EDGAR 10-K Filing

Company CIK: 1840904
Filing Year: 2025
Filename: 1840904_10-K_2025_0000950170-25-040244.json

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ITEM 1. BUSINESS
Item 1.
Business

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ITEM 1A. RISK FACTORS
Item 1A.
Risk Factors

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties.
Our principal executive office is located at Wallstraße 16, 10179, Berlin, Germany where we lease approximately 7,400 square feet of office space. The lease commenced in February 2023, and we will make payments over a five year term. We also lease office space in New York, New York. We believe that these facilities will be adequate for our near-term needs and that we will be able to renew these leases. If required, we believe that suitable additional or alternative space would be available in the future on commercially reasonable terms.
In October 2024 we acquired IntelGenx Corp. and assumed leases of approximately 43,000 square feet of office, lab, and manufacturing spaces in Montreal, Canada. The leases are set to expire in February 2026.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
We are, from time to time, party to various claims and legal proceedings arising in the ordinary course of our business. Given that such proceedings are subject to uncertainty, there can be no assurance that such legal proceedings, either individually or in the aggregate, will not have a material adverse effect on our business, results of operations, financial condition or cash flows. See Note 18, Commitments and Contingencies - Legal Proceedings, to our audited consolidated financial statements for additional information.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common shares began trading on The Nasdaq Global Market under the symbol “ATAI” on June 18, 2021. Prior to that time, there was no established public trading market for our common shares.
Holders of Record
As of March 11, 2025, there were 81 holders of record of our common shares. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common shares whose shares are held in the names of various security brokers, dealers and registered clearing agencies.
Dividend Policy
We have never paid or declared any cash dividends on our common shares in the past, and we do not anticipate paying any cash dividends on our common shares in the foreseeable future. However, if we do pay a dividend or other distribution from our reserves on our common shares in the future, whether in cash, assets or otherwise, then under Dutch law, we may only do so to the extent our shareholders’ equity (eigen vermogen) exceeds the sum of our paid-in and called-up share capital plus the reserves we must maintain under Dutch law or our articles of association and (if it concerns a distribution of profits) after adoption of our statutory annual accounts by our general meeting from which it appears that such dividend distribution is allowed. Subject to such restrictions, any future determination to pay dividends or other distributions from our reserves will be at the discretion of our management board with the approval of our supervisory board and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our management board and supervisory board deem relevant.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7.	Management’s Discussion and Analysis of Fina ncial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes included elsewhere in this Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this Form 10-K.
All references to years, unless otherwise noted, refer to our fiscal years, which end on December 31. Unless the context otherwise requires, all references in this subsection to “we,” “us,” “our,” “atai” or the “Company” refer to atai and its consolidated subsidiaries.
Business Overview
We are a clinical-stage biopharmaceutical company on a mission to develop highly effective mental health treatments to transform patient outcomes. Founded in 2018, atai emerged from the urgent need for better mental health solutions for patients who are under-served by current treatment options. We are advancing a pipeline of product candidates designed to address the complex nature of mental health disorders. We believe that these investigational compounds have the potential to become rapid-acting, durable, and commercially scalable therapies for mental health patients in need of new treatment options.
Mental health disorders are highly prevalent and estimated to affect more than one billion people globally. The economic burden of these disorders is substantial and growing rapidly. Between 2009 and 2019, spending on mental health care in the United States increased by more than 50%, reaching $225 billion, and a Lancet Commission report estimates that the global economic cost will reach $16 trillion by 2030. While current treatments, such as selective serotonin reuptake inhibitors (“SSRIs”) and serotonin-norepinephrine reuptake inhibitors (“SNRIs”) are well established and effective for certain patients, approximately 65% of patients do not achieve remission of their symptoms after up to four antidepressant treatment trials, translating to a significant unmet medical need.
Our research is focused on developing rapid-acting, robust, and durable mental health treatments that can deliver large-scale patient impact. We are committed to leading a new era of mental health treatment - one that not only offers relief from symptoms, but the possibility of an improved quality of life and lasting change. We pursue this in two ways: we develop novel product candidates in-house and we make strategic investments in companies developing promising product candidates.
We have built a diversified pipeline of psychedelic product candidates that target mental health disorders that we believe have significant unmet medical need. Our in-house programs include: VLS-01 (N,N-Dimethyltryptamine (“DMT”)) for treatment-resistant depression (“TRD”); EMP-01 (R-3,4-methylenedioxy-methamphetamine ("R-MDMA")) for social anxiety disorder (“SAD”); and a drug discovery program to identify novel, non-hallucinogenic 5-HT2AR agonists for TRD.
We believe psychedelics are emerging as novel breakthrough therapies for mental health disorders, such as depression, supported by growing scientific evidence, recent regulatory advancements and increasing patient and physician acceptance. Clinical studies have demonstrated the potential safety and efficacy profile of psychedelics, particularly their rapid onset of effect and sustained efficacy after a short course of administration. We believe these programs, which include both novel molecular entities and optimized variants of known compounds, have the potential to address significant unmet needs in mental health treatment.
Our commitment to innovation extends to early-stage drug discovery through our discovery platform. Intellectual property development has been essential to our strategy since inception, particularly through key investments in novel chemical entity ("NCE") development. We have made substantial progress in our drug discovery efforts to date, synthesizing and screening more than 750 compounds and identifying novel scaffolds that display potential in targeting mental health disorders.
We have a strategic investment in Beckley Psytech Limited ("Beckley Psytech"), a private clinical-stage biopharmaceutical company developing two investigational compounds: BPL-003, 5 Methoxy N,N-dimethyltryptamine ("mebufotenin") benzoate, for TRD and alcohol use disorder ("AUD"), and ELE-101, psilocin, for the treatment of major depressive disorder ("MDD"). Our investment in Beckley Psytech is included in Other Investments in our consolidated balance sheets.
We have a strategic investment in Recognify Life Sciences, Inc. ("Recognify"), a company developing RL-007, an investigational pro-cognitive neuromodulator for the treatment of cognitive impairment associated with schizophrenia (“CIAS”). We hold a 51.9% ownership percentage in Recognify, and have consolidated this subsidiary into our consolidated financial statements with the noncontrolling interest reflected in our consolidated balance sheets and the portion of net earnings attributable to the noncontrolling interests reflected in our consolidated statements of operations.
We own IntelGenx Corp. (“IGX”), a subsidiary of IntelGenx Technologies Corp. (“IntelGenx”), a novel drug delivery company focused on the development and manufacturing of novel oral thin film products for the pharmaceutical market and for our development candidate, VLS-01.
We have incurred significant operating losses since our inception. Our net loss attributable to ATAI Life Sciences N.V. stockholders was $149.3 million and $40.2 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, our accumulated deficit was $700.2 million and $550.9 million, respectively. Our ability to generate product revenue sufficient to achieve profitability will depend substantially on the successful development and eventual commercialization of product candidates. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.
Our historical losses resulted principally from costs incurred in connection with research and development activities, as well as general and administrative costs associated with our operations. In the future, we intend to continue to conduct research and development, preclinical testing, clinical trials, regulatory compliance, market access, commercialization, and business development activities that, together with anticipated general and administrative expenses, will result in incurring further significant losses for at least the next several years. Our operating losses stem primarily from the development of our mental health research programs. Furthermore, we expect to continue to incur costs associated with operating as a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through a combination of equity offerings, debt financing, strategic collaborations and alliances or licensing arrangements. Our inability to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. There can be no assurances, however, that our current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.
We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily with proceeds from the sale of our common shares, issuances of convertible notes and a term loan.
Capital Allocation and Strategic Value Capture
Consistent with our strategy, we provide the necessary funding and operational support to our programs to maximize their probability of success in clinical development and commercialization. We also regularly review the status of our programs to assess whether there are alternative forms of ownership, partnership or other forms of collaboration that would optimize our economic interests and the success of our programs. To that end, we are focusing on clinical phase programs and business development that we expect to generate meaningful data in the near term, and, therefore, prioritizing programs and opportunities that we believe have the highest return potential and value. As a result, in late 2023, we finalized and entered into agreements through which we disposed of our equity interests in Psyber, Inc. and TryptageniX Inc. In 2024, our strategic investment in Beckley Psytech Limited added more programs to our diverse portfolio of clinical-stage psychedelic product candidates with multiple upcoming clinical readouts. We are also exploring other opportunities, including but not limited to seeking strategic partnership options, for example, with Recognify Life Sciences, Inc. and Perception Neuroscience Holdings, Inc. In 2024, we finalized and entered into agreements through which we disposed of our equity interest in Psyprotix, Inc. and Kures, Inc.
In February 2023, we implemented a realignment initiative resulting in a reduction in force of approximately 30% of our global workforce in order to more effectively allocate our research and development and other resources supporting the revised business and program priorities and to reduce operational costs. In February 2024, we conducted a reduction in force of approximately 10% of our global workforce, predominantly reducing redundancy in our general & administrative functions to reduce operational costs. Refer to Note 22 in the Notes to the consolidated financial statements in Part II, Item 8 for further information.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and follow the requirements of the United States Securities and Exchange Commission ("SEC"), and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of our financial position, results of operations and comprehensive loss, and cash flows for the periods presented.
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”).
The results of operations for the years ended December 31, 2024 and 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any other future annual or interim period.
Consolidation
Our consolidated financial statements include the accounts of atai and our subsidiaries. All intercompany balances and transactions have been eliminated in the consolidation.
Our policy is to consolidate all entities that we control 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 we are 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 as well as 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 our consolidated balance sheets and 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 our consolidated statements of operations.
Ownership interests in entities over which we have 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 investments. For equity method investments where we have not elected the fair value option, we record gains (losses) from investments in equity method investees, net of tax, for our proportionate share of the underlying company’s net results until the investment balance is adjusted to zero. If we make subsequent additional investments in that same company, we may record additional gains (losses) based on changes to our investment basis and also may record additional income (loss) in equity method investments. If we have elected the fair value option for an equity investment, the fair value of the investments will be recognized upon acquisition and any changes in fair value will be recognized as a component of other income (expense), net.
Components of Our Results of Operations
Revenue
On March 11, 2021, we entered into a license and collaboration agreement (the "Otsuka Agreement"), with Otsuka Pharmaceutical Co., LTD ("Otsuka"), under which we granted exclusive rights to Otsuka to develop and commercialize certain products containing arketamine in Japan for the treatment of depression and other select indications. We received an upfront, non-refundable payment of $20.0 million in June 2021 and we are also eligible to receive up to $35.0 million if certain development and regulatory milestones are achieved and up to $66.0 million in commercial milestones upon the achievement of certain commercial sales thresholds. We are eligible to receive tiered royalties ranging from low-teens to high-teens on net sales of licensed products subject to reduction in certain circumstances. In January 2025, Otsuka provided a notice of termination pursuant to the Otsuka Agreement, effective April 24, 2025. Following the effective termination date, we will no longer be eligible to receive any milestone payments or royalties pursuant to the Otsuka Agreement.
We do not expect to generate any further revenue under the Otsuka Agreement. We do not expect to generate any revenue from the sale of products unless and until such time that our product candidates have advanced through clinical development and regulatory approval, if ever. We expect that any revenue we generate, if at all, will fluctuate from year-to-year as a result of the timing and amount of payments relating to such services and milestones and the extent to which any of our products are approved and successfully commercialized. Our ability to generate future revenues will also depend on our ability to complete preclinical and clinical development of product candidates or obtain regulatory approval for them.
Operating expenses
Research and development expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, which include:
•employee-related expenses, including salaries, related benefits, and stock-based compensation, for employees engaged in research and development functions;
•expenses incurred in connection with the preclinical and clinical development of our product candidates, including our agreements with third parties, such as consultants and contract research organizations ("CROs");
•expenses incurred under agreements with consultants who supplement our internal capabilities;
•the cost of laboratory supplies and acquiring, developing, and manufacturing preclinical study materials and clinical trial materials;
•costs related to compliance with regulatory requirements; and
•payments made in connection with third-party licensing agreements.
Research and development costs, including costs reimbursed under the Otsuka Agreement, are expensed as incurred, with reimbursements of such amounts being recognized as revenue. We account for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.
Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, contract manufacturing organizations (“CMOs”) and research laboratories
in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under third-party license agreements.
Certain internal research and development expenses consisting of employee and contractor-related costs are not allocated to specific product candidate programs because these costs are deployed across multiple product candidate programs under research and development expense.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future in connection with our planned preclinical and clinical development activities in the near term and in the future.
The successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of these product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from our product candidates. This is due to the numerous risks and uncertainties associated with developing products, including the uncertainty of whether (i) any clinical trials will be conducted or progress as planned or completed on schedule, if at all, (ii) we obtain regulatory approval for our product candidates and (iii) we successfully commercialize product candidates.
General and administrative expenses
General and administrative expenses consist primarily of employee-related expenses, including salaries, related benefits and stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions, professional fees for legal, patent, accounting, auditing, tax and consulting services, travel expenses, facility-related expenses, and information technology-related expenses.
Other income (expense), net
Interest income
Interest income consists of interest earned on cash balances held in interest-bearing accounts and interest earned on notes receivable. We expect that our interest income will fluctuate based on the timing and ability to raise additional funds as well as the amount of expenditures for the research and development of our product candidates and ongoing business operations.
Interest expense
Interest expense consists primarily of interest expense incurred in connection with our 2022 Term Loan Facility with Hercules Capital, Inc.
Benefit from research and development tax credit
Benefit from research and development tax credit consists of tax credits received in Australia under the Research and Development Tax Incentive ("RDTI") program and research and development tax credits received in Canada following our acquisition of IGX. Qualifying expenditures include employment costs for research staff, consumables, and relevant, permitted CRO costs incurred as part of research projects.
Change in fair value of assets and liabilities, net:
The Company carries various assets and liabilities at fair value and subsequent remeasurements are recorded as a Change in fair value of assets and liabilities, net as a component of Other income (expense), net. Assets held at fair value include securities held at fair value, investments held at fair value, and convertible notes receivable. Liabilities held at fair value include contingent considerations and convertible promissory notes and derivative liability.
Change in fair value of securities carried at fair value
Change in fair value of securities consists of changes in fair value of our available for sale securities for which we have elected the fair value option.
Change in fair value of other investments held at fair value
Change in fair value of other investments held at fair value consists of subsequent remeasurements of our investments held at fair value, including COMPASS Pathways plc ("COMPASS") and IntelGenx prior to the completion of our acquisition of IGX, for which we have elected the fair value option, as well as additional contingent warrants held with Beckley Psytech.
Change in fair value of convertible notes receivable - related party
Change in fair value of convertible notes receivable - related party consists of subsequent remeasurements of our convertible notes receivable with IntelGenx, for which we elected the fair value option, prior to the completion of our acquisition of IGX.
Change in fair value of contingent consideration liability - related party
Change in fair value of contingent consideration liability - related party consists of subsequent remeasurements of our contingent consideration liability related to our acquisition of Perception Neuroscience Holdings, Inc. ("Perception") for which we record at fair value.
Change in fair value of contingent consideration liabilities
Change in fair value of contingent consideration liabilities consists of subsequent remeasurements of our contingent consideration liabilities related to our acquisition of DemeRx IB, Inc. ("DemeRx IB") and TryptageniX, Inc. ("TryptageniX") for which we record at fair value.
Change in fair value of convertible promissory notes and derivative liability
Change in fair value of convertible promissory notes and derivative liability consists of subsequent remeasurements of certain convertible notes issued in 2020, some of which are held by a related party.
Gain on settlement of pre-existing contract
Gain on settlement of pre-existing contract consists of a non-cash gain recognized upon the acquisition of IGX related to the settlement of an existing contract with IntelGenx.
Impairment of other investments
Impairment of other investments consists of a reduction in the carrying value of our investments that do not have a readily determinable fair value and are accounted for under the measurement alternative under ASC 321, including DemeRx NB, Inc. ("DemeRx NB").
Gain on deconsolidation of a variable interest entity, net
Gain (loss) on deconsolidation of a variable interest entity is the result of removing assets and liabilities from our consolidated balance sheets following a loss of control or divestment of a variable interest entity.
Gain on dissolution of a variable interest entity
Gain on dissolution of a variable interest entity is the result of removing assets and liabilities from our consolidated balance sheets following a dissolution of a variable interest entity.
Foreign exchange gain (loss), net
Foreign exchange gain (loss), net consists of the impact of changes in foreign currency exchange rates on our foreign exchange denominated assets and liabilities, relative to the U.S. dollar. The impact of foreign currency exchange rates on our results of operations fluctuates period over period based on our foreign currency exposures resulting from changes in applicable exchange rates associated with our foreign denominated assets and liabilities.
Other income (expense), net
Other income (expense), net consists principally of the changes in the carrying values of our assets and liabilities and net gains (losses) recognized on the sale of certain of our assets.
Benefit from (provision for) income taxes
For our consolidated entities, deferred income taxes are provided for the effects of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax purposes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
We regularly assess the need to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Accordingly, we maintain a full valuation allowance against net deferred tax assets for all entities as of December 31, 2024. In assessing the realizability on deferred tax assets, we consider whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. The future realization of deferred tax assets is subject to the existence of sufficient taxable income of the appropriate character (e.g., ordinary income or capital gain) as provided under the carryforward provisions of local tax law. We consider the scheduled reversal of deferred tax liabilities (including the effect in available carryback and carryforward periods), future projected taxable income, including the character and jurisdiction of such income, and tax-planning strategies in making this assessment.
Unrecognized tax benefits arise when the estimated benefit recorded in the financial statements differs from the amounts taken or expected to be taken in a tax return because of the considerations described above. The balances of unrecognized tax benefits for the years ended
December 31, 2024 and 2023 are an immaterial amount and $0.4 million, respectively, which represent the amounts that, if recognized, impact the effective income tax rate in future periods. For the years ended December 31, 2024 and 2023 we accrued an immaterial amount and $0.1 million for interest and penalties, respectively.
Losses from investments in equity method investees, net of tax
Losses from investments in equity method investees, net of tax consists of our share of equity method investees losses on the basis of our equity ownership percentage and IPR&D charges resulting from basis differences related to our equity method investments.
Net loss attributable to noncontrolling interests
Net loss attributable to noncontrolling interests consists of the portion of net loss that is allocated to the noncontrolling interests of certain consolidated variable interest entities ("VIEs"). Net losses in consolidated VIEs are attributed to noncontrolling interests considering the liquidation preferences of the different classes of equity held by the shareholders in the VIE and their respective interests in the net assets of the consolidated VIE in the event of liquidation, and their pro rata ownership. Changes in the amount of net loss attributable to noncontrolling interests are directly impacted by changes in the net loss of our VIEs and our ownership percentage changes.
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
For the Year ended December 31,
$ Change
% Change
(in thousands, except percentages)
License revenue
$
$
$
(6
)
(2%)
Operating expenses:
Research and development
55,455
62,203
(6,748
)
(11%)
General and administrative
47,544
63,582
(16,038
)
(25%)
Total operating expenses
102,999
125,785
(22,786
)
(18%)
Loss from operations
(102,691
)
(125,471
)
22,780
(18%)
Other income (expense), net:
Interest income
1,847
(1,069
)
(58%)
Interest expense
(3,124
)
(2,656
)
(468
)
18%
Benefit from research and development tax credit
2,445
(1,920
)
(79%)
Change in fair value of assets and liabilities, net
(48,879
)
86,583
(135,462
)
(156%)
Gain on settlement of pre-existing contract
5,567
-
5,567
100%
Impairment of other investments
-
(1,011
)
1,011
(100%)
Gain on deconsolidation of a variable interest entity, net
-
(60
)
(100%)
Gain on dissolution of a variable interest entity
1,166
-
1,166
100%
Foreign exchange loss, net
(1,263
)
(894
)
(369
)
41%
Other income (expense), net
(484
)
(189
)
(295
)
156%
Total other income (expense), net
(45,714
)
86,185
(131,899
)
(153%)
Net loss before income taxes
(148,405
)
(39,286
)
(109,119
)
278%
Benefit from (provision for) income taxes
(1,016
)
1,372
(135%)
Losses from investments in equity method investees, net of tax
(2,000
)
(3,593
)
1,593
(44%)
Net loss
$
(150,049
)
$
(43,895
)
$
(106,154
)
242%
Net loss attributable to noncontrolling interests
(780
)
(3,671
)
2,891
(79%)
Net loss attributable to ATAI Life Sciences N.V. stockholders
$
(149,269
)
$
(40,224
)
$
(109,045
)
271%
License revenue
License revenue was $0.3 million and $0.3 million for the years ended December 31, 2024, and 2023, respectively, which is related to the reimbursement of research and development expenses under the Otsuka Agreement. For the years ended December 31, 2024, and 2023, respectively, there were no milestones achieved under the Otsuka Agreement.
Research and development expenses
The table and discussion below present research and development expenses of our consolidated entities for the years ended December 31, 2024 and 2023:
For the year ended December 31,
$ Change
% Change
(in thousands, except percentages)
Direct research and development expenses by program:
Core Psychedelic Programs
VLS-01
$
10,606
$
9,055
$
1,551
17%
EMP-01
1,527
2,635
(1,108
)
(42%)
Discovery (Non-Hallucinogenic)
2,649
2,505
1741%
Non-Psychedelic Program
RL-007
10,962
8,394
2,568
31%
Other Programs
5,396
9,840
(4,445
)
(45%)
Enabling Technologies and Drug Discovery Platforms
3,099
(2,501
)
(81%)
Unallocated research and development expenses:
Personnel expenses
20,935
26,415
(5,480
)
(21%)
Professional and consulting services
1,052
1,952
(900
)
(46%)
Depreciation
-
100%
Other
1,546
131%
Total research and development expenses
$
55,455
$
62,203
$
(6,749
)
(11%)
Research and development expenses were $55.5 million for the year ended December 31, 2024, compared to $62.2 million for the year ended December 31, 2023. The decrease of $6.7 million was primarily attributable to a $5.5 million decrease in personnel expenses (inclusive of a $2.0 million decrease in stock-based compensation and a $1.6 million decrease in restructuring charges), a $2.5 million decrease related to our enabling technologies and drug discovery platform as discussed below, and a $0.9 million decrease in professional and consulting fees. These decreases were partially offset by a $1.1 million net increase of direct costs in our Core Psychedelic and Non-Psychedelic programs as discussed below, a $0.9 million increase in other expenses related to impairment of certain intangible assets, and a $0.2 million increase in depreciation expense.
Core Psychedelic Programs
VLS-01: DMT for TRD
The $1.6 million net increase in direct costs was primarily due to a $3.6 million increase of clinical development costs related to our Phase 1b trial of VLS-01 designed to evaluate the efficacy, safety, tolerability, PK and PD of VLS-01 delivered using our proprietary OTF formulation, as well as costs related to our Elumina trial, the randomized, double-blind, placebo-controlled Phase 2 study of VLS-01. These increases were partially offset by a $1.5 million decrease in manufacturing costs and $0.5 million decrease in preclinical development costs.
EMP-01: MDMA for PTSD
The $1.1 million decrease in direct costs for our EMP-01 program was primarily due to a $1.2 million net decrease in clinical development costs relating to the wind-down and completion of our Phase 1 single ascending dose trial, and the start-up of an exploratory, randomized, double-blind, placebo-controlled Phase 2 study in the United Kingdom to assess the safety, tolerability and efficacy of EMP-01 and a $0.2 million decrease in preclinical development costs. These decreases were offset by a $0.3 million increase in manufacturing costs.
Discovery (Non-Hallucinogenic)
The $2.5 million increase in discovery costs was primarily due to a $2.5 million increase of preclinical development costs related to our novel 5-HT2A receptor agonists.
Non-psychedelic Program
RL-007: Pro-Cognitive Neuromodulator for Cognitive Impairment Associated with Schizophrenia
The $2.6 million increase in direct costs for our RL-007 program was primarily due to an increase of $2.3 million of clinical development costs, $0.2 million of manufacturing costs, and $0.2 million of preclinical development costs, all relating to our Phase 2b proof-of-concept clinical trial for RL-007 in CIAS.
Other Programs
The $4.4 million decrease in direct costs for our other programs was primarily due to a $5.2 million decrease in our PCN-101 program, $1.7 million decrease in our EGX-121 program, $0.2 million decrease in our KUR-101 program, and $0.1 million decrease in our RLS-01
program. These decreases were partially offset by a $2.6 million increase in IBX-210 costs and $0.2 million of IGX costs recognized following the completion of our acquisition in October 2024.
Enabling Technologies and Drug Discovery Platforms
The $2.5 million decrease in our enabling technologies and drug discovery platforms primarily relates to the wind-down costs of our Invyxis, TryptageniX, InnarisBio, and Psyber programs.
General and administrative expenses
General and administrative expenses were $47.5 million for the year ended December 31, 2024 compared to $63.6 million for the year ended December 31, 2023. The decrease of $16.1 million was primarily related to a $9.0 million decrease in personnel expenses (inclusive of a $5.4 million decrease in stock-based compensation and a $0.4 million increase in restructuring expenses), a $7.2 million decrease in professional services, and a $1.4 million decrease in insurance expenses; partially offset by a $1.1 million increase in non-income tax expense and a $0.5 million increase in investor relations and public company fees.
We expect that our general and administrative expenses will not materially increase in the near future. We may add more general and administrative head count in the future to support the potential commercialization of our product candidates.
Other income (expense), net
Interest income
Interest income for the years ended December 31, 2024 and 2023 primarily consisted of interest earned on our cash balances and notes receivable during these periods. We recognized interest income of $0.8 million and $1.8 million for the years ended December 31, 2024 and 2023, respectively.
Interest expense
Interest expense for years ended December 31, 2024 and 2023 primarily consisted of interest expense incurred in connection with our 2022 Term Loan Facility with Hercules Capital, Inc. Interest expense was $3.1 million and $2.7 million for the years ended December 31, 2024 and 2023, respectively.
Benefit from research and development tax credit
We recognized a research and development tax credit from the Canadian Tax Authorities and Australian Tax Authorities as a benefit of $0.5 million for the year ended December 31, 2024. We recognized a research and development tax credit from the Australian Tax Authorities as a benefit of $2.4 million for the year ended December 31, 2023.
Change in fair value of assets and liabilities, net:
Change in fair value of securities carried at fair value
Changes in fair value of securities consists of changes in the fair value of our available for sale securities for which we have elected the fair value option. During the years ended December 31, 2024 and 2023, we recognized a gain of $3.8 million and $5.4 million, respectively, relating to the change in fair value of our available for sale securities.
Change in fair value of short-term notes receivable - related party, net
Changes in fair value of short-term notes receivable - related party, net, including interest, consists of subsequent remeasurement of our short-term notes receivable with IntelGenx, prior to the completion of our acquisition, for which we have elected the fair value option. During the year ended December 31, 2024 we recognized a $0.5 million loss related to the change in the fair value. We recorded an immaterial change in the fair value of short-term notes receivable - related party during the year ended December 31, 2023.
Change in fair value of short-term convertible notes receivable - related party
Changes in fair value of short-term convertible notes receivable - related party, including interest, consists of subsequent remeasurement of our convertible notes receivable with IntelGenx, prior to the completion of our acquisition, for which we have elected the fair value option. During the year ended December 31, 2024 we recognized a $13.2 million loss related to the change in the fair value. We recognized an immaterial change in fair value for our short term convertible notes receivable - related party during the year ended December 31, 2023.
Change in fair value of other investments held at fair value
Changes in fair value of other investments held at fair value consists of subsequent remeasurement of our investments held at fair value, including our American Depository Shares ("ADS") holdings in COMPASS, IntelGenx related investments, prior to the completion of our acquisition, and additional contingent warrants issued by Beckley Psytech. During the year ended December 31, 2024, we recognized a $39.4 million loss related to our ADS holdings in COMPASS, a $6.5 million loss related to our investments in IntelGenx, prior to the
completion of our acquisition, and a $1.7 million gain related to additional contingent warrants issued by Beckley Psytech Limited. During the year ended December 31, 2023, we recognized a $81.9 million non-cash change in fair value of other investments held at fair value related to an accounting method change for our ADS holdings in COMPASS resulting in our election of fair value accounting following our loss of significant influence over COMPASS.
Change in fair value of contingent consideration liability-related party
The milestone and royalty payments in relation to the acquisition of Perception were recognized at the acquisition date, and are subsequently remeasured to fair value. For the years ended December 31, 2024 and 2023, we recognized a $0.5 million gain and an immaterial gain, respectively.
Change in fair value of contingent consideration liabilities
In October 2023, we acquired shares of the noncontrolling interest of DemeRx IB making DemeRx IB a wholly owned subsidiary. An earn-out of up to $8.0 million was part of the consideration and was recognized at fair value at the transaction date and subsequently remeasured at fair value. For the years ended December 31, 2024 and 2023, we recognized a $1.2 million gain and a $0.1 million loss, respectively, related to the DemeRx IB contingent consideration. In December 2023, we disposed of our equity interest in TryptageniX, but retained the contingent consideration liability, which is subsequently remeasured to fair value. For the years ended December 31, 2024 and 2023, we recognized a $0.2 million gain and an immaterial gain, respectively, related to the TryptageniX contingent consideration.
Change in fair value of convertible promissory notes and derivative liability
In December 2023 and April 2024, certain 2020 convertible noteholders exchanged the 2020 convertible notes issued by ATAI Life Sciences AG for notes issued by ATAI Life Sciences NV, which are convertible into ATAI NV common shares. We determined that this was a modification to the convertible notes. We bifurcated the note and the conversion option and record the change in fair value of the conversion option quarterly. For the years ended December 31, 2024 and 2023, we recognized a $3.4 million gain and a $0.7 million loss, respectively, due to a change in the fair value of the conversion option of the notes issued by ATAI Life Sciences NV.
Gain on settlement of pre-existing contract
For the year ended December 31, 2024, we recognized a $5.6 million non-cash gain upon the acquisition of IGX related to the settlement of an existing contract with IntelGenx. No such gain or loss was recognized for the year ended December 31, 2023.
Impairment of other investments
We did not recognize an Impairment of other investments for the year ended December 31, 2024. For the year ended December 31, 2023, we recognized a $1.0 million impairment of our DemeRx NB investment, which was transferred to DemeRx, Inc. in connection with our acquisition of the remaining equity in DemeRx IB.
Gain on deconsolidation of a variable interest entity, net
We did not recognize a Gain on deconsolidation of a variable interest entity, net for the year ended December 31, 2024. Gain on deconsolidation of a variable interest entity, net was $0.1 million for the year ended December 31, 2023 as a result of the gain upon deconsolidation of TryptageniX of $0.4 million, partially offset by the loss upon deconsolidation of Psyber, Inc. of $0.3 million.
Gain on dissolution of a variable interest entity
Gain on dissolution of a variable interest entity was $1.2 million for the year ended December 31, 2024 as a result of the gain upon dissolution of Kures. We did not recognize a Gain on dissolution of a variable interest entity for the year ended December 31, 2023.
Foreign exchange loss, net
We recognized a loss of $1.3 million related to foreign currency exchange rates for year ended December 31, 2024 and a loss of $0.9 million related to foreign currency exchange rates for the year ended December 31, 2023. This was primarily due to the impact of fluctuations in the foreign currency exchange rate between the Euro and the U.S. dollar on our foreign denominated balances.
Other income (expense), net
We recognized $0.5 million of other income (expense), net for year ended December 31, 2024, which primarily relates to a $2.1 million non-cash loss on the sale of our ADS holdings in COMPASS. This loss was partially offset by a $1.3 million gain related to our investment in Beckley Psytech upon the issuance of deferred shares pursuant to the Escrow Agreement, and a gain of $0.3 million from the forgiveness of certain accounts payable amounts associated with the Kures dissolution. See Notes 5 and 6 in the Notes to our consolidated financial statements in Part II, Item 8 for further information.
We recognized $0.2 million of other expense, net for the year ended December 31, 2023, which consists primarily of a $0.3 million increase to the allowances on receivables, partially offset by a $0.1 million gain recognized on our divestment of our investment in Juvenescence Limited ("Juvenescence").
Benefit from (provision for) income taxes
We recognized a current income tax benefit of $0.4 million and a current income tax expense of $1.0 million for the years ended December 31, 2024 and 2023, respectively. The incremental benefit is a result of losses generated in Germany, U.K., and the U.S. and favorable return to provision adjustments from our U.S. tax returns. We recognized no deferred tax expense for years ended December 31, 2024 and 2023, respectively. Given our early-stage development and lack of prior earnings history, we have a full valuation allowance primarily related to German and international tax loss carryforwards and temporary timing differences related to stock-based compensation that we consider-more-likely-than-not not to be realized.
Losses from investments in equity method investees
Losses from investment in equity method investees for the years ended December 31, 2024 and 2023 were $2.0 million and $3.6 million, respectively. Loss from investment in equity method investees represents our share of equity method investee losses on the basis of our equity ownership percentages or based on our proportionate share of the respective class of securities in our other investments in the event that the carrying amount of our equity method investments was zero.
Net loss attributable to noncontrolling interests
Net losses attributable to noncontrolling interests for the years ended December 31, 2024 and 2023 were $0.8 million and $3.7 million, respectively which relate to the noncontrolling interests in Recognify, Perception, and Kures.
Liquidity and Capital Resources
Overview
For the years ended December 31, 2024 and 2023, we had net losses attributable to ATAI Life Sciences N.V. shareholders of $149.3 million and $40.2 million, respectively. As of December 31, 2024 and 2023, our accumulated deficit was $700.2 million and $550.9 million, respectively. We expect to continue to incur losses and operating cash outflows for the foreseeable future as we continue working towards commercializing any of our product candidates. Our primary sources of liquidity are our cash and cash equivalents, short-term securities, convertible promissory notes, investments, sales of common shares, including under our at-the-market equity offering program, and the 2022 Term Loan Facility, as further described below. We maintain cash balances with financial institutions in excess of insured limits.
Our primary requirements for liquidity and capital are clinical trial costs, manufacturing costs, nonclinical and other research and development costs, funding of strategic investments, public company compliance costs and general corporate needs. Because our product candidates are in various stages of clinical and pre-clinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings, collaboration arrangements, license agreements, other business development opportunities with third parties and government grants.
Sources of Liquidity
Convertible Promissory Notes
In November 2018 and October 2020, we issued an aggregate principal amount of €1.0 million or $1.2 million (collectively, the “Convertible Notes”). The Convertible Notes are non-interest-bearing and have a maturity date of September 30, 2025, unless previously redeemed, converted, purchased or cancelled. Each note has a face value of €1 and is convertible into one ordinary share of ATAI Life Sciences AG upon the payment of €17.00. The noteholders have agreed that, subsequent to converting the notes into ATAI Life Sciences AG share, they will exchange the ATAI Life Sciences AG share for ATAI Life Science N.V. shares.
In December 2023 and April 2024, respectively, a noteholder and a related party noteholder each entered into an agreement with us to exchange their respective Convertible Notes for new convertible notes issued by ATAI Life Sciences N.V. Each new note has a face value of €1 and is convertible into 16 common shares of ATAI Life Sciences N.V. upon the payment of €17.00. Conversion rights may be exercised by a noteholder at any time prior to maturity.
As of December 31, 2024 the Convertible Notes had a principal balance of $0.4 million. If all convertible notes were converted, the Company would receive proceeds of €6.6 million ($6.9 million).
Investments
A significant potential source of non-dilutive funding resides in our investment in COMPASS's ADS, subject to market conditions. Based on quoted market prices, the market value of our ownership in COMPASS was $26.1 million as of December 31, 2024.
In September 2024, the Company sold 2,660,000 ADSs of COMPASS at a price of $6.05 per ADS in an open market transaction, resulting in net proceeds received of $16.1 million.
ATM Agreement
In November 2022, we entered into an Open Market Sale Agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”), pursuant to which we may issue and sell our common shares, having an aggregate offering price of up to $150.0 million, from time to time through an “at-the-market” equity offering program under which Jefferies will act as sales agent. Subject to the terms and conditions of the Sales Agreement, Jefferies could sell the common shares by any method deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. There have been no sales under the Sales Agreement through December 31, 2024.
Underwritten Offering
In February 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with Berenberg Capital Markets LLC in connection with the issuance and sale by us in a public offering of 26,190,477 of our common shares, at a public offering price of $2.10 per share, less underwriting discounts and commissions. The common shares were offered pursuant to our Shelf Registration Statement as well as a prospectus supplement filed with the SEC on February 13, 2025. Under the terms of the Underwriting Agreement, we granted to the Underwriter an option exercisable for 30 days to purchase up to an additional 3,928,571 common shares from us at the public offering price, less underwriting discounts and commissions. Pursuant to the Underwriting Agreement, the Underwriter exercised the option to purchase an additional 3,928,571 common shares.
The net proceeds from the offering of our common shares were approximately $59.2 million, after deducting the underwriting discounts and commissions and offering expenses payable by us.
Hercules Term Loan
On August 9, 2022, we entered into the Loan Agreement with Hercules, which was amended in May 2023, August 2024, and January 2025. See “ “-Liquidity and Capital Resources-Indebtedness-Hercules Term Loan” for additional information.
Liquidity Risks
As of December 31, 2024, we had cash and cash equivalents of $17.5 million, restricted cash of $10.0 million and short-term securities of $44.8 million. As of December 31, 2024, we believe our cash, cash equivalents and short-term securities and committed term loan funding will be sufficient to fund our operations for at least the next twelve months. Based on our current operating plan, we estimate that our existing cash, including proceeds from our public offering of our common shares, marketable securities, and committed term loan funding as of the date this Annual Report on Form 10-K is filed with the SEC will be sufficient to fund operations into 2027.
We expect to continue to incur substantial additional expenditures in the near term to support our ongoing activities. Additionally, we have incurred and expect to continue to incur additional costs as a result of operating as a public company. We expect to continue to incur net losses for the foreseeable future. Our ability to fund our product development and clinical operations as well as commercialization of our product candidates, will depend on the amount and timing of cash received from planned financings.
Our future capital requirements will depend on many factors, including:
•the time and cost necessary to complete ongoing and planned clinical trials;
•the outcome, timing and cost of meeting regulatory requirements established by the FDA, the EMA and other comparable foreign regulatory authorities;
•the progress, timing, scope and costs of our preclinical studies, clinical trials and other related activities for our ongoing and planned clinical trials, and potential future clinical trials;
•the costs of commercialization activities for any of our product candidates that receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities, or entering into strategic collaborations with third parties to leverage or access these capabilities;
•the amount and timing of sales and other revenues from our product candidates, if approved, including the sales price and the availability of coverage and adequate third party reimbursement;
•the cash requirements for purchasing additional equity from certain atai companies upon the achievement of specified development milestone events;
•the cash requirements for developing our programs and our ability and willingness to finance their continued development;
•the cash requirements for any future acquisitions or discovery of product candidates; and
•the time and cost necessary to respond to technological and market developments, including other products that may compete with one or more of our product candidates.
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans. If we are unable to obtain this funding when needed and on acceptable terms, we could be forced to delay, limit or terminate our product development efforts.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity financings, debt financings, collaborations with other companies and other strategic transactions. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.
Cash Flows
The following table summarizes our cash flows for years ended December 31, 2024 and 2023:
For the year ended December 31,
(in thousands)
Net cash used in operating activities
$
(82,437
)
$
(84,118
)
Net cash provided by (used in) investing activities
59,172
(53,295
)
Net cash provided by (used in) financing activities
5,374
(8,355
)
Effect of foreign exchange rate changes on cash
Net decrease in cash, cash equivalents and restricted cash
$
(17,529
)
$
(145,579
)
Net Cash Used in Operating Activities
Net cash used in operating activities was $82.4 million for the year ended December 31, 2024, which consisted of a net loss attributable to stockholders of $150.0 million, adjusted by noncash benefit of $76.8 million and net cash outflows from the change in operating assets and liabilities of $9.2 million. The noncash loss primarily consisted of $51.6 million loss related to the net change in the fair value of our assets and liabilities carried at fair value, $25.5 million of stock-based compensation, $2.1 million of loss on sale of investment held at fair value, $2.0 million of losses from our equity method investments, $1.1 unrealized foreign exchange losses, $1.0 million of depreciation and amortization, $0.9 million impairment of intangible assets, and $0.4 million of noncash lease expense. These losses were partially offset by a $5.6 million gain on settlement of pre-existing contract, a $1.2 million gain on dissolution of a variable interest entity, and $1.0 million of other income (expense), net. The cash outflow from the change in operating assets and liabilities of $9.2 million was primarily due to a $6.2 million decrease in accrued liabilities and other liabilities and $1.9 million decrease in accounts payable; partially offset by a $1.1 million increase in prepaid expenses and other current assets.
Net cash used in operating activities was $84.1 million for the year ended December 31, 2023, which consisted of a net loss attributable to stockholders of $43.9 million, adjusted by noncash benefit of $47.7 million and net cash inflows from the change in operating assets and liabilities of $7.5 million. The noncash benefit primarily consisted of $86.6 million gain related to the net change in the fair value of our assets and liabilities carried at fair value, $0.5 million of other noncash expenses, and $0.1 million gain on deconsolidation of a variable interest entity, partially offset by $33.0 million of stock-based compensation, $3.6 million of losses from our equity method investments, $1.0 million impairment of other investments, $0.8 million unrealized foreign exchange losses, and $1.1 million of depreciation and amortization. The net cash inflows from the change in operating assets and liabilities of $7.5 million was primarily due to a $8.7 million decrease in prepaid expenses and other current assets and a $2.1 million increase in accounts payable; partially offset by a $3.3 million decrease in accrued liabilities.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities was $59.2 million for the year ended December 31, 2024, primarily driven by $65.6 million of proceeds from sale and maturities of securities at fair value, $16.1 million of proceeds from the sale of ADSs of COMPASS, and $0.4 million of cash received in the acquisition of IGX; partially offset by $15.0 million cash paid to Beckley Psytech pursuant to the Secondary Sale and the Escrow Agreement, $5.7 million of cash paid for short-term notes receivable - related party, $2.0 million of cash paid for short-term convertible notes receivable and warrant - related party, and $0.1 million of cash paid for intangible assets.
Net cash used in investing activities was $53.3 million for the year ended December 31, 2023, primarily driven by $160.3 million of cash paid for securities carried at fair value, $25 million of cash committed in anticipation of the closing of Beckley Psytech investment in January 2024, $3.5 million of loans remitted to related parties, $2.0 million of cash paid for convertible notes receivable - related party, $1.0 million of cash paid for investments held at fair value, $0.4 million cash paid out in variable interest entity deconsolidation, $0.3 million of cash paid for capitalized internal-use software development costs, and $0.3 million of cash paid for property and equipment; partially offset by $139.0 million of proceeds from sale and maturities of securities at fair value, and $0.5 million of proceeds from sale of other investments.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities of $5.4 million for the year ended December 31, 2024 consisted of $5.0 million of proceeds from debt financing and $0.5 million of proceeds from stock option exercises; partially offset by $0.2 million of financing costs paid.
Net cash used in financing activities was $8.4 million for the year ended December 31, 2023, primarily due to $8.5 million of cash paid for acquisition of noncontrolling interest and $0.1 million of debt financing costs paid; partially offset by $0.2 million of proceeds from stock option exercises.
Indebtedness
Convertible Notes
In November 2018, we issued an aggregate principal amount of $0.2 million of 2018 Convertible Notes. In October 2020, we issued an additional principal amount of $1.0 million of 2018 and 2020 Convertible Notes. The 2018 and 2020 Convertible Notes are non-interest-bearing and have a maturity date of September 30, 2025, unless previously redeemed, converted, purchased or cancelled. Each note has a face value of €1 and is convertible into one common share of ATAI Life Sciences AG upon the payment of €17.00. Conversion rights may be exercised by a noteholder at any time prior to maturity, except during certain periods subsequent to the consummation of the IPO.
In December 2023 and April 2024, respectively, a noteholder and a related party noteholder each entered into an agreement with us to exchange their respective 2018 and 2020 Convertible Notes for new convertible notes issued by ATAI Life Sciences N.V. Each new note has a face value of €1 and is convertible into 16 common shares of ATAI Life Sciences N.V. upon the payment of €17.00. Conversion rights may be exercised by a noteholder at any time prior to maturity.
As of December 31, 2024, the new ATAI Life Sciences N.V. notes had a principal balance of $0.4 million. If all convertible notes were converted, the Company would receive proceeds of €6.6 million ($6.9 million).
Hercules Term Loan
On August 9, 2022 (the “Closing Date”), we, ATAI Life Sciences AG (“ATAI AG” and together with us, the “Borrowers”) and certain of our subsidiary guarantors (collectively, the “Subsidiary Guarantors”) entered into a Loan and Security Agreement (the “Hercules Loan Agreement”). The Hercules Loan Agreement provides for term loans in an aggregate principal amount of up to $175.0 million under multiple tranches (as amended by that certain First Amendment to Loan and Security Agreement, dated as of March 13, 2023, the “First Amendment,” that Second Amendment to Loan and Security Agreement, dated as of May 26, 2023, the “Second Amendment,” and that Third Amendment to Loan and Security Agreement, dated August 14, 2024, the “Third Amendment,” and the Fourth Amendment to Loan and Security Agreement, dated January 6, 2025, the “Fourth Amendment” and collectively, the “2022 Term Loan Facility”).
On May 26, 2023, we, ATAI AG, and the Subsidiary Guarantors entered into the Second Amendment, with the several banks and other financial institutions or entities from time to time parties to the Hercules Loan Agreement, defined below, (collectively, the “Lenders”) and Hercules, in its capacity as administrative agent and collateral agent for itself and for the Lenders (the “Agent”) which amended that certain Loan and Security Agreement, dated August 9, 2022 (as amended by the First Amendment, the “Existing Loan Agreement” and as amended by the Second Amendment, the “Hercules Loan Agreement”) to, among other things, (i) extend the availability of Tranche 1B of $10.0 million, from May 1, 2023, under the Existing Loan Agreement, to November 15, 2024, (ii) extend the availability of Tranche 1C of $15.0 million, from December 15, 2023, under the Existing Loan Agreement, to December 15, 2024, (iii) provide Tranche 1D of $20.0 million, available upon the earlier of (x) the full draw of Tranche 1C and (y) the expiration of Tranche 1C availability, through February 15, 2025, (iv) extend the availability of Tranche 2 of $15.0 million, from June 30, 2024, under the Existing Loan Agreement, subject to certain conditions under the Hercules Loan Agreement, to the earlier of (x) the full draw of Tranche 1D and (y) the expiration of Tranche 1D availability, through March 15, 2025, subject to the Tranche 2 Draw Test, (v) extend the timeline to achieve the second amortization
extension condition, from June 30, 2024, in the Existing Loan Agreement, to December 15, 2024, (vi) amend the Tranche 2 Draw Test, satisfaction of which is a condition to draw Tranche 2 under the Hercules Loan Agreement and (vii) extend the financial covenant commencement date, from the later of (x) July 1, 2023, and (y) the date that the outstanding debt under the facility is equal to or greater than $40.0 million, in the Existing Loan Agreement, to the later of (x) May 1, 2024, and (y) the date that the outstanding debt under the facility is equal to or greater than $30.0 million, provided, that the financial covenant is waived if the Company has a market capitalization of at least $550.0 million.
On August 14, 2024 (the “Third Amendment Date”), the Borrowers and certain Subsidiary Guarantors entered into the Third Amendment with the Lenders and Hercules, in its capacity as the Agent, which amended that certain Loan and Security Agreement, dated August 9, 2022 to, among other things, (i) provide Tranche 1B of $5.0 million on the Third Amendment Date, (ii) reduce the remainder of available Tranche 1 to $25.0 million, and extend the availability thereof (x) with respect to Tranche 1C, to be available after the Third Amendment Date until March 31, 2025, and (y) with respect to Tranche 1D, to be available upon the earlier to occur of (1) March 31, 2025 and (2) full borrowing of Tranche 1C, until June 30, 2025, (iii) increase Tranche 2 to $30.0 million, and extend the availability thereof to be available upon the earlier to occur of (1) June 30, 2025, and (2) full borrowing of Tranche 1D, until September 30, 2025, subject to the Tranche 2 Draw Test, (iv) extend the availability of Tranche 3 of $100.0 million, through March 31, 2026, available subject to lender’s investment committee approval, (v) extend the amortization date to September 1, 2025, and extend the timeline to achieve the second amortization extension condition, to June 30, 2025, upon the occurrence of which the amortization date may be extended to March 1, 2026, (vi) amend the financial covenant to commence on October 1, 2024, and require that so long as our market capitalization is less than $550.0 million, Borrowers shall maintain qualified cash equal to at least 50% of the sum of (x) the amount of outstanding debt under the facility plus (y) Qualified Cash A/P Amount (as defined in the Agreement), or upon the occurrence of certain conditions, 70% of the sum of (x) the amount of outstanding debt under the facility plus (y) Qualified Cash A/P Amount, and (vii) reduce the interest rate to equal the greater of (x) 9.05% or (y) prime rate plus 4.30% (or, upon achieving certain conditions, (y) shall equal prime rate plus 4.05%).
In January 2025 (the “Fourth Amendment Date”), the Borrowers and certain Subsidiary Guarantors entered into the Fourth Amendment with the Lenders and Hercules, in its capacity as the Agent, which amended that certain Loan and Security Agreement, dated August 9, 2022 (as amended by the First Amendment, the Second Amendment, the Third Amendment, and the Fourth Amendment the “2022 Term Loan Agreement”) to, among other things, consent to the conversion of ATAI AG from a German stock corporation (Aktiengesellschaft - AG) into a German limited liability company (Gesellschaft mit beschränkter Haftung - GmbH).
We are permitted to engage in certain specified transactions (subject to mandatory prepayment in certain instances as well as certain limitations, including the pledge of equity interests of certain subsidiaries and VIEs), including but not limited to, (i) entering into non-exclusive and certain specified exclusive licensing arrangements with respect to intellectual property without the consent of the Lenders; and (ii) entering into certain permitted acquisitions.
The 2022 Term Loan Facility will mature on August 1, 2026 (the “Maturity Date”), which may be extended until February 1, 2027 if we raise at least $175.0 million of unrestricted new net cash proceeds from certain permitted sources after the Closing Date and prior to June 30, 2025, and satisfy certain other specified conditions (the “Extension Condition Two”). The outstanding principal balance of the 2022 Term Loan Facility bears interest at a floating interest rate per annum equal to the greater of either (i) the prime rate as reported in the Wall Street Journal plus 4.30% and (ii) 9.05%; provided, that if the Extension Condition Two is satisfied, the rate of interest in the foregoing clause (i) is prime rate as reported in The Wall Street Journal plus 4.05%. Accrued interest is payable monthly following the funding of each term loan advance. We may make payments of interest only, without any loan amortization payments until September 1, 2025, which date may be extended to March 1, 2026 if Extension Condition Two is achieved. At the end of the interest only period, we are required to begin repayment of the outstanding principal of the 2022 Term Loan Facility in equal monthly installments.
As collateral for the obligations under the 2022 Term Loan Facility, we have granted to the Agent for the benefit of the Lenders a senior security interest in substantially all of our cash and investment accounts and each Subsidiary Guarantor’s property (including a pledge of equity interests of certain subsidiaries and VIEs), exclusive of intellectual property, with certain limited exceptions set forth in the Hercules Loan Agreement.
The 2022 Term Loan Agreement contains customary closing and commitment fees, prepayment fees and provisions, events of default and representations, warranties and affirmative and negative covenants, including a financial covenant requiring us to maintain certain levels of cash in accounts subject to a control agreement in favor of the Agent (the “Qualified Cash”) at all times commencing from the Closing Date, which includes a cap on the amount of cash that can be held by, among others, certain of our foreign subsidiaries in Australia and the United Kingdom. In addition, the financial covenant under the 2022 Term Loan Agreement requires that beginning on October 1, 2024, we shall maintain Qualified Cash in an amount no less than the sum of (1) 50% of the outstanding amount under the 2022 Term Loan Facility, and (2) the amount of the Borrowers’ and Subsidiary Guarantors’ accounts payable that have not been paid within 180 days from the invoice date of the relevant account payable, subject to certain exceptions; provided, upon the occurrence of certain conditions, we shall at all times maintain Qualified Cash in an amount no less than the sum of (1) 70% of the outstanding amount under the 2022 Term Loan Facility, and (2) the amount of the Borrowers’ and Subsidiary Guarantors’ accounts payable that have not been paid within 180 days from the invoice date of the relevant account payable, subject to certain exceptions; provided, further, that the financial covenant shall not apply on any day that our market capitalization is at least $550.0 million measured on a consecutive 10-business day period immediately prior to
such date of measurement and tested on a daily basis. Upon the occurrence of an event of default, including a material adverse effect, subject to certain exceptions, on our and ATAI AG’s, taken together, business, operations, properties, assets or financial condition, and subject to any specified cure periods, all amounts owed by us may be declared immediately due and payable by the Lenders. As of December 31, 2024, we were in compliance with all applicable covenants under the 2022 Term Loan Agreement.
In addition, we are required to make a final payment fee (the “End of Term Charge”) upon the earlier of (i) the Maturity Date, (ii) the date that we prepay, in full or in part, the principal balance of the 2022 Term Loan Facility, or (iii) the date that the outstanding balance of the 2022 Term Loan Facility becomes due and payable. The End of Term Charge is 6.95% of the aggregate original principal amount of the term loans so repaid or prepaid under the 2022 Term Loan Agreement.
We may, at our option, prepay the term loans in full or in part, subject to a prepayment penalty equal to (i) 2.00% of the principal amount prepaid if the prepayment occurs on or prior to the first anniversary of the Closing Date, (ii) 1.0% of the principal amount prepaid if the prepayment occurs after the first anniversary and on or prior to the second anniversary of the Closing Date, and (iii) 0.5% of the principal amount prepaid if the prepayment occurs after the second anniversary and prior to the Maturity Date.
Material Cash Requirements from Known Contractual and Other Obligations
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the consolidated balance sheets as of December 31, 2024, while others are considered future commitments. Our contractual obligations primarily consist of milestone payments under existing license agreements. For information regarding our other contractual obligations, refer to Note 12. Leases, Note 18. Commitments and Contingencies, and Note 19. License Agreements.
We have entered into other contracts in the normal course of business with certain CROs, CMOs and other third parties for preclinical research studies and testing, clinical trials and manufacturing services. These contracts do not contain any minimum purchase commitments and are cancelable by us upon written notice. Payments due upon cancellation consist only of payments for services provided and expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. The amounts and timing of such payments are not known.
In addition, under various licensing and related agreements to which we are a party, we are obligated to pay annual license maintenance fees and may be required to make milestone payments and to pay royalties and other amounts to third parties. The payment obligations under these agreements are contingent upon future events, such as our achievement of specified milestones or generating product sales, and the amount, timing and likelihood of such payments are not known. Such contingent payment obligations are described below. For additional information regarding our license agreements described below, see Note 19 to our consolidated financial statements included elsewhere in this Annual Report. For additional information regarding our contingent commitments and future put rights or options associated with our investments, see Note 4 to our consolidated financial statements included elsewhere in this Annual Report.
Otsuka License and Collaboration Agreement
In March 2021, Perception entered into a license and collaboration agreement (the “Otsuka Agreement”) with Otsuka under which Perception granted exclusive rights to Otsuka to develop and commercialize products containing arketamine, known as PCN-101 in Japan for the treatment of any depression, including treatment-resistant depression, or major depressive disorder or any of their related symptoms or conditions at its own cost and expense. Perception retained all rights to PCN-101 outside of Japan.
With the execution of the Otsuka Agreement, Perception received an upfront, non-refundable payment of $20.0 million. Perception is also entitled to receive aggregate payments of up to $35.0 million if certain development and regulatory milestones are achieved for the current or a new intravenous formulation of a product and up to $66.0 million in commercial milestones upon the achievement of certain commercial sales thresholds. Otsuka is obligated to pay Perception a tiered, double-digit royalty on net sales of products containing PCN-101 in Japan, subject to reduction in certain circumstances. In January 2025, Otsuka provided a notice of termination pursuant to the Otsuka Agreement, effective April 24, 2025. Following the effective termination date, we will no longer be eligible to receive any milestone payments or royalties pursuant to the Otsuka Agreement.
For the years ended December 31, 2024 and 2023, there were no additional milestones achieved under the Otsuka Agreement. We recognized revenues of $0.3 million and $0.3 million related to certain research and development services during the years ended December 31, 2024 and 2023, respectively.
National University Corporation Chiba University License Agreement
In August 2017, Perception entered into a license agreement or CHIBA License with the National University Corporation Chiba University ("CHIBA") relating to Perception’s drug discovery and development initiatives. Under the CHIBA License, Perception has been granted a worldwide exclusive license under certain patents and know-how of CHIBA to research, develop, manufacture, use and commercialize therapeutic products. Perception paid an upfront license fee and is required to pay an annual maintenance fee until the filing of a new drug application with the Food and Drug Administration. In addition, Perception is also required to pay tiered royalties ranging in the low to mid-single-digit on future net sales of licensed products that are covered by a valid claim of a licensed patent, if any. Perception is also
obligated to make contingent milestone payments totaling up to $1.2 million upon the achievement of certain clinical or regulatory milestones for each of the first two licensed products and $1.0 million upon the achievement of certain clinical or regulatory milestones for each additional licensed product. The CHIBA License will remain in effect until terminated by the parties according to their rights.
During the years ended December 31, 2024 and 2023, we did not make any material payments pursuant to the CHIBA License.
Allergan License Agreement
In February 2020, Recognify entered into a license agreement with Allergan Sales, LLC, or Allergan, which grants Recognify an exclusive sublicensable and worldwide license under certain patent rights and know-how controlled by Allergan to develop, manufacture and commercialize certain products for use in all fields including the treatment of certain diseases and conditions of the central nervous system. Recognify paid Allergan an upfront payment of $0.5 million and will pay Allergan a mid-single-digit royalty on the net sales of the licensed products. In addition, Recognify is obligated to pay Allergan a low teen percentage of the non-royalty sublicense payments it receives from a third party receiving a sublicense to practice the rights licensed to Recognify under the Allergan License Agreement. Upon the occurrence of certain change of control transactions involving Recognify, or sale, assignment or transfer (other than sublicense) to a third party of any rights licensed to Recognify under the Allergan License Agreement, Recognify is required to share with Allergan a low teen percentage of the proceeds it receives from such transactions. The Allergan License Agreement will remain in effect until terminated by the parties according to their rights.
During the years ended December 31, 2024 and 2023, we had made no material payments pursuant to the Allergan License agreement.
Columbia Stock Purchase Agreement
In June 2020, Kures entered into a license agreement (the “License Agreement”) with Trustees of Columbia University (“Columbia”), pursuant to which, Kures obtained an exclusive license under certain patents and technical information to discover, develop, manufacture, use and commercialize such patents or other products in all uses and applications (“Columbia IP”). In addition, in consideration for the rights to the Columbia IP, Kures entered into a Stock Purchase Agreement (the “SPA”) with Columbia in contemplation of the License Agreement. Pursuant to the SPA, Kures issued to Columbia certain shares of the Kures’ capital stock, representing 5.0% of Kures common stock on a fully diluted basis. Furthermore, the SPA provided that from time to time, Kures shall issue to Columbia additional shares of Kures’ common stock, at a per share price equal to the then fair market value of each such share, which price shall be deemed to have been paid in partial consideration for the execution, delivery and performance by Columbia of the License Agreement, such that the common stock held by Columbia shall equal to 5.0% of the common stock on a fully diluted basis, at all times up to and through the achievement of certain funding threshold.
In April 2022, Kures issued shares of Series A-2 Preferred Stock to certain investors upon the achievement of Series A-2 milestone events. Accordingly, we issued certain anti-dilution common stock to Columbia worth $0.3 million. We expensed the cost incurred for acquiring the license as acquisition of in-process research and development expense at inception. Since, the additional anti-dilution shares were issued as partial consideration towards the same license arrangement, the cost of such additional shares of $0.4 million was also expensed as acquisition of in-process research and development expense during the year ended December 31, 2023.
In October 2024, in connection with the dissolution of Kures, Inc., Kures and Columbia mutually agreed to terminate the existing License Agreement ("the Termination Agreement"). Under the Termination Agreement, Kures assigned to Columbia all of Kures' intellectual property rights that were filed during the term of the License Agreement and agreed that all licenses granted to Kures by Columbia are terminated. In exchange, Kures received consideration through the relief and discharge of an immaterial amount of outstanding payment obligations due to Columbia.
During the years ended December 31, 2024 and 2023, we did not make any material payments in connection with the Columbia agreement.
Dalriada License Agreement
In December 2021, Invyxis, Inc. ("Invyxis") entered into an exclusive services and license agreement (the “Dalriada License Agreement”) with Dalriada Drug Discovery Inc. (“Dalriada”). Under the Dalriada License Agreement, Dalriada is to exclusively collaborate with Invyxis to develop products, services and processes with the specific purpose of generating products consisting of new chemical entities. Under the original agreement, Invyxis was obligated to pay Dalriada up to $12.8 million in service fees for research and support services. In May 2023, we executed an amendment to the Dalriada License Agreement, which reduced the amount Invyxis will pay Dalriada in service fees to $7.4 million. In addition, Invyxis will pay Dalriada development milestone payments and low single digit royalty payments based on net product sales. We have the right, but not the obligation, to settle future royalty payments based on net product sales with the our common shares. Invyxis, our wholly-owned subsidiary, and Dalriada will determine the equity settlement based on a price per share determined by both parties.
In December 2022, we executed an amendment to the Dalriada License Agreement, which reduced the upfront deposit from $1.1 million to $0.5 million. As such, the remaining $0.6 million was applied against research and development expense incurred. We will expense the remaining deposit as the services are performed as a component of research and development expense in the consolidated statements of operations.
During the years ended December 31, 2024 and 2023, we recorded $0.4 million and $2.0 million, respectively as research and development expense.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, costs and expenses and the disclosure of contingent liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in greater detail in Note 2, “Basis of Presentation, Consolidation and Summary of Significant Accounting Policies” in our consolidated financial statements appearing under Part II, Item 8, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred.
We accrue expense for preclinical studies and clinical trial activities performed by vendors based upon estimates of the proportion of work completed. We determine such estimates by reviewing contracts, vendor agreements, and through discussions with our internal personnel and external service providers as to the progress or stage of completion and the agreed-upon fee to be paid for such services. However, actual costs and timing of preclinical studies and clinical trials are highly uncertain, subject to risks, and may change depending upon a number of factors, including our clinical development plan.
We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, the accrual is adjusted accordingly. Nonrefundable advance payments for goods and services are deferred and recognized as expense in the period that the related goods are consumed or services are performed.
Acquisitions and Dispositions
We evaluate each of our acquisitions under the accounting framework in ASC 805, Business Combinations, to determine whether the transaction is a business combination or an asset acquisition. In determining whether an acquisition should be accounted for as a business combination or an asset acquisition, we first perform a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the acquired set is not deemed to be a business and is instead accounted for as an asset acquisition. If this is not the case, we further evaluate whether the acquired set includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, we conclude that the acquired set is a business. During the year ended December 31, 2024, we completed the acquisition of IGX, that was accounted for as a business combination. Refer to Note 3 in the Notes to the consolidated financial statements within Part II, Item 8 for more information. We account for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. When determining the fair values of assets acquired and liabilities assumed, we make significant estimates and assumptions. Our estimates of fair value are based upon assumptions believed to be reasonable, but these assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. During the year ended December 31, 2023, we did not have any acquisitions that were accounted for as business combinations.
For asset acquisitions that involve the initial consolidation of a VIE that is not a business for which we are the primary beneficiary, the transactions are accounted for under ASC 810, Consolidation, and no goodwill is recognized. Rather, we recognize the identifiable assets acquired (excluding goodwill), the liabilities assumed, and any noncontrolling interests as though the VIE was a business and subject to the guidance on recognition and measurement in a business combination under ASC 805, and recognize a gain or loss for the difference between (a) the sum of the fair values of consideration paid (including any contingent consideration) and noncontrolling interests, (b) the fair value of the VIE’s identifiable assets and liabilities, and (c) the reported amounts of any previously held interests. Acquisition-related expenses incurred in asset acquisitions that involve the initial consolidation of a VIE that is not a business, are not included as a component of consideration transferred, but are accounted for as an expense in the period in which the costs are incurred. In an asset acquisition, including the initial consolidation of a VIE that is not a business, acquired IPR&D with no alternative future use is charged to research and development expense at the acquisition date.
Upon the occurrence of certain events and on a regular basis, we evaluate whether we no longer have a controlling interest in our consolidated VIEs. If we determine that we no longer have a controlling interest, the subsidiary is deconsolidated. We will record a gain or loss on deconsolidation based on the difference on the deconsolidation date between (i) the aggregate of (a) the fair value of any
consideration received, (b) the fair value of any retained noncontrolling investment in our former subsidiary and (c) the carrying amount of any noncontrolling interest in the subsidiary being deconsolidated, less (ii) the carrying amount of the former subsidiary’s assets and liabilities.
Stock-Based Compensation
We recognize compensation costs related to stock-based awards granted to employees, directors, and consultants based on the estimated fair value of the awards on the date of grant. We estimate the grant date fair value, and the resulting stock-based compensation expense, for stock options that only have service vesting requirements or performance-based vesting requirements without market conditions using the Black-Scholes option-pricing model. The grant date fair value of the stock-based awards with service vesting requirements is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. Determining the appropriate amount to expense for performance-based awards based on the achievement of stated goals requires judgment. We recognize expense for performance-based awards if the stated goals are determined to be probable of being met as of the period end. If any applicable financial performance goals are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed. For performance-based awards with market conditions, we determine the fair value of awards as of the grant date using a Monte Carlo simulation model. We have elected to recognize forfeitures of stock-based compensation awards as they occur.
We estimate the fair value of stock options using the Black-Scholes option-pricing model, which requires assumptions, including the fair value of our Common Shares prior to our initial public offering, volatility, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options, and our expected dividend yield. Certain assumptions used in our Black-Scholes option-pricing model represent management’s best estimates and involve a number of variables, uncertainties and assumptions and the application of management’s judgment, as they are inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.
These subjective assumptions are estimated as follows:
Expected term-We have generally elected to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years).
Expected volatility-As we have limited trading history for our common shares, the expected volatility was estimated based on the average volatility for comparable publicly traded biotechnology companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty. We also included our own historical volatility in the determination of expected volatility.
Risk-free interest rate-The risk-free rate assumption is based on the implied yield with an equivalent expected term at the grant date.
Expected dividend yield-We have not issued any dividends in our history and do not expect to issue dividends over the life of the options; therefore, we have estimated the dividend yield to be zero.
As part of the valuation of stock-based compensation under the Black-Scholes option-pricing model, it is necessary for us to estimate the fair value of our common shares. Prior to our IPO, we were required to periodically estimate the fair value of our common shares when issuing options and in computing our estimated stock-based compensation expense. Given the absence of a public trading market prior to the completion our initial public offering, and in accordance with the American Institute of Certified Public Accountants’ Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, we exercised reasonable judgment and considered numerous objective and subjective factors to determine our best estimate of the fair value of our common shares. The estimation of the fair value of our common shares considered factors including the following: the estimated present value of our future cash flows; our business, financial condition and results of operations; our forecasted operating performance; the illiquid nature of our common shares; industry information such as market size and growth; market capitalization of comparable companies and the estimated value of transactions such companies have engaged in; and macroeconomic conditions. We apply similar methodology to estimate the fair value of our privately held subsidiaries' common shares. After the closing of the IPO, our board of directors determined the fair value of each common share underlying stock-based awards based on the closing price of our common shares as reported on Nasdaq on the date of grant.
Recently Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, “Basis of Presentation, Consolidation and Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements” in our consolidated financial statements appearing under Part II, Item 8.
JOBS Act
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period
provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. In addition, our portfolio of notes receivables is exposed to credit risk in the form of non-payment or non-performance. In mitigating our credit risk, we consider multiple factors, including the duration and terms of the note and the nature of and our relationship with the counterparty. The following analysis provides quantitative information regarding these risks.
Interest Rate Sensitivity
Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. As of December 31, 2024, we had cash and cash equivalents of $17.5 million, restricted cash of $10.0 million, and short-term securities of $44.8 million. We generally hold our cash in interest-bearing demand deposit accounts and short-term securities. Due to the nature of our cash and investment portfolio, a hypothetical 100 basis point change in interest rates would not have a material effect on the fair value of our cash. Our cash is held for working capital purposes. We purchase treasury bills and money-market funds which are rated by nationally recognized statistical credit rating organizations in accordance with its investment policy. This policy is designed to minimize our exposure to credit losses and to ensure that the adequate liquidity is maintained at all times to meet anticipated cash flow needs.
As of December 31, 2024, we had $0.4 million in convertible promissory notes, which was comprised of non-interest-bearing borrowings under the 2018 and 2020 Convertible Notes. Based on the principal amounts of the convertible promissory notes and the interest rate assigned to the convertible promissory notes, an immediate 10% change in interest rates would not have a material impact on our convertible promissory notes, financial position or results of operations.
Foreign Currency Exchange Risk
Our reporting and functional currency is the U.S. dollar, and the functional currency of our foreign subsidiaries is generally the respective local currency. The assets and liabilities of each of our foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as a separate component on the consolidated statements of comprehensive loss. Equity transactions are translated using historical exchange rates. Expenses are translated using the average exchange rate during the previous month. Gains or losses due to transactions in foreign currencies are included in interest and other income, net in our consolidated statements of operations.
The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in foreign exchange gains and losses related to changes in foreign currency exchange rates. In the event our foreign currency denominated assets, liabilities, revenue, or expenses increase, our results of operations may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business, resulting in unrealized foreign exchange gains or losses. We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. No strategy can completely insulate us from risks associated with such fluctuations and our currency exchange rate risk management activities could expose us to substantial losses if such rates move materially differently from our expectations.
A hypothetical 10% change in the relative value of the U.S. dollar to other currencies during any of the periods presented would not have had a material effect on our consolidated financial statements, but could result in significant unrealized foreign exchange gains or losses for any given period.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 34)
Consolidated Balance Sheets as of December 31, 2024 and 2023
Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2024 and 2023
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024 and 2023
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of ATAI Life Sciences N.V.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ATAI Life Sciences N.V. and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Morristown, New Jersey
March 17, 2025
We have served as the Company's auditor since 2020.
ATAI LIFE SCIENCES N.V.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
December 31,
Assets
Current assets:
Cash and cash equivalents
$
17,505
$
45,034
Securities carried at fair value
44,825
109,223
Short-term restricted cash for other investments
10,000
-
Committed investment funds
-
25,000
Prepaid expenses and other current assets
7,795
5,830
Short-term notes receivable - related party, net
-
Total current assets
80,125
185,592
Property and equipment, net
2,535
Operating lease right-of-use assets, net
1,334
1,223
Other investments held at fair value
28,887
89,825
Other investments
42,079
1,838
Intangible assets, net
3,246
1,772
Goodwill
-
Long-term notes receivable - related party, net
-
Convertible notes receivable - related party
-
11,202
Other assets
Total assets
$
159,387
$
293,478
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
2,616
$
4,589
Accrued liabilities
9,847
15,256
Current portion of lease liabilities
Short-term convertible promissory notes and derivative liability - related party
1,150
-
Short-term convertible promissory notes and derivative liability
1,840
-
Current portion of long-term debt
6,374
-
Other current liabilities
2,647
-
Total current liabilities
24,951
20,120
Contingent consideration liability - related party
Contingent consideration liabilities
1,637
Noncurrent portion of lease liabilities
Convertible promissory notes and derivative liability - related party
-
Convertible promissory notes and derivative liability
-
2,666
Long-term debt, net
14,133
15,047
Other liabilities
2,695
7,918
Total liabilities
$
42,833
$
49,162
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock, €0.10 par value ($0.10 and $0.12 par value at December 31, 2024 and December 31, 2023, respectively); 750,000,000 shares authorized at December 31, 2024 and December 31, 2023, respectively; 167,959,752 and 166,026,396 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively
18,785
18,573
Additional paid-in capital
816,185
794,787
Accumulated other comprehensive loss
(18,466
)
(19,460
)
Accumulated deficit
(700,207
)
(550,938
)
Total stockholders’ equity attributable to ATAI Life Sciences N.V. stockholders
116,297
242,962
Noncontrolling interests
1,354
Total stockholders’ equity
116,554
244,316
Total liabilities and stockholders’ equity
$
159,387
$
293,478
See accompanying notes to the consolidated financial statements.
ATAI LIFE SCIENCES N.V.
CONSOLIDATED STATEMEN TS OF OPERATIONS
(In thousands, except share and per share amounts)
For the year ended December 31,
License revenue
$
$
Operating expenses:
Research and development
55,455
62,203
General and administrative
47,544
63,582
Total operating expenses
102,999
125,785
Loss from operations
(102,691
)
(125,471
)
Other income (expense), net:
Interest income
1,847
Interest expense
(3,124
)
(2,656
)
Benefit from research and development tax credit
2,445
Change in fair value of assets and liabilities, net
(48,879
)
86,583
Gain on settlement of pre-existing contract
5,567
-
Impairment of other investments
-
(1,011
)
Gain on deconsolidation of a variable interest entity, net
-
Gain on dissolution of a variable interest entity
1,166
-
Foreign exchange loss, net
(1,263
)
(894
)
Other income (expense), net
(484
)
(189
)
Total other income (expense), net
(45,714
)
86,185
Net loss before income taxes
(148,405
)
(39,286
)
Benefit from (provision for) income taxes
(1,016
)
Losses from investments in equity method investees, net of tax
(2,000
)
(3,593
)
Net loss
(150,049
)
(43,895
)
Net loss attributable to noncontrolling interests
(780
)
(3,671
)
Net loss attributable to ATAI Life Sciences N.V.
stockholders
$
(149,269
)
$
(40,224
)
Net loss per share attributable to ATAI Life Sciences N.V.
stockholders - basic and diluted
$
(0.93
)
$
(0.25
)
Weighted average common shares outstanding attributable
to ATAI Life Sciences N.V. stockholders - basic and diluted
160,159,983
158,833,785
See accompanying notes to the consolidated financial statements.
ATAI LIFE SCIENCES N.V.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
For the year ended December 31,
Net loss
$
(150,049
)
$
(43,895
)
Other comprehensive loss:
Foreign currency translation adjustments, net of tax
2,242
Comprehensive loss
$
(149,055
)
$
(41,653
)
Net loss attributable to noncontrolling interests
(780
)
(3,671
)
Foreign currency translation adjustments, net of tax attributable to noncontrolling interests
(1
)
Comprehensive loss attributable to noncontrolling interests
(748
)
(3,672
)
Comprehensive loss attributable to ATAI Life Sciences N.V. stockholders
$
(148,307
)
$
(37,981
)
See accompanying notes to the consolidated financial statements.
ATAI LIFE SCIENCES N.V.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
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
-
-
-
-
Settlement of issuance of shares upon exercise of
stock options
-
-
-
-
-
-
Issuance of shares upon note conversion
15,920
-
-
-
-
Adjustment to additional paid in capital upon
consolidation of variable interest entity, net
-
-
(10,809
)
-
-
-
(10,809
)
-
(10,809
)
Adjustment to additional paid in capital upon debt
modification
-
-
(1,668
)
-
-
-
(1,668
)
-
(1,668
)
Adjustment to accumulated deficit (pursuant to
adoption of ASU 2016-13)
-
-
-
-
-
(526
)
(526
)
-
(526
)
Stock-based compensation expense
-
-
32,982
-
-
-
32,982
-
32,982
Foreign currency translation adjustment, net of tax
-
-
-
-
2,242
-
2,242
(1
)
2,241
Net loss
-
-
-
-
-
(40,224
)
(40,224
)
(3,671
)
(43,895
)
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 exercise of stock options
453,043
-
-
-
-
Issuance of shares upon restricted stock units vest
1,480,313
(163
)
-
-
-
-
-
-
Adjustment to additional paid in capital upon
acquiring additional interest in variable interest
entity
-
-
(115
)
-
-
-
(115
)
-
(115
)
Adjustment to additional paid in capital upon debt
modification
-
-
(3,590
)
-
-
-
(3,590
)
-
(3,590
)
Adjustment to additional paid in capital upon
dissolution of variable interest entity
-
-
(709
)
-
-
-
(709
)
(349
)
(1,058
)
Stock-based compensation expense
-
-
25,490
-
-
-
25,490
-
25,490
Foreign currency translation adjustment, net of tax
-
-
-
-
-
1,026
Net loss
-
-
-
-
-
(149,269
)
(149,269
)
(780
)
(150,049
)
Balances at December 31, 2024
167,959,752
$
18,785
$
816,185
$
-
$
(18,466
)
$
(700,207
)
$
116,297
$
$
116,554
See accompanying notes to the consolidated financial statements.
ATAI LIFE SCIENCES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the year ended December 31,
Cash flows from operating activities
Net loss
$
(150,049
)
$
(43,895
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of long-term assets
Noncash lease expense
Amortization of debt discount
Stock-based compensation expense
25,490
32,982
Noncash change in the fair value of assets and liabilities, net
51,579
(86,583
)
Loss on sale of investment held at fair value
2,075
-
Gain on dissolution of a variable interest entity
(1,166
)
-
Gain on settlement of pre-existing contract
(5,567
)
-
Impairment of intangible assets
-
Gain on deconsolidation of a variable interest entity, net
-
(60
)
Impairment of other investments
-
1,011
Unrealized foreign exchange loss, net
1,078
Losses from investments in equity method investees, net of tax
2,000
3,593
Other income (expense), net
(1,000
)
(507
)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
(1,091
)
8,663
Accounts payable
(1,872
)
2,138
Accrued liabilities and other liabilities
(6,237
)
(3,332
)
Net cash used in operating activities
(82,437
)
(84,118
)
Cash flows from investing activities
Proceeds from sale and maturities of securities carried at fair value
65,560
138,983
Proceeds from sale of other investment held at fair value
16,093
-
Cash received in acquisition of IntelGenx Corp.
-
Cash paid for securities carried at fair value
-
(160,262
)
Cash paid for investments
(15,000
)
(25,000
)
Cash paid for short-term notes receivable - related party
(5,745
)
-
Cash paid for short-term convertible notes receivable and warrant - related party
(2,000
)
-
Cash paid for intangible asset
(83
)
-
Cash paid for long-term notes receivable - related parties, net
-
(3,500
)
Cash paid for convertible notes receivable - related party
-
(2,014
)
Cash paid for other investments held at fair value
-
(956
)
Proceeds from sale of other investment
-
Cash paid for capitalized internal-use software development costs
(6
)
(331
)
Cash paid out in variable interest entity deconsolidation
-
(443
)
Cash paid for property and equipment
(6
)
(259
)
Net cash provided by (used in) investing activities
59,172
(53,295
)
Cash flows from financing activities
Proceeds from debt financing
5,000
-
Proceeds from issuance of shares upon exercise of stock options
Proceeds from conversion of convertible notes to common stock
-
Cash paid for acquisition of noncontrolling interest
-
(8,480
)
Financing costs paid
(161
)
(100
)
Net cash provided by (used in) financing activities
5,374
(8,355
)
Effect of foreign exchange rate changes on cash
Net decrease in cash, cash equivalents and restricted cash
(17,529
)
(145,579
)
Cash, cash equivalents and restricted cash - beginning of the period
45,034
190,613
Cash, cash equivalents and restricted cash - end of the period
$
27,505
$
45,034
Supplemental disclosures:
Cash paid for interest
$
2,159
$
1,923
Cash paid for taxes
$
$
1,475
Supplemental disclosures of noncash investing and financing information:
Discharge of notes receivable
$
5,356
$
-
Noncash exchange of convertible promissory note modification
$
3,586
$
1,668
Noncash consideration for acquisition of noncontrolling interest, net
$
-
$
2,315
Noncash receipt of call option
$
-
$
(5,062
)
Noncash deferred credit
$
-
$
5,062
Right of use asset obtained in exchange for operating lease liabilities
$
-
$
1,377
Noncash consideration for variable interest deconsolidation
$
$
-
See accompanying notes to the consolidated financial statements.
ATAI LIFE SCIENCES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
ATAI Life Sciences N.V. (“atai”, "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. Founded in 2018, atai emerged from the urgent need for better mental health solutions for patients who are under-served by current treatment options. The Company is advancing a pipeline of interventional psychiatric product candidates designed to address the complex nature of mental health disorders. The Company believes that these investigational compounds have the potential to become fast-acting, durable, and commercially scalable therapies for mental health patients in need of new treatment options.
The Company's research is focused on developing rapid-acting, effective and durable mental health treatments that can deliver large-scale patient impact. The Company is committed to leading a new era of mental health treatment - one that not only offers relief from symptoms, but the possibility of an improved quality of life and lasting change. The Company pursues this in two ways: the Company develops novel product candidates in-house and the Company makes strategic investments in companies developing promising product candidates.
The Company has built a diversified pipeline of drug and discovery development programs, including psychedelic and nonpsychedelic compounds. Psychedelics are emerging as novel therapies for mental health disorders, such as depression and, with growing scientific support, recent regulatory advancements and increasing patient and physician acceptance. There is a growing body of clinical evidence that supports the development of psychedelics, which the Company believes may have potential therapeutic benefits, such as a rapid onset of effect and sustained efficacy after a short-course of administration. The Company believes these programs, which include new molecular entities as well as variants of known compounds with unique pharmacology, have the potential to address unmet needs in mental health disorders.
These programs vary across stage of development, targeted indication and proposed mechanism of action, which the Company believes will improve the commercial potential and risk profile of our pipeline in the aggregate. The Company also prioritizes the development of, and investments in companies who are developing, compounds and compound classes that have shown potential for efficacy and safety in prior clinical trials or observational studies.
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 has incurred significant losses and negative cash flows from operations since its inception. As of December 31, 2024, the Company had cash and cash equivalents of $17.5 million, restricted cash of $10.0 million, and short-term securities of $44.8 million and its accumulated deficit was $700.2 million. The Company has historically financed its operations through the sale of equity securities, sale of convertible notes, debt financings, 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.
2. Basis of Presentation, Consolidation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and follow the requirements of the United States Securities and Exchange Commission ("SEC"), 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, results of operations and comprehensive loss, and cash flows for the periods presented.
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”).
Reclassifications
Certain reclassifications were made to prior period amounts in the consolidated financial statements and accompanying notes to conform with current year presentation due to the increase in the balances of the Company's intangible assets during the period.
Consolidation
The Company's 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 reporting currency is the U.S. dollar.
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 as well as 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 consolidated balance sheets and 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 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
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions made in the accompanying consolidated financial statements include, but are not limited to the fair value of securities carried at fair value, the fair value of other investments held at fair value, the fair value of convertible notes receivable, definite-lived intangible assets, accruals for research and development costs, the fair value of contingent consideration liabilities, the fair value of assets acquired and liabilities assumed in acquisitions, noncontrolling interests recognized in acquisitions, revenue recognition, the valuation of stock-based awards, impairment of long-lived assets, including goodwill, income taxes, including uncertain tax positions, and the valuation allowance of deferred tax assets.
The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and short-term investments. The Company’s cash is mainly held in financial institutions in the United States. Amounts on
deposit may at times exceed federally insured limits. The Company does not believe that it is exposed to any significant credit risk related to these instruments.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. As of December 31, 2024 and 2023, cash and cash equivalents consisted of cash on deposit and cash held in high-yield savings accounts and money market funds, and at times in excess of federally insured limits.
Investment Securities Portfolio
The Company maintains an investment portfolio, which is comprised of money market funds and U.S. treasury securities as well as corporate notes and bonds and U.S. government agencies in the prior year. The Company classified securities in the investment portfolio as available-for-sale securities. Furthermore, the Company elected the fair value option for the available-for-sale securities in the investment portfolio. The decision to elect the fair value option, which is irrevocable once elected, is determined on an instrument-by-instrument basis and applied to an entire instrument. The net gains or losses, if any, on an investment for which the fair value option has been elected are recognized as a Change in fair value of assets and liabilities, net on the consolidated statements of operations and the amortized cost of investments approximates their fair value. The Company's securities in the investment portfolio will mature within one year.
Accounts Receivable
The Company's accounts receivable relate to licensing and collaboration agreements, including agreements for product development, licensing, and supply agreements assumed through its acquisition of IntelGenx Corp. ("IGX") in October 2024 as well as for the Company's licensing agreement with Otsuka, and services performed on behalf of non-consolidated VIEs (defined below). These accounts receivable are short-term in nature. The Company estimates expected credit losses over the life of the financial assets as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. For the years ended December 31, 2024 and 2023, the Company recognized its accounts receivable in Other current assets within its consolidated balance sheets. For the years ended December 31, 2024 and 2023, the Company had no allowance for credit losses.
Property and Equipment
The Company's property and equipment consists of manufacturing equipment, laboratory and office equipment, furniture and fixtures, and computer equipment and is recorded at cost, less accumulated depreciation. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred. Upon disposal, retirement or sale, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations. Depreciation of property and equipment is recorded using the straight-line method over the estimated useful lives of the related assets once the asset has been placed in service. Leasehold improvements are amortized using the straight-line method over the estimated useful life or remaining lease term, whichever is shorter. The Company estimates useful lives by asset class based on the below useful lives:
Asset
Estimated useful lives used
Manufacturing equipment
5 to 20 years
Laboratory and office equipment
5 to 10 years
Furniture and fixtures
7 years
Computer equipment
5 years
Leases
The Company accounts for its leases in accordance with Accounting Standards Codification (“ASC”) Topic 842, Leases ("ASC 842"). At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on the unique facts and circumstances present in that arrangement. Lease classification, recognition, and measurement are then determined at the lease commencement date. For arrangements that contain a lease the Company (i) identifies lease and non-lease components, (ii) determines the consideration in the contract, (iii) determines whether the lease is an operating or financing lease; and (iv) recognizes lease right-of-use (ROU) assets and liabilities. Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable and as such, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment. For lease arrangements with an initial term of 12 months or less, the Company does not recognize a lease liability and ROU asset; instead, the Company recognizes the related lease payments as lease expense on a straight-line basis over the lease term.
The Company, through its various subsidiaries, are lessees for several leases designated as operating leases under ASC 842. The Company presents operating leases on the consolidated balance sheets within Operating lease right-of-use assets, net, Current portion of lease
liabilities, and Noncurrent portion of lease liabilities. On the consolidated statements of operations, the Company presents amortization of operating leases as lease expense within Research and development expenses or General and administrative based on operating lease use.
Most leases include options to renew and, or, terminate the lease, which can impact the lease term. The exercise of these options is at the Company's discretion. The Company does not include any of these options within the expected lease term, as it is not reasonably certain it will exercise these options.
Intangible Assets
The Company has definite-lived intangible assets that are amortized on a straight-line basis over the period in which the Company expects to receive economic benefit and are reviewed for impairment when facts and circumstances indicate that the carrying value of the asset may not be recoverable. The determination of the expected life will be dependent upon the use and underlying characteristics of the intangible asset. In the Company’s evaluation of the intangible assets, it considers the term of the underlying asset life and potential limitations to its useful life, including any legal, regulatory, contractual, or economic factors.
The Company also owns certain developed and acquired in-process research and development (“IPR&D”) intangible assets. These IPR&D assets are considered indefinite-lived intangible assets until completion or abandonment of the associated research and development efforts. These IPR&D assets are not amortized but reviewed for impairment at least annually, or when events or changes in the business environment indicate the carrying value may be impaired. Acquired IPR&D pursuant to an asset acquisition that has no alternative future use is expensed immediately as a component of Research and development expense in the consolidated statements of operations.
The Company presents definite- and indefinite-lived intangible assets on the consolidated balance sheets within Intangible assets, net. On the consolidated statements of operations, the Company presents amortization of definite-lived intangible assets as amortization expense within General and administrative or Research and development based on intangible asset use.
Goodwill
Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired as a result of the Company’s business acquisitions accounted for using the acquisition method of accounting. Goodwill is not amortized and is subject to impairment testing on an annual basis or when a triggering event occurs that may indicate the carrying value of the goodwill is impaired.
Business Combinations
The Company evaluates each of its acquisitions under the accounting framework in Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, to determine whether the transaction is a business combination or an asset acquisition. In determining whether an acquisition should be accounted for as a business combination or an asset acquisition, the Company first performs a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the acquired set is not deemed to be a business and is instead accounted for as an asset acquisition. If this is not the case, the Company then further evaluates whether the acquired set includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the Company concludes that the acquired set is a business.
The Company accounts for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but these assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill.
During the measurement period, which may be up to one year from the acquisition date, the Company adjusts the provisional amounts of assets acquired and liabilities assumed with the corresponding offset to goodwill to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s consolidated statements of operations.
The Company allocates the purchase price of acquired entities to the underlying tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values, with any excess recorded as goodwill. The valuations of the acquired assets and liabilities will impact the determination of future operating results. Determining the fair value of assets the Company acquires and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. The Company determines the fair values of intangible assets acquired generally in consultation with third-party valuation advisors. Fair value adjustments to the assets and liabilities are recognized and the results of operations of the acquired business are included in the Company's consolidated financial statements from the effective date of the acquisition. For the year ended December 31, 2024, the Company completed a transaction that was accounted for as a business combination. The Company did not have any acquisitions that were accounted for as business combinations for the year ended December 31, 2023.
If the Company's screen test determines the fair value of gross assets acquired is concentrated into a single identifiable asset, and the Company is the primary beneficiary, the transactions are accounted for under ASC 810, Consolidation, and no goodwill is recognized. Rather, the Company recognizes the identifiable assets acquired (excluding goodwill), the liabilities assumed, and any noncontrolling interests as though the VIE was a business and subject to the guidance on recognition and measurement in a business combination under ASC 805, and recognizes a gain or loss for the difference between (a) the sum of the fair values of consideration paid (including any contingent consideration) and noncontrolling interests, (b) the fair value of the VIE’s identifiable assets and liabilities, and (c) the reported amounts of any previously held interests. Acquisition-related expenses incurred by the Company in asset acquisitions that involve the initial consolidation of a VIE that is not a business, are not included as a component of consideration transferred, but are accounted for as an expense in the period in which the costs are incurred. In an asset acquisition, including the initial consolidation of a VIE that is not a business, acquired IPR&D with no alternative future use is expensed immediately as a component of in-process research and development expense in the consolidated statements of operations and comprehensive loss.
Variable Interest Entities and Voting Interest Entities
The Company consolidates those entities in which it has a direct or indirect controlling financial interest based on either the variable interest model (the “VIE model”) or the voting interest model (the “VOE model”) as prescribed under ASC 810, Consolidation.
VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity.
The primary beneficiary of a VIE is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE through its interest in the VIE.
To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all the facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes identifying the activities that most significantly impact the VIE’s economic performance and identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE (management and representation on the board of directors) and have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE.
To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests, which primarily include equity investments in preferred and common stock and notes receivable that are convertible into preferred stock, that are deemed to be variable interests in the VIE. This assessment requires the Company to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing the significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.
At the VIE’s inception, the Company determines whether it is the primary beneficiary and if the VIE should be consolidated based on the facts and circumstances. The Company then performs on-going reassessments of the VIE based on reconsideration events and reevaluates whether a change to the consolidation conclusion is required each reporting period. If the Company is not deemed to be the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with the applicable GAAP.
Upon the occurrence of certain events and on a regular basis, the Company evaluates whether it no longer has a controlling interest in its consolidated VIEs. If the Company determines it no longer has a controlling interest, the subsidiary is deconsolidated. The Company records a gain or loss on deconsolidation based on the difference on the deconsolidation date between (i) the aggregate of (a) the fair value of any consideration received, (b) the fair value of any retained noncontrolling investment in the former subsidiary and (c) the carrying amount of any noncontrolling interest in the subsidiary being deconsolidated, less (ii) the carrying amount of the former subsidiary’s assets and liabilities.
Entities that do not qualify as a VIE are assessed for consolidation under the VOE model. Under the VOE model, the Company consolidates the entity if it determines that it, directly or indirectly, has greater than 50% of the voting shares and that other equity holders do not have substantive voting, participating or liquidation rights.
Other Investments Held at Fair Value
Prior to the Company's acquisition of IGX in October 2024, as permitted under Accounting Standards Codification 825, Financial Instruments ("ASC 825"), the Company elected the fair value option to account for its investment in IntelGenx, which otherwise would have been subject to ASC 323. In accordance with ASC 825, the Company recorded this investment at fair value under the Other
investments held at fair value in the Company's consolidated balance sheets and changes in the fair value are recognized as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations.
In January 2024, the Company received Additional Warrants (defined in Note 5) pursuant to the Beckley subscription and shareholders' agreement. The Company determined that the Additional Warrants meet the definition of a derivative instrument under Accounting Standards Codification 815, Derivatives and Hedging, and recorded the additional Warrants under the Other investments held at fair value in the consolidated balance sheets, with subsequent changes in fair value being reflected through the consolidated statements of operations in the Change in fair value of assets and liabilities, net.
As of August 2023, the Company evaluated its ability to continue to exercise significant influence over its investment in Compass and determined that it no longer had significant influence. The Company's COMPASS investment is accounted for at fair value under Accounting Standards Codification 321, Investments-Equity Securities ("ASC 321") and recorded in Other investments held at fair value on the consolidated balance sheets and changes in fair value are recognized as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations.
Other Investments
The Company holds investments in various equity securities that do not have a readily available fair value. The Company records these investments under either the alternative measurement under ASC 321 or as an equity method investment within Other investments on the Company's consolidated balance sheets.
Alternative Measurement
Other investments include ownership rights that either (i) do not provide the Company with control or significant influence, or (ii) do not have risk and reward characteristics that are substantially similar to an investment in the investee’s common stock. The Company records such investments under the measurement alternative method pursuant to ASC 321 as these investments do not have readily determinable fair values. Under the measurement alternative method, the Company records the investment at cost less impairment losses, if any, unless it identifies observable price changes in orderly transactions for the identical or a similar investment of the same issuer, in which case the Company will measure its investments at fair value as of the date that the observable transaction occurred. Such investments are presented as Other Investments on the consolidated balance sheets and any impairment recognized related to these investments are presented as Impairment of other investments, a component of other income (expense), net in the consolidated statements of operations.
The Company performs a qualitative assessment at each reporting period considering impairment indicators to evaluate whether the investment is impaired. Impairment indicators that the Company considers include but are not limited to; i) a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee, ii) a significant adverse change in the regulatory, economic, or technological environment of the investee, iii) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates, iv) a bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment; v) factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants. If the qualitative assessment indicates that an investment is impaired, a loss is recorded equal to the difference between the fair value and carrying value of the investment.
Equity Method Investments
The Company utilizes the equity method to account for investments when it possesses the ability to exercise significant influence, but not control, over the operating and financial decisions of the investee. Generally, the ability to exercise significant influence is presumed when the investor possesses more than 20% of the voting interests of the investee. This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is not present. The Company applies the equity method to investments in common stock and to other investments in nonconsolidated entities that have risk and reward characteristics that are substantially similar to an investment in the investee’s common stock.
In applying the equity method, the Company’s investments are initially recorded at cost in Other investments on the consolidated balance sheets. Upon recording an equity method investment, the Company evaluates whether there are basis differences between the carrying value and fair value of the Company’s proportionate share of the investee’s underlying net assets. Typically, the Company amortizes basis differences identified on a straight-line basis over the underlying assets’ estimated useful lives when calculating the attributable earnings or losses, excluding the basis differences attributable to IPR&D that had no alternative future use. To the extent a basis difference relates to IPR&D and the investee is not a business as defined in ASC 805, the Company immediately expenses such basis difference related to IPR&D. If the Company is unable to attribute all the basis difference to specific assets or liabilities of the investee, the residual excess of the cost of the investment over the proportional fair value of the investee’s assets and liabilities is recognized within the equity investment balance.
The Company subsequently adjusts the carrying amount of the investment by the Company’s proportionate share of the net earnings or losses and other comprehensive income or loss of the investee based on the Company’s percentage of common stock or in-substance common stock ownership during the respective reporting period. The Company records its share of the results of equity method investees
and any impairment related to equity method investments as earnings or losses from investments in equity method investees, net of tax in the consolidated statements of operations. In the event that net losses of the investee reduce the carrying amount to zero, additional net losses may be recorded if the Company has other investment or other outstanding loans and advances to the investee and would be determined based on the Company’s proportionate share of the respective class of securities
Currently the Company is not obligated to make additional capital contributions for its equity method investments, and therefore only records losses up to the amount of its total investment, inclusive of other investments in and loans to the investee, which are not accounted for as equity method investments. To the extent that the Company’s share of losses of the equity method investee on a cumulative basis exceeds its total investment amount, inclusive of its equity method investment, other investments, and loans, the Company will discontinue equity method loss recognition as the Company does not have guaranteed obligations of the investee nor has the Company otherwise committed to provide further financial support for the investee. The Company will resume recording its share of losses in future periods only after its share of the earnings of the equity method investee equals the Company’s share of losses not recognized during the suspended period. The Company evaluates additional equity method investments made after the suspension of loss recognition to determine whether such investments represent the funding of prior suspended losses of the equity method investee.
Equity method investments are reviewed for indicators of other-than-temporary impairment at each reporting period. Equity method investments are written down to fair value if there is evidence of a loss in value that is other-than-temporary. Methodologies that the Company may use to estimate the fair value of its equity method investments include, but are not limited to, considering recent investee equity transactions, discounted cash flow analysis, recent operating results, comparable public company operating cash flow multiples and in certain situations, balance sheet liquidation values. If the fair value of the investment has declined below the carrying amount, management considers several factors when determining whether an other-than-temporary decline has occurred, such as the length of the time and the extent to which the estimated fair value or market value has been below the carrying value, the financial condition and the near-term prospects of the investee, the intent and ability of the Company to retain its investment in the investee for a period of time sufficient to allow for any anticipated recovery in market value and general market conditions. The estimation of fair value and whether an other-than-temporary impairment has occurred requires the application of significant judgment and future results may vary from current assumptions. If declines in the value of the equity method investments are determined to be other-than-temporary, a loss is recorded in earnings in the current period as a component of losses from investments in equity method investees, net of tax on the consolidated statements of operations. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. This evaluation consists of several qualitative and quantitative factors including recent financial results and operating trends of the investee, implied values in recent transactions of investee securities, or other publicly available information that may affect the value of the Company’s investments. The Company presents income/losses from equity investments and any impairment related to equity method investments as Income (losses) from investments in equity method investees, net of tax on the consolidated statements of operations.
Impairment of Long-Lived Assets
The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful lives of its long-lived assets, including goodwill, identifiable intangible assets subject to amortization, and property plant and equipment, may warrant revision or that the carrying value of the assets may be impaired. If impairment indicators are present or changes in circumstance suggest that impairment may exist, the Company performs a recoverability test by comparing the sum of the estimated undiscounted cash flows of each intangible asset to its carrying value on the consolidated balance sheets. If the undiscounted cash flows used in the recoverability test are less than the carrying value, the Company would determine the fair value of the intangible asset and recognize an impairment loss in the statements of operations if the carrying value of the intangible asset exceeds its fair value. Fair value is generally estimated based on either appraised value or other valuation techniques. Events that could result in an impairment, or trigger an interim impairment assessment, may include actions by regulatory authorities with respect to the Company or its competitors, new or better products entering the market, changes in market share or market pricing, changes in the economic lives of the assets, changes in the legal framework covering patents, rights or licenses, and other market changes which could have a negative effect on cash flows and which could result in an impairment. For the year ended December 31, 2024, the Company recognized impairment charges for certain indefinite-lived intangible assets. Refer to Note 10 for more information. The Company did not recognize impairment charges for any of their long-lived assets for the year ended December 31, 2023.
The Company evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances indicate that the carrying value of the reporting unit exceeds the fair value of the reporting unit, in accordance with Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. Goodwill is first qualitatively assessed to determine whether further impairment testing is necessary. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy and changes in the composition or carrying amount of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a one-step test is then performed in accordance with ASC 350. Under the simplified model, a goodwill impairment is calculated as the difference between the carrying amount of the reporting unit and its fair value.
Changes in these assumptions and resulting valuations could result in future long-lived asset impairment charges. Management will continue to monitor any changes in circumstances for indicators of impairment. Any write-downs are treated as permanent reductions in the carrying amount of the assets.
Convertible Notes Receivable
Prior to the Company's acquisition of IGX in October 2024, as permitted under ASC 825, Financial Instruments, or ASC 825, the Company elected the fair value option to account for its IntelGenx convertible notes, which otherwise would have been subject to ASC 320. In accordance with ASC 825, the Company recorded this investment at fair value under Convertible notes receivable - related party in the Company's consolidated balance sheets and changes in fair value are recognized as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations.
Notes Receivable
Prior to the Company's acquisition of IGX in October 2024, the Company had certain notes receivable that were carried at cost, which included the principal value of the note receivable, accrued interest and net of any payments received and expected credit losses. Management utilized an undiscounted probability-of-default (“PD”) and loss-given-default (“LGD”) method for estimating credit losses on its assets pool, which was 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).
For the year ended December 31, 2024, the notes receivable balance was zero. For the year ended December 31, 2023, based on the terms of the notes receivable, certain notes receivable were classified as long-term as their payments were due after twelve months from the balance sheet date.
Contingent Consideration Liabilities
The Company may record contingent consideration as part of the cost of acquisitions. Contingent consideration is recognized at fair value as of the date of acquisition and accounted under Contingent consideration liabilities or Contingent consideration liability - related party on the consolidated balance sheets. Contingent considerations are remeasured on a quarterly basis, as appropriate, using a discounted cash-flow valuation technique until fulfillment of the contingency. Changes in the fair value of the contingent consideration are recognized as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations.
Debt Issuance Costs and Debt Discount
Debt issuance costs include incremental and direct costs incurred in relation to debt, such as legal fees, accounting fees, and other direct costs of the financing. Amounts paid to the lender are a reduction in the proceeds received by the Company and are generally considered a component of issuance discount, unless it is paid to compensate the lender for the services rendered or as a reimbursement of direct costs incurred by them in relation to the debt, in which case it would be akin to a debt issuance cost.
Debt issuance costs related to a recognized debt liability are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the debt liability rather than as an asset, consistent with the presentation of debt discounts, and are amortized to interest expense over the term of the related debt using the effective interest method.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development consist of salaries, benefits and other personnel related costs including equity-based compensation expense, laboratory supplies, preclinical studies, clinical trials and related clinical manufacturing costs, costs related to manufacturing preparations, fees paid to other entities to conduct certain research and development activities on the Company’s behalf and allocated facility and other related costs. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses until the related goods are delivered or services are performed.
Preclinical and clinical study costs are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. Payments for a product license prior to regulatory approval of the product and payments for milestones achieved prior to regulatory approval of the product are expensed in the period incurred as research and development expense.
Contingencies
The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company continually assesses any litigation or other claims it may confront to determine if an unfavorable outcome would lead to a probable loss or reasonably possible loss which could be estimated. The Company will accrue for all contingencies at the earliest date at which the Company deems it probable that a liability has been incurred and the amount of such liability can be reasonably estimated. If the estimate of a probable loss is a range and no amount within the range is more likely than another, the Company will accrue the minimum of the
range. In the cases where the Company believes that a reasonably possible loss exists, the Company will disclose the facts and circumstances of the litigation, including an estimable range, if possible.
Revenue Recognition
The Company accounts for its revenue in accordance with ASC 606, Revenue Recognition. ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: i) identify the contract with the customer, ii) identify the performance obligations in the contract, (iii) determine the transaction price, iv) allocate the transaction price to the separate performance obligations in the contract, and (v) recognize revenue associated with the performance obligations as they are satisfied.
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606, the Company determines the performance obligations that are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied or as it is satisfied. Payments received in advance of the Company satisfying performance obligations will be recognized as deferred revenue which is presented within Other current liabilities on the consolidated balance sheets. As noted above, 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 does recognize revenue through their licenses of intellectual property and manufacturing contracts.
Licenses of Intellectual Property
The Company may enter into collaboration and out-licensing arrangements for research and development, manufacturing, and commercialization activities with counterparties for the development and commercialization of its product candidates. The agreements may have units of account within the scope of ASC 606 where the counterparties meet the definition of a customer as well as units of account within the scope of ASC 808 where both parties are determined to be active participants exposed to significant risk and rewards.
The arrangements may contain multiple components, which may include (i) licenses, or options to obtain licenses to the Company’s intellectual property or sale of the Company’s license, (ii) research and development activities, (iii) participation on joint steering committees, and (iv) the manufacturing of commercial, clinical or preclinical material. Payments pursuant to these arrangements may include non-refundable, upfront payments, milestone payments upon the achievement of significant development events, research and development reimbursements, sales milestones, and royalties on product sales. The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period. The contracts into which the Company enters generally do not include significant financing components.
As part of the accounting for these arrangements, the Company must use significant judgment to determine: a) the number of performance obligations; b) the transaction price; c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price; and d) the measure of progress. The Company uses judgment to determine whether milestones or other variable consideration, except for sales-based milestones and royalties on license arrangements, should be included in the transaction price as described further below.
If a license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from consideration allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other elements, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the counterparties and the availability of its associated expertise in the general marketplace. In addition, the Company considers whether the counterparties can benefit from a promise for its intended purpose without the receipt of the remaining elements, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise. For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress as of each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, is subject to estimates by management and may change over the course of the arrangement. Such a change could have a material impact on the amount of revenue the Company records in future periods.
Customer Options: If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services such as research and development services or manufacturing services, the goods and services underlying the customer options are not considered to be performance obligations at the inception of the arrangement unless a material right is provided to the customer. If the customer option does not represent a material right, the obligation to provide such goods and services is contingent on exercise of the option, and the associated consideration is not included in the transaction price. If a customer option is determined to include a significant and incremental discount and, therefore, represents a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the relative standalone selling price.
Milestone Payments: At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most-likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the respective milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
Royalties: For license arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.
Stock-Based Compensation
The Company accounts for all stock-based payment awards granted to employees, directors and non-employees as stock-based compensation expense based on their grant date fair value. The stock-based payment awards are measured at fair value on the date of the grant and that fair value is recognized as stock-based compensation expense in the Company’s consolidated statements of operations over the requisite service period of the respective award. The estimated fair value of awards that contain performance conditions is expensed when the Company concludes that it is probable that the performance condition will be achieved. The Company may grant awards with graded-vesting features. When such awards have only service vesting requirements, the Company elected to record stock-based compensation expense on a straight-line basis. Recognition of compensation cost relating to awards that vest on a “Liquidity Event” (as defined in the award) will be deferred until the consummation of such transaction.
The Company measures the fair value of its stock options that only have service vesting requirements or performance-based options without market conditions using the Black-Scholes option pricing model. For performance-based awards with market conditions, the Company determines the fair value of the awards as of the grant date using a Monte Carlo simulation model.
Certain assumptions need to be made with respect to utilizing the Black-Scholes option pricing model, including the expected life of the award, volatility of the underlying shares, the risk-free interest rate and the fair value of the Company’s common shares. Since the Company has limited option exercise history, it has generally elected to estimate the expected life of an award based upon the “simplified method” with the continued use of this method extended until such time the Company has sufficient exercise history. The risk-free interest rate is based on the rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of the equity award. Because the Company did not have an extended trading history for its common shares, the expected volatility was estimated using weighted average measures of the Company's historical volatility and the historical volatility of a peer group of companies for a period equal to the expected life of the stock options. The Company’s peer group of publicly traded biopharmaceutical companies was chosen based on their similar size, stage in the life cycle or area of specialty. The Company has elected to recognize forfeitures of stock-based compensation awards as they occur.
As part of the valuation of stock-based compensation under the Black-Scholes option pricing model, it is necessary for the Company to use the fair value of its common stock as a valuation input. Prior to the closing of the IPO, the fair value of the Company’s common stock was estimated on each grant date. The fair value of the Company's privately held subsidiaries' common stock was also estimated on each grant date. Given the absence of a public trading market, and in accordance with the American Institute of Certified Public Accountants’ Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, the Company exercised reasonable judgment and considered numerous objective and subjective factors to determine its best estimate of the fair value of its common stock. The estimation of the fair value of the common stock considered factors including the following: the estimated present value of the Company’s future cash flows; the Company’s business, financial condition and results of operations; the Company’s forecasted operating performance; the illiquid nature of the Company’s common stock; industry information such as market size and growth; market capitalization of comparable companies and the estimated value of transactions such companies have engaged in; and macroeconomic conditions.
After the closing of the IPO in June 2021, the Company’s board of directors determined the fair value of each share of common stock underlying stock-based awards based on the closing price of the Company’s common stock as reported by Nasdaq on the date of grant.
Noncontrolling Interests
The Company recognizes noncontrolling interests related to its consolidated VIEs in the consolidated balance sheets as a component of equity, separate from atai stockholders’ equity. Changes in the Company’s ownership interest in a consolidated VIE that do not result in a loss of control are accounted for as equity transactions. The noncontrolling interests related to its consolidated VIEs are initially recorded at fair value. Net losses in consolidated VIEs are attributed to noncontrolling interests considering the liquidation preferences of the different
classes of equity held by the shareholders in the VIE and their respective interests in the net assets of the consolidated VIE in the event of liquidation, and their pro rata ownership.
In addition, the Company evaluates the classification of noncontrolling interests based upon a review of the legal provisions governing the redemption of such interests as the obligation to redeem these shares are triggered by events that are within the control of the Company. The Company evaluates individual noncontrolling interests for the ability to recognize the noncontrolling interest as permanent equity on the consolidated balance sheets at the time such interests are issued and on a continual basis. Any noncontrolling interest that fails to qualify as permanent equity are considered redeemable noncontrolling interests and reclassified as temporary equity.
The amount of net loss attributable to noncontrolling interests are included in consolidated net loss on the face of the consolidated statements of operations.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when, after consideration of all positive and negative evidence, it is not more likely than not that the Company’s deferred tax assets will be realizable. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes interest and penalties related to the underpayment of income taxes as a component of the Provision for income taxes in its consolidated statements of operations.
Fair Value Measurements
Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1-Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2-Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
Level 3-Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying amount reflected in the accompanying consolidated balance sheets for cash and cash equivalents, committed investment funds, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values, due to their short-term nature.
Foreign Currency
Assets and liabilities of foreign operations are translated using exchange rates in effect at the balance sheet date and their results of operations are translated using average exchange rates for the year. Investments accounted for under the equity method and stockholders’ equity are translated based on historical exchange rates. Certain transactions of the Company and its subsidiaries are denominated in currencies other than their functional currency. Adjustments resulting from the translation of the financial statements of the Company’s foreign functional currency subsidiaries into U.S. dollars are excluded from the determination of net loss and are accumulated in a separate component of shareholders’ equity. Foreign exchange transaction gains and losses are recognized as a component of other income (expense), net in the consolidated statements of operations.
Basic and Diluted Net Loss Per Share of Common Stock
Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders for the year by the weighted average number of common stock outstanding during the year. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders for the year by the weighted average number of common stock, including potential dilutive shares of common stock assuming the dilutive effect of potential dilutive securities. The Company uses the treasury stock method to calculate diluted net loss per share. For years in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share because their impact would be anti-dilutive to the calculation of net loss per share. For the years ended December 31, 2024 and 2023, the Company reports a combined basic net loss and diluted loss per share of common stock.
Subsequent Events
Subsequent events are defined as those events or transactions that occur after the balance sheet date, but before the financial statements are filed with the Securities and Exchange Commission. The Company completed an evaluation of the impact of any subsequent events through the date these financial statements were issued, and determined there were subsequent events that required disclosure or adjustment in these financial statements. See Note 24 to the Company's Consolidated Financial Statements for a discussion of subsequent events.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
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 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.
ASU 2023-07 Segment Reporting: Improvements to Reportable Segment Disclosures
In November 2023, the 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 adopted this standard for fiscal year 2024, and applied the amendments retrospectively to all prior periods presented in the Company's consolidated financial statements. Refer to Note 23 for more information.
Recently Issued Accounting Pronouncements Not Yet Adopted
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 and is currently evaluating this guidance to determine its impact on the Company's consolidated financial statements.
In November 2024, the FASB issued new guidance designed to improve income statement expense disclosures, primarily by requiring new financial statement disclosures in tabular format and disaggregating information about prescribed categories underlying any relevant income statement captions. The standard is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. Upon adoption, the new standard may be applied prospectively or retrospectively. The Company is currently evaluating the impact that the adoption may have on its disclosures in its consolidated financial statements.
In November 2024, the FASB issued new guidance which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The standard is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. Adoption can be on a prospective or retrospective basis. The Company is currently in the process of evaluating the impact of adoption on the consolidated financial statements.
3. Acquisitions and Dispositions
2024 Acquisitions
IntelGenx Corp.
IntelGenx Technologies Corp. ("IntelGenx") is a novel drug delivery company focused on the development and manufacturing of novel oral thin film products for the pharmaceutical market. In March 2021, IntelGenx and the Company entered into the Strategic Development Agreement and Purchaser Rights Agreement (“PPA”), (described in Note 5). In May 2021, IntelGenx and the Company executed a Securities Purchase Agreement (the “2021 IntelGenx SPA”), (described in Note 5), under which the Company held a 25% voting interest in IntelGenx. Pursuant to the PPA, the Company is entitled to designate a number of directors to the IntelGenx’s board of directors in the same proportion as the shares of common stock held by the Company to the outstanding IntelGenx Common Shares.
The Company and IntelGenx also entered into certain loan agreements and convertible promissory note agreements, including the IntelGenx Term Loan, 2023 Initial Notes, 2023 Subsequent Notes, 2023 Term Loan, and the DIP Loan (as defined and described in Note 6).
In May 2024, IntelGenx announced that its board of directors authorized IntelGenx to bring an application in the Quebec Superior Court to seek protection from creditors under the Companies' Creditors Arrangement Act (“CCAA”) to allow time to review its strategic alternatives. IntelGenx was granted protection pursuant to an initial order ("Initial Order"), which also authorized interim debtor-in-possession financing ("DIP Financing") provided by the Company in order to allow IntelGenx to continue its operations during a restructuring process. Subsequently, IntelGenx obtained approval to implement a sale and investment solicitation process (the "SISP" and the approval, the "SISP Approval Order"). As part of the SISP Approval Order, the Court approved the agreement of a purchase and sale between IntelGenx and the Company, solely for the purpose of constituting the “Stalking Horse Bid" under the SISP. The Stalking Horse Bid established a baseline price and deal structure for the solicitation of superior bids from qualified interested parties.
On September 30, 2024, the Superior Court of Quebec issued an Approval and Vesting Order, sanctioning the transactions contemplated in ATAI’s stalking horse bid, which consisted of the Company acquiring IntelGenx Corp. ("IGX"), the operating company and a subsidiary of IntelGenx Technologies Corp. The acquisition closed on October 2, 2024.
The Company did not exchange any equity or cash in this transaction. Rather, the transaction was structured as a credit bid, which resulted in the Company receiving all issued and outstanding shares of IGX in exchange for the discharge of all senior secured debt payable to the Company by IntelGenx, which included solely the DIP Loan and the IntelGenx Term Loan (described in Note 6). The transaction was further structured to include only the assumption of the assets and liabilities which the Company designated within their Stalking Horse Bid (the “Purchase Transaction”). All remaining unsecured debt payable by IntelGenx, and any remaining assets and liabilities not assumed by the Company in the Purchase Transaction, continue to be held by IntelGenx, and IntelGenx continues to be subject to protections under the CCAA.
The Company continues to hold investments in IntelGenx's common stock, Warrants, and Call Option as well as various notes receivable, as defined and discussed further in Note 5 and Note 6.
The Company determined that the transaction met the definition of a business under ASC 805; therefore, the Company accounted for the transaction as a business combination and applied the acquisition method of accounting. The purchase consideration transferred at the acquisition date was $5.7 million, which was the fair value of the aforementioned discharged senior secured debt. The Company did not include any cash or equity as part of the consideration transferred.
The allocation of the purchase price is based upon certain preliminary valuations and other analyses. As a result, the purchase price amount for the transaction and the allocation of the preliminary purchase consideration are preliminary estimates, and may be subject to change within the measurement period, but no later than one year after the acquisition date.
The following table sets forth the preliminary allocation of the IGX purchase price to the estimated fair value of the net assets acquired at the acquisition date (in thousands):
Amounts recognized at the Acquisition Date
Assets acquired:
Cash
$
Accounts receivable
Prepaid expenses and other current assets
Property and Equipment
1,892
Right-of-use assets, net
Definite-lived intangible assets
2,625
Other assets
Total assets
$
6,695
Liabilities assumed:
Accounts payable
$
Deferred revenue
Accrued liabilities
Right-of-use liabilities
Other current liabilities
Total liabilities
$
1,311
Total identifiable net assets acquired
5,384
Goodwill
Total consideration transferred
$
5,715
IGX results from the acquisition date of October 2, 2024 through December 31, 2024, which are included in the consolidated statements of operations, are as follows (in thousands):
Classification in Consolidated Statements of Operations
Acquisition Date through December 31, 2024
Total revenues
$
Net loss
$
(960
)
Unaudited Pro Forma Summary of Operations
The following table shows the unaudited pro forma summary of operations for the years ended December 31, 2024 and 2023, as if the IGX acquisition had occurred on January 1, 2023. This pro forma information does not purport to represent what the Company's actual results would have been if the acquisition had occurred as of January 1, 2023, and is not indicative of what such results would be expected for any future period (in thousands):
For the year ended December 31,
Total revenues
$
$
Net loss
$
(138,803
)
$
(50,740
)
The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of the Company and IGX. The summary pro forma financial information primarily reflects the following pro forma adjustments:
•Removal of the acquisition-related transaction fees and costs;
•Removal of any revenue recognized by IGX in connection with services performed for the Company;
•Removal of IGX’s interest expense and the Company's interest income in connection with certain notes receivable instruments;
•Derecognition of any fair value adjustments recognized by the Company for their equity and notes receivable instruments;
•Additional amortization expense from the acquired intangible assets;
•Additional depreciation of fixed assets; and
•Additional lease expense on the ROU assets.
2023 Dispositions
Psyber, Inc.
In October 2023, the Company entered into a Framework Agreement with the founders of Psyber, Inc. ("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 sheets 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 (expense), net in the consolidated statements 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 sheets, 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 statements of operations for the year ended December 31, 2023.
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 consolidated financial statements from the date of acquisition to December 31, 2024.
As of December 31, 2024 and 2023, the Company has accounted for the following consolidated investments as VIEs:
Consolidated Entities
Relationship as of
December, 31, 2024
Relationship as of
December 31, 2023
Date Control Obtained
Ownership %
December 31, 2024
Ownership % December 31, 2023
Perception Neuroscience Holdings, Inc.
Controlled VIE
Controlled VIE
November 2018
59.2%
59.2%
Recognify Life Sciences, Inc.
Controlled VIE
Controlled VIE
November 2020
51.9%
51.9%
As of December 31, 2024 and 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.
Non-Consolidated VIEs as of December 31, 2024
The following investments no longer meet the requirements to consolidate as VIEs as of December 31, 2024:
Kures, Inc.
Kures Inc. (“Kures”) was a pre-clinical stage biotech company focusing on developing new opioid-based therapeutics for mood disorders and psychiatry or physical pain using mitragynine and tianeptine derivatives. In August 2019, through a series of transactions, the Company acquired a controlling financial interest in Kures through its purchase of Kures' Series A-1 preferred stock. Immediately following the closing of these transactions, the Company's ownership in Kures was approximately 57.1%. Based on the Company's assessment of the transaction at the time of acquisition, the Company concluded that Kures was not a business and accounted for the Company's investment as an initial consolidation of a VIE that is not a business under ASC 810.
In July 2024, the Board of Directors for Kures determined it was in the best interests of the company to wind up operations and dissolve Kures through a Plan of Liquidation and Dissolution ("the Plan"). The Plan consisted of several components, including (i) the dissolution of Kures, (ii) transfer of all outstanding shares of Kures Australia Pty Ltd, a wholly owned subsidiary of Kures, to the Company, and (iii) transfer of all clinical trial data relating to the clinical safety and activity of KUR-101 to the Company.
In October 2024, in connection with the dissolution of Kures, Kures and Columbia mutually agreed to terminate the existing License Agreement (the “Termination Agreement”). Under the Termination Agreement, Kures assigned to Columbia all of Kures’ intellectual property rights that were filed during the term of the License Agreement and agreed that all licenses granted to Kures by Columbia are terminated. In exchange, Kures received consideration through the relief and discharge of an immaterial amount of outstanding payment obligations due to Columbia.
Immediately prior to the transaction the Company's ownership in Kures was approximately 64.5%. The transaction and dissolution closed in November 2024, with the purchase consideration transferred on the acquisition date of $0.1 million. The Company determined the dissolution of Kures in November 2024 meant the Company no longer held a controlling financial interest, and, therefore, accounted for the dissolution as a deconsolidation of a VIE under ASC 810. The Company derecognized all of Kures's assets and liabilities, with the exception of the retained intellectual property from its consolidated balance sheets and recognized a gain of $1.2 million, which was reported as Gain on dissolution of a variable interest entity, a component of other income (expense), net in the consolidated statements of operations for the year ended December 31, 2024. Pursuant to the Plan, the Company recognized $0.1 million of intellectual property from the transaction within Intangible assets, net on the consolidated balance sheets.
As of December 31, 2023, the Company's ownership in Kures was 64.5% and was a consolidated VIE.
PsyProtix, Inc.
On February 3, 2021, PsyProtix, Inc. ("PsyProtix") was created as a joint venture between the Company and Chymia (the “Founders”), with the intent of PsyProtix becoming a newly formed corporate subsidiary of the Company. PsyProtix was created for the purpose of exploring and developing a metabolomics-based precision psychiatry approach. Based on the Company's assessment of the transaction at the time of
acquisition, the Company concluded that PsyProtix was not a business and accounted for the Company's investment as an initial consolidation of a VIE that is not a business under ASC 810.
In April 2024, the Company and Chymia entered into a Framework Agreement which resulted in the Company's acquisition of Chymia's 25% equity ownership of PsyProtix (the “Stock Transfer”). As a result of the Stock Transfer, the Company owned 100% of the outstanding common stock of PsyProtix, and PsyProtix became a wholly owned subsidiary of the Company. The Stock Transfer was accounted for as an equity transaction with no gain or loss recognized. The difference between the carrying amount of Chymia's non-controlling interest and the note receivable forgiven in the acquisition of the additional equity interest was recorded as a reduction in additional paid-in capital in the consolidated balance sheets and consolidated statements of stockholders' equity.
In December 2024, PsyProtix entered into an Agreement and Plan of Merger ("Merger Agreement") with atai Therapeutics Inc., a wholly-owned atai subsidiary. Pursuant to the Merger Agreement, all common stock issued and outstanding of PsyProtix was automatically canceled and retired and ceased to exist. Upon the merger, all assets and liabilities were transferred to atai Therapeutics Inc. and the Company recognized no gain or loss from the transaction in its consolidated statements of operations.
As of December 31, 2023, the Company's ownership in PsyProtix was 75% and was a controlled VIE.
Consolidated VIE Balance Sheets
The following table presents the assets and liabilities (excluding intercompany balances that were eliminated in consolidation) for all VIEs as of December 31, 2024 (in thousands):
Perception
Recognify
Assets:
Current assets:
Cash
$
$
Accounts receivable
-
Prepaid expenses and other current assets
Total current assets
Total assets
$
$
Liabilities:
Current liabilities:
Accounts payable
$
$
Accrued liabilities
Other current liabilities
Total current liabilities
1,186
Total liabilities
$
$
1,186
The following table presents the assets and liabilities (excluding intercompany balances that were eliminated in consolidation) for all consolidated VIEs as of December 31, 2023 (in thousands):
Perception
Kures
Recognify
PsyProtix
Assets:
Current assets:
Cash
$
$
$
4,356
$
Accounts receivable
-
-
-
Prepaid expenses and other current assets
-
-
Total current assets
4,806
Long-term notes receivable
-
-
-
Other assets
-
-
-
-
Total assets
$
$
$
4,806
$
Liabilities:
Current liabilities:
Accounts payable
$
$
$
1,926
$
-
Accrued liabilities
Other current liabilities
-
-
Total current liabilities
2,536
Total liabilities
$
$
$
2,536
$
Non-Consolidated VIEs as of December 31, 2023
The following investments no longer met the requirements to consolidate as VIEs as of December 31, 2023:
EntheogeniX Biosciences, Inc.
In November 2019, the Company entered into a series of agreements with Cyclica Inc. ("Cyclica") to form EntheogeniX Biosciences, Inc. ("EntheogeniX"), a company dedicated to developing the next generation of innovative mental health drugs employing an AI-enabled
computational biophysics platform designed to optimize and accelerate drug discovery. Based on the Company's assessment of the transaction at the time of acquisition, the Company concluded that EntheogeniX was not a business and accounted for the Company's investment as an initial consolidation of a VIE that is not a business under ASC 810.
In February 2022 and September 2022, the Company purchased additional shares of Class A common stock for an aggregate purchase price of $2.2 million. As a result of anti-dilution protection available to Cyclica, the Company's ownership percentage in EntheogeniX did not change due to its purchase.
In March 2023, the Company purchased additional shares of Class A common stock for an aggregate purchase price of $1.0 million. As a result of anti-dilution protection available to Cyclica, the Company's ownership percentage in EntheogeniX did not change due to its purchase.
In September 2023, the Company and Cyclica entered into a Stock Transfer Agreement which resulted in the Company's acquisition of Cyclica’s equity ownership of EntheogeniX for an aggregate purchase price of $0.5 million (the “Stock Transfer”). As a result of the Stock Transfer, the Company owned 100% of the outstanding common stock of EntheogeniX. The Stock Transfer was accounted for as an equity transaction with no gain or loss recognized. The difference between the carrying amount of EntheogeniX's noncontrolling interest and the consideration for the acquisition of the additional equity interest was recorded as a reduction in Additional paid-in capital in the consolidated balance sheets and consolidated statements of stockholders' equity.
DemeRx IB, Inc.
In December 2019, DemeRx IB, Inc. (“DemeRx IB”) was incorporated as a wholly-owned subsidiary of DemeRx, Inc., formed for the purpose of facilitating a joint venture transaction between DemeRx, Inc. and ATAI AG. DemeRx, Inc. and ATAI AG jointly created DemeRx IB, which was designed to use DemeRx Inc.'s intellectual property to develop Ibogaine as a treatment for opioid dependence. Based on the Company's assessment of the transaction at the time of acquisition, the Company concluded that DemeRx IB was not a business and accounted for the Company's investment as an initial consolidation of a VIE that is not a business under ASC 810.
In October 2023, the Company and DemeRx, Inc. entered into a Stock Purchase and Framework Agreement which resulted in the Company's acquisition of DemeRx, Inc.’s equity ownership of DemeRx IB (the “Stock Purchase”). As a result of the Stock Purchase, the Company owned 100% of the outstanding common stock of DemeRx IB. The Stock Purchase consideration included an $8.0 million upfront cash payment, transfer of the Company's ownership in DemeRx, NB, Inc., settlement of a related term loan, and earn-out consideration contingent upon the achievement of certain development milestones directly related to DemeRx’s oral capsule formulation of ibogaine (“DMX-1002”) program. At the execution of the Stock Transfer, the earn-out consideration was recorded as a liability at an estimated fair value of $1.3 million and reflected in Contingent consideration - related parties in the consolidated balance sheets. The Stock Purchase was accounted for as an equity transaction with no gain or loss recognized. The difference between the carrying amount of DemeRx IB's noncontrolling interest and the consideration given for the acquisition of the additional equity interest was recorded as a reduction in Additional paid-in capital in the consolidated balance sheets and consolidated statements of stockholders' equity.
InnarisBio, Inc.
In February 2021, the Company jointly formed InnarisBio, Inc. ("InnarisBio") with UniQuest Pty Ltd (“UniQuest”) for the purpose of adding a solgel-based direct-to-brain intranasal drug delivery technology to the Company’s platform. Based on the Company's assessment of the transaction at the time of acquisition, the Company concluded that InnarisBio was not a business and accounted for the Company's investment as an initial consolidation of a VIE that is not a business under ASC 810.
In October 2023, InnarisBio and UniQuest entered into an Assignment, Termination and Release Agreement ("ATRA") which resulted in InnarisBio reacquiring UniQuest’s equity interest in exchange for the assignment of intellectual property and the termination of certain license and research agreements. The assigned intellectual property has an approximate fair value of $0.1 million, and the termination of agreements resulted in the extinguishment of a $0.1 million contingent commitment liability. As a result of the ATRA, the Company owned 100% of the outstanding common stock of InnarisBio, and InnarisBio became a wholly owned subsidiary of the Company. The ATRA was accounted for as an equity transaction with no gain or loss recognized. The difference between the carrying amount of InnarisBio's noncontrolling interest and the consideration given for the acquisition of the additional equity interest was recorded as a reduction in Additional paid-in capital in the consolidated balance sheets and consolidated statements of stockholders' equity.
Noncontrolling Interests
The Company recognizes noncontrolling interests related to its consolidated VIEs and provides a rollforward of the noncontrolling interests balance, as follows (in thousands):
Perception
Kures
Recognify
Total
Balance as of December 31, 2022
$
1,731
$
$
2,844
$
5,026
Net loss attributable to noncontrolling interests - preferred
(1,302
)
(84
)
(2,287
)
(3,673
)
Comprehensive income attributable to noncontrolling interests
(1
)
-
Balance as of December 31, 2023
$
$
$
$
1,354
Net loss attributable to noncontrolling interests - preferred
(207
)
(16
)
(557
)
(780
)
Adjustment to noncontrolling interests upon dissolution of variable
interest entity
-
(349
)
-
(349
)
Comprehensive loss attributable to noncontrolling interests
(3
)
-
Balance as of December 31, 2024
$
$
-
$
-
$
Non-consolidated VIEs
The Company evaluated the nature of its investments in Innoplexus AG (“Innoplexus”) and Beckley Psytech Limited (collectively “non-consolidated VIEs”) and determined that the investments are not VIEs as of the date of the Company’s initial investment through December 31, 2024. The Company is not the primary beneficiary of the non-consolidated VIEs as it did not have the power to direct the activities that most significantly impact the investments’ economic performance and therefore concluded that it did not have a controlling financial interest in each of the non-consolidated VIEs that would require consolidation as of December 31, 2024 and 2023.
The Company will reevaluate if the investments meet the definition of a VIE upon the occurrence of specific reconsideration events. The Company accounted for these investments under either the equity method, fair value option, or the measurement alternative included within ASC 321 (See Note 5). As of December 31, 2024, the Company’s maximum exposure for its non-consolidated VIEs was $10.0 million of Short-term restricted cash for the purchase of Beckley Deferred Shares (as defined and described in Note 5).
As of December 31, 2023, the Company’s maximum exposure for its non-consolidated VIE regarding IntelGenx was $6.1 million relating to the carrying values in its Other investments, $0.1 million of Long-term notes receivable - related party, net and $11.2 million of Convertible notes receivable - related party, each as shown in the consolidated balance sheets.
5. Investments
Other investments held at fair value
As of December 31, 2024 and 2023, the carrying values of Other investments held at fair value were as follows (in thousands):
December 31, 2024
December 31, 2023
COMPASS Pathways plc
$
26,104
$
83,701
Beckley Psytech Additional Warrants
2,783
-
IntelGenx Technologies Corp.:
2023 Subscription Agreement, as Amended
-
6,124
Total
$
28,887
$
89,825
COMPASS Pathways plc
COMPASS Pathways plc (“COMPASS”) is a mental health care company dedicated to pioneering the development of a new model of psilocybin therapy with its product COMP360. The Company first acquired investments in COMPASS in December 2018 with additional investments through 2021, and accounted for its investment under the equity method until August 2023. In August 2023, COMPASS closed its most recent financing round, in which the Company did not participate, and the Company's ownership interest in COMPASS was reduced to 15.4%.
Following the August 2023 financing, the Company evaluated its ability to continue to exercise significant influence over its investment and determined that it no longer had significant influence and as such will account for its COMPASS investment under ASC 321 at fair value. Any changes in fair value of the Company's investment in COMPASS will be recorded as a Change in fair value of assets and liabilities, net in its audited consolidated statements of operations.
In September 2024, the Company sold 2,660,000 American Depositary shares ("ADS") of COMPASS at a price of $6.05 per ADS in an open market transaction, resulting in net proceeds received of $16.1 million. The Company recognized a non-cash loss of $2.1 million on the sale during the year ended December 31, 2024, which is recorded as a component of Other income (expense), net in its consolidated statements of operations.
Based on quoted market prices, for the years ended December 31, 2024 and 2023, the fair value of the Company’s COMPASS investment was $26.1 million and $83.7 million, respectively. For the years ended December 31, 2024 and 2023, the Company recorded $39.4 million loss and $81.9 million gain related to changes in the fair value of the Company’s investment in Compass within Change in fair value of assets and liabilities, net in its consolidated statements of operations, respectively.
IntelGenx Technologies Corp.
In October 2024, the Company acquired all issued and outstanding shares of IGX (see Note 3). As of December 31, 2024, the Company continues to hold the following equity instruments of IntelGenx, which were all determined to have a carrying value of zero as IntelGenx continues to be party to proceedings under the CCAA.
2021 Securities Purchase Agreement
In May 2021, IntelGenx and the Company executed a Securities Purchase Agreement (the “IntelGenx SPA”) after obtaining IntelGenx shareholder approval, whereby IntelGenx issued shares of its common stock (the "IntelGenx Common Shares") and warrants to the Company at a price of approximately $12.3 million. The carrying amount of the investment was reduced to zero as of December 31, 2021. During the years ended December 31, 2024 and 2023, the Company did not recognize a change in fair value related to its investment in IntelGenx in the consolidated statements of operations. The carrying value of the investment remained at zero as of December 31, 2024 and 2023.
2023 Subscription Agreement, as Amended
In August 2023, IntelGenx and the Company entered into a subscription agreement (the “Subscription Agreement”), under which the Company paid IntelGenx $2.2 million for 2,220 convertible debenture units (the "2023 Initial Units"), with each convertible debenture unit consisting of:
i.$1,000 principal amount convertible promissory notes (the “2023 Initial Notes”) bearing interest at a rate of 12.0% per annum, payable quarterly in arrears beginning September 30, 2023, with all principal and accrued interest convertible into common shares of IntelGenx, at any time from the date that is six months following their issuance up to and including August 31, 2026 at a conversion price equal to $0.185 per common share; and
ii.5,405 common share purchase warrants of IntelGenx (the “2023 Initial Warrants”), each exercisable at an exercise price of $0.26 per common share for a period of three years following their issuance.
Pursuant to the Subscription Agreement, the Company agreed to subscribe for an additional 750 convertible debenture units (the "2023 Subsequent Units") at a price of $750,000 subject to obtaining certain shareholder approvals. The Subsequent Units contain the same terms as the Initial Units, with each Subsequent Unit consisting of (i) $1,000 principal amount convertible promissory notes ("2023 Subsequent Notes") and (ii) 5,405 common share purchase warrants of IntelGenx ("2023 Subsequent Warrants").
Effective September 30, 2023, IntelGenx and the Company amended the Subscription Agreement (the “Amended Subscription Agreement”), allowing the Company, subject to obtaining certain shareholder approvals, the "Call Option" to purchase up to an additional
7,401 convertible debenture units (the “Call Option Units”). The Call Option Units contain the same terms as the Initial Units, with each Call Option Unit consisting of (i) $1,000 principal amount convertible promissory notes, and (ii) 5,405 common share purchase warrants of IntelGenx.
The issuance of any Call Option Unit shall result in a corresponding reduction in the Company's remaining purchase right pursuant to the IntelGenx SPA executed in May 2021 (the “2021 Purchase Right”), with such right to be reduced by the maximum number of shares of common stock issuable in connection with such Call Option Units, and (ii) in the event that the 2021 Purchase Right has been fully or partially exercised such that the aggregate number of shares of common stock issued thereunder together with the number of shares of common stock issuable in accordance with the Call Option Units would exceed 100,000,000, the number of shares of common stock that may be issued in connection with the Call Option Units shall be reduced such that the aggregate number of shares of common stock issued thereunder together with the number of shares of common stock issuable in accordance with the Call Option Units does not exceed 100,000,000. The maximum number of shares of common stock available under the 2021 Purchase Right was reduced from 130,000,000 shares of common stock to 100,000,000 shares of common stock, such that in no event shall the aggregate number of shares of common stock issuable in accordance with the Call Option Units and the 2021 Purchase Right exceed 100,000,000.
There are limits over the conversion of the Initial Units, Subsequent Units, Call Options Units and the IntelGenx Term Loan (as defined below in Note 6) into common shares.
The Company qualified for and elected to account for its investment in the convertible debenture units and call option under the fair value option. The Company believes that the fair value option better reflects the underlying economics of the convertible debenture units and call option. The convertible promissory notes are accounted for at fair value under ASC 320 and recorded in Short-term convertible notes receivable - related party in the consolidated balance sheets, as described further in Note 6. The warrants and call option are accounted for pursuant to the fair value option election and recorded in Other investments held at fair value in the consolidated balance sheets.
For the Initial Units, the Company applied a calibrated model and determined that the initial aggregate fair value of its $2.2 million investment was equal to the transaction price and recorded the 2023 Initial Notes at $1.5 million and the 2023 Initial Warrants at $0.7 million on a relative fair value basis resulting in no initial gain or loss recognized in the consolidated statements of operations. The Company will recognize subsequent changes in fair value of the Initial Units as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations. As of December 31, 2024 and 2023, the fair value of the 2023 Initial Warrants was zero and $0.7 million, respectively. For the years ended December 31, 2024 and 2023, the Company recognized a $0.7 million loss and an immaterial change in Change in fair value of assets and liabilities, net relating to the 2023 Initial Warrants in its consolidated statements of operations, respectively.
In November 2023, upon shareholder approval, the Company paid $750,000 for the 2023 Subsequent Units. The Company applied a calibrated model and determined that the initial aggregate fair value of its $0.8 million investment was equal to the transaction price and recorded the 2023 Subsequent Notes at $0.6 million and the 2023 Subsequent Warrants at $0.2 million on a relative fair value basis resulting in no initial gain or loss recognized in the consolidated statements of operations. The Company will recognize subsequent changes in fair value of the Subsequent Units as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations. As of December 31, 2024 and 2023, the fair value of the 2023 Subsequent Warrants was zero and $0.2 million, respectively. For the years ended December 31, 2024 and 2023, the Company recognized a $0.2 million loss and an immaterial change in Change in fair value of assets and liabilities, net relating to the 2023 Subsequent Warrants in its consolidated statements of operations, respectively.
In November 2023, upon shareholder approval, the Call Option had an estimated fair value of $5.1 million and is recorded in Other investments held at fair value in the consolidated balance sheets. As of December 31, 2024 and 2023, the fair value of the Call Option was zero and $5.2 million, respectively. For the years ended December 31, 2024 and 2023, the Company recognized a $5.2 million loss and a $0.1 million gain in Change in fair value of assets and liabilities, net relating to the Call Option in its consolidated statements of operations, respectively.
The Call Option is additional value conveyed to the Company relating to its investment in and Strategic Development Agreement with IntelGenx. Accordingly, the Company recognized a $5.1 million deferred credit, included in Other liabilities in the consolidated balance sheets as of December 31, 2023. The Company accounted for the deferred credit as a reduction of research and development expense in its consolidated statements of operations until the credit is exhausted or until the Company is no longer receiving goods or services from IntelGenx. Pursuant to the acquisition of IGX as described in Note 3, the Company has determined that it is no longer a customer of IntelGenx, as IGX has become a wholly-owned subsidiary as of October 2024. As such, the Company released the $5.1 million deferred
credit and recognized a $5.1 million gain, which is included in Gain on settlement of pre-existing contract in the consolidated statements of operations.
2024 Term Loan Warrants
In March 2024, the Company and IntelGenx entered into a third amendment to the amended and restated loan agreement (the "Third Amendment"), as further described in Note 6 below. In connection with the Third Amendment, the Company received warrants to purchase up to 4.0 million shares of IntelGenx Common Shares at an exercise price of $0.17, subject to certain adjustments and beneficial ownership limitations ("2024 Warrants"). The Company recorded the 2024 Warrants fair value of $0.4 million in Other investments held at fair value in the consolidated balance sheets, with a corresponding deferred vendor credit included in Other liabilities in the consolidated balance sheets. As of December 31, 2024, the 2024 Warrants have a fair value of zero. For the year ended December 31, 2024, the Company recorded a $0.4 million loss in Change in fair value of assets and liabilities, net for the change in fair value of the 2024 Warrants. Pursuant to the acquisition of IGX as described in Note 3, the Company has determined that it is no longer a customer of IntelGenx, as IGX has become a wholly-owned subsidiary as of October 2024. As such, the Company released the $0.4 million deferred credit and recognized a $0.4 million gain, which is included in Gain on settlement of pre-existing contract in the consolidated statements of operations.
Strategic Development Agreement
Prior to the Company's acquisition of IGX in October 2024 and pursuant to the Strategic Development Agreement, the Company engaged IntelGenx to conduct research and development projects (“Development Project”) using IntelGenx’s proprietary oral thin film technology. Under the terms of the Strategic Development Agreement, the Company could select four (4) program products. As of the effective date of the Strategic Development Agreement, the Company nominated two (2) program products - DMT and Salvinorin A. 20% of any funds that IntelGenx received or will receive through the Company’s equity investment under the IntelGenx SPA will be available to be credited towards research and development services that IntelGenx conducts for the Company under the Development Projects. The Company is eligible to receive a total credit of $2.5 million. For the years ended December 31, 2024 and 2023, research and development expense relating to the Strategic Development Agreement were $0.6 million and $0.7 million, respectively, which was applied as a reduction in research and development expenses in accordance with the Strategic Development Agreement.
Other investments
The Company’s investments in the preferred stock of Beckley Psytech Limited, GABA, defined below, and Innoplexus are not considered as in-substance common stock due to the existence of substantial liquidation preferences and therefore did not have subordination characteristics that were substantially similar to the common stock.
During the years ended December 31, 2024 and 2023, the Company evaluated all of its other investments to determine if certain events or changes in circumstance had a significant adverse effect on the fair value of any of its investments in non-consolidated entities. Based on this analysis, the Company did not note any impairment indicators associated with the Company’s Other investments.
During the years ended December 31, 2024 and 2023 there were no observable changes in price recorded related to the Company’s Other Investments.
As of December 31, 2024 and 2023, the carrying values of Other investments, which consisted of investments in the investee’s preferred stock and common stock not in the scope of ASC 323, were as follows (in thousands):
December 31, 2024
December 31, 2023
Beckley Psytech Limited
$
42,079
$
-
GABA Therapeutics, Inc.
-
1,838
Innoplexus AG
-
-
Total
$
42,079
$
1,838
Beckley Psytech Limited
Beckley Psytech Limited ("Beckley Psytech") is a clinical stage biotechnology company dedicated to improving the lives of people suffering from neuropsychiatric disorders by transforming psychedelics into effective and rapid-acting clinical medicines. Its most advanced programs are focused on the development of psychedelic-based medicines to treat people with treatment resistant depression and major depressive disorder.
Subscription and shareholders' agreement
On January 3, 2024, the Company entered into a subscription and shareholders' agreement with Beckley Psytech and certain other shareholders as identified in the agreement (the "SSA"). Pursuant to the terms of the SSA, the Company (a) has the right to acquire 24,096,385 newly issued series C preferred shares, par value £0.0001 per share, of Beckley Psytech (the “Series C Shares”) for a total purchase price of $40.0 million (the “Primary Investment”); and (b) undertakes to enter into a Share Purchase Deed (the “Secondary Sale SPA”) within 10 business days, pursuant to which the Company will acquire a total of 11,153,246 shares of Beckley Psytech from certain
existing shareholders of Beckley Psytech (the “Secondary Sale” and together with the Primary Investment, the “Investment”), all of which will be re-designated into Series C Shares immediately prior to completion of the Secondary Sale, for a total purchase price of $10.0 million. The Primary Investment is comprised of $25.0 million to be paid upon the closing of the SSA and an additional $15.0 million to be deposited under an Escrow Agreement (as defined below).
In connection with the SSA, the Company acquired, pursuant to an equity warrant instrument between the Company and Beckley Psytech, 24,096,385 warrants to purchase an amount of Series C shares equal to the lesser of (i) 24,096,385 Series C Shares; or (ii) such number of Series C Shares (rounded up to the nearest whole number) as immediately after their issuance would, together with all shares held by the Company in the issued share capital of Beckley Psytech, equal less than 50% of Beckley Psytech’s fully diluted share capital, and each such warrant is exercisable at an exercise price of $2.158 per share ("Series C Warrants").
Also under the SSA, the Company will have the right to receive additional warrants to purchase Series C Shares in the event Beckley Psytech issues equity or equity linked securities pursuant to a deferred equity arrangement in connection with a prior acquisition made by Beckley Psytech, each such warrant is exercisable at an exercise price of $1.66 per share. Each of the warrants described above is exercisable upon delivery of a written notice to Beckley Psytech ("Additional Warrants").
Initial Subscription
On January 3, 2024, the Company made the initial payment of $25 million for 15,060,241 Series C Shares at a subscription share price of $1.66 (“Initial Shares”) and delivered the executed deferred payment escrow agreement ("Escrow Agreement") to Beckley Psytech which was a condition for the closing or completion of the transaction (“Initial Subscription”).
Deferred Shares
On January 5, 2024, subject to the terms of the Escrow Agreement, the Company deposited $15.0 million into an escrow account. Prior to April 1, 2025, Beckley Psytech may, at its sole discretion, draw down up to $5.0 million from the escrow account, with the remaining balance to be paid to Beckley Psytech on April 1, 2025. Beckley shall credit as fully-paid such corresponding number of Series C Shares as corresponds with the value of each draw-down. The total number of deferred payment shares ("Deferred Shares") is 9,036,144 with a share price of $1.66.
Secondary Sale
On January 18, 2024, the Company and Beckley Psytech entered into the Secondary Sale SPA pursuant to which the Company agreed to purchase 11,153,246, £0.0001 par value, re-designated Series C shares (the “Secondary Sale Shares”) at a price of $0.8966 from the existing shareholders for an aggregate consideration of $10.0 million. On January 18, 2024, the Secondary Sale Shares were acquired by the Company.
Upon closing of the Initial Subscription, executed Escrow Agreement, and Secondary Sale Shares, the Company recognized a fair value of $35.3 million in Other Investments in the consolidated balance sheets related to the Initial Shares, Secondary Shares, and Series C Warrants and a fair value of $2.6 million in Other investments held at fair value related to the Additional Warrants.
The Company qualified for and elected to account for the investment acquired per the SSA using the measurement alternative under ASC 321, and is included in Other Investments in the consolidated balance sheets. The Company applied a calibrated model for the $35.3 million investment, to account for the Initial Shares, option to purchase the Deferred Shares, Secondary Shares, and Series C Warrants, on a relative fair value basis resulting in no initial gain or loss recognized in the consolidated statements of operations.
Pursuant to the Escrow Agreement, the Company recognized the fair value of the Deferred Shares as additional consideration for its investment in Beckley as the fair value of the Deferred Shares is less than the purchase price of $1.66 per share. The Company recognized a $2.9 million liability for the Deferred Shares recorded within Other current liabilities in its consolidated balance sheets. Upon Beckley drawing on the Escrow Agreement, the Company will reduce its liability related to the Deferred Shares and recognize gain or loss based on the fair value of the Series C shares as Other income (expense), net in the consolidated statements of operations.
Escrow Agreement Draw
In October 2024, pursuant to the terms of the Escrow Agreement, Beckley Psytech, at its sole discretion, drew $5.0 million from the escrow account and the Company was credited 3,012,048 Series C shares. The Company determined that the fair value of the shares received was $5.3 million, which is recorded as Other investments in the consolidated balance sheets. The Company recognized a gain of $1.3 million related to the investment for the year ended December 31, 2024, which is recognized as Other income (expense), net in the consolidated statements of operations. The Company reflects the remaining $10.0 million held in escrow in Short-term restricted cash for other investments within the consolidated balance sheets as of December 31, 2024. The Company reflects the remaining $1.9 million liability related to the Deferred Shares in Other current liabilities within the consolidated balance sheets as of December 31, 2024.
Additional Warrants
The Company determined that the Additional Warrants meet the definition of a derivative instrument under ASC 815 and recorded the $2.6 million fair value at the transaction date in Other investments held at fair value in the consolidated balance sheets, with subsequent changes in fair value being reflected through the consolidated statements of operations in the Change in fair value of assets and liabilities, net.
In May 2024, Beckley Psytech issued equity pursuant to the deferred equity arrangement, and, per the SSA, the Company received 4,393,400 warrants. The Company determined that once received the Additional Warrants will no longer meet the definition of a derivative instrument under ASC 815. The Company qualified for and elected to account for the warrants under ASC 321, and recorded the warrants received in Other Investments in the consolidated balance sheets. At the time of receipt, the warrants had a fair value of $1.5 million.
As of December 31, 2024, the remaining Additional Warrants had a fair value of $2.8 million recorded in Other investments held at fair value in the consolidated balance sheets. For the year ended December 31, 2024, the Company recorded a $1.7 million gain in the Change in fair value of assets and liabilities, net in its consolidated statements of operations.
GABA Therapeutics, Inc.
GABA is a California based biotechnology company focused on developing GRX-917 for anxiety, depression and a broad range of neurological disorders. The Company is deemed to have significant influence over GABA through its total ownership interest in GABA’s equity, including the Company’s investment in GABA’s preferred stock, and the Company’s noncontrolling representation on GABA’s board of directors.
Common Stock Investment
The Company’s investment in GABA’s common stock was accounted for in accordance with the equity method.
In November 2020 the Company exercised its option to purchase additional shares of common stock of GABA at a price of approximately $1.8 million pursuant to an Omnibus Amendment Agreement under which the Right of First Refusal and Co-Sale Agreement was amended. Pursuant to the amended Right of First Refusal and Co-Sale Agreement, the Company also has the option but not the obligation to purchase additional shares of common stock for up to $2.0 million from the existing common shareholders.
The carrying value of the investment in GABA common stock was reduced to zero as of December 31, 2020 due to IPR&D charges with no alternative future use and remained zero as of December 31, 2024.
Preferred Stock Investment
The Company’s investment in GABA’s preferred stock did not meet the criteria for in-substance common stock. As such, the investment in GABA’s preferred stock is accounted for under the measurement alternative.
In August 2019, GABA and the Company entered into the Preferred Stock Purchase Agreement (the “GABA PSPA”), whereby GABA issued shares of its Series A preferred stock to the Company at a price of approximately $5.5 million. At closing, the Company had an overall ownership interest of over 20% in GABA and a noncontrolling representation on the board.
Pursuant to the GABA PSPA, the Company was obligated to purchase additional shares of Series A preferred stock for up to $10.0 million with the same price per share as its initial investment, upon the achievement of specified contingent clinical development milestones. In April 2021, pursuant to the GABA PSPA, the Company purchased additional shares of Series A preferred stock of GABA, for an aggregate cost of $5.0 million based on the achievement of certain development milestones. In May 2021, the Company exercised its option to purchase additional shares of Series A preferred stock prior to the achievement of certain development milestone for an aggregate cost of $5.0 million completing its obligation to purchase additional shares. The completion of the Series A Preferred stock purchase in May 2021 was deemed to be a reconsideration event at which point GABA was no longer deemed a VIE as GABA now had sufficient equity at risk to finance its activities through the initial development period without additional subordinated financial support. Entities that do not qualify as a VIE are assessed for consolidation under the voting interest model (“VOE model”). Under the VOE model, the Company consolidates the entity if it determines that it, directly or indirectly, has greater than 50% of the voting shares and that other equity holders do not have substantive voting, participating or liquidation rights. While the Company holds greater than 50% of the outstanding equity interest of GABA, the Company does not have the power to control the entity. Concurrent with the exercise of the option, the Company executed a side letter with the other equity holders of GABA agreeing to forego the rights to additional seats on the board of directors, resulting in the Company lacking the ability to control the investee. The Company concluded that it does not have a controlling financial interest that would require consolidation under the VOE model and accounted for the investments in GABA preferred stock under the measurement alternative per ASC 321.
In May 2021, GABA and the Company entered into an Amendment to Preferred Stock Purchase Agreement (the "Amended GABA PSPA”) under which the GABA PSPA was amended and shares of its Series A preferred stock were issued to the Company at a price of approximately $0.6 million. Pursuant to the Amended GABA PSPA, the Company is obligated to purchase additional shares of Series A preferred stock from GABA for up to $1.5 million with the same price per share as its initial investment upon the achievement of specified contingent clinical development milestones. In September 2022, pursuant to the Amended PSPA, GABA issued additional shares of its
Series A preferred stock to the Company at a price of approximately $0.6 million based on the achievement of certain development milestones. As of December 31, 2024, the Company's remaining obligation to purchase additional shares of Series A preferred stock from GABA is for up to $0.9 million at the same price per share as its initial investment upon the achievement of specified contingent milestones.
In accordance with the Amended GABA PSPA, the Company also has the option to purchase the aforementioned additional shares of Series A preferred stock at any time prior to the achievement of any milestone at the same price per share as its initial investment.
GABA’s net losses attributable to the Company were determined based on the Company’s ownership percentage of preferred stock in GABA and recorded to the Company’s investments in GABA preferred stock. As of December 31, 2024 and 2023, the investment in GABA’s preferred stock is zero and $1.8 million, and is recorded in Other investments in the consolidated balance sheets. During the year ended December 31, 2024 and 2023, the Company recognized its proportionate share of GABA’s net loss of $2.0 million and $3.6 million, respectively, as Losses from investments in equity method investees, net of tax on the consolidated statements of operations.
Innoplexus AG
Innoplexus AG is a technology company that provides “Data as a Service” and “Continuous Analytics as a Service” solutions that aims to help healthcare organizations leverage their technologies and expedite the drug development process across all stages-preclinical, clinical, regulatory and commercial. The Company first acquired investments in Innoplexus in August 2018, which consisted of common stock and preferred stock.
As of December 31, 2020, the Company owned 35.0% of the common stock issued by Innoplexus. The Company has significant influence over Innoplexus through its noncontrolling representation on the investee’s supervisory board. Accordingly, the Company’s investment in Innoplexus’ common stock was accounted for in accordance with the equity method. The Company’s investment in Innoplexus’ preferred stock did not meet the criteria for in-substance common stock. As such, the investment in Innoplexus’ preferred stock was accounted for under the measurement alternative as discussed below.
In February 2021, the Company entered into a Share Purchase and Assignment Agreement (the “Innoplexus SPA”) to sell its shares of common and preferred stock held in Innoplexus to a current investor of Innoplexus (the “Purchaser”) in exchange for an initial purchase price of approximately $2.4 million. In addition, the Company is entitled to receive contingent payments based on the occurrence of subsequent equity transactions or liquidity events at Innoplexus as determined under the Innoplexus SPA.
Pursuant to the Innoplexus SPA, the Purchaser is required to hold a minimum number of shares equivalent to the number of shares purchased from the Company through December 31, 2026. In the event that the Purchaser is in breach of this requirement, the purchaser is required to pay the Company an additional purchase price of approximately $9.6 million. The transaction was accounted for as a secured financing as it did not qualify for sale accounting under ASC Topic 860, Transfers and Servicing (ASC 860), due to the provision under the Innoplexus SPA which constrained the Purchaser from its right to pledge or exchange the underlying shares and provided more than a trivial benefit to the Company. The initial proceeds from the transaction are reflected as a secured borrowing liability of $2.2 million as of December 31, 2024 and 2023, which is included in Other liabilities in the Company’s consolidated balance sheets. The Company will continue to account for its investment in Innoplexus’ common stock under the equity method of accounting and its investment in Innoplexus’ preferred shares under the measurement alternative.
In addition, the Innoplexus SPA also provides the rights for the Company to receive additional consideration with a maximum payment outcome of $22.3 million should the equity value of Innoplexus exceed certain thresholds upon the occurrence of certain events. The Company concluded that this feature met the definition of a derivative which required bifurcation. As the probability of the occurrence of certain events defined in the Innoplexus SPA was less than remote, the Company concluded that the fair value of the embedded derivative ascribed to this feature was de minimis for the years ended December 31, 2024 and 2023.
The carrying value of the Company’s investment in Innoplexus was zero as of December 31, 2024 and December 31, 2023.
The Company's ownership of Innoplexus common stock was 35.0% as of December 31, 2024 and December 31, 2023.
DemeRx NB, Inc.
In December 2019, the Company jointly formed DemeRx NB, Inc. ("DemeRx NB") with DemeRx Inc. DemeRx Inc. and DemeRx NB entered into a Contribution Agreement whereby DemeRx inc. assigned all of its rights, title, and interests in and to all of its assets relating to DMX-1002, Noribogaine, in exchange for shares of common stock of DemeRx NB. DemeRx NB will use the contributed intellectual property to develop Noribogaine. Noribogaine is an active metabolite of ibogaine designed to have a longer plasma half-life and potentially reduced hallucinogenic effects compared to ibogaine.
In connection with the Contribution Agreement, the parties entered into a Series A Preferred Stock Purchase Agreement (the “DemeRx NB PSPA”) pursuant to which the Company purchased shares of Series A preferred stock of DemeRx NB at a purchase price of $1.0 million. At closing, the Company had less than 20% of ownership interest in DemeRx NB and a noncontrolling representation on DemeRx NB's board of directors. The investment in DemeRx NB was recorded in Other investments on the consolidated balance sheets under the measurement alternative under ASC 321.
In October 2023, the Company and DemeRx, Inc. entered into a Stock Purchase and Framework Agreement which resulted in the Company's acquisition of DemeRx, Inc.’s equity ownership of DemeRx IB (the “Stock Purchase”), in exchange for consideration that included, among other items, the transfer of the Company's ownership in DemeRx, NB, Inc. to DemeRx, Inc. In connection with the Stock Purchase, the Company assessed the fair market value of its DemeRx NB investment and determined that it had been impaired. As a result, the Company recognized a $1.0 million impairment loss in Impairment of other investments, a component of other income, net in the consolidated statements of operations for the year ended December 31, 2023.
Juvenescence Limited
During the year ended December 31, 2023, the Company divested its investment in Juvenescence Limited ("Juvenescence") and recognized a $0.1 million gain on the transaction reflected in Other income (expense), net on the consolidated statements of operations. Prior to the divestment of Juvenescence, the Company’s investment was in common stock, however, it was not able to exercise significant influence over the operating and financial decisions of Juvenescence.
Summarized Financial Information
The following is a summary of financial data for investments accounted for under the equity method of accounting (in thousands):
Balance Sheets
December 31, 2024
December 31, 2023
GABA
GABA
Current assets
$
$
1,720
Total assets
$
$
1,720
Current liabilities
$
2,805
$
1,546
Total liabilities
$
2,805
$
1,546
Statements of Operations
For the year ended December 31, 2024
For the year ended December 31, 2023
Nine Months Ended September 30, 2023
GABA
GABA
COMPASS (1)
Loss from continuing operations
$
(3,227
)
$
(3,593
)
$
(98,514
)
Net loss
$
(3,227
)
$
(3,593
)
$
(85,932
)
(i) As of August 18, 2023, the Company determined that it no longer had significant influence. At this remeasurement date, the Company qualified for and elected to account for its investment in COMPASS under the fair value option. Summarized financial information is as of and for the nine month period ending September 30, 2023 as this information is not readily available as of August 18, 2023 and the Company has no practical way to estimate otherwise.
6. Notes Receivable
IntelGenx Technologies Corp.
Prior to the Company's acquisition of IGX in October 2024, the Company had outstanding loan agreements and convertible notes with IntelGenx, as described below. The Company discharged its secured debt it held with IntelGenx in consideration for IGX, which included the DIP Loan and the IntelGenx Term Loan. The Company continues to hold the 2023 Initial Notes, the 2023 Subsequent notes, and the IntelGenx 2023 Term Loan Note with IntelGenx, which continues to be subject to protections under the CCAA. The Company determined that the fair value of the 2023 Initial Notes, the 2023 Subsequent notes, and the IntelGenx 2023 Term Loan Note with IntelGenx is zero as of December 31, 2024.
IntelGenx Term Loan, as amended
In March 2021, the Company and IntelGenx entered into a loan agreement (the "Original Loan Agreement") under which the Company provided a loan to IntelGenx for an aggregate principal amount of $2.0 million. In May 2021, the Company paid an additional advance of $0.5 million as an additional term loan. In September 2021, the Company entered into an amended and restated loan agreement which, among other things, increased the principal amount of loans available to IntelGenx by $6.0 million, for a total of up to $8.5 million. The additional $6.0 million loan amount was funded via two separate $3.0 million tranches. The first $3.0 million tranche was funded in January 2022 and the second $3.0 million tranche was funded in January 2023. The loan bears an annualized interest rate of 8% and such interest is accrued daily. The Company recorded this loan at cost in Long-term notes receivable - related parties, net on the consolidated balance sheets.
On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses, as further discussed in Note 2, which resulted in a $0.4 million increase to accumulated deficit and allowance for credit losses related to the IntelGenx loan.
In August 2023, the Company and IntelGenx entered into the first amendment to the amended and restated loan agreement (the "First Amendment") which, among other things, extended the maturity date from January 5, 2024 to January 5, 2025 and granted the Company additional security over any non-licensed intellectual property owned or controlled by IntelGenx. The Company determined that this modification did not have a material impact on the amortized cost basis of the IntelGenx Term Loan (as defined below).
Effective September 30, 2023, the Company and IntelGenx entered into a second amendment to the amended and restated loan agreement (the "Second Amendment", and together with the Original Loan Agreement and the First Amendment, the "IntelGenx Term Loan") which, subject to obtaining certain shareholder approvals, entitles the Company to convert any portion of the outstanding and unpaid principal and accrued interest into common shares of IntelGenx at a conversion price per share of $0.185 (the "Conversion Feature"). There are limits over the conversion of the IntelGenx Term Loan, along with Initial Units, Subsequent Units, and Call Options Units into common shares.
In November 2023, upon shareholder approval, the Conversion Feature was effective. The Company evaluated this modification subject to accounting guidance in ASU 2022-02, Financial Instruments - Credit Losses and determined the Conversion Feature is considered the addition of a substantive conversion option and the modification is more than minor. Therefore, the Second Amendment should be treated as an extinguishment of the existing loan and the issuance of a new convertible debt instrument. The IntelGenx Term Loan, as amended, meets the definition of a security and will be accounted for under ASC 320. Pursuant to the remeasurement event, the Company is eligible and has elected the fair value option to account for its investment in the IntelGenx Term Loan. The Company believes that the fair value option better reflects the underlying economics of the loan. The Company recorded the new convertible debt instrument at its fair value of $9.2 million in Convertible notes receivable - related party on the consolidated balance sheets. The existing carrying value of the extinguished loan was $9.3 million ($8.5 million of principal and $1.2 million of accrued interest, net of $0.4 million allowance for credit losses). The difference of $0.1 million was recorded as an extinguishment loss and included in Change in fair value of assets and liabilities, net in the consolidated statements of operations. The IntelGenx Term Loan was subsequently remeasured at each reporting date until settled or converted. The Company recognized subsequent changes in fair value of the IntelGenx Term Loan in Change in fair value of assets and liabilities, net, a component of other income (expense), net in its consolidated statements of operations.
In March 2024, the Company and IntelGenx entered into the Third Amendment (together with the Original Loan Agreement, the First Amendment, and the Second Amendment, the “IntelGenx Term Loan”) pursuant to which the Company immediately provided an additional $1.0 million term loan (“Tranche 1 Additional Term Loan”), and would provide an additional $1.0 million term loan (“Tranche 2 Additional Term Loan”) contingent upon certain of the Company's clinical milestones. The IntelGenx Term Loan, as amended includes a conversion feature that allows for:
i.any portion of the outstanding and unpaid principal under the Initial Tranches and/or the Tranche 1 Additional Term Loan into conversion shares (the “Conversion Shares”) at a conversion price per share of $0.185 (the “Initial Conversion Price”);
ii.any accrued interest under the Initial Tranches into Conversion Shares at the Initial Conversion Price;
iii.any portion of the outstanding and unpaid principal under the Tranche 2 Additional Term Loan into Conversion Shares at a conversion price per share equal to the greater of: (1) the Initial Conversion Price; and (2) the 5-day volume-weighted average
price (the “5-day VWAP”) of the Shares, less the maximum permitted discount under the applicable rules of the Stock Exchange, ending on the date immediately prior to the advancement of the Tranche 2 Additional Term Loan (the “Tranche 2 Conversion Price”); and
iv.any accrued interest under the Tranche 1 Additional Term Loan into Conversion Shares at the 5-day VWAP of the shares, less the maximum permitted discount under the applicable rules of the Stock Exchange, ending on the day that is the second business day before the day the Interest become due and payable (the “Interest Conversion Price” and, together with the Initial Conversion Price and the Tranche 2 Conversion Price, the “Conversion Price”), subject to Stock Exchange approval.
In connection with the Third Amendment, the Company received warrants to purchase up to 4.0 million shares of IntelGenx Common Shares at an exercise price of $0.17, subject to certain adjustments and beneficial ownership limitations, which were recorded at fair value of $0.4 million in Other investments held at fair value in the consolidated balance sheets, with a corresponding deferred vendor credit included in Other liabilities in the consolidated balance sheets. See Note 5 above for further discussion.
As a result of the Third Amendment, the Company recorded the Tranche 1 Additional Term Loan principal of $1.0 million in Convertible notes receivable - related party on the consolidated balance sheets.
In May 2024, the Company paid the Tranche 2 Additional Term Loan and recorded the principal of $1.0 million in Convertible notes receivable - related party on the consolidated balance sheets.
Immediately prior to the Company's acquisition of IGX in October 2024, the Company estimated that the fair value of the underlying collateral of the secured debt was less than the principal and interest of the DIP Loan (as defined below). As the DIP Loan is senior secured, the Company determined that the fair value of the IntelGenx Term Loan was zero and IntelGenx Term Loan was subsequently discharged on the acquisition date. As of December 31, 2023, the $8.6 million fair value of the amended IntelGenx Term Loan was recorded in Convertible notes receivable - related party on the consolidated balance sheets. For the years ended December 31, 2024 and 2023, the Company recognized a loss of $10.9 million and $0.3 million, respectively, in Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations for the reduction in fair value of IntelGenx Term Loan.
For the years ended December 31, 2024 and 2023, the Company recognized zero and $0.6 million of interest income, respectively, associated with the IntelGenx Term Loan.
IntelGenx Convertible Notes
On August 30, 2023, the Company and IntelGenx entered into the Subscription Agreement (as further described in Note 5), under which the Company paid IntelGenx $2.2 million for 2,220 convertible debenture units (the "Initial Units"), with each convertible debenture unit consisting of (i) $1,000 principal amount convertible promissory notes (the “2023 Initial Notes”); and (ii) 5,405 common share purchase warrants of IntelGenx.
The 2023 Initial Notes are accounted for at fair value under ASC 320 and recorded in Convertible notes receivable - related party in the consolidated balance sheets. The Company applied a calibrated model and determined that the initial aggregate fair value of its $2.2 million investment was equal to the transaction price and recorded the 2023 Initial Notes at $1.5 million and the 2023 Initial Warrants at $0.7 million on a relative fair value basis resulting in no initial gain or loss recognized in the consolidated statements of operations. The Company will recognize unpaid interest and subsequent changes in fair value of the 2023 Initial Notes as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations.
In November 2023, upon shareholder approval, the Company paid $750,000 for the 2023 Subsequent Units (as further described in Note 5), which included the 2023 Subsequent Notes. The 2023 Subsequent Notes are accounted for at fair value under ASC 320 and recorded in Convertible notes receivable - related party in the consolidated balance sheets. The Company applied a calibrated model and determined that the initial aggregate fair value of its $0.8 million investment was equal to the transaction price and recorded the 2023 Subsequent Notes at $0.6 million and the 2023 Subsequent Warrants at $0.2 million on a relative fair value basis resulting in no initial gain or loss recognized in the consolidated statements of operations. The Company will recognize unpaid interest and subsequent changes in fair value of the 2023 Subsequent Notes as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations.
The Company has estimated the fair value of various notes receivables with IntelGenx based on the fair value of the underlying collateral of the secured debt. As the 2023 Initial Notes and 2023 Subsequent Notes are not secured by underlying collateral, the Company has determined the fair value of the 2023 Initial Notes and 2023 Subsequent Notes are zero, respectively as of December 31, 2024. As of December 31, 2023, the fair value of the 2023 Initial Notes and 2023 Subsequent Notes was $1.8 million and $0.5 million, respectively, and recorded in Convertible notes receivable - related party in the consolidated balance sheets.
For the years ended December 31, 2024 and 2023, the Company recognized losses of $1.8 million and $0.3 million within Change in fair value of assets and liabilities, net relating to the 2023 Initial Notes, respectively, in its consolidated statements of operations. For the years
ended December 31, 2024 and 2023, the Company recognized losses of $0.5 million and an immaterial amount within Change in fair value of assets and liabilities, net relating to the 2023 Subsequent Notes, respectively, in its consolidated statements of operations.
IntelGenx 2023 Term Loan Note
In December 2023, the Company and IntelGenx entered into a new term loan agreement under which the Company provided the aggregate principal amount of $500,000 (the “2023 Term Loan Note”). The loan bears an annualized interest rate of 14.0% compounding monthly. Principal and interest outstanding shall be due and payable from proceeds of future IntelGenx fundraising. The outstanding principal and interest on the 2023 Term Loan Note is due and payable on the earlier of December 31, 2024 or the bankruptcy, receivership or insolvency of IntelGenx. The outstanding principal and interest on the 2023 Term Loan Note is due and payable under the terms of the agreement.
The Company qualified for and elected to account for the 2023 Term Loan Note under the fair value option. The Company believes that the fair value option better reflects the underlying economics of the 2023 Term Loan Note. The IntelGenx 2023 Term Loan Note is accounted for at fair value under ASC 825 and recorded in Short-term notes receivable - related party, net in the consolidated balance sheets. The Company will recognize unpaid interest and subsequent changes in fair value of the IntelGenx 2023 Term Loan Note as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations.
The Company has estimated the fair value of various notes receivables with IntelGenx based on the fair value of the underlying collateral of the secured debt. As the 2023 Term Loan Note is not secured by underlying collateral, the Company has determined the fair value of the 2023 Term Loan Note is zero as of December 31, 2024. As of December 31, 2023, the 2023 Term Loan Note had a fair value of $0.5 million and recorded in Short-term notes receivable - related party, net.
For the years ended December 31, 2024 and 2023, the Company recognized a $0.5 million loss and an immaterial loss, respectively, in Change in fair value of assets and liabilities, net relating to the IntelGenx 2023 Term Loan Note in its consolidated statements of operations.
Debtor-in-Possession Loan
In May 2024, pursuant to the Initial Order authorizing the DIP Financing, the Company and IntelGenx entered into a senior secured super-priority, interim, non-revolving multiple draw credit facility ("DIP Loan") up to a maximum of CDN $8.0 million. The DIP Loan bears an annualized interest rate equal to the National Bank of Canada prime rate. The outstanding principal and interest of the DIP Loan is due and payable on the earlier of (i) September 30, 2024, (ii) the termination of the stay period in the CCAA proceedings, (iii) the CCAA proceedings are converted into a bankruptcy or receivership, (iv) implementation of a restructuring plan or sale of the IntelGenx business during the CCAA proceedings, or (v) an event of default as defined in the DIP Loan agreement.
The Company qualified for and elected to account for the DIP Loan under the fair value option. The Company believed that the fair value option better reflects the underlying economics of the DIP Loan. The DIP Loan was accounted for at fair value under ASC 825 and recorded in Short term notes receivable - related party, net in the consolidated balance sheets. The Company recognized unpaid interest and subsequent changes in fair value of the DIP Loan Note as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations. Prior to the Company's acquisition of IGX in October 2024, IntelGenx drew CDN $7.8 million (USD $5.7 million) pursuant to the DIP Loan.
Immediately prior to the Company's acquisition of IGX, the Company estimated the fair value of the DIP Loan to be based on the fair value of the underlying collateral of IntelGenx's secured debt and the relative seniority of the debt. The fair value of the DIP Loan immediately prior to the IGX acquisition was $5.7 million, and the DIP Loan was subsequently discharged as of the acquisition date. For the year ended December 31, 2024, the Company recognized an immaterial change in Change in fair value of assets and liabilities, net relating to the DIP Loan in its consolidated statements of operations.
Subsequent DIP Loan Commitment
Upon entering into the DIP Loan in May 2024, the Company was obligated to fund IntelGenx up to CDN $8.0 million. Accordingly, the Company recognized a liability and related expense of $0.7 million for the remaining committed and unpaid balance of the DIP Loan as of June 30, 2024 ("Subsequent DIP Loan Commitment"). The Subsequent DIP Loan Commitment was accounted for at fair value under ASC 825 and was recognized within Other current liabilities in the consolidated balance sheets, with the related expense recognized as Other income (expense), net in the consolidated statements of operations. As the Company made further payments pursuant to the DIP Loan, it recognized a reduction in the Subsequent DIP Loan Commitment liability and recognized a related gain within Other income (expense), net, in the consolidated statements of operations. Accordingly, the Company recognized a related gain of $0.5 million during the three months ended September 30, 2024 and an additional gain of $0.2 million during the three months ended December 31, 2024, all recorded within Other income (expense), net the consolidated statements of operations.
Immediately prior to the Company's acquisition of IGX, the fair value of the Subsequent DIP Loan Commitment was zero as the DIP Loan was discharged in consideration for the acquisition of IGX, resulting in no remaining future committed payments.
DemeRx Promissory Note
In January 2020, DemeRx IB loaned to DemeRx Inc. $1.0 million pursuant to the terms of a Promissory Note (the "DemeRx Note"). Pursuant to the terms of the DemeRx Note, the aggregate principal amount of $1.0 million together with all accrued and unpaid interest and any other amounts payable are due to be paid on the date that is the earlier of (i) 5 years from the initial closing and (ii) the closing of an initial public offering or a deemed liquidation event of DemeRx IB (the “DemeRx Maturity Date”). Pursuant to the terms of the DemeRx Note, DemeRx Inc. may, in its sole discretion pay any amount due under the DemeRx Note, in cash or through cancellation shares of common stock of DemeRx IB, par value $0.0001 per share, of the fair market value of such shares.
In October 2023, the Company and DemeRx, Inc. entered into a Stock Purchase and Framework Agreement which resulted in the Company's acquisition of DemeRx, Inc.’s equity ownership of DemeRx IB (the “Stock Purchase”). The Stock Purchase, a liquidation event, required a repayment of the DemeRx Note. Pursuant to the terms of the DemeRx Note, DemeRx, Inc opted to repay the outstanding balance through the cancellation of its shares of common stock of DemeRx IB.
For the years ended December 31, 2024, and 2023, the Company did not earn any interest income associated with the DemeRx Note.
7. Fair Value Measurement
The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation (in thousands):
Fair Value Measurements as of
December 31, 2024
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
Money market funds
$
6,196
$
-
$
-
$
6,196
Investment in securities at fair value:
U.S. treasuries
-
44,825
-
44,825
Other investments held at fair value
26,104
-
2,783
28,887
$
32,300
$
44,825
$
2,783
$
79,908
Liabilities:
Contingent consideration liability - related party
$
-
$
-
$
$
Contingent consideration liabilities
-
-
Convertible promissory note conversion option - related party
-
-
Convertible promissory note conversion option
-
-
1,616
1,616
$
-
$
-
$
2,934
$
2,934
Fair Value Measurements as of
December 31, 2023
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
Money market funds
$
$
-
$
-
$
Investment in securities at fair value:
U.S. treasuries
-
67,119
-
67,119
Corporate notes/bonds
-
5,007
-
5,007
U.S. government agencies
-
37,097
-
37,097
Other investments held at fair value
83,701
-
6,124
89,825
Convertible notes receivable - related party
-
-
11,202
11,202
$
83,757
$
109,223
$
17,326
$
210,306
Liabilities:
Contingent consideration liability - related party
$
-
$
-
$
$
Contingent consideration liabilities
-
-
1,637
1,637
2018 convertible promissory note conversion option
-
-
2,385
2,385
$
-
$
-
$
4,643
$
4,643
Investment in securities at fair value
The Company elected the fair value option for the securities in its investment portfolio. The fair value is based on quoted market prices, when available. When a quoted market price is not readily available, the Company uses the market price from its last sale of similar assets. The cash and cash equivalents held by the Company are categorized as Level 1 investments as quoted market prices are readily available for these investments. All other investments in the investment portfolio are categorized as Level 2 investments as inputs utilized to fair value these securities are either directly or indirectly observable, such as the market price from the last sale of similar assets.
The unrealized gains and losses on the available-for-sale securities, represented by change in the fair value of the investment portfolio, is reported in earnings. Since the investment in the available-for-sale securities are already measured at fair value, no separate credit losses would be recorded in the financials.
For the year-ended December 31, 2024 and 2023, the Company recognized a $3.8 million and $5.5 million gain related to the change in fair value in its available for sale securities recorded as a Change in fair value of assets and liabilities, net in its consolidated statements of operations.
Other investments held at fair value
COMPASS Pathways plc
As described in Note 5 above, pursuant to the August 2023 financing, the Company determined that it no longer had significant influence and accounted for its COMPASS investment at fair value under ASC 321 with any changes in fair value recorded as a Change in fair value of assets and liabilities, net in its consolidated statements of operations. The Company determines the fair value of its COMPASS investment by taking the publicly available share price as of the balance sheet date multiplied by the number of shares the Company holds. There are no non-observable inputs in determining the fair value. For the years ended December 31, 2024 and 2023, the Company recognized a $39.4 million loss and a $81.9 million gain within Change in fair value of assets and liabilities, net, respectively.
Beckley Psytech
As described in Note 5, the Company determined that the Additional Warrants meet the definition of a derivative instrument under ASC 815 and recorded the Additional Warrants at fair value with subsequent changes in fair value being reflected through the consolidated statements of operations in the Change in fair value of assets and liabilities, net. The Additional Warrants have a fair value of $2.8 million as of December 31, 2024.
The significant unobservable inputs that are included in the valuation of the Additional Warrants as of December 31, 2024 are (i) probability of issuances under the deferred equity arrangement of 55%-80%, and (ii) volatility of 95%.
IntelGenx Technologies Corp.
As described in Note 5, prior to the completion of the Company's acquisition of IGX in October 2024, the Company's investment in IntelGenx included common shares, 2023 Initial Warrants, 2023 Subsequent Warrants, and 2024 Warrants, (the 2023 Initial Warrants, 2023 Subsequent Warrants, and 2024 Warrants are collectively referred to as the “Warrants”), and Call Option. The Company determined that the Warrants and the Call Option did not meet the definition of a derivative instrument under ASC 815. The Company classified the common shares as Level 2 assets and the Warrants and the Call Option as Level 3 assets in the fair value hierarchy. The Warrants and Call Option were measured at fair value on a quarterly basis and any changes in the fair value were recorded as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations.
Considering the aforementioned facts and circumstances in Note 3 and Note 5, the Company estimated a zero fair value to be attributable to the Warrants and the Call Option as of December 31, 2024.
As of December 31, 2023, the Warrants and Call Option were recorded at fair value utilizing the Black-Scholes option pricing model. The Black Scholes option pricing model was based on the estimated market value of the underlying IntelGenx Common Shares at the valuation measurement date, the remaining contractual term of the Warrants and Call Option, risk-free interest rates, expected dividends, and expected volatility of the price of the underlying IntelGenx Common Shares. The expected volatility was based on a peer group volatility which is a Level 3 input within the fair value hierarchy. As of December 31, 2023, the fair value of the 2023 Initial Warrants, the 2023 Subsequent Warrants and Call Option was $0.7 million, $0.2 million and $5.2 million, respectively, and was recorded in Other investments held at fair value in the consolidated balance sheets.
The significant unobservable inputs that were included in the valuation of the Initial Warrants, 2023 Initial Warrants, 2023 Subsequent Warrants and Call Option as of December 31, 2023 were (i) estimated market value of the underlying common stock of $0.13, including discount for lack of marketability and (ii) volatility of 100%.
An additional significant unobservable input that was included in the valuation of the Call Option as of December 31, 2023 was discount rate of 45.9% based on an assessment of IntelGenx credit risk and market yields of companies with similar credit risk.
IntelGenx notes receivable
As described in Note 6, prior to October 2024, the Company's notes receivable with IntelGenx included the IntelGenx Term Loan, the 2023 Initial Notes, the 2023 Subsequent Notes, the DIP Loan, and the 2023 Term Loan Note. The fair value of these instruments were estimated based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.
For the year ended December 31, 2023, the fair value of the 2023 Initial Notes and the 2023 Subsequent Notes were estimated using a Binomial Lattice in a risk-neutral framework (a special case of the Income Approach). Specifically, the future stock price of IntelGenx was modeled assuming a Geometric Brownian Motion in a risk-neutral framework. For each modeled future price, the 2023 Initial Notes and the 2023 Subsequent Notes were calculated based on the contractual terms (incorporating any optimal early exercise), and then discounted at the term-matched risk-free rate. Finally, the value of the 2023 Initial Notes and the 2023 Subsequent Notes were calculated as the probability-weighted present value over all future modeled payoffs. Additionally, the fair value of the 2023 Term Loan Note was estimated as the present value of the debt cash-flows plus the fair value of the Conversion Feature. The Conversion Feature fair value was estimated utilizing the Black-Scholes option pricing model. The Black Scholes option pricing model was based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the Conversion Feature, risk-free interest
rates, expected dividends, and expected volatility of the price of the underlying common stock. The expected volatility was based on a peer group volatility which is a Level 3 input within the fair value hierarchy.
As described in Note 3 above, the Company served as a Stalking Horse for IntelGenx as they sought protection from creditors under the CCAA. The Company's bid was to acquire certain assets and liabilities of IntelGenx in exchange for the discharge of all senior secured debt payable by IntelGenx, which included the DIP Loan and the IntelGenx Term Loan. The underlying collateral of such senior secured debt was determined to be the net assets and liabilities of IGX as acquired by the Company and as included in the Company's Stalking Horse proposal. Accordingly, the Company has estimated the fair value of the underlying collateral, which included the fair value of the acquired intangible assets, based on a probability adjusted forecasted revenue and expenses and a discount rate of 12.5%. The Company adjusted the fair value of the DIP Loan to agree to this determined fair value of the net assets and liabilities acquired. As of the Company's acquisition date of IGX in October 2024, the fair value of the DIP Loan was $5.7 million and the fair value of the IntelGenx Term Loan was zero.
Considering relevant facts and circumstances, the Company estimated the fair value attributable to the various notes receivables with IntelGenx based on the remaining fair value of the underlying collateral. As the 2023 Initial Notes, 2023 Subsequent Notes, and the 2023 Term Loan Note (collectively the "IntelGenx Unsecured Debt") were not secured by the underlying collateral, the Company determined the fair value of IntelGenx Unsecured Debt to be zero as of December 31, 2024.
IntelGenx Subsequent DIP Loan Commitment
As described in Note 6, there are no additional commitments under the DIP Loan as of the IGX acquisition date in October 2024. Accordingly, the fair value of the Subsequent DIP Loan Commitment was reduced to zero as of the acquisition date and remained zero as of December 31, 2024.
Contingent consideration liability - related party
The contingent consideration liability - related party in the table above relates to milestone and royalty payments in connection with the acquisition of Perception Neuroscience Holdings, Inc. (“Perception”). The fair value of the contingent consideration liability - related party was determined based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy. The fair value of the contingent milestone and royalty liabilities was estimated based on the discounted cash flow valuation technique. The technique considered the following unobservable inputs:
•market-based discount rates,
•the probability and timing of achieving the specified milestones and royalties as of each valuation date,
•the probability of executing the license agreement, and
•the expected first year of revenue.
Perception
The fair value of the Perception contingent milestone and royalty liabilities could change in future periods depending on prospects for the outcome of R-Ketamine milestone meetings with the FDA or other regulatory authorities, and whether the Company realizes a significant increase or decrease in sales upon commercialization. The most significant assumptions in the discounted cash flow valuation technique that impacts the fair value of the milestone contingent consideration are the projected milestone timing and the probability of the milestone being met. Further, significant assumptions in the discounted cash flow that impacts the fair value of the royalty contingent consideration are the projected revenue over ten years, the timing of royalties on commercial revenue, and the probability of success rate for a commercial R-Ketamine product. The valuations as of December 31, 2024 and 2023, used inputs that were unobservable inputs with the most significant being the discount rates for royalties on projected commercial revenue and clinical milestones and probability of success estimates over the following ten years, which represent Level 3 measurements within the fair value hierarchy.
The fair value of the contingent milestone and royalty liabilities for Perception was estimated to be $0.1 million and $0.6 million as of December 31, 2024 and 2023, respectively.
The fair value of the Perception contingent consideration liability - related parties was calculated using the following significant unobservable inputs:
December 31, 2024
December 31, 2023
Valuation Technique
Significant Unobservable Inputs
Input Range
Input Range
Discounted cash flow
Milestone contingent consideration:
Discount rate
11.6%
13.5%
Probability of the milestone
5.0%
28.0%
Discounted cash flow with Scenario-Based Method
Royalty contingent consideration:
Discount rate for royalties
3.8% - 4.3%
13.0% - 14.2%
Discount rate for royalties on milestones
3.8% - 4.3%
13.0% - 14.2%
Probability of success rate
5.0%
13.4% - 28.0%
Contingent Consideration Liabilities
The contingent consideration liabilities in the fair value table above relates to milestone payments in connection with the acquisition of DemeRx IB, Inc. ("DemeRx"), and TryptageniX. The fair value of the contingent consideration liabilities were determined based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy. The fair value of the contingent milestone and royalty liabilities was estimated based on the discounted cash flow valuation technique. The technique considered the following unobservable inputs:
•market-based discount rates, and
•the probability and timing of achieving the specified milestones as of each valuation date
DemeRx
In October 2023, the Company and DemeRx, Inc. entered into a Stock Purchase and Framework Agreement which resulted in the Company's acquisition of DemeRx, Inc.’s equity ownership of DemeRx IB (the “Stock Purchase”), in exchange for consideration that included, among other items, earn-out consideration of up to an additional $8.0 million payable to DemeRx, Inc. contingent upon the achievement of certain development milestones directly related to DemeRx’s oral capsule formulation of ibogaine (“DMX-1002”) program. The earn-out consideration was recorded at fair value in contingent consideration as a liability under ASC 480 and the fair value is adjusted each quarter and reflected in other income and expense in the statements of operations.
The fair value of the DemeRx contingent milestone could change in future periods depending on prospects for the outcome of ibogaine milestone meetings with the FDA or other regulatory authorities. The most significant assumptions in the discounted cash flow valuation technique that impacts the fair value of the milestone contingent consideration are the projected milestone timing and the probability of the milestone being met. The valuations as of December 31, 2024 , used inputs that were unobservable inputs with the most significant being the discount rates clinical milestones and probability of success, which represent Level 3 measurements within the fair value hierarchy.
For the years ended December 31, 2024 and 2023, the fair value of the contingent milestone for DemeRx was estimated to be $0.2 million and $1.4 million, respectively.
The fair value of the DemeRx contingent consideration liability - related parties was calculated using the following significant unobservable inputs:
December 31, 2024
December 31, 2023
Valuation Technique
Significant Unobservable Inputs
Input Range
Input Range
Discounted cash flow
Milestone contingent consideration:
Discount rate
11.7%-11.8%
13.9%
Probability of the milestone
4.0% - 5.0%
20.0% - 25.0%
TryptageniX
The fair value of the contingent liability for TryptageniX was estimated to be an immaterial amount and $0.2 million as of December 31, 2024 and 2023, respectively. The contingent liability is comprised of research and development milestone success fee payments and royalties payments. The fair value of the success fee liability was estimated based on the scenario-based method within the income approach. The fair value of the contingent liability for TryptageniX was determined based on significant unobservable inputs, including the discount rate, estimated probabilities of success, and timing of achieving certain clinical milestones. The fair value of the royalties liability was determined to be de minimis as the products are in the early stages of development. The Company will continue to assess the appropriateness of the fair value of the contingent liability as the products continue through development.
Convertible Promissory Note
As described in Note 13, in December 2023 and April 2024, the Company entered into subscription agreements with each of a noteholder and a related party noteholder, respectively (together the "Subscription Agreements") whereby each of the noteholder and the related party noteholder exchanged their ATAI Life Sciences AG notes (the "Old AG Notes") into the same principal amount of new convertible notes issued by ATAI Life Sciences N.V. (the "New NV Notes"). The exchange resulted in the New NV Notes conversion option no longer meeting the equity classification criteria. Accordingly, at the time of the exchange modification, the Company bifurcated the conversion option and reclassified the conversion option fair value from equity to a liability and is included in Short-term convertible promissory notes and derivative liability and Short-term convertible promissory notes and derivative liability - related party, respectively, in the consolidated balance sheets. The conversion option is measured at fair value on a quarterly basis and any changes in the fair value will be recorded as Change in fair value of assets and liabilities, net, a component of other income (expense), net in the consolidated statements of operations. For the years ended December 31, 2024 and 2023, the Company recognized a loss of $3.4 million and $0.7 million, respectively, as a result of the change in fair value of the New NV Notes.
The conversion option fair value was estimated utilizing the Black-Scholes option pricing model and is classified as Level 3 in the fair value hierarchy based on the nature of the inputs and valuation techniques. The Black-Scholes option pricing model is based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the conversion feature, risk-free interest rates, expected dividends, and expected volatility of the price of the underlying common stock. The expected volatility is based upon the historical volatility of daily lognormal returns on atai shares.
A significant input that is included in the valuation of the conversion feature as of December 31, 2024 and December 31, 2023 is volatility of 75.0% and 78.6%, respectively.
The following table provides a roll forward of the aggregate fair values of the Company’s financial instruments described above, for which fair value is determined using Level 3 inputs (in thousands):
Beckley Psytech Additional Warrants
IntelGenx Debt (i)
IntelGenx Investments Held at Fair Value (ii)
IntelGenx Subsequent DIP Loan Commitment
Contingent
Consideration
Liabilities -
Related Parties (iii)
Contingent
Consideration
Liabilities (iv)
New NV Notes Conversion Feature
Balance as of December 31, 2023
$
-
$
11,202
$
6,124
$
-
$
$
1,637
$
2,385
Initial fair value of instrument
2,645
8,243
-
-
3,590
Change in fair value, including interest
1,676
(13,729
)
(6,544
)
-
(510
)
(1,425
)
(3,363
)
Additional Warrants received
(1,538
)
-
-
-
-
-
-
Reduction in commitment
-
-
-
(680
)
-
-
-
Consideration for acquisition
-
(5,715
)
-
-
-
-
-
Balance as of December 31, 2024
$
2,783
$
-
$
-
$
-
$
$
$
2,611
(i) Includes the IntelGenx Term Loan, the 2023 Initial Notes, the 2023 Subsequent Notes, the DIP Loan, and the 2023 Term Loan Note. (ii) Includes the 2023 Initial Warrants, the 2023 Subsequent Warrants, the 2024 Warrants, and the Call Option Units. (iii) Includes Perception milestone based contingent consideration liability. (iv) Includes contingent consideration liability related to DemeRx IB Stock Purchase and contingent consideration liability related to the TryptageniX research and development milestone success fee payments and royalties payments.
IntelGenx Convertible Notes Receivable
IntelGenx Investments Held at Fair Value (i)
Contingent
Consideration
Liability -
Related Parties (ii)
Contingent Consideration Liability (iii)
2018 Convertible Notes Call Option
Balance as of December 31, 2022
$
-
$
-
$
$
$
-
Initial fair value of instrument
10,800
5,787
-
1,329
1,668
Change in fair value
(116
)
(34
)
Additional contribution
-
-
-
Extinguishment of liability
-
-
(89
)
-
-
Balance as of December 31, 2023
$
11,202
$
6,124
$
$
1,637
$
2,385
(i) Includes, Initial Warrants, Additional Unit Awards, 2023 Initial Warrants, 2023 Subsequent Warrants, and Call Option Units. (ii) Includes Perception's milestone-based contingent consideration liability. (iii) Includes the contingent consideration liability related to DemeRx IB Stock Purchase and the contingent consideration liability related to the TryptageniX
research and development milestone success fee payments and royalties payments.
8. Prepaid Expenses and Other Current Assets
Prepaid expenses consist of the following (in thousands):
December 31, 2024
December 31, 2023
Prepaid research and development related expenses
$
4,900
$
1,822
Tax receivables
1,348
1,752
Other
Prepaid insurance
1,410
Total
$
7,795
$
5,830
9. Property and Equipment
Property and equipment consisted of the following:
December 31, 2024
December 31, 2023
Manufacturing equipment
$
1,572
$
-
Laboratory and office equipment
-
Furniture and fixtures
1,017
Computer equipment
$
2,933
$
1,134
Less: accumulated depreciation and amortization
Total
$
2,535
$
As of December 31, 2024, substantially all of the Company’s in use manufacturing equipment, laboratory and office equipment and computer equipment were located in Canada and are comprised of assets acquired with the Company's acquisition of IGX. The Company has $1.0 million of manufacturing equipment not in service located in Germany also acquired with the Company's acquisition of IGX. For the years ended December 31, 2024 and 2023, approximately $0.7 million and $0.9 million of the Company's remaining property and equipment was located in Germany, respectively, and $0.1 million and $0.1 million in the U.S, respectively.
For the years ended December 31, 2024 and 2023, depreciation and amortization expense on property and equipment was $0.2 million and $0.1 million, respectively.
10. Intangible Assets and Goodwill
Intangible Assets
Definite-lived Intangible Assets
In connection with the Company’s acquisition of IGX (see Note 3 above), the Company acquired ownership and intellectual property rights to IGX’s Oral Thin Film (“OTF”) platform technology. This platform technology serves as the foundation and platform to deliver active pharmaceutical ingredients for both the Company’s and other potential customer products. The Company determined there to be legal and competitive factors that limit the useful life of these OTF Technologies and therefore designated them as a definite-lived intangible asset.
In addition, the Company acquired a manufacturing contract with regards to IGX's right to manufacture gBelBuca, a generic version of Belbuca®, an opioid that is used to manage chronic pain severe enough to require daily, around-the-clock, long-term treatment. This manufacturing contract includes potential future royalty and milestone payments, for which the Company is now eligible to receive.
In accordance with the acquisition method of accounting, the Company allocated the acquisition cost for the transaction to the underlying assets acquired and liabilities assumed, based upon the estimated fair values of those assets and liabilities at the date of acquisition. The value allocated to the OTF Technology was $2.4 million, which will be amortized over the remaining estimated useful life of approximately 10 years. The value allocated to the gBelBuca contract was $0.2 million, which will be amortized over the estimated remaining useful life of approximately 19 years.
In addition to the definite-lived intangible assets above, the Company's definite-lived intangible assets also includes $0.6 million of previously capitalized internal-use software costs, which will be amortized over the estimated remaining useful life of approximately 2 years.
Indefinite-lived Intangible Assets
The Company owns various intellectual property, including in-process digital therapeutics application platforms, clinical trial data from previously consolidated or wholly-owned subsidiaries, and other intangible assets. The Company has designated each of these intangible assets to be indefinite-lived as there are no characteristics that limit each asset's useful life.
As of December 31, 2024, the Company determined they were no longer pursuing digital therapeutics as an enabling technology for their product compounds. The Company performed an impairment assessment and concluded their in-process digital therapeutics application platforms were fully impaired. The carrying value of these indefinite-lived intangible assets prior to the Company's assessment was $0.9 million. Accordingly, the Company recognized a $0.9 million impairment loss, which the Company presented as Research and development expense in the Company's consolidated statements of operations.
The Company continually evaluates whether events or circumstances have occurred that indicate that the carrying value of the intangible assets may be impaired or that the estimated remaining useful lives of these assets may warrant revision. Other than the impairment explained above, as of December 31, 2024, the Company determined that no other intangible assets were impaired and that there are no facts or circumstances that would indicate a need for changing the estimated remaining useful lives of these assets.
For the year ended December 31, 2023, the $1.8 million intangible asset balance was included in Other assets in the Company's consolidated balance sheets.
Intangible assets consisted of the following (in thousands):
December 31, 2024
December 31, 2023
Remaining Useful Lives
Cost
Accumulated Amortization
Impairment
Net Carrying Amount
Cost
Accumulated Amortization
Net Carrying Amount
OTF Technology
10 years
$
2,433
$
(57
)
$
-
$
2,376
$
-
$
-
$
-
gBelBuca manufacturing contract
19 years
(2
)
-
-
-
-
Internal-use software
2 years
(466
)
-
(329
)
In-process research and development
indefinite-lived
1,059
-
(917
)
-
Other
various
(11
)
-
(8
)
Total
$
4,698
$
(536
)
$
(917
)
$
3,246
$
2,109
$
(337
)
$
1,772
For the years ended December 31, 2024 and 2023, amortization expense related to these intangible assets was $0.2 million and $0.2 million, respectively.
Estimated future amortization expense for intangible assets subsequent to December 31, 2024 is as follows (in thousands):
$
Thereafter
1,234
$
2,687
The weighted average remaining useful lives of all amortizable assets is approximately 9.9 years.
Goodwill
In connection with the Company's acquisition of IGX (see Note 3 above), the Company also recognized $0.3 million in goodwill, which was the difference between the amount of consideration associated with the transaction in excess of the fair value of net assets acquired. The goodwill is primarily attributable to the synergies of merging operations, expected future cash flows and the value of the acquired workforce. The following table presents the goodwill balances for the years ended December 31, 2024 and 2023 and the associated changes in goodwill through December 31, 2024 (in thousands).
Balance at December 31, 2023
$
-
IGX acquisition
Measurement period adjustments
-
Balance at December 31, 2024
$
11. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
December 31, 2024
December 31, 2023
Accrued payroll
$
3,776
$
4,941
Accrued external research and development expenses
2,479
3,031
Accrued accounting, legal, and other professional fees
2,867
5,468
Other liabilities
1,101
Taxes payable
Total
$
9,847
$
15,256
12. Leases
Operating lease Right-of-Use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes lease payments made, lease incentives, and initial direct costs incurred, if any.
The Company leases certain office space under long-term operating leases that expire at various dates through 2028. The Company generally has options to renew lease terms on its facilities, which may be exercised at the Company's sole discretion.
In connection with the Company's acquisition of IGX on October 2, 2024, the Company assumed lessee rights to approximately 43,000 square feet of office, lab, and manufacturing spaces in Montréal, Canada. The leases expire in February 2026. The lease terms include an option to renew for an additional 5 years, which may be exercised at the Company's sole discretion.
The Company evaluates renewal and termination options at the lease commencement date to determine if it is reasonably certain to exercise the option and has concluded on all operating leases that is it not reasonably certain that any options will be exercised.
The weighted-average remaining lease term for the Company’s operating leases as of December 31, 2024 was 2.9 years. The weighted-average discount rate for the Company’s operating leases as of December 31, 2024 was 12.7%.
ROU assets and lease liabilities related to the Company’s operating leases are as follows (in thousands):
Balance Sheet Classification
December 31, 2024
December 31, 2023
Right-of-use assets
Operating lease right-of-use asset, net
$
1,334
$
1,223
Current lease liabilities
Current portion of lease liability
Non-current lease liabilities
Non-current portion of lease liability
Expenses related to leases is recorded on a straight-line basis over the lease term. The following table summarizes lease costs by component for the year ended December 31, 2024 and 2023 (in thousands):
For the Year Ended December 31,
Lease Cost Components
Statements of Operations Classification
Operating lease cost
Operating expenses: General and administrative
$
$
Operating lease cost
Operating expenses: Research and Development
-
Short-term lease cost
Operating expenses: General and administrative
Total lease cost
$
$
1,001
Future minimum commitments under all non-cancelable operating leases are as follows (in thousands):
Year Ended
$
-
Total lease payments
1,457
Less: Imputed interest
(248
)
Present value of lease liabilities
$
1,209
Supplemental cash flow information related to the Company’s operating leases for the year ended December 31, 2024 and 2023 (in thousands):
December 31, 2024
December 31, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
$
Right-of-use assets obtained in exchange for new operating lease liabilities
$
-
$
1,377
13. Debt
Convertible Promissory Notes
Convertible Promissory Notes-Related Parties
During November 2018 and October 2020, the Company executed a terms and conditions agreement (the “Convertible Note Agreement”) under which it would issue convertible promissory notes to investors. An investor would become a party to the Convertible Note Agreement and would be issued a convertible promissory note by executing and delivering a subscription form. In November 2018 and October 2020, certain investors subscribed to the Convertible Note Agreement and the Company issued convertible promissory notes in the aggregate principal amount of €1.0 million or $1.2 million (collectively, the “Convertible Notes”). The Convertible Notes are non-interest-bearing, unsecured and are due and payable on September 30, 2025, unless previously redeemed, converted, purchased or cancelled (the “Maturity Date”). Each Convertible Note has a face value of €1 and is convertible into one share of ATAI Life Sciences AG upon the payment of €17.00. Conversion rights may be exercised by a noteholder at any time prior to maturity, except during certain periods subsequent to the consummation of the IPO. The Convertible Notes may be declared for early redemption by the noteholders upon occurrence of specified events of default, including payment default, insolvency and a material adverse change in the Company’s business, operations or financial or other condition. Upon early redemption, the conversion right with respect to the Convertible Notes may no longer be exercised.
The Company concluded that both the embedded conversion feature, which is exercisable by the investor at any time during the maturity, and the contingent put option, which would trigger upon the occurrence of an event of default of the Convertible Notes, do not meet the criteria to be bifurcated and separately accounted for as derivatives and the notes were recorded net of discount and issuance costs, or a reduction to the carrying value of the notes issued in November 2018, with a corresponding adjustment to additional paid in capital. The discount is being amortized using the effective interest method over the period from the respective date of issuance to the Maturity Date.
The Company determined that the October 2020 notes were issued in exchange for services previously provided by the Company’s founders and other shareholders and were fully vested and non-forfeitable upon issuance. These instruments were therefore considered share based compensation awards to non-employees, and the instruments were initially measured and recorded at their grant date fair value based on a Black-Scholes option- pricing model. The fair value of the October 2020 notes exceeded the principal amount that will be due at maturity. Therefore, at initial recognition, the October 2020 notes were accounted for as convertible debt issued at a substantial premium, such that the face value of the note is recorded as a liability and the premium was recorded as paid-in capital.
In April 2021, the Company undertook a corporate reorganization. Upon the corporate reorganization, ATAI Life Sciences N.V became the sole shareholder of ATAI Life Sciences AG. In connection with the corporate reorganization, all former shareholders of ATAI Life Sciences AG contributed their shares of ATAI Life Sciences AG to ATAI Life Sciences N.V. and received sixteen shares in ATAI Life Sciences N.V. for every one share of ATAI Life Sciences AG. In 2023, certain November 2018 noteholders elected to convert some of their convertible promissory notes into shares of ATAI Life Sciences N.V for an immaterial amount. As of December 31, 2023, all notes issued in November 2018 have been converted and the only outstanding Convertible Notes are those issued in October 2020. As of December 31, 2024, the Convertible notes issued in October 2020 continue to be outstanding.
Exchange of Convertible Promissory Notes
In November 2023 and April 2024, a noteholder and a related party noteholder, respectively, of the Convertible Notes issued in October 2020 and ATAI Life Sciences AG executed exchange agreements (together the "Exchange Agreements") where each noteholder agreed to exchange its Convertible Notes issued by ATAI Life Sciences AG ("Old AG Notes") into the same principal amount of new convertible notes issued by ATAI Life Sciences NV ("New NV Notes"). The New NV Notes are non-interest-bearing, unsecured and are due and payable on September 30, 2025, unless previously redeemed, converted, purchased or cancelled (the “Maturity Date”). Each New NV Note has a face value of €1 and is convertible into sixteen shares of ATAI Life Sciences NV upon the payment of €17.00. Conversion rights may be exercised by a noteholder at any time prior to maturity. The New NV Notes may be declared for early redemption by the noteholders upon occurrence of specified events of default, including payment default, insolvency and a material adverse change in the Company’s business, operations or financial or other condition. Upon early redemption, the conversion right with respect to the New NV Notes may no longer be exercised.
In December 2023 and April 2024, the Company entered into subscription agreements with each of the noteholder and related party noteholder, respectively (together the "Subscription Agreements") and exchanged their respective Old AG Notes into New NV Notes. The Company determined that the note exchanges were modifications of the debt. The Exchange Agreements and Subscription Agreements resulted in the New NV Notes conversion option no longer meeting the equity classification criteria. Accordingly, at the time of the Exchange Agreements modification, the Company bifurcated the conversion option and reclassified the conversion option fair value from equity to a liability and is included in Convertible promissory notes and derivative liability in the consolidated balance sheets. The conversion option is measured at fair value on a quarterly basis and any changes in the fair value will be recorded as Change in fair value of assets and liabilities, net, in the consolidated statements of operations. For the years ended December 31, 2024 and 2023, the Company recognized a gain of $3.4 million and a loss of $0.7 million, respectively, as a result of the change in fair value of the New NV Notes.
For the years ended December 31, 2024 and 2023, the fair value of the Convertible Notes and derivative liability was $1.8 million and $2.7 million, respectively. For the year ended December 31, 2024, the fair value of the Short-term convertible promissory note and derivative liability - related party was $1.2 million. As of December 31, 2023, the carrying amount and fair value amount of the 2020 Convertible Notes was $0.2 million and $1.5 million, respectively.
Term Loan
Hercules Loan and Security Agreement
In August 2022 (the “Closing Date”), the Company and certain subsidiaries, as guarantors, and Hercules Capital, Inc., a Maryland corporation (“Hercules”), entered into a Loan and Security Agreement the “Hercules Loan Agreement”. The Hercules Loan Agreement provides for term loans in an aggregate principal amount of up to $175.0 million under multiple tranches (as amended by that certain First Amendment to Loan and Security Agreement, dated as of March 13, 2023, the "First Amendment”, that Second Amendment to Loan and Security Agreement, dated as of May 26, 2023, the “Second Amendment,” and that Third Amendment to Loan and Security Agreement, dated August 14, 2024, the “Third Amendment,” and collectively, the “2022 Term Loan Facility”).
On May 26, 2023, the Company, ATAI Life Sciences AG (“ATAI AG” and together with the Company, the “Borrowers”) and certain subsidiary guarantors of the Company (collectively, the “Subsidiary Guarantors”) entered into the Second Amendment with the several banks and other financial institutions or entities from time to time parties to the Hercules Loan Agreement, defined below, (collectively, the “Lenders”) and Hercules, in its capacity as administrative agent and collateral agent for itself and for the Lenders (the “Agent”) which amended that certain Loan and Security Agreement, dated August 9, 2022 (as amended by the First Amendment, the “Existing Loan Agreement,” and as amended by the Second Amendment, the “Hercules Loan Agreement”) to, among other things, (i) extend the availability of Tranche 1B of $10.0 million, from May 1, 2023, under the Existing Loan Agreement, to November 15, 2024, (ii) extend the availability of Tranche 1C of $15.0 million, from December 15, 2023, under the Existing Loan Agreement, to December 15, 2024, (iii) provide Tranche 1D of $20.0 million, available upon the earlier of (x) the full draw of Tranche 1C and (y) the expiration of Tranche 1C availability, through February 15, 2025, (iv) extend the availability of Tranche 2 of $15.0 million, from June 30, 2024, under the Existing Loan Agreement, subject to certain conditions under the Hercules Loan Agreement, to the earlier of (x) the full draw of Tranche 1D and (y) the expiration of Tranche 1D availability, through March 15, 2025, subject to the Tranche 2 Draw Test, (v) extend the timeline to achieve the second amortization extension condition, from June 30, 2024, in the Existing Loan Agreement, to December 15, 2024, (vi) amend the Tranche 2 Draw Test, satisfaction of which is a condition to draw Tranche 2 under the Hercules Loan Agreement and (vii) extend the financial covenant commencement date, from the later of (x) July 1, 2023, and (y) the date that the outstanding debt under the facility is equal to or greater than $40.0 million, in the Existing Loan Agreement, to the later of (x) May 1, 2024, and (y) the date that the outstanding debt under the facility is equal to or greater than $30.0 million, provided, that the financial covenant is waived if the Company has a market capitalization of at least $550.0 million.
On August 14, 2024 (the “Third Amendment Date”), the Borrowers and certain Subsidiary Guarantors” entered into the Third Amendment with the Lenders and Hercules, in its capacity as the Agent, which amended that certain Loan and Security Agreement, dated August 9, 2022 (as amended by the First Amendment, the Second Amendment and the Third Amendment, the “2022 Term Loan Agreement”) to, among other things, (i) provide Tranche 1B of $5.0 million on the Third Amendment Date, (ii) reduce the remainder of available Tranche 1 to $25.0 million, and extend the availability thereof (x) with respect to Tranche 1C, to be available after the Third Amendment Date until March 31, 2025, and (y) with respect to Tranche 1D, to be available upon the earlier to occur of (1) March 31, 2025 and (2) full borrowing of Tranche 1C, until June 30, 2025, (iii) increase Tranche 2 to $30.0 million, and extend the availability thereof to be available upon the earlier to occur of (1) June 30, 2025, and (2) full borrowing of Tranche 1D, until September 30, 2025, subject to the Tranche 2 Draw Test, (iv) extend the availability of Tranche 3 of $100.0 million, through March 31, 2026, available subject to lender’s investment committee approval, (v) extend the amortization date to September 1, 2025, and extend the timeline to achieve the second amortization extension condition, to June 30, 2025, upon the occurrence of which the amortization date may be extended to March 1, 2026, (vi) amend the financial covenant to commence on October 1, 2024, and require that so long as the Company’s market capitalization is less than $550.0 million, Borrowers shall maintain qualified cash equal to at least 50% of the sum of (x) the amount of outstanding debt under the facility plus (y) Qualified Cash A/P Amount (as defined in the Agreement), or upon the occurrence of certain conditions, 70% of the sum of (x) the amount of outstanding debt under the facility plus (y) Qualified Cash A/P Amount, and (vii) reduce the interest rate to equal the greater of (x) 9.05% or (y) prime rate plus 4.30% (or, upon achieving certain conditions, (y) shall equal prime rate plus 4.05%).
The 2022 Term Loan Facility will mature on August 1, 2026 (the “Maturity Date”), which may be extended until February 1, 2027 if the Company raises at least $175.0 million of unrestricted new net cash proceeds from certain permitted sources after the Closing Date and prior to June 30, 2025, and satisfies certain other specified conditions (the “Extension Condition Two”). The outstanding principal balance of the 2022 Term Loan Facility bears interest at a floating interest rate per annum equal to the greater of either (i) the prime rate as reported in the Wall Street Journal plus 4.30% and (ii) 9.05%; provided, that if the Extension Condition Two is satisfied, the rate of interest in the foregoing clause (i) is prime rate as reported in The Wall Street Journal plus 4.05%. Accrued interest is payable monthly following the funding of each term loan advance. The Company may make payments of interest only, without any loan amortization payments, until September 1, 2025, which date may be extended to (i) March 1, 2026 if Extension Condition Two is achieved. At the end of the interest
only period, the Company is required to begin repayment of the outstanding principal of the 2022 Term Loan Facility in equal monthly installments.
The 2022 Term Loan Agreement contains customary closing and commitment fees, prepayment fees and provisions, events of default and representations, warranties and affirmative and negative covenants, including a financial covenant requiring the Company to maintain certain levels of cash in accounts subject to a control agreement in favor of the Agent (the “Qualified Cash”) at all times commencing from the Closing Date, which includes a cap on the amount of cash that can be held by, among others, certain of our foreign subsidiaries in Australia and the United Kingdom. In addition, the financial covenant under the 2022 Term Loan Agreement requires that beginning on October 1, 2024, the Company shall maintain Qualified Cash in an amount no less than the sum of (1) 50% of the outstanding amount under the 2022 Term Loan Facility, and (2) the amount of the Borrowers’ and Subsidiary Guarantors’ accounts payable that have not been paid within 180 days from the invoice date of the relevant account payable, subject to certain exceptions; provided, upon the occurrence of certain conditions, the Company shall at all times maintain Qualified cash in an amount no less than the sum of (1) 70% of the outstanding amount under the 2022 Term Loan Facility, and (2) the amount of the Borrowers’ and Subsidiary Guarantors’ accounts payable that have not been paid within 180 days from the invoice date of the relevant account payable, subject to certain exceptions; provided, further, that the financial covenant shall not apply on any day that the Company's market capitalization is at least $550.0 million measured on a consecutive 10-business day period immediately prior to such date of measurement and tested on a daily basis. Upon the occurrence of an event of default, including a material adverse effect, subject to certain exceptions, on the Company and ATAI AG’s, taken together, business, operations, properties, assets or financial condition, and subject to any specified cure periods, all amounts owed by the Company may be declared immediately due and payable by the Lenders. As of December 31, 2024, the Company was in compliance with all applicable covenants under the Hercules Loan Agreement.
In addition, the Company is required to make a final payment fee (the “End of Term Charge”) upon the earlier of (i) the Maturity Date, (ii) the date that the Company prepays, in full or in part, the principal balance of the 2022 Term Loan Facility, or (iii) the date that the outstanding balance of the 2022 Term Loan Facility becomes due and payable. The End of Term Charge is 6.95% of the aggregate principal amount of the term loans so repaid or prepaid under the 2022 Term Loan Agreement.
The Company may, at its option, prepay the term loans in full or in part, subject to a prepayment penalty equal to (i) 2.00% of the principal amount prepaid if the prepayment occurs on or prior to the first anniversary of the Closing Date, (ii) 1.0% of the principal amount prepaid if the prepayment occurs after the first anniversary and on or prior to the second anniversary of the Closing Date, and (iii) 0.5% of the principal amount prepaid if the prepayment occurs after the second anniversary and prior to the Maturity Date.
The Company incurred financing expenses related to the Hercules Loan Agreement, which are recorded as an offset to long-term debt on the Company's consolidated balance sheets. These deferred financing costs are being amortized over the term of the debt using the effective interest method, and are included in other income, net in the Company’s consolidated statements of operations. During the years ended December 31, 2024 and 2023, respectively, interest expense included $0.5 million and $0.4 million of amortized deferred financing costs related to the 2022 Term Loan Facility, respectively.
Outstanding debt obligations are as follows (in thousands):
December 31, 2024
December 31, 2023
Principal amount
$
20,000
$
15,000
End of the term charge
1,390
1,042
Less: unamortized issuance discount
(123
)
(204
)
Less: unamortized issuance costs
(51
)
(84
)
Less: unamortized end of term charge
(709
)
(707
)
Net carrying amount
20,507
15,047
Less: current maturities
(6,374
)
-
Long-term debt, net of current maturities and unamortized debt discount and issuance costs
$
14,133
$
15,047
For the years ended December 31, 2024 and 2023, the fair value of the outstanding Hercules debt obligations was $21.5 million and $16.2 million, respectively. The fair value of the Hercules debt obligations represent Level 3 measurements within the fair value hierarchy.
14. Common Stock
All common shareholders have identical rights. Each common share entitles the holder to one vote on all matters submitted to the shareholders for a vote.
All holders of common shares are entitled to receive dividends, as may be declared by the Company’s supervisory board. Upon liquidation, common shareholders will receive distribution on a pro rata basis. As of December 31, 2024 and December 31, 2023, no cash dividends have been declared or paid.
In November 2022, the Company entered into an Open Market Sale Agreement with Jefferies LLC (“Jefferies”), pursuant to which the Company may issue and sell its common shares, nominal value €0.10 per share, having an aggregate offering price of up to $150.0 million, from time to time through an “at the market” equity offering program under which Jefferies will act as sales agent. There have been no sales under the Sales Agreement for the years ended December 31, 2024 and 2023.
15. Stock-Based Compensation
atai Equity Incentive Plans
The Company has stock options and restricted stock units (“RSUs”) outstanding under various equity incentive plans, including the 2021 Incentive Plan, 2020 Incentive Plan, and HSOP Plan (all as defined below).
Atai Life Sciences 2021 Incentive Award Plan
Effective April 23, 2021, the Company adopted and the atai shareholders approved the 2021 Incentive Award Plan (“2021 Incentive Plan”). The 2021 Incentive Plan is administered by the Company’s supervisory board. The plan is intended to encourage ownership of shares by employees, directors, and certain consultants to the Company in order to attract and retain such individuals, to induce them to work for the benefit of the Company or of an affiliate and to provide additional incentive for them to promote the success of the Company. The 2021 Incentive Plan enables the Company to grant incentive stock options or nonqualified stock options, restricted stock awards and other stock-based awards to executive officers, directors and other employees and consultants of the Company.
The Company has reserved up to 63,336,909 shares of common stock, for issuance to executive officers, directors and employees and consultants of the Company pursuant to the 2021 Incentive Plan. In accordance with the evergreen clause in the Company's 2021 Incentive Plan, the number of shares initially available for issuance was increased by 8,296,796 and 8,301,319 shares of common stock effective January 1, 2023 and 2024, respectively. Shares that are expired, terminated, surrendered, or canceled without having been fully exercised will be available for future awards. As of December 31, 2024, 42,963,222 shares were available for future grants under the 2021 Incentive Plan.
Atai Life Sciences 2020 Equity Incentive Plan
Prior to the effective date of the 2021 Incentive Plan, the Company granted equity awards to eligible executive officers, directors, employees and consultants of the Company under the 2020 Employee, Director and Consultant Equity Incentive Plan (as amended from time to time, “2020 Incentive Plan”). As of the effective date of the 2021 Incentive Plan, the Company has not granted any further awards under the 2020 Incentive Plan.
As of December 31, 2024, there were no shares available for future grants under the 2020 Incentive Plan and any shares subject to outstanding stock options originally granted under the 2020 Incentive Plan that terminate, expire or lapse for any reason without the delivery of shares to the holder thereof shall become available for issuance pursuant to the 2021 Incentive
In October 2024, the Company modified all outstanding pre-IPO stock options under the 2020 Equity Incentive Plan to extend the contractual term to be ten years, to align with stock options granted under the 2021 Incentive Plan, which is consistent with prevailing market practices. The Company recognized approximately $3.2 million in non-cash stock-based compensation expense related to this modification, including $2.0 million of research and development expenses and $1.2 million of general and administrative expenses.
Stock Options
The stock options outstanding below consist primarily of both service and performance-based options to purchase common shares of the Company. These stock options have a ten-year contractual term. These awards are subject to the risk of forfeiture until vested by virtue of continued employment or service to the Company.
The following is a summary of stock option activity from December 31, 2023 to December 31, 2024:
Number of
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value (thousands)
Outstanding as of December 31, 2023
39,066,454
$
4.62
5.56
$
6,294
Granted
11,411,894
(i)
1.71
-
-
Exercised
(453,043
)
1.93
-
-
Cancelled or forfeited
(9,982,384
)
4.78
-
-
Outstanding as of December 31, 2024
40,042,921
(ii)
$
3.81
7.29
$
5,119
Options exercisable as of December 31, 2024
24,312,752
$
4.66
6.52
$
4,558
(i) Includes (a) 7,757,000 stock options with 25% vesting on January 1, 2025 and the remaining over a three-year service period, (b) 1,016,094 stock options that will vest upon the satisfaction of specified market-based conditions tied to the price of the Company's publicly traded shares, (c) 1,711,800 stock options that will vest over a four-year service period, (d) 515,000 stock options that will vest after a one-year service period, and (e) 412,000 stock options with 33% vesting on the first anniversary of the grant date and the remaining over a two-year service period.
(ii) Includes 15,730,170 outstanding unvested stock options; (a) 7,574,659 that will continue to vest over a one to four-year service period, (b) 6,046,762 options with 25% vesting on January 1, 2025 and the remaining over a three-year service period, (c) 1,016,094 stock options that will vest upon the satisfaction of specified market-based conditions tied to the price of the Company's publicly traded shares, (d) 992,654 that will continue to vest over a three to four-year service period and upon the satisfaction of specified performance-based vesting conditions, and (e) 100,000 stock options that will continue to vest over a two-year service period and upon the satisfaction of specified market-based conditions tied to the price of the Company's publicly traded shares.
The weighted-average grant-date fair value of options granted during the years ended December 31, 2024 and 2023 was $1.35 and $1.02, respectively.
The Company estimates the fair values of stock options using the Black-Scholes option-pricing model on the date of grant. For the years ended December 31, 2024 and 2023, the assumptions used in the Black-Scholes option pricing model were as follows:
December 31,
Weighted average expected term in years
5.95
6.23
Weighted average expected stock price volatility
95.7%
85.7%
Risk-free interest rate
3.53% - 4.40%
3.50% - 4.18%
Expected dividend yield
0%
0%
For the years ended December 31, 2024 and 2023, the Company recorded stock-based compensation expense related to stock options of $23.5 million and $27.9 million, respectively.
As of December 31, 2024, total unrecognized compensation cost related to the unvested stock options was $19.2 million, which is expected to be recognized over a weighted average period of 2.29 years.
Restricted Stock Units
The Company has granted RSUs to certain of its employees under the 2021 Incentive Plan, as part of its equity compensation program. Pursuant to the terms of the applicable award agreements, each RSU represents the right to receive one share of the Company’s common stock. The restricted stock units noted below consist of service-based awards vesting over a two-year period, subject to the risk of forfeiture until vested by virtue of continued employment or service to the Company. The Company reflects restricted stock units as issued and outstanding common stock when vested and the shares have been delivered to the individual.
The following is a summary of restricted stock unit activity from December 31, 2023 to December 31, 2024:
Number of Restricted Stock Units
Weighted-Average Grant Date Fair Value
Unvested at December 31, 2023
2,944,935
$
1.18
Granted
-
-
Vested
1,830,313
1.18
Forfeited
395,065
1.18
Unvested at December 31, 2024
719,557
$
1.18
For the years ended December 31, 2024 and 2023, the Company recorded stock-based compensation expense related to restricted stock units of $1.8 million and $1.4 million, respectively.
The total fair value of restricted stock units vested during the year ended December 31, 2024 was $2.2 million. As of December 31, 2024, total unrecognized compensation cost related to the unvested restricted stock units was $0.2 million, which is expected to be recognized over a weighted average period of 0.20 years.
Atai Life Sciences Hurdle Share Option Plan
On August 21, 2020, the Partnership (as defined below) approved and implemented an employee stock option plan for selected executives, employees, and consultants of the Partnership (the "Hurdle Share Options Program" or the “HSOP Plan”), which became effective on January 2, 2021, the date the first grants under the HSOP Plan were made (“HSOP Options”). This plan is primarily aimed at German-based executives, employees, and consultants of the Company (collectively as “HSOP Participants”). The purpose of the HSOP Plan is to permit these individuals to indirectly participate in the appreciation in value of the Company through a German law private partnership, ATAI Life Sciences HSOP GbR (the “Partnership”). The HSOP Plan was established under the Partnership Agreement of the Partnership. The HSOP Plan requires the exercise price to be equal to the fair value of the shares on the date of grant.
The Partnership acquired 7,281,376 shares of atai common stock (“HSOP Shares”) pursuant to the HSOP Plan. HSOP Options that are canceled or forfeited without having been fully exercised will be available for future awards. As of December 31, 2024, 257,419 HSOP Options were available for future grants under the HSOP Plan.
The HSOP Plan mimics the economics of a typical stock option plan, however, with the HSOP Shares to which the HSOP Options refer already being issued to the Partnership. Each HSOP Option contains both service and performance-based vesting conditions, including a liquidity-based condition, and gives the holder the option to request the distribution of HSOP Shares under its vested HSOP Options. The grantee is required to pay a nominal value (€0.06 per share) for the shares upon grant (“Nominal Upfront Payment”). The nominal amount paid at the grant date is refundable if the HSOP Options do not vest or are forfeited. Otherwise, the nominal amount is refundable until the later of the occurrence of a Liquidity Event (as defined in the “HSOP Plan”) or the exercise date.
The HSOP Shares issued under the HSOP Plan to the Partnership are indirectly owned by HSOP Participants (being the holders of HSOP Options) via their interest in the Partnership. However, each HSOP Participant signed a nonrevocable power of attorney ceding virtually all rights and decisions, including their rights as shareholders to the Managing Partner (as defined in the Partnership agreement) of the Partnership. HSOP Participants have a forfeitable right to distributions until the HSOP Options vest, at which time the right becomes nonforfeitable. Accordingly, the HSOP Shares issued to the Partnership and allocated to the HSOP Options holders are not considered outstanding for accounting purposes. Therefore, the Company accounted for the Nominal Upfront Payment as an in-substance early exercise provision under ASC 718 as the nominal amount is deducted from the exercise price upon exercise. As of December 31, 2024, the $0.5 million Nominal Upfront Payment was recorded as an Other liability on the consolidated balance sheets. The HSOP Options include a provision that requires the HSOP Options holders pay compensation equal to 2% per annum interest on the unpaid exercise price less the €0.06 nominal amount paid upon grant (“Non-recourse Loan”) upon qualifying events (as defined in the Partnership agreement).
The 2% per annum interest rate is fixed and not linked to something other than a service, performance, or market condition, therefore, the Company accounted for the fixed rate interest charge as an in-substance non-recourse loan in a stock compensation arrangement under ASC 718. In such cases, the rights and obligations embodied in a transfer of equity shares to an employee for a note that provides no recourse to other assets or the employee (other than the correlating shares) are substantially the same as those embodied in a grant of share options. The 2% per annum interest was considered in the valuation of the HSOP Options.
HSOP Options
The HSOP Options outstanding noted below consist of service and performance-based options to request the distribution of HSOP Shares. These HSOP Options have a fifteen-year contractual term. These HSOP Options vest over a three to four-year service period, only if and when a “Liquidity Event” (as defined in the Partnership agreement) occurs within fifteen years of the date of grant. These awards are subject to the risk of forfeiture until vested by virtue of continued employment or service to the Company.
The liquidity-based performance condition contingent upon the achievement of a Liquidity Event was satisfied in June of 2021, therefore, the Company began recognizing expense for all associated options that were previously deemed improbable of vesting.
The following is a summary of stock option activity under the HSOP Plan from December 31, 2023 to December 31, 2024:
Number of
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value (thousands)
Outstanding as of December 31, 2023
6,921,829
$
6.64
12.01
$
-
Granted
-
-
-
-
Exercised
-
-
-
-
Cancelled or forfeited
-
-
-
-
Outstanding as of December 31, 2024
6,921,829
$
6.64
11.01
$
-
Options exercisable as of December 31, 2024
6,921,829
$
6.64
11.01
$
-
The Company estimates the fair values of stock options using the Black-Scholes option-pricing model on the date of grant. As shown above, the Company did not grant any new HSOP options during the year ended December 31, 2024 or 2023. For the years ended December 31, 2024 and 2023, the Company recorded stock-based compensation expense related to HSOP Options of $0.1 million and $3.1 million, respectively.
As of December 31, 2024, there was no unrecognized compensation cost related to any unvested HSOP Options.
Subsidiary Equity Incentive Plans
Certain controlled subsidiaries of the Company adopt their own equity incentive plan (“EIP”). Each EIP is generally structured so that the applicable subsidiary, and its affiliates’ employees, directors, officers and consultants are eligible to receive non-qualified and incentive stock options and restricted stock unit awards under their respective EIP. Standard option grants have time-based vesting requirements, generally vesting over a period of four years with a contractual term of ten years. Such time-based stock options use the Black-Scholes option pricing model to determine grant date fair value.
For the years ended December 31, 2024 and 2023, the Company recorded stock-based compensation expense of $0.2 million and $0.5 million, respectively, in relation to subsidiary EIPs. As of December 31, 2024, there was an immaterial amount of total unrecognized stock-based compensation expense related to unvested EIP awards to employees and non-employee directors expected to be recognized over a weighted-average period of approximately 1.08 years.
Stock-Based Compensation
Stock-based compensation expense is allocated to either Research and development or General and administrative expense on the consolidated statements of operations based on the cost center to which the option holder belongs.
The following table summarizes the total stock-based compensation expense by function for the year ended December 31, 2024 (in thousands):
For the year ended December 31, 2024
atai 2020 and 2021 Incentive Plans
atai
HSOP
Other Subsidiaries Equity Plan
Total
Research and development
$
10,247
$
-
$
$
10,397
General and administrative
14,963
$
15,093
Total stock-based compensation expense
$
25,210
$
$
$
25,490
The following table summarizes the total stock-based compensation expense by function for the year ended December 31, 2023 (in thousands):
For the year ended December 31, 2023
atai 2020 and 2021 Incentive Plans
atai
HSOP
Other Subsidiaries Equity Plan
Total
Research and development
$
12,262
$
-
$
$
12,688
General and administrative
17,203
3,052
$
20,294
Total stock-based compensation expense
$
29,465
$
3,052
$
$
32,982
16. Income Taxes
The component of German and overseas income (loss) from continuing operations before income taxes is as follows (in thousands):
Year Ended
December 31,
Germany
$
(95,551
)
$
19,916
International
(52,854
)
(59,201
)
Total loss before income taxes and loss from equity method investments
$
(148,405
)
$
(39,285
)
The tax benefit from (provision for) income taxes consists of the following (in thousands):
Year Ended
December 31,
Current income tax benefit (provision):
Germany
$
-
$
-
International
(1,016
)
Total current income tax provision:
$
$
(1,016
)
The international current tax provision for December 31, 2024 and 2023 is primarily comprised of corporate income taxes incurred in the United States, United Kingdom and Australia.
A reconciliation of the statutory income tax rate to the Company’s effective income tax rate for continuing operations is as follows (in thousands):
Year Ended
December 31,
Loss before income taxes:
Germany
$
(96,160
)
$
19,916
International
(52,245
)
(59,201
)
Total loss before income taxes:
(148,405
)
(39,286
)
German statutory rate
30.18
%
30.18
%
Expected income tax expense (benefit)
(44,781
)
(11,856
)
US state income taxes, net of US federal tax benefit
$
(1,010
)
$
(3,662
)
International tax rate differential
4,589
5,188
Effect of Australian R&D tax credit incentives
(134
)
Effect of consolidation and deconsolidation of subsidiaries
3,250
Effect of share-based compensation expense
Effect of statutory to US GAAP accounting adjustments
-
-
Compensation Expenses not deductible under IRC Section 162(m)
1,368
Expenses not deductible for tax purposes
Return to Provision and deferred tax adjustments
(10,438
)
10,188
Uncertain Tax Positions
(22
)
Change in German and International valuation allowance
49,547
(5,713
)
Total income tax expense
$
(356
)
$
1,016
Effective income tax rate:
0.24
%
-2.59
%
The Company is headquartered in Berlin, Germany and has subsidiaries in the United States, Australia, the United Kingdom, and Canada as well as minority investments in Canada, Germany, and the United Kingdom. The Company incurred tax losses in most jurisdictions, however, generated taxable profits in certain United States subsidiaries, United Kingdom, and Australian subsidiaries. The weighted-average combined German corporate income tax rate for the year ended December 31, 2024 and 2023 was 30.18% (inclusive a corporate income tax rate of 15.00%, solidarity surcharge of 0.83%, and trade tax rate of 14.35%). The weighted-average United States corporate income tax rate for year ended December 31, 2024 and 2023 was 21.00%. The weighted-average Australia corporate income tax rate for the year ended December 31, 2024 and 2023 was 25.00%. In 2024, atai Therapeutics Pty Ltd, atai Life Sciences Australia Pty ltd, Kures Australia Pty Ltd. and Empathbio Australia Pty Ltd. would not qualify for the reduced rate under the base rate entity ("BRE") test as the amount of passive income exceed 90% of total income. This entity was therefore subject to a 30% tax rate. The weighted-average United Kingdom corporate income tax rate for the year ended December 31, 2024 and 2023 was 25.00%, respectively. The combined Canada federal and provincial corporate income tax rate for the year ended December 31, 2024 was 26.5%.
Deferred income taxes are provided for the effects of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax purposes.
Significant components of deferred tax assets and deferred tax liabilities consisted of the following (in thousands):
Year Ended
December 31,
Deferred tax assets:
German tax loss carryforward
$
55,507
$
49,014
International tax loss carryforward
26,869
16,270
Share compensation
39,975
35,062
Capitalized research and experimentation expenses
31,010
19,312
Operating lease right-of-use liability
-
Other deductible timing differences
1,300
1,127
Total deferred tax assets, gross
154,661
120,798
Valuation allowance
(139,514
)
(89,968
)
Total deferred tax assets, net
$
15,147
$
30,830
Deferred tax liabilities:
Fixed and intangible assets
$
(1,626
)
$
(930
)
Unrealized foreign exchange
(6,571
)
(4,904
)
Outside basis differences in equity and other investments
(2
)
(2
)
Investments
(6,948
)
(24,982
)
Operating lease right-of-use asset
-
(12
)
Total deferred tax liabilities
(15,147
)
(30,830
)
Total deferred tax asset
$
-
$
-
The valuation allowance provided against net deferred tax assets as of December 31, 2024 and 2023 was $139.5 million and $90.0 million, respectively. The valuation allowance recorded at both periods was primarily related to German and international tax loss carryforwards, capitalized research and experimental costs, and stock-based compensation timing differences that, in the judgment of management, are not more-likely-than-not, to be realized. In 2023, a valuation allowance was provided against net deferred tax assets recognized with regard to certain subsidiaries in the United States and United Kingdom where in the judgment of management, are not more-likely-than-not to be realized as a result of a change in tax and finance policies.
As relevant to certain United States subsidiaries, the Tax Cuts and Jobs Act of 2017 requires taxpayers to capitalize and amortize certain research and experimental (“R&D”) expenditures under Internal Revenue Code ("IRC") Section 174 for tax years beginning after December 31, 2021 resulting in the capitalization of certain R&D costs within the Company's tax provision in 2024 and 2023. IRC Section 174 costs attributable to R&D performed in the United States and outside of the United States is amortizable over 5 years and 15 years, respectively. The majority of the Company's R&D costs incurred in 2024 and 2023 was performed outside of the United States and are amortizable over a 15 year period.
In assessing the realizability of deferred tax assets, the Company regularly considers whether it is more-likely-than-not that some or all of the recorded deferred tax assets will be realized. The future realization of deferred tax assets is subject to the existence of sufficient taxable income of the appropriate character (e.g., ordinary income or capital gain) as provided under the carryforward provisions of local tax law. Additionally, deferred tax assets with respect to tax losses in the United States may be subject to limitation as a result of ownership changes within the meaning of Section 382 of the IRC. The Company considers its limited history and historical tax losses, future projected taxable income, including the character and jurisdiction of such income, the scheduled reversal of deferred tax liabilities (including the effect in available carryback and carryforward periods), and tax-planning strategies in making this assessment. In the event that there is a change in the ability to recover deferred tax assets, the Company's income tax provision would increase or decrease in the period in which the assessment is changed.
A Section 382 analysis was undertaken in 2021, which determined that the tax loss carryforwards recorded by one United States subsidiary were able to be utilized in full, offsetting the entity's United States taxable income generated for the year ended December 31, 2021, subject to statutory limitations.
The Company has limited prior earnings history and, due to the early stages of its development and research activities, is expected to generate losses for the next several years and cannot accurately estimate future profit projections beyond such time. As such, management believes that it is more likely than not that the Company will not realize the benefits of such tax loss carryforwards and deductible differences.
As of December 31, 2024 and 2023 the Company did not have any significant unremitted earnings in its foreign subsidiaries.
The Company’s gross tax loss carryforward for tax return purposes are as follows (in thousands):
Year Ended
December 31,
Germany tax losses
$
183,952
$
162,436
International tax losses
97,985
56,691
Total
$
281,937
$
219,127
The Company's tax loss carryforwards have an indefinite carryforward period, however, for tax years 2021 and beyond, in the United States, utilization of certain tax losses may not exceed 80% of United States taxable income in any one year, computed without regard a deduction for tax losses utilized.
The Company's 2020 through 2023 tax returns are currently open to audit. The 2021 tax return for Perception Neuroscience Holdings, Inc. was under routine audit by the Internal Revenue Service and was settled in 2024. The Company is not under examination for any other entity.
Unrecognized tax benefits arise when the estimated benefit recorded in the financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. As of December 31, 2024 and 2023, the Company notes the following unrecognized tax benefits.
Year Ended
December 31,
Beginning of year balance
$
$
-
Decreases - prior year tax positions
(369
)
-
Increases - current year tax positions
-
Ending of year balance
$
-
$
The balances of unrecognized tax benefits as of December 31, 2024 were written down as the company has settled the 2021 audit.
17. Net Loss Per Share
Basic and diluted net loss per share attributable to atai stockholders were calculated as follows (in thousands, except share and per share data):
For the year ended December 31,
Basic and Diluted EPS
Numerator:
Net loss
$
(150,049
)
$
(43,895
)
Net loss attributable to noncontrolling interests
(780
)
(3,671
)
Net loss attributable to ATAI Life Sciences N.V. shareholders - basic and diluted
$
(149,269
)
$
(40,224
)
Denominator:
Weighted average common shares outstanding attributable to ATAI Life Sciences N.V. Stockholders - basic and diluted
160,159,983
158,833,785
Net loss per share attributable to ATAI Life Sciences N.V. shareholders - basic and diluted
$
(0.93
)
$
(0.25
)
HSOP Shares issued to the Partnership and allocated to the HSOP Participants are not considered outstanding for accounting purposes and not included in the calculation of basic weighted average common shares outstanding in the table above because the HSOP Participants have a forfeitable right to distributions until the HSOP Options vest and are exercised, at which time the right becomes nonforfeitable.
The following also represents the maximum amount of outstanding shares of potentially dilutive securities that were excluded from the computation of diluted net loss per share attributable to common shareholders for the periods presented because including them would have been antidilutive:
Potentially dilutive securities to the Company’s common shares:
As of December 31,
Options to purchase common stock
40,042,921
39,066,454
HSOP options to purchase common stock
6,921,829
6,921,829
2018 short-term convertible promissory notes - related parties
2,367,200
2,367,200
2018 short-term convertible promissory notes
3,818,704
3,818,704
Unvested restricted stock units
719,557
2,944,935
53,870,211
55,119,122
18. Commitments and Contingencies
Research and Development Agreements
The Company may enter into contracts in the normal course of business with clinical research organizations for clinical trials, with contract manufacturing organizations for clinical supplies and with other vendors for preclinical studies, supplies and other services and products for operating purposes.
Indemnification
In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors, business partners, supervisory board members, officers and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company, negligence or willful misconduct of the Company, violations of law by the Company, or intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with supervisory directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as supervisory directors, officers or employees. No demands have been made upon the Company to provide indemnification under such agreements, and thus, there are no claims that the Company is aware of that could have a material effect on the Company’s consolidated financial statements.
The Company also maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify the Company’s directors. To date, the Company has not incurred any material costs and has not accrued any liabilities in the consolidated financial statements as a result of these provisions.
Contingencies
From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company is unable to predict the outcome of these matters or the ultimate legal and financial liability, and at this time cannot reasonably estimate the possible loss or range of loss and accordingly has not accrued a related liability. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. Given that such proceedings are subject to uncertainty, there can be no assurance that such legal proceedings, either individually or in the aggregate, will not have a material adverse effect on our business, results of operations, financial condition or cash flows.
19. License Agreements
Otsuka License and Collaboration Agreement
In March 2021, Perception entered into a license and collaboration agreement (the “Otsuka Agreement”) with Otsuka under which Perception granted exclusive rights to Otsuka to develop and commercialize products containing arketamine, known as PCN-101 in Japan for the treatment of any depression, including treatment-resistant depression, or major depressive disorder or any of their related symptoms or conditions at its own cost and expense. Perception retained all rights to PCN-101 outside of Japan.
With the execution of the Otsuka Agreement, Perception received an upfront, non-refundable payment of $20.0 million. Perception is also entitled to receive aggregate payments of up to $35.0 million if certain development and regulatory milestones are achieved for the current or a new intravenous formulation of a product and up to $66.0 million in commercial milestones upon the achievement of certain commercial sales thresholds. Otsuka is obligated to pay Perception a tiered, double-digit royalty on net sales of products containing PCN-101 in Japan, subject to reduction in certain circumstances. In January 2025, Otsuka provided a notice of termination pursuant to the Otsuka Agreement, effective April 24, 2025. Following the effective termination date, the Company will no longer be eligible to receive any milestone payments or royalties pursuant to the Otsuka Agreement.
For the years ended December 31, 2024 and 2023, there were no additional milestones achieved under the Otsuka Agreement. The Company recognized revenues of $0.3 million and $0.3 million related to certain research and development services during the years ended December 31, 2024 and 2023, respectively.
National University Corporation Chiba University License Agreement
In August 2017, Perception entered into a license agreement (the “CHIBA License”), with the National University Corporation Chiba University or CHIBA, relating to Perception’s drug discovery and development initiatives. Under the CHIBA License, Perception has been granted a worldwide exclusive license under certain patents and know-how of CHIBA to research, develop, manufacture, use and commercialize therapeutic products. Perception paid an upfront license fee which was recorded as research and development expense during the year ended December 31, 2017. The Company previously exercised an option and purchased licenses to additional CHIBA technologies and related know-how, and as such the Company is required to pay an annual maintenance fee until the filing of a new drug application with the Food and Drug Administration. In addition, Perception is also required to pay tiered royalties ranging in the low to mid-single-digit on future net sales of licensed products that are covered by a valid claim of a licensed patent, if any. In addition, the Company is obligated to make contingent milestone payments totaling up to $1.2 million upon the achievement of certain clinical or regulatory milestones for each of the first two licensed products and $1.0 million upon the achievement of certain clinical or regulatory milestones for each additional licensed product.
The Company has the right to terminate the CHIBA License for any reason upon a 90-day notice and if CHIBA materially breaches the agreement and fails to remedy any such default within specified cure periods. CHIBA has the right to terminate the CHIBA License if the Company declares bankruptcy, becomes insolvent or otherwise materially breaches the agreement and fails to remedy any such default within specified cure periods. Such termination does not preclude CHIBA’s rights to any milestone payments, royalties, and other payments described above. The CHIBA License will remain in effect until terminated by the parties according to their rights.
During the years ended December 31, 2024 and 2023, respectively, the Company did not make any material payments pursuant to the CHIBA License.
Allergan License Agreement
In February 2020, Recognify entered into an amended and restated license agreement (the "Allergan License Agreement"), with Allergan Sales, LLC, or Allergan, under which Allergan granted Recognify an exclusive (non-exclusive as to know-how), sublicensable and worldwide license under certain patent rights and know-how controlled by Allergan to develop, manufacture and commercialize certain products for use in all fields including the treatment of certain diseases and conditions of the central nervous system.
Under the Allergan License Agreement, Recognify is subject to certain diligence obligations and is obligated to use commercially reasonable efforts, either by itself or through its affiliates or sublicensees, to develop, obtain regulatory approvals for and commercialize certain licensed products, at its sole cost. If Recognify decides to enter into negotiation of a change of control transaction with any third parties or receives a proposal from a third party for such transaction, Allergan has a right of first negotiation to negotiate the terms and conditions for acquisition of Recognify or its assets.
As partial consideration for the rights granted by Allergan to Recognify under the Allergan License Agreement, Recognify paid Allergan an upfront payment of $0.5 million which was paid prior to the Company’s acquisition of Recognify in November 2020. Recognify is also responsible for paying Allergan a mid-single-digit royalty on the net sales of the licensed products. In addition, Recognify is obligated to pay Allergan a low teen percentage of the non-royalty sublicense payments it receives from a third party receiving a sublicense to practice the rights licensed to Recognify under the Allergan License Agreement. Upon the occurrence of certain change of control transactions involving Recognify, or sale, assignment or transfer (other than sublicense) to a third party of any rights licensed to Recognify under the
Allergan License Agreement, Recognify is required to share with Allergan a low teen percentage of the proceeds it receives from such transactions.
Recognify has the right to terminate the Allergan License Agreement for any reason, subject to a specified notice period, and if Allergan materially breaches the agreement and fails to remedy any such default within specified cure periods. Allergan has the right to terminate the Allergan License Agreement if Recognify declares bankruptcy, becomes insolvent or otherwise materially breaches the agreement and fails to remedy any such default within the specified cure periods. Such termination does not preclude Allergan’s rights to any milestone payments, royalties, or other payments described above. The Allergan License Agreement will remain in effect until terminated by the parties according to their rights.
During the years ended December 31, 2024 and 2023, respectively, the Company did not make any material payments pursuant to the Allergan License Agreement.
Columbia Stock Purchase and License Agreement
In June 2020, Kures entered into a license agreement (the “License Agreement”) with Trustees of Columbia University (“Columbia”), pursuant to which, Kures obtained an exclusive license under certain patents and technical information to discover, develop, manufacture, use and commercialize such patents or other products in all uses and applications (“Columbia IP”). In addition, in consideration for the rights to the Columbia IP, Kures entered into a Stock Purchase Agreement (the “SPA”) with Columbia in contemplation of the License Agreement. Pursuant to the SPA, Kures issued to Columbia certain shares of the Kures’ capital stock, representing 5.0% of Kures common stock on a fully diluted basis. Furthermore, the SPA provided that from time to time, Kures shall issue to Columbia additional shares of Kures’ common stock, at a per share price equal to the then fair market value of each such share, which price shall be deemed to have been paid in partial consideration for the execution, delivery and performance by Columbia of the License Agreement, such that the common stock held by Columbia shall equal to 5.0% of the common stock on a fully diluted basis, at all times up to and through the achievement of certain funding threshold.
In April 2022, Kures issued shares of Series A-2 Preferred Stock to certain investors upon the achievement of Series A-2 milestone events. Accordingly, the Company issued certain anti-dilution common stock to Columbia worth $0.3 million. The Company expensed the cost incurred for acquiring license as acquired in-process research and development expense at inception. Since, the additional anti-dilution shares were issued as partial consideration towards the same license arrangement, the $0.4 million cost of such additional share was also expensed as acquired in-process research and development expense during the year ended December 31, 2022.
In October 2024, in connection with the dissolution of Kures, Inc., Kures and Columbia mutually agreed to terminate the existing License Agreement ("the Termination Agreement"). Under the Termination Agreement, Kures assigned to Columbia all of Kures' intellectual property rights that were filed during the term of the License Agreement and agreed that all licenses granted to Kures by Columbia are terminated. In exchange, Kures received consideration through the relief and discharge of an immaterial amount of outstanding payment obligations due to Columbia.
During the years ended December 31, 2024 and 2023, Kures did not make any material payments in connection with the Columbia agreement.
Dalriada License Agreement
In December 2021, Invyxis, Inc., or Invyxis, entered into an exclusive services and license agreement (the “Dalriada License Agreement”) with Dalriada Drug Discovery Inc. (“Dalriada”). Under the Dalriada License Agreement, Dalriada is to exclusively collaborate with Invyxis to develop products, services and processes with the specific purpose of generating products consisting of new chemical entities. Invyxis will pay Dalriada up to $12.8 million in service fees for research and support services. In May 2023, the Company executed an amendment to Dalriada License Agreement, which reduced the amount Invyxis will pay Dalriada in service fees to $7.4 million. In addition, Invyxis will pay Dalriada development milestone payments and low single digit royalty payments based on net product sales. The Company has the right, but not the obligation, to settle future royalty payments based on net product sales with the our common shares. Invyxis, our wholly-owned subsidiary, and Dalriada will determine the equity settlement based on a price per share determined by both parties.
In December 2022, the Company executed an amendment to the Dalriada License Agreement, which reduced the upfront deposit from $1.1 million to $0.5 million. As such, the remaining $0.6 million was applied against research and development expense incurred. The Company will expense the remaining deposit as the services are performed as a component of research and development expense in the consolidated statements of operations.
During the years ended December 31, 2024 and 2023, the Company recorded $0.4 and $2.0 million, respectively as research and development expense. During the years ended December 31, 2024 and 2023 Invyxis made no other service fee payments to Dalriada.
20. Related Party Transactions
atai Formation
In connection with the formation of atai in 2018, the Company entered into a series of transactions with its shareholders, Apeiron, Galaxy Group Investments LLC. (“Galaxy”) and HCS Beteiligungsgesellschaft mbH (“HCS”) whereby these shareholders contributed their investments in COMPASS, Innoplexus and Juvenescence to the Company in exchange for atai’s common stock of equivalent value. Apeiron is the family office of the Company’s founder who owns 20.1% and 19.7% of the outstanding common stock in the Company as of December 31, 2024 and 2023, respectively.
Consulting Agreement with Mr. Angermayer
In January 2021, the Company entered into a consulting agreement, (the “2021 Consulting Agreement”), with Mr. Angermayer, one of the Company’s co-founders and supervisory director. Apeiron is the family office and merchant banking business of Mr. Angermayer. Pursuant to the Consulting Agreement, Mr. Angermayer agreed to render services to the Company on business and financing strategies in exchange for 624,000 shares under the 2020 Incentive Plan upon achievement of certain performance targets.
In January 2024, the Company and Mr. Angermayer entered into the Termination and New Consultancy Agreement (the “2024 Consultancy Agreement"). Pursuant to the 2024 Consultancy Agreement, the parties agreed to terminate the 2021 Consulting Agreement (as defined above) between ATAI AG and Mr. Angermayer and enter into a new consultancy agreement between the Company and Mr. Angermayer to, among other things, extend the term of the 2021 Consultancy Agreement to January 5, 2028, increase the services to include various business objectives (including related to business and finance, communication and investor relations), and provide for the grant of an option to purchase 1,658,094 shares of the Company that vests over four years in part based on continued service and in part based on the Company's total shareholder return compared to the four-year total shareholder return of the companies comprising the XBI.
As a result of the 2024 Consulting Agreement, for the year ended December 31, 2024, the Company recognized $0.4 million of stock-based compensation included in general and administrative expense in its consolidated statements of operations. Additionally, as a result of the Consulting Agreement, for the year ended December 31, 2023, the Company recorded $0.7 million of stock-based compensation included in general and administrative expense in its consolidated statements of operations.
For the years ended December 31, 2024 and 2023, the Company recorded $0.3 and $0.6 million, respectively, of stock-based compensation included in general and administrative expense in its consolidated statements of operations related to Mr. Angermayer's service as Chairman of the Company's supervisory board.
21. Defined Contribution Plan
The Company has a defined contribution retirement savings plan under Section 401(k) of the Internal Revenue Code. This plan allows eligible employees to defer a portion of their annual compensation. Employees may make contributions by having the Company withhold a percentage of their salary up to the Internal Revenue Service annual limit. The Company recorded $0.5 million and $0.5 million of related compensation expense for the years ended December 31, 2024 and 2023.
22. Corporate Restructurings
2024 Restructuring
In February 2024, the Company restructured its workforce and eliminated approximately 10% of its global workforce in order to more effectively allocate its research and development and other resources supporting the revised business and program priorities and to reduce operational costs.
Restructuring expense related to the workforce reduction incurred during the year ended December 31, 2024, resulted in $2.0 million of restructuring expense, which consisted of $1.6 million of cash expenditures for severance and other employee separation-related costs and $0.4 million of non-cash stock-based compensation expense. Of the restructuring expense, for the year ended December 31, 2024, $0.3 million and $1.7 million were recorded in research and development expenses and general and administrative expenses, respectively, in the consolidated statements of operations.
As of December 31, 2024, all restructuring liabilities had been paid in full and there were no restructuring liabilities included in accrued expenses on the Company's consolidated balance sheets.
2023 Restructuring
In February 2023, the Company restructured its workforce and eliminated approximately 30% of its global workforce in order to more effectively allocate its research and development and other resources supporting the revised business and program priorities and to reduce operational costs.
Restructuring expense related to the workforce reduction incurred during the year ended December 31, 2023, resulted in $3.2 million of restructuring expense, which consisted of $3.0 million of cash expenditures for severance and other employee separation-related costs and $0.2 million of non-cash stock-based compensation expense. Of the restructuring expense, for the year ended December 31, 2023, $1.8 million and $1.4 million were recorded in research and development expenses and general and administrative expenses, respectively, in the consolidated statements of operations.
As of December 31, 2023, all restructuring liabilities had been paid in full and there were no restructuring liabilities included in accrued expenses on the Company's consolidated balance sheets.
A reconciliation of the restructuring charges and related payments for the years ended December 31, 2024 and 2023 is as follows (in thousands):
December 31, 2024
December 31, 2023
Restructuring costs expensed during the period
$
2,029
$
3,206
Non-cash impact of stock-based compensation
(358
)
(195
)
Cash payments of restructuring liabilities, net
(1,671
)
(3,011
)
Ending Restructuring liability
$
-
$
-
23. Segment Reporting
The Company's operations are organized into one operating and reportable segment dedicated to the global discovery, research, development, and commercialization of highly effective mental health treatments to transform patient outcomes. The Company's Chief Executive Officer is the Company's Chief Operating Decision Maker (“CODM”) and makes key operating decisions and assesses performance on a consolidated basis. The Company's determination that it operates as a single operating segment is consistent with the financial information regularly reviewed by the CODM.
The Company's primary operations are located in the United States, Germany, and Canada. The measure of segment assets is reported on the Company's consolidated balance sheets as total assets. Refer to Note 9 for more information regarding the Company's property and equipment assets by geographic region.
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 does recognize revenue through its licenses of intellectual property and manufacturing contracts. Refer to Note 19 for more information.
For the Company's single reportable segment, the CODM uses net loss that is reported on the consolidated statements of operations to allocate resources, predominantly during the annual budget and forecasting process. The CODM also uses non-financial inputs and qualitative information to evaluate the Company's performance, establish compensation, monitor budget versus actual results, and decide the level of investment in the Company's various operating activities and other capital allocation activities.
The Company's reportable segment net loss, including significant segment expenses, for the years ended December 31, 2024 and 2023 consisted of the following (in thousands):
For the year ended December 31,
License revenue
$
$
Research ad Development
VLS-01
10,606
9,055
EMP-01
1,527
2,635
RL-007
10,962
8,394
Discovery (Non-hallucinogenic)
2,649
Other programs(i)
5,994
12,939
Personnel and employee-related expenses(ii)
10,545
14,054
Non-cash share-based compensation expense
10,390
12,361
Depreciation
-
Other Expenses(iii)
2,597
2,621
General and Administrative
Personnel and employee-related expenses(ii)
12,493
14,888
Non-cash share-based compensation expense
14,767
20,183
Accounting and Tax Fees
5,057
6,790
Legal & Intellectual Property Fees
5,895
8,770
Insurance
2,328
3,692
Depreciation and Amortization
Other Expenses(iii)
6,715
8,952
Interest income
1,847
Interest expense
(3,124
)
(2,656
)
Other segment items(iv)
(45,012
)
82,385
Segment and consolidated net loss
$
(150,049
)
$
(43,895
)
(i) Includes direct expenses related to PCN-101, KUR-101, RLS-01, EGX-121, IGX, enabling technologies, and other discovery programs. (ii) Includes labor, benefits, and personnel-based restructuring expenses. (iii) Includes, professional consulting services, facilities costs, technology and communication costs, and miscellaneous fees. (iv) Includes benefit from research and development tax credit, change in fair value of assets and liabilities, net, gain on settlement of pre-existing contract, impairment of other investments, gain on deconsolidation of a variable interest entity, net, gain on dissolution of a variable interest entity, foreign exchange gains (losses), net, benefit (provision) for income taxes, and losses from investments in equity method investees, net of tax.
24. Subsequent Events
Hercules 4th Amendment
In January 2025, the Borrowers and certain Subsidiary Guarantors entered into the Fourth Amendment with the Lenders and Hercules, in its capacity as the Agent, which amended that certain Loan and Security Agreement, dated August 9, 2022 (as amended by the First Amendment, the Second Amendment, the Third Amendment, and the Fourth Amendment the “2022 Term Loan Agreement”) to, among other things, consent to the conversion of ATAI AG from a German stock corporation (Aktiengesellschaft - AG) into a German limited liability company (Gesellschaft mit beschränkter Haftung - GmbH).
Proposed Public Offering of Common Shares
In February 2025, the Company issued and sold an aggregate principal amount of $55.0 million of its common shares pursuant to an underwritten public offering. The Company granted the underwriter a 30-day option to purchase up to an additional $8.3 million of common shares. The underwriter elected to purchase $8.3 million of additional common shares pursuant to the option granted by the Company. A related party participated in the public offering, purchasing 10,835,718 common shares for $22.8 million. All common shares sold in the offering were sold by the Company. The Company intends to use the net proceeds from this offering for general corporate purposes, including for working capital and to advance the clinical development of its product candidates and programs.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Limitations on Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024. Based on this evaluation our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2024 at the reasonable assurance level.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of its evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2024.
Attestation Report of the Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to an exemption established by the JOBS Act for “emerging growth companies.”
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2024, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(d) or 15d-15(d) of the Exchange Act) identified in management’s evaluation during the quarter ended December 31, 2024 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
(a) Disclosure in lieu of reporting on a Current Report on Form 8-K.
None.
(b) Insider trading arrangements and policies.
During the three months ended December 31, 2024, no director or “officer” (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
Except as set forth below, the information required by this Item is incorporated by reference from our definitive proxy statement for our 2025 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024.
We have adopted a written code of conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions. A current copy of the code is posted in the "Investors" section of our website under "Corporate Governance," which is located at https://ir.atai.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our code of conduct, as well as Nasdaq’s requirement to disclose waivers with respect to directors and executive officers, by posting such information on our website at the address and location specified in the preceding sentence. The information contained on our website is not incorporated by reference into this Form 10-K. We granted no waivers under our code of conduct in 2024.
Information About Our Directors and Executive Officers
The following table provides information regarding our executive officers and members of our supervisory board of directors (ages as of the date of this Annual Report on Form 10-K):
Name
Age
Position at atai
Principal Employment
Srinivas Rao, Ph.D, M.D.
Chief Executive Officer
Same
Anne Johnson
Chief Financial Officer
Same
Sahil Kirpekar, M.D.
Chief Business Officer
Same
Glenn Short, Ph.D
Chief Scientific Officer
Same
Kevin Craig, M.D.
Chief Medical Officer
Same
Gerd Kochendoerfer, Ph.D.
Chief Operating Officer
Same
Christian Angermayer
Founder and Chairman
Founder of Apeiron Investment Group, an investment company
Sabrina Martucci Johnson
Supervisory Director
Founder and Chief Executive Officer of Daré Bioscience, Inc., a biopharmaceutical company
Amir Kalali, M.D.
Supervisory Director
Professor of Psychiatry at the University of California San Diego
Andrea Heslin Smiley
Supervisory Director
President and Chief Executive Officer of VMS BioMarketing, a biomarketing company
Scott Braunstein, M.D.
Supervisory Director
Founder, In Situ Healthcare Consulting
Laurent Fischer, M.D.
Supervisory Director
Chief Executive Officer and President of Adverum Biotechnologies, a biopharmaceutical company

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference from our definitive proxy statement for our 2025 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item is incorporated by reference from our definitive proxy statement for our 2025 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated by reference from our definitive proxy statement for our 2025 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services.
The information required by this Item is incorporated by reference from our definitive proxy statement for our 2025 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of this report
(a)(1) Financial Statements
Information in response to this Item is included in Part II, Item 8 of this Annual Report.
(a)(2) Financial Statement Schedules
All financial schedules have been omitted because the required information is either presented in the consolidated financial statements filed as part of this Annual Report or the notes thereto or is not applicable or required.
(a)(3) Exhibits
The following is a list of exhibits filed as part of this Annual Report.
Incorporated by Reference
Exhibit
Number
Description
Form
File No.
Exhibit
Filing
Date
Filed/Furnished
Herewith
1.1
Open Market Sale Agreement, dated as of November 10, 2022, between ATAI Life Sciences N.V. and Jefferies LLC
8-K
001-40493
1.1
11/10/2022
3.1
Articles of Association of ATAI Life Sciences N.V. (translated into English), currently in effect
S-3
333-265970
3.1
7/01/2022
3.2
Rules of the Management Board of ATAI Life Sciences N.V.
S-1/A
333- 255383
3.2
6/11/2021
3.3
Rules of the Supervisory Board of ATAI Life Sciences N.V.
S-1/A
333- 255383
3.3
6/11/2021
4.1
Form of Share Issue Deed
S-1/A
333- 255383
3.4
6/11/2021
4.2
Description of Securities
*
10.1#
Separation Agreement, dated May 14, 2024, by and between the Registrant and Florian Brand
8-K
001-40493
10.1
5/15/2024
10.2#
Second Amended and Restated Employment Agreement, dated January 8, 2025, between atai Life Sciences US, Inc. and Srinivas Rao
8-K
001-40493
10.1
1/10/2025
10.3#
Secondment Letter, dated October 17, 2024, by and between atai Life Sciences US Inc. and Srinivas Rao
*
10.4#
Amended and Restated Employment Agreement, dated May 10, 2023, by and between atai Life Sciences US Inc. and Anne Johnson
*
10.5#
Employment Agreement, dated November 11, 2025, by and between Gerd Kochendoerfer and ATAI Life Sciences AG
8-K
001-40493
10.2
1/10/2025
10.6#
Form of Indemnification Agreement between ATAI Life Sciences N.V. and members of the Supervisory Board or Management
S-1/A
333- 255383
10.4
6/11/2021
10.7#
Atai Life Sciences N.V. 2021 Incentive Award Plan
S-1/A
333- 255383
10.5
6/11/2021
10.8#
Form of Option Award Agreement under 2021 Incentive Award Plan
S-1/A
333- 255383
10.17
6/11/2021
10.9#
Form of Restricted Stock Award Agreement under 2021 Incentive Award Plan
S-1/A
333- 255383
10.18
6/11/2021
10.10#
Form of Restricted Stock Unit Agreement under 2021 Incentive Award Plan
S-1/A
333- 255383
10.19
6/11/2021
10.11#
2020 Employee, Director, and Consultant Equity Incentive Plan
S-1/A
333- 255383
10.20
6/11/2021
10.12#
Form of Stock Option Agreement under 2020 Employee, Director and Consultant Equity Incentive Plan
S-1/A
333- 255383
10.21
6/11/2021
10.13#
Remuneration Policy for the Board of Supervisory Directors of ATAI Life Sciences N.V.
S-1/A
333- 255383
10.23
6/11/2021
10.14#
Remuneration policy for the Board of Managing Directors of ATAI Life Sciences N.V.
S-1/A
333- 255383
10.24
6/11/2021
10.15
License Agreement, dated as of August 14, 2017, between National University Corporation Chiba University and Perception Neurosciences, Inc., as amended by Amendment No. 1, dated as of August 7, 2018, the Second Amendment, dated as of March 17, 2020, and Amendment No. 3, dated as of March 5, 2021.
S-1
333-255383
10.8
4/20/2021
10.16
Stock Purchase Agreement, dated as of June 8, 2020, between The Trustees of Columbia University in the City of New York and Kures, Inc.
S-1
333-255383
10.9
4/20/2021
10.17
Preferred Stock Purchase Agreement, dated as of August 29, 2019, between GABA Therapeutics, Inc. and ATAI Life Sciences AG, as amended by the Omnibus Amendment, dated as of October 30, 2020
S-1
333-255383
10.11
4/20/2021
10.18
Series A Preferred Stock Purchase Agreement, dated as of December 27, 2019, among DemeRx IB, Inc., ATAI Life Sciences AG and DemeRx, Inc.
S-1
333-255383
10.13
4/20/2021
10.19
Series A Preferred Stock Purchase Agreement, dated as of November 6, 2020, between FSV7, Inc. and ATAI Life Sciences AG
S-1/A
333-255383
10.13
5/27/2021
10.20
Amended and Restated License Agreement, dated as of February 21, 2020, between Allergan Sales, LLC and FSV7, LLC
S-1
333-255383
10.14
4/20/2021
10.21
License and Collaboration Agreement, dated as of March 11, 2021, between Perception Neuroscience, Inc. and Otsuka Pharmaceutical Co., Ltd.
S-1/A
333-255383
10.16
5/27/2021
10.22
Partnership Agreement of ATAI Life Sciences HSOP GbR, dated August 21, 2020
S-1/A
333-255383
10.22
6/11/2021
10.23
Amendment to Preferred Stock Purchase Agreement, dated as of May 15, 2021, by and among ATAI Life Sciences AG, GABA Therapeutics, LLC and GABA Therapeutics, Inc.
S-1/A
333-255383
10.26
6/4/2021
10.24
Loan and Security Agreement between the Registrant, ATAI Life Sciences AG, certain of the Registrant’s subsidiaries from time to time party thereto as a guarantor, Hercules Capital, Inc., and the several banks and other financial institutions or entities from time to time party thereto, and Hercules Capital, Inc. as administrative agent and collateral agent for itself and the lenders, dated August 9, 2022
10-Q
001-40493
10.1
8/15/2022
10.25
First Amendment to Loan and Security Agreement between the Registrant, ATAI Life Sciences AG, certain of the Registrant’s subsidiaries from time to time party thereto as a guarantor, Hercules Capital, Inc., and the several banks and other financial institutions or entities from time to time party thereto, and Hercules Capital, Inc. as administrative agent and collateral agent for itself and the lenders, dated March 13, 2023
10-K
001-40493
10.27
3/24/2023
10.26
Second Amendment to the Loan and Security Agreement between the Registrant, ATAI Life Sciences AG, certain of the Registrant’s subsidiaries from time to time party thereto as a guarantor, Hercules Capital, Inc., and the several banks and other financial institutions or entities from time to time party thereto, and Hercules Capital, Inc. as administrative agent and collateral agent for itself and the lenders, dated May 26, 2023
8-K
001-40493
10.1
5/31/2023
10.27
Third Amendment to the Loan and Security Agreement between the Registrant, ATAI Life Sciences AG, certain of the Registrant’s subsidiaries from time to time party thereto as a guarantor, Hercules Capital, Inc., and the several banks and other financial institutions or entities from time to time party thereto, and Hercules Capital, Inc. as administrative agent and collateral agent for itself and the lenders, dated August 14, 2024.
8-K
001-40493
10.1
8/14/2024
10.28
Consent and Fourth Amendment to the Loan and Security Agreement between the Registrant, ATAI Life Sciences AG, certain of the Registrant’s subsidiaries from time to time party thereto as a guarantor, Hercules Capital, Inc., and the several banks and other financial institutions or entities from time to time party thereto, and Hercules Capital, Inc. as administrative agent and collateral agent for itself and the lenders, dated January 6, 2025.
*
10.29
Amendment to Series A Preferred Stock Purchase Agreement, dated as of May 25, 2021, by and among ATAI Life Sciences AG and FSV7, Inc.
10-K
001-40493
10.28
3/4/2023
10.30
Second Amendment to Series A Preferred Stock Purchase Agreement, dated as of September 17, 2021, by and among ATAI Life Sciences AG and Recognify Life Sciences Inc., f/k/a FSV7, Inc.
10-K
001-40493
10.29
3/4/2023
10.31
Omnibus Amendment to Series A Preferred Stock Purchase Agreement, dated as of October 5, 2022, by and among ATAI Life Sciences AG and Recognify Life Sciences, Inc., f/k/a FSV7, Inc.
10-K
001-40493
10.30
3/4/2023
10.32#
Separation Agreement between Mr. Stephen Bardin and atai Life Sciences N.V., dated February 6, 2024
8-K
001-40493
10.1
2/6/2024
10.33#
Termination and New Consultancy Agreement, by and among the Company, ATAI AG and Christian Angermayer, dated January 7, 2024
8-K
001-40493
10.1
1/9/2024
10.34
Fourth Amendment to Series A Preferred Stock Purchase Agreement by and among atai Life Sciences AG, Recognify Life Sciences, Inc., f/k/a FSV7, Inc., and the Shareholders (as listed on Exhibit A)
10-Q
001-40493
10.2
11/14/2023
10.35
Amended and Restated Subscription and Shareholders’ Agreement Relating to Beckley Psytech Limited, dated January 3, 2024, by and among the Company, Beckley Psytech Limited, and certain other persons set forth therein
8-K
001-40493
10.1
1/4/2024
10.36
Share Purchase Deed, dated January 18, 2024, by and among the Company, Beckley Psytech Limited, and certain other persons set forth therein
8-K
001-40493
10.1
1/23/2024
10.37
Fourth Amendment to Series A Preferred Stock Purchase Agreement by and among atai Life Sciences AG, Recognify Life Sciences, Inc., f/k/a FSV7, Inc., and the Shareholders (as listed on Exhibit A)
10-Q
001-40493
10.2
5/15/2024
19.1
Insider Trading Compliance Policy
*
21.1
List of Subsidiaries
*
23.1
Consent of Deloitte & Touche LLP, an independent registered public accounting firm
*
31.1
Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a)
*
31.2
Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a)
*
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350
**
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350
**
97.1
Policy for Recovery of Erroneously Awarded Compensation
10-K
001-40493
97.1
3/28/2024
101.INS
Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K
*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
*	Filed herewith.
**	Furnished herewith.
#	Management contract or compensatory plan, contract or arrangement.
	Certain confidential portions (indicated by brackets and asterisks) have been omitted from this exhibit pursuant to 		Regulation S-K, Item 601(b)(10)(iv).