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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2021

OR

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

For the transition period from ___________ to ___________

Commission File Number: 001-39536

 

Taysha Gene Therapies, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

84-3199512

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

3000 Pegasus Park Drive Ste 1430

Dallas, Texas

75247

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (214) 612-0000

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.00001 per share

 

TSHA

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

As of August 16, 2021, the registrant had 38,391,165 shares of common stock, $0.00001 par value per share, outstanding.

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Balance Sheets

1

 

Statements of Operations

2

 

Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

3

 

Statements of Cash Flows

5

 

Notes to Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

62

Item 4.

Controls and Procedures

62

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

63

Item 1A.

Risk Factors

63

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

Item 3.

Defaults Upon Senior Securities

64

Item 4.

Mine Safety Disclosures

64

Item 5.

Other Information

64

Item 6.

Exhibits

66

Signatures

67

 

 

 

i


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Taysha Gene Therapies, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

2021

 

 

December 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

197,370

 

 

$

251,253

 

Prepaid expenses and other current assets

 

 

9,932

 

 

 

6,626

 

Total current assets

 

 

207,302

 

 

 

257,879

 

Deferred lease asset

 

 

691

 

 

 

715

 

Property, plant and equipment, net

 

 

33,867

 

 

 

287

 

Total assets

 

$

241,860

 

 

$

258,881

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,355

 

 

$

1,994

 

Accrued expenses and other current liabilities

 

 

22,036

 

 

 

5,135

 

Total current liabilities

 

 

28,391

 

 

 

7,129

 

Build-to-suit lease liability

 

 

26,209

 

 

 

 

Other non-current liabilities

 

 

765

 

 

 

450

 

Total liabilities

 

 

55,365

 

 

 

7,579

 

Commitments and contingencies - Note 10

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

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

 

 

 

 

 

 

Additional paid-in capital

 

 

320,571

 

 

 

312,428

 

Accumulated deficit

 

 

(134,076

)

 

 

(61,126

)

Total stockholders’ equity

 

 

186,495

 

 

 

251,302

 

Total liabilities and stockholders' equity

 

$

241,860

 

 

$

258,881

 

 

 

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

 

1


Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

 

 

For the Three Months

Ended June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

30,643

 

 

$

3,062

 

 

$

54,497

 

 

$

8,576

 

General and administrative

 

 

10,129

 

 

 

948

 

 

 

18,365

 

 

 

1,018

 

Total operating expenses

 

 

40,772

 

 

 

4,010

 

 

 

72,862

 

 

 

9,594

 

Loss from operations

 

 

(40,772

)

 

 

(4,010

)

 

 

(72,862

)

 

 

(9,594

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of preferred stock tranche liability

 

 

 

 

 

(17,210

)

 

 

 

 

 

(17,030

)

Interest income

 

 

40

 

 

 

 

 

 

106

 

 

 

 

Interest expense

 

 

(194

)

 

 

 

 

 

(194

)

 

 

(27

)

Total other expense, net

 

 

(154

)

 

 

(17,210

)

 

 

(88

)

 

 

(17,057

)

Net loss

 

$

(40,926

)

 

$

(21,220

)

 

$

(72,950

)

 

$

(26,651

)

Net loss per common share, basic and diluted

 

$

(1.09

)

 

$

(1.95

)

 

$

(1.96

)

 

$

(2.45

)

Weighted average common shares outstanding, basic and diluted

 

 

37,479,164

 

 

 

10,894,999

 

 

 

37,237,115

 

 

 

10,894,999

 

 

 

 

 

 

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

 

 

 

2


Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

(Unaudited)

 

For the Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of March 31, 2021

 

 

37,761,435

 

 

$

 

 

$

316,022

 

 

$

(93,150

)

 

$

222,872

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,549

 

 

 

 

 

 

4,549

 

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

 

 

629,730

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(40,926

)

 

 

(40,926

)

Balance as of June 30, 2021

 

 

38,391,165

 

 

$

 

 

$

320,571

 

 

$

(134,076

)

 

$

186,495

 

 

For the Three Months Ended June 30, 2020

 

 

 

 

Series A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Stockholders'

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Deficit)

 

Balance as of March 31, 2020

 

 

6,000,000

 

 

$

16,520

 

 

 

10,894,999

 

 

 

 

 

 

980

 

 

$

(6,546

)

 

$

(5,566

)

Issuance of Series A convertible preferred stock,

net of offering costs of $10

 

 

200,000

 

 

 

590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

904

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,220

)

 

 

(21,220

)

Balance as of June 30, 2020

 

 

6,200,000

 

 

$

18,014

 

 

 

10,894,999

 

 

$

 

 

$

980

 

 

$

(27,766

)

 

$

(26,786

)

 

 

 

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

3


Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

(Unaudited)

 

For the Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2020

 

 

37,761,435

 

 

$

 

 

$

312,428

 

 

$

(61,126

)

 

$

251,302

 

Stock-based compensation

 

 

 

 

 

 

 

 

8,143

 

 

 

 

 

 

8,143

 

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

 

 

629,730

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(72,950

)

 

 

(72,950

)

Balance as of June 30, 2021

 

 

38,391,165

 

 

$

 

 

$

320,571

 

 

$

(134,076

)

 

$

186,495

 

 

 

For the Six Months Ended June 30, 2020

 

 

 

 

Series A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Stockholders'

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Deficit)

 

Balance as of December 31, 2019

 

 

 

 

 

 

 

 

10,894,999

 

 

 

 

 

 

980

 

 

 

(1,115

)

 

 

(135

)

Issuance of Series A convertible preferred stock,

net of offering costs of $440 and issuance of

preferred stock tranche liability of $1,050

 

 

6,200,000

 

 

 

17,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

904

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,651

)

 

 

(26,651

)

Balance as of June 30, 2020

 

 

6,200,000

 

 

$

18,014

 

 

 

10,894,999

 

 

$

 

 

$

980

 

 

$

(27,766

)

 

$

(26,786

)

 

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

 

 

4


Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

For the Six Months

Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(72,950

)

 

$

(26,651

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

117

 

 

 

 

Change in fair value of preferred stock tranche liability

 

 

 

 

 

17,030

 

Research and development license expense

 

 

5,500

 

 

 

3,000

 

Stock-based compensation

 

 

8,143

 

 

 

 

Other

 

 

194

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(3,282

)

 

 

(9

)

Accounts payable

 

 

2,382

 

 

 

1,237

 

Accrued expenses and other liabilities

 

 

15,053

 

 

 

1,214

 

Due to related party

 

 

(8

)

 

 

14

 

Net cash used in operating activities

 

 

(44,851

)

 

 

(4,165

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of research and development license

 

 

(5,500

)

 

 

(3,000

)

Purchase of property, plant and equipment

 

 

(3,532

)

 

 

 

Net cash used in investing activities

 

 

(9,032

)

 

 

(3,000

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuances of Series A convertible preferred stock

 

 

 

 

 

18,600

 

Payment of Series A convertible preferred stock issuance costs

 

 

 

 

 

(263

)

Proceeds from note payable to related party

 

 

 

 

 

1,673

 

Repayment of note payable to related party

 

 

 

 

 

(1,645

)

Net cash provided by financing activities

 

 

 

 

 

18,365

 

Net (decrease) increase in cash and cash equivalents

 

 

(53,883

)

 

 

11,200

 

Cash at the beginning of the period

 

 

251,253

 

 

 

 

Cash at the end of the period

 

$

197,370

 

 

$

11,200

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

27

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Property, plant and equipment in accounts payable and accrued expenses

 

$

3,308

 

 

$

19

 

Acquisition of property, plant and equipment funded by landlord

 

$

606

 

 

$

 

Build-to-suit lease liability

 

$

26,250

 

 

$

 

Deferred offering costs not yet paid

 

$

 

 

$

90

 

Reclassification of preferred stock tranche liability

 

$

 

 

$

904

 

Allocation of preferred stock tranche liability

 

$

 

 

$

1,050

 

Series A convertible preferred stock issuance costs not yet paid

 

$

 

 

$

177

 

 

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

 

 

5


 

Note 1—Organization and Description of Business Operations

Taysha Gene Therapies, Inc. (the “Company” or “Taysha”) was originally formed under the laws of the State of Texas on September 20, 2019 (“Inception”). Taysha converted to a Delaware corporation on February 13, 2020, which had no impact to the Company’s par value or issued and authorized capital structure.

Taysha is a patient-centric gene therapy company focused on developing and commercializing AAV-based gene therapies for the treatment of monogenic diseases of the central nervous system in both rare and large patient populations.

Stock Split

On September 16, 2020, the Company effected a 1.0895-for-one stock split of its authorized, issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock as discussed in Note 5. Accordingly, all share and per share amounts for the periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split and adjustment of the convertible preferred stock conversion ratios. On September 16, 2020, the Company also increased the number of shares of common stock authorized for issuance under the 2020 Equity Incentive Plan (the “Existing Plan”) to 3,845,294.

Initial Public Offering

On September 23, 2020, the Company’s registration statement on Form S-1 (File No. 333-248559) related to the initial public offering (“IPO”) of its common stock became effective and on September 28, 2020, the IPO closed. Pursuant to the IPO, the Company issued and sold 9,050,000 shares of common stock at a public offering price of $20.00 per share, which included 1,180,434 shares of common stock issued upon the exercise in full of the underwriters’ option to purchase additional shares. The Company received net proceeds of $165.9 million after deducting underwriting discounts and commissions and other offering costs of $2.5 million. The shares began trading on the Nasdaq Global Select Market on September 24, 2020.

On September 28, 2020, in connection with the closing of the IPO, 10,000,000 shares of Series A and 5,647,048 shares of Series B convertible preferred stock automatically converted into an aggregate of 17,047,378 shares of common stock with a conversion ratio of 1.0895 shares of common stock for each share of Series A and Series B convertible preferred stock.

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

Upon the effectiveness of the Company’s registration statement related to the IPO, the Company’s 2020 Stock Incentive Plan (the “New Plan”) and 2020 Employee Stock Purchase Plan became effective. At that time, all shares reserved for issuance under the Existing Plan ceased to be available for issuance under such plan and became available for issuance under the New Plan.

Liquidity and Capital Resources

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.

Prior to the closing of the Company’s IPO, between March and July 2020, the Company closed on the sale of an aggregate of 10,000,000 shares of Series A convertible preferred stock for gross proceeds of $30.0 million. Between July and August 2020, the Company closed on the sale of an aggregate of 5,647,048 shares of Series B convertible preferred stock for gross proceeds of $96.0 million.

 

Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and the market acceptance of the Company’s products. The Company will need to obtain additional financing in order to complete clinical studies and launch and commercialize any product candidates for which it receives regulatory approval. 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.

6


 

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 the financial results for the six months ended June 30, 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

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP") as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and are consistent in all material respects with those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission ("SEC") on March 3, 2021 (the “2020 Annual Report”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. The consolidated balance sheet as of December 31, 2020 is derived from audited financial statements, however, it does not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s 2020 Annual Report.

Principles of Consolidation

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. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates and assumptions in the Company’s financial statements relate to the determination of the fair value of the common stock prior to the IPO (as an input into stock-based compensation), estimating preclinical manufacturing accruals and accrued or prepaid research and development expenses, and the valuation of the preferred stock tranche liability. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. In response to the ongoing and rapidly evolving COVID-19 pandemic, management considered the impact of the estimated economic implications on the Company’s critical and significant accounting estimates, including assessment of impairment of long-lived assets.

Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies as disclosed in 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

7


 

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

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), as amended, with guidance regarding the accounting for and disclosure of leases. This update requires lessees to recognize the liabilities related to all leases, including operating leases, with a term greater than 12 months on the balance sheets. This update also requires lessees and lessors to disclose key information about their leasing transactions. This guidance will become effective for the Company for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The 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

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

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Prepaid research and development

 

$

6,716

 

 

$

2,462

 

Prepaid bonus

 

 

1,192

 

 

 

409

 

Prepaid insurance

 

 

826

 

 

 

2,480

 

Prepaid clinical trial

 

 

184

 

 

 

944

 

Other

 

 

1,014

 

 

 

331

 

Total prepaid expenses and other current assets

 

$

9,932

 

 

$

6,626

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Leasehold improvements

 

 

1,863

 

 

 

 

Furniture and fixtures

 

 

676

 

 

 

 

Computer equipment

 

 

529

 

 

 

95

 

Laboratory equipment

 

 

460

 

 

 

 

Construction in progress

 

 

30,465

 

 

 

201

 

 

 

 

33,993

 

 

 

296

 

Accumulated depreciation

 

 

(126

)

 

 

(9

)

Property, plant and equipment, net

 

$

33,867

 

 

$

287

 

 

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.

 

8


 

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

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Accrued research and development

 

$

14,508

 

 

$

2,106

 

Accrued compensation

 

 

3,210

 

 

 

1,766

 

Accrued professional and consulting fees

 

 

1,372

 

 

 

999

 

Accrued property, plant, and equipment

 

 

1,309

 

 

 

173

 

Accrued clinical trial

 

 

959

 

 

 

 

Other

 

 

678

 

 

 

91

 

Total accrued expenses and other current liabilities

 

$

22,036

 

 

$

5,135

 

 

Note 4—Research, Collaboration and License Agreements

UT Southwestern Agreement

On November 19, 2019, the Company entered into a research, collaboration and license agreement (“UT Southwestern Agreement”) with the Board of Regents of the University of Texas System on behalf of The University of Texas Southwestern Medical Center (“UT Southwestern”). Under the UT Southwestern Agreement, UT Southwestern is primarily responsible for preclinical development activities with respect to licensed products for use in certain specified indications (up to investigational new drug application-enabling studies), and the Company is responsible for all subsequent clinical development and commercialization activities with respect to the licensed products. UT Southwestern will conduct such preclinical activities for a two-year period under mutually agreed upon sponsored research agreements that were entered into beginning in April 2020. During the initial research phase, the Company has the right to expand the scope of specified indications under the UT Southwestern Agreement.

In connection with the UT Southwestern Agreement, the Company obtained an exclusive, worldwide, royalty-free license under certain patent rights of UT Southwestern and a non-exclusive, worldwide, royalty-free license under certain know-how of UT Southwestern, in each case to make, have made, use, sell, offer for sale and import licensed products for use in certain specified indications. Additionally, the Company obtained a non-exclusive, worldwide, royalty-free license under certain patents and know-how of UT Southwestern for use in all human uses, with a right of first refusal to obtain an exclusive license under certain of such patent rights and an option to negotiate an exclusive license under other of such patent rights. The Company is required to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one licensed product.

On April 2, 2020, the Company amended the UT Southwestern Agreement to include the addition of another licensed product and certain indications, and a right of first refusal to the Company over certain patient dosing patents. No additional consideration was transferred in connection with this amendment.

The UT Southwestern Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last valid claim of a licensed patent in such country for such licensed product. After the initial research term, the Company may terminate the agreement, on an indication-by-indication and licensed product-by-licensed product basis, at any time upon specified written notice to UT Southwestern. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party.

In November 2019, as partial consideration for the license rights granted under the UT Southwestern Agreement, the Company issued 2,179,000 shares of its common stock, or 20% of its then outstanding fully-diluted common stock, to UT Southwestern. As additional consideration, UT Southwestern was entitled to receive additional shares if their holdings fell below 10% on a fully-diluted basis before or as a result of the completion of a qualified financing. In March 2020, following the initial closing of the Series A convertible preferred stock agreement, which met the definition of such qualified financing, the anti-dilution feature expired and no additional shares were issued. The Company does not have any future milestone or royalty obligations to UT Southwestern under the UT Southwestern Agreement other than costs related to maintenance of patents.

Queen’s Agreement

In late December 2019, the Company entered into a research grant agreement (“RGA”) with Queen’s University at Kingston (“Queen’s”), for certain research and development activities related to the generation of AAV9 vector. The Company committed to fund $3.8 million under the RGA with Queen’s. The Company 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

9


 

rate of 6%. Any amounts outstanding under the Note were required to be repaid, along with any accrued interest, by or before June 30, 2020. In the event of default, any amount outstanding was deemed immediately payable by RA Session II, the Company’s President and Chief Executive Officer, as a personal guarantor (see Note 8). For the period from Inception through December 31, 2019, the Company did not incur any expenses associated with the Queen’s RGA, and no amounts were due or outstanding under the Note as of December 31, 2019. For the year ended December 31, 2020, the Company paid all expenses associated with the Queen’s RGA, thus no amounts were due or outstanding under the Note as of December 31, 2020, and the promise-to-pay has therefore expired.

On February 21, 2020, the Company entered into a license agreement with Queen’s (the “Queen’s Agreement”) to obtain the exclusive perpetual, royalty-bearing license, with the right to sublicense through multiple tiers, under certain patent rights and know-how of Queen’s, including certain improvements to such patent rights and know-how, to develop products in any field which use one or more valid claims of the patents licensed under the Queen’s Agreement (the “Licensed Patents”), or the technology, information and intellectual property related to the patents licensed under the Queen’s Agreement (together with the Licensed Patents, the “Licensed Products”), and to make, have made, use, sell, offer for sale, import and export Licensed Products and otherwise exploit such patents and know-how for use in certain specified indications. In exchange for the rights granted to the Company, the Company made a cash payment of $3.0 million in April 2020 which is recorded in research and development expenses in the condensed consolidated 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. 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

In August 2020, the Company entered into license and inventory purchase agreements with Abeona Therapeutics Inc. (“Abeona”) for worldwide exclusive rights to certain intellectual property rights and know-how relating to the research, development and manufacture of ABO-202, an AAV-based gene therapy for CLN1 disease (also known as infantile Batten disease). Under the terms of the agreements, the Company made initial cash payments to Abeona of $3.0 million for the license fee and $4.0 million for purchase of clinical materials and reimbursement for previously incurred development costs in October 2020. In exchange for the license rights, the Company recorded an aggregate of $7.0 million within research and development expenses in the consolidated statements of operations for the year ended December 31, 2020 since the acquired license or acquired inventory do not have an alternative future use. The Company is obligated to make up to $26.0 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed CLN1 product. The Company will also pay an annual earned royalty in the high single digits on net sales of any licensed CLN1 products. The license agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party. The Company may terminate the 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.

 

Abeona Rett Agreement

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

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

In connection with the Abeona Rett Agreement, the Company paid Abeona a one-time upfront license fee of $3.0 million which is recorded in research and development expenses in the consolidated statements of operations for the year ended December 31, 2020 since the acquired license does not have an alternative future use. The Company is obligated to pay Abeona up to $26.5 million in regulatory-related milestones and up to $30.0 million in sales-related milestones per licensed Rett product and high single-digit

10


 

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

The Abeona Rett Agreement expires on a country-by-country and licensed product-by-licensed product basis upon the expiration of the last royalty term of a licensed product. Either party may terminate the agreement upon an uncured material breach of the agreement or insolvency of the other party. The Company may terminate the agreement for convenience upon specified prior written notice to Abeona.

 

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

 

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

In March 2021, the Company acquired the exclusive worldwide rights to a clinical-stage AAV9 gene therapy program, now known as TSHA-120, for the treatment of Giant Axonal Neuropathy (“GAN”). TSHA-120 is an intrathecally dosed AAV9 gene therapy currently being evaluated in a clinical trial for the treatment of GAN. The trial is being conducted by the National Institutes of Health in close collaboration with a leading patient advocacy group focused on finding treatments and cures for GAN. TSHA-120 has received rare pediatric disease and orphan drug designations from the U.S. Food and Drug Administration for the treatment of GAN. The worldwide rights 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 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

Authorized Shares

The Company amended its certificate of incorporation on March 4, 2020, July 2, 2020 and again on July 28, 2020 such that the total number of shares of common stock authorized to be issued was increased to 32,685,000, and the total number of shares of preferred stock authorized to be issued was increased to 15,647,052, of which 10,000,000 preferred shares were designated Series A convertible preferred stock and 5,647,052 were designated Series B convertible preferred stock. 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.

IPO

On September 28, 2020, the Company issued an aggregate of 7,869,566 shares of common stock in the IPO, and on September 29, 2020, the Company issued an aggregate of 1,180,434 shares of common stock upon the underwriters’ exercise in full of their option to purchase additional shares, each at the public offering price of $20.00 per share less underwriting discounts and commissions. In connection with the IPO, the Company received gross proceeds of $181.0 million, which was offset by issuance costs, including underwriters’ discounts and commissions, of approximately $15.1 million.

Series A and B convertible preferred stock

On March 4, 2020, the Company entered into a purchase agreement (the “Series A Purchase Agreement”) providing for a private placement of up to 10,000,000 shares of Series A convertible preferred stock at an original issuance price of $3.00 per share, subject to separate closings, including: (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

11


 

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. Each Series A investor had the right, but not the obligation, to purchase all or any portion of the Milestone Shares at any time in its sole option and in its sole and absolute discretion, whether or not the Company had achieved the applicable clinical milestone.

On June 30, 2020, several affiliated Series A investors elected to exercise in full their options to purchase 200,000 shares, representing all of their remaining pro-rata portion of the Milestone Shares, prior to the Company’s achievement of the clinical milestones for gross proceeds of $0.6 million. The remainder of the Series A investors exercised in full their options to purchase 3,800,000 shares, representing all of their remaining pro-rata portion of the Milestone Shares, prior to the Company’s achievement of the clinical milestones, for gross proceeds of $11.4 million between July 1, 2020 and July 2, 2020. As part of this issuance, the Company issued and sold 3,266,667 shares to PBM TGT Holdings, LLC and 400,000 shares to Nolan Capital, LLC, which stockholders are controlled by certain members of the Company’s board of directors.

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 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.

Series A convertible preferred stock tranche liability

The Company concluded that the tranche liability met the definition of a freestanding financial instrument, as it was legally detachable and separately exercisable from the initial closing of the Series A convertible preferred stock. The estimated fair value of the tranche liability was determined using a Monte Carlo simulation at the initial issuance date. As of March 4, 2020, the simulations occurred based on the implied aggregate equity value of the Company derived from the Series A convertible preferred stock offering price of $3.00 per share, along with, in part, the following subjective assumptions: risk-free rate of 0.59%, an expected volatility of 80%, the expected term to a liquidity event of 1 year, and a 60% probability of achieving the clinical milestones and timing thereof. Subsequently, the estimated fair value of the tranche liability was determined using a backsolve approach at June 30, 2020, immediately prior to the issuance of the Milestone Shares, which was calculated based on the aggregate equity value of the Company derived from the Series B convertible preferred stock offering price of $17.00 per share. The subsequent remeasurement also considered, in part, a risk-free rate of 0.17%, an expected volatility of 80%, and the expected term to a liquidity event of 0.5 years.

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.

 

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Note 6—Stock-Based Compensation

On July 1, 2020, the Company’s board of directors approved the Existing Plan which permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, RSAs, RSUs and other stock-based awards to employees, directors, officers and consultants. On July 1, 2020, 3,529,412 shares of common stock were authorized for issuance under the Existing Plan. On September 16, 2020, the Company increased the number of shares of common stock authorized for issuance under the Existing Plan to 3,845,294.

On September 16, 2020, the Company’s stockholders approved the New Plan, which became effective upon the execution of the underwriting agreement in connection with the IPO. The number of shares available for future issuance under the New Plan is the sum of (1) 3,390,168 new shares of common stock,  (2) 209,841 remaining shares of common stock reserved under the Existing Plan that became available for issuance upon the effectiveness of the New Plan and (3) the number of shares of common stock subject to outstanding awards under the Existing Plan when the New Plan became effective that thereafter expire or are forfeited, canceled, withheld to satisfy tax withholding or to purchase or exercise an award, repurchased by the Company or are otherwise terminated. At December 31, 2020, there were 2,941,509 shares available for future grant under the New Plan. The number of shares of common stock reserved for issuance under the New Plan will automatically increase on January 1 of each year, for a period of ten years, from January 1, 2021 continuing through January 1, 2030, by 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors.  On January 1, 2021 the board of directors increased the number of common stock reserved for issuance under the New Plan by 1,434,934 shares.

Furthermore, on September 16, 2020, the Company’s stockholders approved the Employee Stock Purchase Plan (“ESPP”), which became effective upon the execution of the underwriting agreement in connection with the IPO. The maximum number of shares of common stock that may be issued under the ESPP will not exceed 362,000 shares of common stock, plus the number of shares of common stock that are automatically added on January 1st of each year for a period of up to ten years, commencing on the first January 1 following the IPO date and ending on (and including) January 1, 2030, in an amount equal to the lesser of (i) one percent (1.0%) of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year, and (ii) 724,000 shares of common stock.   No shares 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

On July 1, 2020, options to purchase 2,896,782 shares of common stock under the Existing Plan were awarded to certain employees and consultants of the Company with an exercise price per share of $0.80, which were expected to vest over a four-year period, all of which were subsequently cancelled (the “Cancelled Options”). The grant date fair value of the Cancelled Options was $13.8 million at the original grant date. In exchange, the Company awarded 2,518,932 RSUs on September 2, 2020, which are expected to vest over a four-year term. The Company accounted for the changes in award terms as a modification in accordance with ASC 718 Compensation – Stock Compensation. The modification was accounted for as an exchange of the original award for a new award with total compensation cost equal to the grant-date fair value of the original award plus any incremental value measured on the modification date. The Company determined that there was no incremental value as the fair value of the original award immediately before the modification was greater than the fair value of the new award immediately after the modification. Accordingly, the Company 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. 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

 

 

1.07

%

 

 

0.80

%

Expected dividend yield

 

 

 

 

Expected term in years

 

 

6.0

 

 

 

6.0

 

Expected volatility

 

 

76

%

 

 

75

%

 

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

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

Aggregate

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Intrinsic

 

 

 

Stock

 

 

Exercise

 

 

Contractual

 

 

Value

 

 

 

Options

 

 

Price

 

 

Life (in years)

 

 

(in thousands)

 

Outstanding at December 31, 2020

 

 

674,842

 

 

 

20.68

 

 

 

9.8

 

 

$

3,953

 

Options granted

 

 

2,586,650

 

 

 

26.41

 

 

 

 

 

 

 

 

 

Options cancelled or forfeited

 

 

(47,800

)

 

 

28.61

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2021

 

 

3,213,692

 

 

$

25.18

 

 

 

9.6

 

 

$

786

 

Vested and expected to vest at June 30, 2021

 

 

3,213,692

 

 

$

25.18

 

 

 

9.6

 

 

$

786

 

Options exercisable at June 30, 2021

 

 

43,054

 

 

$

20.50

 

 

 

9.3

 

 

$

37

 

 

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; 25% of the shares of common stock underlying the RSUs vest at each anniversary over a four-year period. The RSUs are subject to a service-based vesting condition. The RSUs were also subject to a liquidity-based performance vesting condition that was met upon the closing of the IPO. The Company at any time may accelerate the vesting of the RSUs. 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.

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:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

Grant Date

 

 

 

Number

 

 

Fair Value

 

 

 

of Shares

 

 

per Share

 

Nonvested at January 1, 2021

 

 

2,850,053

 

 

$

6.37

 

Restricted units granted

 

 

 

 

 

 

Vested

 

 

(629,730

)

 

 

5.25

 

Cancelled or forfeited

 

 

(167,186

)

 

 

5.25

 

Nonvested at June 30, 2021

 

 

2,053,137

 

 

$

6.80