What changed in this filing

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Item 1. Financial Statements

2021-05-10 compared with 2020-11-25 · 467 added, 1083 removed, 287 unchanged (84% of the section changed)

Financial Statements.

A LIGOS T HERAPEUTICS , I NC .

C ONDENSED C ONSOLIDATED B ALANCE S HEETS

(In thousands, except

share and per share data)

September 30,

ALIGOS THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

Current assets:

1 unchanged sentence

Restricted cash

Investments in

available-for-sale securities, at fair value

Investments in

held-to-maturity securities

Short-term investments

Other current assets

Total current assets

Operating lease

right-of-use assets

Operating lease right-of-use assets

Property and equipment, net

Long-term investments in

held-to-maturity securities

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK,

AND STOCKHOLDERS DEFICIT

LIABILITIES, PREFERRED STOCK,

AND STOCKHOLDERS’ EQUITY

Current liabilities:

3 unchanged sentences

Finance lease liabilities, current

Deferred revenue from collaborations, current

Total current liabilities

Derivative liabilities

Redeemable convertible preferred stock liabilities

Operating lease liabilities, net of current portion

1 unchanged sentence

Other liabilities

Deferred revenue from collaborations, net of current portion

Total liabilities

Commitments and contingencies (Note 12)

Series A redeemable convertible preferred stock, $0.0001 par value;

101,962,864 shares authorized

as of September 30, 2020 and December 31, 2019;

10,857,395 and 10,819,843 shares issued and outstanding as of September 30, 2020 and December 31, 2019 respectively;

aggregate minimum liquidation preference of $101,188 at

September 30, 2020

Series B-1 redeemable convertible preferred stock, $0.0001

77,764,055 shares authorized as of September 30, 2020 and December 31, 2019;

8,344,034 shares issued and outstanding as of September 30, 2020 and December 31, 2019;

aggregate minimum liquidation preference of $85,005

at September 30, 2020

Stockholders deficit:

Preferred Stock, $0.0001 par value;

10,000,000 shares authorized as of March 31, 2021 and December 31, 2020;

no shares issued and outstanding as of March 31, 2021 and December 31, 2020

Stockholders’ equity (deficit):

Common stock, $0.0001 par value;

278,000,000 shares authorized as of September 30, 2020 and

December 31, 2019, respectively;

4,104,585 and 3,927,803 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

320,000,000 shares authorized as of March 31, 2021 (unaudited) and December 31, 2020, respectively;

38,147,205 and 38,120,606 shares issued and outstanding as of March 31, 2021 (unaudited) and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Total stockholders deficit

Total liabilities, redeemable convertible preferred stock, and stockholders deficit

Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities, preferred stock, and stockholders’ equity (deficit)

The accompanying notes are an integral part of these consolidated financial statements.

C ONDENSED C ONSOLIDATED

S TATEMENTS OF O PERATIONS AND C OMPREHENSIVE L OSS

(In thousands, except

share and per share data)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

Three Months Ended

Nine Months Ended

September 30,

Revenue from collaborations

Operating expenses:

3 unchanged sentences

Loss from operations

Interest and other (expense) income, net

Interest and other income, net

Loss before income tax expense

Income tax benefits

Income tax expense

Other comprehensive gain (loss):

Unrealized (loss) gain on

available-for-sale securities

Unrealized (loss) gain on pension plans

Other comprehensive (loss) and income

Unrealized gain (loss) on available-for-sale securities

Unrealized gain on pension plans

Other comprehensive income (loss)

Comprehensive loss

2 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements.

C ONDENSED C ONSOLIDATED

S TATEMENTS OF C HANGES IN R EDEEMABLE C ONVERTIBLE P REFERRED S TOCK AND S TOCKHOLDERS

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share and per share data)

Three Months Ended September 30, 2020

Series A Redeemable Convertible

Preferred Stock

Series B-1 Redeemable Convertible

Preferred Stock

Three Months Ended March 31, 2021

Comprehensive

Income (Loss)

Stockholders’

Balance as of June 30, 2020

Issuance of common stock upon exercise of stock options

Stock-based compensation

Vesting of early exercised common stock options

Other comprehensive loss

Balance as of September 30, 2020

Nine Months Ended September 30, 2020

Series A Redeemable Convertible

Preferred Stock

Series B-1 Redeemable Convertible

Preferred Stock

Comprehensive

Income (Loss)

Stockholders

Balance as of December 31, 2020

Issuance of Series A redeemable covertible stock upon exercise of Series A warrants

Issuance of common stock upon exercise of stock options

Issuance of common stock

upon exercise of stock

Stock-based compensation

Vesting of early exercised common stock options

Vesting of early exercised

common stock options

Other comprehensive income

Balance as of September 30, 2020

Balance as of March 31,

The accompanying notes are an integral part of these consolidated financial statements.

Three Months Ended September 30, 2019

Three Months Ended March 31, 2020

Series A Redeemable Convertible

3 unchanged sentences

Comprehensive

Income (Loss)

Stockholders’

Balance as of June 30, 2019

Stock-based compensation

Vesting of early exercised common stock

Issuance of common stock upon exercise of stock options

Other comprehensive loss

Balance as of September 30, 2019

Nine Months Ended September 30, 2019

Series A Redeemable Convertible

Preferred Stock

Series B-1 Redeemable Convertible

Preferred Stock

Comprehensive

Income (Loss)

Stockholders

Balance as of December 31, 2019

Issuance of Series A stock

upon exercise of Series A

Stock-based compensation

Vesting of early exercised common stock

Issuance of common stock upon exercise of stock options

Other comprehensive loss

Balance as of September 30, 2019

Vesting of early exercised

Issuance of common stock

upon exercise

of stock options

Vesting of early exercised

existing exercises

Other comprehensive income

Balance as of March 31,

The accompanying notes are an integral part of these consolidated financial statements.

C ONDENSED C ONSOLIDATED

S TATEMENTS OF C ASH F LOWS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

5 unchanged sentences

Change in fair value of derivative liability

Change in fair value of redeemable convertible preferrable stock liabilities

Change in fair value of redeemable convertible preferred stock liabilities

Changes in operating assets and liabilities:

3 unchanged sentences

Operating lease liabilities

Other liabilities

Deferred revenue from collaborations

Net cash and cash equivalents used in operating activities

Cash flows from investing activities:

Activities in

available-for-sale investments:

Maturities of investments

Purchase of investments

Activities in

held-to-maturity investments:

Activities in available-for-sale investments:

Purchase of short-term investments

Purchase of long term investments

Activities in held-to-maturity investments:

Maturities of investments

Purchase of investments

Purchases of property and equipment

Net cash and cash equivalents provided by investing activities

Net cash and cash equivalents provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from exercise of warrants for Series A redeemable convertible preferred stock

Payment of Series B-1 redeemable convertible preferred

stock issuance cost

Payments on deferred offering costs

Proceeds from exercise of warrants for series A convertible preferred stock

Payment of Series B-1 redeemable convertible preferred stock issuance cost

Payments on finance lease

Proceeds from the exercise of common stock options

Net cash and cash equivalents (used in) provided by financing activities

Proceeds from the exercise of common stock option

Net cash and cash equivalents provided by (used in) financing activities

Net decrease in cash, cash equivalents, and restricted cash

2 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements.

C ONDENSED C ONSOLIDATED S TATEMENTS

OF C ASH F LOWS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine Months Ended Sept 30,

Three Months Ended March 31,

Reconciliation to amounts on the consolidated balance sheet:

4 unchanged sentences

Interest paid

Income taxes paid

Supplemental disclosures of noncash financing and investing activities:

Leasehold improvement directly paid by landlord

Equipment acquired through finance lease

Mark to market adjustment for

available-for-sale investments

Mark to market adjustment for available-for-sale investments

Acquisition of right of use asset through operating lease obligation

1 unchanged sentence

Vesting of early exercised options

Receivable from exercise of common stock options

Deferred offering costs included in accounts payable and accrued liabilities

Property and equipment purchases in accounts payable

Change in pension obligation

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

(In dollars, expect share and per share data)

Description of business

Aligos Therapeutics, Inc.

(Aligos-US) was incorporated in the state of Delaware on

February 5, 2018 (inception).

(Aligos-US) was incorporated in the state of Delaware on February 5, 2018 (inception).

On September 10, 2018, the Company formed Aligos Belgium BVBA (Aligos-Belgium), a limited liability company organized under the laws of Belgium.

On March 30, 2020, the Company

formed as a wholly owned subsidiary, Aligos Australia Pty LTD (Aligos-Australia), a proprietary limited company, and together with Aligos-US and Aligos-Belgium being the Company or

Aligos is a clinical-stage biopharmaceutical company developing novel therapeutics to address unmet medical needs in

viral and liver diseases, including chronic hepatitis B and coronaviruses therapeutics for non-alcoholic steatohepatitis (NASH).

On March 30, 2020, the Company formed as a wholly owned subsidiary, Aligos Australia Pty LTD (Aligos-Australia), a proprietary limited company, and together with Aligos-US and Aligos-Belgium being the Company or Aligos.

Aligos is a clinical-stage biopharmaceutical company developing novel therapeutics to address unmet medical needs in viral and liver diseases, including chronic hepatitis B and coronaviruses therapeutics for non-alcoholic steatohepatitis (NASH).

The Company is devoting substantially all of its efforts to the research and development of its drug candidates.

The Company has not generated

any product revenue to date.

candidates, uncertainty of market acceptance of products, competition from substitute products and larger companies, the need to obtain additional financing, compliance with government regulations, protection of proprietary technology, dependence on

third-parties, product liability, and dependence on key individuals.

The Company has not generated any product revenue to date.

The Company is also subject to a number of risks similar to other companies in the biotechnology industry, including the uncertainty of success of its nonclinical studies and clinical trials, regulatory approval of drug candidates, uncertainty of market acceptance of products, competition from substitute products and larger companies, the need to obtain additional financing, compliance with government regulations, protection of proprietary technology, dependence on third-parties, product liability, and dependence on key individuals.

Reverse stock split

On October 8, 2020, the Companys board of directors approved a

1-for-9.3197 reverse stock split (the Reverse Stock Split) of the Companys common stock and redeemable convertible preferred stock to be consummated

prior to the effectiveness of the Companys planned initial public offering (IPO).

The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock

On October 8, 2020, the Company’s board of directors approved a 1-for-9.3197 reverse stock split (the Reverse Stock Split) of the Company’s common stock and redeemable convertible preferred stock to be consummated prior to the effectiveness of the Company’s planned initial public offering (IPO).

The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock split.

All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.

Company filed an amended and restated certificate of incorporation in Delaware on October 9, 2020 that automatically effectuated the Reverse Stock Split without any further action required.

The Company filed an amended and restated certificate of incorporation in Delaware on October 9, 2020 that automatically effectuated the Reverse Stock Split without any further action required.

Initial public offering

On October 20, 2020, the Company closed its IPO and issued 10,000,000 shares of its common stock at a public offering price of $15.00 per

share for net proceeds of $135,400, after deducting underwriting discounts and commissions of $10,500 and estimated expenses of $4,100.

In connection with the IPO, all shares of Series A redeemable convertible preferred stock (Series A),

Series B-1 redeemable convertible preferred stock (Series B-1) and Series B-2 redeemable convertible preferred stock

(Series B-2) converted into 19,761,870 shares of voting common stock and 3,092,338 shares of non-voting common stock.

On November 5, 2020, the

underwriters of the IPO partially exercised their overallotment option by purchasing an additional 1,150,000 shares from the Company, resulting in an additional $16,043 in net proceeds, after deducting underwriting discounts and commissions of

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Summary of significant accounting policies

Company has incurred losses and negative cash flows from operations since its inception.

As of September 30, 2020 and December 31, 2019, the Company had an accumulated deficit of approximately $140,320 and $66,197, respectively.

inception through September 30, 2020, the Company has funded operations primarily with the net proceeds from the issuance of redeemable convertible preferred stock and convertible notes.

Management expects to continue to incur additional

substantial losses in the foreseeable future as a result of expanded research and development activities.

As of September 30, 2020,

the Company has unrestricted cash, cash equivalents and investments of approximately $70,064.

In addition, the Company received net proceeds of approximately $151,443 from the sale of an aggregate of 11,150,000 shares of its common stock on

October 20, 2020 and on November 5, 2020 as part of its IPO, which is available to fund future operations.

The Company expects to continue to spend substantial amounts to continue the nonclinical and clinical development of its current and

future programs.

If the Company is able to gain marketing approval for drug candidates that are being developed, it will require significant additional amounts of cash beyond the net proceeds from its IPO in order to launch and commercialize such

drug candidates.

On October 20, 2020, the Company closed its IPO and issued 10,000,000 shares of its common stock at a public offering price of $15.00 per share for net proceeds of $135.4 million, after deducting underwriting discounts and commissions of $10.5 million and expenses of $4.1 million.

In connection with the IPO, all shares of Series A redeemable convertible preferred stock (Series A), Series B-1 redeemable convertible preferred stock (Series B-1) and Series B-2 redeemable convertible preferred stock (Series B-2) converted into 19,761,870 shares of voting common stock and 3,092,338 shares of non-voting common stock.

On November 5, 2020, the underwriters of the IPO partially exercised their overallotment option by purchasing an additional 1,150,000 shares from the Company, resulting in an additional $16.0 million in net proceeds, after deducting underwriting discounts and commissions of $1.2 million.

The Company has incurred losses and negative cash flows from operations since its inception.

As of March 31, 2021 and December 31, 2020, the Company had an accumulated deficit of $202.4 million and $174.7 million, respectively.

Management expects to continue to incur additional substantial losses in the foreseeable future as a result of expanded research and development activities.

As of March 31, 2021, the Company has unrestricted cash, cash equivalents and investments of approximately $213.4 million which is available to fund future operations.

The Company expects to continue to spend substantial amounts to continue the nonclinical and clinical development of its current and future programs.

If the Company is able to gain marketing approval for drug candidates that are being developed, it will require significant additional amounts of cash in order to launch and commercialize such drug candidates.

In addition, other unanticipated costs may arise.

Because the design and outcome of the Companys planned and anticipated clinical trials is highly uncertain, the Company cannot reasonably estimate the actual amounts necessary

to successfully complete the development and commercialization of any drug candidate the Company may develop.

The Company expects to

finance its cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing or distribution arrangements.

In addition, the Company may seek

additional capital to take advantage of favorable market conditions or strategic opportunities even if the Company believes it has sufficient funds for its current or future operating plans.

Based on the Companys research and development

plans, it is expected that the Companys existing cash, cash equivalents and investments, will enable the Company to fund its operations for at least 12 months following the date the condensed consolidated financial statements are issued.

However, the Companys operating plan may change as a result of many factors currently unknown.

The accompanying condensed

consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the

normal course of business.

Risks and uncertainties

The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations,

protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing.

As a result, the Company is unable to predict the timing or amount of increased expenses or when

or if the Company will be able to achieve or maintain profitability.

Drug candidates currently under development will require significant additional research and development efforts, including extensive nonclinical and clinical testing and

regulatory approval.

Moreover, it is particularly difficult to estimate with certainty the Companys future expenses given the

dynamic nature of its business, the COVID-19 pandemic and the macro-economic environment generally.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Summary of significant accounting policies, continued

Risks and uncertainties, continued

The Companys ability to raise additional funds will depend on financial, economic and

other factors, many of which are beyond its control.

Because the design and outcome of the Company’s planned and anticipated clinical trials is highly uncertain, the Company cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of any drug candidate the Company may develop.

The Company expects to finance its cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing or distribution arrangements.

In addition, the Company may seek additional capital to take advantage of favorable market conditions or strategic opportunities even if the Company believes it has sufficient funds for its current or future operating plans.

Based on the Company’s research and development plans, it is expected that the Company’s existing cash, cash equivalents and investments, will enable the Company to fund its operations for at least 12 months following the date the condensed consolidated financial statements are issued.

However, the Company’s operating plan may change as a result of many factors currently unknown, and the Company may need to seek additional funds sooner than planned.

Moreover, it is particularly difficult to estimate with certainty the Company’s future expenses given the dynamic nature of its business, the COVID-19 pandemic and the macro-economic environment generally .

The Company’s ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond its control.

In particular, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets.

disruption persists or deepens, the Company could be unable to access additional capital, which could negatively affect its ability to consummate certain corporate development transactions or other important, beneficial or opportunistic investments.

If additional funds are not available to the Company when needed, on terms that are acceptable to the Company, or at all, the Company may choose to reduce discretionary spending through delaying, limiting, reducing or terminating nonclinical

studies, clinical trials or other research and development activities or eliminate one or more of its development programs altogether;

or delay, limit, reduce or terminate its efforts to establish manufacturing and sales and marketing capabilities

or other activities that may be necessary to commercialize any future approved products, or reduce the Companys flexibility in developing or maintaining its sales and marketing strategy.

If the disruption persists or deepens, the Company could be unable to access additional capital, which could negatively affect its ability to consummate certain corporate development transactions or other important, beneficial or opportunistic investments.

If additional funds are not available to the Company when needed, on terms that are acceptable to the Company, or at all, the Company may be required to:

delay, limit, reduce or terminate nonclinical studies, clinical trials or other research and development activities or eliminate one or more of its development programs altogether;

or delay, limit, reduce or terminate its efforts to establish manufacturing and sales and marketing capabilities or other activities that may be necessary to commercialize any future approved products, or reduce the Company’s flexibility in developing or maintaining its sales and marketing strategy.

Summary of significant accounting policies

The accompanying condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

Risks and uncertainties

The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing.

As a result, the Company is unable to predict the timing or amount of increased expenses or when or if the Company will be able to achieve or maintain profitability.

Drug candidates currently under development will require significant additional research and development efforts, including extensive nonclinical and clinical testing and regulatory approval.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting

principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting.

Accordingly, they do not include all of the information and footnotes required by

generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting.

Accordingly, they do not include all of the information and footnotes required by U.S.

GAAP for complete financial statements.

Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S.

GAAP included in the Accounting Standards Codification (ASC), and Accounting

Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB).

The condensed consolidated

balance sheet as of December 31, 2019 included herein was derived from the audited consolidated financial statements as of that date but does not include all of the information and notes required by U.S.

GAAP for complete financial

GAAP included in the Accounting Standards Codification (ASC), and Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB).

The condensed consolidated balance sheet as of December 31, 2020 included herein was derived from the audited consolidated financial statements as of that date but does not include all of the information and notes required by U.S.

GAAP for complete financial statements.

Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such rules and regulations.

As such, the information included in this

Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2019, included in the

Companys final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act), on October 19, 2020 (the Prospectus).

As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 23, 2021.

Principles of consolidation

The accompanying condensed consolidated financial statements include Aligos-US and its wholly owned

subsidiaries Aligos-Belgium and Aligos-Australia.

The accompanying condensed consolidated financial statements include Aligos-US and its wholly owned subsidiaries Aligos-Belgium and Aligos-Australia.

All intercompany balances and transactions have been eliminated.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Summary of significant accounting policies, continued

Use of estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and

assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes.

The Company regularly evaluates estimates and assumptions related to assets and liabilities, and disclosures of contingent assets

and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period.

Areas where management uses subjective judgments include, but are not limited to right-of-use assets, lease obligations, impairment of long-lived assets, stock-based compensation, accrued research and development costs, pension liabilities, derivative

liabilities and redeemable convertible preferred stock liability in the accompanying condensed consolidated financial statements.

Management bases its estimates on historical experience and on various other assumptions that are believed to be

reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ materially from these

estimates under different assumptions or conditions.

The preparation of the condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make certain estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes.

The Company regularly evaluates estimates and assumptions related to assets and liabilities, and disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period.

Areas where management uses subjective judgments include but are not limited to right-of-use assets, lease obligations, impairment of long-lived assets, stock-based compensation, accrued research and development costs, pension liabilities, revenue from collaborations and deferred revenue in the accompanying condensed consolidated financial statements.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ materially from these estimates under different assumptions or conditions.

Unaudited interim financial information

The accompanying consolidated balance sheet as of September 30, 2020, the consolidated statements of operations and comprehensive loss for

the three and nine months ended September 30, 2020 and 2019, the consolidated statements of redeemable convertible preferred stock and stockholders deficit for the three and nine months ended September 30, 2020 and 2019, and the

consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 are unaudited.

The unaudited consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial

statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Companys consolidated financial position as of September 30, 2020 and the

consolidated results of its operations and cash flows for the three and nine months ended September 30, 2020 and 2019.

The consolidated financial data and other information disclosed in these notes related to the three and nine months ended

September 30, 2020 and 2019 are unaudited.

The consolidated results for the three and nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other

interim periods, or any future year or period.

Deferred offering costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings, including the IPO, as deferred offering costs until such financings are consummated.

After consummation of the financing, these costs are recorded as a reduction of the proceeds

received from the equity financing.

If a planned equity financing is abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations and comprehensive loss.

There were $2,610 and $0 in deferred offering costs recorded with other assets on the Companys condensed consolidated balance sheets at September 30, 2020 and December 31, 2019, respectively.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Summary of significant accounting policies, continued

The Company determines the appropriate classification of debt securities at the time of purchase and

re-evaluates such designation as of each balance sheet date.

Debt securities are classified as held-to-maturity when the Company

has the positive intent and ability to hold the securities to maturity, otherwise debt securities are classified as available-for sale.

The accompanying consolidated balance sheet as of March 31, 2021, the consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020, the consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit) for the three months ended March 31, 2021 and 2020, and the consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited.

The unaudited consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position as of March 31, 2021 and the consolidated results of its operations and cash flows for the three months ended March 31, 2021 and 2020.

The consolidated financial data and other information disclosed in these notes related to the three months ended March 31, 2021 and 2020 are unaudited.

The consolidated results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

Foreign currency

The Company’s foreign subsidiaries use the U.S.

dollar as their functional currency, and they initially measure the foreign currency denominated assets and liabilities at the transaction date.

Monetary assets and liabilities are then re-measured at exchange rates in effect at the end of each period, and non-monetary assets and liabilities are converted at historical rates.

A re-measurement gain was recognized during the three months ended March 31, 2021 and 2020 of $50,000 and $45,000, respectively, and are reflected within interest and other income, net on the consolidated statements of operations and comprehensive loss.

Segment information

The Company has determined that the Chief Executive Officer is its Chief Operating Decision Maker.

The Company’s Chief Executive Officer reviews financial information presented on a consolidated basis for the purposes of assessing the performance and making decisions on how to allocate resources.

Accordingly, the Company has determined that it operates in a single reportable segment.

No product revenue has been generated since inception.

The Company has $6.3 million and $1.3 million of fixed assets in Aligos-US and Aligos-Belgium, respectively, as of March 31, 2021 and $6.6 million and $1.4 million of fixed assets in Aligos-US and Aligos‑Belgium, respectively as of December 31, 2020.

Cash equivalents

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents.

Restricted cash

As of March 31, 2021 and December 31, 2020, the restricted cash balance was $ 556,000 and $ 560,000 , respectively, and was used to secure the letters of credit in relation to the Company’s operating leases and deposits on rental assets (Note 6).

The Company determines if an arrangement is a lease at the inception of the lease.

Operating leases are included in operating lease right-of-use (ROU) assets and operating lease liabilities in the consolidated balance sheet.

Finance leases are included in property and equipment and finance lease liabilities in the consolidated balance sheet.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

When the Company’s leases do not provide an implicit rate, an incremental borrowing rate is used based on the information available at the commencement dates in determining the present value of lease payments.

The Company uses the implicit rate when readily determinable.

The operating lease ROU assets also include any lease payments made and excludes lease incentives when paid by the Company or on the Company’s behalf.

The Company’s lease terms may include the period covered by options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components.

The Company elected to not separate lease and non-lease components for all of its building leases.

For vehicle leases, lease and non-lease components are accounted for separately.

The Company also made an accounting policy election to recognize lease expense for leases with a term of 12 months or less on a straight-line basis over the lease term and not recognize ROU assets or lease liabilities for such leases.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation, and is depreciated using the straight-line method over the estimated useful life of the asset, which are as follows:

Lab equipment

Computer equipment

Furniture and office equipment

Leasehold improvements

Shorter of the useful

life or remaining lease term

Expenditures for repairs and maintenance of assets are charged to expense as incurred.

Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in loss from operations.

Impairment of long-lived assets

The Company regularly reviews the carrying amount of its property, equipment and intangible assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

If indications of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying amount to determine whether the asset’s value is recoverable.

If the carrying value of the asset exceeds such projected undiscounted cash flows, the asset will be written down to its estimated fair value.

No impairment charges were recorded during the three months ended March 31, 2021 or 2020.

The Company determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity, otherwise debt securities are classified as available-for sale.

Held-to-maturity securities are carried at amortized cost.

Available-for-sale debt

securities are measured and reported at fair value using quoted prices in active markets for similar securities.

Unrealized gains and losses

on available-for-sale debt securities are reported as a separate component of stockholders deficit.

Premiums or discounts from par value are amortized to

investment income over the life of the underlying investment.

The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in interest and other (expense) income, net within the condensed

consolidated statements of operations and comprehensive loss.

held-to-maturity and available-for-sale investments, the Company periodically reviews

each individual security position that has an unrealized loss, or impairment, to determine if that impairment is other-than-temporary.

If the Company believes an impairment of a security position is other than temporary, based on available

quantitative and qualitative information as of the report date, the loss will be recognized as other income (expense) in the Companys condensed consolidated statements of operations and a new cost basis in the investment is established.

impairment charges were recorded during the nine months ended September 30, 2020 and 2019.

As of September 30, 2020 and

December 31, 2019, short-term investments consisted of U.S.

Available-for-sale debt securities are measured and reported at fair value using quoted prices in active markets for similar securities.

Unrealized gains and losses on available-for-sale debt securities are reported as a separate component of stockholders’ equity.

Premiums or discounts from par value are amortized to investment income over the life of the underlying investment.

The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in interest and other income, net within the condensed consolidated statements of operations and comprehensive loss.

For both held-to-maturity and available-for-sale investments, the Company periodically reviews each individual security position that has an unrealized loss, or impairment, to determine if that impairment is other-than-temporary.

If the Company believes an impairment of a security position is other than temporary, based on available quantitative and qualitative information as of the report date, the loss will be recognized as other income in the Company’s condensed consolidated statements of operations and a new cost basis in the investment is established.

No impairment charges were recorded during the three months ended March 31, 2021 and 2020.

As of March 31, 2021 and December 31, 2020, short-term investments consisted of U.S.

Treasury securities with original maturities of less than one year.

As of December 31, 2019, long-term investments consisted of U.S.

Treasury securities with original maturities

of more than one year.

Research and development expenses

Research and development costs are expensed as incurred.

Research and development expenses consist of costs incurred in performing research and

development activities, including salaries, stock-based compensation and benefits, facilities costs, depreciation, and third-party license fees.

Non-refundable prepayments for goods or services that will be

used or rendered for future research and development activities are deferred and capitalized.

Such amounts are recognized as an expense as the goods are delivered or the related services are performed or until it is no longer expected that the goods

will be delivered or the services will be rendered.

Derivative liabilities

The Company accounts for certain warrants as liabilities at fair value and adjusts the instruments to fair value at each reporting period.

Company determined that its outstanding warrants are freestanding derivative instruments.

The warrants are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is

recognized as a component of interest and other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss.

The fair value of the warrants issued by the Company has been estimated using a probability-weighted

multi-scenario Black-Scholes option-pricing model.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Summary of significant accounting policies, continued

Redeemable convertible preferred stock liability

The freestanding instrument related to the commitment by certain preferred stockholders to purchase and the commitment by the Company to sell

its redeemable convertible preferred stock in a subsequent closing, contingent upon the achievement of certain developmental milestones or an election by preferred stockholders to waive such milestones, at a fixed price per share, is considered a

derivative liability (Redeemable Convertible Preferred Stock Liability).

The Redeemable Convertible Preferred Stock Liability is measured at fair value as the underlying shares contain liquidation preferences upon certain deemed

liquidation events that are not solely within the Companys control and which are considered in-substance contingent redemption features (refer to Note 8 for further discussion on the redemption

rights of the redeemable convertible preferred stock).

The Redeemable Convertible Preferred Stock Liability is subject to revaluation at each balance sheet date until settlement or extinguishment, with revaluations recognized as a component of

interest and other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss.

The fair value of the Redeemable Convertible Preferred Stock Liability in subsequent closings has been estimated using a

probability-weighted multi-scenario Black-Scholes hybrid valuation method (Note 10).

The Companys shares of redeemable convertible

preferred stock were assessed at issuance for classification and redemption features requiring bifurcation.

The Company presents as temporary equity any stock which (i) the Company undertakes to redeem at a fixed or determinable price on the

fixed or determinable date or dates, (ii) is redeemable at the option of the holders, or (iii) has conditions for redemption which are not solely within the control of the Company.

The Companys preferred stock is redeemable upon a

deemed liquidation event which the Company determined is not solely within its control and thus has classified shares of preferred stock as temporary equity until such time as the conditions are removed or lapse.

Because the occurrence of a deemed

liquidation event is not currently probable, the carrying values of the shares of redeemable convertible preferred stock are not being accreted to their redemption values.

Subsequent adjustments to the carrying values of the shares of redeemable

convertible preferred stock would be made only when a deemed liquidation event becomes probable.

Research and development expenses consist of costs incurred in performing research and development activities, including salaries, stock-based compensation and benefits, facilities costs, depreciation, and third-party license fees.

Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are expensed as incurred.

In-process research and development (IPR&D) expense represents the costs to acquire technologies to be used in research and development that have not reached technological feasibility or have no alternative future uses and thus are expensed as incurred.

IPR&D expense also includes upfront license fees and milestones paid to collaborators for technologies with no alternative use .

Collaborative arrangements

The Company enters into collaboration arrangements with pharmaceutical and other partners, under which the Company may grant licenses to its collaboration partners to research and develop potential drug candidates.

Consideration under these contracts may include an upfront payment, development, regulatory, sales and other milestone payments.

Contractual payments received for research and development activities performed are recognized on a gross basis in revenue from collaboration arrangements.

The Company may also perform research and development activities under the collaboration agreements where the Company may be granted licenses from its collaboration partners.

Contractual payments to the other party in collaboration agreements and costs incurred by the Company are recognized on a gross basis in research and development expenses.

Royalties and license payments are recorded as due.

When the Company enters into collaboration arrangements, the Company assesses whether the arrangement falls within the scope of ASC 808, Collaborative Arrangements (ASC 808) based on whether the arrangement involves joint operating activities and whether both parties would be active participants and would be exposed to significant risks and rewards of the arrangement.

To the extent that the arrangement falls within the scope of ASC 808, the Company assesses whether the payments between the parties fall within the scope of other accounting literature such as ASC 606, Revenue from Contracts with Customers (ASC 606).

During the three months ended March 31, 2021 and 2020, no milestones were met and no royalties were due;

therefore, the Company did not pay or expense any milestone or royalties.

Fair value measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP.

Fair value is defined as the exchange price

that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three

levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Certain assets and liabilities of the Company are carried at fair value under U.S.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs (other than Level 1 quoted prices), such as quoted prices in active

markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3 Unobservable inputs that are supported by little or no market activity that are significant

to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Summary of significant accounting policies, continued

Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Stock-based compensation

The Company’s stock-based awards consist of restricted stock awards and stock options.

For stock-based awards issued to employees and

nonemployees with service-based vesting, the Company measures the estimated fair value of the stock-based awards on the date of grant and recognizes compensation expense for those awards over the requisite service period, which is generally the

vesting period of the respective award.

For stock-based awards issued to employees and nonemployees with service-based vesting, the Company measures the estimated fair value of the stock-based awards on the date of grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award.

The Company has granted certain options with performance-based vesting for which expense is recognized over the explicit service period when achievement of the performance-based milestones is deemed probable.

The Company uses judgement to determine whether and, if so, how many awards are deemed probable of vesting at each reporting period.

The fair value of stock-based awards with non-market performance conditions

is estimated on the grant date.

The fair value of stock-based awards with non-market performance conditions is estimated on the grant date.

The Company records expense for awards with service-based vesting using the straight-line method and for awards with performance conditions utilizing an accelerated attribution method.

The Company accounts for

forfeitures as they occur.

The Company classifies stock-based compensation expense in its condensed consolidated statements of operations

and comprehensive loss in the same manner in which the award recipients cash compensation costs are classified.

The fair value of

each restricted stock award is determined based on the number of shares granted and the value of the Companys common stock on the date of grant.

The fair value of each stock option award is estimated on the date of grant using the

Black-Scholes option pricing model.

The Black-Scholes option-pricing model requires the use of a number of complex assumptions including the fair value of the common stock, expected volatility, risk-free interest rate, expected dividends, and

expected term of the option.

The Company accounts for forfeitures as they occur.

The Company classifies stock-based compensation expense in its condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s cash compensation costs are classified.

The fair value of each restricted stock award is determined based on the number of shares granted and the value of the Company’s common stock on the date of grant.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model.

The Company had been a private company prior to the IPO and lacks company-specific historical and implied fair value information.

Therefore, the Board of Directors (the Board) of the Company considered

numerous objective and subjective factors to determine the fair value of the Companys common stock options at each meeting in which awards were approved.

The factors considered include, but are not limited to (i) the results of

contemporaneous independent third-party valuations of the Companys common stock and the prices, rights, preferences and privileges of the Companys redeemable convertible preferred stock relative to those of its common stock;

Therefore, the Board of Directors (the Board) of the Company considered numerous objective and subjective factors to determine the fair value of the Company’s common stock options at each meeting in which awards were approved.

The factors considered include, but are not limited to (i) the results of contemporaneous independent third-party valuations of the Company’s common stock and the prices, rights, preferences and privileges of the Company’s redeemable convertible preferred stock relative to those of its common stock;

(ii) the lack of marketability of the Company’s common stock;

1 unchanged sentence

(iv) current business conditions and projections;

(v) the likelihood of achieving a liquidity event, such as an

initial public offering or sale of the Company, given prevailing market conditions, and (vi) precedent transactions involving the Companys shares.

The Company determined the expected stock volatility using a weighted-average of the historical volatility of a group of guideline companies

that issued options with substantially similar terms, and expects to continue to do so until such time as the Company has adequate historical data regarding the volatility of its own traded stock price.

The expected term of the Companys stock

options has been determined utilizing the simplified method for awards that qualify as plain-vanilla options.

(v) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions, and (vi) precedent transactions involving the Company’s shares.

The Company determined the expected stock volatility using a weighted average of the historical volatility of a group of guideline companies that issued options with substantially similar terms, and expects to continue to do so until such time as the Company has adequate historical data regarding the volatility of its own traded stock price.

The expected term of the Company’s stock options has been determined utilizing the simplified method for awards that qualify as plain-vanilla options.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for

time periods approximately equal to the expected term of the award.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

The Company has not paid, and does not anticipate paying, cash dividends on its common stock;

therefore, the expected dividend yield is assumed to be zero.

See Note 9 for the assumptions used by the Company in determining the grant date fair value of stock-based awards granted, as well as a summary

of the stock-based award activity under the Companys stock-based compensation plan, for the nine months ended September 30, 2020 and 2019.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Summary of significant accounting policies, continued

See Note 9 for the assumptions used by the Company in determining the grant date fair value of stock-based awards granted, as well as a summary of the stock-based award activity under the Company’s stock-based compensation plan, for the three months ended March 31, 2021 and 2020.

Net loss per share

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the

weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities.

Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the

weighted-average number of common stock and potentially dilutive securities outstanding for the period.

For purposes of the diluted net loss per share calculation, redeemable convertible preferred stock, stock options, common stock subject to

repurchase related to early exercise of stock options, unvested restricted stock subject to repurchase, warrants and convertible notes are considered to be potentially dilutive securities.

The Company applies the two-class method to calculate its basic and diluted net loss per

share as the Company has issued shares that meet the definition of participating securities.

The two-class method is an earnings allocation formula that treats a participating security as having

rights to earnings that otherwise would have been available to common stockholders.

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities.

Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period.

For purposes of the diluted net loss per share calculation, redeemable convertible preferred stock, stock options, common stock subject to repurchase related to early exercise of stock options, unvested restricted stock subject to repurchase, warrants and convertible notes are considered to be potentially dilutive securities.

The Company applies the two-class method to calculate its basic and diluted net loss per share as the Company has issued shares that meet the definition of participating securities.

The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders.

The Company’s participating securities contractually entitle the holders of such shares to participate in dividends;

but do not contractually require the

holders of such shares to participate in losses of the Company.

but do not contractually require the holders of such shares to participate in losses of the Company.

Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities.

Accordingly, in periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since

dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Accordingly, in periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Recently issued accounting standards

From time to time, new accounting pronouncements are issued by FASB that the Company adopts as of the specified effective date.

The Company qualifies as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 and has the option to not opt out of the extended transition related to complying with new or revised

accounting standards.

adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to opt out of such extended transition period or (ii) no longer qualifies as an emerging growth company.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has the option to not “opt out” of the extended transition related to complying with new or revised accounting standards.

This means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company has the option to adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

Property and equipment

The components of property and equipment as of September 30, 2020 and December 31, 2019 were as follows:

September 30, 2020

December 31, 2019

The components of property and equipment as of March 31, 2021 and December 31, 2020 were as follows:

Leasehold improvements

5 unchanged sentences

Accumulated depreciation

Depreciation expense was $708 and $2,005 for the three and nine months ended September 30, 2020,

respectively, and $387 and $868 for the three and nine months ended September 30, 2019, respectively.

Depreciation expense was $741,000 for the three months ended March 31, 2021, and $331,000 for the three months ended March 31, 2020, respectively.

Finance leases are also included in property and equipment as vehicles on the condensed consolidated balance sheets (Note 6).

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

As of September 30, 2020 and December 31, 2019, amortized cost, gross unrealized gains and losses, and estimated fair values of total

fixed-maturity securities were as follows:

September 30, 2020

Held-to-maturity

Treasury bonds

Available-for-sale

As of March 31, 2021 and December 31, 2020, amortized cost, gross unrealized gains and losses, and estimated fair values of total fixed-maturity securities were as follows:

March 31, 2021

Available-for-sale securities

Treasury bonds

December 31, 2020

Held-to-maturity

Held-to-maturity securities:

Treasury bonds

Available-for-sale securities

Treasury bonds

Changes in fair value are related to changes in market interest rates.

The Company expects to collect all

contractual principal and interest payments.

The following is a summary of maturities of securities held-to-maturity and available-for-sale as of September 30, 2020:

Held-to-maturity

The Company expects to collect all contractual principal and interest payments.

The following is a summary of maturities of securities held-to-maturity and available-for-sale as of March 31, 2021:

Available-for-sale

Amortized Cost

Amounts maturing in:

1 unchanged sentence

Total investments

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Investements , continued

The Company recorded interest income of $234 and $985 for three and nine months ended

September 30, 2020, respectively, and $345 and $1,308 for the three and nine months ended September 30, 2019, respectively, as a component of interest and other (expense) income, net on the Companys condensed consolidated statement

of operations and comprehensive loss.

The Company recorded interest income of $105,000 for three months ended March 31, 2021, and $468,000 for the three months ended March 31, 2020, respectively, as a component of interest and other income, net on the Company’s condensed consolidated statement of operations and comprehensive loss.

Accrued liabilities

Accrued liabilities consisted of the following as of:

September 30,

Accrued payables

2 unchanged sentences

The Company has operating and finance leases for corporate offices, research and development facilities, and certain vehicles.

have remaining lease terms of four to eight and a half years, some of which include options to extend the leases for five to eight years.

These leases have remaining lease terms of four to eight and a half years, some of which include options to extend the leases for five to eight years.

The Company has determined that it is not reasonably certain to exercise the options under any leases.

lease of research and development facilities includes costs for utilities and common area maintenance, which have been included in the calculation of lease payments.

Differences between lease payments as measured at lease inception and variations in

monthly payments will be recognized as operating expenses in the period in which the obligation is incurred.

Leases with an initial term

of 12 months or less are not recorded on the balance sheet, and the Company recognizes lease expense for these leases on a straight-line basis over the lease terms.

Leases with terms greater than 12 months are included in operating lease ROU assets

and operating lease liabilities in the Companys condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019.

The lease of research and development facilities includes costs for utilities and common area maintenance, which have been included in the

calculation of lease payments.

Differences between lease payments as measured at lease inception and variations in monthly payments will be recognized as operating expenses in the period in which the obligation is incurred.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the Company recognizes lease expense for these leases on a straight-line basis over the lease terms.

Leases with terms greater than 12 months are included in operating lease ROU assets and operating lease liabilities in the Company’s condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Leases, continued

Maturities of lease liabilities as of September 30, 2020 and are as follows:

Maturities of lease liabilities as of March 31, 2021 and are as follows:

Year ending December 31:

2020 (excluding the nine months ended September 30, 2020)

2021, remainder

imputed interest

2 unchanged sentences

Lease liabilities net of current portion

The components of lease expense were as follows for the three and nine months ended September 30, 2020 and

The components of lease expense were as follows for the three months ended March 31, 2021 and 2020:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating lease cost

Finance lease cost:

Amortization of

right-of-use assets

Amortization of right-of-use assets

Interest on lease liabilities

Total finance lease cost

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Leases, continued

The Company made payments of $637 and $1,885 during the three and nine months ended

September 30, 2020, respectively, and $415 and $670 during the three and nine months ended September 30, 2019, respectively, which are included as cash flow from operations on the condensed consolidated statements of cash flows.

As of September 30, 2020 and December 31, 2019, $296 of finance lease ROU assets were presented as part of property and equipment on

the condensed consolidated balance sheet with accumulated amortization of $94 and $47, respectively.

Additional information related to the

Companys leases was as follows as of September 30, 2020 and December 31, 2019:

September 30,

The Company made payments of $638,000 during the three months ended March 31, 2021, respectively, and $607,000 during the three months ended March 31, 2020, respectively, which are included as cash flow from operations on the condensed consolidated statements of cash flows.

As of March 31, 2021 and December 31, 2020, $296,000 of finance lease ROU assets were presented as part of property and equipment on the condensed consolidated balance sheet with accumulated amortization of $126,000 and $107,000, respectively.

Additional information related to the Company’s leases was as follows as of March 31, 2021 and December 31, 2020:

Operating Lease:

5 unchanged sentences

Derivative liabilities and redeemable convertible preferred stock liability

connection with the issuance of certain notes, lenders were issued Warrants to purchase 134,112 shares of Series A.

The Warrants have a coverage percentage of 25% of the principal amount of the notes and have a

ten-year expiration date from the applicable closing date of April 20, 2018 or June 6, 2018.

In connection with the issuance of certain notes, lenders were issued Warrants to purchase 134,112 shares of Series A.

The Warrants have a coverage percentage of 25% of the principal amount of the notes and have a ten-year expiration date from the applicable closing date of April 20, 2018 or June 6, 2018.

The underlying shares issuable upon the exercise of the Warrants were eligible to be exercised into the next round of equity financing.

Warrants became exercisable into shares of Series A for an exercise price of $9.32 per share.

There were warrants to purchase 83,149 and 120,701 shares of Series A outstanding as of September 30, 2020 and December 31, 2019, respectively.

The Company recorded the Warrants initially at fair value (Note 10) as derivative liabilities on the condensed consolidated balance sheet

with the value being allocated to the notes as a debt discount.

The fair value of the Warrants was $620 and $461 as of September 30, 2020 and December 31, 2019, respectively.

During the nine months ended September 30, 2020, 37,552 Warrants were exercised.

No Warrants were exercised during the three months ended

September 30, 2020, or during the nine months ended September 30, 2019.

As Series A contains a conditional obligation for the Company to repurchase the shares for cash consideration, the Warrants remain outstanding as derivative

liabilities with changes in fair value being recorded on the condensed consolidated statements of operations and comprehensive loss.

The Company recorded a change in fair value of derivative liabilities of $240 and $296 for the three and nine months

ended September 30, 2020, respectively, and $154 and $294 for the three and nine months ended September 30, 2019, respectively.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Derivative liabilities and redeemable convertible preferred stock liability , continued

The Warrants became exercisable into shares of Series A for an exercise price of $9.32 per share.

The Company recorded the Warrants initially at fair value (Note 10) as derivative liabilities on the consolidated balance sheet with the value being allocated to the notes as a debt discount.

The fair value of the Warrants upon issuance on April 20, 2018 and June 6, 2018, was $0.7 million and $238,000, respectively.

The fair value of the Warrants was $0 and $0 as of March 31, 2021 and December 31, 2020, respectively as, due to the IPO in October 2020, all outstanding warrants were automatically exercised for the issuance of Common Stock, and upon that exercise, such warrants were no longer outstanding.

No warrants were exercised during the three months ended March 31, 2021, or during the three months ended March 31, 2020.

As Series A contained a conditional obligation for the Company to repurchase the shares for cash consideration, the Warrants were exercised as of the IPO date, with changes in fair value being recorded on the consolidated statements of operations and comprehensive loss.

The Company recorded a change in fair value of derivative liabilities of $0 and $20,000 for the three months ended March 31, 2021 and March 31, 2020, respectively.

Redeemable convertible preferred stock liability

contingent upon the achievement of certain developmental milestones or a receipt of a waiver of achievement of the milestones.

The Redeemable Convertible Preferred Stock Liability is considered a freestanding instrument that qualifies as a liability

under ASC Topic 480, Distinguishing Liabilities from Equity as the Company is committed to issue an instrument that ultimately may require a transfer of assets.

The liability is accounted for at fair value and

re-measured at each reporting date (Note 10).

On the date of the initial closing, the Company recorded the Redeemable Convertible Preferred Stock Liability at a fair value of $3,174.

As of September 30,

2020, none of the Series B-2 shares were issued and the fair value of the liability related to this freestanding instrument increased by $11,750 and $11,387 during the three and nine months ended

September 30, 2020.

In connection with the issuance of shares of Series B-1 (Note 8), the Series B-1 preferred stockholders committed to purchase and the Company committed to sell 3,569,630 shares of Series B-2 at a price of $11.20563 per share in a subsequent closing, contingent upon the achievement of certain developmental milestones or a receipt of a waiver of achievement of the milestones.

The Redeemable Convertible Preferred Stock Liability is considered a freestanding instrument that qualifies as a liability under ASC Topic 480, Distinguishing Liabilities from Equity as the Company is committed to issue an instrument that ultimately may require a transfer of assets.

The liability is accounted for at fair value and re-measured at each reporting date (Note 10).

On the date of the initial closing, the Company recorded the Redeemable Convertible Preferred Stock Liability at a fair value of $3.2 million.

As of March 31, 2021 and December 31, 2020, all of the Series B-2 shares were issued and then, as a result of the IPO, converted to shares of common stock.

The Company recorded a change in fair value of the liability of $0 and $166,000 during the three months ended March 31, 2021 and 2020.

Capital stock

December 23, 2019, pursuant to the Second Amended and Restated Certificate of Incorporation, the total shares of common stock authorized were set to 278,000,000 and the total shares of redeemable convertible preferred stock were set to

212,994,964 with a par value of $0.0001 per share.

The total shares of redeemable convertible preferred stock authorized comprised of 101,962,864 shares of Series A, 77,764,055 shares of Series B-1, and

33,268,045 shares of Series B-2.

The holders of shares of Common Stock are entitled to one vote

for each share of Common Stock at all meetings of stockholders.

On October 20, 2020, the certificate of incorporation was amended to increase the total shares of Common Stock authorized for issuance to 320,000,000 and decrease the total shares of preferred stock authorized for issuance to 10,000,000 with a par value of $0.0001 per share.

300,000,000 shares of the Common Stock were designated as “Voting Common Stock” and 20,000,000 shares of the Common Stock were designated as “Non-Voting Common Stock”.

The holders of shares of Common Stock are entitled to one vote for each share of Common Stock at all meetings of stockholders.

Redeemable convertible preferred stock

On August 16, 2018, the Company entered into the Series A Preferred Stock Purchase Agreement for the purchase and sale of Series A for

$9.32 per share.

The Company received $75,000 in cash proceeds from the initial purchasers.

On September 19, 2018, the Company received an additional $20,000 in cash proceeds from subsequent purchasers.

Additionally, on the initial closing

date, $5,600 in convertible notes plus accrued interest converted into shares of Series A and the notes were subsequently cancelled.

On August 16, 2018, the Company entered into the Series A Preferred Stock Purchase Agreement for the purchase and sale of Series A for $9.32 per share.

The Company received $75.0 million in cash proceeds from the initial purchasers.

On September 19, 2018, the Company received an additional $20.0 million in cash proceeds from subsequent purchasers.

Additionally, on the initial closing date, $5.6 million in convertible notes plus accrued interest converted into shares of Series A and the notes were subsequently cancelled.

The Warrants associated with the convertible notes became exercisable into shares of Series A.

Each share of Series

A is convertible into Common Stock on a one-for-one basis.

In connection with the issuance of Series A, the Company incurred $194 in issuance costs which have offset

amounts reported as temporary equity as of September 30, 2020.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Capital stock, continued

Redeemable convertible preferred stock, continued

On December 23, 2019, the Company entered into the Series

B-1 and Series B-2 Preferred Stock Purchase Agreement (the Series B Purchase Agreement), pursuant to which the investors committed to invest an aggregate

amount of up to $125,000 for the issuance and sale of shares of Series B-1 and Series B-2 (collectively, the Series B), at a price of $10.18690 and $11.20563

per share, respectively.

The Company issued 8,344,034 shares of Series B-1 for cash proceeds of $85,000 at the initial closing.

The investors also committed to purchase and the Company committed to sell

3,569,630 shares of Series B-2 in a subsequent closing (the Second Closing), contingent upon achievement by the Company of certain development milestones or a receipt of a waiver of achievement of

the milestones.

No shares of Series B-2 were issued as of September 30, 2020.

In connection with the issuance of Series B-1, the Company incurred $442 in

issuance costs which have offset amounts reported as temporary equity as of September 30, 2020.

The holders of the Companys

Series A and Series B (collectively, the Preferred Stock) had the following rights, preferences, and privileges prior to the completion of the Companys IPO:

The holders of shares of Preferred Stock, in preference to the holders of Common Stock, shall be entitled to receive, on a pari passu

basis, when, as and if declared by the board of directors (Board) out of funds legally available, noncumulative cash dividends at the rate of eight percent (8%) of the original issue price per annum on each outstanding share of Preferred

So long as any shares of Preferred Stock are outstanding, the Company shall not pay or declare any dividend, or make any other distribution on the Common Stock, or purchase, redeem or otherwise acquire for value any shares of Common Stock

until all dividends on the Preferred Stock shall have been paid or declared and set apart, except for:

acquisitions of Common Stock by the Company pursuant to agreements which permit the Company to repurchase such shares upon termination of services

to the Company;

or acquisitions of Common Stock in exercise of the Companys right of first refusal to repurchase such shares as approved by the Board.

After the dividends on the Preferred Stock have been paid, then the Company may declare and

distribute in such year dividends among the holders of Preferred Stock and the holders of Common Stock pro rata based on the number of shares of Common Stock held by each, determined on an as-if-converted to Common Stock basis (assuming full conversion of all such Preferred Stock) as of the record date with respect to the declaration of such dividends.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Capital stock, continued

Redeemable convertible preferred stock, continued

Liquidation preference and redemption

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of shares of Preferred Stock

then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders or, in the case of a Deemed Liquidation Event (as defined below), out of the consideration payable to stockholders in such

Deemed Liquidation Event or the Available Proceeds (as defined below), before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to one (1) times the applicable Original

Issue Price of such series of Preferred Stock, plus any dividends declared but unpaid thereon.

If upon any such liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, the assets of the Company available for distribution

to its stockholders shall be insufficient to pay the holders of shares of Preferred Stock the full amount to which they shall be entitled, the assets or consideration will be distributed ratably among such holders.

After the payment in full of all liquidation amounts required to be paid to the holders of shares of Preferred Stock the remaining assets of

the Company available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Preferred Stock or the remaining Available Proceeds, as the case may be, shall be

distributed among the holders of the shares of Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to Common Stock immediately

prior to such liquidation, dissolution or winding up of the Company;

provided, however, that if the aggregate amount which the holders of shares of Preferred Stock are entitled to receive shall exceed one and

one-half (1.5) times the applicable Original Issue Price of such series of Preferred Stock per share, plus any dividends declared, but unpaid thereon (such amount, with respect to a series of Preferred Stock,

the Maximum Participation Amount), each holder of shares of a series of Preferred Stock shall be entitled to receive upon such liquidation, dissolution or winding up of the Company the greater of (i) the Maximum Participation Amount

applicable to such series or (ii) the amount such holder would have received if all shares of such series of Preferred Stock had been converted into Common Stock immediately prior to such liquidation, dissolution or winding up of the Company.

Each of the following events shall be considered a Deemed Liquidation Event unless the holders of at least 67% of the

outstanding shares of Preferred Stock (voting as a single class on an as-converted to Common Stock basis) which must include certain non-strategic holders of Series B-1 or Series B-2 holding at least 33% of outstanding shares of Series B-1 and Series B-2 elect

otherwise by written notice sent to the Company prior to the effective date of any such event:

a merger or consolidation in which the Company is a constituent party or a subsidiary of the Company is a

constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except (1) any such merger or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company

outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, a majority, by voting power, of

the capital stock of (a) the surviving or resulting corporation;

or (b) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent

corporation of such surviving or resulting corporation;

or (2) a merger effected exclusively to change the domicile of the Company;

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Capital stock, continued

Redeemable convertible preferred stock, continued

the closing of the sale, in a single transaction or series of related transactions, of equity securities of the

Company other than (a) bona fide equity financing, and (b) any transaction in which, the stockholders of the Company prior to such transaction continue to hold at least fifty percent (50%) of the outstanding shares of the surviving

(1) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of

related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or (2) the sale or disposition (whether by merger, consolidation or otherwise,

and whether in a single transaction or a series of related transactions) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries,

except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company.

Each share of Preferred Stock is convertible into fully paid and non-assessable shares of Common Stock

at any time at the option of the holder, and is subject to mandatory conversion upon the written consent of certain holders or upon the closing of a firm commitment underwritten public offering (i) approved by a majority of the then-outstanding

shares of Series B-1 or Series B-2 held by certain non-strategic Series B-1 and Series B-2 holders or (ii) after the earlier of (A) September 30, 2021 and (B) the occurrence of a developmental milestone, in the case of clause (ii) which firm commitment underwritten public

offering involves a price per share dependent upon whether it is prior to the Second Closing or on or after the Second Closing, and gross proceeds to the Company of at least $75,000.

The conversion ratio at September 30, 2020 and

December 31, 2019, was one-for-one, and is subject to certain anti-dilutive adjustments.

The holders of Preferred Stock have voting rights equivalent to the number of shares of Common Stock into which their shares of Preferred

Stock convert.

Except as provided by law or by the other provisions of the amended and restated certificate of incorporation, holders of shares of Preferred Stock shall vote together with the holders of shares of Common Stock as a single class and

on an as-converted to Common Stock basis.

The holders of record of shares of Series A,

exclusively and as a separate class, shall be entitled to elect four (4) directors of the Company, the holders of record of shares of Series B-1 and Series B-2,

exclusively and as a separate class on an as-converted basis, shall be entitled to elect one (1) director of the Company and the holders of record of shares of Common Stock, exclusively and as a separate

class, shall be entitled to elect two (2) directors of the Company.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Each share of Series A is convertible into Common Stock on a one-for-one basis.

In connection with the issuance of Series A, the Company incurred $194,000 in issuance costs which have offset amounts reported as temporary equity as of December 31, 2019.

As of December 31, 2020, in connection with the Company’s IPO, all shares of Series A converted into Common Stock.

On December 23, 2019, the Company entered into the Series B-1 and Series B-2 Preferred Stock Purchase Agreement (the Series B Purchase Agreement), pursuant to which the investors committed to invest an aggregate amount of up to $ 125 .

0 million for the issuance and sale of shares of Series B-1 and Series B-2 (collectively, the Series B), at a price of $ 10.18690 and $ 11.20563 per share, respectively.

The Company issued 8,344,034 shares of Series B-1 for cash proceeds of $ 85 .

0 million at the initial closing.

The investors also committed to purchase and the Company committed to sell 3,569,630 shares of Series B-2 in a subsequent closing (the Second Closing), contingent upon achievement by the Company of certain development milestones or a receipt of a waiver of achievement of the milestones.

No shares of Series B-2 were issued as of March 31, 2021 .

In connection with the issuance of Series B-1, the Company incurred $ 442 ,000 in issuance costs which have offset amounts reported as temporary equity as of December 31, 20 19 .

Prior to the IPO, the Company issued 3,569,630 shares of Series B-2, which upon the closing of the IPO converted into common stock.

In connection with the Company’s IPO, all shares of Series B-1 converted into common stock.

As of December 31, 2020, there was 10,000,000 shares of preferred stock authorized and no preferred stock issued.

Stock-based compensation

2018 Equity incentive plan

The Companys 2018 Equity Incentive Plan, as amended, (the Plan), allows for the Company to issue restricted stock awards and

restricted stock units, and to grant incentive stock options or non-qualified stock options.

Incentive stock options may be granted only to the Companys employees including officers and members of the

Board who are also employees.

Restricted stock awards, restricted stock units and non-qualified stock options may be granted to employees, members of the Board, outside advisors, and consultants of the Company

(the Participants).

As of September 30, 2020, the Company was authorized to issue awards for 4,913,665 shares of Common Stock under the Plan.

In addition, the Company had 4,238,874 awards granted as of September 30, 2020 with

674,791 available for future issuances.

Stock options

The exercise price for incentive stock options is at least 100% of the fair market value on the date of grant for stockholders owning less than

10% of the voting power of all classes of stock, or at least 110% of the fair market value for stockholders owning more than 10% of the voting power of all classes of stock.

Options generally expire in 10 years.

Options may vest over periods

determined by the Board, generally 48 months (Time-Vesting Options), or vest upon the achievement of a certain performance condition (Performance-Vesting Options).

Certain stock options referred to as early exercise

stock options permit the holders to exercise the option in whole or in part prior to the full vesting of the option in exchange for unvested shares of Restricted Stock with respect to any unvested portion of the option so exercised.

Of the option awards outstanding as of September 30, 2020, 1,711,065 were Time-Vesting Options, with an unamortized expense balance of

$3,463, to be amortized over a weighted average period of 2.88 years.

Of the option awards outstanding as of September 30, 2020,

434,977 were Performance-Vesting Options.

On September 30, 2020, the Company has determined that the vesting condition associated with the Performance-Vesting Options became probable.

Therefore, the Company has recognized compensation expense

under the accelerated attribution method measured at the grant date fair value.

In September 2020, terms of certain Performance-Vesting Options were modified.

The performance condition for these options was removed and they became fully vested.

Company recognized a total of $203 of incremental compensation expense as a result of the modification.

The total unrecognized expense for Performance-Vesting options was $629 as of September 30, 2020, which will be recognized over a

weighted-average period of 3.30 years.

During the three and nine months ended September 30, 2020, the Companys stock option

compensation expense was approximately $926 and $1,403, respectively.

During the three and nine months ended September 30, 2019, stock option compensation expense was $60 and $203, respectively.

There was no recognized tax benefit in either of

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Stock-based compensation, continued

Stock options, continued

Stock option activity during the nine months ended September 30, 2020 is as follows:

Time-Vesting Options

Performance-Vesting Options

Shares subject

average exercise

Shares subject

average exercise

contractual term

During the periods ended March 31, 2021 and 2020, the Company’s stock option compensation expense was approximately $2.7 million and $240,000, respectively, and there was no recognized tax benefit in either of the periods.

As of March 31, 2021, unamortized expense balance was $37.1 million, to be amortized over a weighted average period of 3.21 years.

Stock option activity during the three months ended March 31, 2021 is as follows:

Time-based options

Outstanding as of January 1, 2021

Outstanding as of September 30, 2020

Options vested and expected to vest as of September 30, 2020

Options vested and exercisable as of September 30, 2020

The weighted-average grant date fair value of both Time-Vesting Options and Performance-Vesting Options

granted was $2.23 per share during the three and nine months ended September 30, 2020.

The Company did not grant any Time-Vesting Options or Performance-Vesting Options during the three months ended September 30, 2020.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Stock-based compensation, continued

Outstanding as of March 31, 2021

Options vested and expected to vest as of March 31, 2021

Options vested and exercisable as of March 31, 2021

The weighted-average grant date fair value of options granted was $17.33 per share during the three months ended March 31, 2021.

Restricted stock awards

The Company may grant restricted stock purchase awards to the Participants to purchase restricted stock under the Companys Plan, which

are subject to vesting conditions.

The purchase prices of the restricted stock are determined by the Board.

The Company has a right to repurchase the shares if the Participants service period is not fulfilled or upon termination of service at

the original per share issuance price.

The right of repurchase lapses over a service period which is typically four years with 25% vesting on the first anniversary of the vesting commencement date and 1/48 each month thereafter.

Before the adoption of the Companys Plan, the Company granted 502,964 shares of restricted stock to employees and founders.

of restricted stock have similar characteristics to the restricted stock awards granted under the Companys Plan, other than the right of repurchase, which typically lapses over three years with 33% vesting on the first anniversary of the

vesting commencement date and 1/36 each month thereafter.

During the three and nine months ended September 30, 2020, the Company

recorded a total stock-based compensation expense of $90 and $271, respectively, related to the restricted stock awards.

During the three and nine months ended September 30, 2019, the Company recorded stock-based compensation expense related to

restricted stock awards of $91 and $401, respectively.

As of September 30, 2020 unrecognized stock-based compensation expense related to outstanding unvested shares of restricted stock that are expected to vest were approximately $542, expected

to be recognized over a weighted-average period of 1.36 years.

The following table summarizes the Companys restricted common stock

activity for the nine months ended September 30, 2020:

Average Grant

Date Fair Value

Aggregate Fair

During the three months ended March 31, 2021 and 2020, the Company recorded a total stock-based compensation expense of $90,000 and $90,000 related to the restricted stock awards.

As of March 31, 2021, unrecognized stock-based compensation expense related to outstanding unvested shares of restricted stock that are expected to vest were approximately $421,000, expected to be recognized over a weighted-average period of 1.00 years.

The following table summarizes the Company’s restricted common stock activity for the three months ended March 31, 2021:

Issued and unvested as of January 1, 2021

Restricted stock awards granted

Restricted stock awards vested

Issued and unvested as of September 30, 2020

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Stock-based compensation, continued

Stock-based compensation expense was allocated as follows for the three and nine months ended

September 30, 2020 and 2019:

Three months ended

September 30,

Nine months ended

September 30,

Issued and unvested as of March 31, 2021

Stock-based compensation expense was allocated as follows for the three months ended March 31, 2021 and 2020:

March 31, 2021

March 31, 2020

Research and development

General and administrative

During the nine months ended September 30, 2020, the Company issued 52,062 shares of common stock,

upon exercise of unvested stock options or purchases for unvested restricted stock awards.

As of September 30, 2020 and December 31, 2019, there were 441,198 and 577,124 shares of Common Stock held by employees subject to repurchase at an

aggregate price of $650 and $753, respectively.

A corresponding liability was recorded and included in accrued expenses on the condensed consolidated balance sheet as of September 30, 2020 and December 31, 2019, respectively.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

The following tables present the fair value of the Companys financial instruments that are measured or disclosed at fair value on a

recurring basis:

During the three months ended March 31, 2021, the Company issued 317,456 shares of common stock, upon exercise of unvested stock options or purchases for unvested restricted stock awards.

As of March 31, 2021 and December 31, 2020, there were 338,358 and 396,522 shares of Common Stock held by employees subject to repurchase at an aggregate price of $0.5 million and $0.6 million, respectively.

A corresponding liability was recorded and included in accrued expenses on the condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020, respectively.

The following tables present the fair value of the Company’s financial instruments that are measured or disclosed at fair value on a recurring basis:

Fair Value Measurements

as of September 30, 2020

as of March 31, 2021

Cash equivalents

Money market funds

Held-to-maturity

Treasury bonds

Available-for-sale

Treasury bonds

Derivative liabilities

Redeemable convertible preferred stock liability

Fair Value Measurements

1 unchanged sentence

Cash equivalents

Money market funds

Held-to-maturity

Treasury bonds

Derivative liabilities

Redeemable convertible preferred stock liability

The derivative liability in the table above refers to the fair value of Warrants (Note 7).

values of the Warrants were determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Fair value, continued

In order to determine the fair value of the Warrants, the Company utilized a

probability-weighted multi-scenario Black-Scholes option-pricing model to determine the fair value of the Warrants by accounting for the probability of multiple possible outcomes, including deemed liquidation events, as best estimated by the

Estimates and assumptions impacting the fair value measurement including the fair value of the underlying shares of Series A, the remaining contractual or expected term of the Warrants, risk-free interest rate, expected dividend

yield and expected volatility of the price of the underlying preferred stock on an as converted basis.

The Company considered the probability of a deemed liquidation event in determining the remaining expected term of the Warrants, which was used as

an input to the probability-weighted multi-scenario Black-Scholes option-pricing model adopted in 2019.

The Company lacks company-specific historical and implied volatility information of its stock since there is currently no market.

Therefore, it

estimated its expected stock volatility based on the historical volatility of publicly traded guideline companies for a term equal to the remaining contractual or expected term of the Warrants.

The risk-free interest rate was determined by reference

Treasury yield curve for time periods approximately equal to the remaining contractual or expected term of the Warrants.

The Company estimated no expected dividend yield based on the fact that the Company has never paid or declared

dividends and does not intend to do so in the foreseeable future.

The Warrants were measured at fair value under the following

September 30,

Exercise price

Term (in years)

Risk-free interest rate

Dividend yield

The significant unobservable inputs used in the fair value measurement of the Warrants are the remaining

expected term, which considers the timing of a liquidation event that would net settle the awards before their contractual term expires, and the equity volatility, which is a statistical measure of the dispersion of returns for a given security.

Significant increases (decreases) in the term would result in significantly higher (lower) fair value measurements.

Significant increases (decreases) in the volatility would result in significantly higher (lower) fair value measurements.

The following table sets forth a summary of changes in fair value of the Companys derivative liability and redeemable convertible

preferred stock liability for which fair value was determined by Level 3 inputs:

Redeemable Convertible

Preferred Stock Liability

Balance as of December 31, 2019

Exercise of warrants

Change in fair value

Balance as of September 30, 2020

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Fair value, continued

In order to determine the fair value of the Redeemable Convertible Preferred Stock Liability,

the Company used a probability-weighted multi-scenario Black Scholes hybrid valuation method that accounts for the probability of achieving milestones as estimated by the management.

The Redeemable Convertible Preferred Stock Liability was measured

at fair value under the following assumption as of September 30, 2020:

September 30,

Exercise price

Term (in years)

Risk-free interest rate

Dividend yield

The significant unobservable inputs used in the fair value measurement of the redeemable convertible preferred

stock liability include the probability of milestone achievement and/or milestone achievement waiver, the Series B-2 current or future value estimate under each scenario, the term, and the equity volatility,

which is a statistical measure of the dispersion of returns for a given security.

Significant increases (decreases) in the probability of milestone achievement and/or milestone waiver would result in a significantly higher (lower) fair value

Significant decreases (increases) in assumed current or future Series B-2 value would result in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in the term

would result in a significantly higher (lower) fair value measurement.

Significant increases (decreases) in the volatility would result in significantly higher (lower) fair value measurements.

License and collaboration agreements

Agreement with Emory University (Emory)

In June 2018, the Company entered into a license agreement with Emory (the Emory License Agreement), pursuant to which Emory

granted the Company a worldwide, sublicensable license under certain of its intellectual property rights to make, have made, develop, use, offer to sell, sell, import and export products containing certain compounds relating to Emorys

hepatitis B virus capsid assembly modulator technology, for all therapeutic and prophylactic uses.

In June 2020, the Company amended the

license agreement with Emory.

In June 2018, the Company entered into a license agreement with Emory (the Emory License Agreement), pursuant to which Emory granted the Company a worldwide, sublicenseable license under certain of its intellectual property rights to make, have made, develop, use, offer to sell, sell, import and export products containing certain compounds relating to Emory’s hepatitis B virus capsid assembly modulator technology, for all therapeutic and prophylactic uses.

Such license is initially exclusive with respect to specified licensed patents owned by Emory and non-exclusive with respect to certain of Emory’s specified know-how.

Beginning in June 2022, the license to such patents will become non-exclusive with respect to all fields except for the treatment and prevention of HBV;

however, the Company may select up to six compounds which will maintain exclusivity with respect to all therapeutic and prophylactic uses.

With respect to all other compounds that are enabled by the licensed patents, those which are jointly invented by the Company and Emory or inventors in the Schinazi laboratory, or which are disclosed in a specified licensed patent, are licensed to the Company exclusively including as to Emory;

whereas all other such compounds are licensed to the Company non-exclusively.

Under the terms of the Emory License Agreement, the Company is obligated to use commercially reasonable efforts to bring licensed products to market in accordance with a mutually agreed upon development plan.

Unless terminated earlier by either party in accordance with the provisions thereof, the Emory License Agreement shall continue until the expiration of the last–to-expire of the patents licensed to the Company thereunder.

As consideration for the Emory License Agreement, the Company paid an upfront license fee of $290,000 and issued the Emory Convertible Note of $600,000.

As discussed in Note 8, upon issuance of the Series A in August 2018, the Emory Convertible Note and unpaid accrued interest was cancelled and converted into shares of Series A at a conversion price of $9.32 per share.

In June 2020, the Company amended the license agreement with Emory.

Pursuant to the amended license agreement, Emory granted the Company additional patent rights to certain compounds targeting the treatment or prevention of HBV.

As consideration for the additional rights, the Company

made a one-time, non-refundable payment to Emory in the amount of $150, with an additional obligation to pay up to a maximum of $35.

On the same date, the Company

entered into a collaboration agreement with Emory, with the initial research plan pertaining to the synthesis and evaluation of the compounds licensed through the additional patent rights granted in the amended license agreement.

The research plan

terminates one year from the effective date, with the Company having an option to extend for a second year.

As consideration for the additional rights, the Company made a one-time, non-refundable payment to Emory in the amount of $ 150 ,000 , with an additional obligation to pay up to a maximum of $ 35 ,000 .

On the same date, the Company entered into a collaboration agreement with Emory, with the initial research plan pertaining to the synthesis and evaluation of the compounds licensed through the additional patent rights granted in the amended license agreement.

The research plan terminates one year from the effective date, with the Company having an option to extend for a second year.

In connection with the research plan, the Company will provide Emory funding up to $ 270 ,000 per year.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

License and collaboration agreements, continued

The Company has agreed to pay Emory up to an aggregate of $125.0 million upon the achievement of specified development, regulatory, and commercial milestones, and all ongoing patent costs.

During the three months ended March 31, 2021, the Company had $80,000 expenses related to milestone payments.

The Company also agreed to pay Emory tiered single-digit royalties on worldwide annual net sales of licensed products, on a quarterly basis and calculated on a product-by-product basis.

With respect to licensed products containing any of a specified subset of the licensed compounds, such royalties range from a mid-single digit to a high-single digit percentage rate.

With respect to licensed products which do not contain such compounds, the royalties span a range of percentage rates within the mid-single digits if a Phase 1 clinical trial is initiated for the product within three years of the effective date of the Emory License Agreement, and range from a low-single digit to a mid-single digit rate if a Phase 1 clinical trial is initiated more than three years after the effective date.

During the three months ended March 31, 2021 and 2020, the Company made no payments associated with royalties and recognized no expense or accruals.

Agreement with Luxna Biotech Co., Ltd.

On December 19, 2018, the Company entered into a license agreement with Luxna, pursuant to which Luxna granted the Company an exclusive,

worldwide, sublicensable license under certain of Luxnas intellectual property rights to research, develop make, have made and commercialize for all therapeutic and prophylactic uses, (i) products containing oligonucleotides targeting the

hepatitis B virus genome, (ii) products containing certain oligonucleotides targeting up to three genes which contribute to NASH, which the Company may select at any time during the first eight years of the term, to the extent not licensed to a

third party, and (iii) products containing oligonucleotides targeting up to three genes which contribute to hepatocellular carcinoma, which the Company may select at any time during the first three years of the term.

On December 19, 2018, the Company entered into a license agreement with Luxna, pursuant to which Luxna granted the Company an exclusive, worldwide, sublicensable license under certain of Luxna’s intellectual property rights to research, develop make, have made and commercialize for all therapeutic and prophylactic uses, (i) products containing oligonucleotides targeting the hepatitis B virus genome, (ii) products containing certain oligonucleotides targeting up to three genes which contribute to NASH, which the Company may select at any time during the first eight years of the term, to the extent not licensed to a third party, and (iii) products containing oligonucleotides targeting up to three genes which contribute to hepatocellular carcinoma, which the Company may select at any time during the first three years of the term.

As consideration for this agreement, the Company paid an upfront license fee of $600,000, which was recorded as research and development expense during the period from inception through December 31, 2018 and the year ended December 31, 2019.

In April 2020, the Company amended the license agreement with Luxna.

Pursuant to the amended license agreement, Luxna granted the Company an

exclusive, worldwide license under the licensed patents to research, develop, make, have made and commercialize products containing oligonucleotides targeting three families of viruses:

orthomyxoviridae, paramyxoviridae, and coronaviridae (a family

which includes SARS-CoV-2).

As consideration for the amended license agreement, the Company paid Luxna a one-time non-refundable fee of $200.

Pursuant to the amended license agreement, Luxna granted the Company an exclusive, worldwide license under the licensed patents to research, develop, make, have made and commercialize products containing oligonucleotides targeting three families of viruses:

orthomyxoviridae, paramyxoviridae, and coronaviridae (a family which includes SARS-CoV-2).

As consideration for the amended license agreement, the Company paid Luxna a one-time non-refundable fee of $200,000 in April 2020.

The Company is obligated to make payments to Luxna, in aggregate, totaling up to but no more than $55.5 million upon the achievement of specified development, regulatory, and commercial milestones.

During the three months ended March 31, 2021 and 2020, the Company recognized no expenses related to milestone payments.

The Company is also required to pay Luxna a low-single digit royalty percentage on net sale of applicable products, if any.

During the three months ended March 31, 2021 and 2020, the Company made no payments associated with royalties.

Agreement with Katholieke Universiteit Leuven (KU Leuven)

On June 25, 2020, the Company entered into a Research, Licensing and Commercialization Agreement (KU Leuven

Agreement) with KU Leuven, under which the Company is collaborating with KU Leuvens Rega Institute for Medical Research, as well as its Centre for Drug Design and Discovery, to research and develop potential protease inhibitors for the

treatment, diagnosis or prevention of coronaviruses, including of SARS-CoV-2.

Unless terminated earlier by either party in accordance with provisions in the agreement,

the collaboration period will terminate at the earlier of completion of all collaboration activities or 2.5 years.

In connection with the KU Leuven Agreement, KU Leuven and the Company granted each other exclusive cross-licenses to use certain know-how and existing patents of the other party as well as certain joint know-how and joint patents to carry out research and development collaboration activities during the

collaboration period.

KU Leuven granted to the Company an exclusive (including as to KU Leuven), worldwide license under certain of KU Leuvens know-how and existing patents, and certain joint patents and

joint know-how, to manufacture and commercialize the licensed products for the treatment, diagnosis or detection of viral infections in humans.

KU Leuven reserved the right to use all KU Leuven knowhow,

existing KU Leuven patents, joint patents and joint know-how for academic and non-commercial research and teaching purposes.

As consideration for this license, the

Company is obligated to make payments to KU Leuven, in aggregate, totaling up to but no more than $30,000 upon the achievement of certain commercial sales milestones.

For each licensed product developed through KU Leuven and the Companys

collaborative effort, the Company is obligated to make payments to KU Leuven, in aggregate, totaling up to $32,000 upon the achievement of certain development and regulatory milestones.

On June 25, 2020, the Company entered into a Research, Licensing and Commercialization Agreement (KU Leuven Agreement) with KU Leuven, under which the Company is collaborating with KU Leuven’s Rega Institute for Medical Research, as well as its Centre for Drug Design and Discovery, to research and develop potential protease inhibitors for the treatment, diagnosis or prevention of coronaviruses, including of SARS-CoV-2.

Unless terminated earlier by either party in accordance with provisions in the agreement, the collaboration period will terminate at the earlier of completion of all collaboration activities or 2.5 years.

KU Leuven granted to the Company an exclusive (including as to KU Leuven), worldwide license under certain of KU Leuven’s know-how and existing patents, and certain joint patents and joint know-how, to manufacture and commercialize the licensed products for the treatment, diagnosis or detection of viral infections in humans.

KU Leuven reserved the right to use all KU Leuven knowhow, existing KU Leuven patents, joint patents and joint know-how for academic and non-commercial research and teaching purposes.

As consideration for this license, the Company is obligated to make payments to KU Leuven, in aggregate, totaling up to but no more than $30.0 million upon the achievement of certain commercial sales milestones.

For each licensed product developed through KU Leuven and the Company’s collaborative effort, the Company is

obligated to make payments to KU Leuven, in aggregate, totaling up to $ 32 .

0 million upon the achievement of certain development and regulatory milestones.

The Company is also required to pay KU Leuven a low-to-mid-single digit royalty percentage, subject to certain adjustments, on net sales of applicable products, if any.

terminated earlier by either party, the agreement shall continue until the expiration of the last to expire royalty term, which is the later of the expiration or termination of the last valid patent claim covering the manufacture, use, sale or

importation of the licensed product in a particular country or 10 years after the first commercial sale of a licensed product.

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Unless terminated earlier by either party, the agreement shall continue until the expiration of the last to expire royalty term, which is the later of the expiration or termination of the last valid patent claim covering the manufacture, use, sale or importation of the licensed product in a particular country or 10 years after the first commercial sale of a licensed product.

During the three months ended March 31, 2021 , the Company recognized no expenses related to milestone payments.

Agreement with Merck

In December 2020, the Company and Merck & Co.

entered into an exclusive License and Research Collaboration Agreement under which Merck and the Company agreed to apply the Company’s oligonucleotide platform technology to discover, research, optimize and develop oligonucleotides directed against a NASH target and up to one additional liver-targeted cardiometabolic and/or fibrosis target.

Under the terms of the agreement, the Company received an upfront payment from Merck and may receive an additional upfront payment after finalization of a research plan for such additional target.

With respect to each collaboration target, the Company will be eligible for up to $458.0 million in development and commercialization milestones as well as tiered royalties on net sales.

The Company will be primarily responsible for designing, preparing and evaluating the oligonucleotide molecules and delivering optimized lead molecules, and Merck will be responsible for subsequent research, clinical development and commercialization efforts.

The Company determined that the Merck agreement falls within the scope of ASC 808 and we analogized to ASC 606 for the accounting of payments such as upfront payments and other milestones.

During the three months ended March 31, 2021 the Company recognized $910,000 of revenue from collaborative arrangements related to milestone payments.

During the three months ended March 31, 2020 the Company did not recognize any revenue from collaborative arrangements.

Commitments and contingencies

From time to time, the Company may have certain contingent liabilities, including legal

matters that arise in the ordinary course of its business activities.

From time to time, the Company may have certain contingent liabilities, including legal matters that arise in the ordinary course of its business activities.

The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

The Company had no

contingent liabilities requiring accrual as of September 30, 2020 and December 31, 2019.

The Company had no contingent liabilities requiring accrual as of March 31, 2021 and December 31, 2020.

The Company has a history of losses and expected to record a loss in 2021.

The Company continues to maintain a full valuation allowance its net deferred tax assets.

Net loss per share

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Three Months Ended

Nine Months Ended

September 30,

Weighted average common stock outstanding, basic and diluted

Weighted average common stock outstanding, basic and

Net loss per share - basic and diluted

The Companys potentially dilutive securities, which include redeemable convertible preferred

stock, a forward contract to issue preferred stock, options to purchase common stock and unvested restricted stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

The Company’s potentially dilutive securities, which include redeemable convertible preferred stock, a forward contract to issue preferred stock, options to purchase common stock and unvested restricted stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of shares of Common Stock outstanding used to calculate both basic and diluted net loss per share is the same.

The Company excluded the following potential shares of Common Stock, presented based on amounts

outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

The Company excluded the

following potential shares of Common Stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

Three Months Ended

Nine Months Ended

September 30,

Redeemable convertible preferred stock

Forward contract to issue redeemable convertible preferred stock

Convertible preferred stock

Forward contract to issue redeemable

convertible preferred stock

Options to purchase common stock

2 unchanged sentences

Subsequent events

In preparing the interim financial statements as of September 30, 2020 and for the three and nine months then ended, the Company evaluated

subsequent events for recognition and measurement purposes.

The Company concluded that no events or transactions have occurred that require disclosure in the accompanying financial statements, other than the following:

ALIGOS THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, expect share and per share data)

Subsequent events, continued

Series B-2 redeemable convertible preferred

On October 6, 2020, the Company issued 3,569,630 shares of Series B-2 at a

price of $11.20563 per share for proceeds of $40,000 following the achievement of certain milestones stated in the Series B Purchase Agreement.

Warrants to purchase Series A redeemable convertible preferred stock

Prior to the completion of the Companys IPO, all Warrants to purchase Series A were exercised.

Non-voting common stock election

In October 2020, certain holders of the Companys redeemable convertible preferred stock elected to have such shares convert into

3,092,338 shares of non-voting Common Stock upon the closing of the Companys planned IPO.

The shares of non-voting common stock shall have the same rights and

preferences as the voting common stock, but shall be non-voting.

Holders of non-voting common stock shall have the right to convert each share of non-voting common stock into one share of common stock at such holders election, provided that as a result of such conversion, such holder, together with its affiliates and any members of a Schedule 13(d)

group with such holder, would not beneficially own in excess of 4.99% of the Companys common stock immediately prior to and following such conversion, unless otherwise expressly provided for in the Companys amended and restated

certificate of incorporation.

However, this ownership limitation may be increased to any other percentage designated by such holder of non-voting common stock upon 61 days notice to the Company or

decreased at any time upon notice to the Company.

2020 Incentive Award Plan

The Company adopted the 2020 Incentive Award Plan (the 2020 Plan) effective October 15, 2020.

The 2020 Plan provides for a

variety of stock-based compensation awards, including stock options, stock appreciation rights, or SARs, restricted stock awards, restricted stock unit awards, performance bonus awards, performance stock unit awards, dividend equivalents, or other

stock or cash based awards.

The Company has initially reserved for issuance 4,426,822 shares of common stock pursuant to the 2020 Plan.

2020 Employee Stock Purchase Plan

The Company adopted the 2020 Employee Stock Purchase Plan (the 2020 ESPP) effective on October 15, 2020.

The 2020 ESPP will

enable eligible employees of the Company to purchase shares of common stock at a discount to fair market value.

The Company initially reserved for issuance 368,901 shares of common stock pursuant to the 2020 ESPP.

First dosage in Phase 1a/b clinical trial for ALG-000184

On October 30, 2020, the Company dosed its first subject in a

first-in-human Phase 1a/b clinical trial for Small Molecule drug candidate

ALG-000184-201.

Upon the first dosage, the Company became liable for a $4,500 milestone payment.

In preparing the interim financial statements as of March 31, 2021 and for the three months then ended, the Company evaluated subsequent events for recognition and measurement purposes.

The Company concluded that no events or transactions have occurred that require disclosure in the accompanying financial statements.

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

The following discussion and analysis of our financial condition and results of operations should be read together with our

condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q.

This discussion and analysis contains forward-looking

statements that involve risks, uncertainties and assumptions.

Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in Risk Factors and Special note

regarding forward-looking statements.

We are a clinical-stage biopharmaceutical company currently focused on developing novel therapeutics to address unmet medical needs in viral and liver

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q.

This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in “Risk factors” and “Special note regarding forward-looking statements.”

We are a clinical-stage biopharmaceutical company currently focused on developing novel therapeutics to address unmet medical needs in viral and liver diseases.

We utilize our proprietary oligonucleotide and small molecule platforms to develop pharmacologically optimized drug candidates for use in combination regimens designed to achieve improved treatment outcomes.

Our lead effort is to develop a

functional cure for Chronic Hepatitis B (CHB), which often results in other life-threatening conditions such as cirrhosis, end-stage liver disease (ESLD) and the most common form of

liver cancer, hepatocellular carcinoma (HCC).

Our lead effort is to develop a functional cure for Chronic Hepatitis B (CHB), which often results in other life-threatening conditions such as cirrhosis, end-stage liver disease (ESLD) and the most common form of liver cancer, hepatocellular carcinoma (HCC).

The most widely used treatment for CHB, nucleos(t)ide analogs, suppresses viral replication but only achieves low rates of functional cure and often requires long-term administration.

address this issue, we have developed a portfolio of differentiated drug candidates for CHB, including an S-antigen Transport-inhibiting Oligonucleotide Polymers (STOPS) molecule, a small molecule

Capsid Assembly Modulator (CAM), and oligonucleotides (ASO and siRNA), each of which is designed against clinically validated targets in the Hepatitis B Virus (HBV) life cycle.

We believe that combination regimens utilizing

our portfolio of CHB drug candidates may lead to higher rates of functional cure.

A Phase 1 proof of concept trial for our STOPS molecule is ongoing and in New Zealand we initiated a Phase 1 clinical trial with our CAM in October 2020.

second area of focus is in non-alcoholic steatohepatitis (NASH), a complex, chronic liver disease where combination regimens may prove beneficial.

Our most advanced drug candidate for NASH is ALG-055009, a small molecule THR-ß

agonist currently in nonclinical studies to enable a first-in-human clinical trial.

ALG-055009 has the potential to become an integral component of future combination regimens for NASH.

Our third area of focus is to develop drug candidates with

pan-coronavirus activity, including SARS-CoV-2, the virus responsible for COVID-19.

On October 20, 2020, we closed our IPO and issued 10,000,000 shares of our common stock at a price to the public of $15.00 per share for net proceeds of

$135.4 million, after deducting underwriting discounts and commissions of $10.5 million and estimated expenses of $4.1 million.

In connection with the IPO, all shares of Series A, Series B-1 and

Series B-2 redeemable convertible preferred stock converted into 22,854,208 shares of common stock.

On November 5, 2020, the underwriters of the IPO partially exercised their overallotment option by

purchasing an additional 1,150,000 shares from the Company, resulting in an additional $16.0 million, after deducting underwriting discounts and commissions of $1.2 million.

Prior to our IPO, we had received gross proceeds of approximately

$186.9 million from sales of our preferred stock and our issuance of convertible debt.

We have incurred net losses and negative cash flows from

operations in each year.

Our net losses were $74.1 million and $34.1 million for the nine months ended September 30, 2020 and 2019, respectively.

To address this issue, we have developed a portfolio of differentiated drug candidates for CHB, including an S-antigen Transport-inhibiting Oligonucleotide Polymers (STOPS) molecule, a small molecule Capsid Assembly Modulator (CAM), and oligonucleotides (ASO and siRNA), each of which is designed against clinically validated targets in the Hepatitis B Virus (HBV) life cycle.

We believe that combination regimens utilizing our portfolio of CHB drug candidates may lead to higher rates of functional cure.

Phase 1 proof of concept trials evaluating the properties of our STOPS molecule and CAM are ongoing in New Zealand, Hong Kong, and Moldova.

We may also in the future conduct clinical trials for our STOPS molecule and CAM and other drug candidates in other countries and territories, including South Korea, the United Kingdom, and China.

Our second area of focus is in non-alcoholic steatohepatitis (NASH), a complex, chronic liver disease where combination regimens may likewise prove beneficial.

Our most advanced drug candidate for NASH is ALG‑055009, a small molecule THR-ß agonist currently in nonclinical studies to enable a first-in-human clinical trial.

We believe ALG‑055009 has the potential to become an integral component of future combination regimens for NASH.

Our third area of focus is to develop drug candidates with pan-coronavirus activity, including SARS-CoV-2, the virus responsible for COVID-19.

In October 2020, we completed our initial public offering (IPO) and issued 10,000,000 shares of our common stock at a price to the public of $15.00 per share for net proceeds of $135.4 million, after deducting underwriting discounts and commissions of $10.5 million and expenses of $4.1 million.

In connection with the IPO, all shares of Series A, Series B-1 and Series B-2 redeemable convertible preferred stock converted into 19,761,870 shares of voting common stock and 3,092,338 shares of non-voting common stock.

On November 5, 2020, the underwriters of the IPO partially exercised their overallotment option by purchasing an additional 1,150,000 shares from the Company, resulting in an additional $16.0 million, after deducting underwriting discounts and commissions of $1.2 million.

Prior to our IPO, we had received gross proceeds of approximately $186.9 million from sales of our preferred stock and our issuance of convertible debt.

We have incurred net losses and negative cash flows from operations in each year since our formation in February 2018.

Our net losses were $27.7 million and $20.0 million for the three months ended March 31, 2021 and 2020, respectively.

We have had no revenue from product sales.

As of September 30, 2020, we had an

accumulated deficit of $140.3 million.

As of March 31, 2021, we had an accumulated deficit of $202.4 million.

Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

expect to continue to incur significant expenses and increasing operating losses over at least the next several years.

Our net operating losses may fluctuate from quarter to quarter and year to year depending primarily on the timing of our clinical

trials and nonclinical studies and our other research and development expenses.

We expect to continue to incur significant expenses and increasing operating losses over at least the next several years.

Our net operating losses may fluctuate from quarter to quarter and year to year depending primarily on the timing of our clinical trials and nonclinical studies and our other research and development expenses.

We have no internal manufacturing capabilities or salesforce and outsource a substantial portion of our clinical trial work to third parties.

Components of our results of operations

Operating expenses

Our operating expenses since inception have consisted solely of research and development costs and general and administrative costs.

Research and development expenses

We rely substantially

on third parties to conduct our discovery activities, nonclinical studies, clinical trials and manufacturing.

We estimate research and development expenses based on estimates of services performed, and rely on third party contractors and vendors to

provide us with timely and accurate estimates of expenses of services performed to assist us in these estimates.

Research and development costs consist primarily of costs incurred for the identification and development of our drug candidates through

our technology platforms, which include:

salaries, benefits and other employee-related costs, including stock-based compensation expense, for personnel

engaged in research and development functions;

We rely substantially on third parties to conduct our discovery activities, nonclinical studies, clinical trials and manufacturing.

We estimate research and development expenses based on estimates of services performed, and rely on third party contractors and vendors to provide us with timely and accurate estimates of expenses of services performed to assist us in these estimates.

A portion of our research and development expenses are based on contractual milestones.

Research and development costs consist primarily of costs incurred for the identification and development of our drug candidates through our technology platforms, which include:

salaries, benefits and other employee-related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

costs of outside consultants, including their fees, and related travel expenses;

costs associated with in-process research and development, including

license fees and milestones paid to third-party collaborators for technologies with no alternative use;

costs associated with in-process research and development, including license fees and milestones paid to third-party collaborators for technologies with no alternative use;

costs related to production of clinical materials, including fees paid to contract manufacturers;

1 unchanged sentence

costs related to compliance with regulatory requirements;

facility costs, depreciation, and other expenses, which include direct and allocated expenses for rent and

maintenance of facilities, insurance, and other supplies.

We expense research and development costs as the services are performed or

the goods are received.

facility costs, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies.

We expense research and development costs as the services are performed or the goods are received.

Non-refundable payments for goods or services that will be used for future research and development activities are deferred and capitalized.

Such amounts are recognized as an expense as

the goods are delivered or the related services are performed until it is no longer expected that the goods will be delivered or the services will be rendered.

We expect our research and development costs to increase in future periods as we continue to invest in research and development activities and advance our

nonclinical and clinical programs through clinical development.

The process of conducting nonclinical studies and, eventually, clinical trials necessary to obtain regulatory approval is costly and time consuming, and the successful development of

our drug candidates is highly uncertain.

As a result, we are unable to determine the duration and completion costs of our research and development projects or clinical trials or if and to what extent we will generate revenue from the

commercialization and sale of any of our drug candidates.

Such amounts are recognized as an expense as the goods are delivered or the related services are performed until it is no longer expected that the goods will be delivered or the services will be rendered.

We expect our research and development costs to increase in future periods as we continue to invest in research and development activities and advance our nonclinical and clinical programs through clinical development.

The process of conducting nonclinical studies and, eventually, clinical trials necessary to obtain regulatory approval is costly and time consuming, and the successful development of our drug candidates is highly uncertain.

As a result, we are unable to determine the duration and completion costs of our research and development projects or clinical trials or if and to what extent we will generate revenue from the commercialization and sale of any of our drug candidates.

General and administrative expenses

General and administrative 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.

General and administrative 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.

General and administrative expenses also include legal fees relating to patent and corporate matters;

2 unchanged sentences

travel expenses;

and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs not otherwise classified as research and development

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative personnel

headcount to support personnel in research and development and to support our operations generally as we increase our research and development activities and activities related to the potential commercialization of our drug candidates.

expect to incur increased expenses associated with operating as a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with

exchange listing rules and requirements of the Securities and Exchange Commission (the SEC), director and officer insurance costs, and investor and public relations costs.

Interest and other (expense) income, net

and other (expense) income, net comprises interest (expense) income, net and other income (expense), net.

Interest income (expense), net primarily consists of interest earned on our cash, cash equivalents, and short-term investments and interest

expense related to our convertible note instruments.

Other (expense) income, net consists primarily of the change in fair value of our derivative liabilities.

We classify our warrants and the commitment to sell redeemable convertible preferred stock as liabilities on our consolidated balance sheets and record

changes in fair value at each balance sheet date with the corresponding change recorded as other income (expense), net.

We will continue to record adjustments to the fair value of the warrants and the redeemable convertible preferred stock liability

at each balance sheet date until they are exercised, automatically converted into common stock or expire.

Prior to our IPO, all outstanding warrants were exercised for the issuance of shares of common stock and, upon that exercise, such warrants

were no longer outstanding.

We anticipate other (expense) income, net to fluctuate in the future based on subsequent revaluations at each balance sheet

date of the redeemable convertible preferred stock liability through the date on which such shares are converted into shares of common in connection with the closing of the IPO, if not earlier converted.

Provision for income taxes

Since our inception in 2018, we have not recorded any U.S.

federal or state income tax benefits for the net losses we have incurred in any year or for our

earned research and development tax credits, due to our uncertainty of realizing a benefit from those items.

As of December 31, 2019, we had federal net operating loss (NOL) carryforwards of $57.6 million available to reduce

taxable income and these NOLs can be carried forward indefinitely.

We have state NOL carryforwards of $60.5 million as of December 31, 2019, available to reduce future state taxable income, which expire at various dates beginning in 2038.

As of December 31, 2019, we also had federal and state research and development tax credit carryforwards of $1.4 million and $1.1 million, respectively.

The federal development tax credit carryforwards begin to expire in 2029, while

the state development tax credit carryforwards can be carried forward indefinitely.

In addition, we may in the future experience ownership changes, either as a result of the IPO or other changes in our stock ownership (some of which are not in our

For these reasons, our ability to utilize our NOL carryforwards and other tax attributes to reduce future tax liabilities may be limited.

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative personnel headcount to support personnel in research and development and to support our operations generally as we increase our research and development activities and activities related to the potential commercialization of our drug candidates.

We also expect to incur increased expenses associated with operating as a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing rules and requirements of the Securities and Exchange Commission (the SEC), director and officer insurance costs, and investor and public relations costs.

Interest and other income, net

Interest and other income, net comprises interest income, net and other income, net.

Interest income, net primarily consists of interest earned on our cash, cash equivalents, and short-term investments and interest expense related to our convertible note instruments.

Other income, net consists primarily of the change in fair value of our derivative liabilities.

We classify our warrants and the commitment to sell redeemable convertible preferred stock as liabilities on our consolidated balance sheets and record changes in fair value at each balance sheet date with the corresponding change recorded as other income, net.

We will continue to record adjustments to the fair value of the warrants and the redeemable convertible preferred stock liability at each balance sheet date until they are exercised, automatically converted into common stock or expire.

Prior to our IPO, all outstanding warrants were exercised for the issuance of shares of common stock and, upon that exercise, such warrants were no longer outstanding.

We anticipate other income, net to fluctuate in the future based on changes in our short - term investments .

Results of Operations

Comparison of the three months

ended September 30, 2020 and 2019

Comparison of the three months ended March 31, 2021 and 2020

Operating expenses

The following table summarizes our operating expenses for the three months ended September 30, 2020 and 2019:

The following table summarizes our operating expenses for the three months ended March 31, 2021 and 2020:

Three Months Ended

September 30,

Operating expenses:

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Research and development expenses

Three Months Ended

September 30,

Third party expenses

Employee related expenses

Laboratory supplies and other costs

Facilities and other allocated expenses

Depreciation and other expenses

Total research and development expenses

Research and development expenses were $17.3 million for the three months ended September 30, 2020, compared to

$11.7 million for the three months ended September 30, 2019, an increase of $5.6 million.

The increase was primarily due to an increase of $3.5 million in third-party expenses for our preclinical programs and the continued

increase in expenditures related to research and development activities associated with our STOPs molecule and CAM candidates, as well as activities related to our NASH program.

The increase also includes $1.6 million of additional

employee-related costs, including a $0.2 million increase in stock-based compensation, $0.2 million of increased laboratory supplies primarily due to higher headcount and $0.3 million in depreciation and other expenses.

Research and development expenses were $22.9 million for the three months ended March 31, 2021, compared to $17.3 million for the three months ended March 31, 2020, an increase of $5.6 million.

The increase was primarily due to an increase of $2.7 million of additional employee-related costs, including a $1.5 million increase in stock-based compensation.

The increase also includes $1.8 million in third-party expenses for our preclinical programs and the continued increase in expenditures related to research and development activities associated with our STOPs molecule and CAM candidates, as well as activities related to our NASH program, and $0.9 million of allocated facilities and related expenses.

General and administrative expenses

administrative expenses were $4.2 million for the three months ended September 30, 2020, compared to $2.8 million for the three months ended September 30, 2019, an increase of $1.4 million.

The increase was primarily due to

$0.9 million in increased personnel-related costs, including an increase of $0.7 million of additional stock-based compensation expense, and a $0.5 million increase in third-party expenses primarily due to increased general and

administrative headcount to support the growth of our research and development organization.

Interest and other (expense) income, net

General and administrative expenses were $5.8 million for the three months ended March 31, 2021, compared to $3.4 million for the three months ended March 31, 2020, an increase of $2.4 million.

The increase was primarily due to $1.5 million in increased employee-related costs, including an increase of $0.9 million of additional stock-based compensation expense, a $2.1 million increase in third-party expenses primarily due to increased administrative costs and D&O insurance to support our status as a public company, offset by a decrease of $0.9 million in allocated facilities and related expenses.

Interest and other income, net

Three Months Ended

September 30,

Interest income, net

Other (loss) income, net

Interest and other (expense) income, net

Interest income, net decreased to $0.2 million for the three months ended September 30, 2020 from $0.3 million

for the three months ended September 30, 2019, a decrease in $0.1 million, primarily due to the change in our portfolio of cash equivalents, short-term investments and long-term investments.

Other (loss) income, net decreased to a loss of $12.0 million for the three months ended September 30, 2020 from income of $0.1 million for the

three months ended September 30, 2019, a decrease of $12.1 million, primarily due to the loss recognized on the net increase in fair value of both our redeemable convertible preferred stock liability and warrant liabilities.

Comparison of the nine months ended September 30, 2020 and 2019

Operating expenses

Nine Months Ended

September 30,

Operating expenses:

Research and development

General and administrative

Total operating expenses

Research and development expenses

Nine Months Ended

September 30,

Third party expenses

Employee related expenses

Laboratory supplies and other costs

Facilities and other allocated expenses

Depreciation and other expenses

Total research and development expenses

Research and development expenses were $51.8 million for the nine months ended September 30, 2020, compared to

$29.1 million for the nine months ended September 30, 2019, an increase of $22.7 million.

The increase was primarily due to an increase of $16.4 million in third-party expenses for our preclinical programs and the continued increase

in expenditures related to research and development activities associated with our STOPs molecule and CAM candidates, as well as activities related to our NASH program.

The increase also includes $4.8 million of additional employee-related

costs, including a $0.2 million increase in stock-based compensation, $0.9 million of increased laboratory supplies primarily due to higher headcount, and $0.6 million in depreciation and other expenses.

General and administrative expenses

administrative expenses were $11.7 million for the nine months ended September 30, 2020, compared to $6.5 million for the nine months ended September 30, 2019, an increase of $5.2 million.

The increase was primarily due to

$1.9 million in increased personnel-related costs, including an increase of $0.9 million of additional stock-based compensation expense, a $2.6 million increase in third-party expenses primarily due to increased general and

administrative headcount to support the growth of our research and development organization, and a $0.7 million increase in depreciation and other expenses.

Interest and other (expense) income, net

Nine Months Ended

September 30,

Interest income, net

Other (loss) income, net

Interest and other (expense) income, net

Interest income, net decreased to $1.0 million for the nine months ended September 30, 2020 from $1.3 million

for the nine months ended September 30, 2019, a decrease of $0.3 million, primarily due to the change in our portfolio of cash equivalents, short-term investments and long-term investments.

Other (loss) income, net decreased to a loss of $11.6 million for the nine months ended September 30, 2020 from income of $0.2 million for the

nine months ended September 30, 2019, a decrease of $11.8 million, primarily due to the loss recognized on the net increase in fair value of both our redeemable convertible preferred stock liability and warrant liabilities.

Other income, net

Total interest and other income, net

Interest income, net decreased to $0.1 million for the three months ended March 31, 2021 from $0.5 million for the three months ended March 31, 2020, a decrease in $0.4 million, primarily due to the change in our portfolio of cash equivalents, short-term investments and long-term investments which results in lower interest yield.

Other income, net decreased to a loss of $0.0 million for the three months ended March 31, 2021 from a loss of $0.2 million for the three months ended March 31, 2020, a decrease of $0.2 million, primarily due to the fair value change recognized on the net increase in fair value of both our redeemable convertible preferred stock liability and warrant liabilities in the prior year.

Liquidity and capital resources

Since our inception, we

have not generated any revenue from product sales or any other sources, and have incurred significant operating losses.

We have not yet commercialized any products and we do not expect to generate revenue from sales of any drug candidates for at

least several years, if ever.

Since our inception, we have not generated any revenue from product sales or any other sources, and have incurred significant operating losses.

We have not yet commercialized any products and we do not expect to generate revenue from sales of any drug candidates for at least several years, if ever.

To date, we have financed our operations through private placements of preferred stock, issuances of common stock and convertible debt.

Through September 30, 2020, we had received gross proceeds of

$186.9 million from sales of our preferred stock, issuances of common stock and our issuance of convertible debt.

As of September 30, 2020, we had cash, cash equivalents and investments of $70.1 million.

Through March 31, 2021, we had received gross proceeds of $186.9 million from sales of our preferred stock, issuances of common stock and our issuance of convertible debt.

As of March 31, 2021, we had cash, cash equivalents and investments of $213.4 million.

Funding requirements

We have incurred net losses

since inception.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development costs related to our drug candidates and our discovery programs, and to a lesser extent, general and administrative

expenditures.

We have incurred net losses since inception.

We expect our expenses to increase substantially in connection with our ongoing clinical development activities related to our most advanced drug candidates, ALG-010133 and ALG-000184, which are still in the early stages of development, as well as our research and development of our other drug candidates within our CHB, NASH and coronavirus programs.

In addition, we are incurring additional costs associated with operating as a public company following our IPO in October 2020.

We expect that our expenses

will increase substantially to the extent we:

We expect that our expenses will increase substantially to the extent we:

conduct our current and future clinical trials, and additional nonclinical studies;

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pursue marketing approvals for any of our drug candidates that successfully complete clinical trials, if any;

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may

obtain marketing approval;

require the manufacture of larger quantities of our drug candidates for clinical development and potentially

commercialization;

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

require the manufacture of larger quantities of our drug candidates for clinical development and potentially commercialization;

obtain, maintain, expand, protect and enforce our intellectual property portfolio;

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hire and retain additional clinical, quality control and scientific personnel;

achieve milestones triggering payments by us under our current and potential future licensing and/or

collaboration agreements;

achieve milestones triggering payments by us under our current and potential future licensing and/or collaboration agreements;

build out or expand existing facilities to support our ongoing development activity;

add operational, financial and management information systems and personnel, including personnel to support our

drug development, any future commercialization efforts and our transition to becoming a public company.

As of September 30, 2020, we had cash, cash equivalents and investments of $70.1 million.

October 2020, we issued an aggregate of 3,569,630 shares of our Series B-2 redeemable convertible preferred stock in the second tranche of our Series B convertible preferred stock financing for aggregate

proceeds to us of $40.0 million.

add operational, financial and management information systems and personnel, including personnel to support our drug development, any future commercialization efforts and our transition to becoming a public company.

As of March 31, 2021, we had cash, cash equivalents and investments of $213.4 million.

In October 2020, we issued an aggregate of 3,569,630 shares of our Series B-2 redeemable convertible preferred stock in the second tranche of our Series B convertible preferred stock financing for aggregate proceeds to us of $40.0 million.

In addition, we have received net proceeds of $151.4 million from the sale of an aggregate of 11,150,000 shares of our common stock on October 20, 2020 and on November 5, 2020 as part of our IPO.

We believe that our existing cash, cash equivalents and investments will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next twelve months.

We have based this estimate on assumptions that

may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Furthermore, we may elect to raise additional capital on an opportunistic basis to fund operations.

Because of the numerous risks and uncertainties associated with our research and development programs and because the extent to which we may enter into

collaborations with third parties for development of our drug candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our

drug candidates.

Because of the numerous risks and uncertainties associated with our research and development programs and because the extent to which we may enter into collaborations with third parties for development of our drug candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our drug candidates.

Our future capital requirements will depend on many factors, including:

the scope, progress, results and costs of researching and developing our drug candidates and programs, and of

conducting nonclinical studies and clinical trials;

the timing of, and the costs involved in, obtaining marketing approvals for drug candidates we develop if

clinical trials are successful;

the cost of commercialization activities for our current drug candidates, and any future drug candidates we

develop, whether alone or in collaboration, including marketing, sales and distribution costs if our current drug candidates or any future drug candidate we develop is approved for sale;

the cost of manufacturing our current and future drug candidates for clinical trials in preparation for marketing

approval and commercialization;

our ability to establish and maintain strategic licenses or other arrangements and the financial terms of such

agreements, including milestone payments to our licensors;

the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent

claims, including litigation costs and the outcome of such litigation;

the scope, progress, results and costs of researching and developing our drug candidates and programs, and of conducting nonclinical studies and clinical trials;

the timing of, and the costs involved in, obtaining marketing approvals for drug candidates we develop if clinical trials are successful;

the cost of commercialization activities for our current drug candidates, and any future drug candidates we develop, whether alone or in collaboration, including marketing, sales and distribution costs if our current drug candidates or any future drug candidate we develop is approved for sale;

the cost of manufacturing our current and future drug candidates for clinical trials in preparation for marketing approval and commercialization;

our ability to establish and maintain strategic licenses or other arrangements and the financial terms of such agreements, including milestone payments to our licensors;

the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;

the timing, receipt and amount of sales of, or profit share or royalties on, our future products, if any;

the emergence of competing therapies and other adverse market developments;

the emergence of competing therapies hepatological indications and viral diseases and other adverse market developments;

any acquisitions or in-licensing of other programs or technologies.

Developing pharmaceutical products, including conducting nonclinical studies and clinical trials, is a time-consuming, expensive and

uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any drug candidates or generate revenue from the sale of any drug candidate for which we may obtain

marketing approval.

Developing pharmaceutical products, including conducting nonclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any drug candidates or generate revenue from the sale of any drug candidate for which we may obtain marketing approval.

In addition, our drug candidates, if approved, may not achieve commercial success.

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Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us

on acceptable terms, or at all.

Adequate additional funds may not be available to us on acceptable terms, or at all.

We do not currently have any committed external source of funds.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and

the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder.

Additional debt or preferred equity financing, if available, may involve

agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends, which could adversely constrain our ability to conduct our business, and

may require the issuance of warrants, which could potentially dilute your ownership interest.

If we raise additional funds through collaborations,

strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or drug candidates or grant licenses on terms that may not be favorable to us.

development programs or any future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder.

Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends, which could adversely constrain our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute your ownership interest.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or drug candidates or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings or collaborations, strategic alliances or licensing arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate our product development programs or any future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.

The following table summarizes our sources and uses of cash for each of the periods presented:

Nine Months Ended

September 30,

Three Months Ended

Net cash used in operating activities

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by financing activities

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Operating activities

During the nine months ended September 30, 2020, operating activities used $54.6 million of cash, primarily resulting from our net loss of

$74.1 million, partially offset by non-cash charges of $15.9 million and cash provided by changes in our operating assets and liabilities of $3.6 million.

Net cash provided by changes in our

operating assets and liabilities of $3.6 million consisted of an increase of $5.5 million in accounts payable and accrued liabilities, partially offset by a decrease of $1.0 million in other current assets and a decrease of

$0.9 million in operating lease liability.

The increase in accounts payable and accrued liabilities was largely due to an increase in external research and development costs.

The decrease in other assets was largely due to an increase in

prepayments for services.

The decrease in the operating lease liability was a result of payments made on outstanding lease obligations.

During the nine

months ended September 30, 2019, operating activities used $31.7 million of cash, primarily resulting from our net loss of $34.1 million, partially offset by non-cash charges of

$1.2 million and cash provided by changes in our operating assets and liabilities of $1.2 million.

Net cash provided by changes in our operating assets and liabilities of $1.2 million consisted of an increase of $1.4 million in

accounts payable and accrued liabilities, an increase of $0.2 million in operating lease liability, an increase of $0.1 million in right of use assets, and a decrease of $0.5 million in other current assets.

The increase in accounts

payable and accrued liabilities was largely due to an increase in external research and development costs.

The decrease in other assets was largely due to receipt of tax credits associated with income taxes paid by us on behalf of employees due to

the exercise of restricted stock purchase rights.

During the three months ended March 31, 2021, operating activities used $29.8 million of cash, primarily resulting from our net loss of $27.7 million and cash used in changes in our operating assets and liabilities of $5.8 million, partially offset by non-cash charges of $3.7 million.

Net cash provided by changes in our operating assets and liabilities of $5.8 million consisted of a decrease of $4.7 million in accounts payable and accrued liabilities, a decrease of $0.9 million in deferred revenue from collaborations, a $0.3 million in other assets, partially offset by an increase of $0.3 million in operating lease liability.

The decrease in accounts payable and accrued liabilities was largely due to payment of the annual bonus in 2021 that was accrued for in 2020.

The decrease in other assets was largely due to an increase in prepayments for services.

The increase in the operating lease liability was a result of an extension of the facilities lease.

During the three months ended March 31, 2020, operating activities used $20.3 million of cash, primarily resulting from our net loss of $20.0 million and cash used in changes in our operating assets and liabilities of $1.2 million, partially offset by non-cash charges of $0.9 million.

Net cash provided by changes in our operating assets and liabilities of $1.2 million consisted of a decrease of $0.1 million in accounts payable and accrued liabilities, an increase of $0.3 million in operating lease liability, an increase of $0.2 million in right of use assets, and an increase of $0.5 million in other current assets.

The decrease in accounts payable and accrued liabilities was largely due to an increase in external research and development costs.

Investing activities

During the nine months ended September 30, 2020, investing activities provided $17.8 million of cash, consisting primarily of $65.1 million of

investment maturities, offset by $45.3 million of investment purchases and $2.0 million of purchases of property and equipment.

During the nine

months ended September 30, 2019, investing activities provided $28.6 million of cash, consisting primarily of $76.0 million of investment maturities, offset by $45.3 million of investment purchases and $2.1 million of

purchases of property and equipment.

During the three months ended March 31, 2021, investing activities provided $9.7 million of cash, consisting primarily of $10.0 million of investment maturities, offset by $0.3 million of purchases of property and equipment.

During the three months ended March 31, 2020, investing activities used $23.8 million of cash, consisting primarily of $22.6 million of investment maturities, offset by $45.3 million of investment purchases, and $1.1 million of purchases of property and equipment.

Financing activities

During the nine months ended September 30, 2020, net cash used in financing activities was $1.0 million, consisting primarily of $1.1 million in

payments for deferred offering costs and $0.4 million in payments for Series B-1 redeemable convertible preferred stock issuance costs, partially offset by $0.3 million from the proceeds from the

exercise of warrants to purchase shares of Series A convertible preferred stock and $0.2 million proceeds from the exercise of stock options.

the nine months ended September 30, 2019, net cash provided financing activities was $0.3 million, consisting primarily of proceeds from the exercise of stock options.

During the three months ended March 31, 2021, net cash provided by financing activities was $0.1 million, consisting primarily of $0.1 million proceeds from the exercise of stock options.

During the three months ended March 31, 2020, net cash used in financing activities was $0.1 million, consisting primarily of $0.3 million proceeds from the exercise of warrants offset by $0.4 million of preferred stock issuance costs.

Contractual obligations and commitments

material changes to our contractual obligations and commitments as of December 31, 2019 as disclosed in the contractual obligations and commitment section in our final prospectus filed with the Securities and Exchange Commission pursuant to

Rule 424(b)(4) under the Securities Act of 1933 on October 19, 2020 in connection with our IPO (the Prospectus).

We have no material changes to our contractual obligations and commitments as of March 31, 2021 as disclosed in the contractual obligations and commitment section in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2021.

Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as

defined in the rules and regulations of the SEC.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Indemnification agreements

We enter into standard indemnification arrangements in the ordinary course of business.

Pursuant to these arrangements, we indemnify, hold harmless and agree

to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its

Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology.

The term of these indemnification agreements is generally perpetual any time after the execution of the agreement.

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Critical accounting policies and use of estimates

managements discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the consolidated financial

statements, as well as the reported expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form

the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles (GAAP).

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

For a discussion of our critical accounting estimates, see Managements discussion and analysis of financial condition and results of

operations in the Prospectus, the notes to our audited financial statements appearing in the Prospectus and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form

There have been no material changes to these critical accounting policies and estimates through September 30, 2020 from those discussed in our Prospectus.

For a discussion of our critical accounting estimates, see “Management’s discussion and analysis of financial condition and results of operations” in our annual report on Form 10-K, the notes to our audited financial statements appearing in the Form 10-K and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

There have been no material changes to these critical accounting policies and estimates through March 31, 2021 from those discussed in our Prospectus.

Recently issued and adopted accounting pronouncements

For a description of the expected impact of recently adopted accounting pronouncements, see Note 2.

Summary of Significant Accounting Policies in the

Notes to Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this report.

Summary of Significant Accounting Policies in the “Notes to Unaudited Condensed Consolidated Financial Statements” contained in Part I, Item 1 of this report.

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What changed 10-Q

Item 1. Financial Statements