What changed in this filing

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Item 1. Financial Statements

2021-08-16 compared with 2021-05-11 · 155 added, 101 removed, 309 unchanged (45% of the section changed)

6 unchanged sentences

Prepaid expenses and other current assets

Deferred offering costs

Total current assets

6 unchanged sentences

Total current liabilities

Build-to-suit lease liability

Other non-current liabilities

3 unchanged sentences

Preferred stock, $ 0.00001 par value per share;

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

10,000,000 shares authorized and no shares issued and outstanding as of June 30, 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 March 31, 2021 and December 31, 2020

200,000,000 shares authorized and 38,391,165 and 37,761,435 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

7 unchanged sentences

For the Three Months

Ended March 31, 2021

For the Three Months Ended March 31, 2020

Ended June 30,

For the Six Months

Ended June 30,

Operating expenses:

7 unchanged sentences

Interest expense

Total other income, net

Total other expense, net

Net loss per common share, basic and diluted

4 unchanged sentences

(in thousands, except share data)

For the Three Months Ended March 31, 2021

For the Three Months Ended June 30, 2021

Stockholders'

Balance as of December 31, 2020

Balance as of March 31, 2021

Stock-based compensation

Issuance of common stock upon vesting and settlement of restricted stock units

Balance as of June 30, 2021

For the Three Months Ended June 30, 2020

Stockholders'

Preferred Stock

Balance as of March 31, 2020

Issuance of Series A convertible preferred stock,

net of offering costs of $ 10

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

Balance as of June 30, 2020

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

2 unchanged sentences

(in thousands, except share data)

For the Three Months Ended March 31, 2020

For the Six Months Ended June 30, 2021

Stockholders'

Balance as of December 31, 2020

Stock-based compensation

Issuance of common stock upon vesting and settlement of restricted stock units

Balance as of June 30, 2021

For the Six Months Ended June 30, 2020

Stockholders'

Preferred Stock

3 unchanged sentences

preferred stock tranche liability of $ 1,050

Balance as of March 31, 2020

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

Balance as of June 30, 2020

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

2 unchanged sentences

(in thousands)

For the Three Months

Ended March 31, 2021

For the Three Months Ended March 31, 2020

For the Six Months

Ended June 30,

Cash flows from operating activities

11 unchanged sentences

Cash flows from investing activities

Purchase of research and development license

Purchase of property, plant and equipment

2 unchanged sentences

Proceeds from issuances of Series A convertible preferred stock

Payment of Series A convertible preferred stock issuance costs

Proceeds from note payable to related party

4 unchanged sentences

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:

Purchase of research and development license not yet paid

Property, plant and equipment in accounts payable and accrued expenses

Acquisition of property, plant and equipment funded by landlord

Build-to-suit lease liability

Deferred offering costs not yet paid

Reclassification of preferred stock tranche liability

Allocation of preferred stock tranche liability

Series A issuance costs not yet paid

Series A convertible preferred stock issuance costs not yet paid

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

Note 1—Organization and Descr iption of Business Operations

Note 1—Organization and Description 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 March 31, 2021, the Company had an accumulated deficit of $93.2 million.

As of June 30, 2021, the Company had an accumulated deficit of $ 134.1 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.

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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 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.

As of June 30, 2021, the Company had cash of $ 197.4 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 that causes the disease COVID-19 emerged and has subsequently spread worldwide.

The World Health Organization has declared the COVID-19 outbreak a global pandemic , resulting in federal, state and local governments and private entities implementing various restrictions , including travel restrictions, restrictions on public gatherings, stay at home orders, other advisories and quarantines of 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 .

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 treat COVID-19.

Management believes the financial results for the six months ended June 3 0 , 2021 were not significantly impacted by the COVID-19 pandemic .

In addition, management believes the remote working arrangements and travel restrictions imposed by various governmental jurisdictions have had limited impact on the Company’s ability to maintain internal operations during the six months ended June 30, 2021 .

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 new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19.

Note 2—Summary of Significant Accounting Policies

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The accompanying interim condensed consolidated financial statements include the accounts of Taysha and its inactive wholly owned U.S.

subsidiaries that were incorporated during 2020.

subsidiaries that were incorporated during 2020, and one inactive foreign subsidiary incorporated in June 2021.

All intercompany transactions and balances have been eliminated in consolidation.

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Significant Accounting Policies

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.

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, except as described below.

Build-to-Suit Lease

In the Company’s recent lease arrangement (as described in Note 10), the Company was involved in the construction of the build-out.

To the extent the Company is involved with the structural improvements of the construction project or takes construction risk prior to the commencement of a lease, accounting guidance requires the Company to be considered the owner for accounting purposes of these types of projects during the construction period.

In such cases, the Company records an asset in property, plant and equipment

on its consolidated balance sheet equal to the fair value of the building shell, and a corresponding build-to-suit lease obligation on its consolidated balance sheet representing the amounts paid by the lessor.

Upon completion of construction, the Company will consider the requirements for sale-leaseback accounting treatment, including evaluating whether all risks of ownership have been transferred back to the landlord.

Recently Issued Accounting Pronouncements

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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 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 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 .

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 the 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 be 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

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Prepaid research and development

Prepaid insurance

Prepaid bonus

Prepaid insurance

Prepaid clinical trial

Total prepaid expenses and other current assets

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

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

Leasehold improvements

Furniture and fixtures

Computer equipment

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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.

Included in construction in progress at June 30, 2021 was $ 30.3 million of costs associated with the Build-to-Suit lease (see Note 10).

Depreciation expense was $ 85,000 and $ 117,000 for the three and six months ended June 30, 2021, respectively.

There was no depreciation expense for the three and six months ended June 30, 2020.

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

Accrued research and development

Accrued license fees

Accrued compensation

Accrued professional and consulting fees

Accrued construction in progress

Accrued property, plant, and equipment

Accrued clinical trial

Total accrued expenses and other current liabilities

1 unchanged sentence

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 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.

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.

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 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.

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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 statements of operations and included as an investing cash outflow in the condensed consolidated statements of cash flows since the acquired license does not have an alternative future use for the six months ended June 30, 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.

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.

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.

No additional milestone payments were made in connection with the Queen’s Agreement during the six months ended June 30, 2021.

Abeona CLN1 Agreements

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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.

No additional milestone payments were made in connection with this agreement during the six months ended June 30, 2021.

Abeona Rett Agreement

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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.

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.

2 unchanged sentences

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.

No additional milestone payments were made in connection with the Abeona Rett Agreement during the six months ended June 30, 2021.

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

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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.

The worldwide rights were acquired through a license agreement, effective March 29, 2021, between Hannah’s Hope Fund for Giant Axonal Neuropathy, Inc.

(“HHF”) and the Company.

Under the terms of the agreement, in exchange for granting the Company the exclusive worldwide rights to TSHA-120, HHF received 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.

This license fee was paid in April 2021 and has been classified as an investing outflow in the condensed consolidated statements of cash flows for the six months ended June 30, 2021 .

No additional milestone payments were made in connection with this agreement during the six months ended June 30, 2021.

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

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

As of June 30, 2021 and December 31, 2020, no shares of preferred stock were issued or outstanding.

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.

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(1) 6,000,000 shares at the initial closing on March 4, 2020, and (2) 2,000,000 shares at each of two subsequent closings triggered by the achievement of specific clinical milestones.

The Series A Purchase Agreement obligated the Company to issue and sell and the Series A investors to purchase up to a total of 4,000,000 additional shares of Series A convertible preferred stock (the “Milestone Shares”) at the same price per share upon the achievement of certain defined clinical milestones (the “tranche liability”).

The Series A Purchase Agreement obligated the

Company to issue and sell and the Series A investors to purchase up to a total of 4,000,000 additional shares of Series A convertible preferred stock (the “Milestone Shares”) at the same price per share upon the achievement of certain defined clinical milestones (the “tranche liability”).

The determination as to whether the milestone events had been met was subject to certification by the Board of Directors.

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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 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.

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 investors.

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.

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.

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 purchase their pro-rata portion of the Milestone Shares 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 expense of $ 17.0 million in the condensed consolidated statement of operations for the six months ended June 30, 2020.

As 200,000 of the Milestone Shares were also issued to certain investors on June 30, 2020, the related tranche liability was extinguished, and the Company reclassified $ 0.9 million to convertible preferred stock on the condensed consolidated balance sheet as of June 30, 2020.

The Company concluded that no beneficial conversion feature (“BCF”) existed as the effective conversion price of the Series A convertible preferred stock exceeded 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, no BCF existed.

Note 6—Stock-Based Compensation

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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.

No shares were added to the ESPP as of January 1, 2021 and no issuances have been made under the ESPP as of June 30, 2021.

Stock Options

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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:

For the three months ended June 30, 2021, options to purchase 964,750 shares of common stock under the New Plan were awarded with a weighted-average grant date fair value per share of $ 14.73 .

For the six months ended June 30, 2021, options to purchase 2,586,650 shares of common stock under the New Plan were awarded with a weighted-average grant date fair value per share of $ 17.25 .

The stock options vest over one to 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 and six months ended June 30, 2021:

Three months ended June 30, 2021

Six months ended June 30, 2021

Risk-free interest rate

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Expected volatility

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

The following table summarizes stock option activity, during the six months ended June 30, 2021:

Life (in years)

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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

Outstanding at June 30, 2021

Vested and expected to vest at June 30, 2021

Options exercisable at June 30, 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 June 30, 2021 and the exercise price of the stock options.

As of June 30, 2021, the total unrecognized compensation related to unvested stock option awards granted was $ 47.5 million, which the Company expects to recognize over a weighted-average period of approximately 3.5 years.

Restricted Stock Units

On September 2, 2020, the Company issued 331,121 RSUs to an employee under the Existing Plan;

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

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:

As of June 30, 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 $ 13.3 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 1.5 years.

The Company's default tax withholding method for RSUs is the sell-to-cover method, in which shares with a market value equivalent to the tax withholding obligation are sold on behalf of the holder of the RSUs upon vesting and settlement to cover the tax withholding liability and the cash proceeds from such sales are remitted by the Company to taxing authorities.

The Company’s RSU activity for the six months ended June 30, 2021 was as follows:

Nonvested at January 1, 2021

Restricted units granted

Nonvested at March 31, 2021

Cancelled or forfeited

Nonvested at June 30, 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 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.

RA Session II, the Company’s founder, 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 June 30, 2021, the total unrecognized compensation related to unvested RSAs granted was $ 2.6 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 1.8 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 three months ended March 31, 2021 was as follows:

The Company’s RSA activity for the six months ended June 30, 2021 was as follows:

Nonvested at December 31, 2020

Restricted stock granted

Nonvested at March 31, 2021

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 months ended March 31, 2021 (in thousands):

For the Three Months

Ended March 31, 2021

Nonvested at June 30, 2021

For the Three Months Ended June 30, 2021

For the Six Months Ended June 30, 2021

Research and development expense

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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):

The following table represents 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,

Ended June 30,

For the Six Months

Ended June 30,

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

1 unchanged sentence

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

The following common stock equivalents outstanding as of June 30, 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:

Unvested RSUs

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Note 8—Related Party Transactions

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.

RA Session II, founder, 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.

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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.

In April 2021, the PBM services agreement was terminated and all outstanding amounts due have been paid.

Note 9—Income Taxes

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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.

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

As of June 30, 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

2 unchanged sentences

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 March 31, 2021.

The Company’s maximum exposure under these arrangements is unknown at June 30, 2021.

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

4 unchanged sentences

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.

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 incurred initial direct costs to enter into the Durham Lease of approximately $ 0.8 million in December 2020.

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

In accordance with ASC Topic 840, Leases , the Company is deemed, for accounting purposes only, to be the owner of the entire leased Facility, including the building shell, during the construction period because of the Company’s expected level of direct financial and operational involvement in the substantial tenant improvements, including structural improvements, required to build out the Facility.

As a result, the Company capitalized approximately $ 26.3 million as a build-to-suit asset within property, plant and equipment, net and recognized a corresponding build-to-suit lease financing obligation as a liability on its condensed consolidated balance sheets equal to the fair value of the existing building shell using comparable market prices per square foot for similar space for public real estate transactions in the surrounding area at commencement of construction.

Additionally, construction costs incurred as part of the build-out and tenant improvements are also capitalized within property, plant and equipment, net.

Costs of approximately $ 4.0 million have been capitalized during the six months ended June 30, 2021, related to both equipment purchases and the build-out of the leased Facility.

Construction is expected to be completed in 2023, upon which time the Company will assess and determine if the build-to-suit asset and corresponding liability should be de-recognized.

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 Dallas Lease commenced on May 27, 2021 , and has a term of approximately ten years .

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

The Company’s obligation for the payment of base rent for the Office Space is initially 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.

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

The Dallas Landlord has the right to terminate the Lease, or the Company’s right to possess the Office Space without terminating the Dallas 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.

As of June 30, 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 condensed consolidated balance sheets as a deferred lease incentive obligation and is being amortized into earnings as a deduction of rent expense over the term of the Dallas Lease.

Note 11—Subsequent Events

On August 12, 2021 (the “Closing Date”), the Company entered into a Loan and Security Agreement (the “Term Loan Agreement”), by and among the Company, the lenders party thereto from time to time (the “Lenders”) and Silicon Valley Bank, as administrative agent and collateral agent for the Lenders (“Agent”).

The Term Loan Agreement provides for (i) on the Closing Date, $ 40.0 million aggregate principal amount of term loans available through December 31, 2021 , (ii) from January 1, 2022 until September 30, 2022 , an additional $ 20.0 million term loan facility available at the Company’s option upon having three distinct and active clinical stage programs at the time of draw, (iii) from October 1, 2022 until March 31, 2023 , an additional $ 20.0 million term loan facility available at the Company’s option upon having three distinct and active clinical stage programs at the time of draw and (iv) from April 1, 2023 until December 31, 2023 , an additional $ 20.0 million term loan facility available upon approval by the Agent and the Lenders (collectively, the “Term Loans”).

The Company drew $ 30.0 million in term loans on the Closing Date.

The interest rate applicable to the Term Loans is the greater of (a) the WSJ Prime Rate plus 3.75 % or (b) 7.00 % per annum.

The Term Loans are interest only from the Closing Date through August 31, 2024, after which the Company is required to pay equal monthly installments of principal through August 1, 2026 , the maturity date.

The Term Loans may be prepaid in full through August 12, 2022 with payment of a 2.00 % prepayment premium, after which they may be prepaid in full through August 12, 2023 with payment of a 1.00 % prepayment premium, after which they may be prepaid in full with no prepayment premium.

An additional final payment of 7.5 % of the amount of Terms Loans advanced by the Lenders will be due upon prepayment or repayment of the Term Loans in full.

The obligations under the Term Loan Agreement are secured by a perfected security interest in all of the Company’s assets except for intellectual property and certain other customarily excluded property pursuant to the terms of the Term Loan Agreement.

There are no financial covenants and no warrants associated with the Term Loan Agreement.

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