absi-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2024


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

For the transition period from _________ to __________

Commission file number 001-40646

ABSCI CORPORATION

(Exact name of registrant as specified in its charter)


Delaware						85-3383487
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

18105 SE Mill Plain Blvd Vancouver, WA						98683
(Address of Principal Executive Offices)						(Zip Code)

(360) 949-1041

Registrant's telephone number, including area code

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock. $0.0001 par value

ABSI

The Nasdaq Global Select Market

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

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

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


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

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

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

The registrant had outstanding 113,083,669 shares of $0.0001 par value common stock as of April 30, 2024.

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		Page No.
Part I Financial Information (Unaudited)		6
Item 1.	Unaudited Condensed Consolidated Financial Statements	6
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	6
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023	7
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	8
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	27
Item 4.	Controls and Procedures	27

Part II Other Information		28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
Signatures		30

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements that may relate to our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, in particular, under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors”. Forward-looking statements can often be identified by the use of terminology such as “may,” “might,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking. In particular, these forward-looking statements include, but are not limited to:

•our expectations regarding our further development of, successful application of, and the rate and degree of market acceptance of, our Integrated Drug Creation platform, including progress towards fully in silico biologic drug discovery;

•our expectations regarding our ability to leverage our Integrated Drug Creation platform to shorten preclinical development of biologics;

•our expectations regarding the markets for our services and technologies, including the growth rate of the biologics market;

•our ability to attract new partners and enter into drug creation agreements that contain milestone and royalty obligations in favor of us;

•our potential to receive revenue from the achievement of milestones and from royalties on net sales under agreements with our partners with respect to products originating from our Integrated Drug Creation platform;

•our ability to enter into license agreements for our existing Active Programs with those partners who do not currently have milestone payment and royalty obligations to us;

•our ability to manage and grow our business by expanding our relationships with existing partners or introducing our Integrated Drug Creation platform to new partners and developing lead drug candidates for our internal drug discovery efforts;

•our expectations regarding our current and future partners’ continued development of, and ability to commercialize, biologic drugs generated utilizing our platform;

•our plans and expectations regarding our internal discovery and development, including preclinical and clinical trial timelines, of programs using our platform;

•our expectations and estimates of our expenses, ongoing losses, future revenue, capital requirements and our need for or ability to obtain additional funding before we can expect to generate additional revenue;

•our estimates of the sufficiency of our cash and cash equivalents and short-term investments;

•our calculations and estimates related to the valuation of our intangible assets;

•our ability to establish, maintain or expand collaborations, partnerships or strategic relationships;

•our ability to provide our partners with a full biologic drug discovery and cell line development solution from target to Investigational New Drug application (IND)-ready, including non-standard amino acid incorporation capabilities and the application of artificial intelligence across our Integrated Drug Creation platform;

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•our ability to obtain, maintain and enforce intellectual property protection for our platform, products and technologies, the duration of such protection and our ability to operate our business without infringing on the intellectual property rights of others;

•our ability to attract, hire and retain key personnel and to manage our growth effectively;

•our expectations regarding use of our cash and cash equivalents and short-term investments;

•our financial performance and that of companies in our industry and the financial markets generally;

•the volatility of the trading price of our common stock;

•our competitive position and the development of and projections relating to our competitors or our industry;

•the effects of the organizational realignment that we announced in September 2023;

•the impact of laws and regulations;

•our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act); and

•global economic conditions, including market volatility, acts of war and civil and political unrest, and our expectations about market trends and effects from inflation.

We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements we make. Moreover, we operate in a competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures, or investments we may make or enter into.

You should read this Quarterly Report and the documents that we file with the Securities and Exchange Commission, or the SEC, with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report are made as of the date of this Quarterly Report, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Except as otherwise indicated, references in this Quarterly Report on Form 10-Q to “Absci,” the “Company,” “we,” “us,” and “our” refer to Absci Corporation and its subsidiaries.

Trademarks

This Quarterly Report on Form 10-Q contains references to our trademarks and service marks and to those belonging to third parties. Absci’s stylized A logo, Absci®, SoluPro®, Bionic SoluPro®, and SoluPure® are our registered trademarks with the U.S. Patent and Trademark Office. We also use various other trademarks, service marks and trade names in our business, including but not limited to, the Absci AI logo mark, HiPrBind, Bionic proteins, IgDesign,Translating Ideas into Drugs, Integrated Drug Creation, Unlimit with us, Creating drugs at the speed of Ai, Better biologics for patients, faster, Breakthrough therapeutics at the click of a button, for everyone, Denovium, and Denovium Engine. All other trademarks, service marks or trade names referred to in this Quarterly Report on Form 10-Q are the intellectual property of their respective owners. Use of these marks/trade names does not imply affiliation, endorsement, or sponsorship of any kind. Solely for convenience, the trademarks and trade names in this Quarterly Report on Form 10-Q may be referred to with

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or without the ® and ™ symbols, but references which omit the ® and ™ symbols should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

Availability of Other Information about Absci

Investors and others should note that we routinely communicate with investors and the public using our website (www.absci.com) and our investor relations website (investors.absci.com) free of charge, including without limitation, through the posting of investor presentations, SEC filings (including amendments and exhibits to such filings as soon as reasonably practicable after filed with or furnished to the SEC), press releases, public conference calls and webcasts on these websites, as well as on X (Twitter), LinkedIn and YouTube. The information that we post on these websites and social media outlets could be deemed to be material information. As a result, investors, the media, and others interested in Absci are encouraged to review this information on a regular basis. The contents of our website and social media postings, or any other website that may be accessed from our website or social media postings, shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

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Part I. Financial Information

Item 1. Financial Statements

ABSCI CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS



	March 31,		December 31,
(In thousands, except for share and per share data)	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	58,831	$	72,362
Restricted cash	16,350		16,193
Short-term investments	102,712		25,297
Receivables under development arrangements, net	42		2,189
Prepaid expenses and other current assets	3,863		4,537
Total current assets	181,798		120,578
Operating lease right-of-use assets	4,275		4,490
Property and equipment, net	38,755		41,328
Intangibles, net	47,411		48,253

Restricted cash, long-term	1,126		1,112
Other long-term assets	1,533		1,537
TOTAL ASSETS	$	274,898	$	217,298
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,653	$	1,503
Accrued expenses	15,398		19,303
Long-term debt	3,301		3,258
Operating lease obligations	1,586		1,679
Financing lease obligations	287		641
Deferred revenue	3,063		3,174
Total current liabilities	25,288		29,558
Long-term debt, net of current portion	3,745		4,660
Operating lease obligations, net of current portion	5,296		5,643
Finance lease obligations, net of current portion	29		76
Deferred tax liability, net	175		186
Deferred revenue, long-term	180		966
Other long-term liabilities	78		33
TOTAL LIABILITIES	34,791		41,122

STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding	—		—
Common stock, $0.0001 par value; 500,000,000 shares authorized; 112,998,922 and 93,087,675 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	11		9
Additional paid-in capital	668,698		582,699
Accumulated deficit	(428,470)		(406,495)
Accumulated other comprehensive loss	(132)		(37)
TOTAL STOCKHOLDERS' EQUITY	240,107		176,176
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	274,898	$	217,298

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

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ABSCI CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS



	For the Three Months Ended March 31,
(In thousands, except for share and per share data)		2024		2023
Revenues
Technology development revenue		$	898	$	1,269

Total revenues		898		1,269
Operating expenses
Research and development		12,236		12,657
Selling, general and administrative		8,744		9,593
Depreciation and amortization		3,416		3,504

Total operating expenses		24,396		25,754
Operating loss		(23,498)		(24,485)
Other income (expense)
Interest expense		(176)		(321)
Other income, net		1,711		1,458
Total other income, net		1,535		1,137
Loss before income taxes		(21,963)		(23,348)
Income tax expense		(12)		(7)
Net loss		$	(21,975)	$	(23,355)




Net loss per share: Basic and diluted		$	(0.22)	$	(0.26)

Weighted-average common shares outstanding: Basic and diluted		99,393,333		91,479,452

Comprehensive loss:
Net loss		$	(21,975)	$	(23,355)
Foreign currency translation adjustments		(47)		(14)
Unrealized (loss) gain on investments		(48)		39
Comprehensive loss		$	(22,070)	$	(23,330)

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

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ABSCI CORPORATION

UNAUDITED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY



(In thousands, except for share and per share data)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss			Total Stockholders' Equity
						Shares			Amount
Balances - December 31, 2023			93,087,675	$	9		$	582,699	$	(406,495)	$	(37)	$	176,176
Issuance of common shares, net of issuance costs of $411			19,205,000	2			80,825		—		—		80,827
Issuance of shares under stock plans, net of shares withheld for tax payments			706,247	—			1,630		—		—		1,630
Stock-based compensation			—	—			3,544		—		—		3,544

Foreign currency translation adjustments			—	—			—		—		(47)		(47)
Unrealized gain on investments			—	—			—		—		(48)		(48)

Net loss			—	—			—		(21,975)		—		(21,975)
Balances - March 31, 2024			112,998,922	$	11		$	668,698	$	(428,470)	$	(132)	$	240,107



(In thousands, except for share and per share data)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss			Total Stockholders' Equity
						Shares			Amount
Balances - December 31, 2022			92,411,103	$	9		$	570,454	$	(295,929)	$	(120)	$	274,414
Issuance of shares under stock plans, net of shares withheld for tax payments			171,899	—			229		—		—		229
Stock-based compensation			—	—			2,652		—		—		2,652
Forfeiture of common stock			(101,030)	—			—		—		—		—
Foreign currency translation adjustments			—	—			—		—		(14)		(14)
Unrealized gain on investments			—	—			—		—		39		39

Net loss			—	—			—		(23,355)		—		(23,355)
Balances - March 31, 2023			92,481,972	$	9		$	573,335	$	(319,284)	$	(95)	$	253,965

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

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ABSCI CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	For the Three Months Ended March 31,
(In thousands)	2024		2023
Cash Flows From Operating Activities
Net loss	(21,975)		(23,355)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,416		3,504




Deferred income taxes	(11)		(14)
Stock-based compensation	3,590		2,652

Accretion of discount on short-term investments	(631)		(832)


Other	(45)		(338)




Changes in operating assets and liabilities:
Receivables under development arrangements	2,147		247
Prepaid expenses and other current assets	520		1,153
Operating lease right-of-use assets and liabilities	(225)		(201)
Other long-term assets	4		60
Accounts payable	150		(482)
Accrued expenses and other liabilities	(3,905)		(2,427)
Deferred revenue	(898)		(86)
Net cash used in operating activities	(17,863)		(20,119)
Cash Flows From Investing Activities
Purchases of property and equipment	—		(280)


Investment in short-term investments	(97,330)		(69,073)
Proceeds from maturities of short-term investments	20,500		42,000
Proceeds from sales of property and equipment	149		52

Net cash used in investing activities	(76,681)		(27,301)
Cash Flows From Financing Activities



Principal payments on long-term debt	(872)		(662)
Principal payments on finance lease obligations	(401)		(671)
Proceeds from issuance of common stock, net of issuance costs	82,457		229

Net cash provided by (used in) financing activities	81,184		(1,104)
Net decrease in cash, cash equivalents, and restricted cash	(13,360)		(48,524)
Cash, cash equivalents and restricted cash - Beginning of year	89,667		76,842
Cash, cash equivalents, and restricted cash - End of period	$	76,307	$	28,318



Supplemental Disclosure of Non-Cash Investing and Financing Activities



Property and equipment purchases included in accounts payable	—		126

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

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ABSCI CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.Organization and nature of operations

Absci Corporation (the “Company”) is a data-first generative AI drug creation company that combines AI with scalable wet lab technologies to create better biologics for patients, faster. Absci leverages its integrated drug creation platform (the “Integrated Drug Creation Platform”) to improve upon traditional biologic drug discovery by using AI to simultaneously optimize multiple drug characteristics important to development and therapeutic benefit. The Company was organized in the State of Oregon in August 2011 as a limited liability company and converted to a limited liability company (“LLC”) in Delaware in April 2016. In October 2020, the Company converted from a Delaware LLC to a Delaware corporation. The Company’s headquarters are located in Vancouver, Washington.

Unaudited interim financial information

The Company prepared its interim condensed consolidated financial statements that accompany these notes in conformity with accounting principles generally accepted in the United States (US GAAP), consistent in all material respects with those applied in its Annual Report on Form 10-K for the year ended December 31, 2023.

The Company has made estimates and judgments affecting the amounts reported in its condensed consolidated financial statements and the accompanying notes. The actual results that the Company experiences may differ materially from its estimates. The interim financial information is unaudited and reflects all normal adjustments that are, in the Company’s opinion, necessary to provide a fair statement of results for the interim periods presented. This report should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 where the Company includes additional information about its critical accounting estimates.

2.Revenue recognition

Contract balances

Contract liabilities are recorded in deferred revenue when cash payments are received or due in advance of the satisfaction of performance obligations. As of March 31, 2024 and December 31, 2023, contract liabilities were $3.2 million and $4.1 million, respectively. During the three months ended March 31, 2024 and 2023, the Company recognized $0.9 million and $0.1 million, respectively, as revenue that had been included in deferred revenue at the beginning of the period.

Concentration Risk

During the three months ended March 31, 2024, two partners represented approximately 99% of total revenue under technology development arrangements. During the three months ended March 31, 2023, one partner represented approximately 93% of total revenue under technology development arrangements.

3.Investments

Cash equivalents, marketable securities and deposits are classified as available-for-sale and are, therefore, recorded at fair value on the condensed consolidated balance sheets, with any unrealized gains and losses reported in accumulated other comprehensive loss, which is reflected as a separate component of stockholders’ equity on the Company’s condensed consolidated balance sheets, until realized. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

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ABSCI CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost and fair value of investments are as follows (in thousands):



	March 31, 2024
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair market value
Assets
Money market funds	$	1,513	$	—	$	—	$	1,513

U.S. treasuries	114,679		—		(46)		114,633
Total	$	116,192	$	—	$	(46)	$	116,146
Classified as:
Cash equivalents							$	13,434
Short-term investments							102,712

Total							$	116,146



	December 31, 2023
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair market value
Assets
Money market funds	$	1,158	$	—	$	—	$	1,158

U.S. treasuries	39,332		2		—		39,334
Total	$	40,490	$	2	$	—	$	40,492
Classified as:
Cash equivalents							$	15,195
Short-term investments							25,297

Total							$	40,492

Investments held as of March 31, 2024 have a remaining maturity of less than one year. Proceeds from maturities of available for sale securities were $34.6 million and $42.0 million for the three months ended March 31, 2024 and 2023, respectively. Unrealized gains and losses on securities were primarily due to changes in interest rates.

The Company holds a non-marketable equity investment with a carrying value of $1.2 million which is classified as other long-term assets on the condensed consolidated balance sheets.

4.Stock-based compensation

The Company grants stock options, restricted stock units, and stock appreciation rights (“SARs”) under the 2021 Stock Option and Incentive Plan (“2021 Plan”) and the 2023 Inducement Plan (the “2023 Inducement Plan”). On January 1, 2024, the number of shares of common stock reserved for future issuance under the 2021 Plan was increased by 4,654,384 shares pursuant to an automatic annual increase. As of March 31, 2024, 3,667,088 shares were available for future grant under the 2021 Plan. As of March 31, 2024, 2,500,000 shares were available for future grant under the 2023 Inducement Plan.

Total stock-based compensation expense related to all of the Company’s stock-based awards was recorded in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

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ABSCI CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



	For the Three Months Ended March 31,
		2024		2023
Research and development		$	1,654	$	1,193
Selling, general and administrative		1,943		1,473
Total stock-based compensation expense		$	3,597	$	2,666

Stock options

Stock options generally vest either 25% after one year from the date of the grant with the remainder vesting monthly over the following three-year period or ratably over three years in three equal installments. The Company recognizes forfeitures as they occur and uses the straight-line expense recognition method. Activity for stock options is shown below:


	Number of Options	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands $)
Outstanding at December 31, 2023	17,104,505	$	3.03	8.3	$	30,661
Granted	3,970,309	4.38
Exercised	(542,741)	2.68			1,233
Canceled/Forfeited	(225,111)	2.59
Expired	(40,087)	5.11
Outstanding at March 31, 2024	20,266,875	3.31		8.5	$	55,369
Exercisable at March 31, 2024	5,926,599	$	3.66	7.1	$	16,497

The aggregate intrinsic value of outstanding stock options as of March 31, 2024 was calculated based on the Company’s closing stock price of $5.68 per share as reported on the Nasdaq Global Select Market on such date.

The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2024 and 2023 was $3.15 and $1.46, respectively, per share. As of March 31, 2024, total unrecognized stock-based compensation related to stock options was $29.6 million, which the Company expects to recognize over a remaining weighted average period of 2.6 years.

Determination of fair value

The estimated grant-date fair value of all the Company’s stock options was calculated using the Black-Scholes option pricing model, based on the following assumptions:



	For the Three Months Ended March 31,
		2024	2023
Expected term (in years)		5.5-6.1	5.3-6.1
Volatility		81%-82%	79%-80%
Risk-free interest rate		3.8%-4.1%	3.4%-4.2%
Dividend Yield		—%	—%

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ABSCI CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted stock

In connection with certain business combinations and as compensation for other service relationships, the Company has issued shares of restricted stock that vest over time subject to continued service by the stockholder. Shares of restricted stock that have not yet vested are subject to the Company’s right of repurchase or forfeiture by the stockholder. Activity for restricted shares is shown below:


			Number of shares
Unvested as of December 31, 2023			374,208


Vested			(105,336)
Unvested as of March 31, 2024			268,872

As of March 31, 2024, there was $0.6 million of unrecognized compensation expense related to the outstanding shares of restricted stock expected to be recognized over a remaining weighted-average period of 0.9 years.

Restricted stock units subject to time-based vesting generally vest ratably over a term of 1-4 years. The Company recognizes forfeitures as they occur and uses the straight-line expense recognition method. Activity for restricted stock units is shown below:


	Number of Shares	Weighted Average Grant Date Fair Value
Unvested as of December 31, 2023	2,198,334	$	1.42
Granted	2,426,855	3.62
Vested	(14,326)	2.21
Forfeitures	(61,908)	1.56
Unvested as of March 31, 2024	4,548,955	$	2.59

The weighted-average grant date fair value of restricted stock units granted during the three months ended March 31, 2024 was $3.62. The aggregate grant date fair value of restricted stock units vested during the three months ended March 31, 2024 and 2023 was $0.0 million. As of March 31, 2024, there was $11.7 million of unrecognized compensation expense related to the outstanding restricted stock units expected to be recognized over a remaining weighted-average period of 2.0 years. Fair value of restricted stock units subject to time-based vesting is calculated based on the Company’s closing stock price per share as reported on the Nasdaq Global Select Market on the date of grant.

Restricted Stock Unit Award with Market Conditions

In March 2024, the Company granted 1,500,000 performance restricted stock units to its Founder and Chief Executive Officer that contained market conditions (the “2024 Market Award”). Subject to the holder’s continued service, the 2024 Market Award provided for vesting in tranches once the Company’s closing stock price meets or exceeds certain thresholds established by the Company’s Compensation Committee of the Board of Directors. The original grant-date fair value of the 2024 Market Award of $5.5 million was determined using a Monte Carlo simulation model using an expected volatility of 97% and risk-free rate of 4.5%. The stock based compensation expense will be recognized over the derived service period for each tranche over periods up to 1.3 years. As of March 31, 2024, none of the stock price thresholds for the 2024 Market Award had been met resulting in no shares vesting. Any unvested tranches of the 2024 Market Award will expire in March 2027 if the vesting conditions are not met.

Stock appreciation rights

In January 2021, the Company issued SARs that are contingent upon a qualifying liquidity event that continues to not be probable of occurrence; accordingly, no compensation expense has been recognized for these awards. The aggregate intrinsic value of the 394,736 SARs outstanding as of March 31, 2024 is $2.2

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ABSCI CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

million based on the Company’s closing stock price of $5.68 per share as reported on the Nasdaq Global Select Market on such date.

Under the Company’s 2020 Stock Option and Grant Plan and 2021 Plan, the Company has also granted a limited quantity of cash-settled SARs to certain employees and consultants based outside the United States. As of March 31, 2024, 197,150 of these SARs were outstanding with a weighted average exercise price of $4.65 per share. The fair value is remeasured at the end of each reporting period based on the Company’s stock price, with remeasurements reflected as an adjustment to compensation expense in the condensed consolidated statements of operations and comprehensive loss for such period. As of March 31, 2024 and as of December 31, 2023, the Company had recognized a less than $0.1 million liability for SARs classified within other long-term liabilities on the condensed consolidated balance sheets.

5.Fair value measurements

The Financial Accounting Standards Board (“FASB”) has defined fair value to establish a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

When quoted market prices are available in active markets, the fair value of assets and liabilities is estimated within Level 1 of the valuation hierarchy.

If quoted prices are not available, then fair values are estimated by using pricing models, quoted prices of assets and liabilities with similar characteristics, or discounted cash flows, within Level 2 of the valuation hierarchy. In cases where Level 1 or Level 2 inputs are not available, the fair values are estimated by using inputs within Level 3 of the hierarchy.

The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 (in thousands):



	March 31, 2024
	Level 1		Level 2		Level 3		Total
Assets:
Debt Securities:
Money market funds	$	1,513	$	—	$	—	$	1,513

U.S. treasuries	7,715		106,918		—		114,633


Total assets	$	9,228	$	106,918	$	—	$	116,146
Liabilities:



Contingent consideration	$	—	$	—	$	12,750	$	12,750
Total liabilities	$	—	$	—	$	12,750	$	12,750

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ABSCI CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEC Form 10-Q filed by Absci Corporation