10-Q
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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: 001-39787

 

BIOATLA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

85-1922320

( State or other jurisdiction of

incorporation or organization)

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

11085 Torreyana Road, San Diego, California

92121

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (858) 558-0708

 

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, $0.0001 par value per share

 

BCAB

 

The Nasdaq Global Market

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 13, 2021, the number of shares of the registrant’s common stock outstanding was 32,315,301 and the number of shares of the registrant’s Class B common stock outstanding was 1,492,059.

 

 

 


 

BIOATLA, INC.

Quarterly Report on Form 10-Q

 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements:

1

Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020

1

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three and six months ended June 30, 2021 and 2020

2

Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended June 30, 2021 and 2020

3

Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2021 and 2020

4

Notes to Condensed Consolidated Financial Statements (unaudited)

5

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

69

Item 3.

Defaults Upon Senior Securities

69

Item 4.

Mine Safety Disclosures

69

Item 5.

Other Information

69

Item 6.

Exhibits

70

SIGNATURES

71

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

BioAtla, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)

 

 

 

June 30,
2021

 

 

December 31,
2020

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

207,609

 

 

$

238,605

 

Prepaid expenses and other current assets

 

 

4,722

 

 

 

2,076

 

Total current assets

 

 

212,331

 

 

 

240,681

 

Property and equipment, net

 

 

4,223

 

 

 

4,102

 

Other assets

 

 

154

 

 

 

154

 

Total assets

 

$

216,708

 

 

$

244,937

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

15,898

 

 

$

12,068

 

Current portion of deferred rent

 

 

452

 

 

 

387

 

Current portion of deferred revenue

 

 

19,806

 

 

 

19,806

 

Total current liabilities

 

 

36,156

 

 

 

32,261

 

Long-term accrued interest

 

 

8

 

 

 

5

 

Deferred rent, less current portion

 

 

1,839

 

 

 

2,015

 

Other debt

 

 

682

 

 

 

682

 

Total liabilities

 

 

38,685

 

 

 

34,963

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 200,000,000 shares authorized at June
   30, 2021 and December 31, 2020;
0 shares issued and outstanding
   at June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.0001 par value; 350,000,000 shares authorized at June 30, 2021
   and December 31, 2020;
32,315,301 and 32,171,560 shares issued and outstanding
   at June 30, 2021 and December 31, 2020, respectively

 

 

3

 

 

 

3

 

Class B common stock, $0.0001 par value; 15,368,569 shares authorized at
   June 30, 2021 and December 31, 2020;
1,492,059 shares issued and
  outstanding at June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

318,019

 

 

 

300,888

 

Accumulated deficit

 

 

(139,999

)

 

 

(90,917

)

Total stockholders’ equity

 

 

178,023

 

 

 

209,974

 

Total liabilities and stockholders’ equity

 

$

216,708

 

 

$

244,937

 

 

See accompanying notes.  

1


 

BioAtla, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Collaboration and other revenue

 

$

250

 

 

$

190

 

 

$

250

 

 

$

279

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expense

 

 

14,850

 

 

 

2,923

 

 

 

25,273

 

 

 

4,584

 

General and administrative expense

 

 

15,860

 

 

 

1,787

 

 

 

24,234

 

 

 

1,324

 

Total operating expenses

 

 

30,710

 

 

 

4,710

 

 

 

49,507

 

 

 

5,908

 

Loss from operations

 

 

(30,460

)

 

 

(4,520

)

 

 

(49,257

)

 

 

(5,629

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

80

 

 

 

1

 

 

 

178

 

 

 

6

 

Interest expense (includes related party amounts of $0 for the three and six months ended June 30, 2021 and $79 and $138 for the three and six months ended June 30, 2020, respectively)

 

 

(1

)

 

 

(754

)

 

 

(3

)

 

 

(1,301

)

Change in fair value of derivative liability

 

 

 

 

 

(775

)

 

 

 

 

 

(728

)

Extinguishment of convertible debt

 

 

 

 

 

(174

)

 

 

 

 

 

(174

)

Total other income (expense)

 

 

79

 

 

 

(1,702

)

 

 

175

 

 

 

(2,197

)

Consolidated net loss and comprehensive loss

 

$

(30,381

)

 

$

(6,222

)

 

$

(49,082

)

 

$

(7,826

)

Net loss per common share, basic and diluted (1)

 

$

(0.90

)

 

 

 

 

$

(1.46

)

 

 

 

Weighted-average shares of common stock outstanding, basic and diluted (1)

 

 

33,678,893

 

 

 

 

 

 

33,671,298

 

 

 

 

 

(1) For the three and six months ended June 30, 2020, the Company determined that the attribution of pre-Corporate Reorganization net losses based on the post-Corporate Reorganization capital structure would not meaningfully represent the economic rights of the unit holders. As a result, the Company presents net loss per share information only for the period subsequent to the Corporate Reorganization. (see Note 1).

 

See accompanying notes.

2


 

BioAtla, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

 

 

 

 Three Months Ended June 30, 2021

 

 

 

Common Stock

 

 

Class B
Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at March 31, 2021

 

 

32,171,560

 

 

$

3

 

 

 

1,492,059

 

 

$

 

 

$

305,531

 

 

$

(109,618

)

 

$

195,916

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,298

 

 

 

 

 

 

12,298

 

Issuance of common stock under equity incentive plans

 

 

138,461

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for Employee Stock Purchase Plan

 

 

5,280

 

 

 

 

 

 

 

 

 

 

 

 

190

 

 

 

 

 

 

190

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,381

)

 

 

(30,381

)

Balance at June 30, 2021

 

 

32,315,301

 

 

$

3

 

 

 

1,492,059

 

 

$

 

 

$

318,019

 

 

$

(139,999

)

 

$

178,023

 

 

 

 

 Six Months Ended June 30, 2021

 

 

 

Common Stock

 

 

Class B
Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

32,171,560

 

 

$

3

 

 

 

1,492,059

 

 

$

 

 

$

300,888

 

 

$

(90,917

)

 

$

209,974

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,941

 

 

 

 

 

 

16,941

 

Issuance of common stock under equity incentive plans

 

 

138,461

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for Employee Stock Purchase Plan

 

 

5,280

 

 

 

 

 

 

 

 

 

 

 

 

190

 

 

 

 

 

 

190

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(49,082

)

 

 

(49,082

)

Balance at June 30, 2021

 

 

32,315,301

 

 

$

3

 

 

 

1,492,059

 

 

$

 

 

$

318,019

 

 

$

(139,999

)

 

$

178,023

 

 

See accompanying notes.

3


 

BioAtla, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(49,082

)

 

$

(7,826

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

636

 

 

 

431

 

Loss on disposal of property and equipment

 

 

4

 

 

 

 

Change in fair value of derivative liability

 

 

 

 

 

728

 

Change in fair value of profits interest liability

 

 

 

 

 

(7,601

)

Loss on extinguishment of debt

 

 

 

 

 

174

 

Stock-based compensation

 

 

16,941

 

 

 

 

Non-cash interest

 

 

 

 

 

489

 

Accrued interest

 

 

3

 

 

 

813

 

Deferred rent

 

 

(111

)

 

 

(51

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(2,646

)

 

 

389

 

Accounts payable and accrued expenses

 

 

5,716

 

 

 

5,867

 

Deferred revenue

 

 

 

 

 

(279

)

Net cash used in operating activities

 

 

(28,539

)

 

 

(6,866

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(736

)

 

 

(86

)

Net cash used in investing activities

 

 

(736

)

 

 

(86

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of convertible debt

 

 

 

 

 

2,750

 

Proceeds from issuance of PPP loan

 

 

 

 

 

682

 

Payment of initial public offering costs

 

 

(1,911

)

 

 

 

Proceeds from issuance of common stock under Employee Stock Purchase Plan

 

 

190

 

 

 

 

Net cash provided by (used in) financing activities

 

 

(1,721

)

 

 

3,432

 

Net decrease in cash and cash equivalents

 

 

(30,996

)

 

 

(3,520

)

Cash and cash equivalents, beginning of period

 

 

238,605

 

 

 

3,704

 

Cash and cash equivalents, end of period

 

$

207,609

 

 

$

184

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

 

Unpaid deferred financing costs

 

$

 

 

$

95

 

Property and equipment additions included in accounts payable and accrued expenses

 

$

42

 

 

$

89

 

 

 

See accompanying notes.

4


 

BioAtla, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Summary of Significant Accounting Policies

Organization

BioAtla, LLC was formed in Delaware in March 2007 and converted to a Delaware corporation in July 2020 as part of the Corporate Reorganization defined and described below, and was renamed BioAtla, Inc. (the “Company”). The Company has a proprietary platform for creating biologics, including its conditionally active biologics (“CAB” or “CABs”). CABs have been designed to be active only under certain conditions found in diseased tissue, while remaining inactive in normal tissue. The Company is currently in clinical development of its two lead CAB antibody drug conjugates (“CAB ADC”) targeting AXL and ROR2 receptors.

Corporate Reorganization and Series D Financing

In July 2020, BioAtla, LLC completed a series of transactions (the “Corporate Reorganization”) in connection with the conversion from a limited liability company into a Delaware corporation, the spin-off of Himalaya Therapeutics SEZC, and the completion of a Series D convertible preferred stock financing. The Corporate Reorganization involved the formation of Himalaya Parent LLC as a wholly owned subsidiary of BioAtla, LLC and the formation of BioAtla MergerSub LLC, as a wholly owned subsidiary of Himalaya Parent LLC. Under the Agreement and Plan of Merger (the “Merger Agreement”), BioAtla, LLC was merged into and with BioAtla MergerSub LLC, with BioAtla, LLC surviving, and the members of BioAtla, LLC immediately prior to the effective time of the Merger Agreement received membership interests, on a one-for-one basis, of Himalaya Parent LLC as consideration, and the then-outstanding warrants to purchase equity of BioAtla, LLC were converted into warrants to purchase common shares of common stock of BioAtla, Inc. (see Note 6). The Himalaya Parent LLC operating agreement provided identical equity rights for the then outstanding units of BioAtla, LLC. In addition: (i) the membership interests of BioAtla, LLC held by Himalaya Parent LLC were exchanged for 6,220,050 shares of BioAtla, Inc. common stock, (ii) BioAtla, Inc. issued an aggregate of 59,164,808 shares of Series D convertible preferred stock to Himalaya Parent LLC and Himalaya Parent LLC issued an aggregate of 59,164,808 Class D units to the holders of convertible notes of BioAtla, LLC in connection with the conversion of their convertible notes into Class D units of Himalaya Parent LLC (see Note 4), (iii) BioAtla, LLC distributed to Himalaya Parent LLC its equity interests in Himalaya Therapeutics SEZC, a then majority-owned subsidiary which is engaged in the development of a set of antibodies in the field of oncology primarily in Greater China, (iv) Himalaya Parent LLC assumed the profits interest liability of BioAtla, LLC (see Note 7) and (v) BioAtla, LLC converted into a Delaware corporation pursuant to a statutory conversion and changed its name to BioAtla, Inc. Following the Corporate Reorganization, Himalaya Parent LLC owned 59,164,808 shares of BioAtla, Inc. Series D convertible preferred stock and 6,220,050 shares of BioAtla, Inc. common stock, all of which were subsequently distributed (the "Distribution") to the members of Himalaya Parent LLC. As a result of the sale of 140,626,711 shares of Series D convertible preferred stock to new investors in July 2020 (see Note 6), BioAtla, Inc. was not controlled by Himalaya Parent LLC and BioAtla, Inc. does not control Himalaya Parent LLC subsequent to the distribution (see further discussion in “Principles of consolidation and deconsolidation” below). All pre-Corporate Reorganization operations, employees, property, assets and obligations of BioAtla, LLC (exclusive of the profits interest liability and Himalaya Therapeutics SEZC now held by Himalaya Parent LLC) are held by BioAtla, Inc. Shares of Series D convertible preferred stock were subsequently converted into common stock as part of the Company's initial public offering ("IPO") in December 2020.

Principles of Consolidation and Deconsolidation

Prior to the Corporate Reorganization in July 2020, the consolidated financial statements included the accounts of BioAtla, LLC and those of its majority owned subsidiary Himalaya Therapeutics SEZC that had no material operations. Himalaya Therapeutics SEZC also had a wholly owned subsidiary, Himalaya Therapeutics HK Limited that had no material operations. All intercompany balances were eliminated in consolidation. In connection with the Corporate Reorganization, Himalaya Therapeutics SEZC and Himalaya Therapeutics HK Limited were deconsolidated without material impact to the consolidated financial statements. Subsequent to the Corporate Reorganization and subsequent to the Distribution as defined and described above, Himalaya Parent LLC does not control, is not under common control with, and is not consolidated by BioAtla, Inc. and BioAtla, Inc. is a single legal entity with no consolidated variable interest entities ("VIEs") or subsidiaries.

Liquidity and Going Concern

The Company has incurred cumulative operating losses and negative cash flows from operations since its inception and expects to continue to incur significant expenses and operating losses for the foreseeable future as it continues the development of its product candidates. As of June 30, 2021, the Company had an accumulated deficit of $140.0 million. The Company plans to continue to fund its losses from operations and capital funding needs through public or private equity or debt financings or other sources. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend

5


 

payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

Management is required to perform a two-step analysis of the Company’s ability to continue as a going concern. Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern (Step 1). If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt (Step 2). Management’s assessment included the preparation of cash flow forecasts resulting in management’s conclusion that there is not substantial doubt about the Company’s ability to continue as a going concern as its current cash and cash equivalents will be sufficient to fund the Company’s operations for a period of at least one year from the issuance date of these unaudited condensed consolidated financial statements.

Unaudited Interim Financial Information

The unaudited condensed consolidated financial statements as of June 30, 2021, and for the three and six months ended June 30, 2021 and 2020, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and with accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year or future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020, included in its Annual Report on Form 10-K filed with the SEC on March 24, 2021.

Use of Estimates

The preparation of the Company’s consolidated financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. The most significant estimates in the Company’s consolidated financial statements relate to revenue recognition, accruals for research and development costs, equity-based compensation and fair value measurements. 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 revenue and expenses that are not readily apparent from other sources. Actual results may differ materially and adversely 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.

Concentrations of Risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.


Income Taxes

In March 2021, the American Rescue Plan (H.R. 1319) was signed into law. This legislation extends and enhances a number of current-law tax incentives for businesses, but also expands the definition of a “covered employee” as defined by Section 162(m)(1) of the Internal Revenue Code. The corporate tax provisions included within the bill are not expected to have a material impact on the Company.

Stock-Based Compensation

Stock-based compensation expense represents the grant date fair value of equity awards, consisting of stock options, restricted stock units (“RSUs”) and employee stock purchase plan rights, over the requisite service period of the awards (usually the vesting period) on a straight-line basis. The Company estimates the fair value of stock option grants and employee stock purchase plan rights using the Black-Scholes option pricing model. Prior to the Company’s IPO, the fair value of RSUs was based on the estimated fair value of the underlying common stock on the date of grant and, subsequent to the Company’s IPO, the fair value is based on the closing sales price of the Company’s common stock on the date of grant. Equity award forfeitures are recognized as they occur.

6


 

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. There have been no items qualifying as other comprehensive loss and, therefore, for all periods presented, the Company’s comprehensive loss was the same as its reported net loss.

Net Loss Per Share

Basic net loss per common share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of common stock warrants, RSUs, and common stock options outstanding under the Company’s stock option plan.

For the three and six months ended June 30, 2020, the Company determined that the attribution of pre-Corporate Reorganization net loss based on the post-Corporate Reorganization capital structure would not meaningfully represent the economic rights of the unit holders. As a result, the Company presents net loss per share information only for the period subsequent to the Corporate Reorganization.

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalents):

 

 

 

June 30,
2021

 

Common stock warrants

 

 

717,674

 

Common stock options

 

 

850,149

 

Restricted stock units

 

 

1,781,576

 

Total

 

 

3,349,399

 

 

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases. The new standard establishes a right-of-use model and requires a lessee to recognize on the balance sheet a right-of-use asset and corresponding lease liability for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 and early adoption is permitted. While management is currently assessing the impact this new standard will have, the expected primary impact to its consolidated financial position upon adoption will be the recognition, on a discounted basis, of its minimum commitments under noncancelable operating leases on its consolidated balance sheets resulting in the recording of right of use assets and lease liabilities. The Company’s current minimum commitments under its noncancelable operating leases are disclosed in Note 5. 

2. Balance Sheet Details

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

 

 

 

June 30,
2021

 

 

December 31,
2020

 

Prepaid research and development

 

$

2,915

 

 

$

2,004

 

Prepaid insurance

 

 

1,461

 

 

 

 

Other prepaid expenses and current assets

 

 

346

 

 

 

72

 

Total

 

$

4,722

 

 

$

2,076

 

 

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Property and equipment consist of the following (in thousands):

 

 

 

Useful life
(years)

 

June 30,
2021

 

 

December 31,
2020

 

Furniture, fixtures and office equipment

 

3 - 7

 

$

1,933

 

 

$

1,719

 

Laboratory equipment

 

5

 

 

2,197

 

 

 

1,790

 

Leasehold improvements

 

2 - 3

 

 

3,687

 

 

 

3,663

 

Construction in progress

 

 

 

 

102

 

 

 

 

 

 

 

 

7,919

 

 

 

7,172

 

Less accumulated depreciation and amortization

 

 

 

 

(3,696

)

 

 

(3,070

)

Total

 

 

 

$

4,223

 

 

$

4,102

 

 

Accounts payable and accrued expenses consist of the following (in thousands):

 

 

 

June 30,
2021

 

 

December 31,
2020

 

Accounts payable

 

$

1,283

 

 

$

2,456

 

Accrued compensation

 

 

2,240

 

 

 

2,804

 

Accrued research and development

 

 

11,743

 

 

 

4,852

 

Accrued equity issuance costs

 

 

 

 

 

1,143

 

Other accrued expenses

 

 

632

 

 

 

813

 

Total

 

$

15,898

 

 

$

12,068

 

 

3. Fair Value Measurements

The carrying amounts of the Company’s current financial assets and current financial liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. As of June 30, 2021 and December 31, 2020, the Company had no financial assets or liabilities measured at fair value on a recurring basis.

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

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

None of the Company’s non-financial assets and liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

4. Convertible and Other Debt

The Company issued convertible promissory notes between December 2015 and May 2020 totaling $21.8 million, of which $2.0 million was with related parties. The convertible promissory notes accrued interest at 8% per annum with maturity dates of five years after issuance. The convertible promissory notes were settled in connection with the Company’s Series D financing in July 2020. As of June 30, 2021, the Company had $0.7 million outstanding under a promissory note issued pursuant to the Paycheck Protection Program (“PPP”) of the CARES Act. On July 2, 2021, the Company received notice from its lender that the U.S. Small Business Administration ("SBA") had approved the Company's application for forgiveness and that there was no remaining balance on the PPP Loan. The Company expects to record the forgiveness as other income in July 2021. For the three and six months ended June 30, 2021, the Company recognized interest expense related to its outstanding debt of $1,000 and $3,000, respectively. For the three and six months ended June 30, 2020, the Company recognized interest expense related to its outstanding debt of $0.8 million and $1.3 million, respectively.

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5. Commitments and Contingencies

Operating Lease

In June 2017, as amended in January 2019, the Company entered into a non-cancellable operating lease for its corporate headquarters and laboratory space in San Diego, California. The lease commenced in January 2018, the period the Company gained access to the leased space and began recognizing rent expense. The lease expires in July 2025 and the Company has an option to extend the term of the lease for an additional five years. The lease includes certain rent abatement, rent escalations, tenant improvement allowances and additional charges for common area maintenance and other costs. Rent expense for the three and six months ended June 30, 2021 was $0.4 million and $0.8 million, respectively. Rent expense for the three and six months ended June 30, 2020 was $0.5 million and $0.9 million, respectively.

Expected future minimum payments under the non-cancelable operating lease as of June 30, 2021 are as follows (in thousands):

 

Years ending December 31:

 

Operating
Lease

 

2021 (6 months)

 

$

741

 

2022

 

 

1,555

 

2023

 

 

1,636

 

2024

 

 

1,685

 

Thereafter

 

 

845

 

 

 

$

6,462

 

 

Contingencies

From time to time, the Company may be subject to various claims and suits arising in the ordinary course of business. The Company is not currently a party to any legal proceedings the outcome of which the Company believes, if determined adversely to the Company, would individually or in the aggregate have a material adverse effect on the Company’s business, operating results or financial condition.

6. Stockholders’/Members' Equity (Deficit)

The statement of members' deficit for the three months ended June 30, 2020 is as follows (in thousands, except unit amounts):

 

 

 

Class C Preferred Units

 

 

Class A Units

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Noncontrolling

 

 

Total
Members’

 

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Deficit

 

Balance at March 31, 2020

 

 

23,968,178

 

 

$

89,345

 

 

 

54,600,000

 

 

$

750

 

 

$

2,295

 

 

$

(149,958

)

 

$

(47

)

 

$

(57,615

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,222

)

 

 

 

 

 

(6,222

)

Balance at June 30, 2020

 

 

23,968,178

 

 

$

89,345

 

 

 

54,600,000

 

 

$

750

 

 

$

2,295

 

 

$

(156,180

)

 

$

(47

)

 

$

(63,837

)

 

The statement of members' deficit for the six months ended June 30, 2020 is as follows (in thousands, except unit amounts):

 

 

 

Class C Preferred Units

 

 

Class A Units

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Noncontrolling

 

 

Total
Members’

 

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Deficit

 

Balance at December 31, 2019

 

 

23,968,178

 

 

$

89,345

 

 

 

54,600,000

 

 

$

750

 

 

$

2,295

 

 

$

(148,354

)

 

$

(47

)

 

$

(56,011

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,826

)

 

 

 

 

 

(7,826

)

Balance at June 30, 2020

 

 

23,968,178

 

 

$

89,345

 

 

 

54,600,000

 

 

$

750

 

 

$

2,295

 

 

$

(156,180

)

 

$

(47

)

 

$

(63,837

)

Initial Public Offering and Related Transactions

In December 2020, the Company completed its IPO selling 12,075,000 shares of its common stock at $18.00 per share. Proceeds from the Company’s IPO, net of underwriting discounts and commissions and other offering costs, were $198.3 million. In connection with the IPO, all 199,791,519 shares of convertible preferred stock outstanding at the time of the IPO converted into 13,876,510 shares of the Company’s common stock and 1,492,059 shares of the Company’s Class B common stock.

2020 Equity Incentive Plan

On October 29, 2020, the Company’s board of directors approved the adoption of the BioAtla, Inc. 2020 Equity Incentive Plan (the “2020 Plan”) and approved certain amendments to the 2020 Plan in December 2020. The Company’s stockholders approved the 2020 Plan, as amended, in December 2020. Under the 2020 Plan, the Company may grant awards of common stock to the Company’s employees, consultants and non-employee directors pursuant to option awards, stock appreciation rights awards, restricted stock

9


 

awards, restricted stock unit awards, performance stock awards, performance stock unit awards and other stock-based awards. As of June 30, 2021 and December 31, 2020, the total number of common shares authorized for issuance under the 2020 Plan was 6,226,540 and 4,939,678, respectively. On January 1st of each year, commencing with the first January 1st following the effective date of the 2020 Plan, the shares authorized for issuance under the 2020 Plan shall be increased by a number of shares equal to the lesser of 4% of the total number of shares outstanding on the immediately preceding December 31st and such lesser number of shares determined by the Company’s board of directors. The maximum term of the options granted under the 2020 Plan is no more than ten years. Awards under the 2020 Plan generally vest at 25% one year from the vesting commencement date and ratably each month thereafter for a period of 36 months, subject to continuous service.

There was no stock-based compensation expense reported for the three and six months ended June 30, 2020 as the 2020 Plan was not yet adopted. Stock-based compensation expense for the three and six months ended June 30, 2021 has been reported in the consolidated statements of operations and comprehensive loss as follows (in thousands):

 

 

 

Three Months
Ended
June 30,
2021

 

 

Six Months
Ended
June 30,
2021

 

Research and development

 

$

1,154

 

 

$

2,109

 

General and administrative

 

 

11,144

 

 

 

14,832

 

Total

 

$

12,298

 

 

$

16,941

 

 

Restricted Stock Units

The following table summarizes RSU activity under the 2020 Plan for the six months ended June 30, 2021:

 

 

 

Number of
Shares

 

 

Weighted - Average
Grant Date
Fair Value

 

Outstanding at December 31, 2020

 

 

1,920,037

 

 

$

18.00

 

Vested

 

 

(138,461

)

 

$

18.00

 

Outstanding at June 30, 2021

 

 

1,781,576

 

 

$

18.00

 

 

As of June 30, 2021, total unrecognized stock-based compensation expense for RSUs was $23.0 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.7 years. During the six months ended June 30, 2021, the Company modified 138,461 RSU's under the Transition Agreement (See Note 9).

Stock Options

The following table summarizes stock option activity under the 2020 Plan for the six months ended June 30, 2021 (in thousands, except share and per share data and years):

 

 

 

Number of
Options

 

 

Weighted - Average
Exercise
Price Per
Share

 

 

Weighted -Average
Remaining
Contractual
Term
(In Years)

 

 

Aggregate
Intrinsic
Value

 

Balance at December 31, 2020

 

 

615,106

 

 

$

18.00

 

 

 

9.95

 

 

$

9,848

 

Granted

 

 

235,043

 

 

$

44.57

 

 

 

 

 

 

 

Balance at June 30, 2021

 

 

850,149

 

 

$

25.35

 

 

9.48

 

 

$

15,199

 

Vested and expected to vest at June 30, 2021

 

 

850,149

 

 

$

25.35

 

 

9.48