0001558370-23-009096.txt : 20230510 0001558370-23-009096.hdr.sgml : 20230510 20230510160634 ACCESSION NUMBER: 0001558370-23-009096 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 73 CONFORMED PERIOD OF REPORT: 20230331 FILED AS OF DATE: 20230510 DATE AS OF CHANGE: 20230510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Atreca, Inc. CENTRAL INDEX KEY: 0001532346 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 273723255 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38935 FILM NUMBER: 23906327 BUSINESS ADDRESS: STREET 1: 835 INDUSTRIAL ROAD, STREET 2: SUITE 400 CITY: SAN CARLOS STATE: CA ZIP: 94070 BUSINESS PHONE: 650-595-2595 MAIL ADDRESS: STREET 1: 835 INDUSTRIAL ROAD, STREET 2: SUITE 400 CITY: SAN CARLOS STATE: CA ZIP: 94070 10-Q 1 bcel-20230331x10q.htm 10-Q
39092167379828630001532346--12-312023Q1http://www.atreca.com/20230331#DepositsAndOthershttp://www.atreca.com/20230331#DepositsAndOthers6715441671544132351950324411430.540.651P2Y0.50false0001532346us-gaap:CommonStockMember2023-01-012023-03-310001532346us-gaap:CommonClassAMemberbcel:AtMarketOfferingMember2023-01-012023-03-310001532346us-gaap:CommonClassAMemberbcel:AtMarketOfferingMember2022-01-012022-03-310001532346us-gaap:CommonStockMember2022-01-012022-03-310001532346us-gaap:RetainedEarningsMember2023-03-310001532346us-gaap:AdditionalPaidInCapitalMember2023-03-310001532346us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001532346us-gaap:RetainedEarningsMember2022-12-310001532346us-gaap:AdditionalPaidInCapitalMember2022-12-310001532346us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001532346us-gaap:RetainedEarningsMember2022-03-310001532346us-gaap:AdditionalPaidInCapitalMember2022-03-310001532346us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001532346us-gaap:RetainedEarningsMember2021-12-310001532346us-gaap:AdditionalPaidInCapitalMember2021-12-310001532346us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001532346us-gaap:CommonStockMember2023-03-310001532346us-gaap:CommonStockMember2022-12-310001532346us-gaap:CommonStockMember2022-03-310001532346us-gaap:CommonStockMember2021-12-310001532346bcel:TwoThousandNineteenAndTwoThousandTenAndInducementPlanMember2022-01-012022-12-310001532346bcel:TwoThousandNineteenAndTwoThousandTenAndInducementPlanMember2022-12-310001532346srt:MinimumMemberbcel:EmployeeStockPurchasePlan2019Member2023-01-012023-03-310001532346srt:MaximumMemberbcel:EmployeeStockPurchasePlan2019Member2023-01-012023-03-310001532346srt:MinimumMemberbcel:EmployeeStockPurchasePlan2019Member2022-01-012022-03-310001532346srt:MaximumMemberbcel:EmployeeStockPurchasePlan2019Member2022-01-012022-03-310001532346bcel:TwoThousandNineteenAndTwoThousandTenAndInducementPlanMember2022-01-012022-03-310001532346us-gaap:RestrictedStockUnitsRSUMember2023-03-310001532346us-gaap:RestrictedStockUnitsRSUMember2022-12-310001532346us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-03-310001532346us-gaap:RestrictedStockUnitsRSUMemberbcel:EquityIncentivePlan2019Memberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2023-01-012023-03-310001532346us-gaap:RestrictedStockUnitsRSUMemberbcel:EquityIncentivePlan2019Memberus-gaap:ShareBasedCompensationAwardTrancheOneMember2023-01-012023-03-310001532346bcel:EmployeeStockPurchasePlan2019Member2023-01-012023-03-310001532346bcel:BillMelindaGatesFoundationMemberbcel:GrantAgreementMember2023-01-012023-03-3100015323462022-04-012022-06-300001532346bcel:OtherLegalFeesMember2023-01-012023-03-310001532346bcel:IntellectualPropertyRelatedLegalFeesMember2023-01-012023-03-310001532346bcel:OtherLegalFeesMember2022-01-012022-03-310001532346bcel:IntellectualPropertyRelatedLegalFeesMember2022-01-012022-03-310001532346us-gaap:LeaseholdImprovementsMember2023-03-310001532346us-gaap:FurnitureAndFixturesMember2023-03-310001532346us-gaap:EquipmentMember2023-03-310001532346us-gaap:ConstructionInProgressMember2023-03-310001532346us-gaap:ComputerEquipmentMember2023-03-310001532346us-gaap:LeaseholdImprovementsMember2022-12-310001532346us-gaap:FurnitureAndFixturesMember2022-12-310001532346us-gaap:EquipmentMember2022-12-310001532346us-gaap:ConstructionInProgressMember2022-12-310001532346us-gaap:ComputerEquipmentMember2022-12-3100015323462019-06-020001532346us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001532346us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001532346us-gaap:RetainedEarningsMember2023-01-012023-03-310001532346us-gaap:RetainedEarningsMember2022-01-012022-03-310001532346us-gaap:RestrictedStockUnitsRSUMemberbcel:EquityIncentivePlan2019Member2023-03-310001532346us-gaap:EmployeeStockOptionMemberbcel:EquityIncentivePlan2019Member2023-03-310001532346us-gaap:RestrictedStockUnitsRSUMemberbcel:EquityIncentivePlan2019Member2023-01-012023-03-310001532346us-gaap:EmployeeStockOptionMemberbcel:EquityIncentivePlan2019Member2023-01-012023-03-310001532346bcel:TwoThousandNineteenAndTwoThousandTenPlanMember2022-06-132022-06-130001532346bcel:OtherLegalFeesMember2023-03-310001532346bcel:IntellectualPropertyRelatedLegalFeesMember2023-03-310001532346bcel:OtherLegalFeesMember2022-12-310001532346bcel:IntellectualPropertyRelatedLegalFeesMember2022-03-310001532346bcel:BillMelindaGatesFoundationMemberbcel:GrantAgreementMember2023-03-310001532346bcel:TwothousandtwentythreeplanMemberus-gaap:CommonClassAMember2023-02-090001532346us-gaap:CommonClassBMember2023-03-310001532346us-gaap:CommonClassAMember2023-03-310001532346us-gaap:CommonClassBMember2022-12-310001532346us-gaap:CommonClassAMember2022-12-310001532346us-gaap:CommonClassBMember2019-06-020001532346us-gaap:CommonClassAMember2019-06-0200015323462022-03-3100015323462021-12-310001532346us-gaap:USTreasurySecuritiesMember2023-03-310001532346us-gaap:MoneyMarketFundsMember2023-03-310001532346us-gaap:DebtSecuritiesMember2023-03-310001532346us-gaap:USTreasurySecuritiesMember2022-12-310001532346us-gaap:MoneyMarketFundsMember2022-12-310001532346us-gaap:DebtSecuritiesMember2022-12-310001532346us-gaap:CorporateDebtSecuritiesMember2022-12-310001532346us-gaap:CertificatesOfDepositMember2022-12-310001532346us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:FairValueMeasurementsRecurringMember2023-03-310001532346us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001532346us-gaap:FairValueMeasurementsRecurringMember2022-12-3100015323462022-01-012022-12-310001532346us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-03-310001532346us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001532346us-gaap:WarrantMember2022-01-012022-03-310001532346us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001532346us-gaap:EmployeeStockOptionMember2022-01-012022-03-310001532346bcel:EmployeeStockPurchasePlan2019Memberus-gaap:CommonClassAMember2023-01-012023-03-310001532346us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001532346us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-310001532346bcel:TwoThousandNineteenAndTwoThousandTenPlanMember2023-01-012023-03-310001532346bcel:EmployeeStockPurchasePlan2019Memberus-gaap:CommonClassAMember2022-01-012022-03-310001532346us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-03-310001532346us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-03-310001532346us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001532346us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001532346us-gaap:CommonClassBMember2023-05-100001532346us-gaap:CommonClassAMember2023-05-100001532346us-gaap:PrepaidExpensesAndOtherCurrentAssetsMemberbcel:AssignmentAndLicenseAgreementMember2023-03-310001532346us-gaap:PrepaidExpensesAndOtherCurrentAssetsMemberbcel:AssignmentAndLicenseAgreementMember2022-12-310001532346bcel:ZymeworksIncMemberus-gaap:ResearchAndDevelopmentExpenseMemberbcel:OptionAndLicenseAgreementMember2022-04-012022-04-300001532346bcel:TwoThousandNineteenAndTwoThousandTenPlanMember2022-06-130001532346bcel:TwoThousandNineteenAndTwoThousandTenAndInducementPlanMember2023-01-012023-03-310001532346bcel:TwoThousandNineteenAndTwoThousandTenAndInducementPlanMember2023-03-310001532346us-gaap:CommonClassAMemberbcel:AtMarketOfferingMember2020-08-310001532346bcel:AtMarketOfferingMember2020-08-012020-08-310001532346bcel:ZymeworksIncMemberbcel:OptionAndLicenseAgreementMember2022-04-012022-04-300001532346us-gaap:CommonClassAMember2019-06-022019-06-0200015323462023-01-310001532346bcel:BillMelindaGatesFoundationMemberbcel:GrantAgreementMember2022-10-3100015323462022-01-012022-03-310001532346us-gaap:CommonClassAMemberbcel:AtMarketOfferingMember2020-08-012023-03-310001532346srt:MaximumMember2023-01-012023-03-310001532346srt:MaximumMember2022-01-012022-12-310001532346bcel:XencorIncMemberbcel:CollaborationAndLicenseAgreementMember2020-07-012020-07-3100015323462023-01-012023-03-3100015323462023-03-3100015323462022-12-31iso4217:USDxbrli:purebcel:Institutionbcel:Programbcel:Votexbrli:sharesiso4217:USDxbrli:sharesbcel:segment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to Commission file number 001-38935

ATRECA, INC.

(Exact name of registrant as specified in its charter)

Delaware

27-3723255

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

835 Industrial Road, Suite 400,

San Carlos, CA 94070

(Address of principal executive offices)

(Zip Code)

(650)-595-2595

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock

BCEL

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No  .

As of May 10, 2023, the registrant had 32,441,143 shares of Class A common stock, $0.0001 par value per share and 6,715,441 shares of Class B common stock, $0.0001 par value per share, outstanding.

PART I --- FINANCIAL INFORMATION

Item 1. Financial Statements

Atreca, Inc.

Balance Sheets

(in thousands, except share and per share data)

March 31, 

December 31, 

    

2023

    

2022

    

(unaudited)

ASSETS

Current Assets

Cash and cash equivalents

$

39,484

$

30,819

Investments

16,904

39,676

Prepaid expenses and other current assets

3,255

7,531

Total current assets

59,643

78,026

Property and equipment, net

36,671

37,972

Operating lease right-of-use assets

35,618

36,056

Deposits and other

2,494

2,976

Total assets

$

134,426

$

155,030

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

Accounts payable

$

1,400

$

1,741

Accrued expenses

7,890

9,681

Operating lease liabilities, current portion

3,655

3,544

Other current liabilities

1,121

1,327

Total current liabilities

14,066

16,293

Operating lease liabilities, net of current portion

59,394

60,331

Total liabilities

73,460

76,624

Commitment and contingencies (Note 9)

Stockholders’ equity

Class A common stock, $0.0001 par value, 650,000,000 shares authorized as of both March 31, 2023 and December 31, 2022; 32,441,143 and 32,351,950 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

3

3

Class B common stock, $0.0001 par value, 50,000,000 shares authorized as of both March 31, 2023 and December 31, 2022; 6,715,441 shares issued and outstanding as of both March 31, 2023 and December 31, 2022

1

1

Additional paid-in capital

538,924

535,592

Accumulated other comprehensive loss

(28)

(266)

Accumulated deficit

(477,934)

(456,924)

Total stockholders’ equity

60,966

78,406

Total liabilities and stockholders’ equity

$

134,426

$

155,030

See accompanying notes to the unaudited financial statements.

- 3 -

Atreca, Inc.

Statements of Operations

(in thousands, except share and per share data)

(unaudited)

Three Months Ended March 31, 

    

2023

    

2022

Expenses

Research and development

$

13,452

$

17,064

General and administrative

8,079

8,606

Total expenses

21,531

25,670

Interest and other income (expense)

Other income

92

750

Interest income

429

44

Net other income (expense)

$

521

$

794

Loss before income tax expense

(21,010)

(24,876)

Income tax expense

Net loss

$

(21,010)

$

(24,876)

Net loss per share, basic and diluted

$

(0.54)

$

(0.65)

Weighted-average shares used in computing net loss per share, basic and diluted

39,092,167

37,982,863

See accompanying notes to the unaudited financial statements.

- 4 -

Atreca, Inc.

Statements of Loss and Comprehensive Loss

(in thousands)

(unaudited)

Three Months Ended March 31, 

    

2023

    

2022

Net loss

$

(21,010)

$

(24,876)

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale debt securities

238

(368)

Comprehensive loss

$

(20,772)

$

(25,244)

See accompanying notes to the unaudited financial statements.

- 5 -

Atreca, Inc.

Statements of Stockholders' Equity

(in thousands, except share data)

(unaudited)

Accumulated

Additional

Other

Total

Three Months Ended March 31, 2022

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders'

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balances at December 31, 2021

37,758,797

$

4

$

514,794

$

(102)

$

(359,767)

$

154,929

Issuance of Class A common stock through "at-the-market" offering, net of underwriter discount and issuance costs

700,000

3,509

3,509

Issuance of Class A common stock upon exercise of options

16,666

76

76

Issuance of Class A common stock under the Employee Stock Purchase Plan

115,973

177

177

Stock-based compensation

4,336

4,336

Unrealized loss on available-for-sale debt securities

(368)

(368)

Net loss

(24,876)

(24,876)

Balances at March 31, 2022

38,591,436

$

4

$

522,892

$

(470)

$

(384,643)

$

137,783

Accumulated

Additional

Other

Total

Three Months Ended March 31, 2023

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders'

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balances at December 31, 2022

39,067,391

$

4

$

535,592

$

(266)

$

(456,924)

$

78,406

Issuance of Class A common stock under the Employee Stock Purchase Plan

89,193

109

109

Stock-based compensation

3,223

3,223

Unrealized gain on available-for-sale debt securities

238

238

Net loss

(21,010)

(21,010)

Balances at March 31, 2023

39,156,584

$

4

$

538,924

$

(28)

$

(477,934)

$

60,966

See accompanying notes to the unaudited financial statements.

- 6 -

Atreca, Inc.

Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended March 31, 

    

2023

    

2022

Cash Flows from Operating Activities

Net loss

$

(21,010)

$

(24,876)

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

Depreciation and amortization

1,290

1,352

Amortization of operating right-of-use asset

438

386

Stock-based compensation

3,223

4,336

Amortization of discount or premium on available-for-sale securities

(70)

89

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

4,836

(224)

Accounts payable

(328)

1,086

Accrued expenses

(1,791)

(6,703)

Other current liabilities

(206)

(205)

Operating lease liabilities

(826)

(792)

Net cash used in operating activities

(14,444)

(25,551)

Cash Flows from Investing Activities

Purchase of property and equipment

(80)

(68)

Purchase of investments

(4,905)

(39,141)

Proceeds from maturities of investments

27,985

14,820

Net cash provided by investing activities

23,000

(24,389)

Cash Flows from Financing Activities

Proceeds from the issuance of Class A common stock under the Employee Stock Purchase Plan

109

177

Proceeds from exercise of stock options

76

Proceeds from issuance of common shares in "at-the-market" equity offering, net of issuance costs

3,518

Principal payments on capital lease obligations

(4)

Net cash provided by financing activities

109

3,767

Net change in cash, cash equivalents and restricted cash

8,665

(46,173)

Cash, cash equivalents and restricted cash, beginning of period

31,934

96,204

Cash, cash equivalents and restricted cash, end of period

$

40,599

$

50,031

See accompanying notes to the unaudited financial statements.

- 7 -

Atreca, Inc.

Statements of Cash Flows (continued)

(in thousands)

(unaudited)

Three Months Ended March 31, 

    

2023

    

2022

  

Supplemental Schedule of Non-Cash Investing and Financing Activities

Costs related to "at-the-market" offering included in accounts payable

$

$

9

Purchases of property and equipment included in accounts payable and accrued liabilities

$

$

300

Reclassification of fixed assets held-for-sale

$

78

$

See accompanying notes to the unaudited financial statements.

- 8 -

Notes to Unaudited Interim Financial Statements

1.            Business

Nature of Business

Atreca, Inc. (the “Company”) was incorporated in the State of Delaware on June 11, 2010 (“inception”), and is located in San Carlos, California. The Company is a biopharmaceutical company utilizing its differentiated platform to discover and develop novel antibody-based immunotherapeutics to treat a range of solid tumor types. The Company's lead product candidate, ATRC-101, is a monoclonal antibody in clinical development with a novel mechanism of action and target derived from an antibody identified using its discovery platform. The Company operates in a single segment. Since inception, the Company has been primarily engaged in research and development, raising capital, building its management team and building its intellectual property portfolio.

2.           Summary of Significant Accounting Policies

Basis of Presentation

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited financial statements should be read in conjunction with the audited financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission ("SEC") on March 29, 2023.

Going Concern

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of our plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, we evaluate whether the mitigating effect of its plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of our plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. In performing this analysis, we excluded certain elements of our operating plan that cannot be considered probable.

Our expectation to generate operating losses and negative operating cash flows in the future and the need for additional funding to support our planned operations raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that the financial statements are issued. Management intends to complete additional equity financings and reduce spending in fiscal 2023 and 2024. However, due to several factors, including those outside management’s control, there can be no assurance that we will be able to complete additional equity financings. If we are unable to complete additional financings, management’s plans include further reducing or delaying operating expenses. We have concluded the likelihood that our plan to successfully obtain sufficient funding from one or more of these sources or adequately reduce expenditures, while reasonably possible, is less than probable. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least 12 months from the date of issuance of these unaudited financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not

- 9 -

include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of income and expenses in the financial statements and accompanying notes. Actual results could differ from those estimates. Key estimates in the financial statements include estimated useful lives of property and equipment, impairment of long-lived assets, accrued expenses, valuation of deferred income tax assets, fair value of available-for-sale debt securities, incremental borrowing rate used for lease accounting and fair value of options granted under the Company's stock option plan.

Unaudited Interim Financial Statements

The accompanying financial statements are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of March 31, 2023 and its results of operations for the three months ended March 31, 2023 and 2022, and statements of cash flows for the three months ended March 31, 2023 and 2022. The financial data and the other financial information contained in these notes to the financial statements related to the three-month periods ended March 31, 2023 and 2022 are also unaudited. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period. The balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date.

Other Income

Other income is comprised of amounts earned from services performed under service agreements. The Company follows the provisions of Accounting Standards Update 2014-09 ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”). The guidance provides a unified model to determine how income is recognized.

In determining the appropriate amount of other income to be recognized as it fulfills its obligations under the agreements, the Company performs the following steps: (i) identifies the promised goods or services in the contract; (ii) determines whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measures the transaction price, including the constraint on variable consideration; (iv) allocates the transaction price to the performance obligations based on estimated selling prices; and (v) recognizes other income when (or as) the Company satisfies each performance obligation.

The Company generally allocates the transaction price to distinct performance obligations at their stand-alone selling prices, determined by their estimated costs plus some margin. Performance obligations are generally delivered over time and recognized based upon observable inputs as the related research services are performed, which are recorded as research and development expenses. Amounts due under service agreements are generally billed monthly as services are delivered and do not generally result in contract liabilities or assets.

In March 2022, the Company entered into an agreement with a third party for the assignment of certain non-core intellectual property. The initial consideration was classified as other income and recognized upon completion of the assignment. The agreement provides for additional consideration in the event of commercial exploitation of the intellectual property. The term of the agreement extends to the date of expiration of the last to expire of any of the assigned patents.

In October, 2022, the Company entered into the Grant Agreement with the Bill & Melinda Gates Foundation under which it was awarded a grant totaling up to $1.2 million for its malaria program. The parties amended the agreement in December 2022 to extend the grant term. During the three months ended March 31, 2023, the Company recognized $92,000 of income related to the Grant Agreement and had $1.1 million of unused funds received recorded as

- 10 -

deferred revenue within accrued and other current liabilities. The Company recorded no receivables under service and license agreements as of March 31, 2023 and December 31, 2022.

Collaborations

Historically, we have entered into a number of discovery collaborations as we developed our discovery platform. These collaborations have generally focused on identifying novel antibodies in areas of significant unmet medical need.

In July 2020, the Company entered into a Collaboration and License Agreement with Xencor, Inc. (the “Xencor Agreement”), to research, develop and commercialize novel CD3 bispecific antibodies as potential therapeutics in oncology. Under the Xencor Agreement, the Company and Xencor, Inc. will engage in a three-year research program in which the Company will provide antibodies against novel tumor targets through its discovery platform from which Xencor, Inc. will engineer XmAb bispecific antibodies that also bind to the CD3 receptor on T cells. Up to two joint programs are eligible to be mutually selected for further development and commercialization, with each partner sharing 50% of costs and profits. Each company has the option to lead development, regulatory and commercialization activities for one of the joint programs. In addition, the Xencor Agreement allows each partner the option to pursue up to two programs independently, with a mid-to high-single digit percent royalty payable on net sales to the other partner.

The Company evaluated the Xencor Agreement under the provisions of ASC 606 and ASU 2018-18, Collaborative Arrangements (Topic 808) Clarifying the Interaction between Topic 808 and Topic 606. The Company concluded that Xencor, Inc. is not a customer as there are no distinct units of account that are reflective of a vendor-customer relationship or exchange of consideration for the research activities. The Company’s share of any collaboration expense is recognized as an research and development expense on the Company’s statement of operations.

For the cost-sharing related to the research program, the Company will follow the presentation and disclosure guidance of ASC 808, Collaboration Agreements. The Company had a receivable of $187,000 and a payable of $12,000 and under the research cost-sharing provision recorded in prepaid and other current assets and accrued expenses, respectively, on the accompanying balance sheets as of March 31, 2023 and December 31, 2022, respectively.

In-Licensing Arrangements – Development

In April 2022, the Company entered into an Option and License Agreement (the “Option and License Agreement”), by and between the Company and Zymeworks Inc (“Zymeworks”). The Company received a license under certain of Zymeworks’ proprietary drug conjugate patents and know-how to perform preclinical research and development of antibody drug conjugates (“ADCs”). The aggregate consideration for the research license is $5.0 million. The Company also received an option to obtain an exclusive license to research, develop, manufacture, and commercialize certain ADCs for additional license fees and royalties. Unless earlier terminated or extended, the term of the research license and the commercial option is two years from the effective date.

The Company will be required to use commercially reasonable efforts to develop and commercialize at least one licensed product and the Company will pay to Zymeworks an option exercise fee, and lump sum payments upon the achievement of certain development and regulatory milestones and commercial milestones. In addition, with respect to each licensed product, the Company will pay tiered royalties on net sales of licensed products at single-digit royalty rates.

The research license fee of $5.0 million was expensed to research and development expense in April 2022 in accordance with the Company's research and development expense policy.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include all cash balances and highly liquid investments purchased with an original maturity of three months or less.

- 11 -

The Company maintained restricted cash of $1.1 million as of both March 31, 2023 and December 31, 2022. These amounts as of March 31, 2023 and December 31, 2022 are included in deposits and other in the accompanying balance sheets and is comprised solely of letter of credit required pursuant to the lease for Company facilities.

The Company’s reconciliation of cash and cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same amounts shown in the statements of cash flows were as follows (in thousands):

    

March 31, 

    

December 31, 

2023

    

2022

Cash and cash equivalents

$

39,484

$

30,819

Restricted cash

1,115

1,115

Cash, cash equivalents and restricted cash shown in the statements of cash flows

$

40,599

$

31,934

Investments

The Company considers securities purchased with original maturities greater than three months to be investments. The Company’s policy is to protect the value of its investment portfolio and minimize principal risk by earning returns based on current interest rates. The Company’s intent is to convert all investments into cash to be used for operations and has classified them as available for sale. For purposes of determining realized gains and losses, the cost of debt securities sold is based on specific identification. Interest and dividends on securities classified as available-for-sale are included in interest income.

Leases

The Company determines if an arrangement is, or contains, a lease at inception. The Company measures lease liabilities based on the present value of lease payments over the lease term. As the Company’s leases generally do not provide an implicit discount rate, the net present value of future minimum lease payments is determined using the Company’s incremental borrowing rate. Options in the lease terms to extend or terminate the lease are not reflected in the lease liabilities unless it is reasonably certain that any such option will be exercised.

The Company measures right-of-use assets at the lease commencement date based on the corresponding lease liabilities adjusted for (i) prepayments made to the lessor at or before the commencement date, (ii) initial direct costs incurred and (iii) certain tenant incentives under the lease. The Company evaluates the recoverability of the right-of-use assets for possible impairment in accordance with the long-lived assets policy. The Company has elected not to recognize right-of-use assets or lease liabilities for leases with an initial lease term of twelve months or less.

The Company’s lease agreements do not contain residual value guarantees or covenants. Lease expense is recognized on a straight-line basis over the terms of the leases. Incentives granted under the Company’s facilities lease, including rent holidays, are recognized as adjustments to lease expense on a straight-line basis over the terms of the leases.

Risks and Uncertainties

The Company is subject to a number of risks associated with companies at a similar stage, including COVID-19, dependence on key individuals, competition from similar services and larger companies, volatility of the industry, ability to obtain regulatory clearance, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company and general economic conditions.

- 12 -

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents, investments and other receivables included in prepaid and other current assets. Cash and cash equivalents are held at three financial institutions and were in excess of the Federal Deposit Insurance Corporation insurable limit at March 31, 2023 and December 31, 2022. Additionally, cash and cash equivalents and investments are maintained at brokerage firms for which amounts are insured by the Securities Investor Protection Corporation subject to legal limits. The Company does not require collateral or other security for other receivables.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs consist primarily of salaries and benefits, consultant fees, stock-based compensation, certain facility costs, and other costs associated with preclinical and clinical development.

A substantial portion of the Company’s ongoing research and development activities are conducted by third-party service providers in connection with preclinical and clinical development activities and contract manufacturing organizations in connection with the production of materials for clinical trials. At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expense relating to these costs.

Stock-Based Compensation

The Company generally grants stock options to its employees for a fixed number of shares with an exercise price equal to the fair value of the underlying shares at the date of grant. The Company accounts for stock option grants using the fair value method. The fair value of options is calculated using the Black-Scholes option pricing model. For restricted stock units, fair value is based on the closing price of the Company’s Class A common stock on the grant date. Stock-based compensation is recognized as the underlying options vest using the straight-line attribution approach, and forfeitures are recorded as they occur.

Emerging Growth Company Status

The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act, (“JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act, which provides that an EGC can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards, and as a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company Financial Accounting Standards Board (“FASB”) standards’ effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of the IPO or such earlier time that the Company is no longer an EGC.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, or Topic 326: Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2020-03, and ASU 2020-02 which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables. The amendment replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. For available-for-sale debt securities, credit losses should be recorded through an allowance for credit losses. The Company adopted this accounting standard as of January 1, 2023. The adoption of this standard did not have

- 13 -

any impact to the Company’s financial statements as credit losses at the transition date were not expected, based on the evaluation of the Company’s available-for-sale debt securities.

3.           Fair Value of Financial Instruments

The fair value of the Company's assets and liabilities, which qualify as financial instruments under FASB ASC 820, Fair Value Measurements and Disclosures, approximates their carrying value represented in the balance sheets. The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

March 31, 2023

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

  

  

  

  

Money market funds

$

37,998

$

$

$

37,998

U.S. Treasury securities

16,904

16,904

Total

$

54,902

$

$

$

54,902

December 31, 2022

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

  

  

  

  

Money market funds

$

29,658

$

$

$

29,658

Certificates of deposit

483

483

Corporate debt securities

1,996

1,996

U.S. Treasury securities

37,197

37,197

Total

$

67,338

$

1,996

$

$

69,334

The Company utilized the market approach and Level 1 valuation inputs to value its money market funds, certificates of deposit, and U.S. government treasury securities because published fair market values were readily available. The Company measured the fair value of corporate debt securities using Level 2 valuation inputs, which are based on quoted prices and market observable data of similar instruments. As of both March 31, 2023 and December 31, 2022, the remaining contractual maturity of all marketable securities was less than one year.

- 14 -

4.           Cash, Cash Equivalents and Investments

The fair value and the amortized cost of cash, cash equivalents and available-for-sale investments by major security type consist of the following (in thousands):

Gross

Gross

Estimated

Cash and

 

Amortized

Unrealized

Unrealized

Fair

Cash

Short-term

 

March 31, 2023

    

Cost

    

Gains

    

Losses

    

Value

    

Equivalents

Investment

 

Cash, cash equivalents and money market funds

$

39,484

$

$

$

39,484

$

39,484

$

Available-for-sale:

U.S. Treasury securities

 

16,932

(28)

16,904

16,904

Total

$

56,416

$

$

(28)

$

56,388

$

39,484

$

16,904

Gross

Gross

Estimated

Cash and

 

Amortized

Unrealized

Unrealized

Fair

Cash

Short-term

 

December 31, 2022

    

Cost

    

Gains

    

Losses

    

Value

    

Equivalents

Investment

 

Cash, cash equivalents and money market funds

$

30,819

$

$

$

30,819

$

30,819

$

Available-for-sale:

U.S. Treasury securities

 

37,458

(261)

37,197

37,197

Corporate debt securities

1,999

(3)

1,996

1,996

Certificates of deposit

485

 

 

(2)

 

483

 

 

483

Total

$

70,761

$

$

(266)

$

70,495

$

30,819

$

39,676

The Company evaluated the securities for other-than-temporary impairment and considered the decline in market value for the securities to be primarily attributable to current economic and market conditions. It is not more likely than not that the Company will be required to sell the securities, and the Company has no intention to do so prior to the recovery of the amortized cost basis. Based on this analysis, these marketable securities were not considered to be other-than-temporarily impaired as of March 31, 2023.

5.           Prepaid Expenses and Other Current Assets

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

    

March 31,

December 31,

    

2023

    

2022

    

Vendor prepayments and deposits

$

2,006

$

2,010

Prepaid insurance

504

1,026

Prepaid facility maintenance fee

 

336

 

336

Other receivables

 

187

 

3,985

Interest receivables and other current assets

222

174

Total prepaid expenses and other current assets

$

3,255

$

7,531

- 15 -

6.           Property and Equipment, net

Property and equipment, net consists of the following (in thousands):

March 31, 

    

December 31, 

    

2023

    

2022

 

Laboratory equipment

$

12,339

$

13,191

Furniture and fixtures

 

1,929

 

1,929

Computer hardware and software

 

1,566

 

1,518

Leasehold improvements

 

37,908

 

37,908

Construction in process

 

199

 

178

 

53,941

 

54,724

Less accumulated depreciation and amortization

 

(17,270)

 

(16,752)

Total property and equipment, net

$

36,671

$

37,972

Depreciation and amortization expense was $1.3 million and $1.4 million for the three months ended March 31, 2023 and 2022, respectively.

In December 2022, the Company identified certain long-lived assets no longer utilized under current or expected future operations. Accordingly, the Company recognized impairment expense of $0.4 million in 2022. In January 2023, certain long-lived assets with carrying value of $0.1 million met the criteria to be classified as held for sale and classified as current assets included in prepaid and other current assets.

7.           Accrued Expenses

Accrued expenses consist of the following (in thousands):

    

March 31,

    

December 31,

2023

    

2022

Compensation and related benefits

$

1,645

$

3,789

License fees

3,000

3,000

Contract research fees

2,428

2,201

Professional fees

621

128

Other

196

563

Total accrued expenses

$

7,890

$

9,681

8.           Leases

The Company leases its office facilities under a non-cancellable operating lease agreement that expires in April 2033. Under the terms of the leases, the Company is responsible for certain insurance, property taxes and maintenance expenses. The office facilities lease agreements contain scheduled increases over the lease term. The Company was not party to any finance leases as of March 31, 2023.

The Company's future lease payments as of March 31, 2023, which are presented as current portion of operating lease liabilities, and operating lease liabilities, net of current portion on the Company's balance sheets (in thousands, except weighted-average data) are as follows:

- 16 -

Operating

Leases

Periods

2023 - remainder

$

5,765

2024

 

7,846

2025

 

8,064

2026

8,288

2027

8,519

Thereafter

48,771

Total lease payments

$

87,253

Less: imputed interest

 

(24,204)

Present value of lease liabilities

$

63,049

Lease liabilities, current

3,655

Lease liabilities, noncurrent

59,394

Total lease liabilities

$

63,049

Weighted-average remaining lease term (in years)

10.2

Weighted-average discount rate

6.64%

Lease expenses under the Company’s operating leases were $1.5 million for each of the three months ended March 31, 2023 and 2022. Variable lease expenses for operating leases were $0.8 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively.

Cash paid for amounts included in the measurement of lease liabilities for each of the three months ended March 31, 2023 and 2022 were $1.9 million.

Practical Expedients

Leases with an initial term of 12 months or less are not recorded on the balance sheets. The Company recognizes the lease expense for such leases on a straight-line basis over the lease term.

The Company has elected to account for lease (e.g., fixed payments including rent) and non-lease components (e.g., common-area maintenance costs) as a single combined lease component under ASC 842 as the lease components are the predominant elements of the combined components.

As part of the transition to ASC 842, the Company elected to use the modified retrospective transition method with the new standard being applied as of the January 1, 2022 adoption date. Additionally, the Company has elected, as of the adoption date, not to reassess whether expired or existing contracts contain leases under the new definition of a lease, not to reassess the lease classification for expired or existing leases, and not to reassess whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.

9.           Commitments and Contingencies

Litigation

The Company is not aware of any asserted or unasserted claims against it where it believes that an unfavorable resolution would have an adverse material impact on the operations or financial position of the Company.

- 17 -

10.           Reorganization and Other Charges

On June 1, 2022, the Company implemented and announced a corporate reorganization of its operations. In connection with the reorganization, the Company undertook a workforce reduction and recorded severance and employee benefits charges of $0.7 million to operating expenses in the quarter ending June 30, 2022.

As of March 31, 2023, there was no outstanding liability related to severance and employee benefit charges and does not expect to incur any material additional costs related to the reorganization.

11.           Capital Stock

Class A and Class B Common Stock

On June 2, 2019, the board of directors of the Company authorized the issuance of 650,000,000 shares of Class A common stock, $0.0001 par value per share, 50,000,000 shares of Class B common stock, $0.0001 par value per share and 300,000,000 shares of preferred stock, $0.0001 par value per share, upon the filing of the Company’s Amended and Restated Certificate of Incorporation. Each holder of Class A common stock is entitled to one vote and each holder of Class B common stock is not entitled to vote except as may be required by law and shall not be entitled to vote on the election of directors at any time.

Sales Agreement

In August 2020, the Company entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company may, upon the terms and subject to the conditions set forth therein, issue and sell through Cowen, acting as the Company’s sales agent and/or principal, shares of the Company’s Class A common stock, having an aggregate offering price of up to $100.0 million (the “ATM Shares”). The Company has no obligations to sell any ATM Shares under the Sales Agreement. The Sales Agreement provides that Cowen will be entitled to compensation for its services in an amount equal to up to 3.0% of gross proceeds for each time we issue and sell ATM Shares under the Sales Agreement. The ATM Shares will be sold based on prevailing market prices at the time of the sale, and, as a result, prices may vary. Unless otherwise terminated earlier, the Sales Agreement continues until all shares available under the Sales Agreement have been sold. As of March 31, 2023, the Company issued and sold 1,493,361 shares of its Class A common stock. Cumulative net proceeds from the sales were $7.9 million after deducting underwriting fees of $0.3 million and issuance costs of $0.3 million. During the three months ended March 31, 2023 and 2022, the Company sold zero and 700,000 shares of its Class A common stock, respectively.

12.           Equity Incentive Plans

2019 Equity Incentive Plan and 2023 Inducement Plan

The Company’s board of directors adopted and our stockholders approved our 2019 Equity Incentive Plan (the “2019 Plan”) on June 2, 2019, and June 7, 2019, respectively. The 2019 Plan became effective on June 19, 2019, and no further grants will be made under the Company’s 2010 Equity Incentive Plan (the “2010 Plan”). The purpose of the 2019 Plan, through the grant of stock awards including stock options and other stock-based awards, including restricted stock units (“RSUs”), is to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for our success and that of the Company’s affiliates, and provide a means by which the eligible recipients may benefit from increases in the value of the Company’s Class A common stock.

On February 9, 2023, the 2023 Inducement Plan, or the Inducement Plan, became effective. Subject to adjustment from time to time as provided in the Inducement Plan, 1.0 million shares of Class A common stock are available for issuance under the Inducement Plan. The purpose of the Inducement Plan is to attract, retain and motivate

- 18 -

certain new employees of the Company. The Inducement Plan is administered by the compensation committee of the Company’s board of directors. Under the terms of the Inducement Plan, the compensation committee may grant equity awards, including nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, and other stock awards to new employees of the Company.

Stock Option Repricing

Effective June 13, 2022, the Company’s board of directors approved a one-time repricing of previously granted and outstanding vested and unvested stock options with exercise prices greater than or equal to $9.00 per share under the 2010 Plan and the 2019 Plan held by eligible employees. As a result, the exercise price for these awards was modified to $1.845 per share, which was the closing price of the Company’s Class A common stock as reported on the Nasdaq Global Select Market on June 13, 2022. No other terms of the repriced stock options were modified, and the repriced stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the repricing, 3,606,163 vested and unvested stock options outstanding as of June 13, 2022 with original exercise prices ranging from $9.87 to $22.10, were repriced.

The repricing resulted in incremental stock-based compensation expense of $2.5 million, of which $0.1 million was expensed during the three months ended March 31, 2023. Remaining $0.5 million related to unvested stock option awards will be amortized on a straight-line basis over the weighted-average vesting period of those awards of approximately 0.8 years.

Stock Options

Stock option activity under the 2019 Plan, the 2010 Plan and the Inducement Plan is as follow:

Options Outstanding

Weighted-

Average

Aggregate

Weighted-

Remaining

Intrinsic

Number

Average

Contractual

Value

    

of Shares

Exercise Price

Life (years)

(in thousands)

Balances, December 31, 2022

 

6,373,534

$

3.56

7.3

$

2

Granted

 

2,785,458

 

1.48

 

 

Cancelled

 

(170,191)

 

3.81

 

 

Balances, March 31, 2023

 

8,988,801

$

2.91

7.9

$

6

Vested and expected to vest at March 31, 2023

 

8,988,801

$

2.91

7.9

$

6

Exercisable at March 31, 2023

 

4,428,346

$

3.87

6.5

$

5

Vested at March 31, 2023

 

4,428,346

$

3.87

6.5

$

5

The weighted-average exercise price, weighted-average remaining contractual life and aggregate intrinsic value as of March 31, 2023 reflect the impact of the stock option repricing discussed above. The weighted-average grant date fair value of options granted in the three months ended March 31, 2023 and 2022 was $1.10 and $1.70, respectively. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model, assuming no expected dividends and the following weighted average assumptions:

Three Months Ended March 31, 

    

2023

    

2022

 

 

Expected life (in years)

 

5.98

 

6.06

Volatility

 

86.8

%  

84.4

%

Risk-free interest rate

 

3.8

%  

1.9

%

Expected volatility is based on volatilities of public peer companies operating in the Company’s industry. The expected life of the options is estimated using the simplified method detailed in SEC Staff Accounting Bulletin No. 107.

- 19 -

The simplified method calculates the expected term as the mid-point between the weighted-average time to vesting and the contractual maturity. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

Restricted Stock Units

The 2019 Plan provides for the issuance of RSUs to employees, directors and consultants. RSUs vest over a period of two years with 50% vesting on the one year anniversary of the award and the remainder vesting on the two year anniversary of the award.

The following table summarizes RSU activity for the three months ended March 31, 2023:

Weighted-Average

Number

Grant Date

    

of Shares

Fair Value per RSU

Unvested Balances, December 31, 2022

 

330,440

$

6.15

RSUs Granted

 

438,502

 

1.49

RSUs Cancelled

 

(15,478)

 

2.88

Unvested Balances, March 31, 2023

 

753,464

$

3.51

2019 Employee Stock Purchase Plan

Three Months Ended March 31, 

    

2023

    

2022

 

 

Expected life (in years)

 

0.5 - 2.0

 

0.5 - 2.0

Volatility

 

84.6 - 111.0

%  

79.0 - 89.9

%

Risk-free interest rate

 

4.9 - 5.2

%  

0.6 - 1.3

%

The Company’s board of directors adopted the 2019 Employee Stock Purchase Plan (“ESPP”) on June 2, 2019, and the Company’s stockholders approved the ESPP on June 7, 2019. During the three months ended March 31, 2023 and 2022, the expense related to the ESPP was $0.1 million and $0.2 million, respectively. The fair value of each ESPP is estimated on the date of grant using the Black-Scholes option pricing model, assuming no expected dividends and the following range of assumptions:

The Company recognized $3.2 million and $4.3 million of stock-based compensation expense related to the 2019 Plan, 2010 Plan, and ESPP for the three months ended March 31, 2023 and 2022, respectively. The compensation expense is allocated on a departmental basis, based on the classification of the option holder, as follows (in thousands):

Three Months Ended March 31, 

    

2023

    

2022

 

Research and development

$

1,392

$

2,067

General and administrative

 

1,831

 

2,269

$

3,223

$

4,336

No income tax benefits have been recognized in the statements of operations for stock-based compensation arrangements and no stock-based compensation costs have been capitalized as property and equipment as of March 31, 2023.

Unrecognized compensation expense as of March 31, 2023 totaled $12.6 million related to non-vested stock options with a remaining weighted-average requisite service period of 2.1 years and $1.4 million related to non-vested RSUs with a remaining weighted-average requisite service period of 1.2 years.

- 20 -

13.          401(k) Plan

The Company has a 401(k) plan that qualifies as a deferred compensation arrangement under Section 401 of the Code. Eligible employees may elect to defer a portion of their pretax earnings subject to certain statutory limits. Beginning January 1, 2021, the Company matches 100% up to the first $5,000 contributed by a participant. All matching contributions are immediately vested. Total matching contributions to the 401(k) Plan were $0.3 million and $0.4 million for the three months ended March 31, 2023 and 2022, respectively.

14.          Net Loss Per Share

The following outstanding potentially dilutive common shares were excluded from the computation of diluted net loss per share for the periods presented because the impact of including them would have been antidilutive:

Three Months Ended March 31, 

    

2023

    

2022

Common stock options

8,988,801

6,958,583

Unvested restricted stock units

753,464

835,980

Common stock warrants

 

 

49,997

9,742,265

7,844,560

15.          Related Party Transactions

The Company recorded other income of $92,000 and zero for the three months ended March 31, 2023 and 2022, respectively, under the Grant Agreement and service contracts with a stockholder. The Company had no receivable from the stockholder as of both March 31, 2023 and December 31, 2022.

The Company recorded expense of $0.3 million and $0.4 million during the three months ended March 31, 2023 and 2022, respectively, related to intellectual property and other legal services performed by a related party. An immediate family member of Tito A. Serafini (“Dr. Serafini”), a member of our board of directors and our Chief Strategy Officer, is a partner of the legal service provider. The Company has a payable of $0.2 million to the related party as of both March 31, 2023 and December 31, 2022, respectively.

The Company recorded expense of $0.4 million and $0.7 million during the three months ended March 31, 2023 and 2022, respectively, related to legal services performed by a related party. An immediate family member of Dr. Serafini is a partner of the legal service provider. The Company has a payable of $270,000 and $33,000 to the related party as of both March 31, 2023 and December 31, 2022.

The Company recorded research and development expense of $63,000 during each of the three months ended March 31, 2023 and 2022 under consulting agreements with a member of the Company’s board of directors. The Company has a payable of $74,000 to the member of the Company’s board of directors as of both March 31, 2023 and December 31, 2022.

- 21 -

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with (1) our unaudited financial statements and related notes appearing in Part I, Item I of this Quarterly Report on Form 10-Q and (2) the audited financial statements and the related notes and the discussion in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2022 included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission, or SEC, on March 29, 2023, or 2022 Form 10-K.

Special Note Regarding Forward-Looking Statements

The following discussion and this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “will,” “should,” “may,” “plan,” “assume” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from our anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate we have conducted exhaustive inquiry into, or review of, all potentially available relevant information. We anticipate that subsequent events and developments will cause our views to change. New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q and are cautioned not to place undue reliance on such forward-looking statements.

Overview

We are a clinical-stage biopharmaceutical company utilizing our differentiated platform primarily to discover and develop novel antibody-based therapeutics to treat a range of solid tumor types. While more traditional oncology drug discovery approaches attempt to generate antibodies against known targets, our approach relies on the human immune system to direct us to unique antibody-target pairs from patients experiencing a clinically meaningful, active immune response against their tumors. These unique antibody-target pairs represent a potentially novel and previously unexplored landscape of oncology targets. We believe the fact that our approach has the potential to deliver novel, previously unexplored oncology targets provides us with a significant competitive advantage over traditional approaches, which focus on known targets that many companies are aware of and can pursue. We have utilized our drug discovery approach to identify over 2,000 distinct human antibodies that bind preferentially to tumor tissue from patients who are not the source of the antibody.

Our most advanced product candidate, ATRC-101, is a monoclonal antibody with a novel mechanism of action and target derived from an antibody identified using our discovery platform. ATRC-101 reacts in vitro with a majority of human ovarian, non-small cell lung, colorectal and breast cancer samples from multiple patients. It has demonstrated robust anti-tumor activity as a single agent in multiple preclinical models, including one model in which PD-1 checkpoint inhibitors typically display limited activity. In 2020, we commenced clinical development of ATRC-101 with a Phase 1b clinical trial evaluating ATRC-101 as a monotherapy in patients with select solid tumors which is ongoing,

- 22 -

and in 2021 we expanded clinical development by opening a new cohort to evaluate ATRC-101 in combination with pembrolizumab, a PD-1 checkpoint inhibitor. In 2022, we began limiting enrollment of subjects in our clinical trials to those with biopsies positive for the target of ATRC-101 as determined by a CAP-CLIA certified assay. To date, ATRC-101 continues to be well tolerated, and we have observed longer progression free survival in patients with high target expression in this study. Enrollment in both cohorts is ongoing, and 71 participants have been enrolled and dosed as of data cut-off date of February 17, 2023. We expect additional data from both cohorts over the course of 2023, and we expect to make potential Phase 2 development decisions in late 2023.

Our efforts beyond ATRC-101 are focused on expanding our clinical pipeline by advancing additional product candidates using our discovery platform. We expect the focus of our pre-clinical development efforts will be on lead-stage oncology programs, including APN-497444, an ADC against a novel tumor glycan target, and APN-346958, a CD3 bispecific T-cell engager against an RNA-binding protein target and anticipate nominating clinical candidates for both programs later this year. We continue to aim for one additional IND per year in oncology with our next IND targeted in late 2024. In addition, we continue to develop our platform capabilities and to expand the weaponization technologies we have access to so that we can combine the novel antibodies that are generated by our platform with these antibody weaponization technologies to generate clinical candidates. In February 2023, we announced the first joint program, mutually selected with Xencor, Inc., or Xencor, for advancement under our existing strategic collaboration, combining an Atreca-discovered antibody with Xencor’s XmAb® bispecific Fc domain and a cytotoxic T-cell binding domain or CD3. The joint program is based on APN-346958, an Atreca-discovered antibody. APN-346958 recognizes an RNA-binding protein that is normally sequestered in the nucleus but is mislocalized to the cell surface in tumors. In preclinical studies, the XmAb bispecific antibody engineered against APN-346958’s target has demonstrated compelling anti-tumor activity and robust immune activation as evidenced by an increase in IFN gamma levels in plasma, and expansion of CD8+ T cells in the blood. Atreca and Xencor targeted to name a candidate from the program later in 2023, and Atreca targets an IND submission by early 2025.

In April 2022, we provided an update on our preclinical pipeline in oncology, and we announced our next clinical candidate, ATRC-301. ATRC-301 is an antibody drug conjugate, or ADC, that selectively targets a novel, membrane-proximal epitope on erythropoietin-producing hepatocellular receptor A2, or EphA2. We initiated IND-enabling studies for ATRC-301, including a non-human primate toxicology study in September 2022. In November 2022, we announced that this study revealed safety signals, including bleeding, and as a result, we discontinued the development of ATRC-301. We continue to evaluate our anti-EphA2 antibodies in multiple weaponized formats.

Beyond oncology, in October 2021, we entered into a licensing agreement with the Bill & Melinda Gates Medical Research Institute or Gates MRI to allow Gates MRI to develop and commercialize MAM01/ATRC-501 for the prevention of malaria in GAVI, the Vaccine Alliance, eligible countries located in malaria-endemic regions of the world, to advance its charitable purposes. MAM01/ATRC-501 is an engineered version of an antibody that we discovered using our platform that targets the circumsporozoite protein of Plasmodium falciparum, the protozoan that causes the deadliest form of malaria. In November 2022, we announced that an IND for MAM01/ATRC-501 is expected to be filed by Gates MRI in the first half of 2023, and that Gates MRI expects to commence clinical development by the second half of 2023. We retain commercial rights in the U.S., Europe and parts of Asia, and potential product development opportunities in those regions include prevention of malaria for those traveling to malaria endemic regions.

We commenced operations in 2010, and have since devoted substantially all our resources to research and development, identifying product candidates, undertaking preclinical studies, conducting clinical trials, raising capital, building our management team and building our intellectual property portfolio. We do not have any products approved for marketing or sale and have not generated any revenue from product sales. Our ability to generate product revenue sufficient to achieve or sustain profitability will depend on the successful development, regulatory approval and eventual commercialization of one or more of our current or future product candidates.

To date, we have financed our operations primarily through equity offerings of our securities. Our net losses were $21.0 million and $24.9 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we had an accumulated deficit of $478.0 million. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on discovering, completing the necessary development,

- 23 -

obtaining regulatory approval for and preparing for potential commercialization of product candidates. As of March 31, 2023, we had cash, cash equivalents and investments of $56.4 million.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from period to period, depending on the timing of our planned preclinical studies and clinical trials and expenditures on other research and development activities. We expect our expenses will increase over time as we:

complete clinical trials for ATRC-101 and initiate preclinical studies on any additional product candidates that we may pursue in the future;
continue research and development to expand our growing library of more than 2,000 antibodies and develop potential future product candidates from that collection;
continue to invest in advancing our differentiated discovery platform, and the underlying technologies;
seek marketing approvals for product candidates that successfully complete clinical trials;
maintain, protect and expand our portfolio of intellectual property rights, including patents, trade secrets and know-how;
implement additional operational, financial and management systems; and
attract, hire and retain additional administrative, clinical, regulatory and research personnel.

Impact of COVID-19

To date, the COVID-19 pandemic has not had a material adverse impact on our productivity or our business, and as of March 31, 2023, we have not identified any significant disruption or impairment of our assets due to the pandemic. However, the extent to which the COVID-19 pandemic may impact our operational and financial performance remains uncertain and will depend on many factors outside our control, including the timing, extent, trajectory and duration of the pandemic, the emergence of new variants or a resurgence of the pandemic, the development, availability, distribution and effectiveness of vaccines and treatments, the imposition of protective public safety measures, and the impact of the pandemic or any variant or resurgence of COVID-19 on the global economy. To the extent the COVID-19 pandemic or other public health crises disrupt economic activity globally, it could adversely affect our ability to access capital, which could in the future negatively affect our liquidity. As a result, COVID-19 or other public health crises could materially adversely affect our business, financial condition, results of operations, growth prospects, and our ability to execute on our business strategies in the future and potentially disrupt the business of third parties with whom we do business, including our existing and potential future collaborators, any of which could also have the effect of heightening many of the other risks and uncertainties described in Part I, Item 1A. ‘‘Risk Factors’’ in this Quarterly Report on Form 10-Q. We will continue to closely monitor and evaluate the nature and extent of the impacts of COVID-19 on our business, results of operations, and financial condition.

Financial Operations Overview

Revenue

We have no products approved for marketing or commercial sale and have never generated any revenue from product sales.

Operating Expenses

Research and Development

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of our own product development efforts, salaries, employee benefits and stock-based compensation for personnel contributing to research and development activities, laboratory supplies, outsourced research and development expenses, professional services and allocated facilities-related costs. We expect our research and development expenses to increase in the foreseeable future as we continue to invest in our differentiated discovery

- 24 -

platform to expand our pipeline of product candidates, advance our product candidates into and through preclinical studies and clinical trials and pursue regulatory approval of our product candidates.

General and Administrative

Our general and administrative expenses consist primarily of personnel costs, allocated facilities costs and other expenses for outside professional services, including legal, human resource, audit and accounting services. We expect to incur additional general and administrative expenses as we continue to support the growth of our business and incur the costs of compliance associated with being a public company.

Interest and Other Income (Expense)

Interest and other income (expense) includes amounts received from partners for research and discovery services and for assignment to other parties of non-core intellectual property, interest income earned on our cash, cash equivalents and investments, interest expense and gains or losses on the periodic disposals of property and equipment.

Results of Operations

Comparison of the three months ended March 31, 2023 and 2022

The following table summarizes our results of operations during the respective periods:

Three Months Ended

 

March 31, 

Change

 

    

2023

    

2022

    

$

    

%

 

(in thousands)

 

Operating expenses:

 

  

 

  

 

  

  

Research and development

$

13,452

$

17,064

$

(3,612)

(21)

%

General and administrative