SEC Filing | Taysha Gene Therapies

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10-Q

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 March 31, 2023


☐	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.

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 May 11, 2023, the registrant had 64,178,567 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 Stockholders’ (Deficit) Equity	3
	Statements of Cash Flows	4
	Notes to Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
Signatures		54

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)



	March 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	63,425		$	87,880
Prepaid expenses and other current assets		8,933			8,537
Total current assets		72,358			96,417
Restricted cash		2,637			2,637
Property, plant and equipment, net		14,642			14,963
Operating lease right-of-use assets		10,647			10,943
Other non-current assets		1,316			1,316
Total assets	$	101,600		$	126,276
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities
Accounts payable	$	9,002		$	10,946
Accrued expenses and other current liabilities		16,602			18,287
Deferred revenue		28,851			33,557
Total current liabilities		54,455			62,790
Term loan, net		38,161			37,967
Operating lease liability, net of current portion		19,928			20,440
Other non-current liabilities		4,004			4,130
Total liabilities		116,548			125,327
Commitments and contingencies - Note 11
Stockholders' (deficit) equity
Preferred stock, $0.00001 par value per share; 10,000,000 shares authorized and no shares issued and outstanding as of March 31, 2023 and December 31, 2022		—			—
Common stock, $0.00001 par value per share; 200,000,000 shares authorized and 63,473,349 and 63,207,507 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		1			1
Additional paid-in capital		404,114			402,389
Accumulated deficit		(419,063	)		(401,441	)
Total stockholders’ (deficit) equity		(14,948	)		949
Total liabilities and stockholders' (deficit) equity	$	101,600		$	126,276

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

Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)


	For the Three Months Ended March 31,
	2023			2022
Revenue	$	4,706		$	—
Operating expenses:
Research and development		12,514			38,182
General and administrative		8,751			11,469
Total operating expenses		21,265			49,651
Loss from operations		(16,559	)		(49,651	)
Other income (expense):
Interest income		319			14
Interest expense		(1,374	)		(672	)
Other expense		(8	)		(8	)
Total other expense, net		(1,063	)		(666	)
Net loss	$	(17,622	)	$	(50,317	)
Net loss per common share, basic and diluted	$	(0.28	)	$	(1.32	)
Weighted average common shares outstanding, basic and diluted		63,260,905			38,174,717

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

Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(in thousands, except share data)

(Unaudited)

For the Three Months Ended March 31, 2023


					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders'
	Shares		Amount		Capital		Deficit			Equity (Deficit)
Balance as of December 31, 2022		63,207,507	$	1	$	402,389	$	(401,441	)	$	949
Stock-based compensation		—		—		1,675		—			1,675
Issuance of common stock upon release of restricted stock units, net		229,922		—		—		—			—
Issuance of common stock under ESPP		35,920		—		50		—			50
Net loss		—		—		—		(17,622	)		(17,622	)
Balance as of March 31, 2023		63,473,349	$	1	$	404,114	$	(419,063	)	$	(14,948	)

For the Three Months Ended March 31, 2022



					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders'
	Shares		Amount		Capital		Deficit			Equity (Deficit)
Balance as of December 31, 2021		38,473,945	$	—	$	331,032	$	(235,649	)	$	95,383
Adjustment to beginning accumulated deficit from the adoption of ASC 842		—		—		—		222			222
Stock-based compensation		—		—		5,453		—			5,453
Net loss		—		—		—		(50,317	)		(50,317	)
Balance as of March 31, 2022		38,473,945	$	—	$	336,485	$	(285,744	)	$	50,741

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

Taysha Gene Therapies, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	For the Three Months Ended March 31,
	2023			2022
Cash flows from operating activities
Net loss	$	(17,622	)	$	(50,317	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		331			260
Research and development license expense		—			1,250
Stock-based compensation		1,675			5,329
Non-cash lease expense		300			309
Other		128			194
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(400	)		271
Accounts payable		359			2,544
Accrued expenses and other liabilities		(250	)		(779	)
Deferred revenue		(4,706	)		—
Net cash used in operating activities		(20,185	)		(40,939	)
Cash flows from investing activities
Purchase of research and development license		—			(3,000	)
Purchase of property, plant and equipment		(3,900	)		(8,427	)
Net cash used in investing activities		(3,900	)		(11,427	)
Cash flows from financing activities
Payment of shelf registration costs		(387	)		(151	)
Proceeds from common stock issuances under ESPP		50			277
Other		(33	)		(233	)
Net cash used in financing activities		(370	)		(107	)
Net decrease in cash, cash equivalents and restricted cash		(24,455	)		(52,473	)
Cash, cash equivalents and restricted cash at the beginning of the period		90,517			151,740
Cash, cash equivalents and restricted cash at the end of the period	$	66,062		$	99,267
Cash and cash equivalents		63,425			96,630
Restricted cash		2,637			2,637
Cash, cash equivalents and restricted cash at the end of the period	$	66,062		$	99,267
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,125		$	419
Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment in accounts payable and accrued expenses		112			4,513
Right-of-use assets obtained in exchange for lease liabilities		—			18,634
Offering costs not yet paid		—			21
Purchase of research and development license not yet paid		—			1,250

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

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.

Sales Agreement

On October 5, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with SVB Securities LLC (f/k/a 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 in its sole discretion, shares of its common stock having an aggregate offering price of up to $150.0 million through the Sales Agents. In March 2022, the Company amended the Sales Agreement to, among other things, include Goldman Sachs & Co. LLC as an additional Sales Agent. 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 are entitled to receive 3.0% of the gross sales price per share of common stock sold under the Sales Agreement. In April 2022, the Company sold 2,000,000 shares of common stock under the Sales Agreement and received $11.6 million in net proceeds. No other shares of common stock have been issued and sold pursuant to the Sales Agreement as of March 31, 2023.

Liquidity and Going Concern

The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Pursuant to ASC 205, Presentation of Financial Statements, the Company is required to and does evaluate at each annual and interim period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. The Company concluded that there was insufficient funding available to allow the Company to fund its currently planned research and discovery programs for a period exceeding one year from the filing of those financial statements, and that those conditions raised substantial doubt about the Company’s ability to continue as a going concern.

In October 2022, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) and an option agreement (the “Option Agreement,” together with the Securities Purchase Agreement, the “Astellas Transactions”) with Audentes Therapeutics, Inc. (d/b/a Astellas Gene Therapy) (“Astellas”), pursuant to which the Company agreed to issue and sell 7,266,342 shares of its common stock for aggregate proceeds of $30.0 million and received a one-time payment in the amount of $20.0 million (the “Upfront Payment”), respectively, for total gross proceeds of $50.0 million. See Note 5 for additional information.

Also in October 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Goldman Sachs & Co. LLC (the "Underwriter”) to issue and sell 14,000,000 shares of common stock at a price to the public of $2.00 per share. The Underwriter exercised its option to purchase an additional 765,226 shares of the Company’s common stock at a price of $1.88 per share. The net proceeds from the offering were $27.7 million, after deducting underwriting discounts and other offering expenses.

The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2023, the Company had an accumulated deficit of $419.1 million. Losses are expected to continue as the Company continues to invest in its research and development activities. 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.

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, 2022, filed with the Securities and Exchange Commission ("SEC") on March 28, 2023 (the “2022 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, 2022 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 2022 Annual Report.

Principles of Consolidation

The accompanying interim condensed consolidated financial statements include the accounts of Taysha and its wholly owned subsidiaries. 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 initial public offering (as an input into stock-based compensation), estimating manufacturing accruals and accrued or prepaid research and development expenses, the measurement of impairment of long-lived assets, and the allocation of consideration received in connection with the Astellas Transactions. 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.

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 2022 Annual Report.

Comprehensive Loss

Comprehensive loss is equal to net loss as presented in the accompanying condensed consolidated statements of operations.

Recently Adopted 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.

On December 31, 2022, the Company adopted ASU 2016-02 using the modified retrospective approach and utilizing the effective date as its date of initial application. The Company has retrospectively changed its previously issued condensed consolidated financial statements as of March 31, 2022 as presented within the Company's March 31, 2022 Quarterly Report on Form 10-Q to reflect the adoption of ASC 842 on January 1, 2022. The condensed consolidated financial statements for the three months ended March 31, 2022 presented herein differ from the Company's condensed consolidated financial statements included in the Company's March 31, 2022 Quarterly Report on Form 10-Q as those condensed consolidated financial statements were prepared using the former accounting standard referred to as ASC Topic 840, Leases.

The Company elected the following practical expedients, which must be elected as a package and applied consistently to all of its leases at the transition date (including those for which the entity is a lessee or a lessor): i) the Company did not reassess whether any expired or existing contracts are or contain leases; ii) the Company did not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with ASC 840 are classified as operating leases, and all existing leases that were classified as capital leases in accordance with ASC 840 are classified as finance leases); and iii) the Company did not reassess initial direct costs for any existing leases. For leases that existed prior to the date of initial application of ASC 842 (which were previously classified as operating leases), a lessee may elect to use either the total lease term measured at lease inception under ASC 840 or the remaining lease term as of the date of initial application of ASC 842 in determining the period for which to measure its incremental borrowing rate. In transition to ASC 842, the Company utilized the remaining lease term of its leases in determining the appropriate incremental borrowing rates.

The adoption of this standard resulted in the recognition of operating lease right-of-use assets and operating lease liabilities of $18.4 million and $19.1 million, respectively, on the Company’s condensed consolidated balance sheet at adoption relating to its operating leases. The lease liabilities were determined based on the present value of the remaining minimum lease payments. Upon adoption of ASC 842, the Company also (i) derecognized the build-to-suit lease asset of $26.3 million previously presented in property, plant and equipment, (ii) derecognized the build-to-suit lease liability of $26.5 million, and (iii) eliminated $0.7 million of deferred rent liabilities and tenant improvement allowances as of January 1, 2022 as these liabilities are reflected in the operating lease right-of-use assets. In adopting ASU 2016-02, the Company recorded a total one-time adjustment of $0.2 million to the opening balance of accumulated deficit as of January 1, 2022 related to the de-recognition of the build-to-suit lease asset and related build-to-suit lease obligation. The adoption did not have a material impact on accumulated deficit and on the condensed consolidated statements of operations and cash flows.

The following table summarizes the effect of the adoption of ASC 842 on the condensed consolidated statement of operation and statement of cash flows for the three months ended March 31, 2022 (in thousands):


	Pre ASC 842 Three Months Ended March 31, 2022			ASC 842 Adjustments			After ASC 842 Three Months Ended March 31, 2022
Condensed Consolidated Statements of Operations
Operating expenses:
Research and development	$	37,799		$	383		$	38,182
Other income (expense):
Interest expense		(849	)		177			(672	)

Condensed Consolidated Statements of Cash Flows
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	$	257		$	3		$	260
Non-cash lease expense		—			309			309
Changes in operating assets and liabilities:
Accrued expenses and other current liabilities		(538	)		(241	)		(779	)
Cash flows from financing activities
Other		(368	)		135			(233	)
Supplemental disclosure of noncash investing and financing activities:
Right-of-use assets obtained in exchange for lease liabilities		—			18,634			18,634

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance on January 1, 2022. There is no impact to the consolidated balance sheets as of December 31, 2022 because of the full valuation allowance position taken for deferred taxes.

Note 3—Balance Sheet Components

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


	March 31, 2023		December 31, 2022
Prepaid research and development	$	4,710	$	4,840
Prepaid clinical trial		2,568		2,119
Deferred offering costs		724		724
Prepaid insurance		373		388
Prepaid bonus		26		18
Other		532		448
Total prepaid expenses and other current assets	$	8,933	$	8,537

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


	March 31, 2023			December 31, 2022
Leasehold improvements	$	2,091		$	2,091
Laboratory equipment		2,868			2,868
Computer equipment		1,115			1,115
Furniture and fixtures		908			898
Construction in progress		9,633			9,633
		16,615			16,605
Accumulated depreciation		(1,973	)		(1,642	)
Property, plant and equipment, net	$	14,642		$	14,963

In November 2022, the Company recognized a non-cash impairment charge of $36.4 million for the manufacturing facility asset group, of which $26.3 million relates to construction in progress and finance lease right-of-use assets. The impairment charge was estimated using a discounted cash flow model and recorded in the consolidated statements of operations for the year ended December 31, 2022. Property, plant and equipment, net includes $1.2 million and $1.3 million of assets capitalized as finance leases as of March 31, 2023 and December 31, 2022, respectively.

Depreciation expense was $0.3 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively.

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


	March 31, 2023		December 31, 2022
Accrued research and development	$	6,451	$	8,190
Accrued severance		3,027		1,463
Accrued clinical trial		2,462		1,473
Lease liabilities, current portion		1,752		1,521
Accrued compensation		1,242		2,519
Accrued professional and consulting fees		866		390
Accrued property, plant and equipment		112		2,081
Other		690		650
Total accrued expenses and other current liabilities	$	16,602	$	18,287

Note 4— Leases

The Company leases certain office, laboratory, and manufacturing space.

Dallas Lease

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

The Dallas Lease commenced on May 27, 2021, and has a term of approximately ten years. The Company has an option to extend the term of the Dallas Lease for one additional period of five years.

The Company 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 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.

Dallas Lease Expansion

On December 14, 2021, the Company amended the Dallas Lease (the “Dallas Lease Amendment”) with the Dallas Landlord, pursuant to which the Company will lease approximately 18,000 square feet of office space adjacent to the Office Space at 3000 Pegasus Park Drive, Dallas, Texas 75247 (the “Expansion Premises”).

The Dallas Lease Amendment commenced on July 1, 2022, and has a term of approximately ten years.

The Company is obligated to pay operating costs and utilities applicable to the Expansion Premises. Total future minimum lease payments under the Dallas Lease Amendment over the initial 10 year term are approximately $6.0 million. The Company will be responsible for costs of constructing interior improvements within the Expansion Premises that exceed a $40.00 per rentable square foot construction allowance provided by the Dallas Landlord.

The Company has a right of first refusal with respect to certain additional office space on the 15th floor at 3000 Pegasus Park Drive, Dallas, Texas 75247 before the Dallas Landlord accepts any offer for such space.

Durham Lease

On December 17, 2020, the Company entered into a lease agreement (the “Durham Lease”) with Patriot Park Partners II, LLC, a Delaware limited liability company (the “Durham Landlord”), pursuant to which the Company agreed to lease approximately 187,500 square feet of a manufacturing facility located at 5 National Way, Durham, North Carolina (the “Facility”). The Durham Lease commenced on April 1, 2021 and is expected to have a term of approximately fifteen years and six months. The Company has two options to extend the term of the Durham Lease, each for a period of an additional five years.

The Company was not required to provide a security deposit in connection with its entry into the Durham Lease. The Company will be responsible for constructing interior improvements within the Facility. The 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 March 31, 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.

Summary of all lease costs recognized under ASC 842

The following table summarizes the lease costs recognized under ASC 842 and other information pertaining to the Company's operating leases for the three months ended March 31, 2023 and 2022 (in thousands):


	For the Three Months Ended March 31,
	2023		2022
Operating lease cost	$	708	$	535
Variable lease cost		243		194
Total lease cost