What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-15 · 213 added, 464 removed, 344 unchanged (66% of the section changed)

3 unchanged sentences

(in thousands, except par value and share amounts)

September 30,

Current assets:

3 unchanged sentences

Property and equipment, net

Operating lease right-of-use asset, net

Liabilities and Stockholders’

1 unchanged sentence

Accounts payable and accrued expenses

Current portion of deferred rent

Current portion of deferred revenue

Operating lease liabilities

Total current liabilities

Long-term accrued interest

Deferred rent, less current portion

Operating lease liabilities, less current portion

Liability to licensor

Total liabilities

3 unchanged sentences

200,000,000 shares authorized at

September 30, 2021 and December 31, 2020;

March 31, 2022 and December 31, 2021;

0 shares issued and outstanding at

September 30, 2021 and December 31, 2020

March 31, 2022 and December 31, 2021

Common stock, $ 0.0001 par value;

350,000,000 shares authorized at September

30, 2021 and December 31, 2020;

35,190,428 and 32,171,560 shares issued and

outstanding at September 30, 2021 and December 31, 2020, respectively

350,000,000 shares authorized at

March 31, 2022 and December 31, 2021;

35,891,284 shares and 35,799,233

shares issued and outstanding at March 31, 2022 and December 31, 2021

Class B common stock, $ 0.0001 par value;

15,368,569 shares authorized at

September 30, 2021 and December 31, 2020;

1,492,059 shares issued and

outstanding at September 30, 2021 and December 31, 2020

March 31, 2022 and December 31, 2021;

1,492,059 shares issued and outstanding

at March 31, 2022 and December 31, 2021

Additional paid-in capital

Accumulated deficit

Total stockholders’

Total stockholders' equity

Total liabilities and stockholders’

3 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Collaboration and other revenue

Three Months Ended March 31,

Operating expenses:

5 unchanged sentences

Interest income

Interest expense (includes related party amounts of $ 0 for the three and nine months ended September 30, 2021 and $ 9 and $ 147 for the three and nine months ended September 30, 2020, respectively)

Change in fair value of derivative liability

Gain (loss) on extinguishment of long-term debt

Other income (expense)

Interest expense

Total other income (expense)

2 unchanged sentences

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

(1) The net loss attributable to common stockholders and related per share amounts for the three and nine months ended September 30, 2020 are based on the period from July 10, 2020 to September 30, 2020, the period where the Company had outstanding common stock (see Note 1).

See accompanying notes.

2 unchanged sentences

(in thousands, except share amounts)

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

Stockholders’

Balance at June 30, 2021

Balance at December 31, 2021

Stock-based compensation expense

Issuance of common stock, net of issuance costs

Issuance of common stock under equity incentive plans

Issuance of common stock upon exercise of options, net

Balance at September 30, 2021

Nine Months Ended September 30, 2021

Taxes related to net share settlement of equity awards

Balance at March 31, 2022

Three Months Ended March 31, 2021

Stockholders’

1 unchanged sentence

Stock-based compensation expense

Issuance of common stock, net of issuance costs

Issuance of common stock under equity incentive plans

Issuance of common stock upon exercise of options, net

Issuance of common stock for Employee Stock Purchase Plan

Balance at September 30, 2021

Balance at March 31, 2021

See accompanying notes.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

1 unchanged sentence

Depreciation and amortization

Loss on disposal of property and equipment

Change in fair value of derivative liability

Change in fair value of profits interest liability

Loss/(gain) on extinguishment of debt

Stock-based compensation

Non-cash interest

Accrued interest

Deferred rent

Changes in operating assets and liabilities:

1 unchanged sentence

Accounts payable and accrued expenses

Deferred revenue

Right-of-use assets and lease liabilities, net

Net cash used in operating activities

3 unchanged sentences

Cash flows from financing activities

Noncontrolling interest

Proceeds from issuance of convertible debt

Proceeds from issuance of convertible preferred stock, net of issuance costs

Proceeds from issuance of PPP loan

Proceeds from initial public offering, net of issuance costs

Payment of initial public offering costs

Proceeds from issuance of common stock

Proceeds from exercise of stock options

Proceeds from issuance of common stock under Employee Stock Purchase Plan

Net cash provided by financing activities

Net increase in cash and cash equivalents

Payments for taxes related to net settlement of equity awards

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

2 unchanged sentences

Property and equipment additions included in accounts payable and accrued expenses

Assumption of profits interest liability by affiliates

Equity issuance costs included in accounts payable and accrued expenses

Carrying value of convertible promissory notes settled in connection with Corporate Reorganization

Fair value of consideration issued in connection with settlement of convertible promissory notes

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

accrued expenses

See accompanying notes.

2 unchanged sentences

Organization and Summary of Significant Accounting Policies

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.

BioAtla, LLC was formed in Delaware in March 2007 and, after undergoing two separate reorganizations in 2019 and in 2020, was converted to a Delaware corporation in July 2020 and was renamed BioAtla, Inc.

(the “Company”).

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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.

(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”

All pre-Corporate Reorganization operations, employees, property, assets and obligations of BioAtla, LLC (exclusive of the profits interest liability and equity interests in 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.

The Company is currently in clinical development of its two lead CAB antibody drug conjugates (“CAB ADC”) targeting AXL and ROR2 receptors, and its CAB immune-oncology antibody targeting CTLA-4.

Basis of Presentation and Principles of Consolidation

Prior to the reorganization in July 2020 (or "Corporate Reorganization"), 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.

1 unchanged sentence

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.

Subsequent to the Corporate Reorganization, BioAtla, Inc.

became a single legal entity with no consolidated variable interest entities ("VIEs") or subsidiaries.

The unaudited condensed consolidated financial statements as of March 31, 2022, and for the three months ended March 31, 2022 and 2021, 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, 2021 , included in its Annual Report on Form 10-K filed with the SEC on February 28, 2022.

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 September 30, 2021 , the Company had an accumulated deficit of $ 162.9 million.

As of March 31, 2022, the Company had an accumulated deficit of $ 210.6 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.

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.

3 unchanged sentences

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 September 30, 2021, and for the three and nine months ended September 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.

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.

The preparation of the Company’s condensed 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 condensed consolidated financial statements and accompanying notes.

The most significant estimates in the Company’s condensed consolidated financial statements relate to revenue recognition, 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.

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.

3 unchanged sentences

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.

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

3 unchanged sentences

Equity award forfeitures are recognized as they occur.

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 consolidated balance sheets.

The Company does not have any finance leases.

Comprehensive Loss

4 unchanged sentences

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 nine months ended September 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.

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 Company's ESPP plan.

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):

September 30,

Common stock warrants

2 unchanged sentences

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.

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.

The Company expects to lose its EGC status as of December 31, 2021, therefore the new standard will be effective for the Company for its fiscal year beginning January 1, 2021 and will be presented in the 2021 annual financial statements.

While management is currently assessing the impact this new standard will have, the expected primary impact to the Company's 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 intends to adopt the standard using the modified retrospective transition method and will not restate comparative periods.

The Company’s current minimum commitments under its noncancelable operating leases are disclosed in Note 5.

In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740) –

Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years.

The Company expects to lose its EGC status as of December 31, 2021, therefore the new standard will be effective for the Company for its fiscal year beginning January 1, 2021.

Adoption of the new standard is not expected to have a material impact on the Company's consolidated financial statements and related disclosures.

There were no new accounting standards that had a material impact on the Company’s consolidated financial statements during the three months ended March 31, 2022, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of March 31, 2022 that the Company expects to have a material impact on its consolidated financial statements.

Balance Sheet Details

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

September 30,

Prepaid research and development

2 unchanged sentences

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

September 30,

Furniture, fixtures and office equipment

3 unchanged sentences

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

September 30,

Accounts payable

1 unchanged sentence

Accrued research and development

Accrued equity issuance costs

Other accrued expenses

1 unchanged sentence

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 September 30, 2021 and December 31, 2020 , the Company had no financial assets or liabilities measured at fair value on a recurring basis.

As of March 31, 2022 and December 31, 2021 , 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 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:

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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.

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.

In April 2020, the Company borrowed $ 0.7 million under the Paycheck Protection Program (“PPP”) under the CARES Act.

was subsequently forgiven in July 2021.

The $ 0.7 million balance of the forgiven loan was recognized as other income on the Company's Statement of Operations for the three and nine months ended September 30, 2021.

For the three and nine months ended September 30, 2021 , the Company recognized interest expense related to its outstanding debt of $ 0 and $ 3,000 , respectively.

For the three and nine months ended September 30, 2020 , the Company recognized interest expense related to its outstanding debt of $ 0.1 million and $ 1.4 million, respectively.

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 Company did no t have any outstanding debt as of March 31, 2022 or December 31, 2021.

As of March 31, 2021, the Company had $ 0.7 million outstanding under a promissory note issued pursuant to the Paycheck Protection Program (“PPP”) of the CARES Act.

The loan was subsequently forgiven in July 2021 and recognized as other income on the Company's Statement of Operations.

For the three months ended March 31, 2022 and 2021, the Company recognized interest expense related to its outstanding debt of $ 0 and $ 2,000 , respectively.

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 .

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 nine months ended September 30, 2021 was $ 0.4 million and $ 1.2 million, respectively.

Rent expense for the three and nine months ended September 30, 2020 was $ 0.4 million and $ 1.3 million, respectively.

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

Years ending December 31:

2021 (3 months)

Contingencies

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 condensed consolidated statements of operations include (in thousands):

Three Months Ended March 31,

Operating lease expense

Variable lease expense

Total lease expense, net

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 months ended March 31, 2022 or 2021, respectively.

The weighted average remaining lease term and weighted average discount rate for operating leases as of March 31, 2022 and 2021 were as follows:

Three Months Ended March 31,

Weighted average remaining lease term (in years)

Weighted average discount rate percentage

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

Three Months Ended March 31,

Cash paid for amounts included in the measurement of operating leases

As of March 31, 2022, future minimum payments under the Company's non-cancelable operating lease under ASC 842 were as follows (in thousands):

Nine months ending December 31, 2022

Total future lease payments

imputed interest

Total operating lease liabilities

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.

Stockholders’/Members' Equity (Deficit)

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

Series D Convertible

Preferred Stock

Class C Preferred Units

Class A Units

Noncontrolling

Members’

Balance at June 30, 2020

Issuance of Series D convertible preferred stock for cash, net of $ 4,317 of issuance costs

Issuance of Series D convertible preferred stock in connection with settlement of convertible promissory notes

LLC Conversion

Assumption of profits interest liability by affiliate

Change in profits interest liability pushed down from affiliate

Noncontrolling interest—distribution of net assets to affiliate and related deconsolidation

Balance at September 30, 2020

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

Series D Convertible

Preferred Stock

Class C Preferred Units

Class A Units

Noncontrolling

Members’

Balance at December 31, 2019

Issuance of Series D convertible preferred stock for cash, net of $ 4,317 of issuance costs

Issuance of Series D convertible preferred stock in connection with settlement of convertible promissory notes

LLC Conversion

Assumption of profits interest liability by affiliate

Change in profits interest liability pushed down from affiliate

Noncontrolling interest—distribution of net assets to affiliate and related deconsolidation

Balance at September 30, 2020

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.

Private Placement of Common Stock

In September 2021, the Company entered into agreements to sell 2,678,600 shares of its common stock at a price of $ 28.00 per share through a private investment in public equity financing (or "Private Placement").

Proceeds from the Private Placement, net of underwriting discounts and commissions and other offering costs, were $ 71.0 million.

In connection with the Private Placement, the Company also issued registration rights to the investors.

The stock purchase agreements provide that the Company shall file a registration statement on Form S-1, or other appropriate form available to the Company, registering the resale of the shares as promptly as practicable and in any event within 30 days following the Closing Date (the “Filing Deadline”).

In connection with the Private Placement, the Company filed a registration statement on Form S-1 (File No.

333-260440) with the SEC registering for resale the shares of common stock issued in the Private Placement.

Stockholders’

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 awards, restricted stock unit awards, performance stock awards, performance stock unit awards and other stock-based awards.

As of September 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.

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 March 31, 2022 and December 31, 2021 , the total number of common shares authorized for issuance under the 2020 Plan was 7,658,509 and 6,226,540 , respective ly.

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.

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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 nine months ended September 30, 2020 as the 2020 Plan was not yet adopted.

Stock-based compensation expense for the three and nine months ended September 30, 2021 has been reported in the consolidated statements of operations and comprehensive loss as follows (in thousands):

September 30,

Stock-based compensation expense for the three months ended March 31, 2022 and 2021 has been reported in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

Three Months Ended

Research and development

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Restricted Stock Units

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

The following table summarizes RSU activity under the 2020 Plan for the three months ended March 31, 2022:

Weighted - Average

Outstanding at December 31, 2021

Outstanding at September 30, 2021

As of September 30, 2021, total unrecognized stock-based compensation expense for RSUs was $ 19.9 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.4 years.

During the nine months ended September 30, 2021 , the Company modified 138,461 RSU's under the Transition Agreement (See Note 9).

Outstanding at March 31, 2022

As of March 31, 2022, total unrecognized stock-based compensation expense for RSUs was $ 15.5 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.0 years .

During the three months ended March 31, 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 nine months ended September 30, 2021 (in thousands, except share and per share data and years):

The following table summarizes stock option activity under the 2020 Plan for the three months ended March 31, 2022:

Weighted - Average

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Balance at December 31, 2021

Balance at September 30, 2021

Vested and expected to vest at September 30, 2021

Exercisable at September 30, 2021

As of September 30, 2021 , total unrecognized stock-based compensation cost for unvested common stock options was $ 14.3 million, which is expected to be recognized over a remaining weighted-average period of approximately 3.2 years.

The weighted- average grant date fair value of stock options granted during the nine months ended September 30, 2021 was $ 27.42 per share.

During the nine months ended September 30, 2021 , the Company modified 7,747 stock options under the Transition Agreement (See Note 9).

Balance at March 31, 2022

Vested and expected to vest at March 31, 2022

Exercisable at March 31, 2022

As of March 31, 2022 , total unrecognized stock-based compensation cost for unvested common stock options was $ 19.6 million, which is expected to be recognized over a remaining weighted-average period of approximately 3.5 years.

The weighted- average grant date fair value of stock options granted during the three months ended March 31, 2022 was $ 4.42 per share .

The total fair value of options vested during the three months ended March 31, 2022 was $ 0.9 million.

During the three months ended March 31, 2021 the Company modified 7,747 stock options under the Transition Agreement (See Note 9).

The assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option grants were as follows:

September 30,

Three Months Ended

Expected volatility

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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 September 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).

The BioAtla, Inc.

Employee Stock Purchase Plan (the “ESPP”) permits participants to purchase common stock through payroll deductions of up to 15 % of their eligible compensation.

As of March 31, 2022 and December 31, 2021, a total of 1,229,148 shares and 833,993 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.

The Company's second offering period commenced in July 2021.

During the nine months ended September 30, 2021 , the Company issued 5,280 shares of common stock under the ESPP.

As of September 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 nine months ended September 30, 2021 was immaterial.

The Company did not issue any shares under the ESPP during the three months ended March 31, 2022 or March 31, 2021.

As of March 31, 2022 , 1,217,966 shares of common stock remained available for issuance under the ESPP.

Stock-based compensation expense related to the ESPP for the three months ended March 31, 2022 and 2021 was immaterial.

Common Stock Warrants

The Company issued warrants in 2016 in connection with certain advisory services.

The warrants became exercisable upon our IPO for a period of 365 and 450 days.

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 September 30, 2021 all the common stock warrants below are exercisable and expire as follows:

and Exercisable

Exercise Price

Expiration Date

December 17, 2021

March 12, 2022

2018-07 on October 1, 2020, the measurement date of the warrants became fixed in accordance with the guidance, and such fair value was nominal since the warrants were deeply out-of-the-money.

In December 2021, a total of 566,586 warrants with an exercise period of 365 days after our IPO expired unexercised.

The remaining 151,088 warrants with an exercise period of 450 days after the Company's IPO expired unexercised in March 2022.

Accordingly, there were no remaining common stock warrants outstanding and exercisable as of March 31, 2022.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance are as follows in common equivalent shares:

September 30,

Warrants for the purchase of common stock

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Total common stock reserved for future issuance

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):

September 30,

Research and development

General and administrative

Collaboration, License and Option Agreements

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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 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 will retain 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 POC Milestone of 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 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 on sales worldwide, ranging from the high-single digits to the low twenties, of 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 nine months ended September 30, 2021 , the Company did no t recognize any revenue related to the collaboration agreement with BeiGene.

Collaboration revenue recognized for the three and nine months ended September 30, 2020 was $ 0.2 million and $ 0.4 million, respectively.

As of September 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 revenue of $ 0 and $ 0.3 million, included in Collaboration and Other Revenue, for the three and nine months ended September 30, 2021 , respectively, related to the achievement of a clinical milestone on a fixed price service contract.

In 2019, BeiGene paid the Company an upfront non-refundable payment of $ 20.0 million and $ 5.0 million for reimbursement of manufacturing costs.

Under the terms of the Amended BeiGene Collaboration, BeiGene was generally responsible for developing BA3071 and for global regulatory filings and commercialization.

Subject to the terms of the Amended BeiGene Collaboration, BeiGene held an exclusive license with the Company to develop and manufacture the BA3071 candidate globally, and BeiGene was responsible for all costs of development, manufacturing and commercialization globally.

The Amended BeiGene Collaboration provided that the Company was eligible to receive tiered royalties on sales worldwide, subsequent development and regulatory milestone payments globally and commercial milestones in the BeiGene territory.

On November 18, 2021, the Company entered into Amendment No.

3 to the Amended BeiGene Collaboration (“Amendment No.3”).

Under Amendment No.

3, the Amended BeiGene Collaboration was terminated, subject to survival of certain provisions, and BeiGene handed back rights to know-how and materials received under the Amended BeiGene Collaboration.

As a result, the Company assumed responsibility for the global development and commercialization of BA3071.

As consideration for Amendment No.3, the Company agreed to pay BeiGene mid-single digit royalties on sales worldwide and on a limited basis will share in any upfront and milestone payments received through a sublicense of BA3071.

As part of Amendment No.3, the Company reclassified its remaining $ 19.8 million of deferred revenue as a long-term liability which is expected to settle as licensing payments are made to BeiGene in accordance with the resulting amendment.

In the event the license is terminated, the liability will be extinguished with no further payment to BeiGene.

For the three months ended March 31, 2022 and 2021 , the Company did no t recognize any revenue related to the collaboration agreement with BeiGene.

As of March 31, 2022 and 2021 , the Company had a $ 19.8 million Liability to Licensor, and $ 19.8 million of deferred revenue which was classified as current, respectively.

BMS Collaboration

In January 2022, the Company entered into a Master Clinical Trial Collaboration Agreement (the “BMS Collaboration”) with Bristol-Myers Squibb Company (“BMS”) pursuant to which the Company and BMS will investigate the Company’s CAB-ADC candidates, mecbotamab vedotin (BA3011) and ozuriftamab vedotin (BA3021), each in combination with Opdivo (the “BMS Compound”) in clinical trials (each a “Combined Therapy Study”).

Opdivo has received approval for several anti-cancer indications.

Under the BMS Collaboration, the Company will serve as the study sponsor for each Combined Therapy Study and will be responsible for the costs associated with trial execution.

BMS will supply the Company with clinical drug supply of the BMS Compound at no cost to the Company for each study as well as provide input on certain clinical and regulatory aspects of each Combined Therapy Study in exchange for jointly owning clinical data.

The BMS collaboration may be early terminated if a party is in material breach, if either party files for bankruptcy, or due to the existence of a material safety issue.

Subject to earlier termination, the BMS Collaboration shall remain in effect until completion and delivery of final study documents for each of the Combined Therapy Study to both parties.

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 nine months ended September 30, 2020, the Company recognized interest expense (including amortization of debt discounts) of $ 2,000 and $ 42,000 , 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 .

Jay Short and Carolyn Anderson Short

Convertible Promissory Notes

For the three and nine months ended September 30, 2020, the Company recognized interest expense (including amortization of debt discounts) o f $ 6,000 and $ 105,000 r espectively, 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 .

Carolyn Anderson Short

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.

(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 nine months ended September 30, 2021, the Company recognized $ 0 and $ 1.0 million, re spectively, related to the lump sum salary payment and target bonus.

The Company also recognized non-cash stock-based compensation cha rges of $ 0 and $ 9.4 million related to the modifi ed equity awards for the three and nine months ended September 30, 2021 , respectively.

No unrecognized stock-based compensation remained as of September 30, 2021.

Private Placement of Common Stock

As part of the September 2021 Private Placement, the Company issued 625,000 shares of common stock for total net proceeds of $ 17.5 million to certain stockholders considered to be related parties.

On March 23, 2021, the Company entered into a transition agreement with Ms.

Anderson Short, our Co-founder and Executive Vice President and Chief of Intellectual Property and Strategy.

Pursuant to this transition agreement, Ms.

Anderson Short continued in her role with the same base salary and employee benefits until her employment with the Company was terminated on May 31, 2021.

Upon her separation from the Company and subject to her execution of a release of claims, Ms.

Anderson Short received the following severance benefits as set forth in the transition agreement, which satisfied existing severance obligations owing to her under a legacy pre-IPO severance agreement she had entered into with the Company on July 1, 2018:

(i) a lump sum payment equal to 18 months of Ms.

Anderson Short’s then-current base salary, (ii) a payment at her targeted bonus rate for 2021, pro-rated to the date of her termination of employment, and (iii) full accelerated 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 which ended on the separation date.

For the three months ended March 31, 2021, the Company recognized $ 0.2 million related to the lump sum salary payment and target bonus, and a $ 1.0 million non-cash charge related to the modified equity awards.

No unrecognized stock-based compensation remained as of March 31, 2022 .

The Company maintains a defined contribution 401(k) plan available to eligible employees.

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The Company, at its discretion, may make certain matching contributions to the 401(k) plan.

As of September 30, 2021 and December 31, 2020 , the Company had no t made any matching contributions.

As of March 31, 2022 and December 31, 2021 , the Company had no t made any matching contributions.

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

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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.

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, 2021 included in the Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on February 28, 2022.

In addition to historical information, this Quarterly Report contains forward-looking statements that involve risks, uncertainties, and assumptions.

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Furthermore, past operating results are not necessarily indicative of results that may occur in future periods.

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.

We are a 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.

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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.

We are a United States-based company with research facilities in San Diego, California and, through our contractual relationship with BioDuro-Sundia, 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 mecbotamab vedotin and ozuriftamab vedotin, 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 $22.9 million and $72.0 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2021, we had an accumulated deficit of $162.9 million.

Our net loss was $24.3 million and $18.7 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of $210.6 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 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 and 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 mecbotamab vedotin;

advance the clinical development of ozuriftamab vedotin;

advance the clinical development of BA3071;

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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.

Furthermore, we expect to incur additional costs associated with operating as a public company.

As a result, we will require substantial additional capital to develop our product candidates and fund operations for the foreseeable future.

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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’

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In September 2021, we received $71.0 million, net of issuance costs, from a private investment in public equity, or PIPE, financing.

As of September 30, 2021, our cash and cash equivalents totaled approximately $269.9 million.

Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations into the first half of 2024.

As of March 31, 2022, our cash and cash equivalents totaled approximately $219.4 million.

Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations into the second half of 2024.

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 experienced non-material business disruptions, including with respect to clinical trials we are conducting, or impairments of our assets as a result of the pandemic.

Our Phase 2 sarcoma trial remains on schedule and the Phase 2 interim analysis for AXL NSCLC and ROR2 studies have experienced some modest delays in patient initiations due to COVID-19, however, overall timelines for study completion have not changed at this time.

To date, we have experienced modest business disruptions, including with respect to clinical trials we are conducting, and non-material impairments as a result of the pandemic.

Our mecbotamab vedotin Phase 2 sarcoma trial remains on schedule and the Phase 2 interim analysis for mecbotamab vedotin NSCLC and ozuriftamab vedotin studies have experienced some modest delays in patient initiations due to COVID-19, however, overall timelines for study completion essentially have not changed at this time.

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.

In March 2020, we implemented a remote working policy for many of our employees and began restricting non-essential travel.

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

Small Business Association approved our application for loan forgiveness for the full amount of the PPP Loan outstanding, resulting in the recognition of $0.7 million to other income for the three months ended September 30, 2021.

The PPP loan is discussed further under “—Liquidity and capital resources.”

In April 2020, we borrowed $0.7 million under the Paycheck Protection Program under the CARES Act and we received full loan forgiveness from the U.S.

Small Business Association in July 2021, resulting in the recognition of $0.7 million to other income for the twelve months ended December 31, 2021.

We are 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.

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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 advanced discussions with BeiGene regarding the allocation of roles and responsibilities for global development and commercialization of BA3071 under our Global Co-Development and Collaboration Agreement with BeiGene.

As part of these ongoing discussions, BeiGene is planning to initiate the transfer of the IND for BA3071 to BioAtla and BioAtla anticipates initiating the Phase I trial for BA3071 during 2021, with dosing commencing in the first half of 2022.

which was amended in December 2019, October 2020, and was terminated by amendment in November 2021.

In 2019, we received from BeiGene an upfront non-refundable payment of $20.0 million and $5.0 million for reimbursement of manufacturing costs.

After the November 2021 amendment, we assumed responsibility for developing BA3071, including global regulatory filings and commercialization, and are responsible for all costs of development, manufacturing and commercialization globally.

Pursuant to the terms of the November 2021 amendment, we agreed to pay single digit royalties to BeiGene and agreed to share on a limited basis in any upfront and

milestone payments received through a sublicense of 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.

For the three and nine months ended September 30, 2020 we recognized $0.2 million and $0.4 million of revenue from our collaboration with BeiGene, respectively.

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 and $0.3 million in collaboration revenues for the three and nine months ended September 30, 2021 from our legacy service contracts.

We did not recognize any revenue for the three months ended March 31, 2022 and 2021, respectively.

Prior to developing our own programs, we received revenue from services performed under fixed price service contracts that, in some cases, provided for potential milestone and royalty payments to us.

We did not recognize any revenue from our legacy service contracts for the three months ended March 31, 2022 and 2021, respectively.

Operating Expenses

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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 contractors, clinical research organizations (CROs) and consultants, including through our relationship with BioDuro-Sundia, 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;

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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

The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming.

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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.

Our general and administrative expenses have increased 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.

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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.

Results of Operations

Comparison of the Three Months Ended September 30, 2021 and 2020

Comparison of the Three Months Ended March 31, 2022 and 2021

Three Months Ended

September 30,

(in thousands)

Collaboration revenue

Operating expenses:

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Interest expense

Change in fair value of derivative liability

Gain (loss) on extinguishment of debt

Other income (expense)

Total other income (expense)

Consolidated net loss and comprehensive loss

Collaboration Revenue

There was no revenue recognized under our collaboration with BeiGene during the three months ended September 30, 2021.

Collaboration revenue for the three months ended September 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

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Three Months Ended

September 30,

(in thousands)

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Total research and development expenses

Research and development expenses were $16.6 million and $4.9 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $11.7 million was primarily driven by a $4.7 million increase in external costs due to manufacturing for our clinical candidates and ongoing clinical development for BA3011 and BA3021, a $4.7 million increase in pre-clinical development including manufacturing and IND enabling studies for CAB bispecific programs, a $1.3 million increase in stock-based compensation due to awards issued in connection with our 2020 Equity Incentive Plan, a $0.8 million increase in personnel related costs due to an increase in headcount to support ongoing development activities on our programs, and a $0.2 million increase in facility and other related expense.

General and Administrative Expense

General and administrative expenses were $7.1 million and $3.3 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $3.8 million was primarily driven by a $3.1 million increase in stock-based compensation due to awards issued under our 2020 Equity Incentive Plan, a $0.8 million increase in insurance expense, and a $0.2 million increase in

personnel related expenses as we expanded our administrative functions in support of our development activities.

This increase was offset by a $0.3 million decrease in professional fees related to accounting, audit and legal services.

Interest Income

Interest income was $76,000 and $31,000 for the three months ended September 30, 2021 and 2020, respectively.

The increase of $45,000 was due to higher average cash and cash equivalent balances after our December 2020 IPO.

Interest Expense

Interest expense was $0 and $86,000 for the three months ended September 30, 2021 and 2020, respectively.

The decrease of $86,000 was due to reduced interest expense as a result of the settlement of all of our convertible debt in July 2020 and forgiveness of our PPP loan in July 2021.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability was $0 and $0.9 million for the three months ended September 30, 2021 and 2020, respectively.

The decrease of $0.9 million was primarily due to changes in the fair value of embedded derivatives in connection with our outstanding convertible promissory notes which all settled in July 2020.

Gain (Loss) on Extinguishment of Debt

Extinguishment of debt was $0.7 million and ($2.7) million for the three months ended September 30, 2021 and 2020, respectively.

The $0.7 million gain and $2.7 million in recognized loss on extinguishment during the three months ended September 30, 2021 and 2020 were related to the forgiveness of our PPP loan in July 2021, and the settlement of our then outstanding convertible promissory notes in connection with our July 2020 Series D Financing, respectively.

Comparison of the nine months ended September 30, 2021 and 2020

Nine Months Ended

September 30,

(in thousands)

Collaboration revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest income

Interest expense

Change in fair value of derivative liability

Gain (loss) on extinguishment of debt

Other income (expense)

Total other income (expense)

Consolidated net loss and comprehensive loss

Collaboration Revenue

Collaboration revenue for the nine months ended September 30, 2021 was $0.3 million, which consisted solely of revenue recognized under our legacy service contracts.

Collaboration revenue for the nine months ended September 30, 2020 was $0.4 million, which consisted of revenue recognized under our collaboration agreement with BeiGene.

Research and Development Expense

The following table summarizes our research and development expenses allocated by CAB program for the periods indicated:

Nine Months Ended

September 30,

(in thousands)

External expenses:

BA3011 (AXL-ADC)

BA3021 (ROR2-ADC)

Other CAB Programs

Total external expenses

Personnel and related

Equity-based compensation

Facilities and other

Total research and development expenses

Research and development expenses were $41.8 million and $9.4 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $32.4 million was primarily driven by a $16.8 million increase in external costs as due to manufacturing and ongoing clinical development for our clinical programs BA3011 and BA3021, a $7.3 million increase in pre-clinical development costs including costs for manufacturing and IND enabling studies for CAB bispecific programs, 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 nine months ended September 30, 2020, a $3.4 million increase in stock-based compensation due to awards issued in connection with our 2020 Equity Incentive Plan, a $1.2 million increase in personnel related costs, and $0.3 million increase in facility and other costs.

Research and development expenses were $16.9 million and $10.4 million for the three months ended March 31, 2022 and 2021, respectively.

The increase of $6.5 million was primarily driven by a $4.8 million increase in external expenses, including a $2.6 million increase in pre-clinical development including manufacturing and IND enabling studies for pipeline CAB programs, a $1.6 million increase related to clinical development for CTLA-4, and a $0.6 million increase in external costs due to manufacturing and clinical development for mecbotamab vedotin (BA3011) and ozuriftamab vedotin (BA3021).

In addition, personnel related costs increased $1.2 million due to an increase in headcount to support ongoing development activities for our programs and stock-based compensation increased $0.3 million due to awards issued in connection with our 2020 Equity Incentive Plan.

General and Administrative Expense

General and administrative expenses were $31.4 million and $4.6 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $26.8 million was primarily driven by a $17.9 million increase in stock-based compensation due to awards issued in connection with our 2020 Equity Incentive Plan and the modification of awards issued to one of our co-founders, a $4.3 million increase in equity-based compensation related to a decrease in the fair value of awards under our profits interest plan during the nine months ended September 30, 2020, a $2.3 million increase in insurance expense, a $1.5 million increase in personnel related expenses as we expanded our administrative functions in support of our development activities plus severance benefits related to the departure of one of our co-founders, a $0.5 million increase in professional fees related to accounting, audit and legal services, a $0.4 million increase in other expenses including corporate franchise taxes and software subscriptions, and a $0.2 million increase in depreciation expense.

These decreases were offset by a $0.2 million decrease in facility costs and a $0.1 million decrease in travel related expense.

General and administrative expenses were $7.4 million and $8.4 million for the three months ended March 31, 2022 and 2021, respectively.

The decrease of $1.0 million was primarily driven by a $1.4 million decrease in stock-based compensation related to awards issued under our 2020 Equity Incentive Plan, offset by an increase of $0.3 million in audit and legal services, and a $0.1 million increase in personnel related expenses.

Interest Income

Interest income was $0.3 million and $37,000 for the nine months ended September 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 $1.4 million for the nine months ended September 30, 2021 and 2020, respectively.

The decrease of $1.4 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 $1.6 million for the nine months ended September 30, 2021 and 2020, respectively.

The $1.6 million recorded was primarily due to changes in the fair value during 2020 of embedded derivatives in connection with our outstanding convertible promissory notes which all settled in July 2020.

Gain (Loss) on Extinguishment of Debt

Extinguishment of debt was $0.7 and ($2.9) million for the nine months ended September 30, 2021 and 2020, respectively.

The $0.7 million gain and $2.9 million in recognized loss on extinguishment during the nine months ended September 30, 2021 and 2020 were related to the forgiveness of our PPP loan in July 2021, and the settlement of our then outstanding convertible promissory notes in connection with our July 2020 Series D Financing, respectively.

Interest income was $85,000 and $98,000 for the three months ended March 31, 2022 and 2021, respectively.

The decrease of $13,000 was due to lower average cash and cash equivalent balances.

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 September 30, 2021, we had cash and cash equivalents of $269.9 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.

As of March 31, 2022, we had cash and cash equivalents of $219.4 million.

On April 22, 2020, we received proceeds from a loan pursuant to the Paycheck Protection Program of the CARES Act, "the PPP Loan", in the amount of $0.7 million from City National Bank, as lender.

In July 2021, we were notified by our lender that our PPP Loan had been fully forgiven by the U.S.

Small Business Administration and that there was no remaining balance on the PPP Loan.

We recorded the forgiveness as other income in July 2021.

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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 into the first half of 2024.

Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations into the second half of 2024.

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.

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.

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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.

For example, market volatility resulting from a variety of causes, including the COVID-19 pandemic, supply chain disruptions and the recent conflict between Russia and Ukraine, 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.

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The following summarizes our cash flows for the periods indicated:

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

Net cash provided by (used in):

Net cash used in:

Operating activities

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Cash Used in Operating Activities

Net cash used in operating activities totaled $41.3 million for the nine months ended September 30, 2021, which consisted of a consolidated net loss of $72.0 million, a net change of $9.3 million in our operating assets and liabilities and $21.4 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 $10.8 million, offset by an increase in prepaid expenses and other assets of $1.5 million.

The non-cash transactions primarily consisted of $21.3 million of stock-based compensation and non-cash charges of $1.0 million related to depreciation and amortization, offset by the $0.7 million gain on the extinguishment of our PPP loan and $0.2 million of deferred rent.

Net cash used in operating activities for the nine months ended September 30, 2020 was $22.3 million, which consisted of a consolidated net loss of $19.5 million and a net change of ($1.7) million in our net operating assets and liabilities, compounded by a decrease of $1.2 million in non-cash transactions.

The net change in our operating assets and liabilities was primarily due to a decrease in accounts payable and accrued expenses of $1.3 million and a decrease in deferred revenue of $0.4 million.

The $1.2 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 $0.9 million on our outstanding convertible debt, $1.6 million related to the change in fair value of our derivative liability, $0.5 million of non-cash interest, $0.7 million related to depreciation and amortization and $2.9 million related to the loss on the extinguishment of our convertible debt.

Net cash used in operating activities totaled $25.1 million for the three months ended March 31, 2022, which consisted of a consolidated net loss of $24.3 million, a net change of $4.8 million in our operating assets and liabilities and $3.9 million of non-cash transactions.

The net change in our operating assets and liabilities was primarily due to a decrease in accounts payable and accrued expenses of $2.4 million, offset by an increase in prepaid expenses and other assets of $2.3 million.

The non-cash transactions primarily consisted of $3.6 million of stock-based compensation and non-cash charges of $0.3 million related to depreciation and amortization.

Net cash used in operating activities for the three months ended March 31, 2021 was $15 million, which consisted of a consolidated net loss of $18.7 million, a net change of $1.2 million in our operating assets and liabilities and $4.8 million of non-cash transactions.

The net change in our operating assets and liabilities was primarily due to an increase in prepaid expenses and other assets of $1.3 million.

The non-cash transactions primarily consisted of $4.6 million of stock-based compensation related to the issuance of RSUs and stock options in the fourth quarter of 2020 and non-cash charges of $0.3 million related to depreciation and amortization.

Cash Used in Investing Activities

Cash used in investing activities was $0.8 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively, related to the purchase of property and equipment.

Cash used in investing activities was immaterial for the three months ended March 31, 2022 and $0.5 million for the three months ended March 31, 2021, respectively, related to the purchase of property and equipment.

Cash Provided by Financing Activities

Net cash provided by financing activities was $73.4 million for the nine months ended September 30, 2021, which consisted primarily of the proceeds from the issuance of common stock through a Private Placement of $75.0 million, the proceeds from the issuance of common stock under our Employee Stock Purchase Plan of $0.2 million, and $0.1 million due to the exercise of stock options under our Equity Incentive Plan, partially offset by our payment of initial public offering costs of $1.9 million.

Net cash provided by financing activities was $75.6 million for the nine months ended September 30, 2020, which consisted primarily of $72.3 million of net proceeds from the issuance of Series D convertible preferred stock, $2.8 million of proceeds from the issuance of convertible promissory notes and $0.7 million of proceeds from a PPP loan, offset by the payment of $0.1 million of costs incurred in connection with our proposed initial public offering.

Net cash used in financing activities was $0.4 million for the three months ended March 31, 2022, which consisted primarily of the payment of taxes related to the net settlement of restricted stock units.

Net cash provided by financing activities was $1.9 million for the three months ended March 31, 2021, which consisted primarily of our payment of offering costs related to our 2020 IPO.

Critical Accounting Policies and Estimates

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contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

There have not been any material changes to the critical accounting policies discussed therein during the nine months ended September 30, 2021.

There have not been any material changes to the critical accounting policies discussed therein during the three months ended March 31, 2022.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable to a smaller reporting company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements