BioAtla, Inc. 10-Q

Item 1 . Financial Statements. BioAtla, Inc. Condensed Balance Sheets (in thousands, except par value and share amounts) June 30, 2023 December 31, 2022 (unaudited) Assets Current assets: Cash and cash equivalents $ 168,693 $ 215,507 Prepaid expenses and other current assets 6,614 4,924 Total current assets 175,307 220,431 Property and equipment, net 2,210 2,728 Operating lease right-of-use asset, net 1,966 2,423 Other assets 154 154 Total assets $ 179,637 $ 225,736 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses $ 32,084 $ 21,610 Operating lease liabilities 1,569 1,521 Total current liabilities 33,653 23,131 Operating lease liabilities, less current portion 1,662 2,460 Liability to licensor 19,806 19,806 Total liabilities 55,121 45,397 Commitments and contingencies (Note 5 ) Stockholders’ equity: Preferred stock, $ 0.0001 par value; 200,000,000 shares authorized at June 30, 2023 and December 31, 2022; 0 shares issued and outstanding at June 30, 2023 and December 31, 2022 — — Common stock, $ 0.0001 par value; 350,000,000 shares authorized at June 30, 2023 and December 31, 2022; 47,803,306 and 46,336,166 shares issued and outstanding at June 30, 2023 and December 31, 2022 5 5 Class B common stock, $ 0.0001 par value; 15,368,569 shares authorized at June 30, 2023 and December 31, 2022; 0 and 1,211,959 shares issued and outstanding at June 30, 2023 and December 31, 2022 — — Additional paid-in capital 480,524 473,135 Accumulated deficit ( 356,013 ) ( 292,801 ) Total stockholders’ equity 124,516 180,339 Total liabilities and stockholders’ equity $ 179,637 $ 225,736 See accompanying notes. 1 BioAtla, Inc. Unaudited Condensed State ments of Operations and Comprehensive Loss (in thousands, except share and per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Operating expenses: Research and development expense $ 30,960 $ 20,711 $ 52,657 $ 37,634 General and administrative expense 6,241 8,344 13,474 15,767 Total operating expenses 37,201 29,055 66,131 53,401 Loss from operations ( 37,201 ) ( 29,055 ) ( 66,131 ) ( 53,401 ) Other income (expense): Interest income 1,460 146 2,940 231 Other income (expense) ( 11 ) 3 ( 21 ) 10 Total other income (expense) 1,449 149 2,919 241 Net loss and comprehensive loss $ ( 35,752 ) $ ( 28,906 ) $ ( 63,212 ) $ ( 53,160 ) Net loss per common share, basic and diluted $ ( 0.75 ) $ ( 0.77 ) $ ( 1.33 ) $ ( 1.42 ) Weighted-average shares of common stock outstanding, basic and diluted 47,706,426 37,420,327 47,639,977 37,371,614 See accompanying notes. 2 BioAtla, Inc. Unaudited Condensed Statements of Stockholders’ Equity (in thousands, except share amounts) Three Months Ended June 30, 2023 Common Stock Class B Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balance at March 31, 2023 47,637,321 $ 5 — $ — $ 476,683 $ ( 320,261 ) $ 156,427 Stock-based compensation expense — — — — 3,675 — 3,675 Issuance of common stock under equity incentive plans, net of shares withheld for taxes 90,385 — — — — — — Issuance of common stock for Employee Stock Purchase Plan 56,793 — — — 173 — 173 Issuance of common stock for director compensation 18,807 — — — 54 — 54 Taxes related to net share settlement of equity awards — — — — ( 61 ) — ( 61 ) Net loss — — — — — ( 35,752 ) ( 35,752 ) Balance at June 30, 2023 47,803,306 $ 5 — $ — $ 480,524 $ ( 356,013 ) $ 124,516 Three Months Ended June 30, 2022 Common Stock Class B Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balance at March 31, 2022 35,891,284 $ 4 1,492,059 $ — $ 400,622 $ ( 210,573 ) $ 190,053 Stock-based compensation expense — — — — 3,842 — 3,842 Issuance of common stock under equity incentive plans 92,692 — — — — — — Issuance of common stock for Employee Stock Purchase Plan 9,482 — — — 19 — 19 Taxes related to net share settlement of equity awards — — — — ( 56 ) — ( 56 ) Net loss — — — — — ( 28,906 ) ( 28,906 ) Balance at June 30, 2022 35,993,458 $ 4 1,492,059 $ — $ 404,427 $ ( 239,479 ) $ 164,952 See accompanying notes. 3 BioAtla, Inc. Unaudited Condensed Statements of Stockholders’ Equity (in thousands, except share amounts) Six Months Ended June 30, 2023 Common Stock Class B Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balance at December 31, 2022 46,336,166 $ 5 1,211,959 $ — $ 473,135 $ ( 292,801 ) $ 180,339 Stock-based compensation expense — — — — 7,289 — 7,289 Issuance of common stock under equity incentive plans 179,581 — — — — — — Issuance of common stock for Employee Stock Purchase Plan 56,793 — — — 173 — 173 Issuance of common stock for director compensation 18,807 — — — 54 — 54 Taxes related to net share settlement of equity awards — — — — ( 127 ) — ( 127 ) Conversion of Class B common stock 1,211,959 — ( 1,211,959 ) — — — — Net loss — — — — — ( 63,212 ) ( 63,212 ) Balance at June 30, 2023 47,803,306 $ 5 — $ — $ 480,524 $ ( 356,013 ) $ 124,516 Six Months Ended June 30, 2022 Common Stock Class B Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balance at December 31, 2021 35,799,233 $ 4 1,492,059 $ — $ 397,136 $ ( 186,319 ) $ 210,821 Stock-based compensation expense — — — — 7,474 — 7,474 Issuance of common stock under equity incentive plans 184,743 — — — — — — Issuance of common stock for Employee Stock Purchase Plan 9,482 — — — 19 — 19 Taxes related to net share settlement of equity awards — — — — ( 202 ) — ( 202 ) Net loss — — — — — ( 53,160 ) ( 53,160 ) Balance at June 30, 2022 35,993,458 $ 4 1,492,059 $ — $ 404,427 $ ( 239,479 ) $ 164,952 See accompanying notes. 4 BioAtla, Inc. Unaudited Condensed Statements of Cash Flows (in thousands) Six Months Ended June 30, 2023 2022 Cash flows from operating activities Net loss $ ( 63,212 ) $ ( 53,160 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 583 601 Loss on disposal of property and equipment — 6 Stock-based compensation 7,289 7,474 Changes in operating assets and liabilities: Prepaid expenses and other assets ( 1,690 ) ( 2,595 ) Accounts payable and accrued expenses 10,575 5,849 Right-of-use assets and lease liabilities, net ( 293 ) ( 232 ) Net cash used in operating activities ( 46,748 ) ( 42,057 ) Cash flows from investing activities Purchases of property and equipment ( 65 ) ( 179 ) Proceeds from sale of property and equipment — 3 Net cash used in investing activities ( 65 ) ( 176 ) Cash flows from financing activities Proceeds from issuance of common stock under Employee Stock Purchase Plan 173 19 Payments for taxes related to net settlement of equity awards ( 174 ) ( 475 ) Net cash used in financing activities ( 1 ) ( 456 ) Net decrease in cash and cash equivalents ( 46,814 ) ( 42,689 ) Cash and cash equivalents, beginning of period 215,507 244,979 Cash and cash equivalents, end of period $ 168,693 $ 202,290 Supplemental disclosure of non-cash investing and financing activities Property and equipment additions included in accounts payable and accrued expenses $ — $ 33 Tax related to net settlement of equity awards included in accounts payable and accrued expenses $ 19 $ 18 See accompanying notes. 5 BioAtla, Inc. Notes to Unaudited Condensed Financial Statements 1. Organization and Summary of Significant Accounting Policies Organization BioAtla, LLC was formed in Delaware in March 2007 and was converted to a Delaware corporation in July 2020 and renamed BioAtla, Inc. (the “Company”). The Company has a proprietary platform for creating biologics, including its conditionally active biologics (“CAB” or “CABs”). CABs have been designed to be active only under certain conditions found in diseased tissue, while remaining inactive in normal tissue. The Company is currently in clinical development of its two lead CAB antibody drug conjugates targeting AXL and ROR2 receptors, its CAB immune-oncology antibody targeting CTLA-4 and its CAB BiSpecific targeting EpCAM. Basis of Presentation The unaudited condensed financial statements as of June 30, 2023, and for the three and six months ended June 30, 2023 and 2022, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and with accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial statements. These unaudited condensed financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year or future periods. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2022 , included in its Annual Report on Form 10-K filed with the SEC on March 23, 2023. Liquidity and Going Concern The Company has incurred cumulative operating losses and negative cash flows from operations since its inception and expects to continue to incur significant expenses and operating losses for the foreseeable future as it continues development of its product candidates. As of June 30, 2023, the Company had an accumulated deficit of $ 356.0 million . The Company plans to continue to fund its losses from operations and capital funding needs through public or private equity or debt financings, or other sources. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects. Management is required to perform a two-step analysis of the Company’s ability to continue as a going concern. Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern (Step 1). If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt (Step 2). Management’s assessment included the preparation of cash flow forecasts resulting in management’s conclusion that there is not substantial doubt about the Company’s ability to continue as a going concern as its current cash and cash equivalents will be sufficient to fund the Company’s operations for a period of at least one year from the issuance date of these unaudited condensed financial statements. Use of Estimates The preparation of the Company’s condensed financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s condensed financial statements and accompanying notes. The most significant estimates in the Company’s condensed financial statements relate to accruals for research and development costs, and equity-based compensation. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue and expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. Concentrations of Risk Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. 6 The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. Stock-Based Compensation Stock-based compensation expense represents the grant date fair value of equity awards, consisting of stock options, restricted stock units (“RSUs”) and employee stock purchase plan rights, over the requisite service period of the awards (usually the vesting period) on a straight-line basis. The Company estimates the fair value of stock option grants and employee stock purchase plan rights using the Black-Scholes option pricing model. Prior to the Company’s IPO, the fair value of RSUs was based on the estimated fair value of the underlying common stock on the date of grant and, subsequent to the Company’s IPO, the fair value is based on the closing sales price of the Company’s common stock on the date of grant. Equity award forfeitures are recognized as they occur. Leases The Company determines if an arrangement is a lease at inception. An arrangement is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If a lease is identified, classification is determined at lease commencement. Operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company’s leases do not provide an implicit interest rate and therefore the Company estimates its incremental borrowing rate to discount lease payments. The incremental borrowing rate reflects the interest rate that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term. Operating lease right-of-use (“ROU”) assets are based on the corresponding lease liability adjusted for any lease payments made at or before commencement, initial direct costs, and lease incentives. Renewals or early terminations are not accounted for unless the Company is reasonably certain to exercise these options. Operating lease expense is recognized and the ROU asset is amortized on a straight-line basis over the lease term. Variable lease costs are not included in the calculation of the ROU asset and the related lease liability and are recognized as incurred. The Company has a single lease agreement with lease and non-lease components, which are accounted for as a single lease component. Payments for short-term leases, defined as leases with a term of twelve months or less, are expensed on a straight-line basis over the lease term. The Company does not currently have any short-term leases. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, and operating lease liabilities, non-current on the Company’s balance sheets. The Company does not have any finance leases. Comprehensive Loss Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. There have been no items qualifying as other comprehensive loss and, therefore, for all periods presented, the Company’s comprehensive loss was the same as its reported net loss. Net Loss Per Share Basic net loss per common share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of RSUs, common stock options outstanding under the Company’s stock option plan, and contingently issuable shares under the BioAtla, Inc. Employee Stock Purchase Plan (the “ESPP”). Potentially dilutive securities not included in the calculation of diluted net loss per common share because to do so would be anti-dilutive are as follows (in common stock equivalents): Six Months Ended June 30, 2023 2022 Common stock options 6,557,990 2,727,336 Restricted stock units 288,070 739,959 ESPP shares 32,033 41,292 Total 6,878,093 3,508,587 7 Recent Accounting Pronouncements There were no new accounting standards that had a material impact on the Company’s financial statements during the three or six months ended June 30, 2023, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of June 30, 2023 that the Company expects to have a material impact on its financial statements. 2. Balance Sheet Details Prepaid expenses and other current assets consist of the following (in thousands): June 30, 2023 December 31, 2022 Prepaid research and development $ 4,888 $ 4,385 Prepaid insurance 1,039 — Other prepaid expenses and current assets 687 539 Total $ 6,614 $ 4,924 Property and equipment consist of the following (in thousands): Useful life (years) June 30, 2023 December 31, 2022 Furniture, fixtures and office equipment 3 - 7 $ 2,140 $ 2,140 Laboratory equipment 5 2,330 2,265 Leasehold improvements 2 - 3 3,687 3,687 8,157 8,092 Less accumulated depreciation and amortization ( 5,947 ) ( 5,364 ) Total $ 2,210 $ 2,728 Accounts payable and accrued expenses consist of the following (in thousands): June 30, 2023 December 31, 2022 Accounts payable $ 2,971 $ 4,231 Accrued compensation 1,981 3,451 Accrued research and development 26,253 12,649 Other accrued expenses 879 1,279 Total $ 32,084 $ 21,610 3. Fair Value Measurements The carrying amounts of the Company’s current financial assets and current financial liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. As of June 30, 2023 and December 31, 2022 , the Company had no financial assets or liabilities measured at fair value on a recurring basis. The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. None of the Company’s non-financial assets and liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented. 8 4. Leases The Company has a single operating lease for its corporate headquarters and laboratory space in San Diego, California. The lease expires in July 2025 and the Company has an option to extend the term of the lease for an additional five years . Additionally, the lease includes certain rent abatement, rent escalations, tenant improvement allowances and additional charges for common area maintenance and other costs. The components of lease expense included in the Company’s statements of operations and loss include (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Operating lease expense $ 261 $ 261 $ 521 $ 521 Variable lease expense 107 64 254 256 Total lease expense, net $ 368 $ 325 $ 775 $ 777 Variable lease costs are primarily related to payments made to lessors for common area maintenance, property taxes, insurance, and other operating expenses. The Company did not have any short-term leases or finance leases for the three and six months ended June 30, 2023 and 2022, respectively. The weighted average remaining lease term and weighted average discount rate for operating leases were as follows: As of June 30, 2023 2022 Weighted average remaining lease term (in years) 2.0 3.0 Weighted average discount rate percentage 3.50 % 3.50 % Supplemental cash flow information related to leases under which the Company is the lessee was as follows (amounts in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Cash paid for amounts included in the measurement of operating leases $ 407 $ 377 $ 814 $ 754 As of June 30, 2023, future minimum payments under the Company’s non-cancelable operating lease under ASC 842 were as follows (in thousands): Operating lease Six months ending December 31, 2023 $ 822 2024 1,685 2025 845 Thereafter — Total future lease payments 3,352 Less: imputed interest ( 120 ) Total operating lease liabilities $ 3,232 5. Commitments and Contingencies From time to time, the Company may be subject to various claims and suits arising in the ordinary course of business. The Company is not currently a party to any legal proceedings the outcome of which the Company believes, if determined adversely to the Company, would individually or in the aggregate have a material adverse effect on the Company’s business, operating results or financial condition. 6. Stockholders’ Equity 2020 Equity Incentive Plan The Company may grant awards of common stock under the 2020 Equity Incentive Plan (the “2020 Plan”) to the Company’s employees, consultants and non-employee directors pursuant to option awards, stock appreciation rights awards, restricted stock 9 awards, restricted stock unit awards, performance stock awards, performance stock unit awards and other stock-based awards. As of June 30, 2023 and December 31, 2022 , the total number of common shares authorized for issuance under the 2020 Plan was 9,196,970 and 7,658,509 , 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. The maximum term of the options granted under the 2020 Plan is no more than ten years . Awards under the 2020 Plan generally vest at 25 % one year from the vesting commencement date and ratably each month thereafter for a period of 36 months , subject to continuous service. Stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 has been reported in the condensed statements of operations and comprehensive loss as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Research and development $ 1,550 $ 1,398 $ 3,001 $ 2,698 General and administrative 2,125 2,444 4,288 4,776 Total $ 3,675 $ 3,842 $ 7,289 $ 7,474 Restricted Stock Units In December 2022, the Company’s board of directors approved an amendment to the Director Compensation Policy, which allows each director to elect to receive their quarterly director fees in the form of restricted stock in lieu of cash. Two board members elected to receive shares of restricted stock in lieu of cash. For the six months ended June 30, 2023 the Company issued 18,807 shares of fully vested restricted stock to the two board members. Compensation expense was earned and recognized for these fully vested restricted stock grants in the amount of $ 26,000 and $ 53,000 for the three and six months ended June 30, 2023, respectively. The following table summarizes RSU activity under the 2020 Plan for the six months ended June 30, 2023: Number of Shares Weighted - Average Grant Date Fair Value Outstanding at December 31, 2022 510,039 $ 18.00 Granted 18,807 $ 2.83 Vested ( 238,131 ) $ 16.80 Forfeited ( 2,645 ) $ 18.00 Outstanding at June 30, 2023 288,070 $ 18.00 As of June 30, 2023, total unrecognized stock-based compensation expense for RSUs was $ 5.2 million , which is expected to be recognized over a remaining weighted-average period of approximately 0.9 years . Stock Options The following table summarizes stock option activity under the 2020 Plan for the six months ended June 30, 2023: Number of Options Weighted - Average Exercise Price Per Share Weighted -Average Remaining Contractual Term (In Years) Aggregate Intrinsic Value Balance at December 31, 2022 2,736,918 $ 13.82 8.82 $ 3,636,148 Granted 3,855,395 $ 3.81 Exercised — $ — Forfeited ( 28,705 ) $ 5.96 Expired ( 5,618 ) $ 30.73 Balance at June 30, 2023 6,557,990 $ 7.96 9.10 $ 98,252 Vested and expected to vest at June 30, 2023 6,557,990 $ 7.96 9.10 $ 98,252 Exercisable at June 30, 2023 1,220,311 $ 15.88 8.16 $ 62,669 10 As of June 30, 2023 , total unrecognized stock-based compensation cost for unvested common stock options was $ 21.1 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 six months ended June 30, 2023 was $ 2.66 per share. The total fair value of options vested during the six months ended June 30, 2023 was $ 4.4 million. On February 26, 2023, the Compensation Committee of the Company’s board of directors approved a modification to the Company’s 2020 Plan to allow vesting of RSUs or stock options, as applicable, subject to the grantee’s continued service to the Company and/or one of its subsidiaries as an employee, non-employee director, or independent contractor. Unvested RSUs totaling 139,730 shares and 574,244 unvested options which would have been forfeited under the original terms of the 2020 Plan will now continue to vest. The Company applied modification accounting to these awards which resulted in a decrease in fair value to these awards. The Company calculated compensation cost for the modified unvested awards of $ 416,000 related to the RSUs and $ 962,000 related to the options, and will recognize these amounts over the remaining requisite service periods. The modification also resulted in an increase to the term of 130,699 fully vested options for which $ 123,000 of incremental compensation cost was immediately recognized on the date of the modification. The assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option grants were as follows: Six Months Ended June 30, 2023 2022 Expected volatility 77.4 % 74.8 % Risk-free interest rate 3.86 % 2.05 % Expected dividend yield 0.0 % 0.0 % Expected term 6.05 years 6.04 years Expected volatility. As the Company’s common stock does not have a significant trading history, the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry. Risk-free interest rate. The Company bases the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present plans to pay cash dividends. Expected term. For employees, the expected term represents the period of time that options are expected to be outstanding. Because the Company has minimal historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period. For nonemployees, the expected term is generally the contractual term of the option. Employee Stock Purchase Plan The ESPP permits participants to purchase common stock through payroll deductions of up to 15 % of their eligible compensation. As of June 30, 2023 and December 31, 2022, a total of 1,737,098 shares and 1,229,148 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 Company issued 56,793 and 9,482 shares of common stock under the ESPP during the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, 1,521,559 shares o f common stock remained available for issuance under the ESPP. Stock-based compensation expense related to the ESPP for the three and six months ended June 30, 2023 and 2022 was immaterial. 11 Common Stock Reserved for Future Issuance Common stock reserved for future issuance are as follows in common equivalent shares: June 30, 2023 December 31, 2022 Common stock options and restricted stock units issued and outstanding 6,846,060 3,246,957 Awards available for future issuance under the 2020 Plan 713,781 3,012,554 Awards available for future issuance under the ESPP 1,521,559 1,070,402 Total common stock reserved for future issuance 9,081,400 7,329,913 7. Collaboration, License and Option Agreements BeiGene In April 2019, the Company entered into a Global Co-Development and Collaboration agreement (the “BeiGene Collaboration”) with BeiGene, Ltd. and BeiGene Switzerland GmbH (collectively “BeiGene”), for the development, manufacturing and commercialization of the Company’s investigational CAB CTLA-4 antibody (BA3071). The BeiGene Collaboration was amended several times between 2019 and 2021 and the Company received a total of $ 25.0 million in non-refundable payments from BeiGene during that time. In November 2021, the 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 is responsible for the global development and commercialization of BA3071. As consideration for this amendment, 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. The Company reclassified its then 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 and six months ended June 30, 2023 and 2022 , the Company did no t recognize any revenue related to the collaboration agreement with BeiGene. The Company had a $ 19.8 million liability to licensor as of June 30, 2023 and December 31, 2022. Service Contracts Prior to developing its own programs, the Company entered into various fixed price research service 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 did no t recognize any revenue related to its legacy service contracts during the three and six months ended June 30, 2023 or 2022. BMS Collaboration In January 2022, the Company and Bristol-Myers Squibb Company (“BMS”) entered into a clinical trial collaboration and supply agreement (the “BMS Agreement”). Under the terms of the BMS Agreement, BioAtla and BMS will collaborate on clinical trials of separate combination therapies using two of BioAtla’s Conditionally Active Biologic Antibody Drug Conjugates, BA3011 and BA3021, each in combination with Opdivo® (nivolumab), BMS’ proprietary anti-PD-1 monoclonal antibody product. The Company will serve as the study sponsor of the scheduled studies and will be responsible for costs associated with the trial execution. BMS will provide Opdivo® clinical drug supply at no cost for the combination study trials. After the completion of the combination therapy trials, the Company is obligated to provide BMS with a final report of the data resulting from the trial. The BMS Agreement 12 was amended in October 2022 to include additional territories for our BA3011 and BA3021 combination study trials. There was no impact to the Company's financial results for the three and six months ended June 30, 2023 and 2022 as a result of this agreement. 8. Related Party Transactions Himalaya Therapeutics SEZC Clinical Trial Services Agreement In April 2022, the Company entered into a Clinical Trial Agreement with Himalaya Therapeutics SEZC. Under the agreement, Himalaya Therapeutics SEZC agreed to provide services related to the initiation of clinical trials for BA3011 in the People’s Republic of China. For the first year following effectiveness of the agreement, the Company has agreed to pay Himalaya Therapeutics SEZC for the full-time use of two of its personnel. Payments are due and payable by BioAtla to Himalaya Therapeutics SEZC on a quarterly calendar basis and are non-refundable. The Company made its final payment under the agreement in January 2023. For the three and six months ended June 30, 2023 , the Company recognized $ 0 and $ 0.1 million, respectively, in research and development expense related to the agreement, compared to $ 0.1 million, for the three and six months ended June 30, 2022. The Company did not have any amounts due from or due to Himalaya Therapeutics SEZC as of June 30, 2023 . 9. 401(k) Plan The Company maintains a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on an individual basis, limited to the maximum amount allowable under federal tax regulations. The Company, at its discretion, may make certain matching contributions to the 401(k) plan. To date, the Company has no t made any matching contributions. 13 Item 2 . Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis together with our unaudited condensed financial statements and notes thereto included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2022 included in the Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 23, 2023. In addition to historical information, this Quarterly Report contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under the caption “Risk Factors” in the Annual Report, and the caption “Risk Factors” in this Quarterly Report, as updated by our subsequent filings under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Furthermore, past operating results are not necessarily indicative of results that may occur in future periods. Overview We are a clinical-stage biopharmaceutical company developing our novel class of highly specific and selective antibody-based therapeutics for the treatment of solid tumor cancer. Our CABs capitalize on our proprietary discoveries with respect to tumor biology, enabling us to target known and widely validated tumor antigens that have previously been difficult or impossible to target. Our novel CAB therapeutic candidates exploit characteristic pH differences between the tumor microenvironment and healthy tissue. Unlike healthy tissue, the tumor microenvironment is acidic, and we have designed our antibodies to selectively bind to their targets on tumor cells under acidic pH conditions but not on targets in normal tissues. Our approach is to identify the necessary targeting and potency required for cancer cell destruction, while aiming to eliminate or greatly reduce on-target, off-tumor toxicity—one of the fundamental challenges of existing cancer therapies. We are a United States-based company with research facilities in San Diego, California and, through our contractual relationship with BioDuro-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 and our Phase 1 clinical trials of BA3071 and BA3182, 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 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 $35.8 million and $63.2 million for the three and six months ended June 30, 2023, respectively, compared to $28.9 million and $53.2 million for the three and six months ended June 30, 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $356.0 million. These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. We do not expect to generate meaningful revenue from product sales for the foreseeable future, and we expect to continue to incur significant operating expenses for the foreseeable future due to the cost of research and development, including identifying and designing product candidates 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 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 mecbotamab vedotin; • advance the clinical development of ozuriftamab vedotin; • advance the clinical development of BA3071; • advance the clinical development of BA3182; • expand our pipeline of bispecific and other CAB antibody-based product candidates; • continue to invest in our CAB technology platform; • maintain, protect and expand our intellectual property portfolio, including patents, trade secrets and know-how; • seek marketing approvals for any product candidates that successfully complete clinical trials; • establish additional product collaborations and commercial manufacturing relationships with third parties; 14 • build sales, marketing and distribution infrastructure and relationships with third parties to commercialize product candidates for which we may obtain marketing approval; • continue to expand our operational, financial and management information systems; and • attract, hire and retain additional clinical, scientific, management, administrative and commercial personnel. As a result, we will require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings, debt financings, collaborations and other similar arrangements. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities. Because of the numerous risks and uncertainties associated with product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to raise capital, maintain our research and development efforts, expand our business or continue our operations at planned levels, and as a result we may be forced to substantially reduce or terminate our operations. As of June 30, 2023, our cash and cash equivalents totaled approximately $168.7 million. Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations for a period of at least twelve months from the date of issuance of the financial statements included in this report. 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 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 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. 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. Financial Operations Overview Revenue To date, we have not generated any revenue from the sale of products and do not expect to generate meaningful revenue in the near future. In 2019 we entered into a collaboration agreement with BeiGene, Ltd. The agreement was amended several times and was terminated in November 2021, which resulted in the Company assuming responsibility for development of BA3071. We received a total of $25.0 million in non-refundable payments from BeiGene from this collaboration. 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, if received, through a sublicense of BA3071. We may in the future seek third-party collaborators or joint venture partners for development and commercialization of BA3071 and additional CAB product candidates. We did not recognize any collaboration revenue for the three and six months ended June 30, 2023 and 2022. 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 and six months ended June 30, 2023 and 2022. 15 Operating Expenses Research and Development Research and development expenses consist primarily of costs incurred in the discovery and development of our product candidates. • External expenses consist of: • Fees paid to third parties such as contractors, clinical research organizations (CROs) and consultants, and other costs related to preclinical and clinical trials; • Fees paid to third parties such as contract manufacturing organizations (CMOs) and other vendors for manufacturing research and clinical trial materials; and • Expenses related to laboratory supplies and services. • Unallocated expenses consist of: • Personnel-related expenses, including salaries, benefits and equity-based compensation expenses, for personnel in our research and development functions; and • Related equipment and facilities depreciation expense. We expense research and development costs in the periods in which they are incurred. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and services are performed. We expect our research and development expenses to generally increase for the foreseeable future as we continue to invest in research and development activities to advance our product candidates and our clinical programs and expand our product candidate pipeline. The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. Successful product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, to the extent that our product candidates continue to advance into clinical trials, including larger and later-stage clinical trials, our expenses will increase substantially and may become more variable. The actual probability of success for our product candidates may be affected by a variety of factors, including the safety and efficacy of our product candidates, the quality and consistency in their manufacture, investment in our clinical programs and competition with other products. As a result of these variables, we are unable to determine the duration and completion costs of our research and development projects and programs or when and to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in achieving regulatory approval for any of our product candidates. General and Administrative Our general and administrative expenses include personnel-related expenses for personnel in our executive, finance, corporate and other administrative functions, intellectual property and patent costs, facilities and other allocated expenses, other expenses for outside professional services, including legal, human resources, investor relations, audit and accounting services and insurance costs. Personnel-related expenses consist of salaries, benefits and equity-based compensation. We also expect our general and administrative expenses to increase in the future as we increase our personnel headcount to support our research and development activities to advance our product candidates and clinical stage programs. Interest Income Interest income consists primarily of interest earned on our cash and cash equivalent balances. 16 Results of Operations Comparison of the Three Months Ended June 30, 2023 and 2022 Three Months Ended June 30, 2023 2022 Change (in thousands) Operating expenses: Research and development 30,960 $ 20,711 $ 10,249 General and administrative 6,241 8,344 (2,103 ) Total operating expenses 37,201 29,055 8,146 Loss from operations (37,201 ) (29,055 ) (8,146 ) Other income (expense): Interest income 1,460 146 1,314 Other income (expense) (11 ) 3 (14 ) Total other income (expense) 1,449 149 1,300 Net loss and comprehensive loss $ (35,752 ) $ (28,906 ) $ (6,846 ) Research and Development Expense The following table summarizes our research and development expenses allocated by CAB program for the periods indicated: Three Months Ended June 30, 2023 2022 Change (in thousands) External expenses: BA3011 (AXL-ADC) $ 6,695 $ 3,565 $ 3,130 BA3021 (ROR2-ADC) 4,504 2,244 2,260 BA3071 (CTLA-4) 5,633 2,491 3,142 Other CAB Programs 8,453 7,530 923 Total external expenses 25,285 15,830 9,455 Personnel and related 3,066 2,768 298 Equity-based compensation 1,550 1,398 152 Facilities and other 1,059 715 344 Total research and development expenses $ 30,960 $ 20,711 $ 10,249 Research and development expenses were $31.0 million and $20.7 million for the three months ended June 30, 2023 and 2022, respectively. The increase of approximately $10.2 million was primarily driven by a $8.9 million increase in clinical development for our clinical-stage programs including startup activities on our EpCAM bispecific trial, a $0.5 million increase in development costs for various pre-clinical programs including manufacturing, a $0.3 million increase in personnel related costs due to an increase in headcount to support ongoing development activities for our programs, a $0.3 million increase in facility related and other costs, and a $0.2 million increase in stock-based compensation related to awards issued under the 2020 Plan. General and Administrative Expense General and administrative expenses were $6.2 million and $8.3 million for the three months ended June 30, 2023 and 2022, respectively. The decrease of approximately $2.1 million was primarily driven by a $1.4 million decrease in accounting and legal services which included a $1.0 million legal settlement in 2022, $0.3 million decrease in insurance due to a decrease in premiums for our D&O policy, and a $0.3 million decrease in stock-based compensation related to awards issued under the 2020 Plan. Interest Income Interest income was $1.5 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively. The increase of $1.4 million was due to higher yields earned compared to the same period in 2022. 17 Results of Operations Comparison of the Six Months Ended June 30, 2023 and 2022 Six Months Ended June 30, 2023 2022 Change (in thousands) Operating expenses: Research and development 52,657 $ 37,634 $ 15,023 General and administrative 13,474 15,767 (2,293 ) Total operating expenses 66,131 53,401 12,730 Loss from operations (66,131 ) (53,401 ) (12,730 ) Other income (expense): Interest income 2,940 231 2,709 Other income (expense) (21 ) 10 (31 ) Total other income (expense) 2,919 241 2,678 Net loss and comprehensive loss $ (63,212 ) $ (53,160 ) $ (10,052 ) Research and Development Expense The following table summarizes our research and development expenses allocated by CAB program for the periods indicated: Six Months Ended June 30, 2023 2022 Change (in thousands) External expenses: BA3011 (AXL-ADC) $ 11,254 $ 8,279 $ 2,975 BA3021 (ROR2-ADC) 6,647 4,032 2,615 BA3071 (CTLA-4) 8,385 4,223 4,162 Other CAB Programs 15,191 11,733 3,458 Total external expenses 41,477 28,267 13,210 Personnel and related 6,149 5,204 945 Equity-based compensation 3,001 2,698 303 Facilities and other 2,030 1,465 565 Total research and development expenses $ 52,657 $ 37,634 $ 15,023 Research and development expenses were $52.7 million and $37.6 million for the six months ended June 30, 2023 and 2022, respectively. The increase of approximately $15.0 million was primarily driven by a $11.2 million increase in clinical development for our clinical-stage programs including startup activities on our EpCAM bispecific trial, a $2.0 million increase in development costs for various pre-clinical programs including manufacturing, a $0.9 million increase in personnel related costs due to an increase in headcount to support ongoing development activities for our programs, a $0.6 million increase in facility and other allocated costs, and a $0.3 million increase in stock-based compensation due to awards issued in connection with the 2020 Plan. General and Administrative Expense General and administrative expenses were $13.5 million and $15.8 million for the six months ended June 30, 2023 and 2022, respectively. The decrease of approximately $2.3 million was primarily driven by a decrease of $1.4 million in accounting and legal services including a $1.0 million legal settlement in 2022, $0.6 million decrease in insurance due to a decrease in premiums for our D&O policy, and a $0.5 million decrease in stock-based compensation related to awards issued under the 2020 Plan, offset by a $0.1 million increase in personnel related costs. Interest Income Interest income was $2.9 million and $0.2 million for the six months ended June 30, 2023 and 2022, respectively. The increase of $2.7 million was due to higher yields earned compared to the same period in 2022. 18 Liquidity and Capital Resources We have incurred aggregate net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. As of June 30, 2023, we had cash and cash equivalents of $168.7 million. Future Funding Requirements Our primary uses of cash are to fund operating expenses, which consist primarily of research and development expenses related to our programs and related personnel costs. The timing and amount of future funding requirements depends on many factors, including the following: • the initiation, scope, rate of progress, results and costs of our preclinical studies, clinical trials and other related activities for our product candidates; • the costs associated with manufacturing our product candidates and establishing commercial supplies and sales, marketing and distribution capabilities; • the timing and costs of capital expenditures to support our research and development efforts; • the number and characteristics of other product candidates that we pursue; • our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make in connection with the licensing, filing, defense and enforcement of any patents or other intellectual property rights; • the timing, receipt and amount of sales from our potential products; • our need and ability to hire additional management, scientific and medical personnel; • the effect of competing products that may limit market penetration of our product candidates; • our need to implement additional internal systems and infrastructure, including financial and reporting systems; • the economic and other terms, timing and success of any collaboration, licensing, or other arrangements into which we may enter in the future, including the timing of receipt of any milestone or royalty payments under these agreements; • the compliance and administrative costs associated with being a public company; and • the extent to which we acquire or invest in businesses, products or technologies, although we have no commitments or agreements relating to any of these types of transactions. Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations for a period of at least twelve months from the date the financial statements included in this report are issued. However, we have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In addition, we will require additional funding in order to complete development of our product candidates and commercialize our products, if approved. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. We cannot assure you that, in the event we require additional financing, such financing will be available at acceptable terms to us, if at all. Failure to generate sufficient cash flows from operations, raise additional capital, and reduce discretionary spending should additional capital not become available could have a material adverse effect on our ability to achieve our intended business objectives. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated preclinical studies and clinical trials. To the extent that we raise additional capital through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates. We may also have to forego future revenue streams of research programs at an earlier stage of development or on less favorable terms than we would otherwise choose, or have to grant licenses on terms that may not be favorable to us. Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. For example, market volatility resulting from a variety of causes, including supply chain disruptions, and geopolitical disruptions, including 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. To the extent we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to our investors and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional 19 capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, acquiring other businesses, products or technology, or declaring dividends. If we are unable to obtain additional funding from these or other sources, it may be necessary to significantly reduce our rate of spending through reductions in staff and delay, scale back or stop certain research and development programs. Cash flows The following summarizes our cash flows for the periods indicated: Six Months Ended June 30, 2023 2022 (in thousands) Net cash provided by: Operating activities $ (46,748 ) $ (42,057 ) Investing activities (65 ) (176 ) Financing activities (1 ) (456 ) Net decrease in cash and cash equivalents $ (46,814 ) $ (42,689 ) Cash Used in Operating Activities Net cash used in operating activities for the six months ended June 30, 2023 was $46.7 million, which consisted of a net loss of $63.2 million, a net change of $8.6 million in our operating assets and liabilities and $7.9 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 $10.6 million, partially offset by an increase in prepaid expenses and other assets of $1.7 million and a net decrease in operating lease right-of-use assets and lease liabilities of $0.3 million. The non-cash transactions primarily consisted of $7.3 million of stock-based compensation and non-cash charges of $0.6 million related to depreciation and amortization. Net cash used in operating activities for the six months ended June 30, 2022 was $42.1 million, which consisted of a net loss of $53.2 million, a net change of $3.0 million in our operating assets and liabilities and $8.1 million of non-cash transactions. The net change in our operating assets and liabilities was primarily due to an increase in accounts payable and accrued expenses of $5.8 million, offset by an increase in prepaid expenses and other assets of $2.6 million. The non-cash transactions primarily consisted of $7.5 million of stock-based compensation and non-cash charges of $0.6 million related to depreciation and amortization. Cash Used in Investing Activities Cash used in investing activities was $65,000 for the six months ended June 30, 2023 and $0.2 million for the six months ended June 30, 2022, respectively, primarily related to the purchase of property and equipment. Cash Used in Financing Activities Net cash used in financing activities was immaterial for the six months ended June 30, 2023, consisting primarily of the proceeds from the issuance of common stock under the ESPP and the 2020 Plan, offset by payment of taxes related to the net settlement of restricted stock units. Net cash used in financing activities was $0.5 million for the six months ended June 30, 2022, which consisted primarily of the payment of taxes related to the net settlement of restricted stock units. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated, and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Our critical accounting policies are those accounting principles generally accepted in the United States that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition 20 and results of operations, as well as the specific manner in which we apply those principles. For a description of our critical accounting policies, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” contained in our Annual Report on Form 10-K for the year ended December 31, 2022. There have not been any material changes to the critical accounting policies discussed therein during the six months ended June 30, 2023. Off-Balance Sheet Arrangements We have not entered into any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Item 3 . Quantitative and Qualitative Disclosures About Market Risk. Not applicable to a smaller reporting company.