What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-16 · 166 added, 109 removed, 355 unchanged (44% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

2 unchanged sentences

Total current assets

Restricted cash

Deferred lease asset

11 unchanged sentences

Preferred stock, $ 0.00001 par value per share;

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

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

Common stock, $ 0.00001 par value per share;

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

200,000,000 shares authorized and 38,473,945 and 37,761,435 issued and outstanding as of September 30, 2021 and December 31, 2020

Additional paid-in capital

7 unchanged sentences

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

Operating expenses:

14 unchanged sentences

(in thousands, except share data)

For the Three Months Ended June 30, 2021

For the Three Months Ended September 30, 2021

Stockholders'

Balance as of March 31, 2021

Balance as of June 30, 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

Balance as of September 30, 2021

For the Three Months Ended September 30, 2020

Stockholders'

Preferred Stock

Balance as of March 31, 2020

Preferred Stock

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

Balance as of June 30, 2020

Conversion of Series A and 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

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

2 unchanged sentences

(in thousands, except share data)

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Stockholders'

2 unchanged sentences

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

Balance as of September 30, 2021

For the Nine Months Ended September 30, 2020

Stockholders'

Preferred Stock

Balance as of December 31, 2019

Issuance of Series A convertible preferred stock,

net of offering costs of $ 440 and issuance of

preferred stock tranche liability of $ 1,050

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

Balance as of June 30, 2020

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

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

2 unchanged sentences

(in thousands)

For the Six Months

Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities

4 unchanged sentences

Stock-based compensation

Build-to-suit lease

Changes in operating assets and liabilities:

9 unchanged sentences

Cash flows from financing activities

Proceeds from issuances of Series A convertible preferred stock

Payment of Series A convertible preferred stock issuance costs

Proceeds from Term Loan, net

Proceeds from initial public offering, net of underwriting discounts and commission and other offering costs

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

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

Proceeds from note payable to related party

1 unchanged sentence

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash at the beginning of the period

Cash at the end of the period

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at the beginning of the period

Cash, cash equivalents and restricted cash at the end of the period

Cash and cash equivalents

Restricted cash

Cash, cash equivalents and restricted cash at the end of the period

Supplemental disclosure of cash flow information:

7 unchanged sentences

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 issuance of common stock in initial public offering 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 Description of Business Operations

18 unchanged sentences

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

As of September 30, 2021, the Company had an accumulated deficit of $ 185.3 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.

3 unchanged sentences

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

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.

As of September 30, 2021, the Company had cash and cash equivalents of $ 188.8 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 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 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 .

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

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.

4 unchanged sentences

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.

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 on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 3, 2021.

Principles of Consolidation

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, and one inactive foreign subsidiary incorporated in June 2021.

subsidiaries that were incorporated during 2020 , and two inactive foreign subsidiaries incorporated during 2021 .

All intercompany transactions and balances have been eliminated in consolidation.

8 unchanged sentences

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:

Restricted Cash

Restricted cash consists of cash that the Company has placed in an escrow account which is pledged as collateral under certain lease agreements and letters of credit.

Offering Costs

The Company capitalizes costs directly associated with equity financings until such financings are consummated, at which time such costs are recorded in additional paid-in capital against the gross proceeds of the equity financings.

Costs associated with the shelf registration statement on Form S-3, filed with the SEC on October 5, 2021 have been capitalized and will be reclassified to additional paid-in capital on a pro rata basis when the Company completes offerings under the shelf registration.

At the end of the three-year term of the shelf registration, the remaining deferred offering costs, if any, will be charged to operations.

As of September 30, 2021, $ 0.2 million of such deferred costs are included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

Build-to-Suit Lease

1 unchanged sentence

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.

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.

6 unchanged sentences

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.

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 condensed consolidated financial statements.

Note 3—Balance Sheet Components

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

September 30,

Prepaid research and development

Prepaid bonus

Prepaid insurance

Prepaid clinical trial

Prepaid insurance

Total prepaid expenses and other current assets

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

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

September 30,

Leasehold improvements

5 unchanged sentences

Property, plant and equipment, net

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.

Included in construction in progress at September 30, 2021 was $ 36.7 million of costs associated with the Build-to-Suit lease (see Note 11).

Depreciation expense was $ 166,000 and $ 283,000 for the three and nine months ended September 30, 2021, respectively.

Depreciation expense was not significant for the three and nine months ended September 30, 2020.

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

September 30,

Accrued research and development

4 unchanged sentences

Total accrued expenses and other current liabilities

Note 4—Loan with Silicon Valley Bank

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 (“Exit Fee’) will be due upon prepayment or repayment of the Term Loans in full.

The Exit Fee of $ 2.3 million was recorded as debt discount and has also been fully accrued within non-current liabilities as of September 30, 2021.

The debt discount is being accreted using the effective interest method over the term of the Term Loans within interest expense in the condensed statements of operations.

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.

The Term Loan Agreement contains various covenants that limit the Company’s ability to engage in specified types of transactions without the consent of the Lenders which include, among others, incurring or assuming certain debt;

merging, consolidating or acquiring all or substantially all of the capital stock or property of another entity;

changing the nature of the Company’s business;

changing the Company’s organizational structure or type;

licensing, transferring or disposing of certain assets;

granting certain types of liens on the Company’s assets;

making certain investments;

and paying cash dividends.

The Term Loan Agreement also contains customary representations and warranties, and also includes customary events of default, including payment default, breach of covenants, change of control, and material adverse effects.

The Company was in compliance with all covenants under the Term Loan Agreement as of September 30, 2021.

Upon the occurrence of an event of default, a default interest rate of an addition 5 % per annum may be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable and exercise all of its rights and remedies as set forth in the Term Loan Agreement and under applicable law.

Future principal debt payments on the loan payable as of September 30, 2021 are as follows (in thousands):

Year Ending December 31,

Total principal payments

Unamortized debt discount

Term loan, net

Note 5—Research, Collaboration and License Agreements

19 unchanged sentences

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

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

3 unchanged sentences

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.

1 unchanged sentence

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.

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

Abeona CLN1 Agreements

8 unchanged sentences

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 six months ended June 30, 2021.

No additional milestone payments were made in connection with this agreement during the nine months ended September 3 0 , 2021.

Abeona Rett Agreement

2 unchanged sentences

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 six months ended June 30, 2021.

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

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

8 unchanged sentences

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 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.

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 nine months ended September 30, 2021 .

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

Note 6—Stockholders’ Equity (Deficit), Convertible Preferred Stock and Tranche Liability

2 unchanged sentences

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

As of September 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.

3 unchanged sentences

(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.

15 unchanged sentences

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 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.

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.

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 reclassified $ 18.1 million to convertible preferred stock on the condensed consolidated balance sheet.

Note 7—Stock-Based Compensation

9 unchanged sentences

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

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

Stock Options

6 unchanged sentences

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 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 .

For the three months ended September 30, 2021, 415,100 shares of common stock under the New Plan were awarded with a weighted-average grant date fair value per share of $ 12.83 .

For the nine months ended September 30, 2021, 3,001,750 shares of common stock under the New Plan were awarded with a weighted-average grant date fair value per share of $ 16.64 .

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

The following weighted-average assumptions were used to estimate the fair value of stock options that were granted during the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30,

Nine months ended September 30,

Risk-free interest rate

2 unchanged sentences

Expected volatility

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

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

Life (in years)

3 unchanged sentences

Options cancelled or forfeited

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.

Outstanding at September 30, 2021

Vested and expected to vest at September 30, 2021

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

As of September 30, 2021, the total unrecognized compensation related to unvested stock option awards granted was $ 47.3 million, which the Company expects to recognize over a weighted-average period of approximately 3.3 years.

No stock options were exercised during the period.

Restricted Stock Units

5 unchanged sentences

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

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.

As of September 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 $ 11.8 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 1.3 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:

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

Nonvested at January 1, 2021

1 unchanged sentence

Cancelled or forfeited

Nonvested at June 30, 2021

Nonvested at September 30, 2021

Restricted Stock Awards

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.

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, 2021, the total unrecognized compensation related to unvested RSAs granted was $ 2.2 million which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 0.8 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 six months ended June 30, 2021 was as follows:

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

Nonvested at December 31, 2020

Restricted stock granted

Nonvested at June 30, 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 and six months ended June 30, 2021 (in thousands):

For the Three Months Ended June 30, 2021

For the Six Months Ended June 30, 2021

Nonvested at September 30, 2021

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Research and development expense

5 unchanged sentences

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

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

common share, basic and diluted

Ended September 30,

For the Nine Months

Ended September 30,

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 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:

The following common stock equivalents outstanding as of September 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:

September 30,

Unvested RSUs

1 unchanged sentence

Stock options

Series A convertible preferred stock

Note 9—Related Party Transactions

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.

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.

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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.

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 provided 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.

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Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax

assets will not be realized.

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

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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.

As of September 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 11—Commitments and Contingencies

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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 June 30, 2021.

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

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

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

The Company was required to place $ 2.6 million in an escrow account which will be released when the improvements are substantially complete.

The escrow funds are recorded as restricted cash on the condensed consolidated balance sheet as of September 30, 2021 and are expected to be released in 2023.

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.

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.

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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.

Costs of approximately $ 10.5 million have been capitalized during the nine months ended September 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.

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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.

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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 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 Dallas Landlord has the right to terminate the Dallas 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 September 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 12 — Subsequent Events

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.

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.

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

Acquisition of Option to License Worldwide Rights to Clinical-Stage AAV9 Gene Therapy Program for CLN7 Disease

In October 2021, the Company announced its exclusive option to license the worldwide rights to a clinical-stage AAV9 gene therapy program for the treatment of CLN7, a form of Batten disease.

The first-generation construct for the CLN7 program was developed in the laboratory of Steven Gray, Ph.D., Associate Professor at UT Southwestern Chief Scientific Advisor for the Company.

The CLN7 program is currently in a Phase 1 clinical proof-of-concept trial run by UT Southwestern, and the Company expects the availability of preliminary human proof-of-concept clinical safety and efficacy data from the first-generation construct by year-end 2021.

The Company also entered into a research collaboration with UT Southwestern to develop a next-generation construct for the treatment of CLN7 disease, which is expected to improve potency, safety profile, packaging efficiency and manufacturability over the first-generation construct.

Completion of the next-generation construct design is anticipated by year-end 2021 with commercial-grade GMP material expected in 2022.

The Company intends to initiate a planned pivotal trial using the next-generation construct in 2022, with reference to the human proof-of-concept clinical data being generated from the first generation construct.

Sales Agreement

On October 5, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with SVB Leerink LLC and Wells Fargo Securities, LLC (collectively, the “Sales Agents”), pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $ 150.0 million through the Sales Agents.

The Sales Agents may sell common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act, including sales made directly on or through the Nasdaq Global Select Market or any other existing trade market for the common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law.

The Sales Agents will be entitled to receive 3.0 % of the gross sales price per share of common stock sold under the Sales Agreement.

As of the date of these financial statements, no shares of common stock have been issued and sold pursuant to the Sales 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