Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

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 audited consolidated financial statements and related notes included elsewhere in this Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and in other parts of this Form 10-K.

Business Overview

Founded in 2025 through the strategic combination of atai Life Sciences N.V. and Beckley Psytech Limited, AtaiBeckley is a clinical-stage biotechnology company on a mission to create breakthroughs for people with difficult-to-treat mental health conditions. Our work is grounded in rigorous science to deliver meaningful outcomes for the patients we serve.

Mental health disorders are highly prevalent and estimated to affect more than one billion people globally. The economic burden of these disorders is substantial and is growing rapidly. Between 2009 and 2019, spending on mental health care in the United States increased by more than 50%, reaching $225 billion, and a Lancet Commission report estimates that the global economic cost will reach $16 trillion by 2030. While current treatments, such as selective serotonin reuptake inhibitors ("SSRIs") and serotonin-norepinephrine reuptake inhibitors ("SNRIs") are well established and effective for certain patients, approximately 65% of patients do not achieve remission of their symptoms after up to four antidepressant treatment trials, translating to a significant unmet medical need.

Our Programs

We aim to create breakthroughs in mental health by developing effective, rapid-acting and convenient treatments that could transform patient outcomes. We are committed to leading a new era of mental health treatment - one that not only offers relief from symptoms, but the possibility of an improved quality of life and lasting change.

We have built a diversified pipeline of investigational psychedelic-based neuroplastogens designed to address some of the most urgent unmet needs in mental health. Our programs include:

We believe psychedelics are emerging as novel breakthrough therapies for mental health disorders, such as depression, supported by growing scientific evidence, recent regulatory advancements and increasing patient and physician acceptance. Clinical studies have demonstrated the potential safety and efficacy profile of psychedelics, particularly their rapid onset of effect and sustained efficacy after a short course of administration. We believe these programs, which include both novel molecular entities and optimized variants of known compounds, have the potential to address significant unmet needs in mental health treatment.

We are committed to innovation in the mental health space as exemplified by our drug discovery program and its focus on identifying new molecules with psychedelic-like pharmacology but without hallucinogenic potential. In addition to these investments in novel chemical entity ("NCE") discovery, intellectual property development has been a key strategic component since inception.

Redomiciliation

On December 30, 2025, as part of the previously announced plan to change our corporate domicile from the Netherlands to the United States via Luxembourg (the "Redomiciliation Transaction"), as approved by our shareholders, we merged with and into atai Life Sciences Luxembourg S.A., a Luxembourg public limited liability company ("atai LuxCo"). On December 30, 2025, atai LuxCo then consummated the conversion of atai LuxCo into a corporation incorporated under the laws of the State of Delaware under the name AtaiBeckley Inc. As a result of the Redomiciliation Transaction, AtaiBeckley Inc. became the successor issuer to Atai Beckley N.V. pursuant to Rule 12g-3(a) under the Exchange Act.

Operating Losses

We have incurred significant operating losses since our inception. Our net loss attributable to AtaiBeckley Inc. stockholders was $660.0 million and $149.3 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, our accumulated deficit was $1.4 billion and $700.2 million, respectively. Our ability to generate sufficient product revenue to achieve

profitability will depend substantially on the successful development and eventual commercialization of product candidates. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

Our historical losses resulted principally from costs incurred in connection with research and development activities, as well as general and administrative costs associated with our operations. In the future, we intend to continue to conduct research and development, preclinical testing, clinical trials, regulatory compliance, market access, commercialization, and business development activities that, together with anticipated general and administrative expenses, will result in incurring further significant losses for at least the next several years. Our operating losses stem primarily from the development of our mental health research programs. Furthermore, we expect to continue to incur costs associated with operating as a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through a combination of equity offerings, debt financing, strategic collaborations and alliances or licensing arrangements. Our inability to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. There can be no assurances, however, that our current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily with proceeds from the sale of our common stock, issuances of convertible notes, and sale of equity securities.

Components of Our Results of Operations

Revenue

We have not generated any revenue from the sale of our core psychedelic product candidates or non-psychedelic product candidates and do not expect to unless and until such time that these 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.

As a full-service contract development and manufacturing organization, Nualtis offers services that include pharmaceutical research and development and the manufacturing of pharmaceutical products by leveraging its proprietary drug delivery technologies. Nualtis recognizes license and research and development revenue from the use of its proprietary drug delivery technologies in its customers' products.

License revenue

In January 2025, Nualtis Corp. ("Nualtis"), a wholly owned subsidiary, entered into an Amended & Restated Asset Purchase Agreement ("APA") and an Amended & Restated Supply Agreement ("Supply Agreement") with Rizafilm LLC ("Rizafilm"). Under the APA, Nualtis sold licensing and intellectual property rights of Nualtis's oral thin film technology in exchange for an upfront payment of $0.2 million and an additional $0.5 million upon completion of certain manufacturing milestones. Under the Supply Agreement, subject to approval by the FDA, Nualtis will serve as the sole manufacturer of Rizafilm's products over a five year term with an automatic renewal option for an additional five years unless either party provides sufficient written notice. Additionally, the Supply Agreement requires Rizafilm to adhere to certain firm commitments.

On March 11, 2021, we entered into a license and collaboration agreement (the "Otsuka Agreement"), with Otsuka Pharmaceutical Co., LTD ("Otsuka"). In January 2025, Otsuka provided a notice of termination pursuant to the Otsuka Agreement, effective April 2025. We did not recognize any revenue pursuant to the Otsuka Agreement in 2025, and, effective as of the termination date, we will no longer be eligible to receive any milestone payments or royalties.

Research and development services revenue

Nualtis recognizes revenue from various research and development agreements. In these agreements, Nualtis is responsible for performing research and development services for customers interested in leveraging Nualtis's novel oral thin film technology for drug delivery. Many of these agreements provide Nualtis either the option or the right to serve as the sole manufacturer of these drugs upon regulatory approval.

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, are expensed as incurred, with reimbursements of such amounts being recognized as revenue. We account for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.

Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, contract manufacturing organizations ("CMOs") and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under third-party license agreements.

Certain internal research and development expenses consisting of employee and contractor-related costs are not allocated to specific product candidate programs because these costs are deployed across multiple product candidate programs under research and development expense.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future in connection with our planned preclinical and clinical development activities in the near term and in the future.

The successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of these product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from our product candidates. This is due to the numerous risks and uncertainties associated with developing products, including the uncertainty of whether (i) any clinical trials will be conducted or progress as planned or completed on schedule, if at all, (ii) we obtain regulatory approval for our product candidates and (iii) we successfully commercialize product candidates.

Acquisition of In-Process Research and Development Expenses

Acquisition of in-process research and development ("IPR&D") expenses consist of in-process research and development acquired in connection with an asset acquisition.

General and administrative expenses

General and administrative expenses consist primarily of employee-related expenses, including salaries, related benefits and stock-based compensation, for personnel in our executive, finance, legal, business development and administrative functions. General and administrative expenses also include legal fees relating to corporate matters and intellectual property, professional fees for accounting, auditing, tax, human resources and administrative consulting services, insurance costs, information technology-related expenses, travel expenses and facility-related expenses, which include direct depreciation costs and allocated expenses for office rent and other operating costs. General and administrative expenses also reflect sublease income that is used to offset the cost for facility rent and other operating costs.

Other expense, net

Interest income

Interest income consists of interest earned on cash balances held in interest-bearing accounts and interest earned on notes receivable. We expect that our interest income will fluctuate based on the timing and ability to raise additional funds as well as the amount of expenditures for the research and development of our product candidates and ongoing business operations.

Interest expense

Interest expense consists primarily of interest expense incurred in connection with our term loan facility with Hercules Capital, Inc entered into in 2022 ("2022 Term Loan Facility") and subsequently terminated in May 2025. See Note 14, debt, in our consolidated financial statements appearing under Part II, Item 8.

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 expense, net. Assets held at fair value include securities held at fair value, investments held at fair value, and convertible notes receivable. Liabilities held at fair value include Promissory notes, convertible promissory notes, contingent considerations, derivative liability, and pre-funded warrant liabilities. The components of change in fair value of assets and liabilities, net include:

Change in fair value of securities carried at fair value

Change in fair value of securities consists of changes in fair value of our available for sale securities for which we have elected the fair value option.

Change in fair value of other investments held at fair value

Change in fair value of other investments held at fair value consists of subsequent remeasurements of our investments held at fair value, including COMPASS Pathways plc ("COMPASS") and IntelGenx prior to the completion of our acquisition of Nualtis, as well as additional contingent warrants held with Beckley Psytech prior to our acquisition of Beckley Psytech.

Change in fair value of short-term notes receivable - related party, net

Changes in fair value of short-term notes receivable - related party, net, including interest, consists of subsequent remeasurement of our short-term notes receivable with IntelGenx, for which we have elected the fair value option, prior to the completion of our acquisition of Nualtis.

Change in fair value of convertible notes receivable - related party

Change in fair value of convertible notes receivable - related party consists of subsequent remeasurements of our convertible notes receivable with IntelGenx, for which we elected the fair value option, prior to the completion of our acquisition of Nualtis.

Change in fair value of short-term convertible promissory notes and derivative liability - related party

Change in fair value of short-term convertible promissory notes and derivative liability consists of subsequent remeasurements of certain convertible notes issued in 2020 to a related party.

Change in fair value of short-term convertible promissory notes and derivative liability

Change in fair value of short-term convertible promissory notes and derivative liability consists of subsequent remeasurements of certain convertible notes issued in 2020.

Change in fair value of contingent consideration liability - related party

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

Change in fair value of contingent consideration liabilities

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

Change in fair value of pre-funded warrant liabilities

Change in fair value of pre-funded warrant liabilities consists of subsequent remeasurements of our pre-funded warrants issued pursuant to the June and July 2025 PIPE Financings, which we record at fair value.

Gain on other investments

Gain on other investments consists of a gain recognized on our additional investment in Beckley Psytech upon the issuance of deferred shares pursuant to the Escrow Agreement.

Gain on consolidation of Beckley Psytech, net

Gain on consolidation of Beckley Psytech consists of a non-cash gain recognized upon the acquisition of Beckley Psytech.

Change in fair value of digital assets, net

Change in fair value of digital assets, net consists of the subsequent remeasurement of our Bitcoin holding, as Bitcoin is measured at fair value based on quoted prices on active exchanges pursuant to ASC 350-60.

Foreign exchange gain (loss), net

Foreign exchange gain (loss), net consists of the impact of changes in foreign currency exchange rates on our foreign exchange denominated assets and liabilities, relative to the U.S. dollar. The impact of foreign currency exchange rates on our results of operations fluctuates period over period based on our foreign currency exposures resulting from changes in applicable exchange rates associated with our foreign denominated assets and liabilities.

Other income (expense), net

Other income (expense), net consists of the following:

Benefit from research and development tax credit

Benefit from research and development tax credit consists of tax credits received in Australia under the Research and Development Tax Incentive ("RDTI") program and research and development tax credits received in Canada by Nualtis. Qualifying expenditures include employment costs for research staff, consumables, and relevant, permitted CRO costs incurred as part of research projects.

Pre-funded warrant issuance costs

Pre-funded warrant issuance costs consists of offering costs and commissions allocated to the pre-funded warrant liabilities issued pursuant to the June and July 2025 PIPE Financings.

Loss on sale of investment held at fair value

Loss on sale of investment held at fair value consists of non-cash loss on the sale of our ADS holdings in COMPASS.

Loss on disposal of fixed assets

Loss on disposal of fixed assets consists of non-cash losses recognized upon the disposal of fixed assets, including certain fixed assets disposed as a result of the early termination of our office lease in Berlin, Germany.

Loss on lease termination

Loss on lease termination consists of a loss recognized related an early termination fee as well as the derecognition of right-of-use assets and related lease liabilities previously recognized as a result of the early termination of our office lease in Berlin, Germany.

Loss on extinguishment of debt

Loss on extinguishment of debt represents the difference between the net carrying amount and the redemption amount related to our early repayment of all outstanding obligations under our 2022 Term Loan Facility pursuant to ASC 405-20.

Gain on settlement of pre-existing contract

Gain on settlement of pre-existing contract consists of a non-cash gain recognized upon the acquisition of Nualtis related to the settlement of an existing contract with IntelGenx.

Gain on dissolution of a variable interest entity, net

Gain on dissolution of a variable interest entity is the result of removing assets and liabilities from our consolidated balance sheets following a dissolution of a variable interest entity.

Gain on forgiveness accounts payable

Gain on forgiveness accounts payable consists of the forgiveness of certain accounts payable amounts associated with the dissolution of a variable interest entity.

Benefit from (provision for) income taxes

Since our inception, we have not recorded any U.S. federal, foreign, or state income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits, as it is more likely-than-not that these benefits will not be realized. We have U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards to offset future taxable income.

Income taxes are determined at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. Our income tax provision may be significantly affected by changes to our estimates.

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.

Net loss attributable to noncontrolling interests

Net loss attributable to noncontrolling interests consists of the portion of net loss that is allocated to the noncontrolling interests of certain consolidated variable interest entities ("VIEs"). Net losses in consolidated VIEs are attributed to noncontrolling interests considering the liquidation preferences of the different classes of equity held by the shareholders in the VIE and their respective interests in the net assets of the consolidated VIE in the event of liquidation, and their pro rata ownership. Changes in the amount of net loss attributable to noncontrolling interests are directly impacted by changes in the net loss of our VIEs and our ownership percentage changes.

Results of Operations

Comparison of the Years Ended December 31, 2025 and 2024

Revenue

License revenue

License revenue was $0.2 million and $0.3 million for the years ended December 31, 2025, and 2024, respectively. The revenue recognized for the year ended December 31, 2025 is related to the Rizafilm APA. The revenue recognized for the year ended December 31, 2024 is related to our license agreement with Otsuka. For the years ended December 31, 2025 and 2024, respectively, there were no milestones achieved under the Rizafilm APA or Otsuka Agreement.

Research and development services revenue

We recognized $3.9 million in research and development services revenue for the year ended December 31, 2025 related to certain research and development services performed by Nualtis for its customers. We did not recognize any research and development services revenue for the year ended December 31, 2024.

Operating expenses

Research and development expenses

The table and discussion below present our research and development expenses for the years ended December 31, 2025 and 2024:

Research and development expenses were $53.1 million for the year ended December 31, 2025 compared to $55.5 million for the year ended December 31, 2024. The decrease of $2.4 million was primarily attributable to a $6.1 million decrease in personnel expenses (inclusive of a $6.4 million decrease in stock-based compensation and a $0.7 million increase in restructuring charges), a $1.2 million decrease in other expenses primarily related to the $0.9 million impairment of certain intangible assets in 2024, and a $0.8 million decrease in professional and consulting fees. These decreases were partially offset by a $4.6 million net increase in our program's direct costs as discussed below and a $0.6 million increase in rent and facilities related costs primarily driven by Nualtis operations, and a $0.5 million increase in depreciation and amortization expense related primarily to manufacturing equipment and intangible assets associated with Nualtis.

BPL-003: Mebufotenin for TRD

The costs attributed to BPL-003 represent direct costs recognized following the completion of our strategic combination with Beckley Psytech in November 2025, and relate to the ongoing development activities of BPL-003, including $1.0 million of clinical development costs, and $0.3 million of manufacturing costs.

VLS-01: DMT for TRD

The $5.7 million net increase in direct costs for our VLS-01 program was primarily due to a $5.4 million increase in clinical development and related costs for our Elumina trial, the randomized, double-blind, placebo-controlled Phase 2 clinical trial of VLS-01, as compared to costs incurred during the year ended December 31, 2024 which were primarily for our Phase 1b trial of VLS-01, as well as $1.9 million in increased manufacturing costs. These increases were partially offset by a $1.6 million decrease in preclinical development costs.

EMP-01: MDMA for SAD

The $6.4 million increase in direct costs for our EMP-01 program was primarily due to a $6.0 million net increase in clinical development and related costs for our exploratory, randomized, double-blind, placebo-controlled Phase 2 study in the United Kingdom to assess the safety, tolerability and efficacy of EMP-01 as well as $0.5 million of increased manufacturing costs. These costs were partially offset by a $0.2 million decrease in preclinical development costs.

Discovery

The $0.3 million decrease in direct costs for our discovery programs was primarily due to a $0.3 million decrease in preclinical development costs related to our novel 5-HT2A receptor agonists. We recognized a $0.3 million reduction in our 2025 research and development expenses related to our discovery program as certain expenses qualified for reimbursement under our National Health Institute grant

Other Programs

The $8.4 million decrease in direct costs for our other programs was primarily due to a $5.2 million decrease in direct costs for our RL-007 program due to a decrease in clinical development and related costs for our Phase 2b clinical trial for RL-007 in CIAS. The decrease also includes a $3.1 million decrease in our IBX-210 program, a $0.4 million decrease in our EGX-121 program, a $0.3 million decrease in our

PCN-101 program, and a $0.5 million decrease in our enabling technologies program. These decreases were partially offset by an increase of $1.1 million of direct costs incurred by Nualtis.

Acquisition of in-process research and development

Acquisition of IPR&D expense was $530.0 million for the year ended December 31, 2025 related to our Beckley Psytech asset acquisition, as well as our Psilera (as defined below) asset acquisition and related milestone payment.

General and administrative expenses

General and administrative expenses were $65.1 million for the year ended December 31, 2025 compared to $47.5 million for the year ended December 31, 2024. The increase of $17.6 million was primarily related to a $20.7 million increase in professional services primarily in connection with our strategic combination with Beckley Psytech and our Redomiciliation Transaction and a $0.3 million increase in other administrative expenses; partially offset by a $2.6 million decrease in personnel expenses (inclusive of a $4.6 million decrease in stock-based compensation and a $0.1 million increase in restructuring) and a $0.8 million decrease in insurance related expenses.

We expect that our general and administrative expenses will decrease in the future as we incurred significant general and administrative expenses for the strategic combination with Beckley Psytech and Redomiciliation Transaction during the year ended December 31, 2025.

Other expense, net

Interest income

Interest income for the year ended December 31, 2025 primarily consisted of interest earned on our cash balances and unsecured promissory note to Beckley Psytech, prior to our strategic combination in November 2025. Interest income for the year ended December 31, 2024 consisted of interest earned on our cash balances. We recognized interest income of $1.5 million and $0.8 million for the years ended December 31, 2025 and 2024, respectively, primarily driven by higher cash holdings in 2025 from various financings and the unsecured promissory note to Beckley Psytech prior to our strategic combination.

Interest expense

Interest expense for the years ended December 31, 2025 and 2024 primarily consisted of interest expense incurred in connection with our 2022 Term Loan Facility. Interest expense decreased $2.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 as the 2022 Term Loan Facility was extinguished in May 2025.

Change in fair value of assets and liabilities, net:

Changes in fair value of assets and liabilities, net consisted of the following for the years ended December 31, 2025 and 2024:

Gain on other investments

Gain on other investments for the year ended December 31, 2025 consists of a $3.8 million gain related to our investment in Beckley Psytech which was recognized upon the issuance of the deferred shares pursuant to the Escrow Agreement in April 2025, as compared to a $1.3 million gain related to our investment in Beckley Psytech upon the issuance of deferred shares pursuant to the Escrow Agreement during the year ended December 31, 2024.

Gain on consolidation of Beckley Psytech

Gain on consolidation of Beckley Psytech for the year ended December 31, 2025 consists of a $6.9 million gain related to our acquisition of Beckley Psytech

Change in fair value of digital assets, net

Change in fair value of digital assets, net consists of the subsequent remeasurement of our Bitcoin holding as Bitcoin is measured at fair

value based on quoted prices on active exchanges pursuant to ASC 350-60. For the year ended December 31, 2025, we recognized a $1.2 million loss related to the change in fair value. We did not recognize any change in fair value for the year ended December 31, 2024.

Foreign exchange loss, net

We recognized a $1.9 million gain related to foreign currency exchange rates for the year ended December 31, 2025 and a $1.3 million loss related to foreign currency exchange rates for the year ended December 31, 2024. This was primarily due to the impact of fluctuations in the foreign currency exchange rate between the Euro, Pound Sterling, and the U.S. dollar on our foreign denominated balances.

Other income (expense), net

We recognized a $3.1 million loss and a $5.5 million gain for the years ended December 31, 2025 and 2024, respectively, in Other income (expense), net driven by the below activity:

Benefit from (provision for) income taxes

We recognized a current income tax expense of $0.3 million and a current income tax benefit of $0.4 million for the years ended December 31, 2025 and 2024, respectively. The income tax expense recognized for the year ended December 31, 2025 was primarily due to tax expense of subsidiaries in the U.S. and the U.K. The income tax benefit recognized for the year ended December 31, 2024 is a result of losses generated in Germany, U.K., and the U.S. and favorable return to provision adjustments from our U.S. tax returns. We recognized no deferred tax expense for years ended December 31, 2025 and 2024, respectively. Given our early-stage development and lack of prior earnings history, we have a full valuation allowance primarily related to U.S. and foreign tax loss carryforwards, capitalized research and experimental costs, and stock-based compensation timing differences that we consider more-likely-than-not not to be realized.

Losses from investments in equity method investees

We did not recognize any losses from investment in equity method investees for the year ended December 31, 2025. Losses from investment in equity method investees for the years ended December 31, 2024 were $2.0 million. Loss from investment in equity method investees represents our share of equity method investee losses on the basis of our equity ownership percentages or based on our proportionate share of the respective class of securities in our other investments in the event that the carrying amount of our equity method investments was zero.

Net loss attributable to noncontrolling interests

Net losses attributable to noncontrolling interests for the years ended December 31, 2025 and 2024 were $0.1 million and $0.8 million, respectively which relate to the noncontrolling interests in Recognify, Perception, and Kures.

Liquidity and Capital Resources

Overview

For the years ended December 31, 2025 and 2024, we had net losses attributable to AtaiBeckley Inc. stockholders of $660.0 million and $149.3 million, respectively. As of December 31, 2025 and 2024, our accumulated deficit was $1.4 billion and $700.2 million, respectively. We expect to continue to incur losses and operating cash outflows for the foreseeable future as we continue working towards commercializing any of our product candidates. Our primary sources of liquidity are our cash and cash equivalents, short-term securities, investments, and sales of common stock. We maintain cash balances with financial institutions in excess of insured limits.

Our primary requirements for liquidity and capital are clinical trial costs, manufacturing costs, non-clinical and other research and development costs, funding of strategic investments (including integration process from our strategic combination with Beckley Psytech),

public company compliance costs and general corporate needs. Because our product candidates are in various stages of clinical and pre-clinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability.

Our ability to generate sufficient product revenue to achieve profitability will depend substantially on the successful development and eventual commercialization, if any, of product candidates. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings, collaboration arrangements, license agreements, other business development opportunities with third parties and government grants. The Company recognizes revenue from license and research and development arrangements through Nualtis.

Sources of Liquidity

Investments

A significant potential source of non-dilutive funding resides in our investment in COMPASS's ADS, subject to market conditions. Based on quoted market prices, the market value of our ownership in COMPASS was $35.4 million as of December 31, 2025.

Convertible Promissory Notes

In November 2018 and October 2020, we issued an aggregate principal amount of €1.0 million or $1.2 million (collectively, the "Convertible Notes"). The Convertible Notes are non-interest-bearing and have a maturity date of September 30, 2025, unless previously redeemed, converted, purchased or cancelled. Each note has a face value of €1 and is convertible into one common share of ATAI Life Sciences AG (subsequently converted into ATAI Life Sciences GmbH in April 2025) upon the payment of €17.00. The noteholders have agreed that, following a conversion, they will exchange the resulting ATAI Life Sciences AG shares for Company shares.

In December 2023 and April 2024, respectively, a noteholder and a related party noteholder each entered into an agreement with us to exchange their respective Convertible Notes for New Convertible Notes issued by ATAI Life Sciences NV (which later become AtaiBeckley Inc. pursuant to the Redomiciliation Transaction). Each New Convertible Note had a face value of €1 and was convertible into 16 common shares of the Company upon the payment of €17.00.

In September 2025, the noteholder and related party noteholder each exercised the conversion feature of the New Convertible Notes and converted all of their respective New Convertible Notes into 6,185,904 common shares of the Company. Upon conversion, the Company received $7.7 million.

Digital Assets

A potential source of non-dilutive funding resides in our investment in digital assets, subject to market conditions, volatility and price fluctuations. Based on quoted market prices, the market value of our ownership in Bitcoin was $8.8 million as of December 31, 2025.

ATM Program

In November 2022, we entered into an Open Market Sale AgreementSM, (the "Sales Agreement") with Jefferies LLC ("Jefferies"), pursuant to which we may issue and sell our common stock from time to time through an "at-the-market" equity offering program under which Jefferies will act as sales agent. Subject to the terms and conditions of the sales agreement, Jefferies may sell the common stock by any method deemed to be an "at-the-market" offering as defined in Rule 415 promulgated under the Securities Act. There have been no sales under the Sales Agreement through December 31, 2025, and as of the date of this Annual Report on Form 10-K, there is currently no registration statement effective with respect to offers and sales of common stock pursuant to the Sales Agreement.

February 2025 Public Offering

In February 2025, we entered into an underwriting agreement (the "February Underwriting Agreement") with Berenberg Capital Markets LLC in connection with the issuance and sale by us in a public offering of 26,190,477 of our common shares, at a public offering price of $2.10 per share, less underwriting discounts and commissions. The common shares was offered pursuant to our Shelf Registration Statement as well as a prospectus supplement thereto. Under the terms of the February Underwriting Agreement, we granted to the underwriter an option exercisable for 30 days to purchase up to an additional 3,928,571 common shares from us at the public offering price, less underwriting discounts and commissions. Pursuant to the February Underwriting Agreement, the underwriter exercised the option to purchase an additional 3,928,571 common shares.

The net proceeds from the offering of our common shares were approximately $59.1 million, after deducting the underwriting discounts and commissions and offering expenses payable by us.

PIPE Financing and Pre-Funded Warrant Subscription Agreements

On June 2, 2025, we entered into the subscription agreements, relating to the purchase (the "June 2025 PIPE Financing") by the investors party thereto of (i) 9,993,341 common shares with a nominal value of €0.10 per share for a purchase price of $1.84 per share, and (ii) a pre-funded warrant to purchase 6,311,006 common shares with an exercise price of $0.01 (the "June 2025 Pre-Funded Warrant"), for a

purchase price of $1.84 per common share underlying the June 2025 Pre-Funded Warrant less the exercise price for the June 2025 Pre-Funded Warrant of $0.01 per share, resulting in aggregate net proceeds to us from the June 2025 PIPE Financing of approximately $28.1 million, after deducting placement agent fees and offering expenses payable by us. The June 2025 PIPE Financing was completed in June 2025.

On July 1, 2025, we entered into subscription agreements, relating to the purchase (the "July 2025 PIPE Financing") by the investors party thereto of (i) 18,264,840 common shares with a nominal value of €0.10 per share for a purchase price of $2.19 per share, and (ii) a pre-funded warrant to purchase 4,566,210 common shares with an exercise price of $0.01 (the "July 2025 Pre-Funded Warrant") for a purchase price of $2.19 per common share underlying the July 2025 Pre-Funded Warrant less the exercise price for the July 2025 Pre-Funded Warrant of $0.01 per share, resulting in aggregate net proceeds to us from the July 2025 PIPE Financing of approximately $46.7 million, after deducting placement agent fees and offering expenses payable by us. The July 2025 PIPE Financing was completed in August 2025.

October 2025 Public Offering

In October 2025, we entered into an underwriting agreement (the "October Underwriting Agreement") with Jefferies, as representative of the underwriters, in connection with the issuance and sale by us in a public offering of 23,725,000 common shares, at a public offering price of $5.48 per share, less underwriting discounts and commissions. The shares were offered pursuant to a registration statement on Form S-3 (File No. 333-290592) filed with the SEC on September 29, 2025, which became automatically effective upon filing with the SEC, as well as a prospectus supplement thereto. Under the terms of the October Underwriting Agreement, we granted to the underwriters an option exercisable for 30 days to purchase up to an additional 3,558,750 common shares at the public offering price, less underwriting discounts and commissions. Pursuant to the October Underwriting Agreement, the underwriters exercised the option to purchase the full amount of the additional 3,558,750 common shares.

The net proceeds from the offering of the common shares were approximately $139.1 million, after deducting the underwriting discounts and commissions and offering expenses payable by the Company.

Liquidity Risks

As of December 31, 2025, we had cash and cash equivalents of $85.3 million and short-term securities of $135.4 million. We believe our cash, cash equivalents and short-term securities will be sufficient to fund our operations for at least the next twelve months following the date of this Annual Report on Form 10-K, and, based on our current operating plan, we currently estimate that our existing cash, cash equivalents, and short-term securities will be sufficient to fund operations into 2029.

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 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. Due to the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.

Cash Flows

The following table summarizes our cash flows for years ended December 31, 2025 and 2024:

Net Cash Used in Operating Activities

Net cash used in operating activities was $102.7 million for the year ended December 31, 2025, which consisted of a net loss attributable to stockholders of $660.1 million, adjusted by noncash charges and other adjustments of $563.9 million and net cash outflows from the change in operating assets and liabilities of $6.5 million. The noncash loss primarily consisted of $530.0 million of IPR&D expenses from the Beckley Psytech and Psilera acquisitions (defined below), $26.0 million loss related to the net change in the fair value of our assets and liabilities carried at fair value, $14.2 million of stock-based compensation, $1.4 million related to issuance costs allocated to pre-funded warrant liabilities issued pursuant to the June and July 2025 PIPE Financings, $1.3 million related to the loss on the extinguishment of the Company's debt, $1.2 million of the change in fair value of the Company's digital assets, $1.0 million of depreciation and amortization, $0.7 million noncash loss on the disposal of fixed assets, $0.4 million of noncash lease expense, $0.4 million noncash loss on lease termination, and $0.2 million of amortization of debt discount. These losses were partially offset by a $6.9 million gain on the acquisition of Beckley Psytech, $3.8 million gain on other investments related to our investment in Beckley Psytech which was recognized upon the issuance of the deferred shares pursuant to the Escrow Agreement, $2.0 unrealized foreign exchange gain, and $0.2 million gain of other income (expense), net. The cash outflow from the change in operating assets and liabilities of $6.5 million was primarily due to a $6.2 million decrease in accrued liabilities and other liabilities and a $1.7 million decrease in accounts payable; partially offset by a $0.7 million decrease in prepaid expenses and other current assets and a $0.8 million increase in deferred revenue.

Net cash used in operating activities was $82.4 million for the year ended December 31, 2024, which consisted of a net loss attributable to stockholders of $150.0 million, adjusted by noncash benefit of $76.8 million and net cash inflows from the change in operating assets and liabilities of $9.2 million. The noncash benefit primarily consisted of $51.6 million loss related to the net change in the fair value of our assets and liabilities carried at fair value, $25.5 million of stock-based compensation, $2.1 million of loss on sale of investment held at fair value, $2.0 million of losses from our equity method investments, $1.1 unrealized foreign exchange losses, $1.0 million of depreciation and amortization, $0.9 million impairment of intangible assets, and $0.4 million of noncash lease expense. These losses were partially offset by a $5.6 million gain on settlement of pre-existing contract, a $1.2 million gain on dissolution of a variable interest entity, and $1.0 million of other income (expense), net. The cash outflow from the change in operating assets and liabilities of $9.2 million was primarily due to a $7.0 million decrease in accrued liabilities and other liabilities, a $1.9 million decrease in accounts payable, and a $1.1 million increase in prepaid expenses and other current assets; partially offset by an increase in deferred revenue of $0.7 million.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $109.1 million for the year ended December 31, 2025, primarily driven by $88.9 million of cash paid for securities carried at fair value, $10.0 million cash paid to Beckley Psytech pursuant to the Secondary Sale and the Escrow Agreement, $10.0 million of cash paid for the Beckley Psytech promissory note prior to our strategic combination, $10.0 million of cash paid for digital assets, $3.0 million of cash paid for Psilera (defined below) asset acquisition, and $0.9 million of cash paid for property plant and equipment. These cash outflows were partially offset by $9.1 million of proceeds from the sale of ADSs of COMPASS and $4.6 million of cash received in the acquisition of Beckley Psytech.

Net cash provided by investing activities was $59.2 million for the year ended December 31, 2024, primarily driven by $65.6 million of proceeds from sale and maturities of securities at fair value, $16.1 million of proceeds from the sale of ADSs of COMPASS, and $0.4 million of cash received in the acquisition of IGX; partially offset by $15.0 million cash paid to Beckley Psytech pursuant to the Secondary Sale and the Escrow Agreement, $5.7 million of cash paid for short-term notes receivable - related party, $2.0 million of cash paid for short-term convertible notes receivable and warrant - related party, and $0.1 million of cash paid for intangible assets.

Net Cash Provided by Financing Activities

Net cash provided by financing activities of $269.5 million for the year ended December 31, 2025 consisted of $258.1 million of proceeds from equity offerings, net of commissions, $21.5 million of proceeds from the issuances of pre-funded warrants, $10.4 million of proceeds from stock option exercises, $7.7 million of proceeds from the conversion of convertible notes to common stock, and $0.2 million of proceeds from other financings. These inflows were partially offset by $21.8 million of cash paid for the extinguishment of our 2022 Term Loan Facility and $6.6 million of cash paid for common stock and pre-funded warrant issuance costs.

Net cash used in financing activities was $5.4 million for the year ended December 31, 2024, primarily due to $5.0 million of proceeds from debt financing and $0.5 million of proceeds from stock option exercises; partially offset by $0.2 million of financing costs paid.

Material Cash Requirements from Known Contractual and Other Obligations

We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the consolidated balance sheets as of December 31, 2025, while others are considered future commitments. Our contractual obligations primarily consist of milestone payments under existing license agreements. For additional information regarding our other contractual obligations, refer to Note 13, Leases, Note 20, Commitments and Contingencies, and Note 21, License Agreements in our consolidated financial statements appearing under Part II, Item 8.

We have entered into other contracts in the normal course of business with certain CROs, CMOs and other third parties for preclinical research studies and testing, clinical trials and manufacturing services. These contracts do not contain any minimum purchase commitments and are cancelable by us upon written notice. Payments due upon cancellation consist only of payments for services provided and expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. The amounts and timing of such payments are not known.

In addition, under various licensing and related agreements to which we are a party, we are obligated to pay annual license maintenance fees and may be required to make milestone payments and to pay royalties and other amounts to third parties. The payment obligations under these agreements are contingent upon future events, such as our achievement of specified milestones or generating product sales, and the amount, timing and likelihood of such payments are not known. Such contingent payment obligations are described below. For additional information regarding our license agreements described below, see Note 21, License Agreements, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. For additional information regarding our contingent commitments and future put rights or options associated with our investments, see Note 5, Variable Interest Entities, in our consolidated financial statements appearing under Part II, Item 8.

National University Corporation Chiba University License Agreement

In August 2017, Perception entered into a license agreement (the "CHIBA License"), with the National University Corporation Chiba University ("CHIBA"), relating to Perception's drug discovery and development initiatives. Under the CHIBA License, Perception has been granted a worldwide exclusive license under certain patents and know-how of CHIBA to research, develop, manufacture, use and commercialize therapeutic products. Perception paid an upfront license fee and is required to pay an annual maintenance fee until the filing of a new drug application with the Food and Drug Administration. In addition, Perception is also required to pay tiered royalties ranging in the low to mid-single-digit on future net sales of licensed products that are covered by a valid claim of a licensed patent, if any. Perception is also obligated to make contingent milestone payments totaling up to $1.2 million upon the achievement of certain clinical or regulatory milestones for each of the first two licensed products and $1.0 million upon the achievement of certain clinical or regulatory milestones for each additional licensed product. The CHIBA License will remain in effect until terminated by the parties according to their rights.

During the years ended December 31, 2025 and 2024, the Company did not make any material payments pursuant to the CHIBA License.

Allergan License Agreement

In February 2020, Recognify entered into an amended and restated license agreement (the "Allergan License Agreement"), with Allergan Sales, LLC, or Allergan, under which Allergan granted Recognify an exclusive (non-exclusive as to know-how), sublicensable and worldwide license under certain patent rights and know-how controlled by Allergan to develop, manufacture and commercialize certain products for use in all fields including the treatment of certain diseases and conditions of the central nervous system. Recognify paid Allergan an upfront payment of $0.5 million and will pay Allergan a mid-single-digit royalty on the net sales of the licensed products. In addition, Recognify is obligated to pay Allergan a low teen percentage of the non-royalty sublicense payments it receives from a third party receiving a sublicense to practice the rights licensed to Recognify under the Allergan License Agreement. Upon the occurrence of certain change of control transactions involving Recognify, or sale, assignment or transfer (other than sublicense) to a third party of any rights licensed to Recognify under the Allergan License Agreement, Recognify is required to share with Allergan a low teen percentage of the proceeds it receives from such transactions. The Allergan License Agreement will remain in effect until terminated by the parties according to their rights.

During the years ended December 31, 2025 and 2024, Recognify did not make any material payments pursuant to the Allergan License Agreement.

Dalriada License Agreement

In December 2021, Invyxis, Inc. ("Invyxis"), now merged with atai Therapeutics, Inc., a wholly owned subsidiary, entered into an exclusive services and license agreement (the "Invyxis ESLA") with Dalriada Drug Discovery Inc. ("Dalriada"). Under the Invyxis ESLA, Dalriada is to exclusively collaborate with Invyxis to develop products, services and processes with the specific purpose of generating products consisting of new chemical entities. Under the original agreement, Invyxis was obligated to pay Dalriada up to $12.8 million in service fees for research and support services. In May 2023, we executed an amendment to the Dalriada License Agreement, which reduced the amount Invyxis will pay Dalriada in service fees to $7.4 million. In addition, Invyxis will pay Dalriada development milestone payments and low single digit royalty payments based on net product sales. We have the right, but not the obligation, to settle future royalty payments based on net product sales with the our common shares. Invyxis, our wholly-owned subsidiary, and Dalriada will determine the equity settlement based on a price per share determined by both parties.

In December 2022, we executed an amendment to the Dalriada License Agreement, which reduced the upfront deposit from $1.1 million to $0.5 million. As such, the remaining $0.6 million was applied against research and development expense incurred. We will expense the remaining deposit as the services are performed as a component of research and development expense in the consolidated statements of operations.

For the year ended December 31, 2025, the Company did not make any material payments pursuant to the Dalriada License Agreement. For the year ended December 31, 2024, the Company recognized $0.4 million in payments as research and development expense. During the years ended December 31, 2025 and 2024 Invyxis made no other service fee payments to Dalriada.

Psilera Acquisition

In February 2025, we entered into an Intellectual Property Assignment & License Agreement with Psilera, Inc. ("Psilera") under which we acquired Psilera's dimethyltryptamine ("DMT") patent portfolio, including all granted and pending patents related to DMT and other related psychedelics. In return, we paid Psilera an upfront fee of $0.8 million upon execution of the agreement and may also be required to pay Psilera additional consideration upon the achievement of certain regulatory and sales milestones, in addition to certain sales-based royalties over a ten-year period. We recognized the upfront fee of $0.8 million as acquired IPR&D expenses in the consolidated statement of operations when incurred during the three months ended March 31, 2025. In August 2025, Psilera achieved a milestone related to the grant of certain patents by the United States Patent Office. Upon completion of the milestone, the Company paid Psilera $2.3 million, which is also recognized as acquired IPR&D expenses in the consolidated statement of operations for the year ended December 31, 2025. The Company may be required to pay Psilera up to an additional $80.0 million upon the completion of certain sales milestones.

During the year ended December 31, 2025, the Company did not make any other payments to Psilera in connection with the Psilera Agreement. Additionally, as of December 31, 2025, the Company did not record any contingent liabilities in connection with the Psilera Agreement.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, costs and expenses and the disclosure of contingent liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in greater detail in Note 2, Basis of Presentation, Consolidation and Summary of Significant Accounting Policies, in our consolidated financial statements appearing under Part II, Item 8, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred.

We accrue expense for preclinical studies and clinical trial activities performed by vendors based upon estimates of the proportion of work completed. We determine such estimates by reviewing contracts, vendor agreements, and through discussions with our internal personnel and external service providers as to the progress or stage of completion and the agreed-upon fee to be paid for such services. However, actual costs and timing of preclinical studies and clinical trials are highly uncertain, subject to risks, and may change depending upon a number of factors, including our clinical development plan.

We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, the accrual is adjusted accordingly. Nonrefundable advance payments for goods and services are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Acquisitions and Dispositions

We evaluate each of our acquisitions under the accounting framework in ASC 805, Business Combinations, to determine whether the transaction is a business combination or an asset acquisition. In determining whether an acquisition should be accounted for as a business combination or an asset acquisition, we first perform a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the acquired set is not deemed to be a business and is instead accounted for as an asset acquisition. If this is not the case, we further evaluate whether the acquired set includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, we conclude that the acquired set is a business. During the year ended December 31, 2025, we did not have any acquisitions that were accounted for as business combinations. During the year ended December 31, 2024, we completed the acquisition of IGX, that was accounted for as a business combination. Refer to Note 4, Acquisitions, to our audited consolidated financial statements for additional information. We account for business acquisitions using the acquisition method of accounting. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. When determining the fair values of assets acquired and liabilities assumed, we make significant estimates and assumptions. Our estimates of fair value are based upon assumptions believed to be reasonable, but these assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill.

For asset acquisitions that involve the initial consolidation of a VIE that is not a business for which we are the primary beneficiary, the transactions are accounted for under ASC 810, Consolidation, and no goodwill is recognized. Rather, we recognize the identifiable assets acquired (excluding goodwill), the liabilities assumed, and any noncontrolling interests as though the VIE was a business and subject to the guidance on recognition and measurement in a business combination under ASC 805, and recognize a gain or loss for the difference between (a) the sum of the fair values of consideration paid (including any contingent consideration) and noncontrolling interests, (b) the fair value of the VIE's identifiable assets and liabilities, and (c) the reported amounts of any previously held interests. Acquisition-related expenses incurred in asset acquisitions that involve the initial consolidation of a VIE that is not a business, are not included as a component of consideration transferred, but are accounted for as an expense in the period in which the costs are incurred. In an asset acquisition, including the initial consolidation of a VIE that is not a business, acquired IPR&D with no alternative future use is charged to research and development expense at the acquisition date.

Upon the occurrence of certain events and on a regular basis, we evaluate whether we no longer have a controlling interest in our consolidated VIEs. If we determine that we no longer have a controlling interest, the subsidiary is deconsolidated. We will record a gain or loss on deconsolidation based on the difference on the deconsolidation date between (i) the aggregate of (a) the fair value of any consideration received, (b) the fair value of any retained noncontrolling investment in our former subsidiary and (c) the carrying amount of any noncontrolling interest in the subsidiary being deconsolidated, less (ii) the carrying amount of the former subsidiary's assets and liabilities.

Stock-Based Compensation

We recognize compensation costs related to stock-based awards granted to employees, directors, and consultants based on the estimated fair value of the awards on the date of grant. We estimate the grant date fair value, and the resulting stock-based compensation expense, for stock options that only have service vesting requirements or performance-based vesting requirements without market conditions using the Black-Scholes option-pricing model. The grant date fair value of the stock-based awards with service vesting requirements is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. Determining the appropriate amount to expense for performance-based awards based on the achievement of stated goals requires judgment.

We recognize expense for performance-based awards if the stated goals are determined to be probable of being met as of the period end. If any applicable financial performance goals are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed. For performance-based awards with market conditions, we determine the fair value of awards as of the grant date using a Monte Carlo simulation model. We have elected to recognize forfeitures of stock-based compensation awards as they occur.

We estimate the fair value of stock options using the Black-Scholes option-pricing model, which requires assumptions, including the fair value of our common stock prior to our initial public offering, volatility, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options, and our expected dividend yield. Certain assumptions used in our Black-Scholes option-pricing model represent management's best estimates and involve a number of variables, uncertainties and assumptions and the application of management's judgment, as they are inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.

These subjective assumptions are estimated as follows:

Expected term-We have generally elected to use the "simplified method" for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years).

Expected volatility-As we have limited trading history for our common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded biotechnology companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty. We also included our own historical volatility in the determination of expected volatility.

Risk-free interest rate-The risk-free rate assumption is based on the implied yield with an equivalent expected term at the grant date.

Expected dividend yield-We have not issued any dividends in our history and do not expect to issue dividends over the life of the options; therefore, we have estimated the dividend yield to be zero.

As part of the valuation of stock-based compensation under the Black-Scholes option-pricing model, it is necessary for us to estimate the fair value of our common stock. Prior to our IPO, we were required to periodically estimate the fair value of our common stock when issuing options and in computing our estimated stock-based compensation expense. Given the absence of a public trading market prior to the completion our initial public offering, and in accordance with the American Institute of Certified Public Accountants' Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, we exercised reasonable judgment and considered numerous objective and subjective factors to determine our best estimate of the fair value of our common stock. The estimation of the fair value of our common stock considered factors including the following: the estimated present value of our future cash flows; our business, financial condition and results of operations; our forecasted operating performance; the illiquid nature of our common stock; industry information such as market size and growth; market capitalization of comparable companies and the estimated value of transactions such companies have engaged in; and macroeconomic conditions. We apply similar methodology to estimate the fair value of our privately held subsidiaries' common stock. After the closing of the IPO, our board of directors determined the fair value of each common share underlying stock-based awards based on the closing price of our common stock as reported on Nasdaq on the date of grant.

Recently Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, Basis of Presentation, Consolidation and Summary of Significant Accounting Policies, in our consolidated financial statements appearing under Part II, Item 8.

JOBS Act

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will remain an emerging growth company until December 31, 2026 (the fiscal year-end following the fifth anniversary of our IPO).