UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

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

For the quarterly period ended September 30, 2014

OR

¨

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

For the transition period from              to             

001-36548

(Commission file number)

 

ATARA BIOTHERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

46-0920988

(State of incorporation)

 

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

 

3260 Bayshore Blvd.

Brisbane, CA

 

94005

(Address of principal executive offices)

 

(Zip code)

(415) 287-2410

(Registrant’s telephone number, including area code)

 

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  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

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

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

x

Smaller reporting company

¨

(Do not check if a smaller reporting company)

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

The number of shares of the registrant’s Common Stock outstanding as of November 7, 2014 was 20,212,889 shares.

 

 

 

 

 


 

ATARA BIOTHERAPEUTICS, INC.

INDEX

 

 

  

 

  

Page

PART I.

  

FINANCIAL INFORMATION

  

 

 

 

 

Item 1.

  

Financial statements (Unaudited)

  

 

 

 

 

 

  

Condensed Combined and Consolidated Balance Sheets

  

3

 

 

 

 

  

Condensed Combined and Consolidated Statements of Operations and Comprehensive Loss

  

4

 

 

 

 

  

Condensed Combined and Consolidated Statements of Cash Flows

  

5

 

 

 

 

  

Notes to Condensed Combined and Consolidated Financial Statements

  

6

 

 

 

Item 2.

  

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

  

21

 

 

 

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk

  

30

 

 

 

Item 4.

  

Controls and Procedures

  

31

 

 

 

 

PART II.

  

OTHER INFORMATION

  

 

 

 

 

 

Item 1.

  

Legal Proceedings

  

31

 

 

 

 

Item 1A.

  

Risk Factors

  

31

 

 

 

 

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

60

 

Item 3.

  

Defaults Upon Senior Securities

  

60

 

Item 4.

  

Mine Safety Disclosures

  

60

 

Item 5.

  

Other information

  

60

 

Item 6.

  

Exhibits

  

61

 

 

 

 

  

Signatures

  

62

 

 

 

 

  

Index to Exhibits

  

63

 

 

 

 

 

2


 

Atara Biotherapeutics, Inc.

Condensed Combined and Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

 

 

September 30,

 

 

December 31,

 

 

2014

 

 

2013

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

25,703

 

 

$

51,615

 

Short-term available-for-sale investments

 

25,996

 

 

 

 

Prepaid expenses and other current assets

 

323

 

 

 

193

 

Total current assets

 

52,022

 

 

 

51,808

 

Property and equipment, net

 

14

 

 

 

8

 

Other assets

 

2,084

 

 

 

12

 

Total assets

$

54,120

 

 

$

51,828

 

Liabilities, convertible preferred stock and stockholders’ deficit

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

569

 

 

$

606

 

Accrued compensation

 

500

 

 

 

331

 

Income tax payable

 

63

 

 

 

155

 

Other accrued liabilities

 

1,280

 

 

 

432

 

Total current liabilities

 

2,412

 

 

 

1,524

 

Other long-term liabilities

 

165

 

 

 

230

 

Total liabilities

 

2,577

 

 

 

1,754

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

Series A convertible preferred stock—$0.0001 par value, liquidation preference of

   $20,088

 

19,909

 

 

 

19,909

 

Series A-1 convertible preferred stock—$0.0001 par value, liquidation preference

   of  $3,000

 

2,768

 

 

 

2,768

 

Series B convertible preferred stock—$0.0001 par value, liquidation preference of

   $52,000

 

51,895

 

 

 

38,414

 

Stockholders’ deficit

 

 

 

 

 

 

 

Common stock—$0.0001 par value, 12,003,891 and 1,509,712 shares issued and

   outstanding as of December 31, 2013 and September 30, 2014, respectively

 

 

 

 

1

 

Additional paid-in capital

 

7,344

 

 

 

2,200

 

Notes receivable from stockholder

 

 

 

 

(335

)

Accumulated other comprehensive loss

 

(11

)

 

 

 

Accumulated deficit

 

(30,362

)

 

 

(12,883

)

Total stockholders’ deficit

 

(23,029

)

 

 

(11,017

)

Total liabilities, convertible preferred stock and stockholders’ deficit

$

54,120

 

 

$

51,828

 

 

See accompanying notes.

 

 

 

3


 

Atara Biotherapeutics, Inc.

Condensed Combined and Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

Three months ended

 

 

Nine months ended

 

 

September 30,

 

 

September 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

$

4,241

 

 

$

1,134

 

 

$

9,332

 

 

$

2,057

 

Research and development costs paid to

   Amgen

 

 

 

 

550

 

 

 

1,066

 

 

 

550

 

General and administrative

 

1,708

 

 

 

868

 

 

 

7,162

 

 

 

2,591

 

Total operating expenses

 

5,949

 

 

 

2,552

 

 

 

17,560

 

 

 

5,198

 

Loss from operations

 

(5,949

)

 

 

(2,552

)

 

 

(17,560

)

 

 

(5,198

)

Interest income

 

30

 

 

 

3

 

 

 

59

 

 

 

8

 

Loss before provision for income taxes

 

(5,919

)

 

 

(2,549

)

 

 

(17,501

)

 

 

(5,190

)

Provision (benefit) for income taxes

 

 

 

 

(13

)

 

 

(22

)

 

 

27

 

Net loss

$

(5,919

)

 

$

(2,536

)

 

$

(17,479

)

 

$

(5,217

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses on investments

 

(11

)

 

 

 

 

 

(11

)

 

 

 

Other comprehensive loss

 

(11

)

 

 

 

 

 

(11

)

 

 

 

Comprehensive loss

$

(5,930

)

 

$

(2,536

)

 

$

(17,490

)

 

$

(5,217

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

$

(4.20

)

 

$

(2.59

)

 

$

(13.07

)

 

$

(5.73

)

Weighted-average common shares outstanding - basic and diluted

 

1,410,507

 

 

 

977,778

 

 

 

1,337,501

 

 

 

910,839

 

 

See accompanying notes.

 

 

 

4


 

Atara Biotherapeutics, Inc.

Condensed Combined and Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Nine months

 

 

ended September 30,

 

 

2014

 

 

2013

 

Operating activities

 

 

 

 

 

 

 

Net loss

$

(17,479

)

 

$

(5,217

)

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

 

 

 

 

 

 

 

Non-cash research and development expenses

 

750

 

 

 

 

Depreciation expense

 

4

 

 

 

3

 

Investment premium amortization, net

 

249

 

 

 

 

Stock-based compensation expense

 

4,328

 

 

 

1,017

 

Interest accrued on notes receivable from stockholder

 

(2

)

 

 

(3

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Other assets

 

(34

)

 

 

(5

)

Prepaid expenses and other current assets

 

33

 

 

 

(523

)

Accounts payable

 

(37

)

 

 

512

 

Income tax payable

 

(92

)

 

 

11

 

Other accrued liabilities

 

440

 

 

 

542

 

Accrued compensation

 

169

 

 

 

186

 

Net cash used in operating activities

 

(11,671

)

 

 

(3,477

)

Investing activities

 

 

 

 

 

 

 

Purchase of short-term investments

 

(28,618

)

 

 

 

Maturities of short-term investments

 

2,200

 

 

 

 

Purchase of property and equipment

 

(10

)

 

 

(3

)

Net cash used in investing activities

 

(26,428

)

 

 

(3

)

Financing activities

 

 

 

 

 

 

 

Repayment of notes receivable from stockholder

 

337

 

 

 

 

Proceeds from sale of convertible preferred stock

 

13,500

 

 

 

15,087

 

Offering costs incurred in connection with sale of convertible preferred stock

 

(19

)

 

 

(124

)

Offering costs incurred in anticipation of initial public filing

 

(1,631

)

 

 

 

Net cash provided by financing activities

 

12,187

 

 

 

14,963

 

Increase (decrease) in cash and cash equivalents

 

(25,912

)

 

 

11,483

 

Cash and cash equivalents-beginning of period

 

51,615

 

 

 

4,207

 

Cash and cash equivalents-end of period

$

25,703

 

 

$

15,690

 

Non-cash financing activities

 

 

 

 

 

 

 

Issuance of common stock for research and development expenses related to technology licensing option

$

750

 

 

$

 

Issuance of Series A-1 convertible preferred stock to Amgen in exchange for license

$

 

 

$

1,003

 

Change in obligation to issue Series A-1 convertible preferred stock to Amgen

$

 

 

$

(1,003

)

Issuance of common stock upon vesting of stock awards

$

65

 

 

$

80

 

Change in other long-term liabilities related to non-vested stock awards

$

(65

)

 

$

251

 

Restricted stock issued to related party in exchange for notes receivable

$

 

 

$

331

 

Offering costs in anticipation of initial public filing included in other accrued liabilities     and accounts payable

$

407

 

 

$

 

Supplemental cash flow disclosure—Cash paid for taxes

$

70

 

 

$

13

 

 

See accompanying notes.

 

 

5


 

Atara Biotherapeutics, Inc.

Notes to Condensed Combined and Consolidated Financial Statements

(Unaudited)

 

1.

Organization and Description of Business

Atara Biotherapeutics, Inc. (“Atara”), Nina Biotherapeutics, Inc. (“Nina”), Santa Maria Biotherapeutics, Inc. (“Santa Maria”) and Pinta Biotherapeutics, Inc. (“Pinta”) (collectively, the “Company,” “we” or “our”) were incorporated in August 2012 in Delaware. We are a clinical-stage biopharmaceutical company developing novel therapeutics, with an initial focus on biologics for muscle wasting conditions and oncology. Atara was formed as a management company with the sole purpose of providing management, financial and administrative services for Nina, Pinta and Santa Maria.

Our product candidate portfolio was acquired through licensing arrangements with Amgen Inc. (“Amgen”) in exchange for convertible preferred stock, milestone payments and commitments for future royalties. See Note 4 for further information.

Initial Public Offering

In October 2014, we completed our initial public offering of 5,750,000 shares of common stock, including 750,000 shares from the exercise by the underwriters of their overallotment option, at an offering price to the public of $11.00 per share. We received net proceeds of approximately $55.8 million, after deducting underwriting discounts and commissions and offering expenses. In connection with the initial public offering, the Company’s outstanding shares of convertible preferred stock were automatically converted into 12,298,515 shares of common stock, resulting in the reclassification of $74.6 million from mezzanine equity to additional paid-in capital.

 

2.

Summary of Significant Accounting Policies

Basis of Presentation and Recapitalization

All share and per-share amounts presented in the combined and consolidated financial statements for the nine months ended September 30, 2014 and for the year ended December 31, 2013 and in the notes hereto have been revised to reflect a 1.3-to-1 reverse stock split which became effective July 9, 2014.

The accompanying condensed combined and consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). These financial statements include the financial position, results of operations, and cash flows of the Company, including its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.

The accompanying condensed combined and consolidated financial statements should be read in conjunction with the Company’s audited combined and consolidated financial statements and notes thereto included in the Company’s final prospectus, relating to the Company’s initial public offering, filed with the SEC on October 16, 2014.

The interim financial data as of September 30, 2014 and 2013 is unaudited and is not necessarily indicative of the results for a full year or any interim period. In the opinion of the Company’s management, the interim data includes all normal and recurring adjustments necessary for a fair statement of the Company’s financial results for the three and nine month periods ending September 30, 2014 and 2013. The December 31, 2013 condensed combined and consolidated balance sheet data has been derived from audited financial statements. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations relating to interim financial statements.

Prior to March 31, 2014, the accompanying financial statements include the operations of Atara, Nina, Pinta and Santa Maria on a combined basis as the four individual companies were under common ownership and common management since inception. All intercompany transactions have been eliminated. On March 31, 2014, our boards of directors approved and we implemented a recapitalization (the “Recapitalization”) in which (a) all the outstanding shares of common stock of Atara were cancelled and forfeited by existing stockholders and (b) the stockholders of Nina, Pinta and Santa Maria exchanged their existing common and convertible preferred stock for newly-issued shares of Atara, with the same rights and privileges as the outstanding capital stock of Nina, Pinta and Santa Maria. The shares were exchanged on a collective nine-for-one basis. The Recapitalization lacked economic substance as the newly-issued shares have the same rights and privileges as the previously outstanding capital stock of Nina, Pinta and Santa Maria and there was no change in ownership percentages of the individual stockholders. As a result of the Recapitalization, Nina, Pinta and Santa Maria became wholly owned subsidiaries of Atara effective March 31, 2014. The Recapitalization is considered a tax-free exchange for US federal income tax purposes.

6


 

Because the four individual companies were under common ownership and the Recapitalization lacked economic substance, we accounted for the Recapitalization as a combination of businesses under common control. The assets and liabilities of Nina, Pinta and Santa Maria were recorded by Atara at their historical carrying amounts on March 31, 2014 and beginning March 31, 2014, the financial statements of the Company are presented on a consolidated basis.  

Liquidity

We have incurred significant operating losses since inception and have relied on private equity financings to fund our operations. At September 30, 2014, we had an accumulated deficit of $30.4 million. As we continue to incur losses, our transition to profitability will depend on the successful development, approval and commercialization of product candidates and on the achievement of sufficient revenues to support our cost structure. We may never achieve profitability, and unless and until we do, we will need to continue to raise additional capital. Management expects that existing cash and cash equivalents as of September 30, 2014, combined with the proceeds from our initial public offering in October 2014, will be sufficient to fund our current operating plan through the first half of 2017.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates relied upon in preparing these combined and consolidated financial statements include the fair value of common stock, the fair value of preferred stock and estimates related to clinical trial accruals. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase, consisting of money market funds that earn interest and dividends overnight.

Investments

Our available-for-sale investments consist primarily of corporate bonds and commercial paper. Investments with original maturities of greater than 90 days are classified as short-term available-for-sale securities on the combined and consolidated balance sheets.

Our investments in available-for-sale securities are reported at fair value. Unrealized gains and losses related to changes in the fair value of securities are recognized in accumulated other comprehensive loss, net of tax, on our combined and consolidated balance sheets. Changes in the fair value of available-for-sale securities impact the statements of operations only when such securities are sold or an other-than-temporary impairment is recognized. Realized gains and losses on the sale of securities are determined by specific identification of each security’s cost basis. We regularly review our investment portfolio to determine if any security is other-than-temporarily impaired, which would require us to record an impairment charge in the period any such determination is made. In making this judgment, we evaluate, among other things, the duration and extent to which the fair value of a security is less than its cost, the financial condition of the issuer and any changes thereto, and our intent to sell, or whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. Our assessment on whether a security is other-than-temporarily impaired could change in the future due to new developments or changes in assumptions related to any particular security.

Fair Value Measurement

The carrying amounts of certain of our financial instruments including cash equivalents, accounts payable and accrued liabilities approximate fair value due to their short maturities. Short-term investments are comprised of available-for-sale securities, which are carried at fair value.

Concentration of Credit Risk and Other Uncertainties

We place cash and cash equivalents in the custody of financial institutions that management believes are of high credit quality, which at times, may be in excess of the amount insured by the Federal Deposit Insurance Corporation. We also have short-term investments in money market funds, corporate bonds and commercial paper backed by US Government or private insurers, which can be subject to certain credit risk. However, we mitigate the risks by investing in high-grade instruments, limiting our exposure to any one issuer, and monitoring the ongoing creditworthiness of the financial institutions and issuers.

7


 

We are subject to certain risks and uncertainties and believe that changes in any of the following areas could have a material adverse effect on future financial position or results of operations: ability to obtain future financing; regulatory approval and market acceptance of, and reimbursement for, our product candidates; performance of third-party clinical research organizations and manufacturers upon which we rely; development of sales channels; protection of our intellectual property; litigation or claims against us based on intellectual property, patent, product, regulatory or other factors; and our ability to attract and retain employees necessary to support our growth.

Fair Value of Financial Instruments

Our financial assets and liabilities carried at fair value are primarily comprised of investments in money market funds, corporate bonds and commercial paper. The fair value accounting guidance requires that assets and liabilities be carried at fair value and classified in one of the following three categories:

 

Level 1:

  

Quoted prices in active markets for identical assets or liabilities that we have the ability to access

 

Level 2:

  

 

Observable market based inputs or unobservable inputs that are corroborated by market data such as quoted prices, interest rates and yield curves

 

Level 3:

  

 

Inputs that are unobservable data points that are not corroborated by market data

We review the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels of certain securities within the fair value hierarchy. We recognize transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs. There were no transfers between Level 1, Level 2, and Level 3 during 2013 or through September 30, 2014.

The following table represents the fair value hierarchy for our financial assets and financial liabilities measured at fair value on a recurring basis:

 

 

 

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

Prices in

 

 

Other

 

 

 

 

 

 

Active

 

 

Observable

 

 

Total

 

 

Markets

 

 

Inputs

 

 

Fair Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(in thousands)

 

At December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

51,615

 

 

$

51,615

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

25,703

 

 

$

25,703

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

21,799

 

 

$

 

 

$

21,799

 

Commercial paper

$

4,197

 

 

$

 

 

$

4,197

 

 

Financial assets and liabilities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis. Corporate bonds and commercial paper are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and are included in Level 2.

Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. We have no Level 3 financial assets and liabilities.

8


 

Available-for-sale investments are carried at fair value and are included in the tables above under short-term investments. The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by major security type are as follows:

 

 

Total

 

 

Total

 

 

Total

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Total

 

 

Cost

 

 

Gain

 

 

Loss

 

 

Fair Value

 

 

(in thousands)

 

At September 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

21,810

 

 

$

3

 

 

$

(14

)

 

$

21,799

 

Commercial paper

 

4,197

 

 

 

 

 

 

 

 

 

4,197

 

Total short-term investments

$

26,007

 

 

$

3

 

 

$

(14

)

 

$

25,996

 

 

The amortized cost and fair value of available-for-sale debt investments, by contractual maturity, were as follows:

 

 

Total

 

 

 

 

 

 

Amortized

 

 

Total

 

 

Cost

 

 

Fair Value

 

 

(in thousands)

 

At September 30, 2014:

 

 

 

 

 

 

 

Maturing within one year

$

24,917

 

 

$

24,906

 

Maturing in one to five years

 

1,090

 

 

 

1,090

 

Short-term available for sale investments

$

26,007

 

 

$

25,996

 

 

Segment and Geographic Information

We operate and manage our business as one reporting and one operating segment, which is the business of developing and commercializing therapeutics. Our Chief Executive Officer, who is our chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of our assets are located in the United States.

Property and Equipment, Net

Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging from three to five years. Maintenance and repairs are charged to operations as incurred.

Long-lived Assets

We evaluate the carrying amount of our long-lived assets whenever events or changes in circumstances indicate that the assets may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount of the asset. To date, there have been no such impairment losses.

Convertible Preferred Stock

We recorded issued convertible preferred stock at fair value on the dates of issuance. The convertible preferred stock is recorded outside of stockholders’ deficit because the shares contain liquidation features that are not solely within our control. We have elected not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because it is uncertain whether or when an event would occur that would obligate us to pay the liquidation preferences to holders of shares of convertible preferred stock. Subsequent adjustments to increase the carrying values to the liquidation preferences will be made only when it becomes probable that such a liquidation event will occur.

Estimated Fair Value of Series A-1 Convertible Preferred Stock

In consideration for the licenses of our product candidate portfolio, we issued 5,538,462 shares of Series A-1 convertible preferred stock (615,384 shares after giving effect to the Recapitalization) and paid $250,000 to Amgen.

9


 

We estimated the fair value of our Series A-1 preferred stock to be $2,768,000 by using the option pricing model (“OPM”), backsolve method. OPM treats the rights of the holders of shares of preferred and common stock as equivalent to call options on any value of the enterprise above certain break points of value based upon the liquidation preferences of the holders of preferred stock, as well as their rights to participation and conversion. Thus, the estimated value of the Series A-1 convertible preferred stock can be determined by estimating the value of its portion of each of these call option rights. The OPM backsolve method derives the implied equity value of a company from a recent transaction involving the company’s own securities issued on an arm’s-length basis. This implied equity value was then allocated to each part of our capital structure, including our Series A-1 convertible preferred stock and common stock. Significant assumptions included an estimated volatility of 53.3%, a risk free interest rate of 0.28% and a time to exit of 2.25 years.

Stock-Based Compensation Expense

We account for stock-based compensation expense, including the expense of restricted common stock awards and grants of RSUs and stock options that may be settled in shares of our common stock, based on the fair values of the equity instruments issued. The fair value is determined on the measurement date, which is generally the date of grant for employee awards and the date when the service performance is completed for non-employees. The fair value for our restricted common stock awards is their intrinsic value, which is the difference between the fair value of the underlying stock at the measurement date and the purchase price. The fair value of our RSUs is the fair value of the underlying stock at the measurement date. The fair value for our stock option awards is determined at the grant date using the Black-Scholes valuation model.  Stock-based compensation expense for awards with time-based vesting criteria is recognized as expense on a straight-line basis over the requisite service period. For employees’ awards with performance-based vesting criteria, we assess the probability of the achievement of the performance conditions at the end of each reporting period and recognize the share-based compensation costs when it becomes probable that the performance conditions will be met. For non-employees’ awards with performance-based vesting criteria, we assess all possible outcomes at the end of each reporting period and recognize the lowest aggregate fair value in the range of possible outcomes. The lowest value in the range of possible outcomes may be zero. For awards that are subject to both service and performance conditions, no expense is recognized until it is probable that performance conditions will be met.  Stock-based compensation expense for awards with performance and other vesting criteria is recognized as expense under an accelerated graded vesting model.

Key assumptions used in the Black-Scholes valuation model used for employee stock awards include:

Expected term – The expected term assumption represents the period that our stock-based awards are expected to be outstanding and is determined using the simplified method.

Expected volatility – Expected volatility is estimated using comparable public companies’ volatility for similar terms.

Expected dividend – We have not historically declared or paid dividends to our stockholders and have no plans to pay dividends; therefore we assumed an expected dividend yield of 0%.

Risk-free interest rate – The risk-free interest rate is based on the yield on U.S. Treasury securities with the expected term of the associated award.

The fair value of non-employee stock options is estimated using the Black-Scholes valuation model with assumptions generally consistent with those used for employee stock options, with the exception of the expected term, which is the remaining contractual life at each measurement date.

Research and Development Expense

Research and development expense consists of costs incurred in performing research and development activities, including compensation and benefits for research and development employees, an allocation of facility and overhead expenses, expenses incurred under agreements with contract research organizations and investigative sites that conduct clinical trials and preclinical studies, the costs of acquiring and manufacturing clinical trial materials, and other supplies and costs associated with product development efforts, preclinical activities and regulatory operations. Research and development costs are expensed as incurred.

Costs for preclinical study and clinical trial activities are recognized based on an evaluation of our vendors’ progress towards completion of specific tasks, using data such as patient enrollment, clinical site activations or information provided to us by our vendors regarding their actual costs incurred. Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services are performed. We determine accrual estimates through reports from and discussions with applicable personnel and outside service providers as to the progress or state of completion of trials, or the services completed. Our estimates of accrued expenses as of each balance sheet date are based on the facts and circumstances known at the time. Costs that are paid in advance of performance are deferred as a prepaid expense and amortized over the service period as the services are provided.

10


 

Income Taxes

We use the assets and liability method to account for income taxes. We record deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect when the differences are expected to reverse. Valuation allowances are provided when necessary to reduce net deferred tax assets to the amount that is more likely than not to be realized. Based on the available evidence, we are unable, at this time, to support the determination that it is more likely than not that our deferred tax assets will be utilized in the future. Accordingly, we recorded a full valuation allowance as of September 30, 2014 and December 31, 2013. We intend to maintain valuation allowances until sufficient evidence exists to support its reversal.

Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit. Interest and penalties related to unrecognized tax benefits are included within the provision for income tax.

Comprehensive Loss

Comprehensive loss is defined as a change in equity of a business enterprise during a period resulting from transactions from non-owner sources. Other comprehensive loss includes net loss and unrealized losses on available-for-sale investments.

Net Loss per Common Share

Basic and diluted net loss per common share is presented, giving effect to the Recapitalization, including cancellation of existing Atara common stock and a nine-for-one share exchange. Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration of common stock equivalents. Diluted net loss per common share is computed by dividing the net loss by the weighted-average number of shares of common stock and common share equivalents outstanding for the period. Common share equivalents are only included in the calculation of diluted net loss per common share when their effect is dilutive. Our convertible preferred stock and restricted stock awards are considered to be participating securities as they are entitled to participate in undistributed earnings with shares of common stock. Due to net losses, there is no impact on the net loss per common share calculation in applying the two-class method since the participating securities have no legal requirement to share in any losses.

Potential dilutive securities, which include convertible preferred stock and unvested restricted common stock awards have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per common share and be antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in all periods presented.

The following shares of potentially dilutive securities give effect to the Recapitalization, and have been excluded from the computations of diluted net loss per common share as the effect of including such securities would be antidilutive:

 

 

Three months

 

 

Nine months

 

 

ended September 30,

 

 

ended September 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Convertible preferred stock

 

12,299,184

 

 

 

5,766,090

 

 

 

12,249,056

 

 

 

5,186,843

 

Unvested restricted common stock

 

631,031

 

 

 

828,118

 

 

 

702,135

 

 

 

796,985

 

 

 

12,930,215

 

 

 

6,594,208

 

 

 

12,951,191

 

 

 

5,983,828

 

 

In addition, 209,959 options have been excluded from the above table as the exercise prices of the underlying options were greater than the average fair value of our common stock for the periods presented.

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (the “FASB”) issued a new accounting standard to provide guidance on the presentation of management’s plans, when conditions or events raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.  The new standard is effective for fiscal years ending after December 15, 2016.  The adoption of this standard is not expected to have a material impact on our financial statements.

In June 2014, the FASB amended the definition of a development-stage entity in the Master Glossary of the Accounting Standards Codification.  The amendments simplified the financial reporting for development-stage companies by eliminating inception-to-date reporting requirements specific to development stage entities.  The revised guidance is effective for annual periods beginning after December 15, 2014; however we early adopted the guidance in the second quarter of 2014.  The adoption of this guidance impacted our financial statement presentation, but did not have a material impact on our financial position or results of operations and cash flows.

11


 

In May 2014, the FASB issued a new accounting standard, Revenue from Contracts with Customers (Topic 606), which supersedes that revenue recognition requirements in the current standard, Revenue Recognition.  The new standard is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  The new standard’s effective date for us will be January 1, 2017.  We will evaluate the application of this standard when we enter into any contracts with customers.

 

3.

Property and Equipment

Property and equipment consists of computer equipment and software, which is depreciated over the estimated useful lives of the assets, ranging from three to five years. Depreciation and amortization expense was not material for all periods presented.

 

4.

Significant Agreements

Related Party License Agreements - In September 2012, we entered into three license agreements with Amgen for the development, manufacturing, use and distribution of products using certain proprietary compounds. Under the terms of these agreements, we paid $250,000 and issued 5,538,462 shares of Series A-1 convertible preferred stock (615,384 shares after giving effect to the Recapitalization) to Amgen. As described further in Note 5, we may also be required to make additional payments to Amgen based upon the achievement of specified development, regulatory, and commercial milestones, as well as mid-single-digit percentage royalties on future sales of products resulting from development of these purchased technologies, if any. These agreements expire at the end of all royalty obligations to Amgen and, upon expiration, the licenses will be fully paid, royalty-free, irrevocable and non-exclusive. We made a $1.0 million milestone payment to Amgen in the second quarter of 2014.

At December 31, 2013, Amgen owns 9.8% of our outstanding voting capital stock on a combined basis. Amgen does not have any rights to participate in our product candidates’ development and is not represented on our boards of directors.

Exclusive Option Agreement – In September 2014, we entered into an exclusive option agreement with Memorial Sloan Kettering Cancer Center (“MSK”) under which we have the right to acquire (pursuant to a negotiated form of license agreement) the exclusive worldwide license rights to the three clinical stage T-cell therapies of MSK.  The initial option period is for twelve months, with extensions available to extend the term up to 27 months at the option of Atara.  Under the terms of the option agreement, we are obligated to use reasonable efforts to prepare a request to be submitted to the US Food and Drug Administration (the “FDA”) regarding a meeting to discuss pivotal trials for one of the clinical stage T-cell therapies.  In exchange for the exclusive option, we paid MSK $1.25 million in cash and issued 59,761 shares of our common stock to MSK.  We estimated the fair value of the common stock issued to MSK to be $750,000.  This total of $2.0 million was recorded as research and development expense in our condensed combined and consolidated statement of operations and comprehensive loss in the third quarter of 2014.  We will be obligated to pay MSK an additional amount up to $630,000 if we extend the option period.

If we extend the option and enter into the license agreement with MSK, we will be obligated under the license agreement to pay to MSK an upfront cash payment of $4.5 million and additional payments of up to $33.0 million based on a license fee and achievement of specified development, regulatory and sales-related milestones, and to make royalty payments based on sales of the T-cell therapy products.

 

5.

Commitments and Contingencies

Operating Leases

In September 2013, we entered into a noncancelable operating lease for our facility in Westlake Village, California. The lease term commenced in October 2013 and will expire in October 2014. After October 2014, this facility is available to us on a month-to-month lease arrangement.  Rent expense for this facility is recognized on a straight-line basis over the term of the lease, and the difference between amounts paid and amounts recorded as rent expense are recorded as deferred rent. Future minimum lease payments under this lease are $31,900 in 2014. We also lease an office facility in Brisbane, California under a sublease that expires in January 2015. Future minimum payments under this lease are $23,220 in 2014 and $811 in 2015.

In September 2014, we entered into a non-cancellable sublease agreement for our corporate headquarters in South San Francisco, California.  The sublease term began in November 2014 and ends on January 31, 2017.  Total commitments over the term of the sublease are estimated to be approximately $0.4 million.

Rent expense for the three and nine month periods ended September 30, 2014 were $19,867 and $49,620, respectively. Rent expense for the three and nine month periods ended September 30, 2013 were $12,988 and $40,224, respectively.

12


 

Related Party License Agreements

Under the terms of our license agreements with Amgen, we are obligated to make additional milestone payments to Amgen of up to $86.0 million upon the achievement of certain development and regulatory approval milestones. Of these milestone payments, $14.0 million relate to milestones for clinical trials. The remaining $72.0 million relate to milestones for regulatory approvals in various territories and are anticipated to be made no earlier than 2017. Thereafter, we are obligated to make tiered payments based on achievement of commercial milestones based upon net sales levels. The maximum payments would be $206.0 million based on sales of over $1 billion for each of three products in a calendar year. We are also obligated to pay mid-single-digit percentage tiered royalties on future net sales of products which are developed and approved as defined by the agreements. Our royalty obligations as to a particular licensed product will be payable, on a country-by-country and product-by-product basis, until the later of (a) the date of expiration of the last to expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell, or import of such licensed product by us or a sublicense in such country, (b) loss of regulatory exclusivity or (c) 10 years after the first commercial sale of the applicable licensed product in the applicable country. As of December 31, 2013 and September 30, 2014, there were no outstanding obligations due to Amgen. We made a $1.0 million milestone payment to Amgen in the second quarter of 2014.

In accordance with terms of the agreements, we use commercially reasonable efforts to pay costs related to the preparation, filing, prosecution, defense and maintenance of the patents covered by the license agreements. During the three and nine month periods ended September 30, 2014, we incurred expenses of $447,518 and $842,228, respectively, related to the preparation, filing and maintenance of patents. During the three and nine month periods ended September 30, 2013, the corresponding amounts were $206,434 and $688,909, respectively.

Indemnification Agreements

In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for indemnification for certain liabilities. The exposure under these agreements is unknown because it involves claims that may be made against us in the future but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations. We also have indemnification obligations to our directors and executive officers for specified events or occurrences, subject to some limits, while they are serving at our request in such capacities. There have been no claims to date and we believe the fair value of these indemnification agreements is minimal. Accordingly, we have not recorded any liabilities for these agreements as of September 30, 2014 and December 31, 2013.

 

6.

Convertible Preferred Stock and Stockholders’ Deficit

Convertible preferred shares issued and authorized as of September 30, 2014 and December 31, 2013 were as follows:

 

 

As of September 30, 2014

 

 

Authorized

 

 

Outstanding

 

 

Carrying

 

 

Shares

 

 

Shares

 

 

Value

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Series A convertible preferred stock

 

5,150,699

 

 

 

5,150,699

 

 

$

19,909

 

Series A-1 convertible preferred stock

 

615,384

 

 

 

615,384

 

 

 

2,768

 

Series B convertible preferred stock

 

6,532,432

 

 

 

6,532,432

 

 

 

51,895

 

 

 

12,298,515

 

 

 

12,298,515

 

 

$

74,572

 

 

13


 

 

As of December 31, 2013

 

 

Nina

 

 

Pinta

 

 

Santa Maria

 

 

Combined Total

 

 

 

 

 

 

Carrying

 

 

 

 

 

 

Carrying

 

 

 

 

 

 

Carrying

 

 

 

 

 

 

Carrying

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

(dollars in thousands)

 

Issued and outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A convertible

   preferred stock

 

15,452,114

 

 

$

2,306

 

 

 

15,452,114

 

 

$

9,963

 

 

 

15,452,114

 

 

$

7,640

 

 

 

46,356,342

 

 

$

19,909

 

Series A-1 convertible

   preferred stock

 

1,846,154

 

 

 

573

 

 

 

1,846,154

 

 

 

1,355

 

 

 

1,846,154

 

 

 

840

 

 

 

5,538,462

 

 

 

2,768

 

Series B convertible

   preferred stock

 

14,509,579

 

 

 

2,496

 

 

 

14,509,579

 

 

 

17,960

 

 

 

14,509,579

 

 

 

17,958

 

 

 

43,528,737

 

 

 

38,414

 

 

 

31,807,847

 

 

$

5,375

 

 

 

31,807,847

 

 

$

29,278

 

 

 

31,807,847

 

 

$

26,438

 

 

 

95,423,541

 

 

$

61,091

 

Authorized:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A convertible

   preferred stock

 

15,452,114

 

 

 

 

 

 

 

15,452,114

 

 

 

 

 

 

 

15,452,114

 

 

 

 

 

 

 

46,356,342

 

 

 

 

 

Series A-1 convertible

   preferred stock

 

1,846,154

 

 

 

 

 

 

 

1,846,154

 

 

 

 

 

 

 

1,846,154

 

 

 

 

 

 

 

5,538,462

 

 

 

 

 

Series B convertible

   preferred stock

 

16,960,012

 

 

 

 

 

 

 

16,960,012

 

 

 

 

 

 

 

16,960,012

 

 

 

 

 

 

 

50,880,036

 

 

 

 

 

 

 

34,258,280

 

 

 

 

 

 

 

34,258,280

 

 

 

 

 

 

 

34,258,280

 

 

 

 

 

 

 

102,774,840

 

 

 

 

 

 

 

Original issuance prices of Series A convertible preferred stock, prior to issuance costs, were $0.152, $0.650 and $0.498 per share, for Nina, Pinta and Santa Maria, respectively, or $1.30 per share on a combined basis. Original issuance prices of Series B convertible preferred stock, prior to issuance costs were $0.173, $1.240 and $1.240 per share, for Nina, Pinta and Santa Maria, respectively, or $2.653 per share on a combined basis. Amgen contributed licenses for issued Series A-1 convertible preferred stock with fair values of $0.310, $0.734 and $0.455 per share for Nina, Pinta and Santa Maria, respectively, or $1.500 per share on a combined basis.

In connection with the Recapitalization on March 31, 2014, the stockholders of Nina, Pinta and Santa Maria exchanged three shares of each company’s preferred stock for one share of Atara preferred stock (a collective nine-for-one basis). The deemed original issuance prices of the new Atara preferred shares, for the calculation of the dividends and liquidation preference discussed below are $3.900, $4.875, and $7.960 for Series A, Series A-1, and Series B, respectively.

Nina, Pinta and Santa Maria issued convertible preferred stock with the same rights and privileges to the same investors. As of December 31, 2013, Atara had not issued any convertible preferred stock. In connection with the Recapitalization on March 31, 2014, Atara issued convertible preferred stock with the same rights and privileges and with the same ownership percentages as the convertible preferred stock previously issued by Nina, Pinta and Santa Maria.

In October 2014, in connection with the completion of our initial public offering, all outstanding shares of Series A convertible preferred stock, Series A-1 convertible preferred stock and Series B convertible preferred stock were converted into 12,298,515 shares of common stock and $74.6 million of mezzanine equity was reclassified to additional paid-in capital.

The significant rights, privileges, and preferences of our convertible preferred stock are as follows:

Dividend Provisions

The holders of the outstanding shares of convertible preferred stock are entitled to receive, when and if declared by our boards of directors, noncumulative annual dividends at a rate of 8% of the $20,087,750 and $52,000,000 liquidation preferences for the Series A and Series B convertible preferred stock, respectively, and 8% of the $3,000,000 liquidation preference for Series A-1 convertible preferred stock. After payments of such dividends, any additional dividends are paid to common and convertible preferred stock holders on an as-converted to common stock basis. No dividends were declared or paid through September 30, 2014.

14


 

Liquidation Preference

In the event of any liquidation, dissolution, winding up or change in control of the Company, the holders of Series B convertible preferred stock are entitled to receive a liquidation amount of $52,000,000 plus all declared but unpaid dividends prior and in preference to the holders of Series A and Series A-1 convertible preferred stock and the common stock. Following payment of these liquidation amounts, if proceeds for distribution remain, the holders of the Series A-1 convertible preferred and Series A convertible preferred stock, pro rata as a single group, are entitled to receive a liquidation amount of $20,087,750 and $3,000,000, respectively, plus all declared but unpaid dividends prior and in preference to the common stockholders. Thereafter, any proceeds remaining for distribution would be distributed pro rata among the common stockholders. Holders of convertible preferred stock may choose to receive the liquidation preference described above as preferred stockholders or instead may participate with the common stock in remaining liquidation proceeds on an as-converted to common stock basis.

Conversion Rights

Each share of convertible preferred stock is convertible, at the option of the holder and at any time, into shares of common stock on a one-for-one basis, subject to certain anti-dilution adjustments.

Each share of convertible preferred stock, subject to certain anti-dilution adjustments, will be automatically converted into one fully paid and nonassessable share of common stock at the applicable conversion rate upon the earlier of: (i) an initial public offering with a pre-initial public offering valuation that results in a price to the public of at least three times the Series B issue price (reduced to 1.6 times following the Recapitalization—see Note 2) and minimum proceeds to us of $30,000,000 or (ii) the date specified by a vote of the holders of a majority of outstanding shares of preferred stock.

Subject to customary exceptions, our amended and restated certificates of incorporation provide anti-dilution protection for holders of convertible preferred stock in the event that we issue additional shares of common stock, options or rights to purchase common stock or securities convertible into common stock without consideration or at a price per share that is less than the then-effective conversion price of any series of the convertible preferred stock, which is referred to as a dilutive issuance. Our amended and restated certificates of incorporation provide that the conversion price shall be adjusted to protect holders of convertible preferred stock from certain dilutive issuances based on a weighted-average formula.

In addition to the anti-dilution protections described above, the conversion price of the convertible preferred stock is subject to adjustments for stock splits, dividends and recapitalizations.

Voting Rights

The holder of each share of convertible preferred stock has the right to one vote for each share of common stock into which such share of convertible preferred stock could be converted. Additionally, specific protective provisions require approval of the holders of a majority of the outstanding shares of convertible preferred stock.

Election of Directors

The members of the boards of directors of Nina, Pinta and Santa Maria were identical for all three companies for the periods presented and were elected as follows: (i) one person was elected by the holders of the common stock; (ii) two persons were elected by the holders of our Series A convertible preferred stock; (iii) one person was elected by the holders of our Series B convertible preferred stock; and (iv) the remaining directors were elected by the holders of our common stock and convertible preferred stock as a single class.

The members of the board of directors of Atara after the Recapitalization were elected as follows: (i) one person was elected by the holders of the common stock; (ii) two persons were elected by the holders of our Series A convertible preferred stock; (iii) one person was elected by the holders of our Series B convertible preferred stock; and (iv) the remaining directors were elected by the holders of our common stock and convertible preferred stock as a single class.

 

15


 

7.

Common Stock and Additional Paid-in Capital

Common stock authorized, issued and outstanding and additional paid-in capital as of September 30, 2014 and December 31, 2013 were as follows:

 

 

Authorized

 

 

Outstanding

 

As of December 31, 2013

 

162,461,535

 

 

 

12,003,891

 

Issuance of common stock upon vesting of awards

 

 

 

 

644,710

 

Recapitalization:

 

 

 

 

 

 

 

Cancellation of Atara shares

 

(923,076

)

 

 

(923,076

)

Tender of Nina, Pinta and Santa Maria shares

 

(161,538,459

)

 

 

(11,725,525

)

Issuance of Atara shares

 

17,948,717

 

 

 

1,302,835

 

Issuance of common stock upon vesting of awards - post Recapitalization

 

 

 

 

147,116

 

Issuance of common stock for research and development expenses related to technology licensing option

 

 

 

 

59,761

 

As of September 30, 2014

 

17,948,717

 

 

 

1,509,712

 

 

 

As of December 31, 2013

 

 

Nina

 

 

Pinta

 

 

Santa Maria

 

 

Atara

 

 

Combined Total

 

 

 

 

 

 

Carrying

 

 

 

 

 

 

Carrying

 

 

 

 

 

 

Carrying

 

 

 

 

 

 

Carrying

 

 

 

 

 

 

Carrying

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

(dollars in thousands)

 

Issued and

   outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock,

   par value

 

3,693,605

 

 

$

 

 

 

3,693,605

 

 

$

 

 

 

3,693,605

 

 

$

1

 

 

 

923,076

 

 

$

 

 

 

12,003,891

 

 

$

1

 

Additional paid-

   in capital

 

 

 

 

147

 

 

 

 

 

 

1,017

 

 

 

 

 

 

1,036

 

 

 

 

 

 

 

 

 

 

 

 

2,200

 

 

 

3,693,605

 

 

$

147

 

 

 

3,693,605

 

 

$

1,017

 

 

 

3,693,605

 

 

$

1,037

 

 

 

923,076

 

 

$

 

 

 

12,003,891

 

 

$

2,201

 

Authorized

 

53,846,153

 

 

 

 

 

 

 

53,846,153

 

 

 

 

 

 

 

53,846,153

 

 

 

 

 

 

 

923,076

 

 

 

 

 

 

 

162,461,535

 

 

 

 

 

 

We have reserved the following shares of common stock for issuance:

 

 

September 30,

 

 

2014

 

Conversion of Series A convertible preferred stock

 

5,150,699

 

Conversion of Series A-1 convertible preferred stock

 

615,384

 

Conversion of Series B convertible preferred stock

 

6,532,432

 

Common stock available for grant of stock awards

 

1,136,543

 

Common stock issuable for options and RSUs outstanding and non-vested restricted stock

 

1,698,120

 

 

 

15,133,178

 

 

Restricted Common Stock

In August 2012, in connection with our formation, our CEO purchased 9,595,384 shares of restricted common stock at a nominal per share purchase price. The shares were issued subject to certain vesting conditions, restrictions on transfer and a Company right of repurchase of any unvested share at their original purchase price. These shares are placed in escrow until vested, and have rights to vote and participate in dividends and distributions. 7,996,153 of these shares have service and fundraising vesting conditions. Under the service vesting condition, shares vest monthly over 48 months, commencing from the first closing of Series A convertible preferred stock financing on October 22, 2012. 1,599,231 of these shares are subject to performance milestones and fundraising vesting conditions. The fundraising vesting conditions for all shares were satisfied as of December 31, 2013. All shares subject to service vesting conditions are subject to accelerated vesting in the event of certain change of control transactions.

The combined grant date intrinsic value for this award was $1,704,094.  

16


 

As of September 30, 2014, there was $1,611,029 of unrecognized stock-based compensation expense related to this restricted common stock. Upon the closing of our initial public offering in October 2014, $508,962 of this stock-based compensation will be recognized in our combined and consolidated statement of operations and comprehensive loss for the three months ended December 31, 2014 and the remainder will be recognized over the remaining service periods through 2016.

In March 2013, an Atara employee purchased 2,423,074 shares of restricted common stock for $331,170. The shares were issued under our 2012 Equity Incentive Plan (as discussed below) and are subject to certain vesting conditions, restrictions on transfer and a Company right of repurchase of any unvested shares at their original purchase price. These shares are placed in escrow until vested, and have rights to vote and participate in dividends and distributions. Under these agreements, the shares vest as follows: 2,319,228 shares vest over four years, with one-quarter vesting after one year of service and the remainder vesting in equal installments over the subsequent thirty-six months, and 103,846 shares vest upon achievement of certain performance milestones. Vesting of all shares is subject to acceleration of vesting in the event of certain change of control transactions.

As of September 30, 2014, there was $302,206 of unrecognized stock-based compensation expense related to this restricted common stock. Upon the closing of our initial public offering in October 2014, $28,319 of this stock-based compensation expense will be recognized in our combined and consolidated statement of operations and comprehensive loss for the three months ended December 31, 2014 and the remainder will be recognized over the remaining service periods through 2016.

The restricted common stock was purchased with secured promissory notes totaling $331,170. The notes bear interest at an annual interest rate of 1.5% and are due on the earlier of five years following the purchase date, the sale or transfer of the related shares, termination of employment or the date prior to the date of a filing of a registration statement with the Securities and Exchange Commission. The notes are secured by shares of common stock owned by the employee and are included in stockholders’ deficit in our combined and consolidated balance sheets. In March and June 2014, the outstanding balances were repaid.

The amounts paid for both restricted stock purchases were initially recorded as other long-term liabilities. As shares vest, we reclassify liabilities to equity and report shares as outstanding in the combined and consolidated statements of convertible preferred stock and stockholders’ deficit. At December 31, 2013, 4,157,739 shares had vested and are classified as equity. Restricted stock shares not vested at December 31, 2013 totaled 7,860,719 shares and are expected to vest over three years.

Prior to the Recapitalization, 4,802,450 shares had vested and were classified as equity. On March 31, 2014, these shares were exchanged for 533,605 shares of Atara common stock. Restricted shares not vested at March 31, 2014 totaled 7,216,006 shares and these shares were exchanged for 801,778 shares of Atara restricted common stock.   As of September 30, 2014, restricted shares not vested totaled 654,663 shares.

As both the Chief Executive Officer and the Atara employee were consultants of Nina, Pinta and Santa Maria through the Recapitalization date, we accounted for these awards as non-employee stock-based awards. Following the Recapitalization, these awards were accounted as employee awards based upon the fair market value of common stock on March 31, 2014. Total stock-based compensation expense related to these awards was as follows:

 

 

Three months

 

 

Nine months

 

 

ended September 30,

 

 

ended September 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Research and development

$

86

 

 

$

90

 

 

$

918

 

 

$

203

 

General and administrative

 

346

 

 

 

249

 

 

 

3,356

 

 

 

814

 

 

$

432

 

 

$

339

 

 

$

4,274

 

 

$

1,017

 

As this stock-based compensation expense relates to shares of common stock for which the fundraising condition was met and our right of repurchase has lapsed, these amounts have been recorded as additional paid-in capital in our combined and consolidated balance sheets.

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2012 Equity Incentive Plans

We adopted the Nina 2012 Equity Incentive Plan, Pinta 2012 Equity Incentive Plan and Santa Maria 2012 Equity Incentive Plan (collectively, the “2012 plans”) in November 2012. Under the terms of the 2012 plans, we may grant options, restricted stock awards and RSUs to employees, directors, consultants and other service providers. Employees typically receive an award upon commencement of employment and non-employee members of our boards of directors receive an award in connection with their appointment. At December 31, 2013, the aggregate number of awards available to be issued under the 2012 plans was 17,021,923 shares of common stock. RSUs expire at the earlier of seven years from the date of grant or two years following the service termination date (or, for RSUs granted after January 2014, the service termination date). Generally, if any shares subject to an award expire, or are forfeited, terminated or cancelled without the issuance of shares, the shares are added back into the total shares available for issuance under the 2012 plans.

Through December 31, 2013, we have granted restricted common stock and RSUs under the 2012 plans. The RSUs have a time-based service condition and a liquidity-based performance condition, and will vest when both conditions are met. We have determined that the liquidity-based performance condition is not probable of occurring and have recorded no compensation expense related to the RSUs during the period from August 22, 2012 (inception) to December 31, 2013. As of December 31, 2013, there was approximately $788,335 of unrecognized stock-based compensation expense related to nonvested RSUs.

As the restricted stock awards and the RSUs were granted by Nina, Pinta and Santa Maria, the grants are considered to be non-employee awards until the Recapitalization and the fair value of the awards was remeasured at each period end by multiplying the number of unvested shares by the per-share fair value of common stock at each period end.  Following the Recapitalization, the awards granted to employees were accounted for based on the fair value of common stock on March 31, 2014. A summary of the restricted stock awards and RSUs granted and vested on a combined and consolidated basis during the period from December 31, 2012 to September 30, 2014 is as follows:

 

 

Combined Number of Units/Awards

 

 

Weighted-Average Grant Date Fair Value

 

Unvested at December 31, 2013

 

4,261,774