ASSEMBLY BIOSCIENCES, INC. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain a system of disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended (the Exchange Act), that is designed to provide reasonable assurance that information, which is required to be disclosed in our reports filed pursuant to the Exchange Act, is accumulated and communicated to management in a timely manner. At the end of fiscal year ending December 31, 2023, we carried out an evaluation, under the supervision, and with the participation of, our management, including our Chief Executive Officer and President, who serves as our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and President concluded that our disclosure controls and procedures for the fiscal year ending as of December 31, 2023 were effective at reasonable assurance levels. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. A control system, no matter how well designed and operated, can only provide reasonable, not absolute, assurance that the objectives of the control system are met. Because of these inherent limitations, management does not expect that our internal controls over financial reporting will prevent all error and all fraud. Under the supervision and with the participation of our management, including our Chief Executive Officer and President, who serves as our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2023. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting in the fourth quarter of 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information Not applicable. Ite m 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 47 PART III Item 10. Directors, Executive Of ficers and Corporate Governance Except as set forth below, the information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with the Annual Meeting of Stockholders (Proxy Statement) within 120 days after the conclusion of our fiscal year ended December 31, 2023 and is incorporated in this Annual Report on Form 10-K by reference. Code of Ethics Our Board has adopted a Code of Ethics for our principal executive officer and all senior financial officers and a Code of Conduct applicable to all of our employees and our directors. Both Codes are available under the “Investors—Corporate Governance” section of our website at www.assemblybio.com. If we make any substantive amendments to, or grant any waivers from, the Code of Ethics for our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions, or any officer or director, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K. Item 11. Execut ive Compensation The information required by this item will be contained in the Proxy Statement and is incorporated into this Annual Report on Form 10-K by reference. Item 12. Security Ownership of Certain Beneficial Ow ners and Management and Related Stockholder Matters Except for the table regarding equity compensation plans, the information required by this item will be contained in the Proxy Statement and is incorporated into this Annual Report on Form 10-K by reference. Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth the indicated information as of December 31, 2023 with respect to our equity compensation plans. Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted average exercise price of outstanding options, warrants and rights (1) (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders 790,667 (2) $ 47.19 318,868 (3) Equity compensation plans not approved by security holders 167,426 (4) $ 132.47 10 (5) Total 958,093 318,878 (1) The weighted average exercise price is calculated solely based on the exercise prices of the outstanding stock options and does not reflect the shares that will be issued upon the vesting of outstanding awards of restricted stock units (RSUs), which have no exercise price. (2) This number includes the following: 19,863 shares subject to stock options granted under the 2010 Equity Incentive Plan (2010 Plan); 211,244 shares subject to outstanding awards granted under the Assembly Biosciences, Inc. Amended and Restated 2014 Stock Incentive Plan (2014 Plan), of which 209,591 were subject 48 to outstanding stock options and 1,653 were subject to outstanding RSUs; 520,707 shares subject to outstanding awards granted under the Assembly Biosciences, Inc. 2018 Stock Incentive Plan, as amended (2018 Plan), of which 429,157 were subject to outstanding stock options and 91,550 were subject to outstanding RSUs; and 38,853 options assumed by us in connection with our merger with Assembly Pharmaceuticals. This number excludes purchase rights currently accruing under the Assembly Biosciences, Inc. Amended and Restated 2018 Employee Stock Purchase Plan (2018 ESPP). (3) This number includes: no shares under the 2010 Plan, which has been frozen; 554 shares available for issuance under the 2014 Plan; 264,627 shares available for issuance under the 2018 Plan; and 53,687 shares reserved for issuance under the 2018 ESPP. As of March 22, 2024, assuming each participant purchases the maximum number of shares in the current offering period, no more than 12,896 shares are subject to purchase in the current offering, which ends on May 14, 2024. (4) This number includes 65,035 shares subject to stock options granted under the 2017 Inducement Award Plan (2017 Inducement Plan); 41,666 shares subject to stock options granted under the 2019 Inducement Award Plan (2019 Inducement Plan); and 60,725 shares subject to outstanding awards granted under the 2020 Inducement Award Plan (2020 Inducement Plan), of which 58,746 were subject to outstanding stock options and 1,979 were subject to outstanding RSUs. (5) This number includes: 6 shares available for issuance under the 2017 Inducement Plan, no shares under the 2019 Inducement Plan and 4 shares available for issuance under the 2020 Inducement Plan. Our stockholder-approved equity compensation plans consist of the 2018 Plan, 2014 Plan, the 2010 Plan, stock options assumed in our merger with Assembly Pharmaceuticals and the 2018 ESPP. Effective on June 2, 2016, the 2010 Plan was frozen, and no further grants will be made under the 2010 Plan. Shares that are forfeited under the 2010 Plan on or after June 2, 2016 will become available for issuance under the 2014 Plan. An “Award” under the 2018 Plan, 2014 Plan or 2010 Plan is any right to receive our common stock consisting of non-statutory stock options, incentive stock options, stock appreciation rights, RSUs, or any other stock award. In May 2018, our stockholders approved the 2018 ESPP and it was amended and restated in May 2021. The 2018 ESPP provides for the purchase by employees of up to an aggregate of 108,333 shares of the Company’s common stock. Eligible employees can purchase shares of our common stock at the end of a predetermined offering period at 85% of the lower of the fair market value at the beginning or end of the offering period. Our outstanding equity compensation arrangements that have not been approved by our stockholders consist of the 2017 Inducement Plan, the 2019 Inducement Plan and the 2020 Inducement Plan. In April 2017, our board of directors adopted the 2017 Inducement Plan and reserved 66,666 shares of our common stock for issuance under the 2017 Inducement Plan. In August 2019, our board of directors adopted the 2019 Inducement Plan and reserved 41,666 shares of our common stock for issuance under the 2019 Inducement Plan. In March 2020, our board of directors adopted the 2020 Inducement Plan and reserved 66,666 shares of our common stock for issuance under the 2020 Inducement Plan. The only persons eligible to receive grants of awards under the 2017 Inducement Plan, the 2019 Inducement Plan or the 2020 Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) and the related guidance under Nasdaq IM 5635-1-that is, generally, a person not previously an employee or director of ours, or following a bona fide period of non-employment, as an inducement material to the individual's entering into employment with us. An “Award” is any right to receive our common stock pursuant to the Inducement Plan, consisting of nonstatutory stock options, stock appreciation rights, restricted stock awards, RSUs, or any other stock award. Item 13. Certain Relationships and Related P arty Transactions, and Director Independence The information required by this item will be contained in the Proxy Statement and is incorporated into this Annual Report on Form 10-K by reference. Item 14. Principal Acco untant Fees and Services The information required by this item will be contained in the Proxy Statement and is incorporated into this Annual Report on Form 10-K by reference. 49 Item 15. Exhibits, Finan cial Statement Schedules (a) Exhibits. The following exhibits are filed as part of this Annual Report on Form 10-K: Exhibit Number Description of Document Registrant’s Form Dated Exhibit No. Filed Herewith 3.1 Sixth Amended and Restated Certificate of Incorporation dated May 25, 2022. X 3.2 Certificate of Amendment to Sixth Amended and Restated Certificate of Incorporation of Assembly Biosciences, Inc., dated February 9, 2024 . 8-K 02/13/2024 3.1 3.3 Amended and Restated Bylaws as amended through December 7, 2022. 8-K 12/12/2022 3.1 4.1 Specimen of Common Stock Certificate. S-3 12/30/2015 4.1 4.2 Description of Securities. X 10.1 Sublease, dated July 26, 2023, by and between Arsenal Biosciences, Inc., as Sublandlord, and Assembly Biosciences, Inc., as Subtenant. 10-Q 11/08/2023 10.1 10.2‡ Option, License and Collaboration Agreement, dated October 15, 2023, by and between Assembly Biosciences, Inc. and Gilead Sciences, Inc. 8-K 10/17/2023 10.1 10.3‡ Common Stock Purchase Agreement, dated October 15, 2023, by and between Assembly Biosciences, Inc. and Gilead Sciences, Inc. 8-K 10/17/2023 10.2 10.4‡ Investor Rights Agreement, dated October 15, 2023, by and between Assembly Biosciences, Inc. and Gilead Sciences, Inc. 8-K 10/17/2023 10.3 10.5* Exclusive License Agreement dated September 3, 2013 by and between The Indiana University Research and Technology Corporation and Assembly Pharmaceuticals, Inc. 10-Q 11/17/2014 10.29 10.6† Amendment No. 1 to Exclusive License Agreement, by and between Assembly Biosciences, Inc. and the Indiana University Research and Technology Corporation. 10-Q 11/05/2020 10.1 10.7† Amendment No. 2 to Exclusive License Agreement, by and between Assembly Biosciences, Inc. and the Indiana University Research and Technology Corporation. 10-Q 11/05/2020 10.2 10.8†‡ Collaboration Agreement, dated as of July 17, 2020, by and between Assembly Biosciences, Inc. and BeiGene, Ltd. 10-Q 11/05/2020 10.3 10.9# Amended and Restated Employment Agreement, dated December 12, 2022, between Assembly Biosciences, Inc. and Jason A. Okazaki. 10-K 03/22/2023 10.7 10.10# Employment Agreement, dated May 1, 2020, between Assembly Biosciences, Inc. and William E. Delaney IV, Ph.D., effective as of May 27, 2020. 10-K 02/25/2021 10.12 10.11# Employment Agreement, dated November 8, 2023, between Assembly Biosciences, Inc. and Anuj Gaggar, M.D., Ph.D. X 10.12# Employment Agreement, dated February 10, 2022, between Assembly Biosciences, Inc. and Nicole S. White, Ph.D., effective as of February 16, 2022. X 10.13# 2010 Equity Incentive Plan. S-1/A 10/4/2010 10.14 50 Exhibit Number Description of Document Registrant’s Form Dated Exhibit No. Filed Herewith 10.14# Assembly Biosciences, Inc. Amended and Restated 2014 Stock Incentive Plan. 8-K 06/06/2016 10.1 10.15# Omnibus Amendment to Assembly Biosciences, Inc. Stock Incentive Plans. 10-Q 05/08/2020 10.2 10.16# Form of Notice of Stock Option Grant and Stock Option Agreement under the Amended and Restated 2014 Stock Incentive Plan. 10-K 03/22/2023 10.12 10.17# Form of Restricted Stock Unit Award Notice and Restricted Stock Unit Award Agreement under the Amended and Restated 2014 Stock Incentive Plan. 10-Q 11/01/2017 10.1 10.18# Assembly Biosciences, Inc. 2017 Inducement Award Plan. 10-Q 08/09/2017 10.1 10.19# Form of Notice of Stock Option Grant and Stock Option Agreement under the 2017 Inducement Award Plan. 10-Q 08/09/2017 10.2 10.20# Form of Restricted Stock Unit Award Notice and Restricted Stock Unit Award Agreement under the 2017 Inducement Award Plan. 10-Q 08/09/2017 10.3 10.21# Assembly Biosciences, Inc. 2018 Stock Incentive Plan. 8-K 06/01/2018 10.1 10.22# Amendment No. 1 to Assembly Biosciences, Inc. 2018 Stock Incentive Plan. 8-K 05/21/2019 10.2 10.23# Amendment No. 3 to Assembly Biosciences, Inc. 2018 Stock Incentive Plan. 8-K 06/16/2020 10.1 10.24# Amendment No. 4 to Assembly Biosciences, Inc. 2018 Stock Incentive Plan. 8-K 05/25/2021 10.1 10.25# Amendment No. 5 to Assembly Biosciences, Inc. 2018 Stock Incentive Plan. 8-K 05/27/2022 10.1 10.26# Amendment No. 6 to Assembly Biosciences, Inc. 2018 Stock Incentive Plan. 8-K 05/30/2023 10.1 10.27# Form of Notice of Stock Option Grant and Stock Option Agreement under the 2018 Stock Incentive Plan. 10-K 03/22/2023 10.22 10.28# Form of Restricted Stock Unit Award Notice and Restricted Stock Unit Award Agreement under the 2018 Stock Incentive Plan. 8-K 06/01/2018 10.3 10.29# Form of Stock Appreciation Right Award Agreement for Non-U.S. Grantees under the Assembly Biosciences, Inc. 2018 Stock Incentive Plan. 8-K 10/12/2018 10.4 10.30# Form of Performance-Based Stock Appreciation Right Award Agreement for Non-U.S. Grantees under the Assembly Biosciences, Inc. 2018 Stock Incentive Plan. 10-K 03/11/2022 10.24 10.31# Amended and Restated Assembly Biosciences, Inc. 2018 Employee Stock Purchase Plan. 8-K 05/25/2021 10.4 10.32# Assembly Biosciences, Inc. 2019 Inducement Award Plan. 10-Q 11/07/2019 10.4 10.33# Form of Notice of Stock Option Grant and Stock Option Agreement under the 2019 Inducement Award Plan. 10-Q 11/07/2019 10.5 10.34# Assembly Biosciences, Inc. 2020 Inducement Award Plan. 10-Q 05/08/2020 10.3 10.35# Form of Notice of Stock Option Grant and Stock Option Agreement under the 2020 Inducement Award Plan. 10-Q 05/08/2020 10.4 10.36# Form of Restricted Stock Unit Award Notice and Restricted Stock Unit Award Agreement under the 2020 Inducement Award Plan. 10-Q 05/08/2020 10.5 10.37 Open Market Sale Agreement by and between Assembly Biosciences, Inc. and Jefferies LLC. S-3 08/28/2020 1.2 51 Exhibit Number Description of Document Registrant’s Form Dated Exhibit No. Filed Herewith 10.38# Assembly Biosciences, Inc. 2022 Corporate Bonus Plan. 8-K 02/04/2022 10.1 21.1 List of Subsidiaries of Assembly Biosciences, Inc. X 23.1 Consent of Independent Registered Public Accounting Firm. X 24.1 Power of Attorney (included on signature page). X 31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1** Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 97.1 Clawback Policy. X 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definitions Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). * Certain information in this exhibit has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request. † The schedules to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. ‡ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. # Represents management contracts or compensatory plans or arrangements. ** The certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K is to be deemed furnished and shall not be deemed “filed” with the SEC and is not to be incorporated by reference into any filing of Assembly Biosciences, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing. Item 16. Form 10-K Summary None. 52 SIGNA TURES In accordance with Section 13 or 15(d) of the Securities Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ASSEMBLY BIOSCIENCES, INC. Date: March 28, 2024 By: /s/ Jason A. Okazaki Name: Jason A. Okazaki Title: Chief Executive Officer and President POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jason A. Okazaki and John O. Gunderson, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated. Signature Title Date /s/ Jason A. Okazaki Chief Executive Officer, President and Director March 28, 2024 Jason A. Okazaki (Principal Executive Officer and Principal Financial Officer) /s/ Jeanette M. Bjorkquist Executive Director, Accounting and Treasury March 28, 2024 Jeanette M. Bjorkquist (Principal Accounting Officer) /s/ William R. Ringo, Jr. Chairman of the Board March 28, 2024 William R. Ringo, Jr. /s/ Anthony E. Altig Director March 28, 2024 Anthony E. Altig /s/ Tomas Cihlar, Ph.D. Director March 28, 2024 Tomas Cihlar, Ph.D. /s/ Gina Consylman Director March 28, 2024 Gina Consylman /s/ Robert D. Cook II Director March 28, 2024 Robert D. Cook II /s/ Sir Michael Houghton, Ph.D. Director March 28, 2024 Sir Michael Houghton, Ph.D. /s/ Lisa R. Johnson-Pratt, M.D. Director March 28, 2024 Lisa R. Johnson-Pratt, M.D. /s/ Susan Mahony, Ph.D. Director March 28, 2024 Susan Mahony, Ph.D. /s/ John G. McHutchison, A.O., M.D. Director March 28, 2024 John G. McHutchison, A.O., M.D. 53 ASSEMBLY BIOSCIENCES, INC. FINANCIAL S TATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) F- 2 Consolidated Balance Sheets as of December 31, 2023 and 2022 F- 4 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022 F- 5 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2023 and 2022 F- 6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 F- 7 Notes to Consolidated Financial Statements F- 8 F- 1 Re port of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Assembly Biosciences, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Assembly Biosciences, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. F- 2 Collaboration Agreement with Gilead Sciences, Inc. Description of the Matter As described in Note 10 to the consolidated financial statements, the Company entered into an Option, License and Collaboration Agreement (the Gilead Collaboration Agreement) and Common Stock Purchase Agreement and an Investor Rights Agreement (the Gilead Equity Agreements) with Gilead Sciences, Inc. during the year ended December 31, 2023. The Company concluded Gilead is a customer and accordingly, the Gilead Collaboration Agreement is within the scope of the revenue from contracts with customers guidance. In determining the appropriate accounting treatment, the Company identified a single combined performance obligation for the discovery, research and development services during the collaboration term, and will recognize revenue over time using a cost-based input method. The Company determined that the total transaction price under the Gilead Collaboration Agreement was $90.7 million, which consisted of an upfront payment of $84.8 million and a $5.9 million premium on the purchase of the Company’s common stock that was allocated to the single combined performance obligation under the Gilead Collaboration Agreement. Auditing the Company’s revenue recognition for the Gilead Collaboration Agreement is complex and required the Company to apply significant judgment to determine whether any promises or services described in the Gilead Collaboration Agreement meet the criteria of being distinct and capable of being distinct within the context of the contract or represent a material right. How We Addressed the Matter in Our Audit To test the conclusion that the various promises under the contract collectively constituted a single combined performance obligation, our audit procedures included, among others, reviewing the Gilead Collaboration Agreement, discussing the potential performance obligations with management, and evaluating whether management's accounting position considered all relevant facts and terms included in the agreement. We further evaluated management's technical analysis and assessed management's conclusions to determine whether they had appropriately considered and applied the guidance and interpretations associated with performance obligations within the scope of the revenue from contracts with customers guidance. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2015. San Jose, California March 28, 2024 F- 3 ASSEMBLY BIOSCIENCES, INC. CONSOLIDATED B ALANCE SHEETS (In thousands except for share amounts and par value) December 31, December 31, 2023 2022 ASSETS Current assets Cash and cash equivalents $ 19,841 $ 52,418 Marketable securities 110,406 39,192 Accounts receivable from collaboration 43 944 Prepaid expenses and other current assets 3,497 4,413 Total current assets 133,787 96,967 Property and equipment, net 385 743 Operating lease right-of-use (ROU) assets 2,339 3,195 Other assets 312 889 Total assets $ 136,823 $ 101,794 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 461 $ 2,493 Accrued research and development expenses 885 3,122 Other accrued expenses 5,744 7,317 Deferred revenue - short-term ($ 30,915 and $− to a related party) 30,915 — Operating lease liabilities - short-term 1,220 3,364 Total current liabilities 39,225 16,296 Deferred revenue - long-term ($ 55,379 and $− to a related party) 55,379 2,733 Operating lease liabilities - long-term 1,122 101 Total liabilities 95,726 19,130 Commitments and contingencies Stockholders' equity Preferred stock, $ 0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding — — Common stock, $ 0.001 par value; 150,000,000 shares authorized as of December 31, 2023 and December 31, 2022; 5,482,752 and 4,074,552 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 5 4 Additional paid-in capital 826,921 807,983 Accumulated other comprehensive loss ( 81 ) ( 803 ) Accumulated deficit ( 785,748 ) ( 724,520 ) Total stockholders' equity 41,097 82,664 Total liabilities and stockholders' equity $ 136,823 $ 101,794 See Accompanying Notes to the Consolidated Financial Statements F- 4 ASSEMBLY BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF OPER ATIONS AND COMPREHENSIVE LOSS (In thousands except for share and per share amounts) Year Ended December 31, 2023 2022 Collaboration revenue ($ 4,430 and $ − from a related party) $ 7,163 $ — Operating expenses Research and development 48,900 69,980 General and administrative 22,909 24,134 Total operating expenses 71,809 94,114 Loss from operations ( 64,646 ) ( 94,114 ) Other income Interest and other income, net 3,451 1,022 Total other income 3,451 1,022 Loss before income taxes ( 61,195 ) ( 93,092 ) Income tax expense ( 33 ) — Net loss $ ( 61,228 ) $ ( 93,092 ) Other comprehensive loss Unrealized gain (loss) on marketable securities 722 ( 384 ) Comprehensive loss $ ( 60,506 ) $ ( 93,476 ) Net loss per share, basic and diluted $ ( 13.38 ) $ ( 23.08 ) Weighted average common shares outstanding, basic and diluted 4,577,371 4,034,105 See Accompanying Notes to the Consolidated Financial Statements F- 5 ASSEMBLY BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF CHA NGES IN STOCKHOLDERS’ EQUITY (In thousands except for share amounts) Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Total Stockholders' Shares Amount Capital Loss Deficit Equity Balance as of December 31, 2021 4,010,009 $ 4 $ 800,772 $ ( 419 ) $ ( 631,428 ) $ 168,929 Issuance of common stock under at-the-market (ATM) equity offering program, net of issuance costs 25,068 — 325 — — 325 Issuance of common stock under Employee Stock Purchase Plan (ESPP) 18,819 — 289 — — 289 Issuance of common stock for settlement of restricted stock units (RSUs) 20,656 — — — — — Unrealized loss on marketable debt securities — — — ( 384 ) — ( 384 ) Stock-based compensation — — 6,597 — — 6,597 Net loss — — — — ( 93,092 ) ( 93,092 ) Balance as of December 31, 2022 4,074,552 $ 4 $ 807,983 $ ( 803 ) $ ( 724,520 ) $ 82,664 Issuance of common stock under ATM equity offering program, net of issuance costs 261,170 — 4,546 — — 4,546 Issuance of common stock under ESPP 14,453 — 129 — — 129 Issuance of common stock for settlement of RSUs 43,105 — — — — — Issuance of common stock to a related party, net of issuance costs 1,089,472 1 9,142 — — 9,143 Unrealized gain on marketable debt securities — — — 722 — 722 Stock-based compensation — — 5,121 — — 5,121 Net loss — — — — ( 61,228 ) ( 61,228 ) Balance as of December 31, 2023 5,482,752 $ 5 $ 826,921 $ ( 81 ) $ ( 785,748 ) $ 41,097 See Accompanying Notes to the Consolidated Financial Statements F- 6 ASSEMBLY BIOSCIENCES, INC. CONSOLIDATED STATEM ENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 Cash flows from operating activities Net loss $ ( 61,228 ) $ ( 93,092 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 450 498 Stock-based compensation 5,119 6,593 Net (accretion) amortization of investments in marketable debt securities ( 1,585 ) 155 Non-cash rent expense 3,507 3,505 Loss on disposal of property and equipment 139 — Changes in operating assets and liabilities: Accounts receivable from collaboration 901 ( 608 ) Prepaid expenses and other current assets 916 1,328 Other assets 577 814 Accounts payable ( 2,032 ) ( 166 ) Accrued research and development expenses ( 2,237 ) ( 278 ) Other accrued expenses ( 1,571 ) 458 Deferred revenue 83,561 — Operating lease liabilities ( 3,774 ) ( 3,670 ) Net cash provided by (used in) operating activities 22,743 ( 84,463 ) Cash flows from investing activities Proceeds from maturities of marketable securities 65,015 88,000 Proceeds from sale of property and equipment 24 — Purchases of property and equipment ( 255 ) ( 102 ) Purchases of marketable securities ( 133,922 ) ( 27,583 ) Proceeds from sale of marketable securities — 28,825 Proceeds from the sale of Microbiome assets — 1,500 Net cash (used in) provided by investing activities ( 69,138 ) 90,640 Cash flows from financing activities Proceeds from the issuance of common stock to a related party, net of issuance costs 9,143 — Proceeds from the issuance of common stock under ATM equity offering program, net of issuance costs 4,546 325 Proceeds from the issuance of common stock under ESPP 129 289 Net cash provided by financing activities 13,818 614 Net (decrease) increase in cash and cash equivalents ( 32,577 ) 6,791 Cash and cash equivalents at the beginning of the period 52,418 45,627 Cash and cash equivalents at the end of the period $ 19,841 $ 52,418 Supplemental non-cash investing and financing activities Operating lease liabilities arising from obtaining ROU assets $ 2,442 $ 171 See Accompanying Notes to the Consolidated Financial Statements F- 7 ASSEMBLY BIOSCIENCES, INC. Notes to Consolidated Financial Statements Note 1 - Nature of Business Overview Assembly Biosciences, Inc. (together with its subsidiaries, Assembly or the Company), incorporated in Delaware in October 2005, is a biotechnology company developing innovative therapeutics. The Company's pipeline includes two helicase-primase inhibitors (HPI) targeting recurrent genital herpes, an orally bioavailable hepatitis delta virus (HDV) entry inhibitor, a clinical stage capsid assembly inhibitor (CAM) candidate designed to disrupt the replication cycle of hepatitis B virus (HBV) at several key points with the aim of achieving finite treatment and functional cures and research programs focused on the discovery of therapeutics to treat devastating viral diseases, including a non-nucleoside polymerase inhibitor (NNPI) targeting transplant-related herpesviruses and a small molecule interferon-α (IFN-α) receptor (IFNAR) agonist targeting HBV and HDV. The Company operates in one segment and is headquartered in South San Francisco, California. Liquidity The Company has not derived any revenue from product sales to date and currently has no approved products. Once a product has been developed, it will need to be approved for sale by the U.S. Food and Drug Administration (FDA) or an applicable foreign regulatory agency. Since inception, the Company’s operations have been financed through the sale of equity securities, the proceeds from the exercise of warrants and stock options, the issuance of debt, and upfront payments related to collaboration agreements. The Company has incurred losses from operations since inception and expects to continue to incur substantial losses for the next several years as it continues its product development efforts. In October 2023, the Company received $ 100.0 million upon entering into the Option, License and Collaboration Agreement (the Gilead Collaboration Agreement) and the Common Stock Purchase Agreement and an Investor Rights Agreement (collectively, the Gilead Equity Agreements) with Gilead Sciences, Inc. (Gilead). Management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months following the date these consolidated financial statements are issued. Note 2 - Summary of Significant Accounting Policies and Recent Accounting Pronouncements Basis of Presentation These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. On January 31, 2024, following approval by the Company's stockholders, the Company's board of directors approved the implementation of a reverse stock split at a ratio of 1-for-12 shares of the Company's common stock (the Reverse Stock Split). The Reverse Stock Split was effective as of February 9, 2024 (see Note 15). All share and per share amounts of the Company's common stock presented have been retroactively adjusted to r eflect the 1-for-12 R everse Stock Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include estimates for revenue recognition, including the standalone selling price (SSP) for the allocation of transaction price to performance obligations and cost-based inputs, as well as estimates of costs incurred but not yet invoiced for research and development accruals. F- 8 The Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible these external factors could have an effect on the Company’s estimates and could cause actual results to differ materially from those estimates and assumptions. Other Risks and Uncertainties The Company relies on contract research organizations (CROs), including one located in Ukraine that temporarily shut down operations due to Russia’s invasion. Though this CRO has resumed operations and the Company continues to utilize this CRO, the Company has reallocated certain work to other global CROs in case the CRO shuts down operations again. U.S. and global financial markets have experienced volatility and disruption due to other macroeconomic and geopolitical events such as rising inflation, rising interest rates to combat inflation, the risk of a recession, the war between Russia and Ukraine and the Israel-Hamas war. The Company cannot predict at this time to what extent, if at all, it and its employees, CROs, vendors and/or collaborators could potentially be negatively impacted by these events. Cash and Cash Equivalents All highly liquid investments, including money market funds, with original maturities of three months or less at the time of purchase are considered to be cash equivalents. All of the Company’s cash equivalents have liquid markets and high credit ratings. The Company maintains its cash in bank deposits and other accounts, the balances of which, at times as of and during the years ended December 31, 2023 and 2022 , exceeded federally insured limits. Investments in Marketable Securities The Company invests its excess cash in debt securities with high credit ratings, including, but not limited to, money market funds classified as cash equivalents, securities issued by the U.S. government and its agencies, corporate debt securities and commercial paper. The Company has designated its investments in marketable securities as available-for-sale and measures these securities at their respective fair values. The Company reviews all available-for-sale securities at each period end to determine if they remain available-for-sale based on their current intent and ability to sell the security if it is required to do so. Marketable securities are classified as short-term or long-term based on the maturity date and their availability to meet current operating requirements. Marketable securities that mature in one year or less from the consolidated balance sheet date are classified as short-term available-for-sale securities, while marketable securities with maturities in one year or beyond one year from the consolidated balance sheet date are classified as long-term. The Company periodically reviews its marketable securities for declines in fair value below the amortized cost basis to determine whether the impairment, if any, is due to credit-related or other factors. This review includes the credit worthiness of the security issuers, the severity of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not the Company will be required to sell the securities before the recovery of the amortized cost basis. Unrealized gains and losses on available-for-sale securities are reported in other comprehensive loss, and as a component of stockholders' equity until their disposition, with the exception of unrealized losses believed to be related to credit losses which are recognized as an allowance for credit losses on the consolidated balance sheet with the corresponding charge in other income in the period the impairment occurs. Impairment assessments are made at the individual security level each reporting period. The Company elected to exclude accrued interest receivable from the amortized cost basis of its available-for-sale debt securities and to not measure an allowance for credit losses for accrued interest receivable. To date, there have been no credit-related declines in value or other impairments of the Company’s investments in marketable securities. Realized gains and losses from the sale of marketable securities, if any, are calculated using the specific-identification method. Leases All of the Company’s leases are operating leases for facilities and equipment. The Company recognizes a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. The Company determines whether an arrangement is or contains a lease at contract inception. Operating leases with a duration greater than one year are included in operating lease ROU assets, operating lease liabilities - short-term, and operating lease liabilities - long-term in the Company’s consolidated balance sheets. The Company elected F- 9 the short-term lease exception policy, permitting it to not apply the recognition requirements to leases with terms of less than one year (short-term leases) for all classes of assets. 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. In determining the net present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The incremental borrowing rate represents the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company considers a lease term to be the noncancelable period that it has the right to use the underlying asset, including any periods where it is reasonably assured the Company will exercise the option to extend the contract. Periods covered by an option to extend are included in the lease term if the lessor controls the exercise of that option. The operating lease ROU assets also include any lease payments made and exclude lease incentives. Lease expense is recognized on a straight-line basis over the expected lease term. Variable lease expenses are recorded when incurred. The Company has elected not to separate lease and non-lease components for its leased assets and accounts for all lease and non-lease components of its agreements as a single lease component. Impairment of Long-Lived Assets The Company monitors the carrying value of long-lived assets, including ROU operating lease assets, for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value. There was no impairment of long-lived assets during the years ended December 31, 2023 and 2022 . Property and Equipment, Net Property and equipment are stated at cost and consist of lab and office equipment and leasehold improvements. The Company records depreciation under the straight-line method over the estimated useful lives of its property and equipment ranging from two to seven years . Leasehold improvements are amortized over the remaining terms of the respective leases or the estimated useful life of the leasehold improvements, whichever is less. Maintenance and repair costs are expensed as incurred. Fair Value Measurements The Company follows accounting guidance on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments: Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed or initial amounts recorded may not be indicative of the amount the Company or holders of the instruments could realize in a current market exchange. F- 10 The carrying amounts of cash equivalents and marketable securities approximate their fair value based upon quoted market prices. Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts which approximate their fair value due to their liquid or short-term nature, such as cash, accounts receivable, accounts payable and accrued expenses. The following tables present the fair value of the Company’s financial assets measured at fair value on a recurring basis using the above input categories (in thousands): December 31, 2023 Level 1 Level 2 Level 3 Fair Value Cash equivalents Money market fund $ 18,982 $ — $ — $ 18,982 Total cash equivalents 18,982 — — 18,982 Short-term marketable securities U.S. and foreign corporate debt securities — 17,633 — 17,633 U.S. treasury securities — 77,018 — 77,018 U.S. and foreign commercial paper — 15,755 — 15,755 Total short-term marketable securities — 110,406 — 110,406 Total assets measured at fair value $ 18,982 $ 110,406 $ — $ 129,388 December 31, 2022 Level 1 Level 2 Level 3 Fair Value Cash equivalents Money market fund $ 49,676 $ — $ — $ 49,676 Total cash equivalents 49,676 — — 49,676 Short-term marketable securities U.S. and foreign corporate debt securities — 18,597 — 18,597 U.S. treasury securities — 11,744 — 11,744 U.S. and foreign commercial paper — 8,851 — 8,851 Total short-term marketable securities — 39,192 — 39,192 Total assets measured at fair value $ 49,676 $ 39,192 $ — $ 88,868 Money market funds are highly liquid and actively traded marketable securities that generally transact at a stable $1.00 net asset value representing its estimated fair value. The Company estimates the fair value of its U.S. and foreign corporate debt securities, U.S. treasury securities and U.S. and foreign commercial paper by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads; benchmark securities; prepayment/default projections based on historical data; and other observable inputs. There have been no transfers between Level 1, Level 2 or Level 3 for any of the periods presented. See Note 4 for further information regarding the carrying value of the Company’s investments in marketable securities. Revenue Recognition and Accounts Receivable from Collaboration The Company analyzes its collaboration arrangements to assess whether such arrangements, or transactions between arrangement participants, involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities or are more akin to a vendor-customer relationship. In making this evaluation, the Company considers whether the activities of the collaboration are considered to be distinct and deemed to be within the scope of the collaborative arrangement accounting standard and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of the revenue with contracts with customers accounting standard. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For elements of collaboration arrangements that are not accounted for pursuant to the revenue from contracts with customers accounting standard, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers accounting standard. Amounts related to transactions with a F- 11 counterparty in a collaborative arrangement that is not a customer are presented on a separate line item from revenue recognized from contracts with customers, if any, in the Company’s consolidated statements of operations and comprehensive loss. Under certain collaborative arrangements, the Company has been reimbursed for a portion of its research and development expenses or participates in the cost-sharing of such research and development expenses. Such reimbursements and cost-sharing arrangements are reflected as a reduction of research and development expense in the Company’s consolidated statements of operations and comprehensive loss. For arrangements or transactions between arrangement participants determined to be within the scope of the contracts with customers accounting standard, the Company evaluates the term of the arrangement and recognizes revenue when the customer obtains control of promised goods or services in a contract for an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. For contracts with customers, the Company applies the following five-step model in order to determine this amount: (1) identification of the promised goods or services in the contract; (2) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (3) measurement of the transaction price, including the constraint on variable consideration; (4) allocation of the transaction price to the performance obligations; and (5) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company has provided standard indemnification and protection of licensed intellectual property for its customers. These provisions are part of assurance the licenses meet the agreements, representations and are not obligations to provide goods or services. The Company only applies the five-step model to contracts when it is probable the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. As part of the accounting for contracts with customers, the Company must develop assumptions that require judgment to determine the estimated relative SSP of each performance obligation identified in the contract. The Company then allocates the total transaction price to each performance obligation based on the SSP of each performance obligation. The Company recognizes the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied as revenue. Licenses If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, upfront license fees based on the relative value prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the collaborator and the collaborator is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company applies an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Research and Development Services The promises under the Company’s agreements may include research and development services to be performed by the Company on behalf of the counterparty. If these services are determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to these services as revenue over time based on an appropriate measure of progress when the performance by the Company does not create an asset with an alternative use and the Company either has received or has an enforceable right to payment for the performance completed to date. If these services are determined not to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to the combined performance obligation as the related performance obligations are satisfied. Customer Options If an arrangement contains customer options, the Company evaluates whether the options are material rights because they allow the customer to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The identification of a material right, and if identified as a material right, the allocation of the transaction price to it, is based on the SSP, which is determined using assumptions regarding estimated costs, F- 12 discount rates, post-option development timeline, the probability of technical and regulatory success and the probability the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised or expires. If the options are deemed not to be a material right, they are considered marketing offers which are excluded as performance obligations at the outset of the arrangement. Development and Regulatory Milestone Payments Depending on facts and circumstances, the Company may record revenues from certain milestones in a reporting period before the milestone is achieved if the Company concludes achievement of the milestone is probable and recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. The Company records a corresponding contract asset when this conclusion is reached. Milestone payments that have not been included in the transaction price to date are fully constrained. The Company re-evaluates the probability of achievement of such milestones and any related constraint each reporting period. The Company adjusts its estimate of the overall transaction price, including the amount of collaborative revenue that was recorded, if necessary. Sales-based Milestone and Royalty Payments The Company’s customers may be required to pay the Company sales-based milestone payments or royalties on future sales of commercial products. The Company recognizes revenues related to sales-based milestone and royalty payments upon the later to occur of (i) achievement of the collaborator’s underlying sales or (ii) satisfaction of any performance obligation(s) related to these sales, in each case assuming the Company’s licensed intellectual property is deemed to be the predominant item to which the sales-based milestones and/or royalties relate. The Company receives payments from its customers based on billing schedules established in the contract. Upfront payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under the arrangement. If the related performance obligation is expected to be satisfied within the next twelve months, these amounts will be classified in current liabilities. The Company recognizes a contract asset relating to its conditional right to consideration that is not subject to a constraint. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. A net contract asset or liability is presented for each contract with a customer. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. At December 31, 2023 and 2022, all accounts receivable from collaboration are deemed collectible. Contract Liabilities The following tables present changes in the Company’s contract liabilities (in thousands): Balance at Beginning of Period Additions Deductions Balance at End of Period Year Ended December 31, 2023 Contract liabilities: Deferred revenue $ 2,733 $ 90,724 $ ( 7,163 ) $ 86,294 Balance at Beginning of Period Additions Deductions Balance at End of Period Year Ended December 31, 2022 Contract liabilities: Deferred revenue $ 2,733 $ — $ — $ 2,733 F- 13 Year Ended December 31, 2023 2022 Collaboration revenue recognized in the period from Amounts included in deferred revenue at the beginning of the period $ 2,733 $ — Performance obligations satisfied in previous period $ — $ — Stock-Based Compensation The Company measures stock-based compensation to employees, consultants, board members, and non-employees at fair value on the grant date of the award. The fair value of RSUs is determined based on the number of shares granted and the quoted market price of the Company’s common stock on the date of grant. If stock-based awards are granted in contemplation of or shortly before a planned release of material nonpublic information, and such information is expected to result in a material increase in the Company’s share price, the Company considers whether an adjustment to the observable market price is required when estimating fair values. Compensation cost is recognized as expense on a straight-line basis over the requisite service period of the award. Stock-based awards with graded vesting schedules are recognized using the accelerated attribution method on a straight-line basis over the requisite service period for each separately vesting portion of the award. For awards that have a performance condition, compensation cost is measured based on the fair value of the award on the grant date, the date performance targets are established, and is expensed over the requisite service period for each separately vesting tranche when achievement of the performance condition becomes probable. The Company assesses the probability of the performance conditions being met on a continuous basis. For awards that have a market condition, compensation cost is measured based on the grant-date fair value of the award and is expensed over the derived service period regardless of whether the underlying market condition is met. Forfeitures are recognized when they occur. The Company estimates the fair value of stock option grants that do not contain market-based vesting conditions using the Black-Scholes option pricing model. The assumptions used in estimating the fair value of these awards, such as expected term, expected dividend yield, volatility and risk-free interest rate, represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The Company uses the Monte-Carlo model to calculate the fair value on the date of grant of awards which contain market-based vesting conditions. This pricing model uses multiple simulations to evaluate the probability of achieving the market condition to calculate the fair value of the awards, which includes the recent market price and volatility of the Company's shares. The Company is also required to make estimates as to the probability of achieving the specific performance conditions. If actual results are not consistent with the Company’s assumptions and judgments used in making these estimates, the Company may be required to increase or decrease compensation expense, which could be material to the Company’s consolidated results of operations. Research and Development Expense and Accruals Research and development costs include personnel-related costs, outside contracted services including clinical study costs, facilities costs, fees paid to consultants, milestone payments prior to FDA approval, license fees prior to FDA approval, professional services, travel costs, dues and subscriptions, depreciation and materials used in clinical trials and research and development and costs incurred under the Company’s collaboration agreements. Research and development costs are expensed as incurred unless there is an alternative future use in other research and development projects. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Such payments are evaluated for current or long-term classification based on when they will be realized or consumed. The Company records expenses related to clinical studies and manufacturing development activities based on its estimates of the services received and efforts expended pursuant to contracts with multiple CROs and manufacturing vendors that conduct and manage these activities on its behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical study milestones. In amortizing or accruing service fees, the Company estimates the time period over which services will be performed, enrollment of subjects, number of sites activated and the level of effort expended in each period. If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, the Company will adjust the accrued or prepaid expense balance accordingly. To date, there have been no material differences from the Company’s estimates to the amounts actually incurred. F- 14 The Company has entered and may continue to enter into license agreements to access and utilize certain technology. In each case, the Company evaluates if the license agreement results in the acquisition of an asset or a business. To date, none of the Company’s license agreements have been considered to be acquisitions of businesses. For asset acquisitions, the upfront payments to acquire such licenses, as well as any future milestone payments, are immediately recognized as research and development expense when paid, provided there is no alternative future use of the rights in other research and development projects. These license agreements may also include contingent consideration in the form of cash payments to be made for future milestone events. The Company assesses whether such contingent consideration meets the definition of a derivative and to date the Company has determined that such contingent consideration are not derivatives. Restructuring Charges The Company recognizes restructuring charges related to reorganization plans that have been committed to by management and when liabilities have been incurred. In connection with these activities, the Company records restructuring charges at fair value for (1) contractual employee termination benefits when obligations are associated to services already rendered, rights to such benefits have vested, and payment of benefits is probable and can be reasonably estimated, (2) one-time employee termination benefits when management has committed to a plan of termination, the plan identifies the employees and their expected termination dates, the details of termination benefits are complete, it is unlikely changes to the plan will be made or the plan will be withdrawn and communication to such employees has occurred, and (3) contract termination costs when a contract is terminated before the end of its term. One-time employee termination benefits are recognized in their entirety when communication has occurred, and future services are not required. If future services are required, the costs are recorded ratably over the remaining period of service. Contract termination costs to be incurred over the remaining contract term without economic benefit are recorded in their entirety when the contract is canceled. The recognition of restructuring charges requires the Company to make certain judgments and estimates regarding the nature, timing and amount of costs associated with the reorganization plan. To the extent the Company’s actual results differ from its estimates and assumptions, the Company may be required to revise the estimates of future accrued restructuring liabilities, requiring the recognition of additional restructuring charges or the reduction of accrued restructuring liabilities already recognized. Such changes to previously estimated amounts may be material to the consolidated financial statements. Changes in the estimates of the restructuring charges are recorded in the period the change is determined. There were no restructuring charges incurred during the year ended December 31, 2023. Changes to previous estimates for restructuring charges were not material during the year ended December 31, 2022. At the end of each reporting period, the Company evaluates the remaining accrued restructuring balances to ensure that no excess accruals are retained, and the utilization of t he provisions are for their intended purpose in accordance with developed restructuring plans. Variable Interest Entities The Company reviews agreements it enters into with third party entities, pursuant to which it may have a variable interest in the entity, in order to determine if the entity is a variable interest entity (VIE). If the entity is a VIE, the Company assesses whether or not it is the primary beneficiary of that entity. In determining whether the Company is the primary beneficiary of an entity, the Company applies a qualitative approach that determines whether it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. If the Company were to determine it is the primary beneficiary of a VIE, the Company would consolidate the statements of operations and financial condition of the VIE into its consolidated financial statements. The Company’s determination about whether it should consolidate such VIEs is made continuously as changes to existing relationships or future transactions may result in a consolidation event. F- 15 Income Taxes The Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company establishes a valuation allowance if it is more likely than not the deferred tax assets will not be realized based on an evaluation of objective verifiable evidence. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit. The Company recognizes and measures uncertain tax positions using a two-step approach set forth in authoritative guidance. The first step is to evaluate the tax position taken or expected to be taken by determining whether the weight of available evidence indicates it is more likely than not the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates uncertain tax positions on a regular basis. The evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of the audit, and effective settlement of audit issues. The provision for income taxes includes the effects of any accruals which the Company believes are appropriate. It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax expense. No interest or penalties related to uncertain tax positions has been incurred or accrued for any periods presented. Pursuant to Section 174 of the Internal Revenue Code (Sec. 174), expenses associated with research conducted in the United States are capitalized and amortized over a five-year period. For expenses associated with research outside of the United States, Sec. 174 expenses are capitalized and amortized over a 15 -year period. Net Loss per Share Basic net loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented. A reconciliation of the numerators and the denominators of the basic and diluted net loss per common share computations is as follows (in thousands, except for share and per share amounts): Year Ended December 31, 2023 2022 Numerator: Net loss $ ( 61,228 ) $ ( 93,092 ) Denominator: Weighted average common shares and pre-funded warrants outstanding - basic and diluted 4,577,371 4,034,105 Net loss per share - basic and diluted $ ( 13.38 ) $ ( 23.08 ) Securities excluded from the computation of diluted net loss per share because including them would have been antidilutive are as follows: December 31, 2023 2022 Options to purchase common stock 862,911 757,418 Common stock subject to purchase under ESPP 13,730 5,971 Unvested RSUs 95,182 141,544 Total 971,823 904,933 F- 16 Comprehensive Loss Comprehensive loss is comprised of net loss and adjustments for the change in unrealized gains and losses on investments in available-for-sale marketable securities. The Company displays comprehensive loss and its components in the consolidated statements of operations and comprehensive loss, net of tax effects if any. Concentrations of Risk Credit Risk Financial instruments which potentially subject the Company to credit risk consist primarily of cash, cash equivalents and marketable securities. The Company holds these investments in highly rated financial institutions, and, by policy, limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. Supplier Risk Certain materials and key components the Company utilizes in its operations are obtained through single suppliers. Since the suppliers of key components and materials must be named in a New Drug Application (NDA) filed with the FDA for a product, significant delays can occur if the qualification of a new supplier is required. If delivery of material from the Company’s suppliers were interrupted for any reason, the Company may be unable to supply any of its product candidates for clinical trials. Customer Risk During the year ended December 31, 2023, 62 % of the Company's collaboration revenue was recognized from a related party, Gilead, under the Gilead Collaboration Agreement (see Note 10 ). If the collaboration with Gilead does not result in the successful development and commercialization of products or if Gilead terminates the Gilead Collaboration Agreement, the Company may not receive any future payments under the collaboration. Recently Adopted Accounting Standards In June 2016, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) No. 2016-13, Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The FASB issued additional amendments to the new guidance related to transition and clarification and deferred the effective date of this standard for all entities except SEC filers that are not smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU 2016-13 effective January 1, 2023 on a modified retrospective basis. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements. Accounting Pronouncements to Be Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which is intended to provide enhanced segment disclosures. The standard will require disclosures about significant segment expenses and other segment items and identifying the Chief Operating Decision Maker and how they use the reported segment profitability measures to assess segment performance and allocate resources. These enhanced disclosures are required for all entities on an interim and annual basis, even if they have only a single reportable segment. The standard is effective for years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating this standard to determine the impact on the Company’s consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The update requires a public business entity to disclose, on an annual basis, a tabular rate reconciliation F- 17 using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. Adoption of the ASU allows for either the prospective or retrospective application of the amendment and is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company does not expect ASU 2023-09 to have a material impact on the Company’s consolidated financial statements. Note 3 - Related Party In October 2023, Gilead purchased 1,089,472 shares of the Company’s common stock at a purchase price of $ 13.92 per share for total proceeds of $ 15.2 million under the Gilead Equity Agreements (see Note 8). As of December 31, 2023 , Gilead held 19.9 % of the Company's outstanding voting common stock. In addition to the Gilead Equity Agreements, the Company entered into the Gilead Collaboration Agreement pursuant to which the Company received total proceeds of $ 84.8 million as an upfront payment (see Note 10). The Company recognized revenue of $ 4.4 million under the Gilead Collaboration Agreement during the year ended December 31, 2023. Additionally, Gilead may, at the Company’s or Gilead's option, subject to certain conditions, purchase additional shares to increase its holdings up to a maximum of 29.9 % of the Company's then-outstanding voting common stock. Under the Investor Rights Agreement, Gilead has the right to designate two directors to the Company's board of directors. The Company appointed each of Gilead's designees to its board of directors in December 2023 and February 2024. Note 4 - Investments in Marketable Securities Investments in marketable available-for-sale securities consisted of the following (in thousands): December 31, 2023 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Cash equivalents Money market fund $ 18,982 $ — $ — $ 18,982 Total cash equivalents 18,982 — — 18,982 Short-term marketable securities U.S. and foreign corporate debt securities 17,595 41 ( 3 ) 17,633 U.S. treasury securities 76,891 127 — 77,018 U.S. and foreign commercial paper 15,728 27 — 15,755 Total short-term marketable securities 110,214 195 ( 3 ) 110,406 Total cash equivalents and marketable securities $ 129,196 $ 195 $ ( 3 ) $ 129,388 December 31, 2022 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Cash equivalents Money market fund $ 49,676 $ — $ — $ 49,676 Total cash equivalents 49,676 — — 49,676 Short-term marketable securities U.S. and foreign corporate debt securities 18,903 — ( 306 ) 18,597 U.S. treasury securities 11,968 — ( 224 ) 11,744 U.S. and foreign commercial paper 8,851 — — 8,851 Total short-term marketable securities 39,722 — ( 530 ) 39,192 Total cash equivalents and marketable securities $ 89,398 $ — $ ( 530 ) $ 88,868 Short-term marketable securities held as of December 31, 2023 and 2022 had contractual maturities of less than one year . F- 18 There were no realized gains and losses for the years ended December 31, 2023 and 2022. As of December 31, 2023 and 2022, investments which were in an unrealized loss position were not material and generally due to interest rate fluctuations, as opposed to declines in credit quality. The Company determined it has the intent and ability to hold all marketable securities that have been in a continuous loss position until recovery of their amortized cost basis, which may be until maturity. As a result, the Company did not recognize any credit losses related to its investments and all unrealized gains and losses on available-for-sale securities are recorded in accumulated other comprehensive loss on the consolidated balance sheets during the years ended December 31, 2023 and 2022. Accrued interest receivable was $ 0.3 million as of December 31, 2023 and 2022 and was recorded in prepaid expenses and other current assets on the consolidated balance sheets. The Company did not write off any accrued interest receivable during the years ended December 31, 2023 and 2022. See Note 2 for further information regarding the fair value of the Company's investments in marketable securities. Note 5 - Property and Equipment, Net Property and equipment, net consists of the following (in thousands): December 31, 2023 2022 Lab equipment $ 295 $ 102 Office equipment 238 699 Leasehold improvement 62 1,629 Total property and equipment 595 2,430 Less: Accumulated depreciation ( 210 ) ( 1,687 ) Property and equipment, net $ 385 $ 743 Depreciation expense for both the years ended December 31, 2023 and 2022 was $ 0.5 million and was recorded in both research and development expense and general and administrative expense in the consolidated statements of operations and comprehensive loss. Note 6 – Other Accrued Expenses Other accrued expenses consist of the following (in thousands): December 31, 2023 2022 Accrued expenses: Accrued compensation $ 5,484 $ 6,228 Accrued restructuring charges — 599 Accrued professional fees and other 260 490 Total accrued expenses $ 5,744 $ 7,317 Note 7 – Restructurings In July 2022, the Company and its board of directors approved a strategic plan to align with its refocused pipeline on its next generation capsid assembly modulators (CAMs) and research programs and reduced its workforce by approximately 30 %. The Company incurred cumulative restructuring charges of $ 1.1 million representing all costs to be incurred. These restructuring charges consisted solely of employee severance and related benefits, including $ 1.0 million in severance payments to executive officers impacted by the restructuring, $ 0.8 million in one-time termination severance payments and other employee-related costs associated with the restructuring and a reversal of $ 0.7 million for previously recognized stock-based compensation expense related to forfeited awards based on the Company's policy of recognizing stock-based awards with graded vesting schedules using an accelerated attribution method on a straight-line basis over the requisite service period for each separately vesting portion of the award and to recognize forfeitures when they occur. F- 19 There were no restructuring charges incurred during the year ended December 31, 2023 . The Company incurred $ 1.1 million in restructuring charges during the year ended December 31, 2022 , $ 0.9 million of which were included in research and development expenses and $ 0.2 million in general and administrative expenses. The following table presents the activity in accrued restructuring charges, included as a component of other accrued expenses on the Company's consolidated balance sheet, during the period (in thousands): Accrued balance as of December 31, 2021 $ — Costs incurred 1,879 Reductions for cash payments ( 1,280 ) Accrued balance as of December 31, 2022 $ 599 Reductions for cash payments ( 599 ) Accrued balance as of December 31, 2023 $ — Note 8 - Stockholders’ Equity The Company is authorized to issue 5,000,000 shares of preferred stock as of December 31, 2023 and 2022. As of December 31, 2023 and 2022 , no shares of preferred stock were issued and outstanding. In May 2022, the Company's stockholders approved the Sixth Amended and Restated Certificate of Incorporation, which increased the authorized number of shares of common stock to 150,000,000 . The Company is authorized to issue 150,000,000 shares of common stock as of December 31, 2023 and 2022. Reverse Stock Split In February 2024, the Reverse Stock Split became effective. All share and per share amounts of the Company's common stock presented have been retroactively adjusted to reflect the 1-for-12 Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital (see Note 15 ). The Company's authorized shares of common stock remain at 150,000,000 and its authorized shares of preferred stock remain at 5,000,000 . Sale of Common Stock In August 2020, the Company entered into a sales agreement under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 100.0 million through “at-the-market” offerings (2020 ATM), pursuant to its shelf registration statement on Form S-3 on file with the SEC. During the year ended December 31, 2023, the Company issued and sold 261,170 shares of common stock under the 2020 ATM, for which the Company received net proceeds of $ 4.5 million , after deducting commissions, fees and expenses. During the year ended December 31, 2022, the Company issued and sold 25,068 shares of common stock under the 2020 ATM, for which the Company received net proceeds of $ 0.3 million , after deducting commissions, fees and expenses. In October 2023, the Company entered into the Gilead Equity Agreements pursuant to which Gilead purchased 1,089,472 shares of the Company’s common stock at a purchase price of $ 13.92 per share for total proceeds of $ 15.2 million. Of the $ 15.2 million in proceeds received under the Gilead Equity Agreements, $ 5.9 million was determined to be a premium on the purchase of the Company’s common stock and allocated to the single combined performance obligation under the Gilead Collaboration Agreement (see Note 10). The fair value of Gilead's common stock purchase was $ 9.3 million and total proceeds from the issuance of common stock under the Gilead Equity Agreements was $ 9.1 million , net of $ 0.2 million in issuance costs. Pursuant to the terms of the Gilead Equity Agreements, if the Company completes equity financing by July 15, 2024 , which results in at least $ 30.0 million of proceeds to the Company, then, subject to approval by the Company’s stockholders (which was obtained on January 31, 2024), the Company may require Gilead to purchase additional shares of common stock from the Company in an amount that results in Gilead owning 29.9 % of the Company’s then-outstanding voting capital stock. If the Company does not complete the equity financing or does not require Gilead to purchase the additional shares, Gilead may elect to purchase additional shares of common stock from the Company in an amount that results in Gilead owning 29.9 % of the Company’s then-outstanding voting capital stock. The purchase price per share for additional shares purchased by Gilead will be equal to the lesser of a 35 % premium to the 30 -day volume weighted average price immediately prior to the date of purchase or a 35 % premium to the 30 -day volume weighted average price immediately prior to delivery by Gilead of notice of the anticipated closing date. The Gilead Equity Agreements also include a three-year standstill provision and two-year lockup provision, with customary exceptions, and provide Gilead with certain other stock purchase rights and F- 20 registration rights, as well as the right to designate two directors to the Company’s board of directors. The Company appointed each of Gilead's designees to its board of directors in December 2023 and February 2024. Note 9 - Stock-Based Compensation Equity Incentive Plans In May 2022, the Company’s stockholders approved an amendment to the 2018 Stock Incentive Plan (the 2018 Plan), which increased the aggregate number of shares of common stock reserved under the 2018 Plan to 716,666 . In May 2023, the Company's stockholders approved an amendment to the 2018 Plan, which increased the aggregate number of shares of common stock reserved under the 2018 Plan to 883,333 . As of December 31, 2023, the Company had awards outstanding under the following shareholder approved plans: 2010 Equity Incentive Plan (the 2010 Plan), which has been frozen; the Amended and Restated 2014 Stock Incentive Plan (the 2014 Plan); and the 2018 Plan. Shares of common stock underlying awards that are forfeited under the 2010 Plan on or after June 2, 2016 will become available for issuance under the 2014 Plan. As of December 31, 2023, the Company also had awards outstanding under the Assembly Biosciences, Inc. 2017 Inducement Award Plan, the 2019 Inducement Award Plan, and the Assembly Biosciences, Inc. 2020 Inducement Award Plan. As of December 31, 2023, the Company also had outstanding options it assumed in connection with its merger with Assembly Pharmaceuticals. The Company issues new shares of common stock to settle options exercised or vested RSUs. The Company also issues new shares of common stock in connection with purchases of shares of common stock by eligible employees under the Assembly Biosciences, Inc. Employee Stock Purchase Plan (the 2018 ESPP). In February 2024, the Reverse Stock Split became effective. All outstanding stock options and restricted stock units, as well as the Company's equity incentive plans presented have been retroactively adjusted to reflect the 1-for-12 Reverse Stock Split (see Note 15). Stock Plan Activity Stock Options The following table summarizes the stock option activity and related information for 2023: Number of Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term (Years) Total Intrinsic Value (in thousands) Outstanding as of December 31, 2022 757,418 $ 84.96 7.1 $ — Granted 190,591 10.68 Forfeited ( 85,098 ) 81.24 Outstanding as of December 31, 2023 862,911 $ 69.00 6.7 $ 1 Options vested and exercisable as of December 31, 2023 486,626 $ 104.88 5.1 $ — The weighted-average grant-date fair value of options granted was $ 7.68 and $ 17.76 during the years ended December 31, 2023 and 2022 , respectively. There were no options exercised in 2023 or 2022. F- 21 RSUs The following table summarizes RSU activity and related information for 2023: Number of RSUs Weighted Average Fair Value Per RSU at Grant Price Nonvested as of December 31, 2022 141,544 $ 40.68 Granted 15,936 10.68 Vested ( 42,898 ) 53.28 Forfeited ( 19,400 ) 27.48 Nonvested as of December 31, 2023 95,182 $ 32.64 The total fair value of RSUs vested and settled during 2023 and 2022 was $ 2.8 million and $ 2.2 million , respectively. The total intrinsic value of RSUs vested and settled during both 2023 and 2022 was $ 0.5 million . In July 2021, the Company granted 26,981 RSUs with performance-based vesting conditions upon the achievement of clinical milestones to the majority of employees, including executive officers. The awards had a grant date fair value of $ 1.2 million and vest upon performance conditions which were deemed probable of being met as of D ecember 31, 2022. The Company recognized stock-based compensation expense of $ 0.3 million and $ 0.7 million for these RSUs during the years ended December 31, 2023 and 2022, respectively. In March 2022, the Company granted 21,248 RSUs with market-based vesting conditions to members of management, including its executive officers. The awards had a grant date fair value of $ 0.4 million and are being recognized over the derived service period of 1.5 years and vest upon the achievement of certain market-based conditions which have not been achieved as of December 31, 2023. The Company recognized stock-based compensation expense of $ 0.1 million and $ 0.2 million for these RSUs during the years ended December 31, 2023 and 2022, respectively. In August 2022, the Company granted 43,748 RSUs with performance-based vesting conditions upon the achievement of clinical milestones to its executive officers. The awards had a grant date fair value of $ 1.1 million. Some of the performance conditions were deemed probable of being met as of December 31, 2022, with the remaining performance conditions deemed probable of being met as of December 31, 2023. The Company recognized stock-based compensation expense of $ 0.6 million and $ 0.1 million for these RSUs during the years ended December 31, 2023 and 2022, respectively. Employee Stock Purchase Plan The 2018 ESPP provides for the purchase by employees of up to an aggregate of 108,333 shares of the Company’s common stock at a discount to the market price. Eligible employees may participate through payroll deductions of up to 15 % of such employee’s compensation for each pay period subject to annual statutory limits and the 2018 ESPP’s limit of 208 shares of common stock per offering. Eligible employees can purchase the Company’s common stock at the end of a predetermined offering period at 85 % of the lower of the fair market value at the beginning or end of the offering period. Under the 2018 ESPP, the offering periods end on the last business day occurring on or before May 14 or November 14. The ESPP is compensatory and results in stock-based compensation expense. In May and November 2023, employees purchased 7,534 and 6,919 shares of common stock, respectively, under the 2018 ESPP. In May and November 2022, employees purchased 11,240 and 7,579 shares of common stock, respectively, under the 2018 ESPP. As of December 31, 2023, 53,687 shares of common stock are available for future sale under the Company’s 2018 ESPP. Stock-based compensation expense recorded in connection with the 2018 ESPP was $ 0.1 million for both the years ended December 31, 2023 and 2022. F- 22 Valuation Assumptions The Company used the Black-Scholes option-pricing model for determining the estimated fair value and stock-based compensation related to stock options and ESPP purchase rights. A summary of the assumptions used to estimate the fair values of stock options grants for the years presented is as follows: Year Ended December 31, 2023 2022 Exercise price $ 8.64 - $ 18.36 $ 18.36 - $ 29.40 Expected volatility 77.5 % - 87.1 % 78.5 % - 81.7 % Risk-free rate 3.59 % - 4.49 % 1.41 % - 4.15 % Expected term (years) 5.5 - 7.5 5.5 - 7.5 Expected dividend yield 0 % 0 % The risk-free interest rate assumption was based on the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the stock option being valued. The expected dividend yield was zero as the Company currently does not intend to pay dividends in the foreseeable future. The weighted average expected term of options was calculated using the simplified method as prescribed by accounting guidance for stock-based compensation due to the Company’s limited history of relevant stock option exercise activity. The expected volatility was calculated based on the Company’s historical stock prices. The fair value of ESPP purchase rights and stock appreciation rights were not material for any period presented. Stock-Based Compensation Expense The Company recognized stock-based compensation expense included in the consolidated statement of operations and comprehensive loss for the years presented (in thousands): Year Ended December 31, 2023 2022 Research and development $ 2,116 $ 3,024 General and administrative 3,003 3,569 Total stock-based compensation expense $ 5,119 $ 6,593 As of December 31, 2023 , there was $ 2.9 million of total unrecognized stock-based compensation related to outstanding equity awards which is expected to be recognized over a weighted average remaining amortization period of 1.5 years. Note 10 - Collaboration Agreements The following table summarizes the collaboration revenue recognized from the Company's collaboration agreements in the consolidated statement of operations and comprehensive loss for the years presented (in thousands): Year Ended December 31, 2023 2022 Gilead $ 4,430 $ — BeiGene, Ltd. (BeiGene) 2,733 — Total collaboration revenue $ 7,163 $ — Gilead Agreement In October 2023, the Company entered into the Gilead Collaboration Agreement pursuant to which Gilead will exclusively license to the Company its HPI program and NNPI program, while retaining opt-in rights to these programs and have an option to take an exclusive license, on a program-by-program basis, to all of the Company’s other current and future pipeline programs for a 12-year collaboration term. In addition to the Gilead Collaboration Agreement, the Company and Gilead entered into the Gilead Equity Agreements, pursuant to which Gilead purchased 1,089,472 shares of the Company’s common stock at a purchase price of $ 13.92 per share (see Note 8). The Company F- 23 received total proceeds of $ 100.0 million , consisting of $ 84.8 million as an upfront payment under the Gilead Collaboration Agreement and $ 15.2 million under the Gilead Equity Agreements. Pursuant to the terms of the Gilead Collaboration Agreement, during the term and for a specified period thereafter, Gilead may exercise its opt-in rights, on a program-by-program basis, at one of two timepoints – completion of a certain Phase 1 study or completion of a certain Phase 2 study for the first product within the program – and upon payment of an opt-in fee ranging from $ 45.0 million to $ 125.0 million per program depending on the type of program and when the option is exercised. If Gilead exercises its opt-in right to any current or future program under the collaboration, the Company is eligible to receive up to $ 330.0 million in potential regulatory and commercial milestones on that program, in addition to royalties ranging from the high single-digits to high teens, depending on the clinical stage of the program at the time of the opt-in. Following Gilead’s exercise of its option for each Company program, the Company may opt in to cover 40 % of the research and development costs in the United States and share 40 % of the profits and operating loss in the United States for products within the program in lieu of receiving milestones and royalties for that program in the United States, unless the Company later opts out of the cost/profit share for the program. Prior to Gilead’s potential exercise of its opt-in, the Company will be primarily responsible for all discovery, research and development on both the Company’s programs and the two Gilead-contributed programs. Gilead may conduct certain development activities related to the Gilead Collaboration Agreement which will be reimbursed by the Company. Following Gilead’s opt-in, Gilead will control the further discovery, research, development, and commercialization on any optioned programs. During the term, Gilead will continue to support the collaboration through extension fees of $ 75.0 million in each of the third, fifth and seventh years of the collaboration. The Gilead Collaboration Agreement is subject to termination by either party for the other party’s uncured, material breach or insolvency. Subject to certain limitations, the Company and Gilead both have certain termination for convenience rights, upon sufficient prior written notice, with respect to programs that one party in-licenses from the other (subject to Gilead’s option rights), and with respect to Gilead, for programs it has option rights to subject to certain time limitations with respect to existing Company programs). Gilead also has a right to terminate the collaborative activities under the Gilead Collaboration Agreement at certain specified points during the collaboration term. The Company concluded Gilead is a customer and accordingly, the Gilead Collaboration Agreement is within the scope of the revenue from contracts with customers guidance. The Company identified a single combined performance obligation for the discovery, research and development services during the collaboration term (the R&D Services). The Company concluded the R&D Services are distinct from Gilead's right to obtain an exclusive license to any of the Company's programs as Gilead benefits from the knowledge and expertise gained from the R&D Services and the Company's know-how is not highly specialized in nature. Gilead could perform the R&D Services themselves, particularly considering Gilead contributed its HPI and NNPI programs and Gilead may continue to conduct development activities on programs being developed under the Gilead Collaboration Agreement. None of the options in the contract were deemed to be separate performance obligations as the options did not provide any discounts or other rights which would be considered a material right in the arrangement. The Company determined the Gilead Collaboration Agreement and Gilead Equity Agreements should be assessed as a single combined transaction because the agreements were negotiated and entered into together, with a single commercial objective. The Company accounted for the agreements based on the fair values of the assets and services exchanged. Of the $ 15.2 million in proceeds received under the Gilead Equity Agreements, $ 5.9 million was determined to be a premium on the purchase of the Company’s common stock and allocated to the single combined performance obligation under the Gilead Collaboration Agreement. As of the effective date of the Gilead Collaboration Agreement, the total transaction price was determined to be $ 90.7 million . The value the Company received from the licenses Gilead contributed are not material within the context of the contract and accordingly, the Company made no adjustments to the transaction price for them. The variable consideration related to the regulatory and commercial milestones has not been included in the transaction price as of December 31, 2023, since Gilead has not opted in to take a license to any of the Company's programs. Any variable consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur pursuant to the Gilead Collaboration Agreement. The Company will reevaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur. F- 24 The transaction price, including the upfront payment from Gilead, is reflected as collaboration revenue when realized in the Company’s consolidated statements of operations. The Company will recognize revenue over time using a cost-based input method, based on internal and external labor cost effort to perform the services, over the initial non-cancellable term of three years since this method best reflects the transfer of services to Gilead. In applying a cost-based input method of revenue recognition, the Company uses actual costs incurred relative to estimated total costs to fulfill each performance obligation. A cost-based input method of revenue recognition requires the Company to make estimates of costs to complete the performance obligation. The cumulative effect of any revisions to estimated costs to complete the performance obligation and associated variable consideration will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods. The Company recognized collaboration revenue of $ 4.4 million during the year ended December 31, 2023. The transaction price for future collaborative activities was recorded as deferred revenue on the consolidated balance sheet as of December 31, 2023, of which $ 30.9 million was included in deferred revenue - short-term and $ 55.4 million was included in deferred revenue - long-term. During the year ended December 31, 2023, the Company did not make any payments to Gilead. Antios Agreement In July 2021, the Company and Antios Therapeutics, Inc. (Antios) entered into a Clinical Trial Collaboration Agreement (the Antios Agreement) to collaborate on a triple combination therapy using VBR and Antios’s active site polymerase inhibitor nucleotide ATI-2173 for the treatment of HBV. Assembly and Antios were individually responsible for the study’s manufacturing costs but equally shared the remaining costs of the study. Antios was responsible for conducting the clinical trial with Assembly reimbursing Antios its share of expenses. In May 2022, the Company was notified by Antios that ATI-2173 had been placed on clinical hold by the FDA following submission of a safety report involving a patient who received a triple combination of VBR, ATI-2173 and a nucleos(t)ide analog reverse transcriptase inhibitor (NrtI). Due to the clinical hold, the Company terminated the Antios Agreement effective May 2022. There were no costs incurred during the year ended December 31, 2023. During the year ended December 31, 2022 , the Company incurred $ 0.4 million in research and development expenses under the Antios Agreement. Arbutus Biopharma Agreement In August 2020, the Company and Arbutus Biopharma Corporation (Arbutus Biopharma) entered into a Clinical Trial Collaboration Agreement (Arbutus Biopharma Agreement) to conduct a randomized, multi-center, open-label Phase 2 clinical trial to explore the safety, pharmacokinetics and antiviral activity of the triple combination of VBR, AB-729 and an NrtI compared to the double combinations of VBR with a NrtI and AB-729 with a NrtI. Under the Arbutus Biopharma Agreement, Assembly and Arbutus Biopharma share responsibility for the costs of the trial equally, excluding manufacturing supply which are the burden of each company to supply their respective drugs, VBR and AB-729. Assembly is responsible for conducting this clinical trial with Arbutus Biopharma reimbursing Assembly its share of expenses. In February 2023, Assembly and Arbutus Biopharma decided to terminate the Phase 2 clinical trial early, at the end of the 48-week on-treatment period, and are in the process of closing the study. The Arbutus Biopharma Agreement is within the scope of the collaborative arrangements guidance as both parties are active participants and are exposed to significant risks and rewards dependent on the success of the collaborative activity. Reimbursements and cost-sharing portions from Arbutus Biopharma are reflected as a reduction of research and development expense when realized in the Company’s consolidated statements of operations. The Company recognized a reduction of research and development expense of $ 1.6 million and $ 2.7 million under the Arbutus Biopharma Agreement during the years ended December 31, 2023 and 2022, respectively. F- 25 BeiGene Agreement In July 2020, the Company and BeiGene entered into a Collaboration Agreement (the BeiGene Agreement) to develop and commercialize the Company’s novel core inhibitor product candidates vebicorvir (VBR), ABI-H2158 (2158) and ABI-H3733 (3733) for chronic HBV infection (the Licensed Product Candidates) in the People’s Republic of China, Hong Kong, Taiwan and Macau (the Territory). Under the agreement, the Company and BeiGene are collaborating on certain global clinical studies and both the Company and BeiGene will independently conduct other clinical studies in their own respective territories. During the term of the BeiGene Agreement, neither party will commercialize any competing products in the Territory. In September 2021, the Company discontinued development of 2158 following the observation of elevated alanine transaminase levels in the Phase 2 clinical study consistent with drug-induced hepatotoxicity, and in July 2022, the Company discontinued clinical development of VBR because it did not achieve functional cure or finite treatment in its two- and three-drug combination studies. In conjunction with the Company entering into the Gilead Collaboration Agreement with Gilead in October 2023, the Company discontinued further development and will no longer seek partnering of 3733. As of the Company's discontinuation of 3733 development, there are no remaining products in development which have been licensed to BeiGene. Pursuant to the terms of the BeiGene Agreement, the Company received an upfront cash payment of $ 40.0 million from BeiGene for the delivery of exclusive, royalty-bearing licenses to develop and commercialize the Licensed Product Candidates in the Territory, and the Company was eligible to receive up to approximately $ 500.0 million in cash milestone payments, comprised of up to $ 113.8 million for development and regulatory milestones and up to $ 385.0 million in net sales milestones. In addition, the Company was eligible to receive tiered royalties at percentages ranging from the mid-teens to the low thirties of net sales. Due to the discontinuation of development of VBR, 2158 and 3733, the Company is not eligible to receive any development and regulatory milestones or net sales milestones. The BeiGene Agreement is within the scope of the collaborative arrangements guidance as both parties are active participants and are exposed to significant risks and rewards dependent on the success of commercializing the Licensed Product Candidates in the Territory but that the unit of account related to the delivery of Licensed Product Candidates is within the scope of the contract with customers guidance. The Company identified the following material promises related to the contract with customers unit of account under the BeiGene Agreement: 1) the transfer of the VBR License, 2) the transfer of the 2158 License, and 3) the transfer of the 3733 License. The Company concluded each of these licenses to be functional as they have significant standalone functionality and grant BeiGene the right to use the Company’s intellectual property as it exists on the effective date of the license. The Company estimated the SSP of the licenses using an income-based valuation approach for the estimated value a licensor of the compounds would receive considering the stage of the compound’s development. The transaction price at the inception of the agreement was limited to the $ 40.0 million upfront payment. The variable consideration related to the remaining development and commercialization milestone payments has not been included in the transaction price as these were fully constrained as of December 31, 2023 and 2022 . Following the discontinuation of development and decision to no longer seek partnering of 3733, the obligation related to the technology transfer associated with the license of 3733 was considered to be complete. Accordingly, the Company recognized $ 2.7 million as collaboration revenue for the amount allocated to 3733 during the year ended December 31, 2023 . No revenue was recognized during the year ended December 31, 2022. As of December 31, 2023 and 2022 , there were no remaining performance obligations under the BeiGene Agreement. The transaction price allocated to 3733 of $ 2.7 million was recorded as a long-term deferred revenue contract liability on the consolidated balance sheet as of December 31, 2022. During the years ended December 31, 2023 and 2022 , the Company did no t recognize any increase or reduction of research and development expense under the BeiGene Agreement. The Company incurred $ 3.5 million in incremental costs of obtaining the BeiGene Agreement. These contract costs have been capitalized and are being recognized consistent with the pattern of recognition of revenue associated with the Licensed Product Candidates. As of December 31, 2023 , no unamortized contract costs remained. As of December 31, 2022 , the remaining unamortized contract costs were $ 0.2 million and were included in other assets on the consolidated balance sheet. F- 26 Note 11 – Strategic License Agreements HBV Research Agreement with Indiana University Since September 2013, the Company has been party to an exclusive License Agreement dated September 3, 2013 with Indiana University Research and Technology Corporation (IURTC) from whom it has licensed aspects of the Company’s HBV program held by IURTC. The license agreement requires the Company to make milestone payments based upon the successful accomplishment of clinical and regulatory milestones. The aggregate amount of all performance milestone payments under the IURTC license agreement, should all milestones through development be met, is $ 0.8 million, with a portion related to the first performance milestone having been paid. The Company is obligated to pay IURTC royalty payments based on net sales of the licensed technology as well as a portion of any sublicensing revenue Assembly receives. The Company is also required to pay diligence maintenance fees each year to the extent that the royalty, sublicensing, and milestone payments to IURTC are less than such fees for that year. In February 2024, following its decision to discontinue further development or partnering for 3733, the Company terminated the IURTC license agreement, which will become effective April 2024. The Company paid IURTC $ 0.1 million in diligence maintenance fees during both the years ended December 31, 2023 and 2022, which are included in research and development expenses in the consolidated statements of operations and comprehensive loss. Door Pharma Agreement In November 2020, the Company and Door Pharmaceuticals, LLC (Door Pharma) entered into an exclusive, two-year Collaboration Agreement and Sublicense Agreement (collectively, the Door Pharma Agreement) focused on the development of a novel class of HBV inhibitors. The Company terminated the Door Pharma Agreement in May 2022, which became effective September 2022, to focus its resources on its other internal HBV programs and its programs targeting other viruses. Under the terms of the Door Pharma Agreement, the Company was obligated to continue to reimburse Door Pharma for certain research and development costs through September 2022 following which such reimbursements ceased. Under the consolidation accounting standard, the Company determined Door Pharma was a VIE. The Company did not have the power to direct the activities that most significantly affected the economic performance of Door Pharma and as such the Company was not the primary beneficiary and consolidation was not required prior to the termination of the agreement in May 2022. The Company did no t incur any research and development funding during the year ended December 31, 2023. The Company incurred research and development funding of $ 1.6 million during the year ended December 31, 2022. Microbiome Purchase Agreement In December 2021, the Company entered into an asset purchase agreement (the Microbiome Purchase Agreement) with a third party pursuant to which the Company sold know-how, patents, materials and regulatory filings for the Company’s Microbiome program. The sale included ABI-M201 (M201), which had been the Company’s lead candidate in its Microbiome program. As consideration for the sale, the Company was entitled to receive $ 3.0 million, of which $ 1.5 million was received in 2021 and the remaining $ 1.5 million was received in 2022. The Company is also entitled to receive a $ 10.0 million milestone payment upon the achievement of a regulatory approval milestone as defined in the purchase agreement. The variable consideration relating to the $ 10.0 million milestone has not been included in the transaction price as it was fully constrained as of December 31, 2023 and 2022 . As part of the Company’s evaluation of the development milestone constraint, it determined the achievement of the milestone is contingent upon success in future clinical studies and regulatory approvals which are not within its control and uncertain at this stage. F- 27 Note 12 - Income Taxes Income tax benefit is as follows (in thousands): December 31, 2023 2022 Current: Federal $ 33 $ — State — — Foreign — — 33 — Deferred: Federal — — State — — Foreign — — — — Income tax expense $ 33 $ — The effective tax rate of the Company's provision for income taxes differs from the federal statutory rate as follows: As of December 31, 2023 2022 Statutory federal income tax rate 21.0 % 21.0 % State taxes, net of federal tax benefit 7.7 8.3 Research and development tax credits 4.4 3.3 Return to provision adjustments 0.3 — Uncertain tax positions ( 0.9 ) ( 0.7 ) Stock-based compensation ( 1.7 ) ( 2.9 ) Other ( 0.5 ) ( 0.2 ) Change in valuation allowance ( 30.4 ) ( 28.8 ) Income taxes provision (benefit) - 0.1 % 0.0 % Significant components of the Company’s deferred taxes are as follows (in thousands): As of December 31, 2023 2022 Deferred tax assets: Federal and state-operating loss carryforwards $ 148,119 $ 144,165 Stock-based compensation 9,948 9,919 Capitalized research expense 28,578 15,004 Operating lease liabilities 594 880 Research and development credits 15,816 13,471 Other 19 1,372 Total deferred tax assets 203,074 184,811 Valuation allowance ( 202,428 ) ( 184,000 ) Deferred tax asset, net of valuation allowance $ 646 $ 811 Deferred tax liabilities: Operating lease right-of-use assets $ ( 593 ) $ ( 811 ) Other ( 53 ) — Total deferred tax liabilities ( 646 ) ( 811 ) Net deferred tax liability $ — $ — The Company maintains a valuation allowance on deferred tax assets due to the uncertainty regarding the ability to utilize these deferred tax assets in the future. The valuation allowance increased by $ 18.4 million and $ 26.9 million F- 28 for the years ended December 31, 2023 and 2022, respectively, primarily due to an increase in the Company’s federal and state-operating loss carryforwards. Net operating loss and tax credit carryforwards as of December 31, 2023 are as follows (in thousands): Amount Expiration Years Net operating losses, federal (post December 31, 2017) $ 401,038 Indefinite Net operating losses, federal (pre January 1, 2018) 123,552 2027 - 2037 Net operating loss, state (Indefinite) 880 Indefinite Net operating loss, state (Definite) 592,044 2031 - 2041 Research and development tax credits, federal 15,203 2028 - 2041 Research and development tax credits, state 6,108 Indefinite Pursuant to Internal Revenue Code (IRC), Sections 382 and 383, use of the Company’s U.S. federal and state net operating loss and research and development income tax credit carryforwards may be limited in the event of a cumulative change in ownership of more than 50.0% within a three-year period. The Company has performed an ownership change study through December 31, 2022 and has determined a “change in ownership” as defined by IRC Section 382 and the rules and regulations promulgated thereunder, did occur in December 2010, January 2013 and October 2014. The Company has adjusted its net operating loss carryovers to appropriately reflect any attributes which will expire due to the limitation. The Company has not completed any additional analysis for IRC Sections 382 and 383 and there is a risk additional changes in ownership could have occurred since December 31, 2022. If a change in ownership were to have occurred, additional net operating loss and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. The following table summarizes activity related to the Company’s gross unrecognized tax benefits (in thousands): As of December 31, 2023 2022 Balances as of beginning of year $ 3,873 $ 3,237 Increases related to prior year tax positions 47 — Decreases related to prior year tax positions — ( 36 ) Increases related to current year tax positions 575 672 Balances as of end of year $ 4,495 $ 3,873 The unrecognized tax benefits, if recognized, would not have an impact on the Company’s effective tax rate assuming the Company continues to maintain a full valuation allowance position. Based on the prior year’s operations and experience, the Company does not expect a significant change to its unrecognized tax benefits over the next twelve months. The unrecognized tax benefits may increase or change during the next year for unexpected or unusual items that arise in the ordinary course of business. In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense. The Company files income tax returns in the U.S. federal, California and other state and foreign jurisdictions and is not currently under examination by federal, state, or local taxing authorities for any open tax years. Due to net operating loss carryforwards, all years effectively remain open for income tax examination by tax authorities in the U.S. and states in which the Company files tax returns. F- 29 Note 13 - Leases Operating Leases In August 2023, the Company entered into a sublease agreement for office and laboratory space in South San Francisco, California to serve as the Company's new corporate headquarters. The sublease contains scheduled annual rent increases over the lease term and expires in October 2025 . The Company has the option to extend the sublease through September 30, 2029 . The option to extend the Company's corporate headquarters sublease through 2029 is not included in the Company's ROU assets or lease liabilities. The Company's previous corporate headquarters sub-sublease in South San Francisco, California expired in December 2023. The Company also leased office space in Carmel, Indiana under a lease agreement, which expired in August 2023. In February 2021, the Company subleased substantially all of the office space under lease in Carmel, Indiana for the remainder of its term. The Company’s China subsidiary leases a registrational office in Shanghai, which expires in March 2024. The Company's registrational office in Beijing, which was month-to-month, ended in 2023. The Company also leases certain laboratory equipment accounted for as operating leases expiring at various dates, with the final lease expiring in 2025. When the Company cannot determine the implicit rate in its leasing arrangements, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. At December 31, 2023, the Company had operating lease liabilities of $ 2.3 million and ROU assets of $ 2.3 million . The following summarizes quantitative information about the Company’s operating leases (in thousands): Year Ended December 31, 2023 2022 Lease cost Operating lease cost $ 3,507 $ 3,505 Short-term lease cost 12 23 Variable lease cost 1,504 1,573 Sublease income ( 102 ) ( 153 ) Total lease cost, net $ 4,921 $ 4,948 As of December 31, 2023, the weighted-average remaining lease term for operating leases was 2.5 years and the weighted-average discount rate for operating leases was 10.0 % . As of December 31, 2023, the maturities of the Company’s operating lease liabilities were as follows (in thousands): 2024 $ 1,400 2025 1,174 Total 2,574 Less: present value discount ( 232 ) Operating lease liabilities $ 2,342 Note 14 - Employee Benefit Plan In January 2018, the Company established a defined contribution 401(k) plan (the Plan) for all employees who are at least 21 years of age. Employees are eligible to participate in the Plan upon commencement of employment. Under the terms of the Plan, employees may make voluntary contributions as a percentage of compensation. The Plan also permits the Company to make discretionary matching contributions. During the years ended December 31, 2023 and 2022, the Company made discretionary matching contributions of $ 0.7 million and $ 0.8 million , respectively. F- 30 Note 15 - Subsequent Event Reverse Stock Split In September 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying the Company, as the bid price for its common stock had closed below $ 1.00 per share for the last 30 consecutive business days, it was not in compliance with Nasdaq Listing Rule 5450(a)(1), which is the minimum bid price requirement for continued listing on the Nasdaq Global Select Market. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided a 180-calendar day period, or until March 25, 2024, to regain compliance with the minimum bid price requirement. The continued listing standard would be met once the closing bid price of the Company’s common stock was at least $ 1.00 per share for a minimum of ten consecutive business days during the 180-calendar day period. In January 2024, the Company's stockholders approved a reverse stock split of its common stock at a range of ratios between 1-for-7 to 1-for-17 , and the Company's board of directors approved the implementation of the Reverse Stock Split at a ratio of 1-for-12 . The Reverse Stock Split was effective as of February 9, 2024 and the Company regained compliance with the minimum bid price requirement in February 2024. As of the effective time of the Reverse Stock Split, every 12 issued and outstanding shares of the Company’s common stock was automatically reclassified into one issued and outstanding share of the Company’s common stock. This reduced the number of shares outstanding from 65.8 million shares to 5.5 million shares. The Reverse Stock Split does not affect the number of authorized shares of common stock or the par value of the common stock. No fractional shares of common stock were issued in connection with the Reverse Stock Split and all fractional shares were rounded down to the nearest whole share with respect to outstanding shares of common stock. Any holders of common stock who would have otherwise received a fractional share of common stock pursuant to the Reverse Stock Split, received cash in lieu of the fractional share. All share and per share amounts of the Company's common stock presented have been retroactively adjusted to reflect the 1-for-12 Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital. F- 31