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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 September 30, 2023

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 November 1, 2023, the number of shares of the registrant’s common stock outstanding was 47,935,808 and the number of shares of the registrant’s Class B common stock outstanding was 0.

 

 


 

BIOATLA, INC.

Quarterly Report on Form 10-Q

 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements:

1

Condensed Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022

1

Condensed Statements of Operations and Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2023 and 2022

2

Condensed Statements of Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2023 and 2022

3

Condensed Statements of Cash Flows (unaudited) for the nine months ended September 30, 2023 and 2022

5

Notes to Condensed Financial Statements (unaudited)

6

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

21

PART II.

OTHER INFORMATION

21

Item 1.

Legal Proceedings

21

Item 1A.

Risk Factors

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

66

Item 3.

Defaults Upon Senior Securities

66

Item 4.

Mine Safety Disclosures

66

Item 5.

Other Information

66

Item 6.

Exhibits

66

SIGNATURES

68

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

BioAtla, Inc.

Condensed Balance Sheets

(in thousands, except par value and share amounts)

 

 

 

September 30,
2023

 

 

December 31,
2022

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

141,282

 

 

$

215,507

 

Prepaid expenses and other current assets

 

 

6,229

 

 

 

4,924

 

Total current assets

 

 

147,511

 

 

 

220,431

 

Property and equipment, net

 

 

1,965

 

 

 

2,728

 

Operating lease right-of-use asset, net

 

 

1,732

 

 

 

2,423

 

Other assets

 

 

154

 

 

 

154

 

Total assets

 

$

151,362

 

 

$

225,736

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

34,006

 

 

$

21,610

 

Operating lease liabilities

 

 

1,596

 

 

 

1,521

 

Total current liabilities

 

 

35,602

 

 

 

23,131

 

Operating lease liabilities, less current portion

 

 

1,251

 

 

 

2,460

 

Liability to licensor

 

 

19,806

 

 

 

19,806

 

Total liabilities

 

 

56,659

 

 

 

45,397

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 200,000,000 shares authorized at September 30, 2023
   and December 31, 2022;
0 shares issued and outstanding at September 30, 2023
   and December 31, 2022

 

 

 

 

 

 

Common stock, $0.0001 par value; 350,000,000 shares authorized at
   September 30, 2023 and December 31, 2022;
47,907,395 and 46,336,166
   shares issued and outstanding at September 30, 2023 and December 31, 2022

 

 

5

 

 

 

5

 

Class B common stock, $0.0001 par value; 15,368,569 shares authorized at
   September 30, 2023 and December 31, 2022;
0 and 1,211,959 shares issued and
   outstanding at September 30, 2023 and December 31, 2022

 

 

 

 

 

 

Additional paid-in capital

 

 

484,036

 

 

 

473,135

 

Accumulated deficit

 

 

(389,338

)

 

 

(292,801

)

Total stockholders’ equity

 

 

94,703

 

 

 

180,339

 

Total liabilities and stockholders’ equity

 

$

151,362

 

 

$

225,736

 

 

See accompanying notes.

1


 

BioAtla, Inc.

Unaudited Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2023

 

2022

 

 

2023

 

2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development expense

$

28,400

 

$

19,839

 

 

$

81,057

 

$

57,473

 

General and administrative expense

 

6,620

 

 

6,340

 

 

 

20,094

 

 

22,107

 

Total operating expenses

 

35,020

 

 

26,179

 

 

 

101,151

 

 

79,580

 

Loss from operations

 

(35,020

)

 

(26,179

)

 

 

(101,151

)

 

(79,580

)

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest income

 

1,734

 

 

370

 

 

 

4,674

 

 

601

 

Other income (expense)

 

(39

)

 

30

 

 

 

(60

)

 

40

 

Total other income

 

1,695

 

 

400

 

 

 

4,614

 

 

641

 

Net loss and comprehensive loss

$

(33,325

)

$

(25,779

)

 

$

(96,537

)

$

(78,939

)

Net loss per common share, basic and diluted

$

(0.70

)

$

(0.69

)

 

$

(2.02

)

$

(2.11

)

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

 

47,834,122

 

 

37,516,769

 

 

 

47,707,259

 

 

37,420,531

 

 

See accompanying notes.

2


 

BioAtla, Inc.

Unaudited Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

 

 

 

Three Months Ended September 30, 2023

 

 

Common Stock

 

Class B
Common Stock

 

Additional
Paid-in

 

Accumulated

 

Total
Stockholders’

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

 

Balance at June 30, 2023

 

47,803,306

 

$

5

 

 

 

$

 

$

480,524

 

$

(356,013

)

$

124,516

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

3,517

 

 

 

 

3,517

 

Issuance of common stock under equity incentive plans, net of shares withheld for taxes

 

88,428

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for Employee Stock Purchase Plan

 

 

 

 

 

 

 

 

 

14

 

 

 

 

14

 

Issuance of common stock for director compensation

 

15,661

 

 

 

 

 

 

 

 

27

 

 

 

 

27

 

Taxes related to net share settlement of equity awards

 

 

 

 

 

 

 

 

 

(46

)

 

 

 

(46

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(33,325

)

 

(33,325

)

Balance at September 30, 2023

 

47,907,395

 

$

5

 

 

 

$

 

$

484,036

 

$

(389,338

)

$

94,703

 

 

 

 

Three Months Ended September 30, 2022

 

 

Common Stock

 

Class B
Common Stock

 

Additional
Paid-in

 

Accumulated

 

Total
Stockholders’

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

 

Balance at June 30, 2022

 

35,993,458

 

$

4

 

 

1,492,059

 

$

 

$

404,427

 

$

(239,479

)

$

164,952

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

3,588

 

 

 

 

3,588

 

Issuance of common stock under equity incentive plans, net of shares withheld for taxes

 

91,759

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxes related to net share settlement of equity awards

 

 

 

 

 

 

 

 

 

(127

)

 

 

 

(127

)

Conversion of Class B Common Stock

 

280,100

 

 

 

 

(280,100

)

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(25,779

)

 

(25,779

)

Balance at September 30, 2022

 

36,365,317

 

$

4

 

 

1,211,959

 

$

 

$

407,888

 

$

(265,258

)

$

142,634

 

 

See accompanying notes.

 

3


 

BioAtla, Inc.

Unaudited Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

 

 

Nine Months Ended September 30, 2023

 

 

Common Stock

 

Class B
Common Stock

 

Additional
Paid-in

 

Accumulated

 

Total
Stockholders’

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

 

Balance at December 31, 2022

 

46,336,166

 

$

5

 

 

1,211,959

 

$

 

$

473,135

 

$

(292,801

)

$

180,339

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

10,806

 

 

 

 

10,806

 

Issuance of common stock under equity incentive plans, net of shares withheld for taxes

 

268,009

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for Employee Stock Purchase Plan

 

56,793

 

 

 

 

 

 

 

 

187

 

 

 

 

187

 

Issuance of common stock for director compensation

 

34,468

 

 

 

 

 

 

 

 

81

 

 

 

 

81

 

Taxes related to net share settlement of equity awards

 

 

 

 

 

 

 

 

 

(173

)

 

 

 

(173

)

Conversion of Class B common stock

 

1,211,959

 

 

 

 

(1,211,959

)

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(96,537

)

 

(96,537

)

Balance at September 30, 2023

 

47,907,395

 

$

5

 

 

 

$

 

$

484,036

 

$

(389,338

)

$

94,703

 

 

 

 

 

Nine Months Ended September 30, 2022

 

 

Common Stock

 

Class B
Common Stock

 

Additional
Paid-in

 

Accumulated

 

Total
Stockholders’

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

 

Balance at December 31, 2021

 

35,799,233

 

$

4

 

 

1,492,059

 

$

 

$

397,136

 

$

(186,319

)

$

210,821

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

11,062

 

 

 

 

11,062

 

Issuance of common stock under equity incentive plans, net of shares withheld for taxes

 

276,502

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for Employee Stock Purchase Plan

 

9,482

 

 

 

 

 

 

 

 

19

 

 

 

 

19

 

Taxes related to net share settlement of equity awards

 

 

 

 

 

 

 

 

 

(329

)

 

 

 

(329

)

Conversion of Class B common stock

 

280,100

 

 

 

 

(280,100

)

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(78,939

)

 

(78,939

)

Balance at September 30, 2022

 

36,365,317

 

$

4

 

 

1,211,959

 

$

 

$

407,888

 

$

(265,258

)

$

142,634

 

 

See accompanying notes.

4


 

BioAtla, Inc.

Unaudited Condensed Statements of Cash Flows

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(96,537

)

 

$

(78,939

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

853

 

 

 

901

 

Loss on disposal of property and equipment

 

 

 

 

 

6

 

Stock-based compensation

 

 

10,806

 

 

 

11,062

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(1,305

)

 

 

(2,876

)

Accounts payable and accrued expenses

 

 

12,533

 

 

 

4,146

 

Right-of-use assets and lease liabilities, net

 

 

(443

)

 

 

(373

)

Net cash used in operating activities

 

 

(74,093

)

 

 

(66,073

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(90

)

 

 

(237

)

Proceeds from sale of property and equipment

 

 

 

 

 

3

 

Net cash used in investing activities

 

 

(90

)

 

 

(234

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock under Employee Stock Purchase Plan

 

 

187

 

 

 

19

 

Payments for taxes related to net settlement of equity awards

 

 

(229

)

 

 

(571

)

Net cash used in financing activities

 

 

(42

)

 

 

(552

)

Net decrease in cash and cash equivalents

 

 

(74,225

)

 

 

(66,859

)

Cash and cash equivalents, beginning of period

 

 

215,507

 

 

 

244,979

 

Cash and cash equivalents, end of period

 

$

141,282

 

 

$

178,120

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

 

Property and equipment additions included in accounts payable and accrued expenses

 

$

 

 

$

1

 

Tax related to net settlement of equity awards included in accounts payable and
   accrued expenses

 

$

11

 

 

$

49

 

 

See accompanying notes.

5


 

BioAtla, Inc.

Notes to Unaudited Condensed Financial Statements

1. Organization and Summary of Significant Accounting Policies

Organization

BioAtla, LLC was formed in Delaware in March 2007 and was converted to a Delaware corporation in July 2020 and 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 targeting AXL and ROR2 receptors, its CAB immune-oncology antibody targeting CTLA-4 and its CAB BiSpecific targeting EpCAM.

Basis of Presentation

The unaudited condensed financial statements as of September 30, 2023, and for the three and nine months ended September 30, 2023 and 2022, 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 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 financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2022, included in its Annual Report on Form 10-K filed with the SEC on March 23, 2023.

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 development of its product candidates. As of September 30, 2023, the Company had an accumulated deficit of $389.3 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 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.

In January 2023, the Company entered into an Open Market Sale Agreement (the “Sales Agreement”) with Jefferies LLC pursuant to which the Company may, from time to time at its sole discretion, sell shares of the Company’s common stock, with aggregate gross sales proceeds of up to $100.0 million. The Company has not sold any shares of its common stock under the Sales Agreement as of September 30, 2023.

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 financial statements.

Use of Estimates

The preparation of the Company’s condensed 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 condensed financial statements and accompanying notes. The most significant estimates in the Company’s condensed financial statements relate to accruals for research and development costs, and equity-based compensation. 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.

6


 

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of 90 days or less at the date of purchase to be cash equivalents. Cash equivalents consist of highly rated securities including U.S. Government and U.S. Treasury money market funds, which are unrestricted as to withdrawal or use. The cash and cash equivalents balance as of September 30, 2023 and 2022 includes $0.1 million and $0, respectively, invested in U.S. Government and U.S. Treasury money market funds.

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 and may invest cash that is not required for immediate operating needs in highly liquid instruments that bear minimal risk. 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.

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.

Leases

The Company determines if an arrangement is a lease at inception. An arrangement is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If a lease is identified, classification is determined at lease commencement. Operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company’s leases do not provide an implicit interest rate and therefore the Company estimates its incremental borrowing rate to discount lease payments. The incremental borrowing rate reflects the interest rate that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term. Operating lease right-of-use (“ROU”) assets are based on the corresponding lease liability adjusted for any lease payments made at or before commencement, initial direct costs, and lease incentives. Renewals or early terminations are not accounted for unless the Company is reasonably certain to exercise these options. Operating lease expense is recognized and the ROU asset is amortized on a straight-line basis over the lease term. Variable lease costs are not included in the calculation of the ROU asset and the related lease liability and are recognized as incurred.

The Company has a single lease agreement with lease and non-lease components, which are accounted for as a single lease component. Payments for short-term leases, defined as leases with a term of twelve months or less, are expensed on a straight-line basis over the lease term. The Company does not currently have any short-term leases.

Operating leases are included in operating lease right-of-use assets, operating lease liabilities, and operating lease liabilities, non-current on the Company’s balance sheets. The Company does not have any finance leases.

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 RSUs, common stock options outstanding under the Company’s stock option plan, and contingently issuable shares under the BioAtla, Inc. Employee Stock Purchase Plan (the “ESPP”).

7


 

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

 

 

As of September 30,

 

 

 

2023

 

 

2022

 

Common stock options

 

 

6,362,386

 

 

 

2,718,930

 

Restricted stock units

 

 

161,219

 

 

 

629,007

 

ESPP shares

 

 

124,969

 

 

 

115,783

 

Total

 

 

6,648,574

 

 

 

3,463,720

 

 

Recent Accounting Pronouncements

There were no new accounting standards that had a material impact on the Company’s financial statements during the three or nine months ended September 30, 2023, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of September 30, 2023 that the Company expects to have a material impact on its financial statements.

2. Balance Sheet Details

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

 

 

 

September 30,
2023

 

 

December 31,
2022

 

Prepaid research and development

 

$

5,143

 

 

$

4,385

 

Prepaid insurance

 

 

532

 

 

 

 

Other prepaid expenses and current assets

 

 

554

 

 

 

539

 

Total

 

$

6,229

 

 

$

4,924

 

 

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

 

 

 

Useful life
(years)

 

September 30,
2023

 

 

December 31,
2022

 

Furniture, fixtures and office equipment

 

3 - 7

 

$

2,147

 

 

$

2,140

 

Laboratory equipment

 

5

 

 

2,349

 

 

 

2,265

 

Leasehold improvements

 

2 - 3

 

 

3,687

 

 

 

3,687

 

 

 

 

 

8,183

 

 

 

8,092

 

Less accumulated depreciation and amortization

 

 

 

 

(6,218

)

 

 

(5,364

)

Total

 

 

 

$

1,965

 

 

$

2,728

 

 

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

 

 

 

September 30,
2023

 

 

December 31,
2022

 

Accounts payable

 

$

6,293

 

 

$

4,231

 

Accrued compensation

 

 

2,967

 

 

 

3,451

 

Accrued research and development

 

 

24,204

 

 

 

12,649

 

Other accrued expenses

 

 

542

 

 

 

1,279

 

Total

 

$

34,006

 

 

$

21,610

 

 

3. Fair Value Measurements

The carrying amounts of the Company’s current financial assets and current financial liabilities, including cash and cash equivalents, are considered to be representative of their respective fair values because of the short-term nature of those instruments.

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:

8


 

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.

As of September 30, 2023 and December 31, 2022, the Company had $0.1 million and $0, respectively, invested in U.S. Government and U.S. Treasury money market funds which are recorded as cash equivalents and represent a Level 1 measurement within the fair value hierarchy.

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. Leases

The Company has a single operating lease for its corporate headquarters and laboratory space in San Diego, California. The lease expires in July 2025 and the Company has an option to extend the term of the lease for an additional five years. Additionally, the lease includes certain rent abatement, rent escalations, tenant improvement allowances and additional charges for common area maintenance and other costs.

The components of lease expense included in the Company’s statements of operations and loss include (in thousands):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating lease expense

 

$

261

 

 

$

261

 

 

$

782

 

 

$

782

 

Variable lease expense

 

 

147

 

 

 

132

 

 

 

401

 

 

 

328

 

Total lease expense, net

 

$

408

 

 

$

393

 

 

$

1,183

 

 

$

1,110

 

Variable lease costs are primarily related to payments made to lessors for common area maintenance, property taxes, insurance, and other operating expenses. The Company did not have any short-term leases or finance leases for the three and nine months ended September 30, 2023 and 2022, respectively.

The weighted average remaining lease term and weighted average discount rate for operating leases were as follows:

 

 

As of September 30,

 

 

 

2023

 

 

2022

 

Weighted average remaining lease term (in years)

 

 

1.75

 

 

 

2.75

 

Weighted average discount rate percentage

 

 

3.50

%

 

 

3.50

%

Supplemental cash flow information related to leases under which the Company is the lessee was as follows (amounts in thousands):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Cash paid for amounts included in the measurement of operating leases

 

$

411

 

 

$

401

 

 

$

1,226

 

 

$

1,155

 

As of September 30, 2023, future minimum payments under the Company’s non-cancelable operating lease under ASC 842 were as follows (in thousands):

 

 

Operating
lease

 

Three months ending December 31, 2023

 

$

411

 

2024

 

 

1,685

 

2025

 

 

845

 

Thereafter

 

 

 

Total future lease payments

 

 

2,941

 

Less: imputed interest

 

 

(94

)

Total operating lease liabilities

 

$

2,847

 

 

9


 

5. Commitments and 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’ Equity

2020 Equity Incentive Plan

The Company may grant awards of common stock under the 2020 Equity Incentive Plan (the “2020 Plan”) to the Company’s employees, consultants and non-employee directors pursuant to option awards, stock appreciation rights awards, restricted stock awards, restricted stock unit awards, performance stock awards, performance stock unit awards and other stock-based awards. As of September 30, 2023 and December 31, 2022, the total number of common shares authorized for issuance under the 2020 Plan was 9,196,970 and 7,658,509, 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.

Stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022 has been reported in the condensed statements of operations and comprehensive loss as follows (in thousands):

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Research and development

 

$

1,321

 

 

$

1,427

 

 

$

4,322

 

 

$

4,125

 

General and administrative

 

 

2,196

 

 

 

2,161

 

 

 

6,484

 

 

 

6,937

 

Total

 

$

3,517

 

 

$

3,588

 

 

$

10,806

 

 

$

11,062

 

 

Restricted Stock Units

In December 2022, the Company’s board of directors approved an amendment to the Director Compensation Policy, which allows each director to elect to receive their quarterly director fees in the form of restricted stock in lieu of cash. Two board members elected to receive shares of restricted stock in lieu of cash. For the nine months ended September 30, 2023, the Company issued 34,468 shares of fully vested restricted stock to the two board members. Compensation expense was earned and recognized for these fully vested restricted stock grants in the amount of $27,000 and $80,000 for the three and nine months ended September 30, 2023, respectively.

The following table summarizes RSU activity under the 2020 Plan for the nine months ended September 30, 2023:

 

 

 

Number of
Shares

 

 

Weighted - Average
Grant Date
Fair Value

 

Outstanding at December 31, 2022

 

 

510,039

 

 

$