What changed in this filing

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Item 1. Financial Statements

2022-05-12 compared with 2021-12-02 · 154 added, 260 removed, 189 unchanged (69% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

September 30,

Current assets

Cash and cash equivalents

Prepaid expenses

Other current assets

Prepaid expenses and other current assets

Total current assets

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Other non-current assets

LIABILITIES AND STOCKHOLDERS’ DEFICIT

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

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Commitments and contingencies (Note 7)

Convertible preferred stock (Series A, A-1, A-2(A), A-2(A-1), B and C), $ 0.0001 par value, 174,808,481 shares authorized and 174,783,481 shares issued and outstanding at September 30, 2021;

133,602,056 shares authorized and 66,788,528 shares issued and outstanding at December 31, 2020;

aggregate liquidation preference of $ 225,500 and $ 80,250 at September 30, 2021 and December 31, 2020, respectively

Stockholders’ deficit

Stockholders’ equity

Preferred stock, $ 0.0001 par value;

5,000,000 shares authorized, no shares issued or outstanding at March 31, 2022 and December 31, 2021

Common stock, $ 0.0001 par value;

220,400,000 shares authorized, 914,760 shares issued and 778,949 shares outstanding at September 30, 2021;

126,000,000 shares authorized, 973,898 shares issued and 689,929 shares outstanding at December 31, 2020

200,000,000 shares authorized at March 31, 2022 and December 31, 2021;

27,471,607 shares issued and 27,376,473 shares outstanding at March 31, 2022;

27,468,950 shares issued and 27,358,375 shares outstanding at December 31, 2021

Additional paid-in capital

Accumulated deficit

Total stockholders’ deficit

Total liabilities, convertible preferred stock and stockholders’ deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

2 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating expenses

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Loss from operations

Other income (expense), net

Other expense, net

Total other income (expense), net

Other expense, net

Total other expense, net

Net loss and comprehensive loss

3 unchanged sentences

XILIO THERAPEUTICS, INC.

Condensed Consolidated Statements of Preferred Units and Convertible Preferred Stock and Members’ and Stockholders’ Deficit

(In thousands, except share and unit data)

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands, except share data)

Preferred Stock

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Equity-based compensation expense

March 31, 2021

Vesting of restricted common stock

Exercise of stock options

Equity-based compensation expense

June 30, 2021

Vesting of restricted common stock

Exercise of stock options

Equity-based compensation expense

September 30, 2021

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

XILIO THERAPEUTICS, INC.

Condensed Consolidated Statements of Preferred Units and Convertible Preferred Stock and Members’ and Stockholders’ Deficit - Continued

(In thousands, except share and unit data)

Preferred Units

Balance at March 31, 2021

Preferred Stock

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Preferred Stock

Stockholders’

1 unchanged sentence

Balance at December 31, 2021

Issuance of Series B Preferred units, net of issuance costs of $ 31

Equity-based compensation expense

March 31, 2020

Effect of reorganization

( 7,500,000 )

( 19,565,216 )

( 39,723,312 )

Vesting of restricted common stock

Equity-based compensation expense

June 30, 2020

Vesting of restricted common stock

Exercise of stock options

Equity-based compensation expense

September 30, 2020

Balance at March 31, 2022

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

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Equity-based compensation expense

Loss on disposal of property and equipment

Change in fair value of warrant and derivative liabilities

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Cash flows from financing activities:

Repayments of debt principal

Proceeds from debt issuance, net of issuance costs

Payments of finance lease

Proceeds from issuance of Series B preferred units, net of issuance costs

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

Proceeds from issuance of Series C convertible preferred stock, net of issuance costs

Proceeds from issuance of convertible preferred stock, net of issuance costs

Proceeds from exercise of stock options

Net cash provided by financing activities

Increase (decrease) in cash, cash equivalents & restricted cash

Net cash (used in) provided by financing activities

(Decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

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Supplemental disclosure of non-cash activities:

Right-of-use assets obtained in exchange for operating lease liabilities

Right-of-use assets obtained in exchange for finance lease liabilities

Tenant improvements funded by landlord

Capital expenditures included in accounts payable or accrued expenses

Deferred offering costs included in accounts payable or accrued expenses

Recognition of derivative liability in connection with long-term debt facility

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

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(Dollars in thousands, unless otherwise stated)

Description of Business, Organization and Liquidity

Description of Business, Initial Public Offering and Liquidity and Capital Resources

Description of Business

Xilio Therapeutics, Inc., incorporated in Delaware in June 2020, is a biotechnology company focused on harnessing the immune system to achieve deep and durable clinical responses to improve the lives of patients with cancer.

For purposes of these condensed consolidated financial statements, the “Company” refers to Xilio Therapeutics LLC (formerly Akriveia Therapeutics Inc., Akriveia Therapeutics LLC and Akrevia Therapeutics LLC) prior to the reorganization described below, and Xilio Therapeutics, Inc.

after such reorganization.

Xilio Therapeutics, Inc.

(“Xilio” or the “Company”), incorporated in Delaware in June 2020, is a clinical-stage biotechnology company focused on harnessing the immune system to achieve deep and durable clinical responses to improve the lives of patients with cancer.

The Company’s headquarters are based in Waltham, Massachusetts.

Akriveia Therapeutics Inc.

was incorporated in Delaware in June 2015.

In May 2016, Akriveia Therapeutics Inc.

completed its first tax free reorganization, and the parent entity became Akriveia Therapeutics LLC.

Akriveia Therapeutics LLC subsequently changed its name to Akrevia Therapeutics LLC in May 2018 and then to Xilio Therapeutics LLC in February 2020.

In June 2020, the Company completed a series of transactions pursuant to which Xilio Therapeutics LLC became a direct, wholly owned subsidiary of Xilio Therapeutics, Inc., and all of the outstanding membership interests of Xilio Therapeutics LLC were exchanged for equity securities of Xilio Therapeutics, Inc.

and Xilio Therapeutics, Inc.

became the parent entity (the “Reorganization”).

The purpose of the transaction was to reorganize the corporate structure so that existing investors would own capital stock in a corporation rather than equity interests in a limited liability company.

Upon consummation of the Reorganization, the historical consolidated financial statements of Xilio Therapeutics LLC became the historical consolidated financial statements of Xilio Therapeutics, Inc.

Initial Public Offering

On October 26, 2021, the Company completed its initial public offering (“IPO”) of common stock, in which it issued and sold an aggregate of 7,353,000 shares at a public offering price of $ 16.00 per share.

On November 1, 2021, the Company issued and sold an additional 766,106 shares of common stock at a public offering price of $ 16.00 per share pursuant to the partial exercise by the underwriters of their option to purchase additional shares.

The Company received aggregate gross proceeds of $ 129.9 million or aggregate net proceeds of $ 116.4 million from its IPO, including the partial exercise of the underwriters’ option, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

In connection with the IPO, the Company effected a 1-for-9.5 reverse stock split of the Company’s issued and outstanding shares of common stock.

The reverse stock split was effective on October 15, 2021.

Accordingly, all share and per share amounts of common stock for all periods presented in these condensed consolidated financial statements and related notes have been retroactively adjusted to give effect to the reverse stock split.

Upon the closing of the IPO, all shares of the Company’s then outstanding preferred stock automatically converted into an aggregate of 18,398,248 shares of common stock (see Note 8).

Liquidity and Capital Resources

Since inception, the Company has devoted substantially all of its financial resources and efforts to research and development activities.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing research programs and conducting additional research programs, advancing the Company’s current and future product candidates into preclinical and clinical development, seeking marketing approvals for any product candidates that successfully complete clinical trials, obtaining, expanding, maintaining and defending the Company’s intellectual property, and hiring additional clinical, regulatory, and scientific personnel.

Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and will need to obtain regulatory approval prior to commercialization.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with the successful research, development and manufacturing of product candidates, and, if approved, any products, obtaining regulatory approvals for product candidates, and, if approved, commercialization of any products, protection and enforcement of intellectual property and proprietary technology, development by third parties of potentially competitive products or product candidates, compliance with governmental regulations, and the ability to secure additional capital to fund operations.

Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and manufacturing process development and will need to obtain regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities.

Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

On October 26, 2021, the Company completed its initial public offering (“IPO”) of common stock and issued and sold an aggregate of 7,353,000 shares of its common stock at a public offering price of $ 16.00 per share, and on November 1, 2021, the Company issued and sold an additional 766,106 shares of common stock at a public offering price of $ 16.00 per share pursuant to the exercise by the underwriters of their option to purchase additional shares.

The Company received aggregate gross proceeds of approximately $ 129.9 million or aggregate net proceeds of approximately $ 116.3 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

the closing of the IPO, all shares of the Company’s then outstanding preferred stock automatically converted into an aggregate of 18,398,248 shares of common stock (see Note 8).

Prior to its IPO, the Company had primarily funded its operations with proceeds from the sale of convertible preferred units and convertible preferred stock and a debt financing.

As of September 30, 2021, the Company had cash and cash equivalents of $ 99.8 million.

The Company expects that its cash and cash equivalents, including the net proceeds from the IPO, will be sufficient to meet the Company’s projected operating requirements and capital expenditures for at least twelve months from the date of issuance of these condensed consolidated financial statements.

The Company expects to continue to generate negative cash flows from operations and net losses for the foreseeable future as it continues to invest significantly in research and development of its product candidates, including preclinical, clinical and manufacturing process development.

As of March 31, 2022, the Company had cash and cash equivalents of $ 177.0 million.

The Company expects that its cash and cash equivalents will be sufficient to meet its projected operating requirements and capital expenditures for at least twelve months from the date of issuance of these condensed consolidated financial statements.

The Company expects to continue to generate negative cash flows from operations and net losses for the foreseeable future and will need additional capital in the future to support its continuing operations and growth strategy as it continues to invest significantly in research and development of its product candidates, including preclinical and clinical testing and manufacturing process

To date, the Company has primarily funded its operations with proceeds from the sale of convertible preferred units and convertible preferred stock, a debt financing and the IPO.

Management’s conclusion with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties that may prove to be incorrect.

If actual results differ from management’s estimates, the Company may be required to seek additional funding or curtail planned activities to reduce operating expenses, which may have an adverse impact on the Company’s ability to achieve its business objectives.

If actual results differ from management’s estimates, the Company may be required to seek additional capital sooner or curtail planned activities to reduce operating expenses, which may have an adverse impact on the Company’s ability to achieve its business objectives.

Summary of Significant Accounting Policies

Basis of Presentation

These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission, (the “SEC”).

These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission, (the “SEC”).

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).

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The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of its initial public offering or such earlier time that it is no longer an emerging growth company.

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements included in the Company’s final prospectus for its IPO, dated October 22, 2021, and filed with the SEC, pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Prospectus”).

Since the date of such audited consolidated financial statements, there have been no changes to the Company’s significant accounting policies except as noted below.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries:

Xilio Therapeutics LLC, Xilio Concerto LLC, Xilio Development, Inc.

and Xilio Securities Corporation, which is a Massachusetts subsidiary created to buy, sell and hold securities.

All intercompany accounts and transactions have been eliminated in consolidation.

Significant Accounting Policies

The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements are described in Note 2, “ Summary of Significant Accounting Policies ” of the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

There have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Unaudited Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021 and 2020, the statements of cash flows for the nine months ended September 30, 2021 and 2020 and the condensed consolidated statements of preferred units and convertible preferred stock and members’ and stockholders’ deficit for the nine months ended September 30, 2021 and 2020 are unaudited.

The financial data and other information contained in the notes thereto as of and for the three and nine months ended September 30, 2021 and 2020 are also unaudited.

The condensed consolidated balance sheet data as of December 31, 2020 was derived from the Company’s audited consolidated financial statements included in the Prospectus.

normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2021, the results of its operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2020, and the notes thereto, included in the Prospectus.

The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ended December 31, 2021, or any other interim periods, or any future year or period.

The accompanying condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021, the statements of cash flows for the three months ended March 31, 2022 and 2021 and the condensed consolidated statements of convertible preferred stock and stockholders’ equity (deficit) for the three months ended March 31, 2022 and 2021 are unaudited.

The financial data and other information contained in the notes thereto as of and for the three months ended March 31, 2022 and 2021

are also unaudited.

The condensed consolidated balance sheet data as of December 31, 2021 was derived from the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2022, the results of its operations for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ended December 31, 2022, or any other interim periods, or any future year or period.

Use of Estimates

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The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates.

Significant estimates of accounting reflected in these condensed consolidated financial statements include, but are not limited to, estimates related to accrued expenses, contingent liabilities associated with the consummation of specified transactions, including an initial public offering, the valuation of equity-based compensation, including incentive units, stock options and restricted common stock, and income taxes.

Significant estimates of accounting reflected in these condensed consolidated financial statements include, but are not limited to, estimates related to accrued expenses, the valuation of equity-based compensation, including stock options and restricted common stock, the useful life of long-lived assets and income taxes.

Actual results could differ from those estimates.

Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents.

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Restricted cash primarily represents a letter of credit issued to the landlord of the Company’s facility lease and is reflected in non-current assets on the accompanying condensed consolidated balance sheets.

Cash, cash equivalents and restricted cash consists of the following (in thousands):

September 30,

Cash, cash equivalents and restricted cash consists of the following:

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash as shown on the condensed consolidated statement of cash flows

Deferred Offering Costs

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

After consummation of the equity financing, such costs are reclassified as a reduction to additional paid-in capital generated as a result of the related financing.

Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately and accounted for as operating expenses in the condensed consolidated statements of operations and comprehensive loss.

Deferred offering costs are presented as a component of other current assets on the condensed consolidated balance sheets.

As of September 30, 2021, the Company capitalized $ 3.4 million of deferred offering costs related to its IPO.

There were no deferred offering costs as of December 31, 2020.

Comprehensive Loss

Comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Comprehensive loss includes net loss and the change in accumulated other comprehensive loss for the period.

The Company did not have any items of comprehensive loss other than its net loss for the three and nine months ended September 30, 2021 and 2020.

Equity-Based Compensation

The Company utilizes significant estimates and assumptions in determining the fair value of its equity and equity-based awards.

Beginning in the nine months ended September 30, 2021, the Company determined the fair value of shares of its common stock underlying stock-based awards granted using a hybrid approach.

The hybrid approach is a scenario-based analysis and where one or more of the scenarios allocate the equity value utilizing the option-pricing method (“OPM”).

When using the hybrid approach, the Company estimates the probability-weighted value across multiple scenarios but used the OPM to estimate the allocation of value within at least one of the scenarios.

In addition to a scenario using the OPM, the hybrid method also considers an initial public offering scenario in which the shares of convertible preferred stock are assumed to convert to common stock.

The future value of the common stock in the initial public offering scenario was discounted back to the valuation date at an appropriate risk adjusted discount rate.

In the hybrid method, the present value indicated for each scenario was probability weighted to arrive at an indication of value for the Company’s common stock.

Total cash, cash equivalents and restricted cash as shown on the consolidated statement of cash flows

Recently Adopted Accounting Pronouncements

The Company did not adopt any new accounting standards during the nine-month period ended September 30, 2021.

The Company continues to evaluate accounting standards that were recently issued but not yet adopted as of September 30, 2021.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments , as amended (“ASU 2016-13”).

The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the previously used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The Company adopted ASU 2016-13 as of January 1, 2022, and the adoption did not have a material effect on its condensed consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470 - 20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815 - 40) (“ASU 2020-06”), which reduces the number of accounting models for convertible debt instruments and convertible preferred stock as well as amends the derivatives scope exception for contracts in an entity’s own equity.

The Company adopted ASU 2020-06 as of January 1, 2022, and the adoption did not have a material effect on its condensed consolidated financial statements and related disclosures.

Fair Value Measurements

The Company measures the following financial liabilities at fair value on a recurring basis.

The fair value of these liabilities was determined as follows (in thousands):

September 30,

Financial liabilities:

Debt derivative liability

Other derivative liability

Warrant to purchase Series A convertible preferred stock

Total financial liabilities

Financial liabilities:

Debt derivative liability

Other derivative liability

Warrant to purchase Series A convertible preferred stock

Total financial liabilities

During the nine months ended September 30, 2021 and the year ended December 31, 2020, the Company did not hold any investments and there were no transfers between Level 1, Level 2, and Level 3.

The fair value of the warrant liability is calculated utilizing the Black-Scholes option-pricing model and contains significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

The fair values of the debt derivative liability and the other derivative liability that are contingently payable upon the consummation of specified transactions, including an initial public offering, are based on significant inputs not observable in the market, including estimates regarding the probability of certain potential future events and outcomes and estimates regarding timing of those events and outcomes, with an applied discount rate representative of time value which represents a Level 3 measurement within the fair value hierarchy.

The following table summarizes the changes in the fair market value of the Company’s warrant liability, debt derivative liability and other derivative liability, which are classified within the Level 3 fair value hierarchy (in thousands):

Balance at December 31, 2020

Change in fair value of liability

Balance at September 30, 2021

As discussed further in Note 6, the change in fair value of the debt derivative liability includes the impact of an amendment to the loan and security agreement with Pacific Western Bank (“PacWest”) in September 2021, which resulted in the

increase of the one-time fee the Company was obligated to pay to PacWest upon the occurrence of specified liquidation events, including an initial public offering, from $ 0.5 million to $ 0.8 million.

The Company measures the following financial assets at fair value on a recurring basis.

The fair value of these assets was determined as follows:

Financial assets:

Cash equivalents—money market funds

Total financial assets

Financial assets:

Cash equivalents—money market funds

Total financial assets

During the three months ended March 31, 2022 and March 31, 2021, the Company did not hold any investments and there were no transfers between Level 1, Level 2, and Level 3.

Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

September 30,

Property and equipment, net consists of the following as of March 31, 2022 and December 31, 2021:

Laboratory equipment

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Property and equipment, net

The Company incurred depreciation and amortization expense related to property and equipment, net of $ 1.0 million and $ 0.7 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company incurred depreciation and amortization expense related to property and equipment, net of $ 0.4 million for each of the three months ended March 31, 2022 and 2021, respectively.

Accrued Expenses

Accrued expenses consist of the following (in thousands):

September 30,

Accrued expenses consist of the following as of March 31, 2022 and December 31, 2021:

External research and development

Personnel-related

Professional services

Professional and consulting fees

Total accrued expenses

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Initial Loan Agreement

In November 2019, the Company entered into a loan and security agreement with PacWest, as amended by a first amendment, dated March 12, 2021, and a second amendment, dated May 10, 2021 (the “Initial Loan Agreement”).

In November 2019, the Company entered into a loan and security agreement with Pacific Western Bank (“PacWest”), as amended by a first amendment, dated March 12, 2021, and a second amendment, dated May 10, 2021 (the “Initial Loan Agreement”).

Pursuant to the Initial Loan Agreement, the Company borrowed $ 10.0 million under a term loan.

Interest on the outstanding initial loan balance accrued at a variable annual rate equal to the greater of (i) the prime rate, as defined in the Loan Agreement, plus 0.25 % or (ii) 5.00 %.

Interest on the outstanding initial loan balance accrued at a variable annual rate equal to the greater of (i) the prime rate, as defined in the Initial Loan Agreement, plus 0.25 % or (ii) 5.00 %.

The Company was required to make interest only payments on the loan on a monthly basis through May 21, 2021.

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The fee represented a derivative instrument that the Company bifurcated from the debt arrangement and carried at fair value with any changes in such fair value recorded to other income (expense), net in the Company’s consolidated statements of operations and comprehensive loss.

This debt derivative is recorded as a component of other liabilities, long-term on the Company’s condensed consolidated balance sheets.

Upon the closing of the loan, the fair value of the debt derivative liability was $ 0.4 million that, together with certain legal and other fees incurred by the Company and associated with the Loan Agreement, was recognized as a debt discount and reflected as a reduction in the carrying value of the debt.

The debt discount has been accreted and recognized as additional interest expense over the term of the Loan Agreement using the effective interest method.

Upon the closing of the loan, the fair value of the debt derivative liability was $ 0.4 million that, together with certain legal and other fees incurred by the Company and associated with the Initial Loan Agreement, was recognized as a debt discount and reflected as a reduction in the carrying value of the debt.

The debt discount has been accreted and recognized as additional interest expense over the term of the Initial Loan Agreement using the effective interest method.

Amended Loan Agreement

On September 17, 2021, the Company entered into a third amendment to the Initial Loan Agreement (as amended, the “Amended Loan Agreement” and together with the Initial Loan Agreement, the “Loan Agreement”), pursuant to which the Company borrowed $ 10.0 million under a new term loan and used the proceeds of such new term loan to repay the outstanding balance on the prior term loan.

On September 17, 2021, the Company entered into a third amendment (the “Third Amendment”) to the Initial Loan Agreement (as amended, and together with the Initial Loan Agreement, the “Loan Agreement”), pursuant to which the Company borrowed $ 10.0 million under a new term loan and used the proceeds of such new term loan to repay the outstanding balance on the prior term loan.

In addition, as a result of the amendment, prior to December 31, 2022, the Company has the ability to request one or more additional term loans in an aggregate principal amount of $ 10.0 million.

Interest on amounts outstanding under the Loan Agreement accrued at a variable annual rate equal to the greater of (i) the prime rate plus 0.25 % or (ii) 4.75 %.

As a result of the amendment, the Company is required to make interest-only payments on any outstanding balances through December 31, 2022.

Interest on amounts outstanding under the Loan Agreement accrue at a variable annual rate equal to the greater of (i) the prime rate plus 0.25 % or (ii) 4.75 %.

As a result of the Third Amendment, the Company is required to make interest-only payments on any outstanding balances through December 31, 2022.

Subsequent to the interest-only period, the Company will be required to make equal monthly payments of principal plus interest until the loan matures on June 30, 2024.

In addition, under the Amended Loan Agreement, the one-time fee the Company was obligated to pay to PacWest upon the occurrence of specified liquidation events, including an initial public offering, was increased from $ 0.5 million to an amount between $ 0.8 million and $ 1.0 million, depending on the timing and occurrence of specified events, including the closing of the IPO.

In addition, as a result of the Third Amendment, the one-time fee the Company was obligated to pay to PacWest upon the occurrence of specified liquidation events, including an initial public offering, was increased from $ 0.5 million to an amount between $ 0.8 million and $ 1.0 million, depending on the timing and occurrence of specified events, including the closing of the IPO.

The Company paid the one-time fee of $ 0.8 million to PacWest in October 2021 upon the closing of the IPO.

As a result of the amendment, the Company is also obligated to pay PacWest a fee of 1.0 % of the aggregate principal amounts then outstanding if any term loans are repaid prior to September 17, 2022.

As a result of the Third Amendment, the Company is also obligated to pay PacWest a fee of 1.0 % of the aggregate principal amounts then outstanding if any term loans are repaid prior to September 17, 2022, which is approximately one year from the date of the Third Amendment.

Using the net present value method, the Company concluded the amendment should be accounted for as a debt modification as the present value of the remaining cash flows of the amended term loan are not substantially different from the present value of the remaining cash flows of the initial term loan.

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Upon the occurrence and continuation of an event of default, a default interest rate of an additional 5 % per annum may be applied to the outstanding loan balance, and the administrative agent, collateral agent, and lender may declare all outstanding obligations immediately due and payable and exercise all of their rights and remedies as set forth in the Loan Agreement and under applicable law.

As of September 30, 2021, the Company was in compliance with all covenants under the Loan Agreement.

The Company has the following minimum aggregate future loan payments under the Loan Agreement at September 30, 2021 (in thousands):

As of March 31, 2022, the Company was in compliance with all covenants under the Loan Agreement.

The Company has the following minimum aggregate future loan payments under the Loan Agreement at March 31, 2022:

Total future principal payments

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Total notes payable

During the nine months ended September 30, 2021 and September 30, 2020, the Company recognized $ 0.5 million and $ 0.4 million of interest expense related to the Loan Agreement, which is reflected in other expense on the consolidated statements of operations and comprehensive loss.

The Company recognized $ 0.2 million of interest expense related to the Loan Agreement during each of the three months ended March 31, 2022 and 2021, respectively, which is reflected in other expense, net on the consolidated statements of operations and comprehensive loss.

Commitments and Contingencies

The Company has an operating lease for its facility and a finance lease for certain lab equipment.

As of September 30, 2021, the Company has a letter of credit for the benefit of its landlord in the amount of $ 1.6 million, collateralized by a money market fund.

Legal Proceedings

From time to time, the Company may be party to legal proceedings or litigation arising in the ordinary course of business.

The Company was not subject to any material legal proceedings during the nine months ended September 30, 2021 or during the year ended December 31, 2020.

Guarantees and Indemnifications

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions.

Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party.

Some of the provisions will limit losses to those arising from third-party actions.

In some cases, the indemnification will continue after the termination of the agreement.

The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable.

The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.

In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that may require the Company, among other things, to indemnify them against liabilities that may arise by reason of their status or service as directors or officers.

The Company maintains a general liability insurance policy that covers certain liabilities of its directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.

Convertible Preferred Stock and Common Stock

In August 2019, the Company entered into a lease agreement with a landlord providing funding for tenant improvements and occupancy of approximately 27,830 square feet of office and laboratory space at 828 Winter Street, Waltham, Massachusetts.

The initial term of the lease expires in March 2030, unless terminated earlier in accordance with the terms of the lease.

The Company has an option to extend the lease for a period of five years at then-market rates.

The Company is obligated to pay its portion of real estate taxes and costs related to the premises, including costs of operations, maintenance, repair, replacement, and management of the leased premises, which it began paying simultaneous with the rent commencement date in March 2020.

As of March 31, 2022, the Company has a letter of credit for the benefit of its landlord in the amount of $ 1.6 million, collateralized by a money market fund, which is classified as restricted cash on the condensed consolidated balance sheets.

Preferred Stock and Common Stock

Undesignated Preferred Stock

As of March 31, 2022 and December 31, 2021, the Company’s certificate of incorporation, as amended, authorized the Company to issue up to 5,000,000 shares of undesignated preferred stock at $ 0.0001 par value per share.

Convertible Preferred Stock

As of December 31, 2020, the Company had authorized 133,602,056 shares of convertible preferred stock, which consisted of the following:

7,525,000 shares of Series A convertible preferred stock, 19,565,216 shares of Series A-1 convertible preferred stock, 7,500,000 shares of Series A-2(A) convertible preferred stock, 19,565,216 shares of Series A-2(A-1) convertible preferred stock, and 79,446,624 shares of Series B convertible preferred stock.

On January 20, 2021, the Company issued 39,723,312 shares of Series B convertible preferred stock to existing Series B convertible preferred stockholders at $ 1.265 per share for cash proceeds of $ 50.2 million, net of issuance costs.

On February 22, 2021, the Company amended and restated its certificate of incorporation to authorize 174,808,481 shares of Convertible Preferred Stock, of which 7,525,000 shares are designated as Series A convertible preferred stock, 19,565,216 shares are designated as Series A-1 convertible preferred stock, 79,446,624 shares are designated as Series B convertible preferred stock, and 68,271,641 shares are designated as Series C convertible preferred stock.

On February 23, 2021, the Company entered into a stock purchase agreement with existing and new investors whereby the Company issued and sold 68,271,641 shares of Series C convertible preferred stock to investors at $ 1.3915 per share for cash proceeds of $ 94.7 million, net of issuance costs.

The Company has evaluated the convertible preferred stock and determined that they should be considered an “equity host” and not a “debt host.” The evaluation was necessary to determine if any embedded features required bifurcation and separate accounting as a derivative financial instrument.

The Company’s analysis was based on a consideration of the economic characteristics and risks and more specifically, evaluated all the stated and implied substantive terms and features including (i) whether the convertible preferred stock included redemption features, (ii) how and when any redemption

features could have been exercised, (iii) whether the convertible preferred stock were entitled to dividends, (iv) the voting rights of the convertible preferred stock and (v) the existence and nature of any conversion rights.

As a result of its evaluation that the convertible preferred stock is an “equity host,” the various embedded conversion options are not considered a separate, embedded derivative.

The Company’s convertible preferred stock (collectively, the “Convertible Preferred Stock”) consisted of the following (in thousands, except share amounts):

As of September 30, 2021

Series A convertible preferred stock

Series A‑1 convertible preferred stock

Series B convertible preferred stock

Series C convertible preferred stock

As of December 31, 2020

Common Shares

Preferred Shares

Issuable Upon

Series A convertible preferred stock

Series A‑1 convertible preferred stock

Series A‑2(A) convertible preferred stock

Series A‑2(A‑1) convertible preferred stock

Series B convertible preferred stock

Upon the closing of the IPO in October 2021, all shares of the Company’s then outstanding preferred stock automatically converted into an aggregate of 18,398,248 shares of common stock.

As of September 30, 2021 and December 31, 2020, the Company’s certificate of incorporation, as amended, authorized the Company to issue 220,400,000 and 126,000,000 shares of common stock, $ 0.0001 par value per share, respectively.

As of March 31, 2022 and December 31, 2021, the Company’s certificate of incorporation, as amended, authorized the Company to issue up to 200,000,000 shares of common stock, $ 0.0001 par value per share.

Shares Reserved for Future Issuance

The Company had reserved shares of common stock for the conversion of outstanding Convertible Preferred Stock and for future issuance under the 2020 Stock Incentive Plan (as amended, the “2020 Plan”) as of the following dates:

September 30,

Shares of common stock reserved for conversion of convertible preferred stock outstanding

Shares of common stock reserved for conversion of convertible preferred shares issuable upon exercise of a warrant

Shares of common stock reserved for exercise of outstanding stock options under the 2020 Stock Incentive Plan

As of March 31, 2022 and December 31, 2021, the Company had reserved shares of common stock for future issuance, including under the Company’s 2020 Stock Incentive Plan (as amended, the “2020 Plan”), 2021 Stock Incentive Plan (the “2021 Plan”) and 2021 Employee Stock Purchase Plan (the “2021 ESPP”) as follows:

Shares of common stock reserved for exercise of a warrant

Shares of common stock reserved for exercise of outstanding stock options under the 2021 and 2020 Stock Incentive Plans

Shares of common stock reserved for future awards under the 2021 Stock Incentive Plan

Shares of common stock reserved for purchase under the 2021 Employee Stock Purchase Plan

Total shares reserved for future issuance

1 unchanged sentence

Equity Incentive Plans

During the nine months ended September 30, 2021, the Company amended its 2020 Plan to increase the common stock issuable under the plan from 991,021 shares to 3,773,235 shares, plus up to 364,120 of additional shares of common stock equal to the number of shares of unvested restricted stock issued in exchange for incentive units as part of the Reorganization, to the extent such shares have been or will be forfeited.

Restricted Stock

A summary of the Company’s restricted stock activity and related information is as follows:

of Restricted

Unvested as of December 31, 2020

Canceled/Forfeited

Unvested as of September 30, 2021

The Company had granted 552,546 shares of common stock underlying restricted stock awards as of June 30, 2020 in connection with the Reorganization.

During the nine months ended September 30, 2021, the aggregate fair value of the restricted stock awards that vested was $ 0.7 million.

As of September 30, 2021, total unrecognized compensation cost related to unvested restricted stock awards was approximately $ 0.8 million, which is expected to be recognized over a weighted-average period of 1.98 years.

2020 Stock Incentive Plan

In July 2020, the Company’s stockholders approved the 2020 Plan.

Under the 2020 Plan, the Company was authorized to issue shares of common stock to the Company’s employees, officers, directors, consultants, and advisors in the form of options, restricted stock awards or other stock-based awards.

Upon the effectiveness of the 2021 Plan in October 2021, the Company ceased granting awards under the 2020 Plan.

2021 Stock Incentive Plan

In September 2021, the Company’s board of directors adopted the 2021 Plan, which was approved by the Company’s stockholders and became effective immediately prior to the effectiveness of the Company’s registration statement on Form S-1, as amended (File No.

333-259973), which was declared effective by the SEC on October 21, 2021 (the “Registration Statement”).

The 2021 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards.

The number of shares of the Company’s common stock initially reserved for issuance under the 2021 Plan was the sum of (1) 2,654,828 ;

plus (2) the number of shares (up to 3,967,038 shares) as is equal to the sum of (x) the number of shares of the Company’s common

stock reserved for issuance under the 2020 Plan that remained available for grant under the 2020 Plan immediately prior to the effectiveness of the Registration Statement and (y) the number of shares of the Company’s common stock subject to outstanding awards whether granted under the 2020 Plan or outside of the 2020 Plan which awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right and that, prior to the effectiveness of the 2021 Plan, would have become available for issuance under the 2020 Plan;

plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year, commencing on January 1, 2022 and continuing until, and including, January 1, 2031, equal to the lesser of (i) 5 % of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (ii) the number of shares of common stock determined by the Company’s board of directors (the “Evergreen Provision”).

Effective January 1, 2022, the number of shares reserved for issuance under the 2021 Plan increased by 1,373,447 shares in accordance with the Evergreen Provision.

As of March 31, 2022, there were 2,860,745 shares available for future issuance under the 2021 Plan.

2021 Employee Stock Purchase Plan

In September 2021, the Company’s board of directors adopted the 2021 ESPP, which was approved by the stockholders and became effective on October 21, 2021, immediately prior to the effectiveness of the Registration Statement.

The Company initially reserved 292,031 shares of the Company’s common stock for future issuance under the 2021 ESPP.

The number of shares of common stock reserved for issuance under the 2021 ESPP will automatically increase on each January 1, beginning on January 1, 2022 and ending on January 1, 2031, by the lesser of (i) 584,062 shares of common stock, (ii) 1 % of the number of shares of the Company’s common stock outstanding on such date, and (iii) a number of shares of common stock as determined by the Company’s board of directors (the “ESPP Evergreen Provision”).

Effective January 1, 2022, the number of shares reserved for issuance under the 2021 ESPP increased by 274,689 shares in accordance with the ESPP Evergreen Provision.

As of March 31, 2022, no offering periods have commenced under the 2021 ESPP.

Equity-Based Compensation Expense

During the three months ended March 31, 2022 and 2021, the Company recorded compensation expense related to stock options and restricted common stock for employees and non-employees, which was allocated as follows in the condensed consolidated statements of operations and comprehensive loss:

Three Months Ended March 31,

Research and development expense

General and administrative expense

Total equity-based compensation expense

Stock Options

5 unchanged sentences

Cancelled/forfeited

Outstanding as of September 30, 2021

Exercisable as of September 30, 2021

Vested and expected to vest as of September 30, 2021

Using the Black-Scholes option pricing model, the weighted average fair value of options granted to employees and directors during the nine months ended September 30, 2021 and 2020 was $ 5.16 and $ 3.60 .

The following assumptions were used in determining the fair value of options granted to employees during the nine months ended September 30, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

Outstanding as of March 31, 2022

Exercisable as of March 31, 2022

Vested and expected to vest as of March 31, 2022

Using the Black-Scholes option pricing model, the weighted average fair value of options granted to employees and directors during the three months ended March 31, 2022 and 2021 was $ 8.83 and $ 4.32 , respectively.

The following assumptions were used in determining the fair value of options granted to employees the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Risk-free interest rate

4 unchanged sentences

84.61 – 85.26

80.60 – 85.26

78.84 – 96.73

The achievement of the performance conditions underlying outstanding performance-based awards was not probable as of September 30, 2021;

The achievement of the performance conditions underlying outstanding performance-based awards was not probable as of March 31, 2022;

therefore, no compensation expense was recorded for these awards.

As of September 30, 2021, total unrecognized compensation costs related to performance-based awards was $ 0.5 million.

As of September 30, 2021, total unrecognized compensation cost related to unvested stock options, excluding performance-based awards, was approximately $ 13.1 million, which is expected to be recognized over a weighted-average period of 3.22 years.

During the nine months ended September 30, 2021, the Company entered into separation agreements with two former employees.

Pursuant to the separation agreements, the former employees terminated their employment with the Company and agreed to provide certain consulting services to the Company through October 15, 2021 and November 30, 2021, respectively, during which the former employees’ equity awards will continue to vest.

In addition, the Company extended the former employees’ periods to exercise their vested option until 90 days from the termination date of the respective consulting periods.

Because the services to be performed during the consulting period are considered non-substantive, the Company concluded that the former employees’ equity awards were modified.

As a result of these modifications, the Company recognized $ 0.2 million in equity-based compensation expense in the statement of operations and comprehensive loss during the nine months ended September 30, 2021.

Equity-Based Compensation Expense

During the three and nine months ended September 30, 2021 and 2020, the Company recorded compensation expense related to incentive units, stock options, and restricted common stock for employees and non-employees, which was allocated as follows in the condensed consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development expense

General and administrative expense

Total equity-based compensation expense

The Company did no t record a provision or benefit for income taxes during the nine months ended September 30, 2021 and 2020.

As of March 31, 2022, total unrecognized compensation costs related to performance-based awards was less than $ 0.1 million.

As of March 31, 2022, total unrecognized compensation cost related to unvested stock options, excluding performance-based awards, was approximately $ 25.4 million, which is expected to be recognized over a weighted-average period of 3.04 years.

Restricted Stock

A summary of the Company’s restricted stock activity and related information is as follows:

of Restricted

Unvested as of December 31, 2021

Canceled/Forfeited

Unvested as of March 31, 2022

In June 2020, the Company granted 552,546 shares of common stock underlying restricted stock awards, and the Company has not subsequently granted any additional restricted stock awards.

During the three months ended March 31, 2022, the aggregate fair value of the restricted stock awards that vested was $ 0.2 million.

As of March 31, 2022, total unrecognized compensation cost related to unvested restricted stock awards was approximately $ 0.6 million, which is expected to be recognized over a weighted-average period of 1.57 years.

The Company did no t record a provision or benefit for income taxes during the three months ended March 31, 2022 and 2021.

The Company continues to maintain a full valuation allowance against all of its deferred tax assets.

4 unchanged sentences

The following table sets forth the outstanding shares of common stock equivalents, presented based on amounts outstanding at each period end, that were excluded from the calculation of diluted net loss per share attributable to common stockholders during each period because including them would have been anti-dilutive:

Nine Months Ended

September 30,

Three Months Ended

Convertible preferred stock

2 unchanged sentences

Total common stock equivalents

Subsequent Events

Reverse Stock Split

The Company’s board of directors and stockholders approved an amendment to the Company’s certificate of incorporation, which became effective on October 15, 2021.

The amendment effected a 1 -for-9.5 reverse stock split of the Company’s issued and outstanding common stock and eliminated the minimum price per share of common stock for an underwritten public offering that would result in the automatic conversion of the Company’s outstanding convertible preferred stock.

Accordingly, all common share and per share amounts in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.

Initial Public Offering

On October 26, 2021, the Company completed its IPO and issued and sold an aggregate of 7,353,000 shares of its common stock at a public offering price of $ 16.00 per share, and on November 1, 2021, the Company issued and sold an additional 766,106 shares of common stock at a public offering price of $ 16.00 per share pursuant to the exercise by the underwriters

of their option to purchase additional shares.

Upon the closing of the IPO, all shares of the Company’s then outstanding Convertible Preferred Stock automatically converted into an aggregate of 18,398,248 shares of common stock (see Note 8).

2021 Stock Incentive Plan

In September 2021, the Company’s board of directors adopted, and in October 2021, the Company’s stockholders approved, the 2021 Stock Incentive Plan (the “2021 Plan”), which became effective on October 21, 2021, immediately prior to the effectiveness of the Company’s registration statement on Form S-1 filed with the SEC on October 1, 2021, as amended (the “Registration Statement”).

The 2021 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards.

The number of shares of the Company’s common stock reserved for issuance under the 2021 Plan is the sum of (1) 2,654,828 ;

plus (2) the number of shares (up to 3,967,038 shares) as is equal to the sum of (x) the number of shares of the Company’s common stock reserved for issuance under the 2020 Plan that remained available for grant under the 2020 Plan immediately prior to the effectiveness of the Registration Statement and (y) the number of shares of the Company’s common stock subject to outstanding awards whether granted under the 2020 Plan or outside of the 2020 Plan which awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right and that, prior to the effectiveness of the 2021 Plan, would have become available for issuance under the 2020 Plan;

plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year, commencing on January 1, 2022 and continuing until, and including, January 1, 2031, equal to the lesser of (i) 5 % of the number of shares of our common stock outstanding on the first day of such fiscal year and (ii) the number of shares of common stock determined by the Company’s board of directors.

2021 Employee Stock Purchase Plan

In September 2021, the Company’s board of directors adopted, and in October 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective on October 21, 2021, immediately prior to the effectiveness of the Registration Statement.

The 2021 ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 292,031 shares of the Company’s common stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements