BioAtla, Inc. 10-Q

Item 1 . Financial Statements. BioAtla, Inc. Condensed Consol idated 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 State ments 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 Consoli dated 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 Conso lidated 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 7 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. 8 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 $ 15,199 Exercisable at June 30, 2021 7,747 $ 18.00 0.16 $ 189 As of June 30, 2021 , total unrecognized stock-based compensation cost for unvested common stock options was $ 12.6 million, which is expected to be recognized over a remaining weighted-average period of approximately 3.4 years. The weighted- average grant date fair value of stock options granted during the six months ended June 30, 2021 was $ 28.91 per share. During the six months ended June 30, 2021, the Company modified 7,747 stock options under the Transition Agreement (See Note 9). 10 The assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option grants were as follows: Six Months Ended June 30, 2021 Expected volatility 74.76 % Risk-free interest rate 0.98 % Expected dividend yield 0.0 % Expected term 5.94 years Expected volatility. As the Company’s common stock does not have a significant trading history, the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry. Risk-free interest rate. The Company bases the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present plans to pay cash dividends. Expected term. For employees, the expected term represents the period of time that options are expected to be outstanding. Because the Company has minimal historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period. For nonemployees, the expected term is generally the contractual term of the option. Employee Stock Purchase Plan In December 2020, the Company’s board of directors and stockholders approved the BioAtla, Inc. Employee Stock Purchase Plan (the “ESPP”). The ESPP permits participants to purchase common stock through payroll deductions of up to 15 % of their eligible compensation. As of June 30, 2021 and December 31, 2020 , a total of 833,993 shares and 464,829 shares, respectively, of common stock were authorized for issuance under the ESPP. The number of shares of common stock authorized for issuance will automatically increase on January 1 of each calendar year, from January 1, 2021 through January 1, 2030 by the least of (i) 1.0 % of the total number of common shares of our common stock outstanding on December 31 of the preceding calendar year (calculated on a fully diluted basis), (ii) 929,658 common shares or (iii) a number determined by the Company’s board of directors that is less than (i) and (ii). In February 2021, employees began to enroll in the ESPP and the Company’s first offering period commenced. The Company's first ESPP purchase transaction occurred on June 30, 2021. During the six months ended June 30, 2021, the Company issued 5,280 shares of common stock under the ESPP. As of June 30, 2021, 828,713 shares of common stock remained available for issuance under the ESPP. Stock-based compensation expense related to the ESPP for the three and six months ended June 30, 2021 was immaterial. Common Stock Warrants Upon adoption of ASU No. 2018-07 on October 1, 2020, the measurement date of the warrants described below became fixed in accordance with the guidance, and such fair value was nominal since the warrants were deeply out-of-the-money. As of June 30, 2021 all the common stock warrants below are exercisable and expire as follows: Outstanding and Exercisable Exercise Price per Share Expiration Date 566,586 $ 88.25 December 17, 2021 151,088 $ 132.37 March 12, 2022 717,674 11 Common Stock Reserved for Future Issuance Common stock reserved for future issuance are as follows in common equivalent shares: June 30, 2021 December 31, 2020 Warrants for the purchase of common stock 717,674 717,674 Common stock options and restricted stock units issued and outstanding 2,631,725 2,535,143 Awards available for future issuance under the 2020 Plan 3,456,354 2,404,535 Awards available for future issuance under the ESPP 828,713 464,829 Total common stock reserved for future issuance 7,634,466 6,122,181 7. Profits Interest Incentive Plan Prior to the Corporate Reorganization in July 2020, the Company maintained a Profits Interest Incentive Plan (the “Plan”) for selected employees, consultants and other service providers. The Class B units generally vested over four years , were subject to continued service requirements, and only provide the participants with benefits (in the form of distributions) if the distributions from BioAtla exceed specified threshold values. Generally, upon termination of services, all unvested Class B units were forfeited to the Company and the Company had the right, but not the obligation, to repurchase the vested Class B units within two years at the termination date fair value. The Class B unit repurchase would be settled in cash, at all times at the option of the Company, and the holder did not have the right to put the Class B units to the Company under any condition. Vested Class B units that are neither repurchased by the Company nor forfeited remained subject to the terms of the Company’s operating agreement. The Class B units were not subject to sale, assignment, transfer, pledge, or allowed to be otherwise encumbered or disposed of without prior written consent of the Company. The Class B units were liability awards pursuant to authoritative guidance, which required the Company to record a liability based on the fair value of the Class B units as of each reporting period. Through the date of the Corporate Reorganization, the fair value of the liability awards was determined based on the Company’s estimated enterprise value, which was allocated based on a hybrid model that, in addition to the option pricing model, considering the Company’s expected IPO. Under the option pricing method, units were valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each unit class. The allocation of equity-based compensation for all Class B units is as follows (in thousands): Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 Research and development $ ( 837 ) $ ( 3,360 ) General and administrative ( 1,061 ) ( 4,241 ) Total $ ( 1,898 ) $ ( 7,601 ) 8. Collaboration, License and Option Agreements Global Co-Development and Collaboration Agreement with BeiGene In April 2019, the Company entered into a Global Co-Development and Collaboration agreement (the “BeiGene Collaboration”) with BeiGene, Ltd. and BeiGene Switzerland GmbH (collectively “BeiGene”), a commercial-stage biopharmaceutical company, for the development, manufacturing and commercialization of the Company’s investigational CAB CTLA-4 antibody (BA3071). The Company and BeiGene amended the Global Co-Development and Collaboration agreement in December 2019 and in October 2020 (the “Amended BeiGene Collaboration”). Under the BeiGene Collaboration the Company would co-develop the CAB-CTLA-4 antibody to reach defined early clinical objectives (“POC Milestone”), whereby the Company would perform the development activities (“Development Services”) and BeiGene would reimburse the Company for a portion of the costs incurred by the Company for these Development Services subsequent to the filing of an Investigational New Drug Application (“IND”). Following the POC Milestone, BeiGene would then lead the parties’ joint efforts to develop the product candidate and be responsible for global regulatory filings and commercialization. Subject to the terms of the agreement, BeiGene will hold a co-exclusive license with the Company to develop and manufacture the 12 product candidate globally and an exclusive license to commercialize the product candidate globally. BeiGene will be responsible for all costs of development, manufacturing and commercialization in China, parts of the Middle East and Asia (excluding Japan), Australia and New Zealand (the “BeiGene Territory”), and the parties would share development and manufacturing costs and commercial profits and losses upon specified terms in the rest of the world that are not part of the BeiGene Territory (the “ROW”). Subject to earlier termination, the BeiGene Collaboration shall remain in effect, on a country-by-country basis until the earlier of ten years following commercial sale or upon such time that the parties cease pursuing commercialization. Unless terminated early, at the expiration date BeiGene retains all licensing rights in the applicable territories. BeiGene may terminate the BeiGene Collaboration at any time after the one-year anniversary of the agreement subject to 90 days written notice, or any time subject to 45 days’ notice if it is determined that the proof of concept ("POC") milestone or technological or scientific feasibility will not be achieved. The BeiGene Collaboration also contains customary provisions for termination by either party, including the event of breach of the BeiGene Collaboration, subject to cure. In 2019, BeiGene paid the Company an upfront non-refundable payment of $ 20.0 million and paid the Company $ 5.0 million for the reimbursement of manufacturing costs. Under the BeiGene Collaboration, the Company was eligible to receive variable consideration for subsequent development and regulatory milestones globally and commercial milestones in the BeiGene Territory and tiered royalties ranging from the mid-single digits to the mid-double digits based on net sales in the BeiGene Territory. The Company concluded that the BeiGene Collaboration is a contract with a customer and applied relevant guidance from Topic 606 through reaching the POC milestone as the licenses to intellectual property granted to BeiGene and the obligation to perform research and development services are outputs of the Company’s ongoing activities. The Company identified material promises in the BeiGene Collaboration through POC milestone, consisting of the licenses described above and the Development Services. It was determined that the licenses are not distinct from the development services resulting in a single performance obligation. In accordance with Topic 606, the Company determined the transaction price of the agreement is limited to the $ 25.0 million received, and excluded the variable consideration of expense reimbursements, milestone payments and royalties as they are fully constrained. The expense reimbursements were included in the transaction price in the reporting period the Company concluded it was probable that inclusion of such amounts in the transaction price would not result in a significant reversal in revenue recognized. As part of the Company’s evaluation of the milestone constraints, the Company determined the achievement of such milestones are contingent upon success in future developments, regulatory approvals and commercial activities which are not within its control and are uncertain at this stage. Variable consideration related to royalties will be recognized when the related sales occur. Under the terms of the Amended BeiGene Collaboration, BeiGene is generally responsible for developing BA3071 and is responsible for global regulatory filings and commercialization. Subject to the terms of the Amended BeiGene Collaboration, BeiGene holds an exclusive license with the Company to develop and manufacture the BA3071 candidate globally, and BeiGene is responsible for all costs of development, manufacturing and commercialization globally. The Amended BeiGene Collaboration provides that the Company is eligible to receive tiered royalties, ranging from the high-single digits to the low twenties, on sales worldwide, up to $ 225.5 million in subsequent development and regulatory milestone payments globally and commercial milestones in the BeiGene territory (reduced from $ 249 million under the BeiGene Collaboration), and a $ 5.0 million milestone payment upon the completion of the Company’s amended performance obligations, including the transfer of the master cell bank for BA3071 and other know-how. Under the Amended BeiGene Collaboration, the Company’s amended performance obligation is satisfied at a point in time determined to be when BeiGene has received the know-how and master cell bank for BA3071. Until then BeiGene cannot benefit from the ability to further develop and manufacture the BA3071 candidate. Under the original collaboration agreement, the Company recognized revenue over time using an input method based on actual costs incurred compared to estimated total costs expected to be incurred to fulfill its performance obligation to perform development services. For the three and six months ended June 30, 2021 , the Company did no t recognize any revenue related to the collaboration agreement with BeiGene. As of June 30, 2021 and December 31, 2020 , the Company had $ 19.8 million of related deferred revenue which was classified as current. The deferred revenue is expected to be earned upon transfer of the know-how and master cell bank within the next twelve months. Service Contracts Prior to developing its own programs, the Company entered into various fixed price research services contracts. In connection with these service contracts, the Company may receive future milestone payments if certain clinical, regulatory and commercialization milestones are achieved. The Company is also eligible to receive royalties based on certain product sales. The Company recognized 13 revenue of $ 0.3 million, included in Collaboration and Other Revenue, for the three and six months ended June 30, 2021 related to the achievement of a clinical milestone on a fixed price service contract. 9. Related Party Transactions Biotech Investment Group, LLC Prior to the Corporate Reorganization, Biotech Investment Group, LLC (“BIG”), was a principal owner, related party of the Company and affiliated with Biotech Investment Group II LLC (“BIG II”). Subsequent to the Corporate Reorganization, BIG is no longer a principal owner and, as a result, neither BIG nor its affiliates are related parties of the Company. Biotech Investment Group II LLC For the three and six months ended June 30, 2020 , the Company recognized interest expense (including amortization of debt discounts) of $ 20,000 and $ 40,000 , respectively, related to an outstanding convertible promissory note payable to BIG II. The convertible promissory note payable to BIG II was settled in connection with the Corporate Reorganization in July 2020 . Dr. Jay Short and Carolyn Anderson Short Convertible Promissory Notes For the three and six months ended June 30, 2020, the Company recognized interest expense (including amortization of debt discounts) of $ 59,000 and $ 98,000 respectively, related to outstanding convertible promissory notes payable to Dr. Jay Short and Carolyn Anderson Short. The convertible promissory notes payable to Dr. Jay Short and Carolyn Anderson Short were settled in connection with the Corporate Reorganization in July 2020 . Transition Agreement On March 18, 2021, the Company and Carolyn Anderson Short, its co-founder and former Chief of Intellectual Property & Strategy, mutually agreed that Ms. Short would depart the Company on May 31, 2021 following an agreed upon transition period. The Transition Agreement provides for the following severance benefits in exchange for a release of claims by Ms. Short: (i) a lump sum payment equal to eighteen (18) months of Ms. Short’s current base salary, (ii) a payment at her targeted bonus rate for 2021, pro-rated to the separation date, and (iii) accelerated full vesting of her equity awards including 7,747 stock options and 138,461 restricted stock units. The modification of these equity awards resulted in an incremental fair value of $ 7.0 million which was recognized on a straight-line basis over the transition service period. For the three and six months ended June 30, 2021 , the Company recognized $ 0.8 million and $ 1.0 million, respectively, related to the lump sum salary payment and target bonus. The Company also recognized non-cash stock-based compensation charges of $ 8.4 million and $ 9.4 million related to the modified equity awards for the three and six months ended June 30, 2021, respectively. No unrecognized stock-based compensation remained as of June 30, 2021. 10. 401(k) Plan The Company maintains a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on an individual basis, limited to the maximum amount allowable under federal tax regulations. The Company, at its discretion, may make certain matching contributions to the 401(k) plan. As of June 30, 2021 and December 31, 2020 , the Company had no t made any matching contributions. 14 Item 2 . Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis together with our unaudited financial statements and notes thereto included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2020 included in the Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 24, 2021. In addition to historical information, this Quarterly Report contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under the caption “Risk Factors” in the Annual Report, and the caption “Risk Factors” in this Quarterly Report, as updated by our subsequent filings under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Furthermore, past operating results are not necessarily indicative of results that may occur in future periods. Overview We are a phase 2 clinical-stage biopharmaceutical company developing our novel class of highly specific and selective antibody-based therapeutics for the treatment of solid tumor cancer. Our CABs capitalize on our proprietary discoveries with respect to tumor biology, enabling us to target known and widely validated tumor antigens that have previously been difficult or impossible to target. Our novel CAB therapeutic candidates exploit characteristic pH differences between the tumor microenvironment and healthy tissue. Unlike healthy tissue, the tumor microenvironment is acidic, and we have designed our antibodies to selectively bind to their targets on tumor cells under acidic pH conditions but not on targets in normal tissues. Our approach is to identify the necessary targeting and potency required for cancer cell destruction, while aiming to eliminate or greatly reduce on-target, off-tumor toxicity—one of the fundamental challenges of existing cancer therapies. We are a United States-based company with research facilities in San Diego, California and, through our contractual relationship with BioDuro, a provider of preclinical development services, in Beijing, China. Since the commencement of our operations, we have focused substantially all of our resources on conducting research and development activities, including drug discovery, preclinical studies and clinical trials of our product candidates, including the ongoing Phase 2 clinical trials of BA3011 and BA3021, establishing and maintaining our intellectual property portfolio, manufacturing clinical and research material through third parties, hiring personnel, establishing product development and commercialization collaborations with third parties, raising capital and providing general and administrative support for these operations. Since 2014, such research and development activities have exclusively related to the research, development, manufacture and Phase 1 and Phase 2 clinical testing of our CAB antibody-based product candidates and the strengthening of our proprietary CAB technology platform and pipeline. We do not have any products approved for sale, and we have not generated any revenue from product sales. In July 2020, BioAtla, LLC completed a series of transactions, or the Corporate Reorganization, in connection with which it converted from a limited liability company into a Delaware corporation, spun-off Himalaya Therapeutics SEZC, and completed a Series D convertible preferred stock financing. Following the Corporate Reorganization, BioAtla, Inc. continued to hold all operations, employees, property and assets of BioAtla, LLC (excluding Himalaya Therapeutics SEZC) and assumed all of the obligations of BioAtla, LLC (exclusive of the profits interest liability related to awards granted under BioAtla, LLC’s profits interest plan). In addition, following the Corporate Reorganization, BioAtla, Inc. is a single legal entity with no consolidated variable interest entities, or VIEs, or subsidiaries. The condensed consolidated financial statements discussed in this section and included in Item 1 of this Quarterly Report on Form 10-Q are those of BioAtla, LLC and its consolidated subsidiaries prior to the Corporate Reorganization and those of BioAtla, Inc. subsequent to the Corporate Reorganization. We have incurred significant losses to date. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current and future product candidates. Our net loss was $30.4 million and $49.1 million for the three and six months ended June 30, 2021, respectively. As of June 30, 2021, we had an accumulated deficit of $140.0 million. These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. We do not expect to generate meaningful revenue from product sales for the foreseeable future, and we expect to continue to incur significant operating expenses for the foreseeable future due to the cost of research and development, including identifying and designing product candidates, conducting preclinical studies and clinical trials, and the regulatory approval process for our product candidates. We expect our expenses, and the potential for losses, to increase substantially as we conduct clinical trials of our lead product candidates and seek to expand our pipeline. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities as we:  advance the clinical development of BA3011;  advance the clinical development of BA3021;  advance the clinical development of BA3071; 15  expand our pipeline of bispecific and other CAB antibody-based product candidates;  continue to invest in our CAB technology platform;  maintain, protect and expand our intellectual property portfolio, including patents, trade secrets and know-how;  seek marketing approvals for any product candidates that successfully complete clinical trials;  establish additional product collaborations and commercial manufacturing relationships with third parties;  build sales, marketing and distribution infrastructure and relationships with third parties to commercialize product candidates for which we may obtain marketing approval;  continue to expand our operational, financial and management information systems; and  attract, hire and retain additional clinical, scientific, management, administrative and commercial personnel. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, insurance, investor relations and other administrative and professional services expenses that we did not incur as a private company. As a result, we will require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings, debt financings, collaborations and other similar arrangements. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities. Because of the numerous risks and uncertainties associated with product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to raise capital, maintain our research and development efforts, expand our business or continue our operations at planned levels, and as a result we may be forced to substantially reduce or terminate our operations. Through the date of our initial public offering, or IPO, in December 2020, we had funded our operations primarily through the receipt of $71.0 million from our collaboration agreements, $27.6 million from the issuance of convertible debt and $138.3 million from the issuance of equity securities. In December 2020, we completed our IPO in which we sold 12,075,000 shares of our common stock at the IPO price to the public of $18.00 per share, which included the exercise in full of the underwriters’ option to purchase additional shares, for aggregate cash proceeds of $217.4 million. We incurred $19.0 million of issuance costs in connection with our IPO. Upon the closing of our IPO, all outstanding shares of our convertible preferred stock converted into 13,876,510 shares of our common stock and 1,492,059 shares of our Class B common stock. As of June 30, 2021, our cash and cash equivalents totaled approximately $207.6 million. Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations at least through the end of 2022. However, we have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Impact of COVID-19 on Our Business On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 caused by a novel strain of coronavirus as a pandemic, which continues to spread throughout the United States and around the world. The worldwide COVID-19 pandemic may affect our ability to complete our current preclinical studies and clinical trials, initiate and complete our planned preclinical studies and clinical trials, disrupt regulatory activities or have other adverse effects on our business, results of operations, financial condition and prospects. In addition, the pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, both of which could adversely affect our business, operations and ability to raise funds to support our operations. To date, we have only experienced non-material business disruptions, including with respect to any of the clinical trials we are conducting, or impairments of any of our assets as a result of the pandemic. We are following, and plan to continue to follow, recommendations from federal, state and local governments regarding workplace policies, practices and procedures. In March 2020, we implemented a remote working policy for many of our employees, began restricting non-essential travel and temporarily reduced salaries of our employees from March 2020 to July 2020. We are complying with all applicable guidelines for our clinical trials, including remote clinical monitoring. In April 2020, we borrowed $0.7 million under the Paycheck Protection Program under the CARES Act and we submitted an application for loan forgiveness in June 2021. We were subsequently notified on July 2, 2021 that the U.S. Small Business Association approved our application for loan forgiveness for the full amount of the PPP Loan outstanding. The PPP loan is discussed further under “—Liquidity and capital resources.” We are 16 continuing to monitor the potential impact of the pandemic, but we cannot be certain what the overall impact will be on our business, financial condition, results of operations and prospects. Financial Operations Overview Revenue To date, we have not generated any revenue from the sale of products and do not expect to generate meaningful revenue in the near future. In April 2019, we entered into a Global Co-Development and Collaboration Agreement with BeiGene, Ltd. which, as amended in December 2019 and October 2020, provides for the development, manufacturing and commercialization of BA3071. Under the terms of our BeiGene collaboration, BeiGene is generally responsible for developing BA3071 and is responsible for global regulatory filings and commercialization. Subject to the terms of the agreement, BeiGene holds an exclusive license with us to develop and manufacture the product candidate globally. BeiGene is responsible for all costs of development, manufacturing and commercialization globally. At the time of execution of the BeiGene collaboration, we received a $20.0 million upfront payment and in December 2019, we received an additional $5.0 million for the reimbursement of manufacturing costs. We are eligible to receive up to $225.5 million in subsequent development and regulatory milestones globally and commercial milestones in the BeiGene territory, together with tiered royalties, ranging from the high-single digits to the low twenties, on sales worldwide. Pursuant to the terms of the October 2020 amendment, we agreed to transfer certain know-how and materials to BeiGene related to the manufacture of BA3071. We are currently in preliminary discussions with BeiGene regarding the allocation of roles and responsibilities under our Global Co-Development and Collaboration Agreement with BeiGene, including with respect to the initiation of the Phase I trial for BA3071. In addition, we may in the future seek third-party collaborators or joint venture partners for development and commercialization of additional CAB product candidates. Prior to developing our own programs, the Company received revenue from services performed under fixed price service contracts that, in some cases, provided for potential milestone and royalty payments to us. We recognized $0.3 million in collaboration revenues for the three and six months ended June 30, 2021 from our legacy service contracts. For the three and six months ended June 30, 2020 we recognized $0.2 million and $0.3 million of revenue from our collaboration with BeiGene, respectively. Operating Expenses Research and Development Research and development expenses consist primarily of costs incurred in the discovery and development of our product candidates.  External expenses consist of:  Fees paid to third parties such as contractors, clinical research organizations (CROs) and consultants, including through our relationship with BioDuro, and other costs related to preclinical and clinical trials;  Fees paid to third parties such as contract manufacturing organizations (CMOs) and other vendors for manufacturing research and clinical trial materials; and  Expenses related to laboratory supplies and services.  Unallocated expenses consist of:  Personnel-related expenses, including salaries, benefits and equity-based compensation expenses, for personnel in our research and development functions; and  Related equipment and facilities depreciation expenses. We expense research and development costs in the periods in which they are incurred. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and services are performed. We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities to advance our product candidates and our clinical programs and expand our product candidate pipeline. The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. Product candidates in later stages of clinical development generally have higher development costs than those in earlier 17 stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, to the extent that our product candidates continue to advance into clinical trials, including larger and later-stage clinical trials, our expenses will increase substantially and may become more variable. The actual probability of success for our product candidates may be affected by a variety of factors, including the safety and efficacy of our product candidates, the quality and consistency in their manufacture, investment in our clinical programs and competition with other products. As a result of these variables, we are unable to determine the duration and completion costs of our research and development projects and programs or when and to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in achieving regulatory approval for any of our product candidates. General and Administrative Our general and administrative expenses consist primarily of personnel-related expenses for personnel in our executive, finance, corporate and other administrative functions, intellectual property and patent costs, facilities and other allocated expenses, other expenses for outside professional services, including legal, human resources, audit and accounting services and insurance costs. Personnel-related expenses consist of salaries, benefits and equity-based compensation. We expect our general and administrative expenses to increase as a result of operating as a public company, including additional costs (i) to comply with the rules and regulations of the SEC and those of The Nasdaq Global Market, (ii) for legal and auditing services, (iii) for additional insurance, (iv) for investor relations activities and (v) for other administrative and professional services. We also expect our intellectual property expenses to increase as we expand our intellectual property portfolio. Interest Income Interest income consists primarily of interest earned on our cash and cash equivalent balances. Our interest income has not been significant to date and we do not expect any material changes. Interest Expense Interest expense consists primarily of interest incurred on our outstanding convertible debt, including coupon interest and the amortization of debt discounts, including those related to beneficial conversion features and embedded derivatives. Our interest expense declined subsequent to the settlement of our outstanding convertible debt in July 2020 and the forgiveness of our PPP loan in July 2021. Change in Fair Value of Derivative Liability The convertible promissory notes we issued during 2019 and 2020 contained redemption features which we determined were embedded derivatives to be recognized as liabilities and measured at fair value. At the end of each reporting period, changes in the estimated fair value during the period were recorded as a change in the fair value of derivative liability. The embedded derivative liability was recorded at fair value utilizing an income approach that identified the cash flows using a “with-and without” valuation methodology. The inputs used to determine the estimated fair value of the derivative instrument were based primarily on the probability of an underlying event triggering the embedded derivative occurring and the timing of such event. We will no longer record changes in the fair value of the derivative liability subsequent to the settlement of the derivative liability in connection with the conversion of our outstanding convertible debt in July 2020. 18 Results of Operations Comparison of the Three Months Ended June 30, 2021 and 2020 Three Months Ended June 30, 2021 2020 Change (in thousands) Collaboration revenue $ 250 $ 190 $ 60 Operating expenses: Research and development 14,850 2,923 11,927 General and administrative 15,860 1,787 14,073 Total operating expenses 30,710 4,710 26,000 Loss from operations (30,460 ) (4,520 ) (25,940 ) Other income (expense): Interest income 80 1 79 Interest expense (1 ) (754 ) 753 Change in fair value of derivative liability — (775 ) 775 Extinguishment of convertible debt — (174 ) 174 Total other income (expense) 79 (1,702 ) 1,781 Consolidated net loss and comprehensive loss $ (30,381 ) (6,222 ) (24,159 ) Collaboration Revenue Collaboration revenue for the three months ended June 30, 2021 was $0.3 million and consisted of revenue recognized under our legacy service contracts. There was no revenue recognized under our collaboration with BeiGene during the three months ended June 30, 2021. Collaboration revenue for the three months ended June 30, 2020 was $0.2 million and consisted of revenue recognized under our collaboration agreement with BeiGene. Under the collaboration agreement with BeiGene, the remaining $19.8 million of deferred revenue is expected to be earned upon transfer of the know-how and materials to BeiGene related to the manufacture of BA3071. Research and Development Expense The following table summarizes our research and development expenses allocated by CAB program for the periods indicated: Three Months Ended June 30, 2021 2020 Change (in thousands) External expenses: BA3011 (AXL-ADC) $ 5,231 $ 679 $ 4,552 BA3021 (ROR2-ADC) 4,077 546 3,531 Other CAB Programs 2,046 581 1,465 Total external expenses 11,354 1,806 9,548 Personnel and related 1,659 1,366 293 Equity-based compensation 1,154 (837 ) 1,991 Facilities and other 683 588 95 Total research and development expenses $ 14,850 $ 2,923 $ 11,927 Research and development expenses were $14.9 million and $2.9 million for the three months ended June 30, 2021 and 2020, respectively. The increase of $12.0 million was primarily driven by a $8.1 million increase in external costs due to manufacturing for our clinical candidates and ongoing clinical development for BA3011 and BA3021, a $1.5 million increase in pre-clinical development for other CAB programs, a $1.1 million increase in stock-based compensation under our post-IPO equity incentive plans, a $0.9 million increase in equity-based compensation related to a decrease in the fair value of awards under our profits interest plan during the three months ended June 30, 2020, a $0.3 million increase in personnel related costs, and a $0.1 million increase and facility and other related expense. General and Administrative Expense General and administrative expenses were $15.9 million and $1.8 million for the three months ended June 30, 2021 and 2020, respectively. The increase of $14.1 million was primarily driven by a $11.1 million increase in stock-based compensation under our 19 post-IPO equity incentive plans, a $1.1 million increase in equity-based compensation related to a decrease in the fair value of awards under our profits interest plan during the three months ended June 30, 2020, a $0.9 million increase in personnel related expenses as we expanded our administrative functions in support of our development activities and incurred severance benefits related to the departure of one of our co-founders, a $0.8 million increase in insurance expense, a $0.1 million increase in professional fees related to accounting, audit and legal services, and a $0.1 million increase in depreciation expense. Interest Income Interest income was $0.1 million and $1,000 for the three months ended June 30, 2021 and 2020, respectively. The increase of $0.1 million was due to higher average cash and cash equivalent balances after our December 2020 IPO. Interest Expense Interest expense was $1,000 and $0.8 million for the three months ended June 30, 2021 and 2020, respectively. The decrease of $0.8 million was due to reduced interest expense as a result of the settlement of all of our convertible debt in July 2020. Change in Fair Value of Derivative Liability Change in fair value of derivative liability was $0 and $0.8 million for the three months ended June 30, 2021 and 2020, respectively. The decrease of $0.8 million was primarily due to changes in the fair value of embedded derivatives issued in connection with our outstanding convertible promissory notes which all settled in July 2020. Extinguishment of Convertible Debt Extinguishment of convertible debt was $0 and $0.2 million for the three months ended June 30, 2021 and 2020, respectively. The $0.2 million in recognized losses on extinguishment during the three months ended June 30, 2020 were related to the amendment of the terms of certain outstanding convertible promissory notes that we concluded were extinguishments. Comparison of the Six Months Ended June 30, 2021 and 2020 Six Months Ended June 30, 2021 2020 Change (in thousands) Collaboration revenue $ 250 $ 279 $ (29 ) Operating expenses: Research and development 25,273 4,584 20,689 General and administrative 24,234 1,324 22,910 Total operating expenses 49,507 5,908 43,599 Loss from operations (49,257 ) (5,629 ) (43,628 ) Other income (expense): Interest income 178 6 172 Interest expense (3 ) (1,301 ) 1,298 Change in fair value of derivative liability — (728 ) 728 Extinguishment of convertible debt — (174 ) 174 Total other income (expense) 175 (2,197 ) 2,372 Consolidated net loss and comprehensive loss $ (49,082 ) (7,826 ) (41,256 ) Collaboration Revenue Collaboration revenue for the six months ended June 30, 2021 was $0.3 million, which consisted solely of revenue recognized under our legacy service contracts. There was no revenue recognized under our collaboration with BeiGene during the six months ended June 30, 2021. Collaboration revenue for six months ended June 30, 2020 was $0.3 million, which consisted of revenue recognized under our collaboration agreement with BeiGene. Under the collaboration agreement with BeiGene, the remaining $19.8 million of deferred revenue is expected to be earned upon transfer of the know-how and materials to BeiGene related to the manufacture of BA3071. 20 Research and Development Expense The following table summarizes our research and development expenses allocated by CAB program for the periods indicated: Six Months Ended June 30, 2021 2020 Change (in thousands) External expenses: BA3011 (AXL-ADC) $ 9,777 $ 1,558 $ 8,219 BA3021 (ROR2-ADC) 5,378 1,471 3,907 Other CAB Programs 3,820 1,213 2,607 Total external expenses 18,975 4,242 14,733 Personnel and related 2,893 2,515 378 Equity-based compensation 2,109 (3,360 ) 5,469 Facilities and other 1,296 1,187 109 Total research and development expenses $ 25,273 $ 4,584 $ 20,689 Research and development expenses were $25.3 million and $4.6 million for the six months ended June 30, 2021 and 2020, respectively. The increase of $20.7 million was primarily driven by a $12.1 million increase in external costs due to manufacturing and ongoing clinical development for our clinical programs BA3011 and BA3021, a $3.4 million increase in equity-based compensation related to a decrease in the fair value of awards under our profits interest plan during the six months ended June 30, 2020, a $2.6 million increase in pre-clinical development for our other CAB programs, a $2.1 million increase in stock-based compensation under our post-IPO equity incentive plans, a $0.4 million increase in personnel related costs, and $0.1 million increase in facility related costs. General and Administrative Expense General and administrative expenses were $24.2 million and $1.3 million for the six months ended June 30, 2021 and 2020, respectively. The increase of $22.9 million was primarily driven by a $14.8 million increase in stock-based compensation under our post-IPO equity incentive plans and the modification of awards issued to one of our co-founders, a $4.2 million increase in equity-based compensation related to a decrease in the fair value of awards under our profits interest plan during the six months ended June 30, 2020, a $1.5 million increase in insurance expense, a $1.3 million increase in personnel related expenses as we expanded our administrative functions in support of our development activities and incurred severance benefits related to the departure of one of our co-founders, a $0.8 million increase in professional fees related to accounting, audit and legal services, a $0.3 million increase in other expenses including corporate franchise taxes and a $0.2 million increase in depreciation expense. Interest Income Interest income was $0.2 million and $6,000 for the six months ended June 30, 2021 and 2020, respectively. The increase of $0.2 million was due to higher average cash and cash equivalent balances after our December 2020 IPO. Interest Expense Interest expense was $3,000 and $1.3 million for the six months ended June 30, 2021 and 2020, respectively. The decrease of $1.3 million was due to reduced interest expense as a result of the settlement of all of our convertible debt in July 2020. 21 Change in Fair Value of Derivative Liability Change in fair value of derivative liability was $0 and $0.7 million for the six months ended June 30, 2021 and 2020, respectively. The decrease of $0.7 million was primarily due to changes in the fair value during 2020 of embedded derivatives issued in connection with our outstanding convertible promissory notes which all settled in July 2020. Extinguishment of Convertible Debt Extinguishment of convertible debt was $0 and $0.2 million for the six months ended June 30, 2021 and 2020, respectively. The $0.2 million in recognized losses on extinguishment during the six months ended June 30, 2020 were related to the amendment of the terms of certain outstanding convertible promissory notes that we concluded were extinguishments. Liquidity and Capital Resources We have incurred aggregate net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. As of June 30, 2021, we had cash and cash equivalents of $207.6 million. Convertible and Promissory Notes As of December 31, 2019, we had outstanding convertible notes with an aggregate principal balance of $19.0 million and issued an additional $2.8 million of convertible notes between March and April of 2020. All principal and accrued interest under the convertible notes was converted into our Series D convertible preferred stock in July 2020. On April 22, 2020, we received proceeds from a loan, or PPP Loan, in the amount of $0.7 million from City National Bank, as lender, pursuant to the Paycheck Protection Program, or PPP, of the CARES Act. The PPP Loan was evidenced by a promissory note, or Note, which contains customary events of default relating to, among other things, payment defaults and breaches of representations, warranties or terms of the PPP Loan documents. The PPP Loan was scheduled to mature on April 22, 2022 with monthly payments of principal and interest scheduled to begin in August 2021. Prepayment of the PPP Loan was permitted at any time prior to maturity with no prepayment penalties. We applied for debt forgiveness on our PPP loan in June 2021. On July 2, 2021, we were notified by our lender, City National Bank, that our PPP Loan had been fully forgiven by the SBA and that there was no remaining balance on the PPP Loan. We expect to record the forgiveness as other income in July 2021. Future Funding Requirements Our primary uses of cash are to fund operating expenses, which consist primarily of research and development expenses related to our programs and related personnel costs. The timing and amount of future funding requirements depends on many factors, including the following:  the initiation, scope, rate of progress, results and costs of our preclinical studies, clinical trials and other related activities for our product candidates;  the costs associated with manufacturing our product candidates and establishing commercial supplies and sales, marketing and distribution capabilities;  the timing and costs of capital expenditures to support our research and development efforts;  the number and characteristics of other product candidates that we pursue;  our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make in connection with the licensing, filing, defense and enforcement of any patents or other intellectual property rights;  the timing, receipt and amount of sales from our potential products;  our need and ability to hire additional management, scientific and medical personnel;  the effect of competing products that may limit market penetration of our product candidates;  our need to implement additional internal systems and infrastructure, including financial and reporting systems;  the economic and other terms, timing and success of any collaboration, licensing, or other arrangements into which we may enter in the future, including the timing of receipt of any milestone or royalty payments under these agreements; 22  the compliance and administrative costs associated with being a public company; and  the extent to which we acquire or invest in businesses, products or technologies, although we have no commitments or agreements relating to any of these types of transactions. Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations at least through the end of 2022. However, we have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In addition, we will require additional funding in order to complete development of our product candidates and commercialize our products, if approved. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. We cannot assure you that, in the event we require additional financing, such financing will be available at acceptable terms to us, if at all. Failure to generate sufficient cash flows from operations, raise additional capital, and reduce discretionary spending should additional capital not become available could have a material adverse effect on our ability to achieve our intended business objectives. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated preclinical studies and clinical trials. To the extent that we raise additional capital through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates. We may also have to forego future revenue streams of research programs at an earlier stage of development or on less favorable terms than we would otherwise choose, or have to grant licenses on terms that may not be favorable to us. Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. For example, market volatility resulting from the COVID-19 pandemic could adversely impact our ability to access capital as and when needed. We may choose to raise additional capital through the issuance of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to our investors and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, acquiring other businesses, products or technology, or declaring dividends. If we are unable to obtain additional funding from these or other sources, it may be necessary to significantly reduce our rate of spending through reductions in staff and delay, scale back or stop certain research and development programs. Cash flows The following summarizes our cash flows for the periods indicated: Six Months Ended June 30, 2021 2020 (in thousands) Net cash provided by (used in): Operating activities $ (28,539 ) $ (6,866 ) Investing activities (736 ) (86 ) Financing activities (1,721 ) 3,432 Net decrease in cash and cash equivalents $ (30,996 ) $ (3,520 ) Cash Used in Operating Activities Net cash used in operating activities totaled $28.5 million for the six months ended June 30, 2021, which consisted of a consolidated net loss of $49.1 million, a net change of $3.1 million in our operating assets and liabilities and $17.5 million of non-cash transactions. The net change in our operating assets and liabilities was primarily due to an increase in accounts payable and accrued expenses of $5.7 million, offset by an increase in prepaid expenses and other assets of $2.6 million. The non-cash transactions primarily consisted of $16.9 million of stock-based compensation and non-cash charges of $0.6 million related to depreciation and amortization, offset by $0.1 million of deferred rent. Net cash used in operating activities for the six months ended June 30, 2020 was $6.9 million, which consisted of a consolidated net loss of $7.8 million and a net change of $6.0 million in our net operating assets and liabilities, partially offset by a decrease of $5.0 million in non-cash transactions. The net change in our operating assets and liabilities was primarily due to a decrease in prepaid expenses and other assets of $0.4 million, and an increase in accounts payable and accrued expenses of $5.9 million. The $5.0 million change in non-cash transactions primarily consisted of a decrease in the profits interest liability of $7.6 million primarily due to a decrease in the fair value of the underlying awards, partially offset by accrued interest of $0.8 million on our outstanding convertible 23 debt, $0.7 million related to the change in fair value of our derivative liability, $0.5 million of non-cash interest, $0.4 million related to depreciation and amortization and $0.2 million related to the loss on the extinguishment of our convertible debt. Cash Used in Investing Activities Cash used in investing activities was $0.7 million and $0.1 million for the six months ended June 30, 2021 and 2020, respectively, related to the purchase of property and equipment. Cash Provided by (Used In) Financing Activities Net cash used in financing activities was $1.7 million for the six months ended June 30, 2021, which consisted primarily of our payment of initial public offering costs of $1.9 million, partially offset by the proceeds from the issuance of common stock under our Employee Stock Purchase Plan of $0.2 million. Net cash provided by financing activities was $3.4 million for the six months ended June 30, 2020, which consisted primarily of proceeds from the issuance of $2.8 million of convertible notes and a $0.7 million PPP loan. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated, and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Our critical accounting policies are those accounting principles generally accepted in the United States that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. For a description of our critical accounting policies, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” contained in our Annual Report on Form 10-K for the year ended December 31, 2020. There have not been any material changes to the critical accounting policies discussed therein during the six months ended June 30, 2021. Off-Balance Sheet Arrangements We have not entered into any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Item 3 . Quantitative and Qualitative Disclosures About Market Risk. Not applicable to a smaller reporting company.