aTYR PHARMA INC 10-Q

Item 1. Financial Statements aTyr Pharma, Inc. Condensed Consolidated Balance Sheets (in thousands, except share and per share data) June 30, December 31, 2021 2020 (unaudited) Assets Current assets: Cash and cash equivalents $ 2,192 $ 16,952 Available-for-sale investments 41,869 14,737 Other receivables 90 2,039 Prepaid expenses 2,256 1,803 Total current assets 46,407 35,531 Property and equipment, net 751 899 Right-of-use assets 1,685 2,083 Other assets 152 213 Total assets $ 48,995 $ 38,726 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 2,224 $ 1,431 Accrued expenses 4,141 3,572 Current portion of operating lease liability 919 861 Total current liabilities 7,284 5,864 Long-term operating lease liability, net of current portion 906 1,378 Commitments and contingencies (Note 4) Stockholders’ equity: Preferred stock, $ 0.001 par value per share; 5,000,000 undesignated authorized shares; Class X Convertible Preferred Stock issued and outstanding shares – 0 as of June 30, 2021 (unaudited) and December 31, 2020, respectively — — Common stock, $ 0.001 par value per share; 42,500,000 and 21,425,000 authorized shares as of June 30, 2021 and December 31, 2020, respectively; issued and outstanding shares – 16,307,370 (unaudited) and 11,018,954 as of June 30, 2021 and December 31, 2020, respectively 16 11 Additional paid-in capital 397,091 370,210 Accumulated other comprehensive loss ( 61 ) ( 43 ) Accumulated deficit ( 356,070 ) ( 338,528 ) Total aTyr Pharma stockholders’ equity 40,976 31,650 Noncontrolling interest in Pangu BioPharma Limited ( 171 ) ( 166 ) Total stockholders' equity 40,805 31,484 Total liabilities and stockholders’ equity $ 48,995 $ 38,726 See accompanying notes. 3 aTyr Pharma, Inc. Condensed Consolidated Statements of Operations (in thousands, except share and per share data) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (unaudited) Revenues: License and collaboration agreement revenues $ — $ 189 $ — $ 8,254 Total revenues — 189 — 8,254 Operating expenses: Research and development 7,655 4,361 12,171 7,977 General and administrative 2,790 2,146 5,476 4,736 Total operating expenses 10,445 6,507 17,647 12,713 Loss from operations ( 10,445 ) ( 6,318 ) ( 17,647 ) ( 4,459 ) Total other income (expense), net 53 ( 129 ) 100 ( 236 ) Consolidated net loss $ ( 10,392 ) $ ( 6,447 ) $ ( 17,547 ) $ ( 4,695 ) Net loss attributable to noncontrolling interest in Pangu BioPharma Limited 1 1 5 2 Net loss attributable to aTyr Pharma, Inc. $ ( 10,391 ) $ ( 6,446 ) $ ( 17,542 ) $ ( 4,693 ) Net loss per share, basic and diluted $ ( 0.64 ) $ ( 0.69 ) $ ( 1.16 ) $ ( 0.58 ) Shares used in computing basic net loss per share, basic and diluted 16,128,473 9,357,432 15,121,721 8,119,612 See accompanying notes. 4 aTyr Pharma, Inc. Condensed Consolidated Statements of Comprehensive Loss (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (unaudited) Consolidated net loss $ ( 10,392 ) $ ( 6,447 ) $ ( 17,547 ) $ ( 4,695 ) Other comprehensive loss: Change in unrealized gain (loss) on available-for-sale investments, net of tax ( 4 ) 9 ( 18 ) ( 4 ) Comprehensive loss $ ( 10,396 ) $ ( 6,438 ) $ ( 17,565 ) $ ( 4,699 ) Comprehensive loss attributable to noncontrolling interest Pangu BioPharma Limited 1 1 5 2 Comprehensive loss attributable to aTyr Pharma, Inc. common stockholders $ ( 10,395 ) $ ( 6,437 ) $ ( 17,560 ) $ ( 4,697 ) See accompanying notes. 5 aTyr Pharma, Inc. Condensed Consolidated Statements of Stockholders’ Equity (in thousands, except share data) Six Months Ended June 30, 2021 (unaudited) Convertible Preferred Stock Common Stock Additional Paid-In Other Comprehensive Accumulated Noncontrolling Total Stockholders’ Shares Amount Shares Amount Capital Gain/(Loss) Deficit Interest Equity Balance as of December 31, 2020 — $ — 11,018,954 $ 11 $ 370,210 $ ( 43 ) $ ( 338,528 ) $ ( 166 ) $ 31,484 Issuance of common stock upon release of restricted stock units — — 4,177 — — — — — — Issuance of common stock from at the market offerings, net of offering costs — — 1,988,254 2 9,619 — — — 9,621 Issuance of common stock from committed purchase agreement, net of offering costs — — 3,000,000 3 15,233 — — — 15,236 Stock-based compensation — — — — 360 — — — 360 Net unrealized loss on investments, net of tax — — — — — ( 14 ) — — ( 14 ) Net loss — — — — — — ( 7,151 ) ( 4 ) ( 7,155 ) Balance as of March 31, 2021 — — 16,011,385 16 395,422 ( 57 ) ( 345,679 ) ( 170 ) 49,532 Issuance of common stock upon exercise of stock options — — 553 — 1 — — — 1 Issuance of common stock pursuant to employee stock purchase plan — — 1,602 — 5 — — — 5 Issuance of common stock from at the market offerings, net of offering costs — — 293,830 — 1,265 — — — 1,265 Stock-based compensation — — — — 398 — — — 398 Net unrealized loss on investments, net of tax — — — — — ( 4 ) — — ( 4 ) Net loss — — — — — — ( 10,391 ) ( 1 ) ( 10,392 ) Balance as of June 30, 2021 — $ — 16,307,370 $ 16 $ 397,091 $ ( 61 ) $ ( 356,070 ) $ ( 171 ) $ 40,805 Six Months Ended June 30, 2020 (unaudited) Convertible Preferred Stock Common Stock Additional Paid-In Other Comprehensive Accumulated Noncontrolling Total Stockholders’ Shares Amount Shares Amount Capital Gain/(Loss) Deficit Interest Equity Balance as of December 31, 2019 1,643,961 $ 2 3,891,787 $ 4 $ 343,524 $ ( 40 ) $ ( 322,304 ) $ ( 160 ) $ 21,026 Conversion of preferred stock to common stock ( 1,643,961 ) ( 2 ) 587,444 1 1 — — — — Issuance of common stock upon release of restricted stock units — — 2,679 — — — — — — Issuance of common stock from underwritten follow-on offering, net of offering costs — — 4,870,588 4 18,775 — — — 18,779 Stock-based compensation — — — — 423 — — — 423 Net unrealized loss on investments, net of tax — — — — — ( 13 ) — — ( 13 ) Net income (loss) — — — — — — 1,753 ( 1 ) 1,752 Balance as of March 31, 2020 — — 9,352,498 9 362,723 ( 53 ) ( 320,551 ) ( 161 ) 41,967 Issuance of common stock upon release of restricted stock units — — 5,999 — — — — — — Issuance of common stock pursuant to employee stock purchase plan — — 1,780 — 6 — — — 6 Issuance of common stock from at the market offerings, net of offering costs — — 23,148 — 25 — — — 25 Stock-based compensation — — — — 378 — — — 378 Net unrealized gain on investments, net of tax — — — — — 9 — — 9 Net loss — — — — — — ( 6,446 ) ( 1 ) ( 6,447 ) Balance as of June 30, 2020 — $ — 9,383,425 $ 9 $ 363,132 $ ( 44 ) $ ( 326,997 ) $ ( 162 ) $ 35,938 See accompanying notes. 6 aTyr Pharma, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) Six Months Ended June 30, 2021 2020 (unaudited) Cash flows from operating activities: Consolidated net loss $ ( 17,547 ) $ ( 4,695 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 244 313 Stock-based compensation 758 801 Debt discount accretion and non-cash interest expense — 239 Accretion of discount of available-for-sale investment securities 106 ( 11 ) Amortization of right-of-use assets 411 407 Loss on disposal of property and equipment — 6 Changes in operating assets and liabilities: Other receivables 1,949 ( 731 ) Prepaid expenses and other assets ( 405 ) ( 894 ) Accounts payable and accrued expenses 1,379 589 Contract liability — ( 7 ) Operating lease liability ( 414 ) ( 362 ) Net cash used in operating activities ( 13,519 ) ( 4,345 ) Cash flows from investing activities: Purchases of property and equipment ( 113 ) ( 185 ) Purchases of available-for-sale investment securities ( 40,024 ) ( 18,011 ) Maturities of available-for-sale investment securities 12,768 20,150 Proceeds from sale of property and equipment — 3 Net cash provided by (used in) investing activities ( 27,369 ) 1,957 Cash flows from financing activities: Proceeds from issuance of common stock through option exercises 1 — Proceeds from issuance of common stock through employee stock purchase plan 5 6 Proceeds from issuance of common stock from at the market offerings, net of offering costs 10,886 25 Proceeds from issuance of common stock from committed purchase agreement, net of offering costs 15,236 — Proceeds from issuance of common stock from underwritten follow-on offering, net of offering costs — 18,779 Repayments on borrowings — ( 4,000 ) Net cash provided by financing activities 26,128 14,810 Net change in cash and cash equivalents ( 14,760 ) 12,422 Cash and cash equivalents at beginning of period 16,952 9,210 Cash and cash equivalents at the end of period $ 2,192 $ 21,632 See accompanying notes. 7 aTyr Pharma, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Organization, Business, Basis of Presentation and Summary of Significant Accounting Policies Organization and Business aTyr Pharma, Inc. (we, us, and our) was incorporated in the state of Delaware on September 8, 2005. We are focused on the discovery and development of innovative medicines based on novel biological pathways. Principles of Consolidation Our condensed consolidated financial statements include our accounts and our 98 % majority-owned subsidiary in Hong Kong, Pangu BioPharma Limited (Pangu BioPharma). All intercompany transactions and balances are eliminated in consolidation. Unaudited Interim Financial Information The accompanying interim condensed consolidated financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) and follow the requirements of the United States Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In our opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position and our results of operations and cash flows for periods presented. These statements do not include all disclosures required by GAAP and should be read in conjunction with our financial statements and accompanying notes for the fiscal year ended December 31, 2020, contained in our Annual Report on Form 10-K filed with the SEC on March 24, 2021. The results of the interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period. Risks and Uncertainties The impact of the COVID-19 pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. Impacts to our business have included delayed enrollment of our Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis and the discontinuation of some patients in that trial, temporary closures of portions of our facilities and those of our licensees and collaborators, disruptions or restrictions on our employee's ability to travel and delays in certain research and development activities. Other potential impacts to our business include, but are not limited to disruptions to or delays in other clinical trials, third-party manufacturing supply and other operations, inflation, the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, interruptions or delays in the operations of the FDA or other regulatory authorities, and our ability to raise capital and conduct business development activities. Liquidity and Financial Condition We have incurred net losses in each year since our inception in 2005, including a condensed consolidated net loss of $ 17.5 million for the six months ended June 30, 2021. As of June 30, 2021, we had an accumulated deficit of $ 356.1 million. We believe that our existing cash, cash equivalents and available-for-sale investments of $ 44.1 million as of June 30, 2021 will be sufficient to meet our anticipated cash requirements for a period of at least one year from the filing date of this Quarterly Report on Form 10-Q. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years at a minimum. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to raise substantial additional capital to fund our operations. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts and the timing and nature of the regulatory approval process for our product candidates. We anticipate that we will seek to fund our operations through equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and when we are closer to commercialization of our product candidates potentially through debt financings. However, we may be unable to raise additional capital or enter into such arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such arrangements when needed would have a negative impact on our financial condition and ability to develop our product candidates. Use of Estimates Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that impact the reported amounts of assets, liabilities 8 and expenses and the disclosure for these items in our condensed consolidated financial statements and accompanying notes. The most significant estimates in our condensed consolidated financial statements relate to clinical trial and research and development expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ materially from these estimates and assumptions. Reclassifications Certain reclassifications have been made to prior year amounts to conform to the current year presentation. The reclassifications were not material to the condensed consolidated financial statements. Leases We follow Accounting Standards Codification (ASC) Topic 842, Leases in recording our operating and financing leases. For our long-term operating leases, we recognized a right-of-use asset and a lease liability in our condensed consolidated balance sheets. The lease liability is determined as the present value of future lease payments using an estimated rate of interest that we would pay to borrow equivalent funds on a collateralized basis at the lease commencement date. The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent. We determine the lease term at the commencement date by considering whether renewal options and termination options are reasonably assured of exercise. We also made accounting policy elections not to apply the recognition requirements under Topic 842 to any of our short-term leases and to account for each separate lease and associated non-lease components as a single lease component for all of our leases. Under Topic 842 we determine if an arrangement is a lease at inception. Our right-of-use assets consist of an operating lease for our facility headquarters. We have a noncancelable operating lease that includes certain tenant improvement allowances and is subject to base lease payments, which escalate over the term of the lease, additional charges for common area maintenance and other costs. Rent expense for the operating lease is recognized on a straight-line basis over the lease term and is included in operating expenses in our condensed consolidated statements of operations. Revenue Recognition We evaluate our agreements under ASC Topic 606, Revenue from Contracts with Customers and ASC Topic 808, Collaborative Arrangements . We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services . In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under our agreement, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. We use key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. We recognize revenue in one of two ways, over time or at a point in time. We recognize revenue over time when we are executing on our performance obligation over time and our partner receives benefit over time. For example, we recognize revenue over time when we provide research and development services. We recognize revenue at a point in time when we transfer control of a distinct performance obligation to our partner. For example, if a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. Net Loss Per Share Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is calculated by dividing the net loss by the weighted average number of common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of warrants for common stock, options and restricted stock units outstanding under our stock option plan and estimated shares to be purchased under our employee stock purchase plan. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding, as the assumed exercise or settlement of stock options, restricted stock units, and warrants, or the conversion of preferred stock are anti-dilutive. 9 Potentially dilutive securities not considered for the calculation of diluted net loss per share are as follows (in common stock equivalents): Six Months Ended June 30, 2021 2020 Common stock warrants 13,760 13,904 Common stock options and restricted stock units 1,295,447 693,670 Employee stock purchase plan 1,780 1,780 Total 1,310,987 709,354 Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326), to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in Topic 326 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Topic 326 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies. We expect the adoption of the amendments in Topic 326 to not have a material effect in our condensed consolidated financial position or results of operations when such amendment is adopted. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes to identify, evaluate, and improve areas of GAAP for which costs and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments for Topic 740 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. Topic 740 is effective for fiscal years beginning after December 15, 2020 which we adopted on January 1, 2021. The adoption did not have an effect on our condensed consolidated financial position or results of operations. 2. Fair Value Measurements The carrying amounts of cash equivalents, prepaid and other assets, accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. Investment securities are recorded at fair value. The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Financial assets measured at fair value on a recurring basis consist of investment securities. Investment securities are recorded at fair value, defined as the exit price in the principal market in which we would transact, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Level 2 securities are valued using quoted market prices for similar instruments, non-binding market prices that are corroborated by observable market data, or discounted cash flow techniques and include our investments in commercial paper, corporate debt securities and asset-bask securities. We have no financial liabilities measured at fair value on a recurring basis. None of our non-financial assets and liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented. Assets measured at fair value on a recurring basis are as follows (in thousands): 10 Fair Value Measurements Using Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) As of June 30, 2021 Assets: Current: Cash equivalents $ 1,781 $ 1,781 $ — $ — Available-for-sale investments: Asset-backed securities 1,001 — 1,001 — Commercial paper 22,582 — 22,582 — Corporate debt securities 17,289 — 17,289 — Municipal bonds 997 — 997 — Total available-for-sale investments 41,869 — 41,869 — Total assets measured at fair value $ 43,650 $ 1,781 $ 41,869 $ — Fair Value Measurements Using Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) As of December 31, 2020 Assets: Current: Cash equivalents $ 13,708 $ 13,708 $ — $ — Available-for-sale investments: Asset-backed securities 2,219 — 2,219 — Commercial paper 5,494 — 5,494 — Corporate debt securities 7,024 — 7,024 — Total available-for-sale investments 14,737 — 14,737 — Total assets measured at fair value $ 28,445 $ 13,708 $ 14,737 $ — As of June 30, 2021 and December 31, 2020, available-for-sale investments are detailed as follows (in thousands): June 30, 2021 Contractual Maturity Gross Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Market Value Available-for-sale investments: Asset-backed securities Within 1 year $ 1,001 $ — $ — $ 1,001 Commercial paper Within 1 year 22,583 1 ( 2 ) 22,582 Corporate debt securities 1 to 2 years 17,296 — ( 7 ) 17,289 Municipal bonds Within 2 years 1,000 — ( 3 ) 997 $ 41,880 $ 1 $ ( 12 ) $ 41,869 December 31, 2020 Contractual Maturity Gross Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Market Value Available-for-sale investments: Asset-backed securities Within 1 year $ 2,218 $ 1 $ — $ 2,219 Commercial paper Within 1 year 5,491 3 — 5,494 Corporate debt securities Within 1 year 7,021 3 — 7,024 $ 14,730 $ 7 $ — $ 14,737 11 At each reporting date, we perform an evaluation of impairment to determine if any unrealized losses are other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, and our intent and ability to hold the investment until recovery of its amortized cost basis. We intend, and have the ability, to hold our investments in unrealized loss positions, if any, until their amortized cost basis has been recovered. As of June 30, 2021, all of our available-for-sale investments have a variety of effective maturity dates of less than two years . As of June 30, 2021, 17 out of 25 available-for-sale investments were in gross unrealized loss positions. 3. License and Other Agreements Kyorin Pharmaceutical Co., Ltd. In January 2020, we entered into a collaboration and license agreement with Kyorin Pharmaceutical Co., Ltd. (Kyorin) for the development and commercialization of ATYR1923 for interstitial lung diseases (ILD) in Japan. Under the agreement (the Kyorin Agreement), Kyorin received an exclusive right to develop and commercialize ATYR1923 in Japan for all forms of ILD. Under the terms of the Kyorin Agreement, Kyorin is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan. In September 2020, Kyorin began dosing patients in a Phase 1 clinical trial of ATYR1923 (known as KRP-R120 in Japan) and completed the last subject visit in December 2020. The Phase 1 clinical trial, which was conducted and funded by Kyorin, is a placebo-controlled study to evaluate the safety, pharmacokinetics and immunogenicity of ATYR1923. ATYR1923 was observed to be generally safe and well-tolerated with no drug-related serious adverse events and pharmacokinetics findings were consistent with previous studies of ATYR1923. We received an $ 8.0 million upfront payment in January 2020 and a $ 2.0 milestone payment in January 2021 upon completion of enrollment in the Phase 1 clinical trial, and we are eligible to receive up to an additional $ 165.0 million in the aggregate upon achievement of certain development, regulatory and sales milestones, as well as tiered royalties ranging from the mid-single digits to mid-teens on net sales in Japan. Following the first anniversary of the effective date of the Kyorin Agreement, Kyorin had the right to terminate the agreement for any reason upon 90 days advance written notice. Either party may terminate the Kyorin Agreement in the event that the other party breaches the agreement and fails to cure the breach, becomes insolvent or challenges certain of the intellectual property rights licensed under the agreement . We assessed our license and collaboration with Kyorin in accordance with Topic 606 and concluded that Kyorin is a customer. We identified the following performance obligations under the Kyorin Agreement: 1) the license of ATYR1923 for ILD in Japan; and 2) free clinical trial material for Kyorin’s Phase 1 clinical trial. The $ 8.0 million upfront payment received from Kyorin is non-refundable and non-creditable and is considered fixed consideration. We determined that the relative stand-alone selling price was $ 7.9 million when the license was delivered to Kyorin in January 2020. We determined that the relative standalone selling price was $ 0.1 million for the free clinical trial material delivered to Kyorin in June 2020, using the “expected cost plus a margin” approach. In December 2020, Kyorin completed the last subject visit in its Phase 1 clinical trial of ATYR1923. This achievement triggered a $ 2.0 million milestone payment which we recognized as license and collaboration revenue in December 2020. We received the $ 2.0 million from Kyorin in January 2021. For the six months ended June 30, 2021, there were no activities that triggered additional license and collaboration agreement revenue. For the six months ended June 30, 2020, we recognized $ 8.0 million as license and collaboration agreement revenue for the upfront payment received. Both the remaining milestones and royalty payments under the Kyorin Agreement are variable consideration. Since milestone payments are binary in nature, we will use the “most-likely” method to evaluate whether the milestones should be included as revenue. We will apply constraint to these amounts until the milestone is probable of being achieved. The royalties are dependent on future sales by Kyorin which are at the full discretion of Kyorin. Accordingly, we will apply a constraint to these amounts until the future sales have occurred. Hong Kong University of Science and Technology In March 2020, our subsidiary, Pangu BioPharma, together with the Hong Kong University of Science and Technology (HKUST) was awarded a grant of approximately $ 750,000 to build a high-throughput platform for the development of bi-specific antibodies. The two-year project is being funded by the Hong Kong Government’s Innovation and Technology Commission (ITC) under the Partnership Research Program (PRP). The PRP aims to support research and development projects undertaken by companies in collaboration with local universities and public research institutions. The grant funded approximately 50% of the total estimated project cost and we contributed the remaining 50%. The research grant agreement between Pangu BioPharma, HKUST and the Government of the Hong Kong Special Administration Region became effective April 1, 2020 . 12 All the contributions provided by the ITC are paid to HKUST and we record expenses under this grant award when incurred. Expenses for the three months ended June 30, 2021 and 2020 were $ 0.1 million and $ 47,000 , respectively . Expenses for the six months ended June 30, 2021 and 2020 were approximately $ 0.3 million and $ 47,000 , respectively . 4. Commitments and Contingencies Facility Leases Future minimum payments under the non-cancelable facility lease and reconciliation to the operating lease liability as of June 30, 2021 were as follows (in thousands): Operating Lease 2021 $ 521 2022 1,062 2023 404 Less: Amount representing interest ( 162 ) Present value of lease payments 1,825 Less: Current portion of operating lease liability ( 919 ) Long-term operating lease liability, net of current portion $ 906 For each of the three months ended June 30, 2021 and 2020, we recorded an operating lease cost of $ 0.2 million. For each of the six months ended June 30, 2021 and 2020, we recorded an operating lease cost of $ 0.5 million. As of June 30, 2021, the weighted-average remaining lease term was 1 .9 years and the weighted-average discount rate was 9.6 %. 5. Stockholders’ Equity At the Market Offering Program In May 2019, we entered into a sales agreement with H.C. Wainwright & Co., LLC (Wainwright) with respect to an at-the-market offering (ATM Offering Program) under which we may offer and sell shares of our common stock having an aggregate offering price of up to $ 10.0 million. Wainwright was entitled to a commission at a fixed rate equal to 3 % of the gross proceeds. In March 2021, the ATM Offering Program with Wainwright automatically terminated upon the issuance and sale of all of the shares of common stock having an aggregate offering price of $ 20.0 million. Prior to the termination of the sales agreement with Wainwright, in 2021, we sold an aggregate of 1,988,254 shares of common stock at an average price of $ 4.99 per share for net proceeds of $ 9.6 million under the ATM Offering Program. In March 2021, we entered into a Capital on Demand TM Sales Agreement with JonesTrading Institutional Services LLC (JonesTrading) for a new ATM Offering Program, pursuant to which we can sell from time to time, at our option, up to an aggregate of $ 25.0 million of shares of our common stock through JonesTrading, as sales agent or principal. JonesTrading is entitled to a commission at a fixed rate equal of up to 3 % of the gross proceeds. For the six months ended June 30, 2021, we sold an aggregate of 293,830 shares of common stock at an average price of $ 4.72 per share for net proceeds of $ 1.3 million under the ATM Offering Program . Underwritten Follow-On Public Offering In February 2020, we completed an underwritten follow-on public offering of 4,235,294 shares of our common stock at a price to the public of $ 4.25 per share. In March 2020, the underwriters fully exercised their option to purchase additional shares resulting in the issuance of an additional 635,294 shares of common stock. The total gross proceeds from the underwritten follow-on public offering, including the underwriters’ option to purchase additional shares, was approximately $ 18.8 million, after deducting underwriting discounts, commissions and offering expenses payable by us. Purchase Agreement In September 2020 , we entered into a common stock purchase agreement (Purchase Agreement) with Aspire Capital Fund, LLC (Aspire Capital), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $ 20.0 million of shares of our common stock at our request from time to time during the 30 month term of the Purchase Agreement. Concurrently with entering into the Purchase Agreement, we also entered into a registration rights agreement with Aspire Capital, in which we agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, as amended, for the resale of the shares of our common stock that have been and may be issued to Aspire Capital under the Purchase Agreement. For the six months ended June 30, 2021, we sold an aggregate of 3,000,000 shares of common stock at an average price of $ 5.09 per share for net proceeds of $ 15.2 million under this Purchase Agreement. 13 Common Stock Reserved for Future Issuance Common stock reserved for future issuance was as follows: June 30, 2021 Common stock warrants 13,760 Common stock options and restricted stock units 1,295,447 Shares available under the 2015 equity incentive plan 415,697 Shares available under the employee stock purchase plan 73,713 1,798,617 The following table summarizes our stock option activity under all equity incentive plans for the six months ended June 30, 2021: Number of Outstanding Stock Options Weighted Average Exercise Price Outstanding as of December 31, 2020 576,534 $ 23.33 Granted 745,739 $ 4.48 Exercises ( 553 ) $ 2.70 Canceled/forfeited/expired ( 33,773 ) $ 25.18 Outstanding as of June 30, 2021 1,287,947 $ 12.43 The assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Expected term (in years) 5.50– 6.08 5.50 – 6.07 5.50 – 6.08 5.50 – 6.07 Risk-free interest rate 1.07% – 1.09 % 0.4 % 0.6% – 1.09 % 0.4% – 1.5 % Expected volatility 87.41% – 88.29 % 103.3% – 109.7 % 88.3% – 104.8 % 102.2% – 109.7 % Expected dividend yield 0.0 % 0.0 % 0.0 % 0.0 % The following table summarizes our restricted stock unit activity under all equity incentive plans for the six months ended June 30, 2021: Number of Outstanding Restricted Stock Units Weighted Average Grant Date Fair Value Balance as of December 31, 2020 7,677 $ 5.32 Granted 4,000 $ 3.89 Released ( 4,177 ) $ 6.18 Balance as of June 30, 2021 7,500 $ 4.08 Stock-based Compensation The allocation of stock-based compensation for all options, including performance options with a market condition, employee stock purchase plan and restricted stock units is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Research and development $ 66 $ 68 $ 128 $ 130 General and administrative 334 310 630 671 Total stock-based compensation expense $ 400 $ 378 $ 758 $ 801 14 6. Subsequent Events From July 1, 2021 through August 9, 2021, we sold an aggregate of 610,442 shares of common stock at a weighted-average price of $ 4.76 per share through the ATM Offering Program for net proceeds of $ 2.8 million.