SEC Form 10-Q filed by ATAI Life Sciences N.V.

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

 

For the quarterly period ended March 31, 2024 or

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

 

For the transition period from __________ to __________

 

Commission File Number: 001-40493

 

 

ATAI Life Sciences N.V.

(Exact name of registrant as specified in its charter)

 

The Netherlands		Not Applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
ATAI Life Sciences N.V. Wallstraße 16, 10179 Berlin, Germany		Not Applicable
(Address of principal executive offices)		(Zip Code)

 

+49 89 2153 9035

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common shares, par value €0.10 per share		ATAI		The Nasdaq Stock Market LLC (Nasdaq Global Market)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of May 8, 2024, the registrant had 167,406,070 common shares, par value €0.10 per share, outstanding.

 

 

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ATAI Life Sciences N.V.

 

FORM 10-Q

 

Table of Contents

 

		Page
Forward-Looking Statements		1
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2024 and 2023	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	56
PART II. OTHER INFORMATION		58
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
	Signatures	61

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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

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

 

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

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

 

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

 

GENERAL

 

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

 

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

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

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

 

ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(unaudited)

 

		March 31,				December 31,
		2024				2023
Assets
Current assets:
Cash and cash equivalents		$	18,867			$	45,034
Securities carried at fair value			87,379				109,223
Short term restricted cash for other investments			5,000				—
Committed investment funds			—				25,000
Prepaid expenses and other current assets			5,732				5,830
Short term notes receivable - related party, net			522				505
Total current assets			117,500				185,592
Long term restricted cash for other investments			10,000				—
Property and equipment, net			920				981
Operating lease right-of-use asset, net			1,115				1,223
Other investments held at fair value			90,205				89,825
Other investments			32,807				1,838
Long term notes receivable - related parties, net			98				97
Convertible notes receivable - related party			13,902				11,202
Other assets			2,574				2,720
Total assets		$	269,121			$	293,478
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	3,843			$	4,589
Accrued liabilities			10,926				15,256
Current portion of lease liability			244				275
Total current liabilities			15,013				20,120
Contingent consideration liability - related parties			607				620
Contingent consideration liability			1,406				1,637
Noncurrent portion of lease liability			907				990
Convertible promissory notes - related parties			159				164
Convertible promissory notes and derivative liability			4,357				2,666
Long term debt, net			15,140				15,047
Other liabilities			8,275				7,918
Total liabilities		$	45,864			$	49,162
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common stock, €0.10 par value ($0.11 and $0.12 par value at March 31, 2024 and December 31, 2023, respectively); 750,000,000 shares authorized at March 31, 2024 and December 31, 2023, respectively; 166,274,426 and 166,026,396 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively			18,600				18,573
Additional paid-in capital			800,520				794,787
Accumulated other comprehensive loss			(18,925	)			(19,460	)
Accumulated deficit			(577,651	)			(550,938	)
Total stockholders’ equity attributable to ATAI Life Sciences N.V. stockholders			222,544				242,962
Noncontrolling interests			713				1,354
Total stockholders’ equity			223,257				244,316
Total liabilities and stockholders’ equity		$	269,121			$	293,478

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

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ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)

 

		For the three months ended March 31,
		2024				2023
License revenue		$	—			$	37
Operating expenses:
Research and development			11,530				19,281
General and administrative			12,555				13,970
Total operating expenses			24,085				33,251
Loss from operations			(24,085	)			(33,214	)
Other income (expense), net:
Interest income			307				275
Interest expense			(687	)			(622	)
Benefit from research and development tax credit			205				—
Change in fair value of assets and liabilities, net			(1,200	)			999
Foreign exchange loss, net			(216	)			(837	)
Other income (expense), net			(5	)			243
Total other income (expense), net			(1,596	)			58
Loss before income taxes			(25,681	)			(33,156	)
Benefit from (provision for) income taxes			4				(165	)
Losses from investments in equity method investees, net of tax			(1,701	)			(1,033	)
Net loss			(27,378	)			(34,354	)
Net loss attributable to noncontrolling interests			(665	)			(1,219	)
Net loss attributable to ATAI Life Sciences N.V. stockholders		$	(26,713	)		$	(33,135	)
Net loss per share attributable to ATAI Life Sciences N.V.    stockholders — basic and diluted		$	(0.17	)		$	(0.21	)
Weighted average common shares outstanding attributable to ATAI    Life Sciences N.V. stockholders — basic and diluted			158,891,067				155,792,490

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

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ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

(unaudited)

 

		For the three months ended March 31,
		2024				2023
Net loss		$	(27,378	)		$	(34,354	)
Other comprehensive income:
Foreign currency translation adjustments, net of tax			535				879
Comprehensive loss		$	(26,843	)		$	(33,475	)
Net loss attributable to noncontrolling interests			(665	)			(1,219	)
Foreign currency translation adjustments, net of tax attributable to noncontrolling interests			24				8
Comprehensive loss attributable to noncontrolling interests			(641	)			(1,211	)
Comprehensive loss attributable to ATAI Life Sciences    N.V. stockholders		$	(26,202	)		$	(32,264	)

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

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ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(unaudited)

 

																						Total
														Accumulated								Stockholders’
										Additional				Other								Equity Attributable to								Total
		Common Stock								Paid-In				Comprehensive				Accumulated				ATAI Life Sciences N.V.				Noncontrolling				Stockholders’
		Shares				Amount				Capital				Loss				Deficit				Stockholders				Interests				Equity
Balances at December 31, 2023			166,026,396			$	18,573			$	794,787			$	(19,460	)		$	(550,938	)		$	242,962			$	1,354			$	244,316
Issuance of shares upon restricted stock units vest			248,030				27				(27	)			—				—				—				—				—
Stock-based compensation expense			—				—				5,760				—				—				5,760				—				5,760
Foreign currency translation adjustment, net of tax			—				—				—				535				—				535				24				559
Net loss			—				—				—				—				(26,713	)			(26,713	)			(665	)			(27,378	)
Balances at March 31, 2024			166,274,426			$	18,600			$	800,520			$	(18,925	)		$	(577,651	)		$	222,544			$	713			$	223,257

 

																										Total
																		Accumulated								Stockholders’
										Additional				Share				Other								Equity Attributable to								Total
		Common Stock								Paid-In				Subscriptions				Comprehensive				Accumulated				ATAI Life Sciences N.V.				Noncontrolling				Stockholders’
		Shares				Amount				Capital				Receivable				Loss				Deficit				Stockholders				Interests				Equity
Balances at December 31, 2022			165,935,914			$	18,562			$	774,092			$	(24	)		$	(21,702	)		$	(510,188	)		$	260,740			$	5,026			$	265,766
Issuance of shares upon exercise of stock options			74,562				9				172				—				—				—				181				—				181
Settlement of issuance of shares upon    exercise of stock options			—				—				—				24				—				—				24				—				24
Stock-based compensation expense			—				—				8,662				—				—				—				8,662				—				8,662
Adjustment to accumulated deficit (pursuant to adoption of ASU 2016-13)			—				—				—				—				—				(526	)			(526	)			—				(526	)
Foreign currency translation adjustment,    net of tax			—				—				—				—				879				—				879				8				887
Net loss			—				—				—				—				—				(33,135	)			(33,135	)			(1,219	)			(34,354	)
Balances at March 31, 2023			166,010,476			$	18,571			$	782,926			$	—			$	(20,823	)		$	(543,849	)		$	236,825			$	3,815			$	240,640

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

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ATAI LIFE SCIENCES N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(unaudited)

 

 

		For the three months ended March 31,
		2024				2023
Cash flows from operating activities
Net loss		$	(27,378	)		$	(34,354	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of long term assets			83				65
Noncash lease expense			83				102
Amortization of debt discount			98				82
Stock-based compensation expense			5,760				8,662
Noncash change in the fair value of assets and liabilities, net			1,827				(999	)
Unrealized foreign exchange loss			194				832
Losses from investments in equity method investees, net of tax			1,701				1,033
Other			72				(194	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			14				4,873
Accounts payable			(742	)			2,476
Accrued liabilities			(4,286	)			(3,689	)
Net cash used in operating activities			(22,573	)			(21,111	)
Cash flows from investing activities
Cash paid for securities carried at fair value			(21,364	)			—
Proceeds from sale and maturities of securities carried at fair value			43,841				19,461
Cash paid for investments			(10,000	)			—
Cash paid for property and equipment			—				(280	)
Cash paid for capitalized internal-use software development costs			(5	)			(163	)
Cash paid for long term notes receivable - related parties, net			—				(3,000	)
Cash paid for convertible notes receivable and warrant - related party			(1,000	)			—
Net cash provided by investing activities			11,471				16,018
Cash flows from financing activities
Proceeds from issuance of shares upon exercise of stock options			—				206
Net cash provided by financing activities			—				206
Effect of foreign exchange rate changes on cash			(64	)			159
Net decrease in cash, cash equivalents and restricted cash			(11,166	)			(4,728	)
Cash, cash equivalents and restricted cash – beginning of the period			45,034				190,613
Cash, cash equivalents and restricted cash – end of the period		$	33,867			$	185,885
Supplemental disclosures:
Cash paid for interest		$	629			$	452
Supplemental disclosures of noncash investing and financing information:
Right of use asset obtained in exchange for operating lease liabilities		$	—			$	1,356

 

 

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes thereto included in this Quarterly Report and our audited consolidated financial statements and related notes thereto for the year ended December 31, 2022, included in our Form 10-K filed with the SEC on March 28, 2024. This discussion contains forward-looking statements based upon current expectations that involve 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 in the section titled "Risk Factors" in our Annual Report on Form 10-K dated and filed with the SEC on March 28, 2024, and may be updated from time to time in our other filings with the SEC.

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 aiming to transform the treatment of mental health disorders. We were founded in 2018 in response to the significant unmet need and lack of innovation in the mental health treatment landscape. We are dedicated to efficiently developing and investing in innovative therapeutics to treat depression, anxiety, addiction, and other mental health disorders. By pooling resources and best practices, we aim to responsibly accelerate the development of new medicines to achieve clinically meaningful and sustained behavioral change in mental health patients.

We have a bold and ambitious vision: to heal mental health disorders so that everyone, everywhere can live a more fulfilled life.

Mental health disorders such as depression, substance use disorder, and anxiety, which are among our initial focus indications, are highly prevalent and estimated to affect more than one billion people globally. In addition, the total costs of mental health disorders are significant and expected to increase substantially. 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 the global economic cost will reach $16 trillion by 2030. While current treatments, such as selective serotonin reuptake inhibitors, or SSRIs, and serotonin-norepinephrine reuptake inhibitors, or SNRIs, are well established and effective for certain patients, a significant percentage of patients either respond inadequately or relapse, translating to a significant unmet patient need.

 

Since our inception in 2018, we have focused substantially all of our efforts and financial resources on acquiring and developing product and technology rights, establishing our platform, building our intellectual property portfolio and conducting research and development activities for our product candidates within our atai companies that we consolidate based on our controlling financial interest of such entities. We operate a decentralized model to enable scalable drug or technological development at our atai companies. Our atai companies drive the development of our programs and enabling technologies for which we have either acquired a controlling or significant interest in or created de novo. We believe that this model provides our development teams the support and incentives to rapidly advance their therapeutic candidates or technologies in a cost-efficient manner. We look to optimize deployment of our capital in order to maximize value for our stakeholders.

We provide our development teams with access to shared services including scientific, intellectual property, clinical, and regulatory support, as well as project management, research and development, market strategy, and development and corporate finance. Our global team of subject matter professionals provides deep domain expertise in areas such as mental health drug development and life sciences intellectual property. Development teams have access to relevant expertise specific to each stage of their development. We believe our knowledge and specialization in psychedelics and mental health continuously enhance the quality of the services we provide through the sharing of learnings and experiences across the teams.

We have incurred significant operating losses since our inception. Our net loss attributable to ATAI Life Sciences N.V. stockholders was $26.7 million and $33.1 million for the three months ended March 31, 2024 and 2023. As of March 31, 2024 and December 31, 2023, our accumulated deficit was $577.7 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 at our atai companies that we consolidate based on our controlling financial interest of such entities as determined under the variable interest entity model ("VIE model") or voting interest entity model ("VOE model"). 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 incur additional

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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 financings, 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 July 2022 through reduction of capital allocation and operational resources, we decided to decelerate some of our drug discovery programs and Revixia Life Sciences. In November 2022, we finalized and entered into agreements through which we disposed of our equity interests in and residual Preferred Stock Purchase Agreement funding obligations to Neuronasal, Inc. 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 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., Perception Neuroscience Holdings, 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 20 in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for further information.

 

 

 

 

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Our Core Clinical Programs

Our pipeline currently consists of therapeutic candidates across multiple neuropsychiatric indications. The table below summarizes the status of our core product candidate portfolio as of the date of this Quarterly Report.

 

Clinical Pipeline Recent Advancements

VLS-01 (N,N-Dimethyltryptamine; (“DMT”) for Treatment-Resistant Depression ("TRD")

Recent Advancements:

BPL-003: 5-MeO-DMT for TRD as primary indication (via strategic investment in Beckley Psytech Limited)

 

Recent Advancements:

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COMP360: Psilocybin Therapy for TRD as primary indication (via strategic investment in Compass Pathways plc)

 

Recent Advancements:

 

Financial Overview

Since our inception in 2018, we have focused substantially all of our efforts and financial resources on acquiring and developing product and technology rights, establishing our platform, building our intellectual property portfolio and conducting research and development activities for our product candidates within our atai companies that we consolidate based on our controlling financial interest of such entities. We operate a decentralized model to enable scalable drug or technological development at our atai companies. Our atai companies drive the development of our programs and enabling technologies for which we have either acquired a controlling or significant interest in or created de novo. We believe that this model provides our development teams the support and incentives to rapidly advance their therapeutic candidates or technologies in a cost-efficient manner. We look to optimize deployment of our capital in order to maximize value for our stakeholders.

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 term loans.

 

Factors and Trends Affecting our Results of Operations

 

We believe that the most significant factors affecting our results of operations include:

 

Research and Development Expenses

 

Our ability to successfully develop innovative product candidates through our programs will be the primary factor affecting our future growth. Our approach to the discovery and development of our product candidates is still being demonstrated. As such, we do not know whether we will be able to successfully develop any of our product candidates. Developing novel product candidates requires a significant investment of resources over a prolonged period of time, and a core part of our strategy is to continue making sustained investments in this area. We have chosen to leverage our platform to initially focus on advancing our product candidates in the area of mental health.

 

All of our product candidates are still in development stages, and we have incurred and will continue to incur significant research and development costs for preclinical studies and clinical trials. We expect that our research and development expenses will constitute the most substantial part of our expenses in future periods in line with the advancement and expansion of the development of our product candidates.

 

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Acquisitions/Investments

 

To continue to grow our business and to aid in the development of our various product candidates, we are strategically acquiring and investing in companies that share our common goal towards advancing transformative treatments, including psychedelic compounds and digital therapeutics, for patients that suffer from mental health disorders.

 

Acquisition of In-Process Research and Development Expenses

 

In an asset acquisition, including the initial consolidation of a VIE that is not a business, acquired in-process research and development, or IPR&D, with no alternative future use is charged to the unaudited condensed consolidated statements of operations as a component of operating expenses at the acquisition date.

 

Stock-Based Compensation

 

In August 2020, we adopted the 2020 Equity Incentive Plan (the “2020 Incentive Plan”) and the Hurdle Share Option Plan (the “HSOP Plan”), which allowed us to grant stock-based awards to executive officers, directors, employees and consultants. Prior to our IPO, we issued stock options that vest over a two to four-year service period, only if and when a “Liquidity Event” (as defined in the plans) occurs, with accelerated vesting if a Liquidity Event occurred by specified dates. Upon the closing of our IPO, the stock-based award vesting contingent upon a Liquidity Event was no longer deferred.

 

Effective April 23, 2021, we adopted and our shareholders approved the 2021 Incentive Award Plan (the “2021 Incentive Plan”). The 2021 Incentive Plan enables us to grant incentive stock options or nonqualified stock options, restricted stock awards and other stock-based awards to our executive officers, directors and other employees and consultants. Any shares subject to outstanding 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 Plan.

 

 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) 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”).

 

Consolidation

 

Since our inception, we have created wholly owned subsidiaries or made investments in certain controlled entities, including partially-owned subsidiaries for which we have majority voting interest under the VOE model or for which we are the primary beneficiary under the VIE model, which we refer to collectively as our consolidated entities. Ownership interests in consolidated entities that are held by entities other than us are reported as noncontrolling interests in our unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of stockholders' equity. The portion of net earnings attributable to the noncontrolling interests is presented as Net loss attributable to noncontrolling interests in our unaudited condensed consolidated statements of operations. All intercompany balances and transactions have been eliminated in the consolidation.

Ownership interests in entities over which we have significant influence, but not a controlling financial interest, are accounted for under either the alternative measurement pursuant to 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 recorded upon acquisition and any changes in fair value will be recorded as a component of other income (expense), net.

 

 

 

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Components of Our Results of Operations

License 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.

 

For the foreseeable future, we may generate revenue from reimbursements of services under the Otsuka Agreement, as well as milestone payments under our current and/or future collaboration agreements. 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:

 

 

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 nonrefundable 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

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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.

 

Acquisition of in-process research and development expenses

 

Acquisition of in-process research and development (“IPR&D”) expenses consist of acquired IPR&D with no future alternative use based on the probability of clinical success.

 

General and administrative expenses

 

General and administrative ("G&A") expenses consist primarily of salaries and other related costs, including 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 and facility-related expenses, advertising, and information technology-related expenses.

 

We are actively controlling G&A spend and expect that our on-going G&A expenses will continue to decrease 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 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 our 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, or RDTI, program. 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, 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, convertible promissory notes and derivative liability, and warrant 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 investment held at fair value consists of subsequent remeasurements of our investments held at fair value, including COMPASS Pathways plc ("COMPASS") and IntelGenx Technologies Corp. ("IntelGenx") for which we have elected the fair value option.

 

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 have elected the fair value option.

 

Change in fair value of contingent consideration liability - related parties

 

Change in fair value of contingent consideration liability - related parties, consists of subsequent remeasurements of our contingent consideration liability related to our acquisition of Perception Neuroscience Holdings, Inc. for which we record at fair value.

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Change in fair value of contingent consideration liability

 

Change in fair value of contingent consideration liability, consists of subsequent remeasurements of our contingent consideration liability related to our acquisition of DemeRx IB, Inc. ("DemeRx IB") and TryptageniX, Inc. ("TryptageniX") for which we record at fair value.

 

Change in the 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.

 

Gain on deconsolidation of a variable interest entity

 

Gain on deconsolidation of a variable interest entity is the result of removing assets and liabilities from our consolidated balance sheet following a loss of control or divestment 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 consists principally of the impact of accounting adoptions and changes in the carrying values of our assets and liabilities.

 

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 March 31, 2024. In assessing the realizability on deferred tax assets, we consider whether it is more-likely-than-not that some or all of 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. As of March 31, 2024, we had no additional unrecognized tax benefits and the Company accrued interest on the tax positions recognized in 2023 through March 31, 2024.

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, IPR&D charges resulting from basis differences and impairment related to our equity method investments.

 

Net Loss Attributable to Noncontrolling Interests

 

Net loss attributable to noncontrolling interests in our unaudited condensed consolidated statements of operations is a result of our investments in certain of our consolidated VIEs and consists of the portion of the net loss of these consolidated entities that is not allocated to us. 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.

 

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Results of Operations

 

Comparison of the Three Months Ended March 31, 2024 and 2023 (unaudited)

 

		For the three months ended March 31,
		2024				2023				$ Change				% Change
		(in thousands, except percentages)
License revenue		$	—			$	37			$	(37	)			(100.0	%)
Operating expenses:
Research and development			11,530				19,281				(7,751	)			(40.2	%)
General and administrative			12,555				13,970				(1,415	)			(10.1	%)
Total operating expenses			24,085				33,251				(9,166	)			(27.6	%)
Loss from operations			(24,085	)			(33,214	)			9,129				(27.5	%)
Other income, net:
Interest income			307				275				32				11.6	%
Interest expense			(687	)			(622	)			(65	)			10.5	%
Benefit from research and development tax credit			205				—				205				0.0	%
Change in fair value of assets and liabilities, net			(1,200	)			999				(2,199	)			(220.1	%)
Foreign exchange gain (loss), net			(216	)			(837	)			621				(74.2	%)
Other expense, net			(5	)			243				(248	)			(102.1	%)
Total other income, net			(1,596	)			58				(1,654	)			(2851.7	%)
Loss before income taxes			(25,681	)			(33,156	)			7,475				(22.5	%)
Provision for income taxes			4				(165	)			169				(102.4	%)
Losses from investments in equity method investees, net of tax			(1,701	)			(1,033	)			(668	)			64.7	%
Net loss		$	(27,378	)		$	(34,354	)		$	6,976				(20.3	%)
Net loss attributable to noncontrolling interests			(665	)			(1,219	)			554				(45.4	%)
Net loss attributable to ATAI Life Sciences N.V. stockholders		$	(26,713	)		$	(33,135	)		$	6,422				(19.4	%)

 

License Revenue

 

We recognized zero and an immaterial amount of license revenue for the three months ended March 31, 2024 and 2023, respectively, related to certain research and development services performed by the Company pursuant to the Otsuka Agreement.

 

Research and Development Expenses

 

The table and discussion below present research and development expenses for the three months ended March 31, 2024 and 2023:

 

		Three Months Ended March 31,
		2024				2023				$ Change				% Change
		(in thousands, except percentages)
Direct research and development expenses by program:
Psychedelic Programs
VLS-01		$	2,090			$	3,068			$	(979	)			(31.9	%)
IBX-210 & DMX-1002			692				476				216				45.3	%
EGX-A & EGX-B			368				482				(114	)			(23.6	%)
EMP-01			60				635				(575	)			(90.5	%)
Non-Psychedelic Programs
RL-007			2,048				1,729				319				18.5	%
Other Programs			247				3,224				(2,978	)			(92.3	%)
Enabling Technologies and Drug Discovery Platforms			476				1,508				(1,032	)			(68.4	%)
Unallocated research and development expenses:
Personnel expenses			4,864				7,691				(2,827	)			(36.8	%)
Professional and consulting services			581				301				280				93.0	%
Other			103				167				(64	)			(38.3	%)
Total research and development expenses		$	11,530			$	19,282			$	(7,752	)			(40.2	%)

 

Research and development expenses were $11.5 million for the three months ended March 31, 2024, compared to $19.3 million for the three months ended March 31, 2023. The decrease of $7.8 million was primarily attributable to a $4.1 million decrease of direct costs in our clinical programs as discussed below, $1.0 million decrease of costs related to our enabling technologies and drug discovery platform as discussed below, $2.8 million decrease in personnel expenses (inclusive of $1.5 million decrease in restructuring costs and $1.1 million

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decrease in stock-based compensation) and a $0.1 million decrease in other expenses, partially offset by a $0.3 million increase in professional services costs.

 

Psychedelic Programs

VLS-01: N,N-dimethyltryptamine; (“DMT”) for Treatment Resistant Depression

The $1.0 million decrease in direct costs for our VLS-01 program was primarily due to a decrease of $0.6 million of manufacturing costs and a decrease of $0.4 million of clinical development costs related to our Phase 1 three-part trial and Phase 1b trial of VLS-01 designed to evaluate the safety, tolerability, PK and PD of VLS-01 delivered by intravenous (IV) infusion and using our proprietary oral transmucosal film (OTF) formulation.

IBX-210 & DMX-1002: Ibogaine for Opioid Use Disorder

 

The $0.2 million net increase in direct costs was primarily due to $0.3 million of preclinical development costs, $0.2 million of clinical development costs and $0.2 million of manufacturing costs related to the IBX-210 program in the first quarter of 2024, as compared to $0.3 million of clinical development costs, $0.1 million of manufacturing costs, and $0.1 million of personnel costs related to the conduct our DMX-1002 Phase 1/2 trial in the first quarter of 2023.

 

EGX-A & EGX-B: Novel 5-HT2A Receptor Agonists

 

The $0.1 million decrease in direct costs for EGX-A & EGX-B was primarily due to a decrease of $0.1 million of preclinical development costs.

 

EMP-01: 3,4-methylenedioxy-methamphetamine (MDMA) derivative for Post Traumatic Stress Disorder

The $0.6 million decrease in direct costs for our EMP-01 program was primarily due to a decrease of $0.3 million in preclinical development costs, a $0.2 million decrease in clinical development costs, and a $0.1 million decrease in manufacturing costs relating to our Phase 1 single ascending dose trial to assess the safety and tolerability of orally administered EMP-01.

 

Non-psychedelic Programs

 

RL-007: Pro-Cognitive Neuromodulator for Cognitive Impairment Associated with Schizophrenia

The $0.3 million increase in direct costs for our RL-007 program was primarily due to an increase of $0.2 million of manufacturing costs and a $0.1 million increase in clinical development costs relating to our Phase 2b proof-of-concept clinical trial for RL-007 in CIAS.

 

Other Programs

 

The $3.0 million decrease in direct costs for our other programs was primarily due to a $2.9 million decrease in our PCN-101 and a $0.1 million decrease in our KUR-101 program.

 

Enabling Technologies and Drug Discovery Platforms

The $1.0 million decrease in our enabling technologies and drug discovery platforms primarily relates to decreased direct costs of $0.5 million in our InnarisBio program, $0.4 million in our TryptageniX program, and $0.1 million in our Invyxis program.

 

General and Administrative Expenses

 

General and administrative expenses were $12.6 million for the three months ended March 31, 2024 compared to $14.0 million for the three months ended March 31, 2023. The decrease of $1.4 million was largely attributable to a decrease of $2.6 million in personnel and travel related costs (inclusive of $1.9 million decrease in stock-based compensation and a $0.3 million increase in restructuring costs), $0.2 million decrease in insurance costs, $0.2 million decrease in investor relations and public company compliance fees, $0.2 million in other administrative expenses, and $0.1 million decrease in legal and professional service expenses, partially offset with an increase of $1.9 million in VAT and non-income tax.

 

Other income (expense), net

 

Interest income

 

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Interest income for the three months ended March 31, 2024 and 2023 primarily consisted of interest earned on our cash balances and notes receivable during these periods. We recognized interest income of $0.3 million and $0.3 million for the three months ended March 31, 2024 and 2023, respectively.

 

Interest expense

 

Interest expense was $0.7 million for the three months ended March 31, 2024, which consists primarily of interest expense incurred in connection with our term loan under the Loan Agreement entered into in August 2022. Interest expense was $0.6 million for the three months ended March 31, 2023.

 

Benefit from research and development tax credit

 

We recognized a research and development tax credit from the Australian Tax Authorities as a benefit of $0.2 million for the three months ended March 31, 2024. We recognized zero research and development tax credit for the three months ended March 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 fair value of available for sale securities. During the three months ended March 31, 2024 and 2023 we recognized a gain of $1.3 million and $1.0 million, respectively, relating to the change in fair value of securities.

 

Change in fair value of other investments held at fair value

 

Changes in fair value of other investment held at fair value consists of subsequent remeasurement of our investments held at fair value, including COMPASS Pathways plc and IntelGenx Technologies Corp. During the three months ended March 31, 2024, we recognized a $4.1 million expense related to our holding in COMPASS Pathways plc and a $1.4 million gain related to our investments in Intelgenx Technologies Corp. For the three months ended March 31, 2023, the company did not recognize any gain or loss related to other investments held at fair value. See Note 5 in the Notes to unaudited Condensed Consolidated Financial Statements in Part I, Item 1 for further information.

 

Change in fair value of convertible notes receivable - related party

 

Changes in fair value of convertible notes receivable - related party, including interest, consists of subsequent remeasurement of our convertible notes receivable - related party with IntelGenx for which we have elected the fair value option. During the three months ended March 31, 2024 we recognized $1.7 million gain related to the change in the fair value. No change in fair value of convertible notes receivable - related party was recognized during the three months ended March 31, 2023. See Note 6 in the Notes to unaudited Condensed Consolidated Financial Statements in Part I, Item 1 for further information.

 

Change in fair value of contingent consideration liability—related parties

 

The milestone and royalty payments in relation to the acquisition of Perception were recorded at the acquisition date, and is subsequently remeasured to fair value. For the three months ended March 31, 2024 and 2023 we recognized an immaterial change in fair value, respectively.

 

Change in fair value of contingent consideration liability

 

In October 2023, we acquired the noncontrolling interest's shares 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 is recorded at fair value at the transaction date and subsequently remeasured at fair value. As of the three months ended March 31, 2024, we recorded a $0.2 million loss related to the DemeRx IB contingent consideration change in fair value. In December 2023, we disposed of our equity interest in TryptageniX, but retained the contingent consideration liability, which is subsequently remeasured to fair value. As of the three months ended March 31, 2024 and 2023, we recorded an immaterial gain, respectfully, related to the TryptageniX contingent consideration.

 

Change in fair value of convertible promissory notes

 

In December 2023, 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

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the convertible note and record the fair value of the conversion option quarterly. For the three months ended March 31, 2024, we recognized a $1.7 million loss due to a change in the fair value of the conversion option of the notes issued by ATAI Life Sciences NV.

 

 

Foreign exchange loss, net

 

We recorded a loss of $0.2 million related to foreign currency exchange rates for the three months ended March 31, 2024 and a loss of $0.8 million related to foreign currency exchange rate for the three months ended March 31, 2023. This was 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 incurred an immaterial amount of other expense for the three months ended March 31, 2024.

 

We incurred other expense of $0.2 million for the three months ended March 31, 2023, which consists principally of a $0.1 million gain recorded as a result of the Company's remeasurement of our expected credit loss allowance as of March 31, 2023 and $0.1 million of service revenue generated for general and administrative services performed by atai on behalf of our platform companies.

 

Benefit from (provision for) income taxes

 

We incurred an immaterial amount of current income tax benefit for the three months ended March 31, 2024 compared to $0.2 million income tax expense for the three months ended March 31, 2023. Our current income tax expense relates to book profits and thus taxable profits generated in our United States, Australian, and United Kingdom based subsidiaries.

Losses from Investments in Equity Method Investees

 

Losses from investment in equity method investees for the three months ended March 31, 2024 and 2023 was $1.7 million and $1.0 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.

 

Liquidity and Capital Resources

For the three months ended March 31, 2024 and 2023, we had net losses attributable to ATAI Life Sciences N.V. shareholders of $26.7 million and $33.1 million, respectively. As of March 31, 2024 and December 31, 2023, our accumulated deficit was $577.7 million and $550.9 million, respectively. We expect to continue to incur losses and operating cash outflows for the foreseeable future until we are able to commercialize any of our product candidates. Our primary sources of liquidity are our cash and cash equivalents, short-term securities, convertible promissory notes, investments, and 2022 Term Loan Facility, as further described below. We maintain cash balances with financial institutions in excess of insured limits.

 

As of March 31, 2024, we had cash and cash equivalents of $18.9 million, restricted cash of $15.0 million, and short-term securities of $87.4 million.

 

Sources of Liquidity

 

Convertible Promissory Notes

 

In November 2018, we issued an aggregate principal amount of $0.2 million of convertible notes (“2018 Convertible Notes”). The 2018 Convertible Notes are non-interest-bearing and have a maturity date of September 30, 2025, unless previously redeemed, converted, purchased or cancelled. In October 2020, we issued an additional principal amount of $1.0 million of the 2018 Convertible Notes. 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.

 

From 2021 through December 31, 2023, certain noteholders elected to convert their 2018 Convertible Notes into shares of ATAI Life Sciences N.V. These investors each paid €17.00 per share for an aggregate amount of €10.4 million ($12.2 million) in order to convert their respective 2018 Convertible Notes into ATAI Life Sciences AG common shares.

 

In December 2023, a 2018 Convertible Notes holder entered into an agreement with ATAI Life Sciences N.V. to exchange its 2018 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.

 

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As of March 31, 2024 the 2018 Convertible Notes had a principal balance of $0.2 million and the new ATAI Life Sciences N.V. notes had a principal balance of $0.2 million. If all convertible notes were converted, the Company would receive proceeds of €6.6 million ($7.1 million).

Investments

 

A significant potential source of liquidity resides in our investment in COMPASS's American Depositary shares, subject to market conditions. Based on quoted market prices, the market value of our ownership in COMPASS was $79.6 million as of March 31, 2024. As of March 31, 2024, our voting interest in COMPASS was 14.0%.

 

Hercules Term Loan

In August 2022, we entered into a Loan and Security Agreement, with Hercules Capital, Inc., which was most recently amended in May 2023. See “ – Liquidity Risks – Indebtedness– Hercules Term Loan” for additional information.

 

Liquidity Risks

 

As of March 31, 2024, we had cash and cash equivalents of $18.9 million, restricted cash of $15.0 million, and short-term securities of $87.4 million. Based on our current operating plan, we estimate that our existing cash and cash equivalents, marketable securities and committed term loan funding as of the date this Quarterly Report will be sufficient to fund operations into 2026.

 

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:

 

 

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

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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.

 

 

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Cash Flows

 

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:

 

		March 31,
		2024				2023
		(in thousands)
Net cash used in operating activities		$	(22,573	)		$	(21,111	)
Net cash provided by investing activities			11,471				16,018
Net cash provided by financing activities			—				206
Effect of foreign exchange rate changes on cash			(64	)			159
Net decrease in cash		$	(11,166	)		$	(4,728	)

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities was $22.6 million for the three months ended March 31, 2024, which consisted of a net loss of $27.4 million, adjusted by non-cash charges of $9.8 million and a net cash outflow of $5.0 million related to the change in operating assets and liabilities. The non-cash charges primarily consisted $5.8 million of stock-based compensation, $1.7 million of losses from our equity method investments, $1.8 million loss related to the change in fair value of assets and liabilities, net, $0.2 million of unrealized foreign exchange losses, $0.1 million change in right-of-use asset, $0.1 million in depreciation and amortization expense and $0.1 million amortization of debt discount. The net cash outflows from the change in operating assets and liabilities were primarily due to a $0.7 million decrease in accounts payable and a $4.3 million decrease in accrued liabilities.

 

Net cash used in operating activities was $21.1 million for the three months ended March 31, 2023, which consisted of a net loss of $34.4 million, adjusted by non-cash charges of $9.6 million and net cash inflows from the change in operating assets and liabilities of $3.7 million. The non-cash charges primarily consisted of $8.7 million of stock-based compensation, $1.0 million of losses from our equity method investments, $0.8 million of unrealized foreign exchange losses, $0.1 million change in right-of-use asset and $0.1 million amortization of debt discount, partially offset by a $1.0 million gain relating to the change in the fair value of our short-term securities during the period. The net cash inflows from the change in operating assets and liabilities were primarily due to a decrease of $4.9 million in prepaid expenses and other current assets and a $2.5 million increase in accounts payable, partially offset by a $3.7 million decrease in accrued liabilities.

 

Net Cash Used in Investing Activities

 

Net cash provided by investing activities was $11.5 million for the three months ended March 31, 2024, primarily driven by $43.9 million of proceeds from the sale and maturities of securities carried at fair value, partially offset by $21.4 million of cash paid for securities at fair value, $10.0 million cash paid for investments, and $1.0 million of cash paid for convertible notes receivable and warrant - related party.

 

Net cash provided by investing activities was $16.0 million for the three months ended March 31, 2023, primarily driven by $19.5 million of proceeds from the sale and maturities of securities carried at fair value, partially offset by $3.0 million of loans remitted to related parties, $0.3 million of purchases of property and equipment and $0.2 million of capitalized internal-use software development costs.

 

Net Cash Provided by Financing Activities

 

There was no cash provided by financing activities for the three months ended March 31, 2024. Net cash provided by financing activities was $0.2 million for the three months ended March 31, 2023, due to $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 Convertible Notes. The 2018 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. 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.

 

From 2021 through March 31, 2024, certain noteholders elected to convert their 2018 Convertible Notes into shares of ATAI Life Sciences N.V. These investors each paid €17.00 per share for an aggregate amount of €10.4 million ($12.2 million) in order to convert their respective 2018 Convertible Notes into ATAI Life Sciences AG common shares, which was in accordance with the original terms of the 2018 Convertible Note Agreements. Concurrent with the conversion of the 2018 Convertible Notes into common shares of ATAI Life

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Sciences AG, the common shares of ATAI Life Sciences AG that were issued to the noteholders were exchanged for 5,478,176 shares of ATAI Life Sciences N.V. through a transfer and sale arrangement such that ATAI Life Sciences AG continued to remain a wholly owned subsidiary of ATAI Life Sciences N.V and the transaction was accounted for as an equity transaction that resulted in no gain or loss recognition.

 

In December 2023, a 2018 Convertible Notes holder entered into an agreement with ATAI Life Sciences N.V. to exchange its 2018 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 March 31, 2024, the 2018 Convertible Notes had a principal balance of $0.2 million and the new ATAI Life Sciences N.V. notes had a principal balance of $0.2 million.

 

Hercules Term Loan

On August 9, 2022 (the “Closing Date”), we, ATAI Life Sciences AG (“ATAI AG” and together with the Company, the “Borrowers”) and certain of our subsidiary guarantors (collectively, the “Subsidiary Guarantors”) entered into a Loan and Security Agreement (the “2022 Term Loan Facility”) with Hercules Capital, Inc. (“Hercules”), in its capacity as administrative agent and collateral agent (the “Agent”) and as a lender, and certain other financial institutions that from time to time become parties to the Loan Agreement, as defined below, as lenders (collectively, the “Lenders”). The Loan Agreement provides for term loans in an aggregate principal amount of up to $175.0 million under multiple tranches.

 

On May 26, 2023, ATAI Life Sciences N.V. (the "Company"), ATAI Life Sciences AG and certain of our subsidiary guarantors of the Company entered into the Second Amendment to Loan and Security Agreement (the “Second Amendment”), with the several banks and other financial institutions or entities from time to time parties to the Loan Agreement and Hercules Capital, Inc., a Maryland corporation, in its capacity as administrative agent and collateral agent for itself and for the Lenders which amends that certain Loan and Security Agreement, dated August 9, 2022 (as amended by that certain First Amendment to Loan and Security Agreement dated as of March 13, 2023, the “Existing Loan Agreement” and as amended by the Second Amendment, the “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 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 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.

 

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 achieve certain performance milestones, raise at least $175.0 million of unrestricted new net cash proceeds from certain permitted sources after the Closing Date and prior to December 15, 2024, and satisfy certain other specified conditions. The outstanding principal balance of the Loan Agreement 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 4.55% and (ii) 8.55%. 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, for a period of thirty (30) months following the Closing Date, which period may be extended to (i) thirty-six months if certain additional performance milestones have been achieved; and (ii) forty-two months if certain additional performance milestones have been 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 Loan Agreement.

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The 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 Loan Agreement requires that beginning on the later of (i) July 1, 2023 and (ii) the date on which the aggregate outstanding amount borrowed under the 2022 Term Loan Facility is equal to or greater than $40.0 million, we shall maintain Qualified Cash in an amount no less than the sum of (1) 33% of the outstanding amount under the Loan Agreement, 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, 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 March 31, 2024, we were in compliance with all applicable covenants under the 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 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 and Commitments

 

Our commitments and obligations were reported in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 28, 2024. During the three months ended March 31, 2024, there have been no material changes from the contractual commitments and obligations previously disclosed in our Form 10-K.

 

Recently Adopted Accounting Pronouncements

See Note 2, “Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” to our unaudited condensed consolidated financial statements appearing under Part 1, Item 1 for more information.

 

Critical Accounting Policies and Estimates

 

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Form 10-K and in Note 2 to our consolidated financial statements included in our Form 10-K. As disclosed in Note 2 to our consolidated financial statements included in our Form 10-K, the preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. During the period covered by this Quarterly Report, there were no material changes to our critical accounting policies from those discussed in our Form 10-K other than those disclosed in Note 2 of this Quarterly Report.

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Item 3. 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.

 

Interest Rate Sensitivity

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 March 31, 2024 we had cash and cash equivalents of $18.9 million, restricted cash of $15.0 million, and short-term securities of $87.4 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. The Company purchases investment grade marketable debt securities which are rated by nationally recognized statistical credit rating organizations in accordance with its investment policy. This policy is designed to minimize the Company's exposure to credit losses and to ensure that the adequate liquidity is maintained at all times to meet anticipated cash flow needs.

As of March 31, 2024, we had $0.4 million in convertible promissory notes, which was comprised of non-interest-bearing borrowings under the 2018 Convertible Notes. Based on the principal amounts of the convertible promissory notes and the interest rate assigned to the convertible promissory notes, a hypothetical 10% change in interest rates would not have a material impact on our convertible promissory notes, financial position or results of operations.

As of March 31, 2024, the carrying amount of our short and long-term notes receivables was an aggregate amount of $14.5 million. Based on the principal amounts of the notes receivable and the interest rates assigned to each note receivable as per their respective contracts, a hypothetical 10% change in the interest rates would not have a material impact on our notes receivables, 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 Condensed 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 (expense), net in our Condensed 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.

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 condensed consolidated financial statements, but could result in significant unrealized foreign exchange gains or losses for any given period.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under 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 Chief Executive Officer and Chief 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.

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In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024, the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2024 at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II- OTHER INFORMATION

Item 1. Legal Proceedings.

We are, from time to time, party to various claims and legal proceedings arising in the ordinary course of our business. See Part I, Item I “Financial Statements (Unaudited) – Note 16, Commitments and Contingencies” in this Quarterly Report, which are incorporated herein by reference.

Item lA. Risk Factors.

Investing in our common shares involves a high degree of risk. In addition to the other information set forth in this Quarterly Report and in other documents that we file with the SEC, you should carefully consider the factors described in the section titled "Risk Factors" in our Form 10-K. There have been no material changes to the risk factors described in Part I, Item 1A of our Form 10-K. If any of the risk factors described in the Form 10-K actually materializes, our business, financial condition and results of operations could be materially adversely affected. In such an event, the market price of our common shares could decline and you may lose all or part of your investment. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

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Item 6. Exhibits.

 

Incorporated by Reference

Exhibit  Number

Description

Form

File No.

Exhibit

Filing Date

Filed/Furnished Herewith

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

10.1#

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

10.2†

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

10.3†

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

10.4†

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

10.5†

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)

*

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

**

101.INS

Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

*

101.SCH

Inline XBRL Taxonomy Extension Schema Document

*

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

*

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

*

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

*

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101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

*

104

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 Item 601(b)(10)(iv).

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

				ATAI LIFE SCIENCES N.V.
Date: May 15, 2024				By:		/s/ Florian Brand
						Florian Brand
						Chief Executive Officer and Managing Director (Principal Executive Officer)
Date: May 15, 2024				By:		/s/ Anne Johnson
						Anne Johnson
						Chief Financial Officer
						(Principal Financial and Accounting Officer)

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