What changed in this filing

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Item 1. Financial Statements

2021-05-11 compared with 2020-11-12 · 204 added, 260 removed, 206 unchanged (69% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

Cash and cash equivalents

Prepaid expenses

Prepaid expenses and other current assets

Deferred offering costs

Total current assets

Property and equipment, net

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Deferred lease asset

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

Accrued expenses

Due to related party

Accrued expenses and other current liabilities

Total current liabilities

Other non-current liabilities

Total liabilities

Commitments and contingencies - Note 10

Stockholders' equity (deficit)

Stockholders' equity

Preferred stock, $0.00001 par value per share;

10,000,000 shares authorized and no shares issued and outstanding as of September 30, 2020;

no shares authorized, issued and outstanding as of December 31, 2019

10,000,000 shares authorized and no shares issued and outstanding as of March 31, 2021 and December 31, 2020

Common stock, $0.00001 par value per share;

200,000,000 shares authorized and 37,761,435 issued and outstanding as of September 30, 2020;

10,895,000 shares authorized, 10,894,999 issued and outstanding as of December 31, 2019

200,000,000 shares authorized and 37,761,435 issued and outstanding as of March 31, 2021 and December 31, 2020

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity (deficit)

Total liabilities and stockholders' equity (deficit)

Total stockholders’ equity

Total liabilities and stockholders' equity

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

2 unchanged sentences

(in thousands, except share and per share data)

September 30,

September 20,

2019 (date of

inception) to

September 30,

For the Three Months

Ended March 31, 2021

For the Three Months Ended March 31, 2020

Operating expenses:

3 unchanged sentences

Loss from operations

Other expense:

Other income (expense):

Change in fair value of preferred stock tranche liability

Interest income

Interest expense

Total other expense

Total other income, net

Net loss per common share, basic and diluted

4 unchanged sentences

(in thousands, except share data)

For the Three Months Ended September 30, 2020

Preferred Stock

For the Three Months Ended March 31, 2021

Stockholders'

Balance as of June 30, 2020

Issuance of Series A convertible preferred stock, net of offering costs of $165

Issuance of Series B convertible preferred stock, net of offering costs of $185

Reclassification of preferred stock tranche liability upon issuance of Series A milestone shares

Conversion of Series A and Series B convertible preferred stock to common stock

Issuance of shares of common stock in initial public offering, net of offering costs and underwriting discounts and commissions of $15,111

Issuance of restricted stock award

Balance as of December 31, 2020

Stock-based compensation

Balance as of September 30, 2020

Balance as of March 31, 2021

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

Taysha Gene Therapies, Inc.

1 unchanged sentence

(in thousands, except share data)

For the Nine Months Ended September 30, 2020

Preferred Stock

For the Three Months Ended March 31, 2020

Stockholders'

Balance as of December 31, 2019

Issuance of Series A convertible preferred stock, net of offering costs of $605 and issuance of preferred stock tranche liability of $1,050

Issuance of Series B convertible preferred stock, net of offering costs of $185

Reclassification of preferred stock tranche liability upon issuance of Series A milestone shares

Conversion of Series A and Series B convertible preferred stock to common stock

Issuance of shares of common stock in initial public offering, net of offering costs and underwriting discounts and commissions of $15,111

Issuance of restricted stock award

Stock-based compensation

Balance as of September 30, 2020

For the Period from September 20, 2019 (date of inception) to September 30, 2019

Preferred Stock

Stockholders'

Balance as of September 20, 2019 (date of inception)

Issuance of Founders Shares

Balance as of September 30, 2019

Balance as of December 31, 2019

Issuance of Series A convertible preferred stock,

net of offering costs of $430 and issuance of

preferred stock tranche liability of $1,050

Balance as of March 31, 2020

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

2 unchanged sentences

(in thousands)

September 30,

September 20,

2019 (date of

inception) to

September 30,

For the Three Months

Ended March 31, 2021

For the Three Months Ended March 31, 2020

Cash flows from operating activities

5 unchanged sentences

Changes in operating assets and liabilities:

Prepaid expenses

Prepaid expenses and other assets

Accounts payable

Accrued expenses

Accrued expenses and other liabilities

Due to related party

1 unchanged sentence

Cash flows from investing activities

Purchase of research and development license

Purchase of property and equipment

Purchase of property, plant and equipment

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commission and other offering costs

Proceeds from issuances of Series A convertible preferred stock, net of issuance costs

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

Proceeds from notes payable to related party

Repayment of notes payable to related party

Proceeds from issuances of Series A convertible preferred stock

Proceeds from note payable to related party

Repayment of note payable to related party

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash at the beginning of the period

Cash at the end of the period

Supplemental disclosure of cash flow information:

Cash paid for interest

Supplemental disclosure of noncash investing and financing activities:

Reclassification of preferred stock tranche liability upon share issuance

Allocation of preferred stock tranche liability

Conversion of Series A and Series B convertible preferred stock to common stock

Purchase of research and development license not yet paid

Issuance costs for issuances of common stock in initial public offering not yet paid

Issuance costs for issuance of Series A convertible preferred stock not yet paid

Property, plant and equipment in accounts payable and accrued expenses

Acquisition of property, plant and equipment funded by landlord

Deferred offering costs not yet paid

Allocation of preferred stock tranche liability

Series A issuance costs not yet paid

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

Note 1—Organization and Description of Business Operations

Note 1—Organization and Descr iption of Business Operations

Taysha Gene Therapies, Inc.

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The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable.

As of September 30, 2020, the Company had an accumulated deficit of $42.8 million.

As of March 31, 2021, the Company had an accumulated deficit of $93.2 million.

Prior to the closing of the Company’s IPO, between March and July 2020, the Company closed on the sale of an aggregate of 10,000,000 shares of Series A convertible preferred stock for gross proceeds of $30.0 million.

Between July and August 2020, the Company closed on the sale of an aggregate of 5,647,048 shares of Series B convertible preferred stock for gross proceeds of $96.0 million.

Due to the proceeds received from the IPO and the sale of its Series A and Series B convertible preferred stock, management believes that its existing financial resources are sufficient to continue operating activities at least one year past the issuance date of these interim condensed consolidated financial statements.

Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and the market acceptance of the Company’s products.

1 unchanged sentence

There can be no assurance that such financing will be available or will be on terms acceptable to the Company.

As of March 31, 2021, the Company had cash of $228.7 million which the Company believes will be sufficient to fund its planned operations for a period of at least twelve months from the date of issuance of these condensed consolidated financial statements.

In December 2019 , the novel coronavirus (“ COVID-19 ”) emerged and has subsequently spread worldwide.

The World Health Organization has declared COVID-19 a global pandemic , resulting in federal, state and local governments a nd private entities implementing various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders, and advisories and quarantining people who may have been exposed to the virus.

The Company has been actively monit oring COVID - 19 and its impact globally.

Management believes the financial results for the nine months ended September 30, 2020 were not significantly impacted by COVID-19.

In addition, management believes the remote working arrangements and travel restrict ions imposed by various governmental jurisdictions have had limited impact on the Company’s ability to maintain internal operations during the nine months ended September 30, 2020.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or t reat COVID-19.

The World Health Organization has declared COVID-19 a global pandemic , resulting in federal, state and local governments and private entities implementing various restrictions, includ ing travel restrictions, restrictions on public gatherings, stay at home orders, and advisories and quarantining people who may have been exposed to the virus.

The Company has been actively monitoring COVID - 19 and its impact globally.

Management believes t he financial results for the three months ended March 3 1 , 2021 were not significantly impacted by COVID-19.

In addition, management believes the remote working arrangements and travel restrictions imposed by various governmental jurisdictions have had limi ted impact on the Company’s ability to maintain internal operations during the three months ended March 31, 2021 .

Note 2—Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.

Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted.

These condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period.

Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the period from September 20, 2019 (date of inception) through December 31, 2019 included in the Company’s final prospectus dated September 23, 2020 and filed with the Securities and Exchange Commission on September 25, 2020, pursuant to Rule 424(b)(4).

The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP") as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and are consistent in all material respects with those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission ("SEC") on March 3, 2021 (the “2020 Annual Report”).

In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented.

The consolidated balance sheet as of December 31, 2020 is derived from audited financial statements, however, it does not include all of the information and footnotes required by GAAP for complete financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s 2020 Annual Report.

Principles of Consolidation

4 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

These estimates and assumptions are based on current facts, historical experience as well as other pertinent industry and regulatory authority information, including the potential future effects of COVID-19, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

Actual results may differ materially and adversely from these estimates.

The most significant estimates and assumptions in the Company’s financial statements relate to the determination of the fair value of the common stock prior to the IPO (as an input into stock-based compensation), estimating preclinical manufacturing accruals and accrued or prepaid research and development expenses, and the valuation of the preferred stock tranche liability.

These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

Actual results may differ materially from these estimates.

To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

In response to the ongoing and rapidly evolving COVID-19 pandemic, management considered the impact of the estimated economic implications on the Company’s critical and significant accounting estimates, including assessment of impairment of long-lived assets.

Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies as disclosed in the audited financial statements as of December 31, 2019, except as noted below.

Cash and Cash Equivalents

Cash and cash equivalents consist of funds held in a standard checking account.

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents.

As of September 30, 2020, the Company does not have any cash equivalents.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents.

Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits.

Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality.

The Company has not experienced any losses on these deposits.

Fair Value of Financial Instruments

The Company’s financial assets and liabilities are accounted for in accordance with ASC 820, Fair Value Measurements and Disclosures which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The fair value hierarchy requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life.

Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgement.

Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized as Level 3.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying values reported in the Company’s condensed consolidated balance sheet for cash and cash equivalents, accounts payable, and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these items.

Deferred Offering Costs

Deferred offering costs, consisting of legal, accounting, and filing fees directly relating to the IPO and the Company’s Series A and Series B preferred stock financings, were capitalized and offset against the related proceeds upon the completion of the offerings.

Upon completion of the IPO, approximately $2.4 million of deferred offering costs were offset against the IPO proceeds in additional paid-in capital.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and consist solely of computer equipment.

Depreciation expense is recognized using the straight-line method over its estimated useful life of 3 years.

Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations.

Expenditures for repairs and maintenance are charged to expense as incurred.

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, which consist of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset.

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

There were no impairment losses recognized during the nine months ended September 30, 2020.

Preferred Stock Tranche Liability

The Company determined that its obligation to issue, and the Company’s investors’ right to purchase, additional shares of Series A convertible preferred stock pursuant to the milestone closings (see Note 5) represented a freestanding financial instrument (the “tranche liability”).

The tranche liability was initially recorded at fair value.

The proceeds from the sale of the convertible preferred stock were first allocated to the fair value of the tranche liability with the remaining proceeds from the sale of the convertible preferred stock allocated to the Series A convertible preferred stock.

The tranche liability was remeasured at each reporting period and upon the exercise or expiration of the obligation, with gains and losses arising from subsequent changes in its fair value recognized in other expense in the condensed consolidated statement of operations.

At the time of the exercise or expiration of the tranche liability, any remaining value of the tranche liability was reclassified to convertible preferred stock on the condensed consolidated balance sheet.

Stock-Based Compensation

The Company accounts for all stock-based payments to employees and non-employees, including grants of stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) based on their respective grant date fair values.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, which is affected principally by the estimated fair value of shares of the Company’s common stock and requires management to make a number of other assumptions, including the expected life of the option, the volatility of the underlying shares, the risk-free interest rate and expected dividends.

Expected volatility is based on the historical share volatility of a set of comparable publicly traded companies over a period of time equal to the expected term of the options.

Due to the lack of historical exercise history, the expected term of the Company’s stock options is determined using the “simplified” method.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Prior to September 23, 2020, the fair value of common stock underlying the Company’s stock options, RSAs and RSUs was estimated by the Company’s board of directors considering, among other things, contemporaneous valuations of the Company’s common stock prepared by unrelated third-party valuation firms.

After the IPO, the fair value of common stock is based on the closing price of the Company’s common stock on the Nasdaq Global Select Market as reported on the date of the grant.

The RSAs and RSUs are valued based on the fair value of the Company’s common stock on the date of grant.

The Company expenses stock-based compensation related to stock options RSAs and RSUs over the requisite service period using the straight-line method.

All stock-based compensation costs are recorded in research and development expense or general and administrative expense in the condensed consolidated statements of operations based upon the respective employee’s roles within the Company.

Forfeitures are recorded as they occur.

There have been no changes in the Company’s significant accounting policies as disclosed in Note 2 to the audited consolidated financial statements included in the 2020 Annual Report.

Recently Issued Accounting Pronouncements

1 unchanged sentence

2016-02, Leases (Topic 842), as amended, with guidance regarding the accounting for and disclosure of leases.

This update requires lessees to recognize the liabilities related to all leases, including operating leases, with a term greater than 12 months on the balance sheet.

This update also requires lessees and lessors to disclose key information about their leasing transactions.

This update requires lessees to recognize the liabilities related to all leases, including operating leases, with a term greater than 12 months on the balance sheets.

This update also requires lessees and lessors to disclose

key information about their leasing transactions.

This guidance will become effective for the Company for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022.

The Company is currently evaluating the impact of this standard on its interim condensed consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

The Company is currently evaluating the impact of this standard on its interim condensed consolidated financial statements.

Note 3—Supplemental Financial Information

Accrued expenses consisted of the following (in thousands):

September 30,

The new standard requires the use of one of the following two approaches, either (1) retrospectively to each prior reporting period presented in the financial statements with t he cumulative effect recognized at the beginning of the earliest comparative period presented, or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment.

The Company has not yet concluded which approach will b e utilized to adopt the new standard and is currently evaluating the impact of this standard on its consolidated financial statements .

Note 3—Balance Sheet Components

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

Prepaid research and development

Prepaid insurance

Prepaid bonus

Prepaid clinical trial

Total prepaid expenses and other current assets

Property, plant and equipment consisted of the following (in thousands):

Computer equipment

Laboratory equipment

Construction in progress

Accumulated depreciation

Property, plant and equipment, net

Depreciation expense was $32,000 for the three months ended March 31, 2021.

There was no depreciation expense for the three months ended March 31, 2020.

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

Accrued research and development

Accrued issuance costs

Accrued license fees

Accrued compensation

Accrued professional fees

Total accrued expenses

Accrued professional and consulting fees

Accrued construction in progress

Total accrued expenses and other current liabilities

Note 4—Research, Collaboration and License Agreements

UT Southwestern Agreement

On November 19, 2019, the Company entered into a research, collaboration and license agreement (“UT Southwestern Agreement”) with the Board of Regents of the University of Texas System on behalf of The University of Texas Southwestern Medical Center (“UT Southwestern”).

Under the UT Southwestern Agreement, UT Southwestern is primarily responsible for preclinical development activities with respect to licensed products for use in certain specified indications (up to investigational new drug application-enabling studies), and the Company is responsible for all subsequent clinical development and commercialization activities with respect to the licensed products.

UT Southwestern will conduct such preclinical activities for a two-year period under mutually agreed upon sponsored research agreements that were entered into beginning in April 2020.

Medical Center (“UT Southwestern”).

Under the UT Southw estern Agreement, UT Southwestern is primarily responsible for preclinical development activities with respect to licensed products for use in certain specified indications (up to investigational new drug application -enabling studies), and the Company is r esponsible for all subsequent clinical development and commercialization activities with respect to the licensed products.

UT Southwestern will conduct such preclinical activities for a two-year period under mutually agreed upon sponsored research agreemen ts that were entered into beginning in April 2020.

During the initial research phase, the Company has the right to expand the scope of specified indications under the UT Southwestern Agreement.

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The Company does not have any future milestone or royalty obligations to UT Southwestern under the UT Southwestern Agreement other than costs related to maintenance of patents.

The Company also had a right of first refusal for any shares that UT Southwestern wished to sell that expired upon the closing of the IPO.

Queen’s Agreement

In late December 2019, the Company entered into a research grant agreement (“RGA”) with Queen’s University at Kingston (“Queen’s”), for certain research and development activities related to the generation of AAV9 vector.

The Company committed to

fund $3.8 million under the RGA with Queen’s.

The Company issue d Queen’s a promise-to-pay note whereby any amounts paid directly by Queen’s for the manufacture of the vector for use in the funded research activities, to the extent such amounts had not already been funded by the Company to Qu een’s, would become a loan obligation for the Company (the “Note”), subject to an interest rate of 6%.

For the nine months ended September 30, 2020, the Company paid all expenses associated with the Queen’s RGA, thus no amounts were due or outstanding unde r the Note as of September 30, 2020 , and the promise-to-pay has therefore expired .

The Company committed to fund $3.8 million under the RGA with Queen’s.

The Company issued Queen’s a promise-to-pay note whereby any amounts paid directly by Queen’s for the manufacture of the vector for use in the funded research activities, to the extent such amounts had not already been funded by the Company to Queen’s, would become a loan obligation for the Company (the “Note”), subject to an interest rate of 6%.

Any amounts outstanding under the Note were required to be repaid, along with any accrued interest, by or before June 30, 2020.

In the event of default, any amount outstanding was deemed immediately payable by RA Session II, the Company’s President and Chief Executive Officer, as a personal guarantor (see Note 8).

For the period from Inception through December 31, 2019, the Company did not incur any expenses associated with the Queen’s RGA, and no amounts were due or outstanding under the Note as of December 31, 2019.

For the year ended December 31, 2020, the Company paid all expenses associated with the Queen’s RGA, thus no amounts were due or outstanding under the Note as of December 31, 2020, and the promise-to-pay has therefore expired.

On February 21, 2020, the Company entered into a license agreement with Queen’s (the “Queen’s Agreement”) to obtain the exclusive perpetual, royalty-bearing license, with the right to sublicense through multiple tiers, under certain patent rights and know-how of Queen’s, including certain improvements to such patent rights and know-how, to develop products in any field which use one or more valid claims of the patents licensed under the Queen’s Agreement (the “Licensed Patents”), or the technology, information and intellectual property related to the patents licensed under the Queen’s Agreement (together with the Licensed Patents, the “Licensed Products”), and to make, have made, use, sell, offer for sale, import and export Licensed Products and otherwise exploit such patents and know-how for use in certain specified indications.

In exchange for the rights granted to the Company, the Company made a cash payment of $3.0 million in April 2020 which is recorded in research and development expenses in the condensed consolidated statement of operations and included as an investing outflow in the statement of cash flows since the acquired license does not have an alternative future use.

In exchange for the rights granted to the Company, the Company made a cash payment of $3.0 million in April 2020 which is recorded in research and development expenses in the condensed consolidated statements of operations for the three months ended March 31, 2020.

The Company is obligated to make aggregate cash payments of up to $10.0 million upon the completion of a combination of regulatory milestones and up to $10.0 million upon the completion of a combination of commercial milestones.

In further consideration of the rights granted, beginning with the Company’s first commercial sale of the Licensed Products, the Company will also pay an annual earned royalty in the low single digits on net sales of Licensed Products, subject to certain customary reductions, and a percentage of non-royalty sublicensing revenue ranging in the low double digits.

Royalties are payable, on a Licensed Products-by-Licensed Products and a country-by-country basis, until expiration of the last valid claim of a Licensed Patent covering such Licensed Products in such country and the expiration of any regulatory exclusivity for such Licensed Products in such country.

sales of Licensed Products, subject to certain customary reductio ns, and a percentage of non-royalty sublicensing revenue ranging in the low double digits.

Royalties are payable, on a Licensed Products-by-Licensed Products and a country-by-country basis, until expiration of the last valid claim of a Licensed Patent cove ring such Licensed Products in such country and the expiration of any regulatory exclusivity for such Licensed Products in such country.

Abeona CLN1 Agreements

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Under the terms of the agreements, the Company made initial cash payments to Abeona of $3.0 million for the license fee and $4.0 million for purchase of clinical materials and reimbursement for previously incurred development costs in October 2020.

In exchange for the license rights, the Company recorded an aggregate of $7.0 million within research and development expenses in the condensed consolidated statement of operations since the acquired license or acquired inventory do not have an alternative future use, all of which was recorded in accounts payable as of September 30, 2020.

In exchange for the license rights, the Company recorded an aggregate of $7.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2020 since the acquired license or acquired inventory do not have an alternative future use.

The Company is obligated to make up to $26.0 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed CLN1 product.

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The Company may terminate the license agreement for convenience upon specified prior written notice to Abeona.

No additional milestone payments were made in connection with this agreement during the three months ended March 31, 2021.

Abeona Rett Agreement

On October 29, 2020, the Company entered into a license agreement (the “Abeona Rett Agreement”) with Abeona pursuant to which the Company obtained an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses under certain patents, know-how and materials originally developed by the University of North Carolina at Chapel Hill, the University of Edinburgh and Abeona to research, develop, manufacture, have manufactured, use, and commercialize licensed products for gene therapy and the use of related transgenes for Rett syndrome.

Subject to certain obligations of Abeona, the Company is required to use commercially reasonable efforts to develop at least one licensed product and commercialize at least one licensed product in the United States.

In connection with the Abeona Rett Agreement, the Company paid Abeona a one-time upfront license fee of $3.0 million which is recorded in research and development expenses in the consolidated statements of operations for the year ended December 31, 2020 since the acquired license does not have an alternative future use.

The Company is obligated to pay Abeona up to $26.5 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed Rett product and high single-digit royalties on net sales of licensed Rett products.

Royalties are payable on a licensed product-by-licensed product and country-by-country basis until the latest of the expiration or revocation or complete rejection of the last licensed patent covering such licensed product in the country where the licensed product is sold, the loss of market exclusivity in such country where the product is sold, or, if no licensed product exists in such country and no market exclusivity exists in such country, ten years from first commercial sale of such licensed product in such country.

The Abeona Rett Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product.

Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party.

The Company may terminate the agreement for convenience upon specified prior written notice to Abeona.

No additional milestone payments were made in connection with the Abeona Rett Agreement during the three months ended March 31, 2021.

Acquisition of Worldwide Rights for TSHA-120 for the treatment of GAN

In March 2021, the Company acquired the exclusive worldwide rights to a clinical-stage AAV9 gene therapy program, now known as TSHA-120, for the treatment of Giant Axonal Neuropathy (“GAN”).

TSHA-120 is an intrathecally dosed AAV9 gene therapy currently being evaluated in a clinical trial for the treatment of GAN.

The trial is being conducted by the National Institutes of Health in close collaboration with a leading patient advocacy group focused on finding treatments and cures for GAN.

TSHA-120 has received rare pediatric disease and orphan drug designations from the U.S.

Food and Drug Administration for the treatment of GAN.

The worldwide rights was acquired through a l icense a greement , effective March 29, 2021 , between Hannah’s Hope Fund for Giant Axonal Neuropathy, Inc.

Under the terms of the agreement, in exchange for granting the Company the exclusive worldwide rights to TSHA-120, HHF will receive an upfront payment of $5.5 million and will be eligible to receive clinical, regulatory and commercial milestones totaling up to $19.3 million, as well as a low, single-digit royalty on net sales upon commercialization of the product.

In exchange for the license rights, the Company recorded an aggregate of $5.5 million within research and development expenses in the condensed consolidated statements of operations since the acquired license does not have an alternative future use.

This license fee was not paid as of March 31, 2021 and has been recorded in accrued expenses and other current liabilities.

Note 5—Stockholders’ Equity (Deficit), Convertible Preferred Stock and Tranche Liability

On September 28, 2020, the Company issued an aggregate of 7,869,566 shares of common stock in the IPO, and on September 29, 2020, the Company issued an aggregate of 1,180,434 shares of common stock upon the underwriters’ exercise in full of their option to purchase additional shares, each at the public offering price of $20.00 per share less underwriting discounts and commissions.

In connection with the IPO, the Company received gross proceeds of $181.0 million, which was offset by issuance costs, including underwriters’ discounts and commissions, of approximately $15.1 million.

In connection with the closing of the IPO, 10,000,000 shares of Series A convertible preferred stock and 5,647,048 shares of Series B convertible preferred stock automatically converted into an aggregate of 17,047,378 shares of common stock with a conversion ratio of 1.0895 shares of common stock for each share of Series A and Series B convertible preferred stock then outstanding.

As a result of the IPO, the underwriters’ exercise of their option, and the conversions of the Series A and B convertible preferred stock, the Company’s total number of outstanding shares increased by 26,097,378 immediately following the closing of the IPO.

Authorized Shares

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On September 28, 2020, the Company amended its certificate of incorporation such that the total number of shares of common stock authorized to be issued was increased to 200,000,000, and the total number of shares of new preferred stock authorized to be issued was 10,000,000.

As of September 30, 2020, no shares of preferred stock were issued or outstanding.

As of March 31, 2021 and December 31, 2020, no shares of preferred stock were issued or outstanding.

Series A and B convertible preferred stock

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On July 2, 2020, the Company entered into a purchase agreement (the “Series B Purchase Agreement”), as later amended on July 28, 2020, providing for a private placement of up to 5,647,052 shares of Series B convertible preferred stock.

The Company sold 5,647,048 of Series B convertible preferred stock at a price of $17.00 per share in multiple closings in July and August 2020 for gross proceeds of $96.0 million.

The majority of investors that participated in the Series B Purchase Agreement were new investors.

The Company sold

5,647 ,048 shares of Series B convertible preferred stock at a price of $17.00 per share in multiple closings in July and August 2020 for gross proceeds of $96.0 million.

The majority of investors that participated in the Series B Purchase Agreement were new inv estors.

As described above, in connection with the closing of the IPO, all shares of Series A and Series B convertible preferred stock were automatically converted into an aggregate of 17,047,378 shares of common stock with a conversion ratio, which was adjusted for the stock split, of 1.0895 shares of common stock for each share of Series A and Series B convertible preferred stock then outstanding.

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Based on the analysis, the Company recorded a preferred stock tranche liability of $1.1 million at the issue date to account for the obligation to issue the Milestone Shares at a predetermined fixed price at a future settlement date.

At June 30, 2020, ahead of the anticipated closing of the Series B Purchase Agreement for $17.00 per share that occurred on July 2, 2020, certain investors elected to exercise in full their options to their pro-rata portion of the Milestone S hares prior to the Company’s achievement of the clinical milestones and purchased 200,000 shares of Series A convertible preferred stock.

The Company remeasured the fair value of the entire tranche liability at June 30, 2020, and recognized a non-cash expe nse of $17.0 million in the condensed consolidated statement of operations.

Between June 30, 2020 and July 2, 2020, all of the 4,000,000 Milestone Shares were issued and the related tranche liability was extinguished in its entirety , and the Company reclas sified $18.1 million to convertible preferred stock on the condensed consolidated balance sheet.

The Company concluded that no beneficial conversion feature (“BCF”) existed as the effective conversion price of the Series A convertible preferred stock excee ded the fair value of the Company’s common stock at each of the commitment dates.

Specifically, at the commitment date of June 30, 2020, when 200,000 Milestone Shares were issued, the deemed proceeds were equal to the cash proceeds received for the shares of Series A convertible preferred stock and the fair value of the tranche liability that related to the Milestone Shares, or $7.52 per share.

As the effective conversion price exceeded the fair value of the Company’s common stock at the commitment date , no BCF existed.

The following table provides a reconciliation of the preferred stock tranche liability measured at fair value using Level 3 significant unobservable inputs (in thousands):

Balance at January 1, 2020

Fair value at issuance of Series A convertible preferred stock

Change in fair value

Settlement of preferred stock tranche liability due to issuance of Milestone Shares

Balance at September 30, 2020

The Company remeasured the tranche liability at March 31, 2020, resulting in a gain of $0.2 million that was recorded in other income, net in the condensed consolidated statements of operations.

The tranche liability was again later remeasured to fair value and reclassified to convertible preferred stock when the remaining Milestone Shares were sold to the investors.

Note 6—Stock-Based Compensation

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The number of shares available for future issuance under the New Plan is the sum of (1) 3,390,168 new shares of common stock, (2) 209,841 remaining shares of common stock reserved under the Existing Plan that became available for issuance upon the effectiveness of the New Plan and (3) the number of shares of common stock subject to outstanding awards under the Existing Plan when the New Plan became effective that thereafter expire or are forfeited, canceled, withheld to satisfy tax withholding or to purchase or exercise an award, repurchased by the Company or are otherwise terminated.

At December 31, 2020, there were 2,941,509 shares available for future grant under the New Plan.

The number of shares of common stock reserved for issuance under the New Plan will automatically increase on January 1 of each year, for a period of ten years, from January 1, 2021 continuing through January 1, 2030, by 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors.

No future issuances were made under the Existing Plan upon the effectiveness of the New Plan.

On January 1, 2021 the board of directors increased the number of common stock reserved for issuance under the New Plan by 1,434,934 shares.

Furthermore, on September 16, 2020, the Company’s stockholders approved the Employee Stock Purchase Plan (“ESPP”), which became effective upon the execution of the underwriting agreement in connection with the IPO.

The maximum number of shares of common stock that may be issued under the ESPP will not exceed 362,000 shares of common stock, plus the number of shares of common stock that are automatically added on January 1st of each year for a period of up to ten years, commencing on the first January 1 following the IPO Date and ending on (and including) January 1, 2030, in an amount equal to the lesser of (i) one percent (1.0%) of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year, and (ii) 724,000 shares of common stock.

No shares have been added to the ESPP as of January 1, 2021 and no issuances have been made under the ESPP as of March 31, 2021.

Stock Options

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The Company accounted for the changes in award terms as a modification in accordance with ASC 718 Compensation – Stock Compensation.

The modification is accounted for as an exchange of the original award for a new award with total compensation cost equal to the grant-date fair value of the original award plus any incremental value measured on the modification date.

The modification was accounted for as an exchange of the original award for a new award with total compensation cost equal to the grant-date fair value of the original award plus any incremental value measured on the modification date.

The Company determined that there was no incremental value as the fair value of the original award immediately before the modification was greater than the fair value of the new award immediately after the modification.

Accordingly, the Company will recognize the remaining compensation cost of $13.2 million over the vesting period of the RSUs.

The estimated fair value of the Company’s common stock at July 1, 2020 was $5.28 per share, as determined using information derived from the issuance price of the Company’s Series B convertible preferred stock of $17.00 per share on July 2, 2020.

The valuation of the common stock was determined using an option-pricing model under which shares are valued by creating a

series of call options with exercise prices based on the liquidation preferences and conversion terms of each equi ty class, adjusted for a discount for the lack of marketability to account for a lack of access to an active public market.

The following assumptions were used to estimate the fair value of the Cancelled Options that were granted on July 1, 2020:

Risk-free interest rate

Expected dividend yield

Expected term in years

Expected volatility

During the three months ended September 30, 2020, options to purchase 185,342 shares of common stock were granted with a weighted-average exercise price per share of $19.55.

On September 2, 2020, options to purchase 16,342 shares of common stock under the Existing Plan were awarded to certain directors of the Company with an exercise price per share of $14.90, and on September 23, 2020, 169,000 shares of common stock under the New Plan were awarded with an exercise price per share of $20.00.

The stock options generally vest over three or four years and have a ten-year contractual term.

The following weighted-average assumptions were used to estimate the fair value of stock options, excluding the Cancelled Options, for the nine months ended September 30, 2020:

Accordingly, the Company continues to recognize the remaining compensation cost of the Cancelled Options over the vesting period of the RSUs.

For the three months ended March 31, 2021, 1,621,900 shares of common stock under the New Plan were awarded with a weighted-average grant date fair value per share of $18.75.

The stock options vest over four years and have a ten-year contractual term.

The following weighted-average assumptions were used to estimate the fair value of stock options that were granted during the three months ended March 31, 2021:

Risk-free interest rate

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Expected volatility

The following table summarizes stock option activity, excluding the Cancelled Options, during the nine months ended September 30, 2020:

The following table summarizes stock option activity, during the three months ended March 31, 2021:

Life (in years)

(in thousands)

Outstanding at January 1, 2020

Outstanding at December 31, 2020

Options granted

Outstanding at September 30, 2020

Vested and expected to vest at September 30, 2020

Options exercisable at September 30, 2020

The aggregate intrinsic value in the above table is calculated as the difference between the fair value of the Company’s common stock as of September 30, 2020 and the exercise price of the stock options.

The weighted-average grant date fair value per share for the stock option awards, excluding the Cancelled Options, granted during the nine months ended September 30, 2020 was $13.73.

As of September 30, 2020, the total unrecognized compensation related to unvested stock option awards granted was $2.5 million, which the Company expects to recognize over a weighted-average period of approximately 3.6 years.

Options cancelled or forfeited

Outstanding at March 31, 2021

Vested and expected to vest at March 31, 2021

Options exercisable at March 31, 2021

The aggregate intrinsic value in the above table is calculated as the difference between the fair value of the Company’s common stock as of March 31, 2021 and the exercise price of the stock options.

As of March 31, 2021, the total unrecognized compensation related to unvested stock option awards granted was $37.0 million, which the Company expects to recognize over a weighted-average period of approximately 3.7 years.

R estricted S tock U nit s

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Such shares are not accounted for as outstanding until they vest.

As of September 30, 2020, the total unrecognized compensation related to unvested RSUs granted, including the remaining compensation cost associated with the RSUs granted on September 2, 2020 in exchange for the Cancelled Options, was $17.8 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.2 years.

The Company’s RSU activity for the nine months ended September 30, 2020 was as follows:

As of March 31, 2021, the total unrecognized compensation related to unvested RSUs granted, including the remaining compensation cost associated with the RSUs granted on September 2, 2020 in exchange for the Cancelled Options, was $15.4 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 1.7 years.

The Company’s RSU activity for the three months ended March 31, 2021 was as follows:

Nonvested at January 1, 2021

Replacement restricted units granted

Restricted units granted

Nonvested at September 30, 2020

Nonvested at March 31, 2021

Restricted Stock Awards

RA Session II, the Company’s President and Chief Executive Officer, was awarded 769,058 RSAs under the Existing Plan on July 1, 2020, which are expected to vest over a three-year term, subject to continuous employment.

As of September 30, 2020, the total unrecognized compensation related to unvested RSAs granted was $3.7 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 1.4 years.

As of March 31, 2021, the total unrecognized compensation related to unvested RSAs granted was $3.0 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.0 years.

The fair value of these RSAs at the grant date of July 1, 2020 was $5.28 per share.

The Company’s RSA activity for the nine months ended September 30, 2020 was as follows:

Nonvested at January 1, 2020

The Company’s RSA activity for the three months ended March 31, 2021 was as follows:

Nonvested at December 31, 2020

Restricted stock granted

Nonvested at September 30, 2020

The following table summarizes the total stock-based compensation expense for the stock options, RSAs and RSUs recorded in the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 (in thousands):

September 30,

Nonvested at March 31, 2021

For the Three Months

Ended March 31, 2021

Research and development expense

2 unchanged sentences

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Since the Company had a net loss in the period presented, basic and diluted net loss per common share are the same.

The following common stock equivalents outstanding as of September 30, 2020 were excluded from the computation of diluted net loss per share attributable to common stockholder s for the period presented because including them would have been anti ‑dilutive:

September 30,

Since the Company had a net loss in all periods presented, basic and diluted net loss per common share are the same.

The following table represent s the calculation of basic and diluted net loss per common share (in thousands, except share and per share data):

For the Three Months

Ended March 31,

Weighted-average shares of common stock outstanding used to compute net loss per

common share, basic and diluted

Net loss per common share, basic and diluted

The following common stock equivalents outstanding as of March 31, 2021 and 2020 were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti‑dilutive:

March 31, 2021

March 31, 2020

Unvested RSUs

1 unchanged sentence

Stock options

Series A convertible preferred stock

Note 8—Related Party Transactions

RA Session II, President and Chief Executive Officer and a member of the Company’s board of directors, is a guarantor under the Guaranty and Security Agreement between himself, Queen’s and the Company, and in the event of the Company’s failure to fund its obligations under the RGA with Queen’s, has personally guaranteed payments due by the Company to Queen’s.

In January 2020, the Company entered into two secured promissory notes with a related party, its President and Chief Executive Officer, RA Session II, for an aggregate of $1.67 million, with 10% interest.

RA Session II, President and Chief Executive Officer and a member of the Company’s board of directors, was a guarantor under the Guaranty and Security Agreement between himself, Queen’s and the Company, and in the event of the Company’s failure to fund its obligations under the RGA with Queen’s, had personally guaranteed payments due by the Company to Queen’s.

In addition, the Company entered into two secured promissory notes with Mr.

Session in January 2020 for an aggregate of $1.67 million, with 10% interest.

The Company secured the notes with a first priority security interest in certain assets of the Company.

As of September 30, 2020, the Company had repaid the notes in full.

As a result, Mr.

Session released his security interest in the collateral.

In March 2020, the Company entered into a services agreement with PBM Capital Group, LLC (“PBM”), an affiliate of PBM TGT Holdings, LLC (a beneficial owner of greater than 5% of the Company’s common stock), whereby PBM provides accounting and other administrative and management services related to payroll administration, human resources, bookkeeping, preparation of financial statements and tax returns, accounts payable and receivable, and other similar functions for a fee of $2,500 per month.

As of September 30, 2020, inclusive of certain pass-through direct costs, the Company has approximately $60,000 due to PBM, which is included in due to related party in the condensed consolidated balance sheet.

During March 2020, the Company repaid $1.65 million of the notes, and the remaining balance was repaid in July 2020.

In March 2020, the Company entered into a services agreement with PBM Capital Group, LLC (“PBM”), an affiliate of PBM TGT Holdings, LLC whereby PBM provides accounting and other administrative and management services related to payroll administration, human resources, bookkeeping, preparation of financial statements and tax returns, accounts payable and receivable, and other similar functions for a fee of $2,500 per month.

Manning, a member of the Company’s board of directors and a holder of more than 5% of the Company’s capital stock, is the Chief Executive Officer of PBM Capital Group, LLC and has sole voting and investment power with respect to the shares held by PBM TGT Holdings, LLC.

In September 2020, PBM TGT Holdings, LLC distributed all of the shares of Series A convertible preferred stock it previously held to its beneficial owners, including Mr.

Manning and entities controlled by Mr.

Manning, for no additional consideration in accordance with the terms of its operating agreement.

As of March 31, 2021, and December 31, 2020, the Company had recorded an immaterial amount due to PBM in the consolidated balance sheets.

Note 9—Income Taxes

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The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets.

Based on its history of operating losses, the Company believes that it is more likely than not that the benefit of its deferred tax assets will not be realized.

Accordingly, the Company has provided a full valuation allowance for its deferred tax assets as of September 30, 2020 and December 31, 2019.

On March 27, 2020, the U.S.

President signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), an economic relief package in response to the COVID-19 global pandemic.

The CARES Act contains several corporate income tax provisions, including making remaining alternative minimum tax credits immediately refundable;

providing a 5-year carryback of net operating loss carryforwards (“NOLs”) generated in tax years 2018, 2019, and 2020, and removing the 80% taxable income limitation on utilization of those NOLs if carried back to prior tax years or utilized in tax years beginning before 2021;

and temporarily liberalizing the interest deductibility rules under Section 163(j) of the Tax Cuts and Jobs Act, by raising the adjusted taxable income limitation from 30% to 50% for tax years 2019 and 2020 and giving taxpayers the election of using 2019 adjusted taxable income for purposes of computing 2020 interest deductibility.

The Company is still evaluating the impact but does not currently expect the provisions of the CARES Act to have a material effect on the realizability of deferred income tax assets or tax expense.

As of September 30, 2020, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the period from September 20, 2019 (date of inception) through December 31, 2019.

There is no provision for income taxes because the Company has incurred operating losses and capitalized certain items for income tax purposes since its inception and maintains a full valuation allowance against its net deferred tax assets.

reported amount of income tax expense for the period differs from the amount that would result from applying the fede ral statutory tax rate to net loss before taxes primarily because of the change in valuation allowance.

As of March 31, 2021, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended December 31, 2020.

Note 10—Commitments and Contingencies

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From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

As of September 30, 2020, the Company was not a party to any leasing agreements.

In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers.

The Company’s maximum exposure under these arrangements is unknown at September 30, 2020.

The Company’s maximum exposure under these arrangements is unknown at March 31, 2021.

The Company does not anticipate recognizing any significant losses relating to these arrangements.

Note 11—Subsequent Events

Partnership with Catalent, Inc.

On November 5, 2020, the Company announced a partnership with Catalent, Inc.

(“Catalent”) to support the development and manufacturing of the Company’s gene therapies at Catalent’s Maryland-based gene therapy facilities.

License Agreement with Abeona Therapeutics Inc.

In connection with the Abeona Rett Agreement, the Company paid Abeona a one-time upfront license fee of $3.0 million.

The Abeona Rett Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product.

Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party.

The Company may terminate the agreement for convenience upon specified prior written notice to Abeona.

Partnership with Invitae Corporation

On October 6, 2020, the Company announced a partnership with Invitae Corporation (“Invitae”) to support Invitae’s Detect Lysosomal Storage Diseases (Detect LSDs) and Behind the Seizure® programs.

The partnership is intended to help identify individuals who are eligible for the Company’s Phase 1/2 clinical trial evaluating TSHA-101 in patients with GM2 gangliosidosis and patient identification across the Company’s gene therapy pipeline.

On December 17, 2020, the Company entered into a lease agreement (the “Durham Lease”) with Patriot Park Partners II, LLC, a Delaware limited liability company (the “Durham Landlord”), pursuant to which the Company agreed to lease approximately 187,500 square feet of a manufacturing facility located at 5 National Way, Durham, North Carolina (the “Facility”).

The Durham Lease commenced on April 1, 2021 and is expected to have a term of approximately fifteen years and six months.

The Company has two options to extend the term of the Durham Lease, each for a period of an additional five years.

The Company was not required to provide a security deposit in connection with its entry into the Durham Lease.

The Company will be responsible for constructing interior improvements within the Facility.

The Durham Landlord has the right to terminate the Durham Lease upon specified events of default, including the Company’s failure to pay rent in a timely manner and upon the occurrence of certain events of insolvency with respect to the Company.

The Company may terminate the Durham Lease if construction of the base building shell of the Facility is not complete by May 16, 2021.

The Company incurred initial direct costs to enter into the Durham Lease of approximately $0.8 million.

The costs have been recorded on the consolidated balance sheets as a deferred lease asset and will be amortized into earnings over the term of the Durham Lease.

On January 11, 2021, the Company entered into a lease agreement (the “Dallas Lease”) with Pegasus Park, LLC, a Delaware limited liability company (the “Dallas Landlord”), pursuant to which the Company will lease approximately 15,000 square feet of office space at 3000 Pegasus Park Drive, Dallas, Texas 75247 (the “Office Space”).

The Lease commences on the date on which certain improvements to the Office Space have been made and the Office Space is tendered to the Company for possession, which the Company and the Dallas Landlord presently anticipate to be delivered on or about May 15, 2021, and will have a term of approximately ten years.

The Company has an option to extend the term of the Lease for one additional period of five years.

The Company’s obligation for the payment of base rent for the Office Space will initially be approximately $32,500 per month and will increase annually, up to an estimated monthly base rent of $50,000 during the term of the Lease.

The Company is obligated to pay operating costs and utilities applicable to the Office Space.

The Company was required to provide a security deposit of $32,500 in connection with its entry into the Lease.

Total future minimum lease payments under the Dallas Lease over the initial 10 year term are approximately $4.9 million.

The Company will be responsible for costs of constructing interior improvements within the Office Space that exceed a construction allowance provided by the Dallas Landlord not to exceed $40.00 per rentable square foot.

The Company has a right of first refusal with respect to certain additional adjacent office space before the Dallas Landlord accepts any offer for such space.

The Landlord has the right to terminate the Lease, or the Company’s right to possess th e Office Space without terminating the Lease, upon specified events of default, including the Company’s failure to pay rent in a timely manner and upon the occurrence of certain events of insolvency with respect to the Company.

The Company may terminate th e Lease if the Office Space is not delivered will all improvements to be made by the Landlord pursuant to the Lease substantially completed by May 31, 2021.

As of March 31, 2021, the Company recognized approximately $0.6 million of lease construction incentive based on the construction allowance provided.

The construction incentive has been recorded on the consolidated balance sheets as a deferred lease incentive obligation and will be amortized into earnings as a deduction of rent expense over the term of the Dallas Lease.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements