6 million decrease in deferred revenue due to the recognition of licensing revenues and a $1.4 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $1.1 million decrease of contract acquisition costs related to the out-licensing of intellectual property rights and transfer of technical know-how and various net non-cash charges of $1.2 million. The Company expects to continue to generate operating losses and negative cash flows from operations for the next few years and will need additional funding to support its planned operating activities through profitability. The transition to profitability is dependent upon the successful development, approval, and commercialization of the Company's product candidates and the achievement of a level of revenues adequate to support its cost structure.

On April 16, 2021, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co. (the "Agent"). From time to time during the term of the Sales Agreement, the Company may offer and sell shares of common stock having an aggregate offering price up to a total of $50.0 million in gross proceeds. The Agent will collect a fee equal to 3% of the gross sales price of all shares of common stock sold. Shares of common stock sold under the Sales Agreement are offered and sold pursuant to the Company's registration statement on Form S-3, which was filed with the SEC on April 16, 2021 and declared effective on April 29, 2021. During the nine months ended September 30, 2021, the Company sold 786,927 shares of common stock pursuant to the Sales Agreement at an average price of $12.04 per share for aggregate net proceeds of approximately $9.0 million. There were no sales of shares of common stock under the Sales Agreement during the three months ended September 30, 2021. Other than the Sales Agreement, the Company currently does not have any commitments to obtain additional funds.

The Company received $2.0 million during the nine months ended September 30, 2021 for the achievement of certain development milestones pursuant to the Company's Exclusive License Agreement (the "3DMed License Agreement) with 3D Medicines Inc. ("3DMed"). An additional $192.5 million in potential future certain development, regulatory, and sales milestones remains under the 3DMed License Agreement, which milestones are variable in nature and not under the Company's control.

As of September 30, 2021, the Company had cash and cash equivalents of approximately $26.3 million and restricted cash and cash equivalents of $0.1 million. In accordance with Accounting Standards Codification ("ASC") 205-40, Presentation of Financial Statements - Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the consolidated financial statements are issued. The Company expects that its cash and cash equivalents, together with access to the Sales Agreement to sell common stock, will be sufficient to fund current planned operations for at least the next 12 months from the date of issuance of these financial statements, though it may pursue additional capital resources through public or private equity or debt financings or by entering into additional license agreements or collaborations with other companies. Management's expectations with respect to its ability to fund current planned operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management's estimates, the Company may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. There is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company is unable to obtain additional funding on a timely basis, it may be forced to significantly curtail, delay, or discontinue one or more of its planned research and development programs or be unable to expand its operations or otherwise prepare for the potential regulatory approval and commercialization of its product candidates, assuming positive data.

8

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

3. Basis of Presentation and Significant Accounting Policies

The Company's complete summary of significant accounting policies can be found in "Item 8. Financial Statements and Supplementary Data - Note 3. Basis of Presentation and Significant Accounting Policies" in the audited annual consolidated financial statements included in the 2020 Annual Report. The significant accounting policies summarized and included in the 2020 Annual Report have not materially changed, except as set forth below.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the ASC and Accounting Standards Updates of the Financial Accounting Standards Board ("FASB").

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. Unless the context otherwise indicates, reference in these notes to the "Company" refer to SELLAS Life Sciences Group, Inc., and its wholly owned subsidiaries, Private SELLAS, SLSG Limited, LLC, Sellas Life Sciences Limited, and Apthera, Inc.

Unaudited Interim Results

These consolidated financial statements and accompanying notes should be read in conjunction with the Company's annual consolidated financial statements and the notes thereto included in the 2020 Annual Report. The accompanying consolidated financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020, are unaudited, but include all adjustments, consisting of normal recurring entries, that management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. Balance sheet amounts as of December 31, 2020 have been derived from the audited financial statements as of that date.

Reclassification

Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on the Company's loss from operations, net loss, and net loss per share.

Time-Vested Restricted Stock Units

During the nine months ended September 30, 2021, the Board of Directors granted restricted stock units ("RSUs") to employees that vest based on continuous service. Time-vested RSUs awarded to employees vest one-fourth per year annually over four years, provided the employee remains employed with the Company. The fair values of the RSUs are measured on the date of grant and are based on the Company's closing stock price on such date. Compensation expense for RSUs with only service conditions is recognized straight-line over the applicable service period. The Company accounts for forfeitures of RSUs when they occur. Previously recognized compensation expense for forfeited RSUs are reversed in the period the RSUs are forfeited.

9

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Net Loss Per Share

Net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options and unvested restricted stock that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share, the weighted average number of shares remains the same for both calculations due to the fact that, when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive (in thousands):

	Nine Months Ended September 30,
	2021	2020
Common stock warrants	558	3,864
Stock options	526	208
RSUs	210	170
	1,294	4,242

Recent Accounting Standards Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which, among other things, eliminates certain exceptions in the current rules regarding the approach for intra-period tax allocations and the methodology for calculating income taxes in an interim period, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard was adopted by the Company on January 1, 2021. This new standard did not have a material impact on the Company’s financial statements.

Recent Accounting Standards 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which, among other things, simplifies the accounting models for the allocation of proceeds attributable to the issuance of a convertible debt instrument. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (i) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (ii) a convertible debt instrument was issued at a substantial premium. The standard becomes effective for the Company in the first quarter of 2022 and early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on its consolidated financial statements.

10

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

4. Fair Value Measurements

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets (in thousands):

Description	September 30, 2021		Quoted Prices In Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	25,392	$	25,392	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	25,492	$	25,492	$	—	$	—
Liabilities:
Warrant liability	$	84	$	—	$	—	$	84
Contingent consideration	5,036		—		—		5,036
Total liabilities measured and recorded at fair value	$	5,120	$	—	$	—	$	5,120

Description	December 31, 2020		Quoted Prices In   Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	34,959	$	34,959	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	35,059	$	35,059	$	—	$	—
Liabilities:
Warrant liability	$	55	$	—	$	—	$	55
Contingent consideration	4,633		—		—		4,633
Total liabilities measured and recorded at fair value	$	4,688	$	—	$	—	$	4,688

The Company did not transfer any financial instruments into or out of Level 3 classification during the nine months ended September 30, 2021 or during the year ended December 31, 2020. See Note 8, Warrants to Acquire Shares of Common Stock, for a reconciliation of the changes in the fair value of the warrant liability for the nine months ended September 30, 2021.

A reconciliation of the change in the fair value of the contingent consideration liability for the nine months ended September 30, 2021 is as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Contingent consideration, December 31, 2020	$	4,633
Change in the estimated fair value of the contingent consideration	403
Contingent consideration, September 30, 2021	$	5,036

11

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

The fair value of the contingent consideration is measured at the end of each reporting period using Level 3 inputs in a probability-weighted, discounted cash-outflow model. The contingent consideration relates to Galena's acquisition of Apthera, Inc. in 2011 and the future contingent payments of up to $32.0 million based on the achievement of certain development and commercial milestones relating to the Company’s NPS product candidate, of which $2.0 million has been paid to date. The remaining contingent consideration of up to $30.0 million is payable at the election of the Company in either cash or shares of common stock, provided that the Company may not issue any shares in satisfaction of any contingent consideration, unless it has first obtained approval from its stockholders in accordance with Rule 5635(a) of the Nasdaq Marketplace Rules.

The significant unobservable assumptions include the probability of achieving each milestone, the date the Company expects to reach the milestone, and a determination of present value factors used to discount future expected cash outflows. Changes in fair value reflect new information about the probability and anticipated timing of meeting the conditions of the milestone payments. In the absence of new information, changes in fair value will only reflect the interest component of contingent consideration related to the passage of time. As of September 30, 2021, estimated future contingent milestone payments related to the Company's business range from zero, if no milestone events are achieved, to a maximum of $30.0 million if all development and commercial milestones are reached. As of September 30, 2021, resulting probability-weighted cash flows were discounted using a weighted average cost of capital of 11.8% for development milestones and cost of debt of 5.4% for the commercial milestones. The Company estimates the timing of achievement of these development milestones to range from five to eight years as of September 30, 2021.

5. Balance Sheet Accounts

Prepaid expenses and other current assets consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Clinical trial costs	$	1,842	$	95
Insurance	691		221
Professional fees	57		49
Other	3		30
Prepaid expenses and other current assets	$	2,593	$	395

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Clinical trial costs	$	1,399	$	631
Compensation and related benefits	865		812
Professional fees	39		276
Other	281		194
Accrued expenses and other current liabilities	$	2,584	$	1,913

12

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

6. Commitments and Contingencies

Lease

The Company has a non-cancelable operating lease for certain executive, administrative, and general business office space for its headquarters in New York, New York, which began on June 5, 2020 and has a term through December 31, 2024. The discount rate of the Company's operating lease under ASC 842: Leases is the Company's estimated incremental borrowing rate of 13%. As of September 30, 2021, the lease has a remaining term of 3.3 years.

Rent expense related to the Company's operating lease was approximately $0.1 million for each of the three months ended September 30, 2021 and 2020 and $0.2 million and $0.3 million for the nine months ended September 30, 2021 and 2020, respectively. The Company made cash payments related to its operating lease of approximately $0.1 million for each of the three months ended September 30, 2021 and 2020 and $0.2 million for each of the nine months ended September 30, 2021 and 2020. Future minimum lease payments under the Company's non-cancelable operating lease are as follows as of September 30, 2021 (in thousands):

Future minimum lease payments:
2021 (remaining)	$	77
2022	311
2023	321
2024	330
Total future minimum lease payments	1,039
Less: imputed interest	(182)
Current and non-current operating lease liability	$	857

Legal Proceedings

From time to time, the Company is subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business, which may include employment matters, breach of contract disputes and stockholder litigation. Such actions and proceedings are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, when the Company has assessed that a loss is probable and an amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. In the opinion of management, as of the date hereof, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect the Company’s consolidated results of operations, financial position or cash flows.

The Company’s predecessor company, Galena, was involved in multiple legal proceedings and administrative actions, including stockholder class actions, both state and federal. The remaining legal proceedings to which the Company is now subject are as follows:

13

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

On February 13, 2017, certain putative shareholder securities class action complaints were filed in federal court alleging, among other things, that Galena and certain of Galena's former officers and directors failed to disclose that Galena’s promotional practices for Abstral® (fentanyl sublingual tablets) were allegedly improper and that Galena may be subject to civil and criminal liability, and that these alleged failures rendered Galena’s statements about its business misleading. The actions were consolidated, lead plaintiffs were named by the U.S. District Court for the District of New Jersey and a consolidated complaint was filed. The Company filed a motion to dismiss the consolidated complaint. On August 21, 2018, the Company's motion to dismiss the consolidated complaint was granted without prejudice to file an amended complaint. On September 20, 2018, the plaintiffs filed an amended complaint. On October 22, 2018, the Company filed a motion to dismiss the amended complaint. On November 13, 2019, the U.S. District Court for the District of New Jersey granted the Company's motion to dismiss without prejudice to file an amended complaint. On December 20, 2019, the lead plaintiffs filed a second Amended Consolidated Class Action Complaint. On January 29, 2020, the Company filed a motion to dismiss the amended complaint. On January 5, 2021, the U.S. District Court for the District of New Jersey granted the Company's motion to dismiss without prejudice to file an amended complaint. On February 18, 2021, the lead plaintiffs filed a third Amended Consolidated Class Action Complaint. The Company has reached a settlement with the plaintiffs in this action which has received preliminary court approval, with the Settlement Fairness Hearing scheduled for February 22, 2022, and which will be fully covered by the Company's directors and officers insurance policy applicable to this case.

In March 2017, a derivative complaint was filed in the U.S. District Court for the District of New Jersey against the Company’s former directors and Galena, as a nominal defendant. In July 2017, a derivative complaint was filed in California state court against the Company’s former directors and Galena, as a nominal defendant. In January 2018, a derivative complaint was filed in the U.S. District Court for the District of New Jersey against the Company’s former directors, officers and employees, and the Company as a nominal defendant. These complaints purport to assert derivative claims for breach of fiduciary duty on the Company’s behalf against the Company’s former directors and, in certain of the complaints, the Company’s current directors, and the Company’s former officers and former employees, based on substantially similar facts as alleged in the putative shareholder securities class action complaints mentioned above. The derivative lawsuit filed in California state court is currently stayed pending resolution of a motion to dismiss in the referenced securities class action. On July 13, 2020 and July 16, 2020, respectively, the Company filed motions to dismiss the two complaints filed in the U.S. District Court for the District of New Jersey. The Company has reached a settlement with the plaintiffs in these three cases which has received preliminary court approval, with the final settlement approval hearing scheduled for November 19, 2021, and which will be fully covered by the Company's directors and officers insurance policy applicable to these cases.

14

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

7. Stockholders’ Equity

Preferred Stock

The Company has authorized up to 5,000,000 shares of preferred stock, $0.0001 par value per share, for issuance.

Common Stock

The Company has authorized up to 350,000,000 shares of common stock, $0.0001 par value per share, for issuance.

As of September 30, 2021, the Company has shares of common stock reserved for future issuance as follows (in thousands):

Warrants outstanding	558
Stock options outstanding	526
RSUs outstanding	210
Shares reserved for future issuance under the Company’s 2019 Equity Incentive Plan	457
Shares reserved for future issuance under the 2021 Employee Stock Purchase Plan	300
Shares reserved for future issuance under the 2017 Employee Stock Purchase Plan	11
Total common stock reserved for future issuance	2,062

8. Warrants to Acquire Shares of Common Stock

Warrants Outstanding

The following is a summary of the activity of the Company's warrants to acquire shares of common stock for the nine months ended September 30, 2021 (in thousands):

Warrant Issuance	Outstanding, December 31, 2020	Granted	Exercised	Canceled/Expired	Outstanding, September 30, 2021	Expiration
July 2020 PIPE Offering	445	—	(420)	—	25	August 2025
January 2020 Offering	719	—	(410)	—	309	July 2025
June 2019 Offering	2	—	(1)	—	1	June 2024
March 2019 Exercise Agreement	63	—	—	—	63	March 2024
July 2018 Offering	141	—	(2)	—	139	July 2023
Other	22	—	—	(1)	21	November 2021 - November 2023
	1,392	—	(833)	(1)	558

Warrants to acquire shares of common stock consist of warrants that may be settled in cash, which are liability-classified warrants, and equity-classified warrants.

15

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Warrants Classified as Liabilities

Liability-classified warrants consist of warrants to acquire common stock issued in connection with certain previous equity financings. These warrants may be settled in cash and were determined not to be indexed to the Company’s common stock.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of operations as change in fair value of warrant liability. The fair value of the warrants is estimated using a Black-Scholes pricing model with the following inputs:

	September 30, 2021		December 31, 2020
Risk free interest rate	0.28	%	0.16	%
Volatility	138.53	%	150.38	%
Expected term (years)	2.00		2.75
Expected dividend yield	—	%	—	%

The expected volatility assumptions are based on the Company's implied volatility in combination with the implied volatilities of similar publicly traded entities. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the time of valuation. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

The changes in fair value of the warrant liability for the nine months ended September 30, 2021 were as follows (in thousands):

 

Warrant liability, December 31, 2020	$	55
Change in fair value of warrants	29
Warrant liability, September 30, 2021	$	84

16

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

9. License Revenue with 3D Medicines Inc.

Exclusive License Agreement with 3D Medicines Inc.

In December 2020, the Company, together with its wholly-owned subsidiary, SLSG Limited, LLC, entered into an Exclusive License Agreement (the “3DMed License Agreement”) with 3D Medicines Inc. ("3DMed"), pursuant to which the Company granted 3DMed a sublicensable, royalty-bearing license, under certain intellectual property owned or controlled by the Company, to develop, manufacture and have manufactured, and commercialize GPS and heptavalent GPS (referred to as GPS Plus) product candidates ("GPS Licensed Products") for all therapeutic and other diagnostic uses in mainland China, Hong Kong, Macau and Taiwan ("3DMed Territory"). The license is exclusive, except with respect to certain know-how that has been non-exclusively licensed to the Company and is sublicensed to 3DMed on a non-exclusive basis. The Company has retained development, manufacturing and commercialization rights with respect to the GPS Licensed Products in the rest of the world.

In partial consideration for the rights granted by the Company, 3DMed agreed to pay the Company (i) a one-time upfront cash payment of $7.5 million, and (ii) milestone payments totaling up to $194.5 million in the aggregate upon the achievement of certain technology transfer, development and regulatory milestones, as well as sales milestones based on certain net sales thresholds of GPS Licensed Products in the 3DMed Territory in a given calendar year. The Company is responsible for providing the licensed technology and data (the "3DMed License") as well as transferring certain technological and manufacturing know-how (the "transfer of know-how").

3DMed also agreed to pay tiered royalties based upon a percentage of annual net sales of GPS Licensed Products in the 3DMed Territory ranging from the high single digits to the low double digits. The royalties are payable on a GPS Licensed Product-by-GPS Licensed Product and region-by-region basis commencing on the first commercial sale of a GPS Licensed Product in a region and continuing until the latest of (i) the date that is 15 years from the receipt of marketing authorization for such GPS Licensed Product in such region and (ii) the date that is 10 years from the expiration of the last valid claim of a licensed patent covering or claiming such GPS Licensed Product in such region. The royalty rate is subject to reduction under certain circumstances, including when generic competition for a GPS Licensed Product exists in a particular region.

3DMed is responsible for all costs related to developing, obtaining regulatory approval of and commercializing the GPS Licensed Products in the 3DMed Territory. 3DMed is required to use commercially reasonable best efforts to develop and obtain regulatory approval for, and upon receipt of regulatory approval, commercialize the GPS Licensed Products in the 3DMed Territory. A joint steering committee has been established between 3DMed and the Company to coordinate and review the development, manufacturing and commercialization plans with respect to the GPS Licensed Products in the 3DMed Territory. The Company and 3DMed also agreed to negotiate in good faith the terms and conditions of a clinical supply agreement, a commercial supply agreement, and related quality agreements pursuant to which the Company will manufacture or have manufactured and supply 3DMed with all quantities of the GPS Licensed Products necessary for 3DMed to develop and commercialize the GPS Licensed Products in the 3DMed Territory until 3DMed has received all approvals required for 3DMed or its designated contract manufacturing organization to manufacture the GPS Licensed Products in the 3DMed Territory.

The 3DMed License Agreement will expire on a GPS Licensed Product-by-GPS Licensed Product and region-by-region basis on the date of the expiration of all of 3DMed’s payment obligations to the Company. Upon expiration of the 3DMed License Agreement, the license granted to 3DMed will become fully paid-up, perpetual and irrevocable. Either party may terminate the 3DMed License Agreement for the other party’s material breach following a cure period or upon certain insolvency events. The Company may terminate the 3DMed License Agreement if 3DMed or its affiliates or sublicensees challenge the validity or enforceability of the licensed patents. At any time following the two-year anniversary of the effective date, 3DMed has the right to terminate the 3DMed License Agreement for convenience, subject to certain requirements. 3DMed may terminate the 3DMed License Agreement upon prior notice to the Company if the grant of the license to 3DMed is prohibited or delayed for a period of time due to a change of U.S. export laws and regulations.

The 3DMed License Agreement includes customary representations and warranties, covenants and indemnification obligations for a transaction of this nature.

17

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Revenue Recognition

The Company evaluated the 3DMed License Agreement and concluded that 3DMed was a customer and the 3DMed License Agreement should be evaluated under ASC 606. In determining the appropriate amount of revenue to be recognized under ASC 606 as the Company fulfills its obligations under the 3DMed License Agreement, the Company performs the following steps: (i) identifies the promised goods or services in the contract; (ii) determines whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measures the transaction price, including any constraints on variable consideration; (iv) allocates the transaction price to the performance obligations; and (v) recognizes revenue when (or as) the Company satisfies each performance obligation.

The Company identified the 3DMed License and the transfer of know-how to be the material promises under the 3DMed License Agreement. The Company determined that the 3DMed License and the transfer of know-how are not distinct from each other. As such, for the purposes of ASC 606, the Company determined that these two material promises, described above, should be combined into a single performance obligation.

The Company determined the initial transaction price of the single performance obligation to be $9.5 million, which included the $7.5 million upfront fee as well as $2.0 million in development milestones that are assessed to be probable of being achieved at the inception of the 3DMed License Agreement and therefore were not constrained. The Company achieved $1.0 million of these milestones in the first quarter of 2021 and achieved the remaining $1.0 million milestone in the second quarter of 2021. The Company determined that $192.5 million in future certain development, regulatory, and sales milestones to be variable consideration subject to constraint at inception. At the end of each subsequent reporting period, the Company will reevaluate the probability of achievement of the future development, regulatory, and sales milestones subject to constraint and, if necessary, will adjust its estimate of the overall transaction price. Any such adjustments will be recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

For the sales-based royalties, the Company will recognize revenue when the related sales occur. To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

Since 3DMed benefited from the combined single performance obligation relating to the 3DMed License and the transfer of know-how as the technology transfer occurred, the Company recognized the transaction price over the technology transfer period, which was finalized in the second quarter of 2021. The revenue recognized was based on an output method to measure progress, using a straight-line convention, which the Company believes reasonably approximates its efforts in satisfying the combined performance obligation. There was no license revenue recognized during the three months ended September 30, 2021, and $7.6 million of license revenue recognized during the nine months ended September 30, 2021. As of September 30, 2021, the initial transaction price of the single performance obligation of $9.5 million has been fully recognized as licensing revenue. There was no license revenue recognized during the three and nine months ended September 30, 2020.

The following table presents a summary of the activity in the Company's deferred revenue, related to the total cash payments received of $9.5 million to date under the 3DMed License, during the nine months ended September 30, 2021 (in thousands):

Deferred revenue, December 31, 2020	$	5,600
Additions	2,000
Revenue recognized	(7,600)
Deferred revenue, September 30, 2021	$	—

18

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Cost of Contract Acquisition

The Company incurred contract acquisition costs (commissions) recorded as a contract asset amounting to approximately $1.4 million at inception of the 3DMed License Agreement which were capitalized under ASC 340-40 as incremental costs of obtaining the 3DMed License Agreement. These costs are amortized through general and administrative expense over the technology transfer period, commensurate with when the license revenue is recognized. There was no contract acquisitions expense during the three months ended September 30, 2021, and $1.1 million in contract acquisitions expense during the nine months ended September 30, 2021. There was no contract acquisitions expense during the three and nine months ended September 30, 2020.

Cost of License Revenue

There was no cost of license revenue during the three months ended September 30, 2021, and the Company incurred $0.2 million of sublicensing fees payable under its license from MSK in connection with the 3DMed License during the nine months ended September 30, 2021. There was no cost of license revenue during the three and nine months ended September 30, 2020.

10. Stock-Based Compensation

2017 Equity Incentive Plan

On December 29, 2017, the 2017 Equity Incentive Plan was approved by the stockholders of the Company, which provided for the issuance of up to a maximum of 24,204 shares of common stock underlying stock options granted prior to September 10, 2019. The 2017 Equity Incentive Plan was terminated upon the approval of the 2019 Incentive Plan subject to outstanding stock options granted under the 2017 Equity Incentive Plan that remain exercisable through maturity for the Company's employees and directors.

2019 Equity Incentive Plan

On September 10, 2019, the 2019 Equity Incentive Plan was approved by the stockholders of the Company, which currently allows for issuance of up to approximately (i) 1,191,000 shares of common stock in connection with the grant of stock-based awards, including stock options, restricted stock, restricted stock units, stock appreciation rights and other types of awards as deemed appropriate plus (ii) 2,684 shares of common stock under the 2017 Equity Incentive Plan that were forfeited back to the Company subsequent to September 10, 2019 and are available for future issuance.

The number of shares reserved for issuance under the 2019 Equity Incentive Plan will automatically increase on January 1 of each year, for a period of not more than four years, commencing on January 1, 2020 and ending on (and including) January 1, 2023, by an amount equal to the lesser of (i) 5% of the total number of shares of common stock outstanding at the end of the prior fiscal year; and (ii) an amount determined by the board of directors or authorized committee. As of September 30, 2021, approximately 457,000 shares of common stock were reserved for future grants under the 2019 Equity Incentive Plan.

Options to Purchase Shares of Common Stock

The following table summarizes stock option activity of the Company for the nine months ended September 30, 2021:

	Total Number of Shares (In Thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (In Thousands)
Outstanding at December 31, 2020	208	$	13.38	9.08	$	733
Granted	318	8.01
Outstanding at September 30, 2021	526	$	10.13	9.01	$	1,722
Options exercisable at September 30, 2021	101	$	21.72	8.25	$	619

19

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

The aggregate intrinsic values of outstanding and exercisable stock options at September 30, 2021 were calculated based on the closing price of the Company’s common stock as reported on the Nasdaq Capital Market on September 30, 2021 of $9.16 per share. The aggregate intrinsic value equals the positive difference between the closing fair market value of the Company’s common stock and the exercise price of the underlying stock options.

The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020, respectively (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	36	$	5	$	84	$	10
General and administrative	239		141		639		427
Total stock-based compensation	$	275	$	146	$	723	$	437

The Company uses the Black-Scholes option-pricing model to determine the fair value of all its stock options granted. The weighted average assumptions used during the nine months ended September 30, 2021 and 2020, respectively, were as follows:

	Nine Months Ended September 30,
	2021		2020
Risk free interest rate	1.04	%	0.62	%
Volatility	121.29	%	106.24	%
Expected lives (years)	6.18		6.15
Expected dividend yield	—	%	—	%

There were no options granted during the three months ended September 30, 2020. The weighted-average grant date fair value of options granted during the three months ended September 30, 2021 was $8.09. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2021 and 2020 was $6.99 and $1.53, respectively.

The Company’s expected common stock price volatility assumption is based upon the Company's own implied volatility in combination with the implied volatility of a basket of comparable companies. The expected life assumptions for employee grants were based upon the simplified method, which averages the contractual term of the Company’s options of ten years with the average vesting term of four years for an average of approximately six years. The expected life assumptions for non-employees were based upon the contractual term of the option. The dividend yield assumption is zero because the Company has never paid cash dividends and presently has no intention to do so. The risk-free interest rate used for each grant was also based upon prevailing short-term interest rates. The Company accounts for forfeitures as they occur.

As of September 30, 2021, there was $2.2 million of unrecognized compensation cost related to outstanding stock options that is expected to be recognized as a component of the Company’s operating expenses over a weighted-average period of 2.82 years.

20

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Time-vested RSUs and RSUs with Performance Conditions

The following table summarizes RSU activity of the Company for the nine months ended September 30, 2021:

	Shares (In Thousands)	Weighted Average Grant Date Fair Value
Unvested at December 31, 2020	170	$	1.89
Granted	40	$	8.00
Vested	—	$	—
Unvested at September 30, 2021	210	$	3.06

As of September 30, 2021, there was $0.6 million of unrecognized compensation cost related to outstanding RSUs that is expected to be recognized as a component of the Company's operating expenses over a weighted-average period of 2.67 years. No RSUs vested during the three and nine months ended September 30, 2021.

2021 Employee Stock Purchase Plan

On April 22, 2021, the Board of Directors adopted the 2021 Employee Stock Purchase Plan ("2021 ESPP") which was approved by the Company's stockholders on June 8, 2021. The 2021 ESPP allows employees to contribute up to 20% of their cash earnings, subject to a maximum of $25,000 per year under Internal Revenue Service rules, to be used to purchase shares of the Company’s common stock on semi-annual purchase dates. The 2021 ESPP allows eligible employees to purchase shares of common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six-month offering period during the term of the 2021 ESPP. The first offering period began in September 2021. There are currently 300,000 shares of common stock reserved for issuance under the 2021 ESPP.

11. Subsequent Events

The Company evaluated all events or transactions that occurred after September 30, 2021 up through the date these financial statements were issued. Other than as disclosed elsewhere in the notes to the consolidated financial statements, the Company did not have any material subsequent events.

21

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis of financial condition as of September 30, 2021 and results of operations for the three and nine months ended September 30, 2021 and 2020, respectively, should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission, or SEC, on March 23, 2021, or our 2020 Annual Report, and our other public reports filed with the SEC.

Overview

We are a late-stage clinical biopharmaceutical company focused on developing novel cancer immunotherapeutics for a broad range of cancer indications. Our product candidates currently include galinpepimut-S and nelipepimut-S.

Galinpepimut-S, or GPS

Our lead product candidate, galinpepimut-S, or GPS, is a cancer immunotherapeutic agent licensed from Memorial Sloan Kettering Cancer Center, or MSK, that targets the Wilms tumor 1, or WT1, protein, which is present in 20 or more cancer types. Based on its mechanism of action as a directly immunizing agent, GPS has potential as a monotherapy or in combination with other immunotherapeutic agents to address a broad spectrum of hematologic, or blood, cancers and solid tumor indications.

In January 2020, we commenced a Phase 3 trial, or the REGAL study, for GPS monotherapy in patients with acute myeloid leukemia, or AML, in the maintenance setting after achievement of second complete remission, or CR2, following successful completion of second-line antileukemic therapy. We expect this study will be used as the basis for submission of a Biologics License Application, or BLA, subject to a statistically significant and clinically meaningful data outcome and agreement with the U.S. Food & Drug Administration, or the FDA. We expect to enroll approximately 116 patients at up to approximately 135 clinical sites primarily in the United States and Europe.

In December 2018, we initiated a Phase 1/2 multi-arm "basket" type clinical study of GPS in combination with Merck & Co., Inc.’s anti-PD-1 therapy, pembrolizumab (Keytruda®). The tumor type currently being studied is ovarian cancer (second or third line).

In February 2020, a Phase I open-label investigator-sponsored clinical trial of GPS, in combination with Bristol-Myers Squibb’s anti-PD-1 therapy, nivolumab (Opdivo®), in patients with malignant pleural mesothelioma, or MPM, who harbor relapsed or refractory disease after having received frontline standard of care multimodality therapy (the "MPM IST") was commenced at MSK.

GPS was granted Orphan Drug Product Designations from the FDA, as well as Orphan Medicinal Product Designations from the European Medicines Agency, or EMA, for GPS in AML, MPM and multiple myeloma, or MM, as well as Fast Track Designation for AML, MPM, and MM from the FDA.

22

Nelipepimut-S or NPS

Nelipepimut-S, or NPS, is a cancer immunotherapy targeting the human epidermal growth factor receptor 2, or HER2, expressing cancers. Data presented in 2018 from a Phase 2b clinical trial of the combination of trastuzumab (Herceptin®) plus NPS in HER2 low expressing (1+ or 2+ per immunohistochemistry, or IHC) breast cancer patients in the adjuvant setting to prevent recurrences showed a clinically and statistically significant improvement in the disease-free survival, or DFS, rate for the triple negative breast cancer, or TNBC, cohort at 24 months for patients treated with NPS plus trastuzumab of 92.6% compared to 70.2% for those treated with trastuzumab alone. Following ongoing discussions with the FDA and based upon written feedback from the FDA and on the totality of clinical, safety and translational NPS data to date, we have finalized the design and plan for a Phase 3 registration-enabling study of NPS in combination with trastuzumab for the treatment of patients with TNBC in the adjuvant setting after standard treatment. If successful, we believe this study may be considered as the basis for a BLA submission to the FDA. We are seeking out-licensing opportunities to fund and conduct the future clinical development of NPS in order to maximize the potential of the program and we do not plan to conduct and fund a Phase 3 program for NPS on our own.

GPS Program Update

The final statistical analysis plan, or SAP, for the REGAL study provides for a planned interim safety and futility analysis after 80 events (deaths) which we had anticipated would take place in the first half of 2022, provided that the ongoing COVID-19 pandemic did not significantly adversely impact our projected timeline for enrollment. Over the last 12 to 18 months we have monitored the impact of the COVID-19 pandemic on our estimated timeline for the REGAL study. During this period, we took several steps to mitigate possible and actual delays due to COVID including increasing the number of clinical sites and the number of countries in which sites are located in order to maintain our original timeline. Even with such mitigation steps, we now anticipate that the interim analysis will take place in the second half of 2022, provided that the ongoing COVID-19 pandemic does not continue to significantly adversely impact our projected timeline for enrollment. In addition to the planned interim analysis under the SAP, the final charter for the Independent Data Monitoring Committee, or the IDMC, for the REGAL study provides for enrollment-based safety, futility and efficacy analyses prior to the interim analysis.

In June 2021, a peer-reviewed article was published in the journal Bone Marrow Transplantation which included a comprehensive retrospective analysis of survival outcomes in 4,280 AML patients treated in more than 450 blood and marrow transplant centers worldwide between 2007 and 2015. The analysis demonstrates the high unmet medical need to extend survival in AML patients. The published analysis showed that even among patients eligible to receive a bone marrow transplant, considered to be the only potential curative therapy in AML, less than half of the patients are alive five years after initial diagnosis. The analysis highlights the importance of the presence of minimal residual disease, or MRD, with patients who harbored MRD at the time of transplant having only 34%-37% probability of surviving five years. In our completed Phase 2 study of AML patients who achieved first remission, or CR1, OS for patients treated with GPS was 48.5 months from time of enrollment in the study. The retrospective analysis of the pooled outcomes for AML patients who underwent a transplant in the article published in Bone Marrow Transplantation indicates that the median OS from the time of transplant is approximately 26 months. In our Phase 2 AML CR1 study the median OS from the time of initial AML diagnosis was 67.6 months.

Based on our review of this data and after consultation with leading key opinion leaders for treatment of AML, we are currently in the regulatory and clinical planning stages for a potential Phase 2/3 study of GPS in AML patients who have undergone a bone marrow transplant and who harbor MRD.

In June 2021, we reported encouraging updated clinical data from the MPM IST. For the four evaluable patients, all of whom had the epithelioid and/or sarcomatoid variant and have received and progressed with, or are refractory to, frontline pemetrexed-based chemotherapy, the average overall survival, or OS, was 35.3 weeks with a median OS of 35.4 weeks at a median follow-up of 35.4 weeks. OS for relapsed/refractory patients receiving standard of care (pemetrexed, a chemotherapy) is approximately 28 weeks. Average progression-free survival, of PFS, was 8.8 weeks with a median PFS of seven weeks at a median follow-up of 35.4 weeks. The safety profile of the GPS-nivolumab combination was similar to that seen with nivolumab alone, with the addition of only low-grade, temporary local reactions at the GPS injection site which was consistent with previous clinical studies of GPS.

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In June 2021, we also reported updated clinical data and immune response profiles from the basket study of GPS in combination with pembrolizumab for treating WT1+ advanced ovarian cancer. Of the 11 evaluable patients, 66.7% were refractory to or had failed their second-line therapies and 33.3% had failed third-line or later therapy and all patients were resistant to the standard of care platinum-based therapy. The expected overall survival for patients receiving standard of care platinum-based therapy is nine to 12 months. The median OS among the patients in this trial is not yet known as all patients remained alive at the time of analysis which time period exceeds nine months. In an ad hoc analysis of the clinical outcomes for the cohort of 11 patients, the disease control rate, or DCR, which is the sum of overall response rate and rate of stable disease, was 63.6% with a median follow-up of 15.4 weeks. At the time of follow-up analysis, median PFS was 11.8 weeks. The safety profile of the GPS-pembrolizumab combination was similar to that seen with pembrolizumab alone, with the addition of only low-grade, temporary local reactions at the GPS injection site, consistent with previously performed clinical studies with GPS. We also reported immunobiological data from this study. CD8+ and CD4+ T-lymphocytes were isolated from peripheral blood mononuclear cells from three patients from whom samples had been collected both at baseline and at the time of the sixth GPS dose (i.e., 18 weeks after starting investigational therapy). The T-cells were assayed ex-vivo for immune responses against the pool of the four peptides that comprise GPS using the validated assay intracellular cytokine staining with fluorescence-activated single cell sorting (ICS-FACS) (Scorpion Biological Services, San Antonio, Texas), with appropriate positive and negative controls. A total of five cytokine “channels” were used for the analysis (i.e., interferon-g, TNF-a, interleukin-2, CD107a and MIP-1b). The peptide re-challenge incubation period was seven days. At the 18-week time point versus pre-vaccination baseline, the assay demonstrated a relative increase in WT1-specific T-lymphocyte frequencies in peripheral blood averaging +242% (range: +104 to +385% across five cytokines) for CD8+ and +80.5% (range: +1 to +174%) for CD4+. There was also evidence of polyfunctional T-cell activation (increases in secretion of >2 cytokines) in two out of three patients (66%).

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of a new coronavirus to be a “pandemic”. The COVID-19 pandemic continues to present substantial public health and economic challenges around the world which have impacted, and will continue to impact, millions of individuals and businesses worldwide. Efforts to contain the spread of the coronavirus since March 2020 have led to travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. As we have historically functioned operationally as a semi-virtual company, the transition to “work-from-home” for our employees has not materially altered our business operations. We have implemented a return-to-work policy in compliance with federal, state and local requirements and guidance, which provides for a hybrid of remote and in-office work, and we have operated on such a semi-virtual basis during the first nine months of 2021. We are continuously monitoring the impact of the pandemic on our clinical development programs. Our Phase 3 REGAL study is progressing, with the necessary work to activate additional sites in the United States and Europe continuing. However, throughout the pandemic we have observed that clinical site initiations and patient enrollment have taken more time than what had been projected prior to the start of the pandemic, likely due to prioritization of hospital resources towards the COVID-19 pandemic, quarantines which have impeded patient movement or interrupted operations at sites, and other COVID-related reasons. Accordingly, due to the accumulation of these delays over the past 18 months, we have adjusted the projected timing of the REGAL study. We believe that the COVID-19 pandemic has not materially impacted our efforts to out-license NPS. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and cannot be predicted with confidence, including the actions taken to contain or treat COVID-19, the ultimate overall duration of the pandemic, the emergence of new variants of COVID-19, the emergence of new geographic hotspots where the coronavirus is spreading more rapidly, and continued or new travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, as well as the effectiveness of actions taken globally to contain and treat the coronavirus, including the availability of safe and effective vaccines and the uptake thereof and whether existing vaccines are effective with respect to new variants. In particular, the continued spread of the coronavirus globally could adversely impact our clinical trial operations and could have an adverse impact on our business and the financial results.

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Components of Results of Operations

License Revenue

License revenue consists of revenue recognized pursuant to our Exclusive License Agreement with 3D Medicines Inc., or 3DMed, dated December 7, 2020, or the 3DMed License Agreement. In the future, we may generate revenue from a combination of reimbursements, up-front payments, milestone payments and royalties in connection with the 3DMed License Agreement.

Cost of License Revenue

Cost of license revenue consists of sublicensing fees payable under our license from MSK in connection with the 3DMed License Agreement.

Research and Development Expense

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

•expenses incurred under agreements with CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;

•manufacturing expenses;

•quality control and quality assurance services;

•outsourced professional scientific development services;

•employee-related expenses, which include salaries, benefits and stock-based compensation;

•payments made under our license agreements, under which we acquired certain intellectual property;

•expenses relating to certain regulatory activities, including filing fees paid to regulatory agencies;

•laboratory materials and supplies used to support our research activities; and

•allocated expenses, utilities and other facility-related costs.

The successful development of our current and future product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from any current or future product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of our clinical trials, which vary significantly over the life of a project as a result of many factors, including, but not limited to:

•the number of clinical sites included in the trials;

•the length of time required to enroll suitable patients;

•the number of patients that ultimately participate in the trials;

•the number of doses patients receive;

•the duration of patient follow-up;

•the results of clinical trials;

•the expenses associated with manufacturing;

•the receipt of marketing approvals;

•the commercialization of current and future product candidates; and

•the impact of the COVID-19 pandemic.

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Research and development activities are central to our business model. Cancer immunotherapy product candidates in the later stages of clinical development generally have higher development costs than those in the earlier stages of clinical development, primarily due to the increased size and duration of the later-stage clinical trials. We expect our research and development expenses to increase for the foreseeable future as we conduct and complete our ongoing early and late stage clinical trials and initiate additional clinical trials.

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals. We may never succeed in achieving regulatory approval for any of our current or future product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or target indications or focus on others. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials due to the COVID-19 pandemic or otherwise, we could be required to expend significant additional financial resources and time on the completion of clinical development. Cancer immunotherapy product commercialization may take several years and millions of dollars in development costs.

General and Administrative Expense

General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses, fees for outside legal counsel, amortization of contract acquisition costs (commissions), and director and officer insurance premiums. Other general and administrative expenses include facility related costs, patent filing and prosecution costs, professional fees for business development, accounting, consulting, legal and tax-related services associated with maintaining compliance with our Nasdaq listing and SEC reporting requirements, investor relations costs, and other expenses associated with being a public company.

If and when we believe that regulatory approval of a product candidate appears likely, we anticipate that an increase in general and administrative expenses will occur as a result of our preparation for commercial operations, particularly as it relates to the sales and marketing of such product candidate. Cancer immunotherapy product commercialization may take several years and millions of dollars in development costs.

Non-Operating (Expense) Income, Net

Non-operating (expense) income, net consists of changes in fair value of our warrant liability, changes in fair value of our contingent consideration, and interest income. Interest income primarily reflects interest earned from our cash and cash equivalents.

Critical Accounting Policies and Estimates

In the 2020 Annual Report, we disclosed our critical accounting policies and estimates upon which our financial statements are derived. There have been no material changes to these policies since December 31, 2020 that are not included in Note 3 of the accompanying consolidated financial statements for the nine months ended September 30, 2021. Readers are encouraged to read the 2020 Annual Report in conjunction with this Quarterly Report on Form 10-Q.

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Results of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30,
	2021		2020		Change
Licensing revenue	$	—	$	—	$	—
Operating expenses:
Cost of license revenue	—		—		—
Research and development	4,541		2,367		2,174
General and administrative	2,436		2,125		311
Total operating expenses	6,977		4,492		2,485
Operating loss	(6,977)		(4,492)		(2,485)
Non-operating income (expense), net	(108)		19		(127)
Net loss	$	(7,085)	$	(4,473)	$	(2,612)

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020 (in thousands):

	Nine Months Ended September 30,
	2021		2020		Change
Licensing revenue	$	7,600	$	—	$	7,600
Operating expenses:
Cost of license revenue	200		—		200
Research and development	12,281		6,511		5,770
General and administrative	8,794		6,312		2,482
Total operating expenses	21,275		12,823		8,452
Operating loss	(13,675)		(12,823)		(852)
Non-operating expense, net	(426)		(218)		(208)
Net loss	$	(14,101)	$	(13,041)	$	(1,060)

Further analysis of the changes and trends in our operating results are discussed below.

Licensing Revenue

Licensing revenue was $7.6 million for the nine months ended September 30, 2021 and was related to the out-licensing of intellectual property rights and transfer of technical know-how associated with the 3DMed License Agreement for the development and commercialization of GPS in China, Hong Kong, Macau, and Taiwan. There was no licensing revenue for the nine months ended September 30, 2020.

Cost of License Revenue

We incurred $0.2 million of sublicensing fees payable under our license from MSK in connection with the 3DMed License Agreement during the nine months ended September 30, 2021. There was no cost of license revenue for the nine months ended September 30, 2020.

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Research and Development

Research and development expenses were $4.5 million for the three months ended September 30, 2021 compared to $2.4 million for the three months ended September 30, 2020. The $2.1 million increase was primarily attributable to a $1.7 million increase in clinical trial expenses primarily related to our ongoing Phase 3 REGAL clinical trial of GPS in AML, a $0.8 million increase in manufacturing and drug supply costs due to the ramp up of the manufacture of clinical trial materials and registration batches of GPS, and a $0.1 million increase in personnel related expenses due to increased headcount. These increases were partially offset by a $0.2 million decrease in licensing fees and a $0.3 million decrease in other research and development expenses. We anticipate that our research and development expenses will increase in the future as we continue to advance the development of GPS, including our Phase 3 trial of GPS in AML and the ongoing basket trial of GPS in combination with pembrolizumab.

Research and development expenses were $12.3 million for the nine months ended September 30, 2021 compared to $6.5 million for the nine months ended September 30, 2020. The $5.8 million increase was primarily attributable to a $3.2 million increase in clinical trial expenses primarily related to our Phase 3 REGAL clinical trial of GPS in AML, a $2.5 million increase in manufacturing and drug supply costs due to the ramp up of the manufacture of clinical trial materials and registration batches of GPS, a technology transfer to a new contract manufacturer, and clinical drug supply purchase costs in the European Union as we open sites and enroll patients in European Union countries for our Phase 3 REGAL clinical trial for GPS in AML, and a $0.4 million increase in personnel related expenses due to increased headcount. These increases were partially offset by a $0.4 million decrease in licensing fees, and a $0.1 million decrease in other research and development expenses.

General and Administrative

General and administrative expenses were $2.4 million for the three months ended September 30, 2021 compared to $2.1 million for the three months ended September 30, 2020. The $0.3 million increase was primarily due to a $0.3 million increase in personnel related expenses due to increased headcount, a $0.1 million increase in outside services and public company costs, and a $0.1 million increase in professional services. These increases were partially offset by a $0.2 million decrease in other general and administrative related expenses.

General and administrative expenses were $8.8 million for the nine months ended September 30, 2021 compared to $6.3 million for the nine months ended September 30, 2020. The $2.5 million increase was primarily due to a $1.1 million amortization expense of our contract asset associated with the 3DMed License Agreement, a $0.6 million increase in personnel related expenses due to a $0.2 million increase in non-cash stock-based compensation and increased headcount, as well as a $0.7 million increase in legal fees as compared to the first nine months of 2020 in which we received a credit in legal fees that offset a significant amount of legal expenses incurred for that period, and a $0.1 million increase in other general and administrative related expenses.

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Non-Operating Income (Expense), Net

Non-operating income (expense), net for the three and nine months ended September 30, 2021 and 2020, respectively, was as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		Change		2021		2020		Change
Change in fair value of warrant liability	$	30	$	6	$	24	$	(29)	$	25	$	(54)
Change in fair value of contingent consideration	(140)		13		(153)		(403)		(268)		(135)
Interest income	2		—		2		6		25		(19)
Total non-operating income (expense), net	$	(108)	$	19	$	(127)	$	(426)	$	(218)	$	(208)

Net non-operating expense of $0.1 million for the three months ended September 30, 2021 was primarily due to the increase in the change in the fair value of the contingent consideration liability partially offset by a slight decrease in the change in the fair value of the warrant liability. The change in the fair value of the contingent consideration liability reflects the interest component of contingent consideration related to the passage of time. The decrease in the estimated fair value of our warrant liability was primarily due to a decrease in our common stock price. Interest income consisted of interest earned from our cash and cash equivalents.

Net non-operating income was nominal for the three months ended September 30, 2020.

Net non-operating expense of $0.4 million during the nine months ended September 30, 2021 was primarily due to the increase in the change in the fair value of the contingent consideration liability and a slight increase in the change in the fair value of the warrant liability partially offset by nominal interest income. The change in the fair value of the contingent consideration liability reflects the interest component of contingent consideration related to the passage of time. The increase in the estimated fair value of our warrant liability was primarily due to an increase in our common stock price. Interest income consisted of interest earned from our cash and cash equivalents.

Net non-operating expense of $0.2 million during the nine months ended September 30, 2020 was primarily due to the increase in the change in the fair value of the contingent consideration liability partially offset by a slight decrease in the change of the fair value of the warrant liability and nominal interest income. The change in the fair value of contingent consideration liability reflect the interest component of contingent consideration related to the passage of time. The decrease in the estimated fair value of our warrant liability was primarily due to a decrease in our common stock price.

The change in fair value of warrant liability and change in fair value of contingent consideration are non-cash in nature.

Income Tax Expense

There was no income tax expense for the three and nine months ended September 30, 2021 and 2020. We continue to maintain a full valuation allowance against our net deferred tax assets.

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Liquidity and Capital Resources

We did not generate any revenue from product sales during the three and nine months ended September 30, 2021 and 2020. Through September 30, 2021, the Company has only generated licensing revenue from the 3DMed License Agreement. Since inception, we have incurred net losses, used net cash in our operations, and have funded substantially all of our operations through proceeds of the sale of equity securities and convertible notes.

On April 16, 2021, we entered into a Controlled Equity OfferingSM Sales Agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or the "Agent. From time to time during the term of the Sales Agreement, we may offer and sell shares of common stock having an aggregate offering price up to a total of $50.0 million in gross proceeds. The Agent will collect a fee equal to 3% of the gross sales price of all shares of common stock sold. Shares of common stock sold under the Sales Agreement will be offered and sold pursuant to our registration statement on Form S-3, which was filed with the SEC on April 16, 2021 and was declared effective on April 29, 2021. During the nine months ended September 30, 2021 we sold 786,927 shares of our common stock pursuant to the Sales Agreement at an average price of $12.04 per share for aggregate net proceeds of approximately $9.0 million. We did not sell shares of common stock under the Sales Agreement during the three months ended September 30, 2021. Other than the Sales Agreement, we do not have any commitments to obtain additional funds.

We received $2.0 million during the nine months ended September 30, 2021 for the achievement of certain development milestones pursuant to our 3DMed License Agreement. An additional $192.5 million in potential future certain development, regulatory, and sales milestones remains under the 3DMed License Agreement which milestones are variable in nature and not under our control.

As of September 30, 2021, we had an accumulated deficit of $132.0 million, cash and cash equivalents of $26.3 million and restricted cash and cash equivalents of $0.1 million. In addition, we had current liabilities of $5.3 million as of September 30, 2021. We expect that our cash and cash equivalents, together with our access to the Sales Agreement, will be sufficient to fund current planned operations for at least the next twelve months from the date of issuance of these financial statements, although we may pursue additional capital resources through public or private equity or debt financings or by establishing additional collaborations with other companies. Our expectations with respect to our ability to fund current planned operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management's estimates, we may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. There is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If we are unable to obtain additional funding on a timely basis, we may be forced to significantly curtail, delay, or discontinue one or more of our planned research and development programs or be unable to expand our operations or otherwise prepare for the potential regulatory approval and commercialization of our product candidates, assuming positive data.

Our future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of any additional financings, (ii) our ability to complete revenue-generating partnerships with pharmaceutical and biotechnology companies, (iii) the success of our research and development activities, (iv) the development of competitive therapies by other biotechnology and pharmaceutical companies, and, ultimately, (v) regulatory approval and market acceptance of our proposed future products.

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Cash Flows

The following table summarizes our cash flows from operating and financing activities for the nine months ended September 30, 2021 and 2020 (in thousands):

	Nine Months Ended September 30,
	2021		2020
Net cash (used in) provided by:
Operating activities	$	(21,045)	$	(13,841)
Financing activities	12,024		14,767
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents	$	(9,021)	$	926

We had no investing activities during the nine months ended September 30, 2021 and 2020.

Net Cash Used in Operating Activities

Net cash used in operating activities of $21.0 million during the nine months ended September 30, 2021 was primarily attributable to an $8.1 million change in our operating assets and liabilities and our net loss of $14.1 million, which was offset by various net non-cash charges of $1.2 million. The net change in our operating assets and liabilities of $8.1 million is primarily attributable to a decrease in deferred revenue of $5.6 million, a $2.2 million increase in prepaid expenses and other assets primarily for prepaid insurance premiums and clinical trial costs and a $1.4 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $1.1 million decrease in contract acquisition costs related to the out-licensing of intellectual property rights and transfer of technical know-how associated with the 3DMed License Agreement.

Net cash used in operating activities of $13.8 million during the nine months ended September 30, 2020 was primarily attributable to our net loss of $13.0 million and a $1.6 million net change in our operating assets and liabilities, which was offset by various net non-cash charges of $0.8 million. The net change in our operating assets and liabilities of $1.6 million is primarily attributable to an increase in prepaid expenses and other current assets of $0.6 million and a $1.0 million decrease in accounts payable and accrued expenses and other current liabilities.

Net Cash Provided by Financing Activities

We generated $12.0 million of net cash from financing activities for the nine months ended September 30, 2021. We received $9.0 million in net proceeds from the issuance of common stock under the Sales Agreement, as well as $3.0 million from the exercise of warrants to acquire shares of common stock.

We generated $14.8 million of net cash from financing activities for the nine months ended September 30, 2020. We received $14.5 million in aggregate net proceeds from the sale of securities in a registered direct offering in January 2020 and a PIPE transaction in July 2020 and $0.3 million from the collection of our stock subscription receivable in January 2020.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet financing arrangements as of September 30, 2021.

 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and our principal financial officer (the “Certifying Officer”), evaluated the effectiveness of our disclosure controls and procedures. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”), such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure. Based on these evaluations, the Certifying Officers have concluded, that, as of the end of the period covered by this Quarterly Report on Form 10-Q:

(a)our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

(b)our disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Exchange Act was accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Please refer to Note 6 (Commitments and Contingencies) to our consolidated financial statements contained in Part I, Item 1 (Financial Statements) of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

ITEM 1A. RISK FACTORS

Please refer to our note on forward-looking statements on page 2 of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in our 2020 Annual Report. The risks described in such 2020 Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, operating results and stock price.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit #	Description	Form	Exhibit	Filing Date
3.1	Composite Amended and Restated Certificate of Incorporation of the Registrant (formerly, Galena Biopharma, Inc.) amended as of December 27, 2017	10-K	3.1	April 13, 2018
3.2	Amended and Restated By-Laws of the Registrant	8-K	3.3	January 5, 2018
31.1	Certification of Principal Executive Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended.**
31.2	Certification of Principal Financial Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended.**
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ***
101.INS	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema.*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.*
101.DEF	XBRL Taxonomy Extension Definition Linkbase.*
101.LAB	XBRL Taxonomy Extension Label Linkbase.*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.*

*	Indicates management contract or compensatory plans or arrangements.
**	Filed herewith
***	The certification attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SELLAS Life Sciences Group, Inc.
By:	/s/ Angelos M. Stergiou
	Angelos M. Stergiou, MD, ScD h.c.
	President and Chief Executive Officer
	Date: November 12, 2021

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EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Angelos M. Stergiou, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SELLAS Life Sciences Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 12, 2021

/s/ Angelos M. Stergiou

Angelos M. Stergiou, MD, ScD h.c.

President and Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Angelos M. Stergiou, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SELLAS Life Sciences Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 12, 2021

/s/ Angelos M. Stergiou

Angelos M. Stergiou, MD, ScD h.c.

President and Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of SELLAS Life Sciences Group, Inc., (the “Company”) on Form 10-Q for the period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the Company’s financial condition and result of operations.

By:	/s/ Angelos M. Stergiou
	Angelos M. Stergiou, MD, ScD h.c.
	President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)
	Date: November 12, 2021

A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

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Cover - shares	9 Months Ended
	Sep. 30, 2021	Nov. 11, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2021
Document Transition Report	false
Entity File Number	001-33958
Entity Registrant Name	SELLAS Life Sciences Group, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-8099512
Entity Address, Address Line One	7 Times Square, Suite 2503,
Entity Address, City or Town	New York,
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10036
City Area Code	(646)
Local Phone Number	200-5278
Title of 12(b) Security	Common Stock, $0.0001 par value per share
Trading Symbol	SLS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		15,885,542
Entity Central Index Key	0001390478
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 26,281	$ 35,302
Restricted cash and cash equivalents	100	100
Contract asset	0	1,128
Prepaid expenses and other current assets	2,593	395
Total current assets	28,974	36,925
Operating lease right-of-use asset	767	896
In-process research and development	5,700	5,700
Goodwill	1,914	1,914
Deposits and other assets	597	614
Total assets	37,952	46,049
Current liabilities:
Accounts payable	2,545	4,657
Accrued expenses and other current liabilities	2,584	1,913
Operating lease liability	190	166
Deferred revenue	0	5,600
Total current liabilities	5,319	12,336
Operating lease liability, non-current	667	825
Deferred tax liability	239	239
Warrant liability	84	55
Contingent consideration	5,036	4,633
Total liabilities	11,345	18,088
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; Series A convertible preferred stock, 17,500 shares designated; no shares issued and outstanding at September 30, 2021 and December 31, 2020	0	0
Common stock, $0.0001 par value; 350,000,000 shares authorized, 15,874,131 and 14,254,554 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	2	1
Additional paid-in capital	158,610	145,864
Accumulated deficit	(132,005)	(117,904)
Total stockholders’ equity	26,607	27,961
Total liabilities and stockholders’ equity	$ 37,952	$ 46,049

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2021	Dec. 31, 2020
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	350,000,000	350,000,000
Common stock, shares issued (in shares)	15,874,131	14,254,554
Common stock, shares outstanding (in shares)	15,874,131	14,254,554
Series A Preferred Stock
Preferred stock, shares authorized (in shares)	17,500	17,500

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Income Statement [Abstract]
Licensing revenue	$ 0	$ 0	$ 7,600,000	$ 0
Operating expenses:
Cost of licensing revenue	0	0	200,000	0
Research and development	4,541,000	2,367,000	12,281,000	6,511,000
General and administrative	2,436,000	2,125,000	8,794,000	6,312,000
Total operating expenses	6,977,000	4,492,000	21,275,000	12,823,000
Operating loss	(6,977,000)	(4,492,000)	(13,675,000)	(12,823,000)
Non-operating income (expense), net:
Change in fair value of warrant liability	30,000	6,000	(29,000)	25,000
Change in fair value of contingent consideration	(140,000)	13,000	(403,000)	(268,000)
Interest income	2,000	0	6,000	25,000
Total non-operating income (expense), net	(108,000)	19,000	(426,000)	(218,000)
Net loss	(7,085,000)	(4,473,000)	(14,101,000)	(13,041,000)
Deemed dividend arising from warrant modifications	0	0	0	(78,000)
Net loss attributable to common stockholders, basic	(7,085,000)	(4,473,000)	(14,101,000)	(13,119,000)
Net loss attributable to common stockholders, diluted	$ (7,085,000)	$ (4,473,000)	$ (14,101,000)	$ (13,119,000)
Per share information:
Net loss per common share attributable to common stockholders, basic (in dollars per share)	$ (0.45)	$ (0.53)	$ (0.92)	$ (1.83)
Net loss per common share attributable to common stockholders, diluted (in dollars per share)	$ (0.45)	$ (0.53)	$ (0.92)	$ (1.83)
Weighted-average common shares outstanding, basic (in shares)	15,874,076	8,418,038	15,344,210	7,174,859
Weighted-average common shares outstanding, diluted (in shares)	15,874,076	8,418,038	15,344,210	7,174,859

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2019		5,080,100
Beginning balance at Dec. 31, 2019	$ 6,093	$ 1	$ 107,239	$ (101,147)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock and common stock warrants, net of issuance costs (in shares)		3,933,078
Issuance of common stock, net of issuance costs	14,455		14,455
Issuance of common stock upon exercise of pre-funded warrants (in shares)		448,800
Issuance of common stock upon exercise of pre-funded warrants	4		4
Stock-based compensation	437		437
Net loss	(13,041)			(13,041)
Ending balance (in shares) at Sep. 30, 2020		9,461,978
Ending balance at Sep. 30, 2020	7,948	$ 1	122,135	(114,188)
Beginning balance (in shares) at Jun. 30, 2020		6,717,900
Beginning balance at Jun. 30, 2020	3,783	$ 1	113,497	(109,715)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock and common stock warrants, net of issuance costs (in shares)		2,744,078
Issuance of common stock, net of issuance costs	8,492		8,492
Stock-based compensation	146		146
Net loss	(4,473)			(4,473)
Ending balance (in shares) at Sep. 30, 2020		9,461,978
Ending balance at Sep. 30, 2020	7,948	$ 1	122,135	(114,188)
Beginning balance (in shares) at Dec. 31, 2020		14,254,554
Beginning balance at Dec. 31, 2020	27,961	$ 1	145,864	(117,904)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock and common stock warrants, net of issuance costs (in shares)		786,927
Issuance of common stock, net of issuance costs	9,005		9,005
Issuance of common stock upon exercise of warrants (in shares)		832,650
Issuance of common stock upon exercise of warrants	3,019	$ 1	3,018
Stock-based compensation	723		723
Net loss	(14,101)			(14,101)
Ending balance (in shares) at Sep. 30, 2021		15,874,131
Ending balance at Sep. 30, 2021	26,607	$ 2	158,610	(132,005)
Beginning balance (in shares) at Jun. 30, 2021		15,873,941
Beginning balance at Jun. 30, 2021	33,415	$ 2	158,333	(124,920)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of warrants (in shares)		190
Issuance of common stock upon exercise of warrants	2		2
Stock-based compensation	275		275
Net loss	(7,085)			(7,085)
Ending balance (in shares) at Sep. 30, 2021		15,874,131
Ending balance at Sep. 30, 2021	$ 26,607	$ 2	$ 158,610	$ (132,005)

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities:
Net loss	$ (14,101)	$ (13,041)
Adjustment to reconcile net loss to net cash used in operating activities:
Non-cash stock-based compensation	723	437
Change in operating lease right of use assets	0	98
Change in fair value of common stock warrants	29	(25)
Change in fair value of contingent consideration	403	268
Changes in operating assets and liabilities:
Contract asset	1,128	0
Prepaid expenses and other assets	(2,181)	(588)
Accounts payable	(2,112)	(2,123)
Accrued expenses and other current liabilities	666	1,133
Deferred revenue	(5,600)	0
Net cash used in operating activities	(21,045)	(13,841)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of offering costs	9,005	14,455
Collection of stock subscription receivable	0	308
Net proceeds from exercise of warrants	3,019	4
Net cash provided by financing activities	12,024	14,767
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents	(9,021)	926
Cash, cash equivalents, restricted cash, and restricted cash equivalents at the beginning of period	35,402	7,377
Cash, cash equivalents, restricted cash, and restricted cash equivalents at the end of period	26,381	8,303
Supplemental disclosure of cash flow information:
Cash received during the period for interest	6	25
Supplemental disclosure of non-cash investing and financing activities:
Operating right of use asset and current and non-current lease liability	$ 0	$ 976

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Description of Business

9 Months Ended

Sep. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

Description of Business

Overview

SELLAS Life Sciences Group, Inc. (the "Company" or "SELLAS") is a late-stage clinical biopharmaceutical company focused on novel cancer immunotherapeutics for a broad range of cancer indications. SELLAS’ lead product candidate, galinpepimut-S ("GPS"), is a cancer immunotherapeutic agent licensed from Memorial Sloan Kettering Cancer Center ("MSK") and targets the Wilms Tumor 1 ("WT1") protein, which is present in 20 or more cancer types. Based on its mechanism of action as a directly immunizing agent, GPS has potential as a monotherapy or in combination with other immunotherapeutic agents to address a broad spectrum of hematologic, or blood, cancers and solid tumor indications. SELLAS’ second product candidate, nelipepimut-S ("NPS"), is a cancer immunotherapy targeting the human epidermal growth factor receptor 2 ("HER2") expressing cancers with potential for the treatment of patients with early stage breast cancer with low to intermediate HER2 expression, otherwise known as HER2 1+ or 2+, which includes triple negative breast cancer ("TNBC") patients, following standard of care.

As used in this Quarterly Report on Form 10-Q, the words the "Company," and "SELLAS" refer to SELLAS Life Sciences Group, Inc. and its consolidated subsidiaries following the completion of the business combination with Galena Biopharma, Inc., a Delaware corporation ("Galena"), and SELLAS Life Sciences Group, Ltd., a privately held Bermuda exempted company ("Private SELLAS"), in December 2017. This business combination is referred to as the Merger. Upon completion of the Merger, the Company's name changed from "Galena Biopharma, Inc." to "SELLAS Life Sciences Group, Inc." and the Company's financial statements became those of Private SELLAS.

On March 11, 2020, the World Health Organization declared the outbreak of a new coronavirus to be a “pandemic”. The COVID-19 pandemic continues to present substantial public health and economic challenges around the world which have impacted, and will continue to impact, millions of individuals and businesses worldwide. Efforts to contain the spread of the coronavirus since March 2020 have led to travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. The Company is continuously monitoring the impact of the pandemic on its clinical development programs. The full extent to which the COVID-19 pandemic directly or indirectly impacts the Company's business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and cannot be predicted with confidence, including the actions taken to contain or treat COVID-19, the ultimate overall duration of the pandemic, the emergence of new variants of COVID-19, the emergence of new geographic hotspots where the coronavirus is spreading more rapidly, and continued or new travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, as well as the effectiveness of actions taken globally to contain and treat the coronavirus, including the availability of safe and effective vaccines and the uptake thereof and whether existing vaccines are effective with respect to new variants. In particular, the continued spread of the coronavirus globally could adversely impact the Company's clinical trial operations and could have an adverse impact on our business and the financial results.

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Liquidity

9 Months Ended

Sep. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Liquidity

Liquidity

Since inception, the Company has incurred recurring losses and negative cash flows from operations and, as of September 30, 2021, has an accumulated deficit of $132.0 million. During the nine months ended September 30, 2021, the Company used $21.0 million of cash in operations which included a net loss of $14.1 million, a $2.2 million increase in prepaid expenses and other assets primarily for insurance and prepaid clinical trial costs, a $5.6 million decrease in deferred revenue due to the recognition of licensing revenues and a $1.4 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $1.1 million decrease of contract acquisition costs related to the out-licensing of intellectual property rights and transfer of technical know-how and various net non-cash charges of $1.2 million. The Company expects to continue to generate operating losses and negative cash flows from operations for the next few years and will need additional funding to support its planned operating activities through profitability. The transition to profitability is dependent upon the successful development, approval, and commercialization of the Company's product candidates and the achievement of a level of revenues adequate to support its cost structure.

On April 16, 2021, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co. (the "Agent"). From time to time during the term of the Sales Agreement, the Company may offer and sell shares of common stock having an aggregate offering price up to a total of $50.0 million in gross proceeds. The Agent will collect a fee equal to 3% of the gross sales price of all shares of common stock sold. Shares of common stock sold under the Sales Agreement are offered and sold pursuant to the Company's registration statement on Form S-3, which was filed with the SEC on April 16, 2021 and declared effective on April 29, 2021. During the nine months ended September 30, 2021, the Company sold 786,927 shares of common stock pursuant to the Sales Agreement at an average price of $12.04 per share for aggregate net proceeds of approximately $9.0 million. There were no sales of shares of common stock under the Sales Agreement during the three months ended September 30, 2021. Other than the Sales Agreement, the Company currently does not have any commitments to obtain additional funds.

The Company received $2.0 million during the nine months ended September 30, 2021 for the achievement of certain development milestones pursuant to the Company's Exclusive License Agreement (the "3DMed License Agreement) with 3D Medicines Inc. ("3DMed"). An additional $192.5 million in potential future certain development, regulatory, and sales milestones remains under the 3DMed License Agreement, which milestones are variable in nature and not under the Company's control.

As of September 30, 2021, the Company had cash and cash equivalents of approximately $26.3 million and restricted cash and cash equivalents of $0.1 million. In accordance with Accounting Standards Codification ("ASC") 205-40, Presentation of Financial Statements - Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the consolidated financial statements are issued. The Company expects that its cash and cash equivalents, together with access to the Sales Agreement to sell common stock, will be sufficient to fund current planned operations for at least the next 12 months from the date of issuance of these financial statements, though it may pursue additional capital resources through public or private equity or debt financings or by entering into additional license agreements or collaborations with other companies. Management's expectations with respect to its ability to fund current planned operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management's estimates, the Company may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. There is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company is unable to obtain additional funding on a timely basis, it may be forced to significantly curtail, delay, or discontinue one or more of its planned research and development programs or be unable to expand its operations or otherwise prepare for the potential regulatory approval and commercialization of its product candidates, assuming positive data.

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Basis of Presentation and Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Significant Accounting Policies

The Company's complete summary of significant accounting policies can be found in "Item 8. Financial Statements and Supplementary Data - Note 3. Basis of Presentation and Significant Accounting Policies" in the audited annual consolidated financial statements included in the 2020 Annual Report. The significant accounting policies summarized and included in the 2020 Annual Report have not materially changed, except as set forth below.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the ASC and Accounting Standards Updates of the Financial Accounting Standards Board ("FASB").

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. Unless the context otherwise indicates, reference in these notes to the "Company" refer to SELLAS Life Sciences Group, Inc., and its wholly owned subsidiaries, Private SELLAS, SLSG Limited, LLC, Sellas Life Sciences Limited, and Apthera, Inc.

Unaudited Interim Results

These consolidated financial statements and accompanying notes should be read in conjunction with the Company's annual consolidated financial statements and the notes thereto included in the 2020 Annual Report. The accompanying consolidated financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020, are unaudited, but include all adjustments, consisting of normal recurring entries, that management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. Balance sheet amounts as of December 31, 2020 have been derived from the audited financial statements as of that date.

Reclassification

Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on the Company's loss from operations, net loss, and net loss per share.

Time-Vested Restricted Stock Units

During the nine months ended September 30, 2021, the Board of Directors granted restricted stock units ("RSUs") to employees that vest based on continuous service. Time-vested RSUs awarded to employees vest one-fourth per year annually over four years, provided the employee remains employed with the Company. The fair values of the RSUs are measured on the date of grant and are based on the Company's closing stock price on such date. Compensation expense for RSUs with only service conditions is recognized straight-line over the applicable service period. The Company accounts for forfeitures of RSUs when they occur. Previously recognized compensation expense for forfeited RSUs are reversed in the period the RSUs are forfeited.

Net Loss Per Share

Net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options and unvested restricted stock that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share, the weighted average number of shares remains the same for both calculations due to the fact that, when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive (in thousands):

	Nine Months Ended September 30,
	2021	2020
Common stock warrants	558	3,864
Stock options	526	208
RSUs	210	170
	1,294	4,242

Recent Accounting Standards Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which, among other things, eliminates certain exceptions in the current rules regarding the approach for intra-period tax allocations and the methodology for calculating income taxes in an interim period, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard was adopted by the Company on January 1, 2021. This new standard did not have a material impact on the Company’s financial statements.

Recent Accounting Standards 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which, among other things, simplifies the accounting models for the allocation of proceeds attributable to the issuance of a convertible debt instrument. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (i) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (ii) a convertible debt instrument was issued at a substantial premium. The standard becomes effective for the Company in the first quarter of 2022 and early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on its consolidated financial statements.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets (in thousands):

Description	September 30, 2021		Quoted Prices In Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	25,392	$	25,392	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	25,492	$	25,492	$	—	$	—
Liabilities:
Warrant liability	$	84	$	—	$	—	$	84
Contingent consideration	5,036		—		—		5,036
Total liabilities measured and recorded at fair value	$	5,120	$	—	$	—	$	5,120

Description	December 31, 2020		Quoted Prices In   Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	34,959	$	34,959	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	35,059	$	35,059	$	—	$	—
Liabilities:
Warrant liability	$	55	$	—	$	—	$	55
Contingent consideration	4,633		—		—		4,633
Total liabilities measured and recorded at fair value	$	4,688	$	—	$	—	$	4,688

The Company did not transfer any financial instruments into or out of Level 3 classification during the nine months ended September 30, 2021 or during the year ended December 31, 2020. See Note 8, Warrants to Acquire Shares of Common Stock, for a reconciliation of the changes in the fair value of the warrant liability for the nine months ended September 30, 2021.

A reconciliation of the change in the fair value of the contingent consideration liability for the nine months ended September 30, 2021 is as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Contingent consideration, December 31, 2020	$	4,633
Change in the estimated fair value of the contingent consideration	403
Contingent consideration, September 30, 2021	$	5,036

The fair value of the contingent consideration is measured at the end of each reporting period using Level 3 inputs in a probability-weighted, discounted cash-outflow model. The contingent consideration relates to Galena's acquisition of Apthera, Inc. in 2011 and the future contingent payments of up to $32.0 million based on the achievement of certain development and commercial milestones relating to the Company’s NPS product candidate, of which $2.0 million has been paid to date. The remaining contingent consideration of up to $30.0 million is payable at the election of the Company in either cash or shares of common stock, provided that the Company may not issue any shares in satisfaction of any contingent consideration, unless it has first obtained approval from its stockholders in accordance with Rule 5635(a) of the Nasdaq Marketplace Rules.

The significant unobservable assumptions include the probability of achieving each milestone, the date the Company expects to reach the milestone, and a determination of present value factors used to discount future expected cash outflows. Changes in fair value reflect new information about the probability and anticipated timing of meeting the conditions of the milestone payments. In the absence of new information, changes in fair value will only reflect the interest component of contingent consideration related to the passage of time. As of September 30, 2021, estimated future contingent milestone payments related to the Company's business range from zero, if no milestone events are achieved, to a maximum of $30.0 million if all development and commercial milestones are reached. As of September 30, 2021, resulting probability-weighted cash flows were discounted using a weighted average cost of capital of 11.8% for development milestones and cost of debt of 5.4% for the commercial milestones. The Company estimates the timing of achievement of these development milestones to range from five to eight years as of September 30, 2021.

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Balance Sheet Accounts

9 Months Ended

Sep. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet Accounts

Balance Sheet Accounts

Prepaid expenses and other current assets consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Clinical trial costs	$	1,842	$	95
Insurance	691		221
Professional fees	57		49
Other	3		30
Prepaid expenses and other current assets	$	2,593	$	395

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Clinical trial costs	$	1,399	$	631
Compensation and related benefits	865		812
Professional fees	39		276
Other	281		194
Accrued expenses and other current liabilities	$	2,584	$	1,913

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Lease

The Company has a non-cancelable operating lease for certain executive, administrative, and general business office space for its headquarters in New York, New York, which began on June 5, 2020 and has a term through December 31, 2024. The discount rate of the Company's operating lease under ASC 842: Leases is the Company's estimated incremental borrowing rate of 13%. As of September 30, 2021, the lease has a remaining term of 3.3 years.

Rent expense related to the Company's operating lease was approximately $0.1 million for each of the three months ended September 30, 2021 and 2020 and $0.2 million and $0.3 million for the nine months ended September 30, 2021 and 2020, respectively. The Company made cash payments related to its operating lease of approximately $0.1 million for each of the three months ended September 30, 2021 and 2020 and $0.2 million for each of the nine months ended September 30, 2021 and 2020. Future minimum lease payments under the Company's non-cancelable operating lease are as follows as of September 30, 2021 (in thousands):

Future minimum lease payments:
2021 (remaining)	$	77
2022	311
2023	321
2024	330
Total future minimum lease payments	1,039
Less: imputed interest	(182)
Current and non-current operating lease liability	$	857

Legal Proceedings

From time to time, the Company is subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business, which may include employment matters, breach of contract disputes and stockholder litigation. Such actions and proceedings are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, when the Company has assessed that a loss is probable and an amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. In the opinion of management, as of the date hereof, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect the Company’s consolidated results of operations, financial position or cash flows.

The Company’s predecessor company, Galena, was involved in multiple legal proceedings and administrative actions, including stockholder class actions, both state and federal. The remaining legal proceedings to which the Company is now subject are as follows:

On February 13, 2017, certain putative shareholder securities class action complaints were filed in federal court alleging, among other things, that Galena and certain of Galena's former officers and directors failed to disclose that Galena’s promotional practices for Abstral® (fentanyl sublingual tablets) were allegedly improper and that Galena may be subject to civil and criminal liability, and that these alleged failures rendered Galena’s statements about its business misleading. The actions were consolidated, lead plaintiffs were named by the U.S. District Court for the District of New Jersey and a consolidated complaint was filed. The Company filed a motion to dismiss the consolidated complaint. On August 21, 2018, the Company's motion to dismiss the consolidated complaint was granted without prejudice to file an amended complaint. On September 20, 2018, the plaintiffs filed an amended complaint. On October 22, 2018, the Company filed a motion to dismiss the amended complaint. On November 13, 2019, the U.S. District Court for the District of New Jersey granted the Company's motion to dismiss without prejudice to file an amended complaint. On December 20, 2019, the lead plaintiffs filed a second Amended Consolidated Class Action Complaint. On January 29, 2020, the Company filed a motion to dismiss the amended complaint. On January 5, 2021, the U.S. District Court for the District of New Jersey granted the Company's motion to dismiss without prejudice to file an amended complaint. On February 18, 2021, the lead plaintiffs filed a third Amended Consolidated Class Action Complaint. The Company has reached a settlement with the plaintiffs in this action which has received preliminary court approval, with the Settlement Fairness Hearing scheduled for February 22, 2022, and which will be fully covered by the Company's directors and officers insurance policy applicable to this case.

In March 2017, a derivative complaint was filed in the U.S. District Court for the District of New Jersey against the Company’s former directors and Galena, as a nominal defendant. In July 2017, a derivative complaint was filed in California state court against the Company’s former directors and Galena, as a nominal defendant. In January 2018, a derivative complaint was filed in the U.S. District Court for the District of New Jersey against the Company’s former directors, officers and employees, and the Company as a nominal defendant. These complaints purport to assert derivative claims for breach of fiduciary duty on the Company’s behalf against the Company’s former directors and, in certain of the complaints, the Company’s current directors, and the Company’s former officers and former employees, based on substantially similar facts as alleged in the putative shareholder securities class action complaints mentioned above. The derivative lawsuit filed in California state court is currently stayed pending resolution of a motion to dismiss in the referenced securities class action. On July 13, 2020 and July 16, 2020, respectively, the Company filed motions to dismiss the two complaints filed in the U.S. District Court for the District of New Jersey. The Company has reached a settlement with the plaintiffs in these three cases which has received preliminary court approval, with the final settlement approval hearing scheduled for November 19, 2021, and which will be fully covered by the Company's directors and officers insurance policy applicable to these cases.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Preferred Stock

The Company has authorized up to 5,000,000 shares of preferred stock, $0.0001 par value per share, for issuance.

Common Stock

The Company has authorized up to 350,000,000 shares of common stock, $0.0001 par value per share, for issuance.

As of September 30, 2021, the Company has shares of common stock reserved for future issuance as follows (in thousands):

Warrants outstanding	558
Stock options outstanding	526
RSUs outstanding	210
Shares reserved for future issuance under the Company’s 2019 Equity Incentive Plan	457
Shares reserved for future issuance under the 2021 Employee Stock Purchase Plan	300
Shares reserved for future issuance under the 2017 Employee Stock Purchase Plan	11
Total common stock reserved for future issuance	2,062

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Warrants to Acquire Shares of Common Stock

9 Months Ended

Sep. 30, 2021

Warrants and Rights Note Disclosure [Abstract]

Warrants to Acquire Shares of Common Stock

Warrants to Acquire Shares of Common Stock

Warrants Outstanding

The following is a summary of the activity of the Company's warrants to acquire shares of common stock for the nine months ended September 30, 2021 (in thousands):

Warrant Issuance	Outstanding, December 31, 2020	Granted	Exercised	Canceled/Expired	Outstanding, September 30, 2021	Expiration
July 2020 PIPE Offering	445	—	(420)	—	25	August 2025
January 2020 Offering	719	—	(410)	—	309	July 2025
June 2019 Offering	2	—	(1)	—	1	June 2024
March 2019 Exercise Agreement	63	—	—	—	63	March 2024
July 2018 Offering	141	—	(2)	—	139	July 2023
Other	22	—	—	(1)	21	November 2021 - November 2023
	1,392	—	(833)	(1)	558

Warrants to acquire shares of common stock consist of warrants that may be settled in cash, which are liability-classified warrants, and equity-classified warrants.

Warrants Classified as Liabilities

Liability-classified warrants consist of warrants to acquire common stock issued in connection with certain previous equity financings. These warrants may be settled in cash and were determined not to be indexed to the Company’s common stock.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of operations as change in fair value of warrant liability. The fair value of the warrants is estimated using a Black-Scholes pricing model with the following inputs:

	September 30, 2021		December 31, 2020
Risk free interest rate	0.28	%	0.16	%
Volatility	138.53	%	150.38	%
Expected term (years)	2.00		2.75
Expected dividend yield	—	%	—	%

The expected volatility assumptions are based on the Company's implied volatility in combination with the implied volatilities of similar publicly traded entities. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the time of valuation. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

The changes in fair value of the warrant liability for the nine months ended September 30, 2021 were as follows (in thousands):

 

Warrant liability, December 31, 2020	$	55
Change in fair value of warrants	29
Warrant liability, September 30, 2021	$	84

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License Revenue with 3D Medicines, Inc.

9 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

License Revenue with 3D Medicines, Inc.

License Revenue with 3D Medicines Inc.

Exclusive License Agreement with 3D Medicines Inc.

In December 2020, the Company, together with its wholly-owned subsidiary, SLSG Limited, LLC, entered into an Exclusive License Agreement (the “3DMed License Agreement”) with 3D Medicines Inc. ("3DMed"), pursuant to which the Company granted 3DMed a sublicensable, royalty-bearing license, under certain intellectual property owned or controlled by the Company, to develop, manufacture and have manufactured, and commercialize GPS and heptavalent GPS (referred to as GPS Plus) product candidates ("GPS Licensed Products") for all therapeutic and other diagnostic uses in mainland China, Hong Kong, Macau and Taiwan ("3DMed Territory"). The license is exclusive, except with respect to certain know-how that has been non-exclusively licensed to the Company and is sublicensed to 3DMed on a non-exclusive basis. The Company has retained development, manufacturing and commercialization rights with respect to the GPS Licensed Products in the rest of the world.

In partial consideration for the rights granted by the Company, 3DMed agreed to pay the Company (i) a one-time upfront cash payment of $7.5 million, and (ii) milestone payments totaling up to $194.5 million in the aggregate upon the achievement of certain technology transfer, development and regulatory milestones, as well as sales milestones based on certain net sales thresholds of GPS Licensed Products in the 3DMed Territory in a given calendar year. The Company is responsible for providing the licensed technology and data (the "3DMed License") as well as transferring certain technological and manufacturing know-how (the "transfer of know-how").

3DMed also agreed to pay tiered royalties based upon a percentage of annual net sales of GPS Licensed Products in the 3DMed Territory ranging from the high single digits to the low double digits. The royalties are payable on a GPS Licensed Product-by-GPS Licensed Product and region-by-region basis commencing on the first commercial sale of a GPS Licensed Product in a region and continuing until the latest of (i) the date that is 15 years from the receipt of marketing authorization for such GPS Licensed Product in such region and (ii) the date that is 10 years from the expiration of the last valid claim of a licensed patent covering or claiming such GPS Licensed Product in such region. The royalty rate is subject to reduction under certain circumstances, including when generic competition for a GPS Licensed Product exists in a particular region.

3DMed is responsible for all costs related to developing, obtaining regulatory approval of and commercializing the GPS Licensed Products in the 3DMed Territory. 3DMed is required to use commercially reasonable best efforts to develop and obtain regulatory approval for, and upon receipt of regulatory approval, commercialize the GPS Licensed Products in the 3DMed Territory. A joint steering committee has been established between 3DMed and the Company to coordinate and review the development, manufacturing and commercialization plans with respect to the GPS Licensed Products in the 3DMed Territory. The Company and 3DMed also agreed to negotiate in good faith the terms and conditions of a clinical supply agreement, a commercial supply agreement, and related quality agreements pursuant to which the Company will manufacture or have manufactured and supply 3DMed with all quantities of the GPS Licensed Products necessary for 3DMed to develop and commercialize the GPS Licensed Products in the 3DMed Territory until 3DMed has received all approvals required for 3DMed or its designated contract manufacturing organization to manufacture the GPS Licensed Products in the 3DMed Territory.

The 3DMed License Agreement will expire on a GPS Licensed Product-by-GPS Licensed Product and region-by-region basis on the date of the expiration of all of 3DMed’s payment obligations to the Company. Upon expiration of the 3DMed License Agreement, the license granted to 3DMed will become fully paid-up, perpetual and irrevocable. Either party may terminate the 3DMed License Agreement for the other party’s material breach following a cure period or upon certain insolvency events. The Company may terminate the 3DMed License Agreement if 3DMed or its affiliates or sublicensees challenge the validity or enforceability of the licensed patents. At any time following the two-year anniversary of the effective date, 3DMed has the right to terminate the 3DMed License Agreement for convenience, subject to certain requirements. 3DMed may terminate the 3DMed License Agreement upon prior notice to the Company if the grant of the license to 3DMed is prohibited or delayed for a period of time due to a change of U.S. export laws and regulations.

The 3DMed License Agreement includes customary representations and warranties, covenants and indemnification obligations for a transaction of this nature.

Revenue Recognition

The Company evaluated the 3DMed License Agreement and concluded that 3DMed was a customer and the 3DMed License Agreement should be evaluated under ASC 606. In determining the appropriate amount of revenue to be recognized under ASC 606 as the Company fulfills its obligations under the 3DMed License Agreement, the Company performs the following steps: (i) identifies the promised goods or services in the contract; (ii) determines whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measures the transaction price, including any constraints on variable consideration; (iv) allocates the transaction price to the performance obligations; and (v) recognizes revenue when (or as) the Company satisfies each performance obligation.

The Company identified the 3DMed License and the transfer of know-how to be the material promises under the 3DMed License Agreement. The Company determined that the 3DMed License and the transfer of know-how are not distinct from each other. As such, for the purposes of ASC 606, the Company determined that these two material promises, described above, should be combined into a single performance obligation.

The Company determined the initial transaction price of the single performance obligation to be $9.5 million, which included the $7.5 million upfront fee as well as $2.0 million in development milestones that are assessed to be probable of being achieved at the inception of the 3DMed License Agreement and therefore were not constrained. The Company achieved $1.0 million of these milestones in the first quarter of 2021 and achieved the remaining $1.0 million milestone in the second quarter of 2021. The Company determined that $192.5 million in future certain development, regulatory, and sales milestones to be variable consideration subject to constraint at inception. At the end of each subsequent reporting period, the Company will reevaluate the probability of achievement of the future development, regulatory, and sales milestones subject to constraint and, if necessary, will adjust its estimate of the overall transaction price. Any such adjustments will be recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

For the sales-based royalties, the Company will recognize revenue when the related sales occur. To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

Since 3DMed benefited from the combined single performance obligation relating to the 3DMed License and the transfer of know-how as the technology transfer occurred, the Company recognized the transaction price over the technology transfer period, which was finalized in the second quarter of 2021. The revenue recognized was based on an output method to measure progress, using a straight-line convention, which the Company believes reasonably approximates its efforts in satisfying the combined performance obligation. There was no license revenue recognized during the three months ended September 30, 2021, and $7.6 million of license revenue recognized during the nine months ended September 30, 2021. As of September 30, 2021, the initial transaction price of the single performance obligation of $9.5 million has been fully recognized as licensing revenue. There was no license revenue recognized during the three and nine months ended September 30, 2020.

The following table presents a summary of the activity in the Company's deferred revenue, related to the total cash payments received of $9.5 million to date under the 3DMed License, during the nine months ended September 30, 2021 (in thousands):

Deferred revenue, December 31, 2020	$	5,600
Additions	2,000
Revenue recognized	(7,600)
Deferred revenue, September 30, 2021	$	—

Cost of Contract Acquisition

The Company incurred contract acquisition costs (commissions) recorded as a contract asset amounting to approximately $1.4 million at inception of the 3DMed License Agreement which were capitalized under ASC 340-40 as incremental costs of obtaining the 3DMed License Agreement. These costs are amortized through general and administrative expense over the technology transfer period, commensurate with when the license revenue is recognized. There was no contract acquisitions expense during the three months ended September 30, 2021, and $1.1 million in contract acquisitions expense during the nine months ended September 30, 2021. There was no contract acquisitions expense during the three and nine months ended September 30, 2020.

Cost of License Revenue

There was no cost of license revenue during the three months ended September 30, 2021, and the Company incurred $0.2 million of sublicensing fees payable under its license from MSK in connection with the 3DMed License during the nine months ended September 30, 2021. There was no cost of license revenue during the three and nine months ended September 30, 2020.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

2017 Equity Incentive Plan

On December 29, 2017, the 2017 Equity Incentive Plan was approved by the stockholders of the Company, which provided for the issuance of up to a maximum of 24,204 shares of common stock underlying stock options granted prior to September 10, 2019. The 2017 Equity Incentive Plan was terminated upon the approval of the 2019 Incentive Plan subject to outstanding stock options granted under the 2017 Equity Incentive Plan that remain exercisable through maturity for the Company's employees and directors.

2019 Equity Incentive Plan

On September 10, 2019, the 2019 Equity Incentive Plan was approved by the stockholders of the Company, which currently allows for issuance of up to approximately (i) 1,191,000 shares of common stock in connection with the grant of stock-based awards, including stock options, restricted stock, restricted stock units, stock appreciation rights and other types of awards as deemed appropriate plus (ii) 2,684 shares of common stock under the 2017 Equity Incentive Plan that were forfeited back to the Company subsequent to September 10, 2019 and are available for future issuance.

The number of shares reserved for issuance under the 2019 Equity Incentive Plan will automatically increase on January 1 of each year, for a period of not more than four years, commencing on January 1, 2020 and ending on (and including) January 1, 2023, by an amount equal to the lesser of (i) 5% of the total number of shares of common stock outstanding at the end of the prior fiscal year; and (ii) an amount determined by the board of directors or authorized committee. As of September 30, 2021, approximately 457,000 shares of common stock were reserved for future grants under the 2019 Equity Incentive Plan.

Options to Purchase Shares of Common Stock

The following table summarizes stock option activity of the Company for the nine months ended September 30, 2021:

	Total Number of Shares (In Thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (In Thousands)
Outstanding at December 31, 2020	208	$	13.38	9.08	$	733
Granted	318	8.01
Outstanding at September 30, 2021	526	$	10.13	9.01	$	1,722
Options exercisable at September 30, 2021	101	$	21.72	8.25	$	619

The aggregate intrinsic values of outstanding and exercisable stock options at September 30, 2021 were calculated based on the closing price of the Company’s common stock as reported on the Nasdaq Capital Market on September 30, 2021 of $9.16 per share. The aggregate intrinsic value equals the positive difference between the closing fair market value of the Company’s common stock and the exercise price of the underlying stock options.

The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020, respectively (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	36	$	5	$	84	$	10
General and administrative	239		141		639		427
Total stock-based compensation	$	275	$	146	$	723	$	437

The Company uses the Black-Scholes option-pricing model to determine the fair value of all its stock options granted. The weighted average assumptions used during the nine months ended September 30, 2021 and 2020, respectively, were as follows:

	Nine Months Ended September 30,
	2021		2020
Risk free interest rate	1.04	%	0.62	%
Volatility	121.29	%	106.24	%
Expected lives (years)	6.18		6.15
Expected dividend yield	—	%	—	%

There were no options granted during the three months ended September 30, 2020. The weighted-average grant date fair value of options granted during the three months ended September 30, 2021 was $8.09. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2021 and 2020 was $6.99 and $1.53, respectively.

The Company’s expected common stock price volatility assumption is based upon the Company's own implied volatility in combination with the implied volatility of a basket of comparable companies. The expected life assumptions for employee grants were based upon the simplified method, which averages the contractual term of the Company’s options of ten years with the average vesting term of four years for an average of approximately six years. The expected life assumptions for non-employees were based upon the contractual term of the option. The dividend yield assumption is zero because the Company has never paid cash dividends and presently has no intention to do so. The risk-free interest rate used for each grant was also based upon prevailing short-term interest rates. The Company accounts for forfeitures as they occur.

As of September 30, 2021, there was $2.2 million of unrecognized compensation cost related to outstanding stock options that is expected to be recognized as a component of the Company’s operating expenses over a weighted-average period of 2.82 years.

Time-vested RSUs and RSUs with Performance Conditions

The following table summarizes RSU activity of the Company for the nine months ended September 30, 2021:

	Shares (In Thousands)	Weighted Average Grant Date Fair Value
Unvested at December 31, 2020	170	$	1.89
Granted	40	$	8.00
Vested	—	$	—
Unvested at September 30, 2021	210	$	3.06

As of September 30, 2021, there was $0.6 million of unrecognized compensation cost related to outstanding RSUs that is expected to be recognized as a component of the Company's operating expenses over a weighted-average period of 2.67 years. No RSUs vested during the three and nine months ended September 30, 2021.

2021 Employee Stock Purchase Plan

On April 22, 2021, the Board of Directors adopted the 2021 Employee Stock Purchase Plan ("2021 ESPP") which was approved by the Company's stockholders on June 8, 2021. The 2021 ESPP allows employees to contribute up to 20% of their cash earnings, subject to a maximum of $25,000 per year under Internal Revenue Service rules, to be used to purchase shares of the Company’s common stock on semi-annual purchase dates. The 2021 ESPP allows eligible employees to purchase shares of common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six-month offering period during the term of the 2021 ESPP. The first offering period began in September 2021. There are currently 300,000 shares of common stock reserved for issuance under the 2021 ESPP.

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Subsequent Events	9 Months Ended
	Sep. 30, 2021
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsThe Company evaluated all events or transactions that occurred after September 30, 2021 up through the date these financial statements were issued. Other than as disclosed elsewhere in the notes to the consolidated financial statements, the Company did not have any material subsequent events.

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Basis of Presentation and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the ASC and Accounting Standards Updates of the Financial Accounting Standards Board ("FASB").

Principles of Consolidation

Principles of Consolidation The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. Unless the context otherwise indicates, reference in these notes to the "Company" refer to SELLAS Life Sciences Group, Inc., and its wholly owned subsidiaries, Private SELLAS, SLSG Limited, LLC, Sellas Life Sciences Limited, and Apthera, Inc.

Reclassification

Reclassification

Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on the Company's loss from operations, net loss, and net loss per share.

Time-Vested Restricted Stock Units

Time-Vested Restricted Stock Units

During the nine months ended September 30, 2021, the Board of Directors granted restricted stock units ("RSUs") to employees that vest based on continuous service. Time-vested RSUs awarded to employees vest one-fourth per year annually over four years, provided the employee remains employed with the Company. The fair values of the RSUs are measured on the date of grant and are based on the Company's closing stock price on such date. Compensation expense for RSUs with only service conditions is recognized straight-line over the applicable service period. The Company accounts for forfeitures of RSUs when they occur. Previously recognized compensation expense for forfeited RSUs are reversed in the period the RSUs are forfeited.

Net Loss Per Share

Net Loss Per Share

Net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options and unvested restricted stock that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share, the weighted average number of shares remains the same for both calculations due to the fact that, when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

Recent Accounting Standards Adopted and Recent Accounting Standards Not Yet Adopted

Recent Accounting Standards Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which, among other things, eliminates certain exceptions in the current rules regarding the approach for intra-period tax allocations and the methodology for calculating income taxes in an interim period, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard was adopted by the Company on January 1, 2021. This new standard did not have a material impact on the Company’s financial statements.

Recent Accounting Standards 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which, among other things, simplifies the accounting models for the allocation of proceeds attributable to the issuance of a convertible debt instrument. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (i) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (ii) a convertible debt instrument was issued at a substantial premium. The standard becomes effective for the Company in the first quarter of 2022 and early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on its consolidated financial statements.

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Basis of Presentation and Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Schedule of Potentially Dilutive Securities Outstanding Excluded from Computation of Diluted Weighted Average Shares Outstanding

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive (in thousands):

	Nine Months Ended September 30,
	2021	2020
Common stock warrants	558	3,864
Stock options	526	208
RSUs	210	170
	1,294	4,242

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets (in thousands):

Description	September 30, 2021		Quoted Prices In Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	25,392	$	25,392	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	25,492	$	25,492	$	—	$	—
Liabilities:
Warrant liability	$	84	$	—	$	—	$	84
Contingent consideration	5,036		—		—		5,036
Total liabilities measured and recorded at fair value	$	5,120	$	—	$	—	$	5,120

Description	December 31, 2020		Quoted Prices In   Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	34,959	$	34,959	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	35,059	$	35,059	$	—	$	—
Liabilities:
Warrant liability	$	55	$	—	$	—	$	55
Contingent consideration	4,633		—		—		4,633
Total liabilities measured and recorded at fair value	$	4,688	$	—	$	—	$	4,688

Reconciliation of Level 3 Liabilities

A reconciliation of the change in the fair value of the contingent consideration liability for the nine months ended September 30, 2021 is as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Contingent consideration, December 31, 2020	$	4,633
Change in the estimated fair value of the contingent consideration	403
Contingent consideration, September 30, 2021	$	5,036

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Balance Sheet Accounts (Tables)

9 Months Ended

Sep. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Clinical trial costs	$	1,842	$	95
Insurance	691		221
Professional fees	57		49
Other	3		30
Prepaid expenses and other current assets	$	2,593	$	395

Schedule of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30, 2021		December 31, 2020
Clinical trial costs	$	1,399	$	631
Compensation and related benefits	865		812
Professional fees	39		276
Other	281		194
Accrued expenses and other current liabilities	$	2,584	$	1,913

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Future Minimum Lease Payments

Future minimum lease payments under the Company's non-cancelable operating lease are as follows as of September 30, 2021 (in thousands):

Future minimum lease payments:
2021 (remaining)	$	77
2022	311
2023	321
2024	330
Total future minimum lease payments	1,039
Less: imputed interest	(182)
Current and non-current operating lease liability	$	857

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Schedule of Common Stock Reserved for Future Issuance

As of September 30, 2021, the Company has shares of common stock reserved for future issuance as follows (in thousands):

Warrants outstanding	558
Stock options outstanding	526
RSUs outstanding	210
Shares reserved for future issuance under the Company’s 2019 Equity Incentive Plan	457
Shares reserved for future issuance under the 2021 Employee Stock Purchase Plan	300
Shares reserved for future issuance under the 2017 Employee Stock Purchase Plan	11
Total common stock reserved for future issuance	2,062

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Warrants to Acquire Shares of Common Stock (Tables)

9 Months Ended

Sep. 30, 2021

Warrants and Rights Note Disclosure [Abstract]

Schedule of Warrant Activity

The following is a summary of the activity of the Company's warrants to acquire shares of common stock for the nine months ended September 30, 2021 (in thousands):

Warrant Issuance	Outstanding, December 31, 2020	Granted	Exercised	Canceled/Expired	Outstanding, September 30, 2021	Expiration
July 2020 PIPE Offering	445	—	(420)	—	25	August 2025
January 2020 Offering	719	—	(410)	—	309	July 2025
June 2019 Offering	2	—	(1)	—	1	June 2024
March 2019 Exercise Agreement	63	—	—	—	63	March 2024
July 2018 Offering	141	—	(2)	—	139	July 2023
Other	22	—	—	(1)	21	November 2021 - November 2023
	1,392	—	(833)	(1)	558

Schedule of Fair Value of Warrants is Estimated Using Black-Scholes Option Pricing Model

The fair value of the warrants is estimated using a Black-Scholes pricing model with the following inputs:

	September 30, 2021		December 31, 2020
Risk free interest rate	0.28	%	0.16	%
Volatility	138.53	%	150.38	%
Expected term (years)	2.00		2.75
Expected dividend yield	—	%	—	%

Schedule of Changes in Fair Value of Warrant Liability

The changes in fair value of the warrant liability for the nine months ended September 30, 2021 were as follows (in thousands):

 

Warrant liability, December 31, 2020	$	55
Change in fair value of warrants	29
Warrant liability, September 30, 2021	$	84

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License Revenue with 3D Medicines, Inc. (Tables)

9 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

Deferred Revenue, Related to Upfront Cash Payment Received

The following table presents a summary of the activity in the Company's deferred revenue, related to the total cash payments received of $9.5 million to date under the 3DMed License, during the nine months ended September 30, 2021 (in thousands):

Deferred revenue, December 31, 2020	$	5,600
Additions	2,000
Revenue recognized	(7,600)
Deferred revenue, September 30, 2021	$	—

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Summary of Stock Option Activity

The following table summarizes stock option activity of the Company for the nine months ended September 30, 2021:

	Total Number of Shares (In Thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (In Thousands)
Outstanding at December 31, 2020	208	$	13.38	9.08	$	733
Granted	318	8.01
Outstanding at September 30, 2021	526	$	10.13	9.01	$	1,722
Options exercisable at September 30, 2021	101	$	21.72	8.25	$	619

Schedule of Allocated Stock-based Compensation Expense

The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020, respectively (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	36	$	5	$	84	$	10
General and administrative	239		141		639		427
Total stock-based compensation	$	275	$	146	$	723	$	437

Assumptions for Option Grants Issued

The Company uses the Black-Scholes option-pricing model to determine the fair value of all its stock options granted. The weighted average assumptions used during the nine months ended September 30, 2021 and 2020, respectively, were as follows:

	Nine Months Ended September 30,
	2021		2020
Risk free interest rate	1.04	%	0.62	%
Volatility	121.29	%	106.24	%
Expected lives (years)	6.18		6.15
Expected dividend yield	—	%	—	%

Summary of RSU Activity

The following table summarizes RSU activity of the Company for the nine months ended September 30, 2021:

	Shares (In Thousands)	Weighted Average Grant Date Fair Value
Unvested at December 31, 2020	170	$	1.89
Granted	40	$	8.00
Vested	—	$	—
Unvested at September 30, 2021	210	$	3.06

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Liquidity (Details) - USD ($)		3 Months Ended				9 Months Ended
	Apr. 16, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Accumulated deficit		$ 132,005,000				$ 132,005,000		$ 117,904,000
Net cash used in operating activities						21,045,000	$ 13,841,000
Net loss		7,085,000			$ 4,473,000	14,101,000	13,041,000
Increase in prepaid expenses and other current assets						2,181,000	588,000
Decrease in deferred revenue						5,600,000	0
Decrease in accounts payable and accrued expenses						1,400,000
Amortization of contract asset		0			$ 0	1,100,000	0
Decrease of contract acquisition costs						1,128,000	$ 0
Non-cash charges						1,200,000
Milestone payment received			$ 1,000,000	$ 1,000,000
Potential milestone payments to be received						192,500,000
Cash and cash equivalents		26,281,000				26,281,000		35,302,000
Restricted cash and cash equivalents		$ 100,000				$ 100,000		$ 100,000
Sales Agreement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sale of shares, common stock gross proceeds	$ 50,000,000
Percentage gross proceeds from the sale of shares (as a percent)	3.00%
Number of shares of stock (in shares)		0				786,927
Stock price per share (in dollars per share)		$ 12.04				$ 12.04
Net proceeds of common stock						$ 9,000,000
Milestone payment received						2,000,000
Potential milestone payments to be received						$ 192,500,000

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Basis of Presentation and Significant Accounting Policies - Time - Vested Restricted Stock Units (Details)	9 Months Ended
	Sep. 30, 2021
RSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Restricted stock unit award vested period	4 years

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Basis of Presentation and Significant Accounting Policies - Antidilutive Securities (Details) - shares shares in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	1,294	4,242
Common stock warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	558	3,864
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	526	208
RSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	210	170

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Fair Value Measurements - Contingent Purchase Price Consideration, Measured at Estimated Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Liabilities:
Warrant liability	$ 84	$ 55
Fair Value, Measurements, Recurring
Assets:
Cash equivalents	25,392	34,959
Restricted cash equivalents	100	100
Total assets measured and recorded at fair value	25,492	35,059
Liabilities:
Warrant liability	84	55
Contingent consideration	5,036	4,633
Total liabilities measured and recorded at fair value	5,120	4,688
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets (Level 1)
Assets:
Cash equivalents	25,392	34,959
Restricted cash equivalents	100	100
Total assets measured and recorded at fair value	25,492	35,059
Liabilities:
Warrant liability	0	0
Contingent consideration	0	0
Total liabilities measured and recorded at fair value	0	0
Fair Value, Measurements, Recurring | Significant Other Observable  Inputs (Level 2)
Assets:
Cash equivalents	0	0
Restricted cash equivalents	0	0
Total assets measured and recorded at fair value	0	0
Liabilities:
Warrant liability	0	0
Contingent consideration	0	0
Total liabilities measured and recorded at fair value	0	0
Fair Value, Measurements, Recurring | Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	0	0
Restricted cash equivalents	0	0
Total assets measured and recorded at fair value	0	0
Liabilities:
Warrant liability	84	55
Contingent consideration	5,036	4,633
Total liabilities measured and recorded at fair value	$ 5,120	$ 4,688

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Fair Value Measurements - Reconciliation of Level 3 Liabilities (Details) - Unobservable  Inputs (Level 3) $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Contingent consideration, December 31, 2020	$ 4,633
Change in the estimated fair value of the contingent consideration	403
Contingent consideration, September 30, 2021	$ 5,036

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Fair Value Measurements - Narrative (Details) - Apthera, Inc.	9 Months Ended	129 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2021 USD ($)	Dec. 31, 2011 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration payable, maximum amount	$ 30,000,000	$ 30,000,000	$ 32,000,000
Contingent consideration paid		2,000,000
Contingent consideration	30,000,000	30,000,000
Contingent consideration payable, minimum amount	$ 0	$ 0
Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Business combination, contingent consideration, timing of development milestones	5 years
Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Business combination, contingent consideration, timing of development milestones	8 years
Weighted average cost of capital
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Business combination, contingent consideration, measurement input (as a percent)	0.118	0.118
Cost of debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Business combination, contingent consideration, measurement input (as a percent)	0.054	0.054

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Balance Sheet Accounts - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Clinical trial costs	$ 1,842	$ 95
Insurance	691	221
Professional fees	57	49
Other	3	30
Prepaid expenses and other current assets	$ 2,593	$ 395

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Balance Sheet Accounts - Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Clinical trial costs	$ 1,399	$ 631
Compensation and related benefits	865	812
Professional fees	39	276
Other	281	194
Accrued expenses and other current liabilities	$ 2,584	$ 1,913

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Commitments and Contingencies - Narrative (Details) $ in Millions		3 Months Ended		9 Months Ended
	Jul. 16, 2020 complaint	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) case	Sep. 30, 2020 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of claims which the Company filed motions to dismiss | complaint	2
Number of cases settled | case				3
Office Space Lease Expiring December 31, 2024
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, discount rate (as a percent)		13.00%		13.00%
Operating lease, remaining term				3 years 3 months 18 days
Rent expense		$ 0.1	$ 0.1	$ 0.2	$ 0.3
Cash payments related to operating lease		$ 0.1	$ 0.1	$ 0.2	$ 0.2

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Commitments and Contingencies - Maturities of Lease Liabilities - 842 (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2021 (remaining)	$ 77
2022	311
2023	321
2024	330
Total future minimum lease payments	1,039
Less: imputed interest	(182)
Current and non-current operating lease liability	$ 857

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Stockholders' Equity - Narrative (Details) - $ / shares	Sep. 30, 2021	Dec. 31, 2020
Equity [Abstract]
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	350,000,000	350,000,000
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001

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Stockholders' Equity - Common Stock are Reserved for Future Issuance (Details) - shares shares in Thousands	Sep. 30, 2021	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding (in shares)	558	1,392
Stock options outstanding (in shares)	526	208
Total common stock reserved for future issuance (in shares)	2,062
2019 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for future issuance (in shares)	457
2021 ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for future issuance (in shares)	300
2017 ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for future issuance (in shares)	11
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs outstanding (in shares)	210	170

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Warrants to Acquire Shares of Common Stock - Warrants Outstanding (Details) shares in Thousands	9 Months Ended
	Sep. 30, 2021 shares
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	1,392
Granted (in shares)	0
Exercised (in shares)	(833)
Canceled/Expired (in shares)	(1)
Outstanding, end of period (in shares)	558
July 2020 PIPE Offering
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	445
Granted (in shares)	0
Exercised (in shares)	(420)
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	25
January 2020 Offering
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	719
Granted (in shares)	0
Exercised (in shares)	(410)
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	309
June 2019 Offering
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	2
Granted (in shares)	0
Exercised (in shares)	(1)
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	1
March 2019 Exercise Agreement
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	63
Granted (in shares)	0
Exercised (in shares)	0
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	63
July 2018 Offering
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	141
Granted (in shares)	0
Exercised (in shares)	(2)
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	139
Other
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	22
Granted (in shares)	0
Exercised (in shares)	0
Canceled/Expired (in shares)	(1)
Outstanding, end of period (in shares)	21

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Warrants to Acquire Shares of Common Stock - Fair Value of Warrants is Estimated Using Black-Scholes Option Pricing Model (Details)	Sep. 30, 2021	Dec. 31, 2020
Risk free interest rate
Class of Warrant or Right [Line Items]
Warrants, measurement input	0.0028	0.0016
Volatility
Class of Warrant or Right [Line Items]
Warrants, measurement input	1.3853	1.5038
Expected term (years)
Class of Warrant or Right [Line Items]
Warrants, measurement input	2.00	2.75
Expected dividend yield
Class of Warrant or Right [Line Items]
Warrants, measurement input	0	0

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Warrants to Acquire Shares of Common Stock - Narrative (Details)	Sep. 30, 2021	Dec. 31, 2020
Coupon rate
Class of Warrant or Right [Line Items]
Expected dividend yield	0
Expected dividend yield
Class of Warrant or Right [Line Items]
Expected dividend yield	0	0

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Warrants to Acquire Shares of Common Stock - Changes in Fair Value of Warrant Liability (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($)
Class of Warrant or Right, Fair Value [Roll Forward]
Warrant liability, December 31, 2020	$ 55
Change in fair value of warrants	29
Warrant liability, September 30, 2021	$ 84

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License Revenue with 3D Medicines, Inc. - Narrative (Details) - USD ($)	1 Months Ended	3 Months Ended				9 Months Ended
	Dec. 31, 2020	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenue from Contract with Customer [Abstract]
Upfront cash payment received	$ 7,500,000					$ 9,500,000
Future milestone payments received	$ 194,500,000
Royalties payable, maximum term	15 years
Royalties payable, minimum term	10 years
Performance obligation, amount	$ 9,500,000	$ 9,500,000				9,500,000
Milestones probable of being achieved	$ 2,000,000
Milestone payment received			$ 1,000,000	$ 1,000,000
Potential milestone payments to be received						192,500,000
Licensing revenue		0			$ 0	7,600,000	$ 0
Contract acquisition costs		1,400,000				1,400,000
Amortization of contract asset		0			0	1,100,000	0
Cost of licensing revenue		$ 0			$ 0	$ 200,000	$ 0

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License Revenue with 3D Medicines, Inc. - Deferred Revenue (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Movement in Deferred Revenue [Roll Forward]
Deferred revenue, December 31, 2020			$ 5,600,000
Additions			2,000,000
Revenue recognized	$ 0	$ 0	(7,600,000)	$ 0
Deferred revenue, September 30, 2021	$ 0		$ 0

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Stock-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions			3 Months Ended		9 Months Ended
	Apr. 22, 2021	Sep. 10, 2019	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 29, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for issuance (in shares)			2,062,000		2,062,000
Closing price of the Company's common stock (in dollars per share)			$ 9.16		$ 9.16
Granted (in shares)				0	318,000
Weighted average exercise price, granted (in dollars per share)			$ 8.09		$ 6.99	$ 1.53
Averages contractual term					10 years
Expected dividend yield (as a percent)					0.00%	0.00%
Unrecognized compensation cost, options			$ 2.2		$ 2.2
Operating expenses weighted average period					2 years 9 months 25 days
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average exercise price, granted (in dollars per share)					$ 8.00
Operating expenses weighted average period					2 years 8 months 1 day
Unrecognized compensation cost			$ 0.6		$ 0.6
RSUs Vested (in shares)			0		0
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average vesting term					6 years
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average vesting term					4 years
2017 Equity Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for issuance (in shares)			2,684		2,684
2017 Equity Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock authorized for issuance (in shares)							24,204
2019 Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock authorized for issuance (in shares)		1,191,000
Shares of common stock reserved for issuance (in shares)			457,000		457,000
Option term		4 years
Increase in number of shares available for future issuance under stock based awards (as a percent)		5.00%
2021 ESPP | Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for issuance (in shares)	300,000
Cash earnings contributed per year	20.00%
Purchase price of common stock	85.00%
Offering period	6 months

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Stock-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2021	Sep. 30, 2020	Sep. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Options outstanding, beginning balance (in shares)	208,000		208,000
Granted (in shares)		0	318,000
Options outstanding, ending balance (in shares)			526,000
Options exercisable (in shares)			101,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Weighted average exercise price, beginning balance (in dollars per share)	$ 13.38		$ 13.38
Weighted average exercise price, granted (in dollars per share)			8.01
Weighted average exercise price, ending balance (in dollars per share)			10.13
Weighted average exercise price, exercisable (in dollars per share)			$ 21.72
Weighted average remaining contractual term, outstanding (in years)	9 years 29 days		9 years 3 days
Weighted average remaining contractual term, options exercisable (in years)			8 years 3 months
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Aggregate Intrinsic Value [Roll Forward]
Aggregate intrinsic value, beginning balance	$ 733		$ 733
Aggregate intrinsic value, ending balance			1,722
Aggregate intrinsic value, options exercisable			$ 619

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Stock-Based Compensation - Allocated Stock-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 275	$ 146	$ 723	$ 437
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	36	5	84	10
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 239	$ 141	$ 639	$ 427

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Stock-Based Compensation - Assumptions for Option Grants Issued (Details)	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Share-based Payment Arrangement [Abstract]
Risk free interest rate	1.04%	0.62%
Volatility	121.29%	106.24%
Expected lives (years)	6 years 2 months 4 days	6 years 1 month 24 days
Expected dividend yield	0.00%	0.00%

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Stock-Based Compensation - Summary of RSU Activity (Details) - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2020
Weighted Average Grant Date Fair Value
Granted (in dollars per share)	$ 8.09	$ 6.99	$ 1.53
RSUs
Shares (In Thousands)
Beginning balance (in shares)		170,000
Granted (in shares)		40,000
Vested (in shares)	0	0
Ending balance (in shares)	210,000	210,000
Weighted Average Grant Date Fair Value
Beginning balance (in dollars per share)		$ 1.89
Granted (in dollars per share)		8.00
Vested (in dollars per share)		0
Ending balance (in dollars per share)	$ 3.06	$ 3.06