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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

 

For the quarterly period ended March 31, 2024 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: 001-40493

 

 

ATAI Life Sciences N.V.

(Exact name of registrant as specified in its charter)

 

The Netherlands

Not Applicable

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

ATAI Life Sciences N.V.

Wallstraße 16, 10179

Berlin, Germany

Not Applicable

(Address of principal executive offices)

(Zip Code)

 

+49 89 2153 9035

(Registrant’s telephone number, including area code)

 

N/A

(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

Common shares, par value €0.10 per share

ATAI

The Nasdaq Stock Market LLC
(Nasdaq Global 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 (§ 232.405 of this chapter) 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, a 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 8, 2024, the registrant had 167,406,070 common shares, par value €0.10 per share, outstanding.

 

 

 


 

ATAI Life Sciences N.V.

 

FORM 10-Q

 

Table of Contents

 

Page

Forward-Looking Statements

1

PART I. FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

3

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023

4

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2024 and 2023

5

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023

6

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

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

39

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

56

Item 4.

Controls and Procedures

56

PART II. OTHER INFORMATION

58

Item 1.

Legal Proceedings

58

Item 1A.

Risk Factors

58

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

58

Item 3.

Defaults Upon Senior Securities

58

Item 4.

Mine Safety Disclosures

58

Item 5.

Other Information

58

Item 6.

Exhibits

59

Signatures

61

 


 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 (the “Quarterly Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this Quarterly Report other than statements of historical fact are forward-looking statements, including without limitation statements regarding our future operating results and financial position; the success, cost, and timing of development of our product candidates, including the progress of preclinical studies and clinical trials and related milestones; the commercialization of our current product candidates and any other product candidates we may identify and pursue, if approved, including our ability to successfully build a specialty sales force and commercial infrastructure to market our current product candidates and any other product candidates we may identify and pursue; the timing of and our ability to obtain and maintain regulatory approvals; our business strategy and plans, including the benefits of our corporate restructuring; potential acquisitions, partnerships and other strategic arrangements; the ability to generate revenue from any current or future licensing agreements and other strategic arrangements, the sufficiency of our cash and cash equivalents and short-term securities to fund our operations; available funding under the Hercules Capital, Inc. loan facility; and the plans and objectives of management for future operations and capital expenditures. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements.

 

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are neither promises nor guarantees, and are subject to a number of important factors that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements, including without limitation: we are a clinical-stage biopharmaceutical company and have incurred significant losses since our inception, and we expect to incur losses for the foreseeable future and may never be profitable; if we are unable to obtain funding when needed and on acceptable terms, we could be forced to delay, limit or discontinue our product candidate development efforts; our limited operating history may make it difficult for you to evaluate the success of our business and to assess our future viability; we rely on third parties to assist in conducting our clinical trials and some aspects of our research and preclinical testing; we currently rely on qualified therapists working at third-party clinical trial sites to administer certain of our product candidates in our clinical trials and we expect this to continue upon approval, if any, of our current or future product candidates, and if third-party sites fail to recruit and retain a sufficient number of therapists or effectively manage their therapists, our business, financial condition and results of operations would be materially harmed; our product candidates are in preclinical or clinical development, which is a lengthy and expensive process with uncertain outcomes, and we cannot give any assurance that any of our product candidates will be successfully developed and/or receive regulatory approval, which is necessary before they can be commercialized; research and development of drugs targeting the central nervous system, or CNS, is particularly difficult, and it can be difficult to predict and understand why a drug has a positive effect on some patients but not others, which may reduce the likelihood our product candidates are ultimately approved and therefore may have a material adverse effect on our business and operating results; the production and sale of our product candidates may be considered illegal or may otherwise be restricted due to the use of controlled substances, which may also have consequences for the legality of investments from foreign jurisdictions and therefore we may not be successful in commercializing our product candidates in such jurisdictions, which will adversely affect our business, financial condition and results of operations ; we face significant competition in an environment of rapid technological and scientific change, and there is a possibility that our competitors may achieve regulatory approval before we do or develop therapies that are safer, more advanced or more effective than ours, which may negatively impact our ability to successfully market or commercialize any product candidates we may develop and ultimately harm our financial condition; if we are unable to obtain and maintain sufficient intellectual property protection for our existing product candidates or any other product candidates that we may identify, or if the scope of the intellectual property protection we currently have or obtain in the future is not sufficiently broad, our competitors could develop and commercialize product candidates similar or identical to ours, and our ability to successfully commercialize our existing product candidates and any other product candidates that we may pursue may be impaired; third parties may claim that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and may prevent or delay our development and commercialization efforts; our future success depends on our ability to retain key employees, directors, consultants and advisors and to attract, retain and motivate qualified personnel; as a result of covenants related to our Loan Agreement with Hercules, our operating activities may be restricted and we may be required to repay the outstanding indebtedness in the event of a breach by us, or an event of default thereunder, which could have a materially adverse effect on our business; if we fail to maintain an effective system of disclosure controls and internal control over financial reporting our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired; our business is subject to economic, political, regulatory and other risks associated with international operations; a pandemic, epidemic, or outbreak of an infectious disease, such as the COVID-19 pandemic, may materially and adversely affect our business, including our preclinical studies, clinical trials, trial sites, third parties on whom we rely, our supply chain, our ability to raise capital, our ability to conduct regular business and our financial results, and other risks, uncertainties, and assumptions described under “Risk Factors” in Item 1A of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II and elsewhere in our Form 10-K for the year ended December 31, 2024 (the "Form 10-K"), as further updated in “Management’s Discussion and Analysis

1


 

of Financial Condition and Results of Operations” in Item 2 of this Quarterly Report, and in our subsequent filings with the Securities and Exchange Commission (“SEC”).

 

Any forward-looking statements made herein speak only as of the date of this Quarterly Report, and you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or achievements reflected in the forward-looking statements will be achieved or will occur. Except as required by applicable law, we undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report or to conform these statements to actual results or revised expectations.

 

GENERAL

 

Unless the context otherwise requires, all references in this Quarterly Report to “we,” “us,” “our,” “atai” or the “Company” refer to ATAI Life Sciences N.V. and its consolidated subsidiaries. References to "Quarterly Report" herein refer to this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 and references to “Form 10-K” and “Annual Report” herein refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

 

All reports we file with the SEC are available for download free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC’s website at www.sec.gov. We also make electronic copies of our reports available for download, free of charge, through our investor relations website at ir.atai.life as soon as reasonably practicable after filing such material with the SEC.

We may announce material business and financial information to our investors using our investor relations website at ir.atai.life. We therefore encourage investors and others interested in atai to review the information that we make available on our website, in addition to following our filings with the SEC, webcasts, press releases and conference calls. Information contained on our website is not incorporated into, and does not form a part of this Quarterly Report.

2


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

 

ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

(unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,867

 

 

$

45,034

 

Securities carried at fair value

 

 

87,379

 

 

 

109,223

 

Short term restricted cash for other investments

 

 

5,000

 

 

 

 

Committed investment funds

 

 

 

 

 

25,000

 

Prepaid expenses and other current assets

 

 

5,732

 

 

 

5,830

 

Short term notes receivable - related party, net

 

 

522

 

 

 

505

 

Total current assets

 

 

117,500

 

 

 

185,592

 

Long term restricted cash for other investments

 

 

10,000

 

 

 

 

Property and equipment, net

 

 

920

 

 

 

981

 

Operating lease right-of-use asset, net

 

 

1,115

 

 

 

1,223

 

Other investments held at fair value

 

 

90,205

 

 

 

89,825

 

Other investments

 

 

32,807

 

 

 

1,838

 

Long term notes receivable - related parties, net

 

 

98

 

 

 

97

 

Convertible notes receivable - related party

 

 

13,902

 

 

 

11,202

 

Other assets

 

 

2,574

 

 

 

2,720

 

Total assets

 

$

269,121

 

 

$

293,478

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,843

 

 

$

4,589

 

Accrued liabilities

 

 

10,926

 

 

 

15,256

 

Current portion of lease liability

 

 

244

 

 

 

275

 

Total current liabilities

 

 

15,013

 

 

 

20,120

 

Contingent consideration liability - related parties

 

 

607

 

 

 

620

 

Contingent consideration liability

 

 

1,406

 

 

 

1,637

 

Noncurrent portion of lease liability

 

 

907

 

 

 

990

 

Convertible promissory notes - related parties

 

 

159

 

 

 

164

 

Convertible promissory notes and derivative liability

 

 

4,357

 

 

 

2,666

 

Long term debt, net

 

 

15,140

 

 

 

15,047

 

Other liabilities

 

 

8,275

 

 

 

7,918

 

Total liabilities

 

$

45,864

 

 

$

49,162

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, €0.10 par value ($0.11 and $0.12 par value at March 31, 2024 and December 31, 2023, respectively); 750,000,000 shares authorized at March 31, 2024 and December 31, 2023, respectively; 166,274,426 and 166,026,396 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

18,600

 

 

 

18,573

 

Additional paid-in capital

 

 

800,520

 

 

 

794,787

 

Accumulated other comprehensive loss

 

 

(18,925

)

 

 

(19,460

)

Accumulated deficit

 

 

(577,651

)

 

 

(550,938

)

Total stockholders’ equity attributable to ATAI Life Sciences N.V. stockholders

 

 

222,544

 

 

 

242,962

 

Noncontrolling interests

 

 

713

 

 

 

1,354

 

Total stockholders’ equity

 

 

223,257

 

 

 

244,316

 

Total liabilities and stockholders’ equity

 

$

269,121

 

 

$

293,478

 

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

3


 

ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share amounts)

(unaudited)

 

 

 

For the three months ended March 31,

 

 

 

2024

 

 

2023

 

License revenue

 

$

 

 

$

37

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

11,530

 

 

 

19,281

 

General and administrative

 

 

12,555

 

 

 

13,970

 

Total operating expenses

 

 

24,085

 

 

 

33,251

 

Loss from operations

 

 

(24,085

)

 

 

(33,214

)

Other income (expense), net:

 

 

 

 

 

 

Interest income

 

 

307

 

 

 

275

 

Interest expense

 

 

(687

)

 

 

(622

)

Benefit from research and development tax credit

 

 

205

 

 

 

 

Change in fair value of assets and liabilities, net

 

 

(1,200

)

 

 

999

 

Foreign exchange loss, net

 

 

(216

)

 

 

(837

)

Other income (expense), net

 

 

(5

)

 

 

243

 

Total other income (expense), net

 

 

(1,596

)

 

 

58

 

Loss before income taxes

 

 

(25,681

)

 

 

(33,156

)

Benefit from (provision for) income taxes

 

 

4

 

 

 

(165

)

Losses from investments in equity method investees, net of tax

 

 

(1,701

)

 

 

(1,033

)

Net loss

 

 

(27,378

)

 

 

(34,354

)

Net loss attributable to noncontrolling interests

 

 

(665

)

 

 

(1,219

)

Net loss attributable to ATAI Life Sciences N.V. stockholders

 

$

(26,713

)

 

$

(33,135

)

Net loss per share attributable to ATAI Life Sciences N.V.
   stockholders — basic and diluted

 

$

(0.17

)

 

$

(0.21

)

Weighted average common shares outstanding attributable to ATAI
   Life Sciences N.V. stockholders — basic and diluted

 

 

158,891,067

 

 

 

155,792,490

 

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

4


 

ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

(unaudited)

 

 

 

For the three months ended March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(27,378

)

 

$

(34,354

)

Other comprehensive income:

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax

 

 

535

 

 

 

879

 

Comprehensive loss

 

$

(26,843

)

 

$

(33,475

)

Net loss attributable to noncontrolling interests

 

 

(665

)

 

 

(1,219

)

Foreign currency translation adjustments, net of tax attributable to noncontrolling interests

 

 

24

 

 

 

8

 

Comprehensive loss attributable to noncontrolling interests

 

 

(641

)

 

 

(1,211

)

Comprehensive loss attributable to ATAI Life Sciences
   N.V. stockholders

 

$

(26,202

)

 

$

(32,264

)

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

5


 

ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Stockholders’

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Equity Attributable to

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

ATAI Life Sciences N.V.

 

 

Noncontrolling

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Stockholders

 

 

Interests

 

 

Equity

 

Balances at December 31, 2023

 

 

166,026,396

 

 

$

18,573

 

 

$

794,787

 

 

$

(19,460

)

 

$

(550,938

)

 

$

242,962

 

 

$

1,354

 

 

$

244,316

 

Issuance of shares upon restricted stock units vest

 

 

248,030

 

 

 

27

 

 

 

(27

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,760

 

 

 

 

 

 

 

 

 

5,760

 

 

 

 

 

 

5,760

 

Foreign currency translation adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

535

 

 

 

 

 

 

535

 

 

 

24

 

 

 

559

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,713

)

 

 

(26,713

)

 

 

(665

)

 

 

(27,378

)

Balances at March 31, 2024

 

 

166,274,426

 

 

$

18,600

 

 

$

800,520

 

 

$

(18,925

)

 

$

(577,651

)

 

$

222,544

 

 

$

713

 

 

$

223,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Stockholders’

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Share

 

 

Other

 

 

 

 

 

Equity Attributable to

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Subscriptions

 

 

Comprehensive

 

 

Accumulated

 

 

ATAI Life Sciences N.V.

 

 

Noncontrolling

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Receivable

 

 

Loss

 

 

Deficit

 

 

Stockholders

 

 

Interests

 

 

Equity

 

Balances at December 31, 2022

 

 

165,935,914

 

 

$

18,562

 

 

$

774,092

 

 

$

(24

)

 

$

(21,702

)

 

$

(510,188

)

 

$

260,740

 

 

$

5,026

 

 

$

265,766

 

Issuance of shares upon exercise of stock options

 

 

74,562

 

 

 

9

 

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

181

 

 

 

 

 

 

181

 

Settlement of issuance of shares upon
   exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

24

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

8,662

 

 

 

 

 

 

 

 

 

 

 

 

8,662

 

 

 

 

 

 

8,662

 

Adjustment to accumulated deficit
(pursuant to adoption of ASU 2016-13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(526

)

 

 

(526

)

 

 

 

 

 

(526

)

Foreign currency translation adjustment,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

879

 

 

 

 

 

 

879

 

 

 

8

 

 

 

887

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,135

)

 

 

(33,135

)

 

 

(1,219

)

 

 

(34,354

)

Balances at March 31, 2023

 

 

166,010,476

 

 

$

18,571

 

 

$

782,926

 

 

$

 

 

$

(20,823

)

 

$

(543,849

)

 

$

236,825

 

 

$

3,815

 

 

$

240,640

 

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

6


 

ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(unaudited)

 

 

 

 

For the three months ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(27,378

)

 

$

(34,354

)

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

 

 

 

 

 

 

Depreciation and amortization of long term assets

 

 

83

 

 

 

65

 

Noncash lease expense

 

 

83

 

 

 

102

 

Amortization of debt discount

 

 

98

 

 

 

82

 

Stock-based compensation expense

 

 

5,760

 

 

 

8,662

 

Noncash change in the fair value of assets and liabilities, net

 

 

1,827

 

 

 

(999

)

Unrealized foreign exchange loss

 

 

194

 

 

 

832

 

Losses from investments in equity method investees, net of tax

 

 

1,701

 

 

 

1,033

 

Other

 

 

72

 

 

 

(194

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

14

 

 

 

4,873

 

Accounts payable

 

 

(742

)

 

 

2,476

 

Accrued liabilities

 

 

(4,286

)

 

 

(3,689

)

Net cash used in operating activities

 

 

(22,573

)

 

 

(21,111

)

Cash flows from investing activities

 

 

 

 

 

 

Cash paid for securities carried at fair value

 

 

(21,364

)

 

 

 

Proceeds from sale and maturities of securities carried at fair value

 

 

43,841

 

 

 

19,461

 

Cash paid for investments

 

 

(10,000

)

 

 

 

Cash paid for property and equipment

 

 

 

 

 

(280

)

Cash paid for capitalized internal-use software development costs

 

 

(5

)

 

 

(163

)

Cash paid for long term notes receivable - related parties, net

 

 

 

 

 

(3,000

)

Cash paid for convertible notes receivable and warrant - related party

 

 

(1,000

)

 

 

 

Net cash provided by investing activities

 

 

11,471

 

 

 

16,018

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of shares upon exercise of stock options

 

 

 

 

 

206

 

Net cash provided by financing activities

 

 

 

 

 

206

 

Effect of foreign exchange rate changes on cash

 

 

(64

)

 

 

159

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(11,166

)

 

 

(4,728

)

Cash, cash equivalents and restricted cash – beginning of the period

 

 

45,034

 

 

 

190,613

 

Cash, cash equivalents and restricted cash – end of the period

 

$

33,867

 

 

$

185,885

 

Supplemental disclosures:

 

 

 

 

 

 

Cash paid for interest

 

$

629

 

 

$

452

 

Supplemental disclosures of noncash investing and financing information:

 

 

 

 

 

 

Right of use asset obtained in exchange for operating lease liabilities

 

$

 

 

$

1,356

 

 

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

7


 

1. Organization and Description of Business

 

ATAI Life Sciences N.V. (“atai" or the "Company"), headquartered in Berlin, Germany is the parent company of ATAI Life Sciences AG and, along with its subsidiaries, is a clinical-stage biopharmaceutical company aiming to transform the treatment of mental health disorders. atai was founded in 2018 as a response to the significant unmet need and lack of innovation in the mental health treatment landscape and is dedicated to efficiently developing innovative therapeutics to treat depression, anxiety, addiction, and other mental health disorders. By pooling resources and best practices, atai aims to responsibly accelerate the development of new medicines to achieve clinically meaningful and sustained behavioral change in mental health patients.

 

The Company is subject to risks and uncertainties common to clinical stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, third-party clinical research organizations and manufacturers, protection of proprietary intellectual property and technology, compliance with government regulations and the ability to secure additional capital to fund operations. Therapeutic candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s therapeutic development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from sales.

 

The Company operates and manages the business as one reportable segment, which is the business of identifying and advancing mental health innovations. The Company has determined that its chief executive officer is the chief operating decision maker (“CODM”). The CODM reviews consolidated operating expenses to make decisions about allocating resources or capital to specific compounds or projects in line with overall Company’s strategies and goals. The Company operates in two geographic regions primarily in the United States and Germany.

 

Liquidity and Going Concern

 

The Company has incurred significant losses and negative cash flows from operations since its inception. As of March 31, 2024, the Company had cash and cash equivalents of $18.9 million, restricted cash of $15.0 million, and short-term securities of $87.4 million and its accumulated deficit was $577.7 million. The Company has historically financed its operations through the sale of equity securities, debt financings, sale of convertible notes and revenue generated from licensing and collaboration arrangements. The Company has not generated any revenues to date from the sale of its product candidates and does not anticipate generating any revenues from the sale of its product candidates unless and until it successfully completes development and obtains regulatory approval to market its product candidates.

 

The Company currently expects that its existing cash and cash equivalents and short-term securities as of March 31, 2024 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the date the unaudited condensed consolidated financial statements are issued.

2. Basis of Presentation, Consolidation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and follow the requirements of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 28, 2024.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the Company’s financial position, its results of operations and comprehensive loss, and its cash flows for the periods presented. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period.

Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP included in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”).

 

 

8


 

Reclassifications

Certain reclassifications were made to prior period amounts in the condensed unaudited consolidated financial statements and accompanying notes to conform with current year presentation in order to consolidate and simplify the disclosures of changes in assets and liabilities held at fair value.

Consolidation

The Company's unaudited condensed consolidated financial statements include the accounts of atai and its subsidiaries. All intercompany balances and transactions have been eliminated in the consolidation.

The Company's policy is to consolidate all entities that it controls by ownership of a majority of the outstanding voting stock. In addition, entities that meet the definition of a variable interest entity (“VIE”) for which atai is the primary beneficiary are consolidated. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly-owned, the third-party’s holding of equity interest is presented as Noncontrolling interests in the Company's unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of stockholders' equity. The portion of net earnings attributable to the noncontrolling interests is presented as Net loss attributable to noncontrolling interests in the Company's unaudited condensed consolidated statements of operations.

Ownership interests in entities over which the Company has significant influence, but not a controlling financial interest, are accounted for under either the alternative measurement under ASC 321 or as an equity method investment. Investments eligible for the measurement alternative under ASC 321 are carried at its initial cost, with remeasurements to fair value upon impairment or upon a price change observed in an orderly transaction of the same or similar investment of the same issuer. For equity method investments where the Company has not elected the fair value option, it records gains (losses) from investments in equity method investees, net of tax, for its proportionate share of the underlying company’s net results until the investment balance is adjusted to zero. If the Company makes subsequent additional investments in that same company, it may record additional gains (losses) based on changes to its investment basis and also may record additional income (loss) in equity method investments. If the Company has elected the fair value option for an equity investment, the fair value of the investment will be recorded upon acquisition and any changes in fair value will be recorded as a component of other income (expense), net.

 

Significant Accounting Policies

During the three months ended March 31, 2024, there were no significant changes to the Company’s significant accounting policies as described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2023 except as described below.

Restricted Cash

The Company maintains certain cash balances restricted as to withdrawal or use. Restricted cash assets as of March 31, 2024 are for the sole purpose of purchasing additional Series C Shares in Beckley Psytech Limited. See Note 5 for further information.

Recently Adopted Accounting Pronouncements

 

ASU 2016-13 Financial Instruments - Credit Losses

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses. This guidance requires immediate recognition of management’s estimates of current expected credit losses. Under the prior model, losses were recognized only when losses were deemed probable. The new model is applicable to most financial assets and certain other instruments that are not measured at fair value through net income.

 

The Company utilizes an undiscounted probability-of-default (“PD”) and loss-given-default (“LGD”) method for estimating credit losses on its assets pool, which is comprised of loans to other companies. Under the PD and LGD method, the expected credit loss percentage (or “loss rate”) is calculated as the probability of default (i.e., the probability the asset will default within the given time frame) multiplied by the loss given default (i.e., the percentage of the asset not expected to be collected because of default). To implement the PD and LGD method, the Company utilizes readily observable market information from term-matched public debt to derive market implied current expected credit losses (“MICECL”) grouped by Standard & Poor’s (“S&P”) credit rating scale. The MICECL framework considers risk characteristics of assets pool based on publicly available or estimated S&P credit ratings to calculate an appropriate credit loss reserve for the pool or group of assets.

 

ASU 2016-13 requires a cumulative effect adjustment to the statement of financial position as of the beginning of the first reporting period in which it is effective. On January 1, 2023, the Company adopted this guidance and applied a modified-retrospective transition approach through a cumulative-effect adjustment to retained earnings upon adoption. At transition, the new accounting guidance’s adoption resulted

9


 

in an increase to accumulated deficit of $0.5 million, net of tax attributable to an increase in the allowance for credit losses related to its long term notes receivable - related parties.

 

Further, the FASB issued ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-03 and ASU 2022-02 to provide additional clarification and guidance on the credit losses standard. The Company adopted ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-03 and ASU 2022-02 on January 1, 2023. The adoption of these standards did not have a material impact on the Company’s consolidated financial statements or disclosures.

 

Recently Issued Accounting Pronouncements Not Yet Adopted

 

In November 2023, the Financial Accounting Standard Board ("FASB") issued new guidance designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses per segment. The guidance is effective for all fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. The new standard must be adopted on a retrospective basis and early adoption is permitted. The Company is not early adopting the standard. We are currently evaluating this guidance to determine its impact on our consolidated financial statements.

 

In December 2023, the FASB issued new guidance designed to improve income tax disclosure requirements, primarily through increased disaggregation disclosures within the effective tax rate reconciliation as well as enhanced disclosures on income taxes paid. The guidance is effective for all fiscal years beginning after December 15, 2024. The new standard can be adopted on a prospective basis with an option to be adopted retrospectively and early adoption is permitted. The Company is not early adopting the standard. We are currently evaluating this guidance to determine its impact on our consolidated financial statements.

 

 

 

 

 

 

3. Dispositions

 

2023 Dispositions

 

Psyber, Inc.

 

In October 2023, the Company entered into a Framework Agreement with the founders of Psyber, Inc. ("Psyber Founders") through which the Company transferred its equity interest in Psyber, Inc. ("Psyber") to the Founders in exchange for certain intellectual property.

 

As a result of the disposition, the Company ceased having controlling financial interest in Psyber. The Company determined that it was no longer the primary beneficiary, no longer had the power to direct the significant activities of Psyber, and accordingly, deconsolidated Psyber. The Company derecognized all of Psyber's assets and liabilities, with the exception of the retained intellectual property, from its consolidated balance sheet and recognized a loss of $0.3 million, which was reported as Loss on deconsolidation of a variable interest entity, a component of other income, net in the consolidated statement of operations for the year ended December 31, 2023.

 

The Company concluded that the decision to deconsolidate Psyber, which was based on resource capital allocation decisions, did not represent a significant strategic shift that would have a material effect on the Company's operations and financial results. Therefore, the Company did not present the results of Psyber prior to deconsolidation as discontinued operations in its consolidated statements of operations for the year ended December 31, 2023.

 

TryptageniX, Inc.

 

In December 2023, the Company finalized and entered into a Framework Agreement with CB Therapeutics, Inc. ("CBT") through which the Company transferred its equity interest in TryptageniX Inc. ("TryptageniX") to CBT in exchange for certain intellectual property and an Amended and Restated Development Services and Exclusive License Agreement.

 

As a result of the disposition, the Company ceased having controlling financial interest in TryptageniX. The Company determined that it was no longer the primary beneficiary, no longer had the power to direct the significant activities of TryptageniX, and accordingly, deconsolidated TryptageniX. The Company derecognized all of TryptageniX's assets and liabilities from its consolidated balance sheet, and recognized a gain of $0.4 million, which was reported as Gain on deconsolidation of a variable interest entity, a component of other income, net in the consolidated statement of operations for the year ended December 31, 2023.

 

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The Company concluded that the decision to deconsolidate TryptageniX, which was based on resource capital allocation decisions, did not represent a significant strategic shift that would have a material effect on the Company's operations and financial results. Therefore, the Company did not present the results of TryptageniX prior to deconsolidation as discontinued operations in its consolidated statements of operations for the year ended December 31, 2023.

 

4. Variable Interest Entities

 

Consolidated VIEs

 

At each reporting period, the Company reassesses whether it remains the primary beneficiary for Variable Interest Entities (“VIEs”) consolidated under the VIE model.

 

The entities consolidated by the Company are comprised of wholly and partially owned entities for which the Company is the primary beneficiary under the VIE model as the Company has (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses that could potentially be significant to the VIE, or the right to receive benefits from the VIE that could potentially be significant to the VIE. The results of operations of the consolidated entities are included within the Company’s unaudited condensed consolidated financial statements from the date of acquisition to March 31, 2024.

 

As of March 31, 2024 and December 31, 2023, the Company has accounted for the following consolidated investments as VIEs, excluding the wholly owned subsidiaries:

 

Consolidated Entities

 

Relationship as of
March 31, 2024

 

Relationship as of
December 31, 2023

 

Date Control Obtained

 

Ownership % March 31, 2024

 

Ownership % December 31, 2023

Perception Neuroscience Holdings, Inc.

 

Controlled VIE

 

Controlled VIE

 

November 2018

 

59.2%

 

59.2%

Kures, Inc.

 

Controlled VIE

 

Controlled VIE

 

August 2019

 

64.5%

 

64.5%

Recognify Life Sciences, Inc.

 

Controlled VIE

 

Controlled VIE

 

November 2020

 

51.9%

 

51.9%

PsyProtix, Inc.

 

Controlled VIE

 

Controlled VIE

 

February 2021

 

75.0%

 

75.0%

 

 

As of March 31, 2024 and December 31, 2023, the assets of the consolidated VIEs can only be used to settle the obligations of the respective VIEs. The liabilities of the consolidated VIEs are obligations of the respective VIEs and their creditors have no recourse to the general credit or assets of atai.

The following table presents the assets and liabilities (excluding intercompany balances that were eliminated in consolidation) for all VIEs as of March 31, 2024 (in thousands):

 

 

 

Perception

 

 

Kures

 

 

Recognify

 

 

PsyProtix

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

52

 

 

$

159

 

 

$

930

 

 

$

34

 

Prepaid expenses and other current assets

 

 

239

 

 

 

 

 

 

429

 

 

 

 

Total current assets

 

 

291

 

 

 

159

 

 

 

1,359

 

 

 

34

 

Long term notes receivable

 

 

 

 

 

 

 

 

 

 

 

98

 

Total assets

 

$

291

 

 

$

159

 

 

$

1,359

 

 

$

132

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

318

 

 

$

364

 

 

$

351

 

 

$

2

 

Accrued liabilities

 

 

678

 

 

 

145

 

 

 

724

 

 

 

33