Prior to the Corporate Reorganization in July 2020, the Company maintained a Profits Interest Incentive Plan (the “Plan”) for selected employees, consultants and other service providers. In connection with the Corporate Reorganization, Himalaya Parent LLC assumed the Plan and the $1.0 million fair value of the liability was reclassified to additional paid-in capital. As of December 31, 2019, the Company had reserved a total of 16,665,977 Class B units for issuance under the Plan. The Class B units generally vested over four years, were subject to continued service requirements, and only provide the participants with benefits (in the form of distributions) if the distributions from BioAtla exceed specified threshold values. Generally, upon termination of services, all unvested Class B units were forfeited to the Company and the Company had the right, but not the obligation, to repurchase the vested Class B units within two years at the termination date fair value. The Class B unit repurchase would be settled in cash, at all times at the option of the Company, and the holder did not have the right to put the Class B units to the Company under any condition. Vested Class B units that are neither repurchased by the Company nor forfeited remained subject to the terms of the Company’s operating agreement. The Class B units were not subject to sale, assignment, transfer, pledge, or allowed to be otherwise encumbered or disposed of without prior written consent of the Company. No Class B units had been repurchased through the date of the Corporate Reorganization.

Activity under the Plan is summarized as follows:


Outstanding at December 31, 2019	14,478,949
Cancelled	(170,836	)
Assumption of Plan by Himalaya Parent LLC on July 10, 2020	(14,308,113	)
Outstanding at December 31, 2020	—

Vesting of Class B units under the Plan is summarized as follows:


Unvested at December 31, 2019	6,158,328
Cancelled	(170,836	)
Vested	(1,310,807	)
Assumption of unvested Class B units by Himalaya Parent LLC on July 10, 2020	(4,676,685	)
Unvested at December 31, 2020	—

The Class B units were liability awards pursuant to authoritative guidance, which required the Company to record a liability based on the fair value of the Class B units as of each reporting period. Through the date of the Corporate Reorganization, the fair value of the liability awards was determined based on the Company’s estimated enterprise value, which was allocated based on a hybrid model that, in addition to the option pricing model, considering the Company’s expected IPO. Under the option pricing method, units were valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each unit class.

In connection with the Division, the distribution thresholds that had to be achieved before the Class B unit holders were entitled to distributions were adjusted, resulting in a $0.9 million reduction to the aggregate profits interest liability between the Predecessor and the Post-Division LLCs at the date of the Division. The thresholds of the Post-Division Successor were changed in order to reflect the impact of the assets assigned to BioAtla Holdings and Inversagen in the Division. For the year ended December 31, 2019, the profits interest liability decreased $7.4 million, including the $0.9 million reduction described above, and $0.8 million recognized as additional paid-in capital related to the fair value of vested Class B units assumed by BioAtla Holdings and Inversagen in connection with the Division. In addition, the Company recognized stock-based compensation expense and additional paid-in capital of $0.2 million related to the fair value of the unvested Class B units assumed by BioAtla Holdings and Inversagen in connection with the Division since these Class B unit holders were employees of the Post-Division Successor, and were not expected to provide services to BioAtla Holdings or Inversagen.

The following table provides a reconciliation of the profits interest liability (in thousands):


Balance at December 31, 2019		8,592
Decrease in fair value of vested liability (Pre-Corporate Reorganization) recognized as decrease to stock-based compensation expense		(7,601	)
Fair value of vested liability assumed by Himalaya Parent LLC on July 10, 2020 recognized as additional paid-in capital		(991	)
Balance at December 31, 2020	$	—

The allocation of equity-based compensation, including $0.7 million from Himalaya Parent as a capital contribution during 2020, for all Class B units is as follows (in thousands):


	Years ended December 31,
		2020			2019
Research and development		$	(2,993	)	$	(2,997	)
General and administrative			(3,859	)		(3,406	)
Total		$	(6,852	)	$	(6,403	)