Convertible preferred stock and members's/stockholders' equity (deficit)

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Convertible preferred stock and members's/stockholders' equity (deficit)

7. Convertible preferred stock and members’/stockholders’ equity (deficit)

Convertible preferred stock

The Company had convertible preferred stock outstanding between the date of its Series D financing in July 2020 until the closing of its IPO in December 2020. The Company’s convertible preferred stock was classified as temporary equity in the accompanying consolidated balance sheets in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities whose redemption is based upon certain change in control events outside of the Company’s control, including liquidation, sale or change of control of the Company. Because these change in control events were not probable, the Company did not adjust the carrying values of the convertible preferred stock to redemption value.

Series D financing

On July 13, 2020, BioAtla, Inc. entered into a Series D Preferred Stock Purchase Agreement, pursuant to which it issued 140,626,711 shares of Series D convertible preferred stock at $0.51554931 per share, for aggregate cash proceeds of $72.5 million. The Company incurred $4.3 million of issuance costs.

Initial public offering and related transactions

In December 2020, the Company completed its IPO selling 12,075,000 shares its common stock at $18.00 per share. Proceeds from the Company’s IPO, net of underwriting discounts and commissions and other offering costs, were $198.3 million. In connection with the IPO, all 199,791,519 shares of convertible preferred stock outstanding at the time of the IPO converted into 13,876,510 shares of the Company’s common stock and 1,492,059 shares of the Company’s Class B common stock.

Private Placement of Common Stock

In September 2021, the Company entered into agreements to sell 2,678,600 shares of its common stock at a price of $28.00 per share through a private investment in public equity financing (or "Private Placement"). Proceeds from the Private Placement, net of underwriting discounts and commissions and other offering costs, were $71.0 million.

In connection with the Private Placement, the Company also issued registration rights to the investors. The Company filed a registration statement on Form S-1 (File No. 333-260440) with the SEC registering for resale the shares of common stock issued in the Private Placement.
 

Description of securities of Delaware corporation

The Company is authorized to issue 200,000,000 shares of preferred stock, par value $0.0001 per share, 350,000,000 shares of common stock, par value $0.0001 per share, and 15,368,569 shares of Class B common stock, par value $0.0001 per share.

Dividends

Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of the Company’s common stock and Class B common stock are entitled to receive dividends only if declared from time to time by the Company’s board of directors out of assets which are legally available.

Liquidation preferences

Upon any liquidation, dissolution or winding-up of the Company, holders of the Company’s common stock and Class B common stock are entitled to share ratably in all assets remaining after payment of all liabilities and the liquidation preferences of any of our outstanding shares of preferred stock.

Conversion

Holders of the Company’s common stock have no conversion rights, while holders of the Company’s Class B common stock shall have the right to convert each share of Class B common stock into one share of common stock at such holder’s election, provided that as a result of such conversion, such holder would not beneficially own in excess of 4.99% of any class of the Company’s securities registered under the Securities Exchange Act of 1934, as amended, unless otherwise as expressly provided for in the Company’s amended and restated certificate of incorporation. This ownership limitation may be increased or decreased to any other percentage designated by such holder of Class B common stock upon 61 days’ notice to the Company.

Voting rights

Except as otherwise expressly provided in the Company’s amended and restated certificate of incorporation or as required by applicable law, on any matter that is submitted to a vote by the Company’s stockholders, holders of the Company’s common stock are entitled to one vote per share of common stock, and holders of the Company’s Class B common stock are not entitled to any votes per share of Class B common stock, including for the election of directors.

Operating agreement

Prior to the Corporate Reorganization, the Company’s operating agreement, as amended and restated, provided for classes of units, allocation of profits and losses, distribution preferences, other member rights and management of the LLC. The operating agreement designated Class A units, Class B units and Class C preferred units. The Class B units and Class C preferred units were non-voting, except as required by law. The Class B units were liability awards pursuant to authoritative guidance and, as such, were reported at fair value outside of members’ deficit. Members were limited in their liability to their capital contributions.

Common stock warrants

The Company issued the warrants described below in 2016 in connection with certain advisory services. The warrants became exercisable upon our IPO for a period of 365 and 450 days.

Upon adoption of ASU No. 2018-07 on October 1, 2020, the measurement date of the warrants described below became fixed in accordance with the guidance, and such fair value was nominal since the warrants were deeply out-of-the-money. In December 2021, a total of 566,586 warrants with an exercise period of 365 days after our IPO expired unexercised. As of December 31, 2021 the remaining common stock warrants below are exercisable and expire as follows:

Outstanding and exercisable	Exercise price per share		Expiration date
151,088	$	132.37	March 12, 2022

Noncontrolling interests

In December 2018, the Company issued a noncontrolling interest in HTKY in the form of ordinary shares in connection with the termination of a collaboration and license agreement. In addition to the ordinary shares issued, certain employees and shareholders of the Company purchased 19,000,000 ordinary shares of HTKY for an aggregate purchase price of $19,000, of which 5,000,000 were repurchased for $5,000 in March 2019. As of December 31, 2019, the Company held all of the outstanding HTKY preferred equity, consisting of 97,183,256 Series B convertible preference shares, and 1,000 ordinary shares. The Series B convertible preference shares had a liquation preference equal to the greater of $1.00 per share, plus declared and unpaid dividends, or the if-converted value, and pay non-cumulative dividends in preference to the holders of ordinary shares at an annual rate of 7% of the purchase price per share when, as and if declared by the board. The net income (loss) of HTKY was allocated to the ordinary shareholders on a pro rata basis. However, any net income was initially be allocated to the preference shares until the liquidation preference is met. Thereafter, preference shares would only be allocated dividends declared by the board of directors of HTKY. For the year ended December 31, 2019, substantially all of the $61,000 net loss of HTKY was allocated to the noncontrolling interest. HTKY had no material operations for the year ended December 31, 2020. As discussed in Note 1, HTKY was deconsolidated as part of the July 2020 Corporate Reorganization.

2020 Equity Incentive Plan

On October 29, 2020, the Company’s board of directors approved the adoption of the BioAtla, Inc. 2020 Equity Incentive Plan (the “2020 Plan”) and approved certain amendments to the 2020 Plan in December 2020. The Company’s stockholders approved the 2020 Plan, as amended, in December 2020. Under the 2020 Plan, the Company may grant awards of common stock to the Company’s employees, consultants and non-employee directors pursuant to option awards, stock appreciation rights awards, restricted stock awards, restricted stock unit awards, performance stock awards, performance stock unit awards and other stock-based awards. As of December 31, 2021 and 2020, the total number of common shares authorized for issuance under the 2020 Plan was 6,226,540 and 4,939,678, respectively. On January 1st of each year, commencing with the first January 1st following the effective date of the 2020 Plan, the shares authorized for issuance under the 2020 Plan shall be increased by a number of shares equal to the lesser of 4% of the total number of shares outstanding on the immediately preceding December 31st and such lesser number of shares determined by the Company’s board of directors. The maximum term of the options granted under the 2020 Plan is no more than ten years. Awards under the 2020 Plan generally vest at 25% one year from the vesting commencement date and ratably each month thereafter for a period of 36 months, subject to continuous service.

Stock-based compensation expense recognized for all equity awards under the 2020 Plan has been reported in the consolidated statements of operations and comprehensive loss as follows (in thousands):

	Year ended December 31, 2021		Year ended December 31, 2020
Research and development	$	4,688	$	740
General and administrative		20,429		2,282
Total	$	25,117	$	3,022

Restricted stock units

In December 2020, the Company granted an aggregate of 1,920,037 restricted stock units (“RSUs”) to certain of the Company’s employees and service providers, including executive officers and non-employee directors.

The following table summarizes RSU activity under the 2020 Plan for the years ended December 31, 2021 and 2020:

	Number of Shares		Weighted - average grant date fair value
Outstanding at December 31, 2019		—	$	—
Granted		1,920,037	$	18.00
Vested		—	$	—
Outstanding at December 31, 2020		1,920,037	$	18.00
Granted		—	$	—
Vested		944,991	$	18.00
Outstanding at December 31, 2021		975,046	$	18.00

As of December 31, 2021, total unrecognized stock-based compensation expense for RSUs was $17.5 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.2 years.

Stock options

The following table summarizes stock option activity under the 2020 Plan for the year ended December 31, 2021 and 2020 (in thousands, except share and per option data and years):

	Number of options			Weighted - average exercise price per option		Weighted - average remaining contractual term (in years)		Aggregate intrinsic value
Balance at December 31, 2019		—		$	—		—	$	—
Granted		615,106		$	18.00
Balance at December 31, 2020		615,106		$	18.00	9.95		$	9,848
Granted		479,543		$	37.86
Exercised		(7,747	)	$	18.00		—	$	182,829
Balance at December 31, 2021		1,086,902		$	26.76		9.22	$	991,495
Vested and expected to vest at December 31, 2021		1,086,902		$	26.76		9.22	$	991,495
Exercisable at December 31, 2021		155,579		$	18.31		8.97	$	247,486

As of December 31, 2021, total unrecognized stock-based compensation cost for unvested common stock options was $15.0 million, which is expected to be recognized over a remaining weighted-average period of approximately 3.1 years. The weighted- average grant date fair value of stock options granted during the years ended December 31, 2021 and 2020 was $24.61 per share and $11.66 per share, respectively. The total fair value of options vested during the year ended December 31, 2021 was $1.9 million. No options vested during the years ended December 31, 2020 and 2019. Upon option exercise, the Company issues new shares of its common stock.

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

	Year ended December 31, 2021			Year ended December 31, 2020
Expected volatility		74.7	%		74.5	%
Risk-free interest rate		1.06	%		0.52	%
Expected dividend yield		0.0	%		0.0	%
Expected term	5.98 years			6.09 years

Expected volatility. As the Company’s common stock does not have a significant trading history, the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry.

Risk-free interest rate. The Company bases the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present plans to pay cash dividends.

Expected term. For employees, the expected term represents the period of time that options are expected to be outstanding. Because the Company has minimal historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period. For nonemployees, the expected term is generally the contractual term of the option.

Employee Stock Purchase Plan

In December 2020, the Company’s board of directors and stockholders approved the BioAtla, Inc. Employee Stock Purchase Plan (the “ESPP”). The ESPP permits participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation. As of December 31, 2021 and 2020, a total of 833,993 and 464,829 shares, respectively, of common stock were authorized for issuance under the ESPP. The number of shares of common stock authorized for issuance will automatically increase on January 1 of each calendar year, from January 1, 2021 through January 1, 2030 by the least of (i) 1.0% of the total number of common shares of our common stock outstanding on December 31 of the preceding calendar year (calculated on a fully diluted basis), (ii) 929,658 common shares or (iii) a number determined by the Company’s board of directors that is less than (i) and (ii). The ESPP plan was amended in September 2021 to change the offering periods to end on May 15th and November 15th of each year beginning January 1, 2022. In February 2021, employees began to enroll in the ESPP and the Company’s first offering period commenced. ESPP purchase transactions occurred on June 30, 2021 and on December 31, 2021. During the year ended December 31, 2021, the Company issued 11,182 shares of common stock under the ESPP. As of December 31, 2021, 822,811 shares of common stock remained available for issuance under the ESPP. Stock-based compensation expense related to the ESPP for the twelve months ended December 31, 2021 was immaterial.

Common stock reserved for future issuance

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

	December 31, 2021		December 31, 2020
Warrants for the purchase of common stock		151,088		717,674
Common stock options and restricted stock units issued and outstanding		2,061,948		2,535,143
Awards available for future issuance under the 2020 Plan		3,211,854		2,404,535
Awards available for future issuance under the ESPP		822,811		464,829
Total common stock reserved for future issuance		6,247,701		6,122,181