What changed in this filing

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Item 9A. Controls and Procedures

2023-03-02 compared with 2022-03-01 · 203 added, 402 removed, 610 unchanged (50% of the section changed)

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Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021.

Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.

Our Chief Executive Officer (our principal executive and financial officer) evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022.

Based upon such evaluation, our Chief Executive Officer has concluded that, as of December 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Control over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive and financial officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.

Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.

Internal control over financial reporting also can be circumvented by collusion or improper management override.

Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.

However, these inherent limitations are known features of the financial reporting process.

Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Under the supervision and with the participation of our management, including our principal executive and financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting.

Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to evaluate the effectiveness of our internal control over financial reporting.

Based on its evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2022.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for “emerging growth companies”.

Changes in Internal Control over Financial Reporting

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Other Information

Not applicable.

On March 1, 2023, Michael Ross, Ph.D., notified us of his resignation as a Class III member of our board of directors, effective immediately.

Ross’ resignation did not result from any disagreement with us on any matter relating to our operations, policies or practices.

Upon the recommendation of the nominating and corporate governance committee, our board of directors unanimously appointed Christy Rossi, a current member of the board of directors, to serve on the audit committee.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

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We post our Code of Business Conduct and Ethics, which applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, in the “Corporate Governance” sub-section of the “Investor Relations” section (ir.xiliotx.com) of our corporate website https://xiliotx.com/.

We intend to disclose on our website any amendments to, or waivers from, the Code

of Business Conduct and Ethics that are required to be disclosed pursuant to the disclosure requirements of Item 5.05 of Form 8-K.

We intend to disclose on our website any amendments to, or waivers from, the Code of Business Conduct and Ethics that are required to be disclosed pursuant to the disclosure requirements of Item 5.05 of Form 8-K.

Our website is not incorporated by reference into this Annual Report on Form 10-K and you should not consider any information contained in or accessible from our website to be a part of this Annual Report on Form 10-K.

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Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 will be included in the sections captioned “Related Person Transactions,” “Policies and Procedures for Related Person Transactions” and “Board Determination of Independence” in our definitive proxy statement for our 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates, which information is incorporated herein by reference.

The information required by this Item 13 will be included in the sections captioned “Related Person Transactions,” “Policies for Related Person Transactions” and “Director Independence” in our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates, which information is incorporated herein by reference.

Principal Accountant’s Fees and Services

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Consolidated Statements of Operations and Comprehensive Loss

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

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

Consolidated Statements of Cash Flows

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Exhibit Number

Sales Agreement, dated September 9, 2022, by and between the Registrant and Cowen and Company, LLC

November 9, 2022

Restated Certificate of Incorporation of the Registrant

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Description of the Registrant’s securities registered pursuant to Section 12 of the Securities and Exchange Act of 1934, as amended

March 1, 2022

2020 Stock Incentive Plan, as amended

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October 18, 2021

2022 Inducement Stock Incentive Plan

Form of Stock Option Agreement under the 2022 Inducement Stock Incentive Plan

Form of Restricted Stock Unit Agreement under the 2022 Inducement Stock Incentive Plan

Loan and Security Agreement, dated as of November 21, 2019, as amended, by and between the Registrant and Pacific Western Bank

October 1, 2021

Letter Agreement, dated September 30, 2021, by and between the Registrant and René Russo

October 1, 2021

Letter Agreement, dated September 30, 2021, by and between the Registrant and Martin Huber

October 1, 2021

Amended and Restated Employment Agreement, dated June 15, 2022, by and between the Registrant and Martin Huber, M.D.

June 16, 2023

Form of Indemnification Agreement between the Registrant and each of its Executive Officers and Directors

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October 1, 2021

Service Agreement, dated June 11, 2020, as amended, by and between the Registrant and Daniel S.

October 1, 2021

Letter Agreement, dated May 24, 2019, by and between the Registrant and Joseph Farmer

October 1, 2021

Separation Agreement, dated March 12, 2021, by and between the Registrant and Joseph Farmer

October 1, 2021

Letter Agreement, dated September 30, 2021, by and between the Registrant and Salvatore Giovine

March 1, 2022

Subsidiaries of the Registrant

October 1, 2021

Consent of Ernst & Young LLP, independent registered public accounting firm

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.

Certification of Principal Executive and Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Executive and Financial Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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/s/ René Russo

President and Chief Executive Officer

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ René Russo

President and Chief Executive Officer

Chief Executive Officer and Director

March 2, 2023

(Principal Executive Officer)

/s/ Salvatore Giovine

Chief Financial Officer

(Principal Executive and Financial Officer)

/s/ Brian King

March 2, 2023

Salvatore Giovine

(Principal Financial and Accounting Officer)

/s/ Daniel S.

Chairman of the Board

March 2, 2023

/s/ Paul Clancy

March 2, 2023

/s/ Dan Curran

/s/ Daniel Curran

March 2, 2023

/s/ Michael Ross

Daniel Curran

March 2, 2023

/s/ Robert Ross

March 2, 2023

/s/ Christina Rossi

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Christina Rossi

/s/ Sara Bonstein

March 2, 2023

Sara Bonstein

March 1, 2022

Xilio Therapeutics, Inc.

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Consolidated Statements of Operations and Comprehensive Loss

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

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

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Xilio Therapeutics, Inc.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, preferred units and convertible preferred stock and members’ and stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with U.S.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended in conformity with U.S.

generally accepted accounting principles.

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Other non-current assets

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

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Commitments and contingencies (Note 9)

Convertible preferred stock (Series A, A-1, A-2(A), A-2(A-1), B and C), $ 0.0001 par value, no shares authorized and no shares issued and outstanding at December 31, 2021;

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

aggregate liquidation preference of $ 0 and $ 80,250 at December 31, 2021 and December 31, 2020, respectively

Stockholders’ equity (deficit)

Stockholders’ equity

Preferred stock, $ 0.0001 par value;

5,000,000 shares authorized, no shares issued or outstanding at December 31, 2021;

no shares authorized, issued or outstanding at December 31, 2020

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

Common stock, $ 0.0001 par value;

200,000,000 shares authorized, 27,468,950 shares issued and 27,358,375 shares outstanding at December 31, 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 December 31, 2022 and December 31, 2021;

27,471,607 shares issued and 27,425,447 shares outstanding at December 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’ equity (deficit)

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

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

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Other income (expense), net

Other expense, net

Other income (expense), net

Total other income (expense), net

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XILIO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF PREFERRED UNITS AND CONVERTIBLE PREFERRED STOCK AND

MEMBERS’ AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except unit and share data)

Preferred Units

Preferred Stock

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data)

Stockholders’

Paid-In Capital

Balance at December 31, 2019

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

Effect of reorganization

( 7,500,000 )

( 19,565,216 )

( 39,723,312 )

Vesting of restricted common stock

Exercise of stock options

Equity-based compensation expense

Balance at December 31, 2020

Preferred Stock

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Preferred Stock

Stockholders’

Equity (Deficit)

Balance at December 31, 2020

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Balance at December 31, 2021

Vesting of restricted common stock

Exercise of stock options

Equity-based compensation expense

Balance at December 31, 2022

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

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Payment of success fee

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

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

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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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Conversion of warrant liability to equity upon initial public offering

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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.

For purposes of these 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.

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.

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.

Xilio Therapeutics, Inc.

(“Xilio” or the “Company”) 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 was incorporated in Delaware in June 2020, and its headquarters are located in Waltham, Massachusetts.

Initial Public Offering

In the fourth quarter of 2021, the Company completed its initial public offering (“IPO”) of common stock, in which it issued and sold an aggregate of 8,119,106 shares of its common stock, including 766,106 shares pursuant to the partial exercise by the underwriters of their option to purchase additional shares, at a public offering price of $ 16.00 per share.

The Company received $ 116.4 million in net proceeds, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Liquidity and Capital Resources

Since its 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 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 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, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

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 11).

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

As of December 31, 2022, the Company had cash and cash equivalents of $ 120.4 million.

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

The Company believes that its existing cash and cash equivalents will be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements into the second quarter of 2024, which is at least twelve months from the date of issuance of these 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 development.

To date, the Company has primarily funded its operations with proceeds from the sale of 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 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”).

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”).

These 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”).

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”).

In April 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted.

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

Following the Reorganization, the accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Xilio Therapeutics LLC, Xilio Concerto LLC (“Concerto”), Xilio Development, Inc.

(“Xilio Development”) and Xilio Securities Corp., which is a Massachusetts subsidiary created to buy, sell and hold securities.

All intercompany accounts and transactions have been eliminated.

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 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.

Xilio Development, Inc.

(“Xilio Development”), a Delaware corporation, and Xilio Securities Corporation, a Massachusetts corporation, created to buy, sell and hold securities.

Effective as of September 30, 2022, the Company’s wholly owned subsidiaries, Xilio Therapeutics, LLC and Xilio Concerto, LLC, were merged with and into Xilio Development, Inc., with Xilio Development, Inc.

continuing as the surviving corporation.

All intercompany accounts and transactions have been eliminated in consolidation.

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 consolidated financial statements include, but are not limited to, estimates related to accrued expenses, contingent amounts payable to third parties upon 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, useful life of long-lived assets and income taxes.

Significant estimates of accounting reflected in these consolidated financial statements include, but are not limited to, estimates related to accrued expenses, contingent amounts payable to third parties upon the consummation of specified transactions, including an initial public offering, the valuation of equity-based compensation, including stock options and restricted common stock, useful life of long-lived assets and income taxes.

Actual results could differ from those estimates.

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Cash equivalents, which consist of money market accounts, are stated at fair value.

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 consolidated balance sheets.

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 consolidated balance sheets.

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

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Restricted cash

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

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

Concentrations of Credit Risk and Significant Suppliers

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The Company periodically evaluates its long-lived assets, which consist of property and equipment, and any leased assets, for impairment whenever events or changes in circumstances indicate that a potential impairment may have occurred.

If such events or changes in circumstances arise, the Company compares the carrying amount of the long-lived assets to the

estimated future undiscounted cash flows expected to be generated by the long-lived assets.

If such events or changes in circumstances arise, the Company compares the carrying amount of the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the long-lived assets.

If the estimated aggregate undiscounted cash flows are less than the carrying amount of the long-lived assets, an impairment charge, calculated as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets, is recorded.

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The Company determines if an arrangement is or contains a lease at inception.

Operating leases are included in right-of-use lease assets (“ROU assets”) and in both the current portion of lease obligations and long-term lease obligations on the Company’s consolidated balance sheets.

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

Operating leases are included in right-of-use lease assets (“ROU assets”) and in both the current portion of lease liabilities and long-term lease liabilities on the Company’s consolidated balance sheets.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense in the consolidated statements of operations and comprehensive loss.

Assets subject to finance leases are included in other non-current assets and the related lease obligation is included in other current liabilities and other long-term liabilities on the Company’s consolidated balance sheets.

Lease expense for finance leases is recognized as depreciation expense and interest expense using the effective interest method.

Lease expense for finance leases is recognized as depreciation expense and interest expense in the consolidated statements of operations and comprehensive loss using the effective interest method.

The Company has elected the short-term lease recognition exemption for short-term leases, which allows the Company not to recognize lease liabilities and ROU assets on the consolidated balance sheets for leases with an original term of twelve months or less.

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease obligations represent the Company’s obligation to make lease payments arising from the lease.

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

Operating lease liabilities and their corresponding ROU assets are initially recorded based on the present value of lease payments over the expected remaining lease term.

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The incremental borrowing rate reflects the fixed rate at which the Company could borrow, on a collateralized basis, the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

Prospectively, the Company will adjust the ROU assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

Prospectively, the Company will adjust the ROU assets for straight-line rent

expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

The Company has lease agreements with lease and non-lease components, which are accounted for as a combined element.

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 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.

Research and Development Costs and Accruals

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Equity-Based Compensation

The Company accounts for equity awards, including grants of incentive units, common units, restricted stock and stock options, in accordance with ASC 718, Compensation—Stock Compensation (“Topic 718”).

The Company issues equity-based awards to employees, directors and non-employees, generally in the form of stock options.

The Company measures employee equity-based compensation based on the grant date fair value of the equity-based awards and recognizes equity-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period of the respective award, in accordance with ASC 718, Compensation—

Stock Compensation (“Topic 718”).

Topic 718 requires all equity-based payments to employees, which includes grants of employee equity awards, to be recognized in the consolidated statements of operations and comprehensive loss based on their grant date fair values.

There are significant judgments and estimates inherent in the determination of the fair value of the common securities.

After the completion of the Company’s IPO, the Company considers the fair value of common stock to be equal to its current share price.

The Company considers the fair value of common stock to be equal to its current share price.

If applicable, the current share price is adjusted to reflect material nonpublic information known to the company but unavailable to market participants.

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The Company uses the simplified method, under which the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term.

The Company utilizes this method due to lack of historical exercise data.

The Company utilizes this method due to lack of historical exercise data and the plain nature of its equity-based awards.

The expected dividend yield is assumed to be zero as the Company has no current plans to pay any dividends on common stock.

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The Company recognizes forfeitures as they occur.

The Company classifies equity-based compensation expense in its consolidated statements of operations and comprehensive loss consistent with the classification of the award recipient’s compensation expense.

Convertible Preferred Stock

The Company records all shares of convertible preferred stock at their respective fair values on the dates of issuance less issuance costs.

The Company classifies its convertible preferred stock outside of stockholders’ deficit when the redemption of such shares is outside the Company’s control.

The Company does not adjust the carrying values of the convertible preferred stock to the liquidation preferences of such stock until such time as a deemed liquidation event is probable of occurring.

Prior to the automatic conversion of all outstanding shares of the Company’s convertible preferred stock upon the closing of the IPO, the Company recorded all shares of convertible preferred stock at their respective fair values on the dates of issuance less issuance costs.

The Company classified its convertible preferred stock outside of stockholders’ equity (deficit) when the redemption of such shares was outside the Company’s control.

The Company did not adjust the carrying values of the convertible preferred stock to the liquidation preferences of such stock until such time as a deemed liquidation event was probable of occurring.

Comprehensive Loss

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The Company has generated a net loss in all periods presented, so the basic and diluted net loss per share are the same, as the inclusion of the potentially dilutive securities would be anti-dilutive.

Prior to the Reorganization, Xilio Therapeutics LLC elected to be treated under the partnership provisions of the Internal Revenue Code.

Accordingly, all income and deductions of Xilio Therapeutics LLC were recorded on its members’ individual tax returns and no taxes were recorded by Xilio Therapeutics LLC.

Xilio Development and Concerto, the wholly owned subsidiaries of Xilio Therapeutics LLC, were taxed as C-corporations for federal income tax purposes and filed separate corporate income tax returns from the LLC entity.

Upon the consummation of the Reorganization, Xilio Therapeutics, Inc.

became the 100 % owner of Xilio Therapeutics LLC, creating a new corporate parent company and a consolidated group for income tax reporting.

The Reorganization and change in tax status of the reporting entity did not have an impact on the consolidated tax provision.

Income taxes for Xilio Therapeutics, Inc.

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Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect of changes in income tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that a valuation allowance for any income tax benefits of which future realization is not more likely than not.

The effect of changes in income tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment date and subject to a valuation allowance which is established for any income tax benefits of which future realization is not more likely than not.

The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions.

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Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (“ASU 2019-12”), as part of its initiative to reduce complexity in the accounting standards.

The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes.

The Company adopted ASU 2019-12 on October 1, 2021, and the implementation of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments, which has been subsequently amended by ASU No.

2018-19, ASU No.

2019-04, ASU No.

2019-05, ASU No.

2019-10, ASU No.

2019-11, and ASU No.

2020-03 (“ASU 2016-13”).

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

ASU 2016-13 is effective for the Company on January 1, 2023, with early adoption permitted.

The Company is currently evaluating the potential impact that ASU 2016-13 may have on its consolidated financial statements and related disclosures.

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 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.

ASU 2020-06 is effective for the Company on January 1, 2024, with early adoption permitted.

The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements and related disclosures.

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

Fair Value Measurements

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Total financial assets

Financial liabilities:

Debt derivative liability

Other derivative liability

Warrant to purchase Series A convertible preferred stock

Total financial liabilities

Financial assets:

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

In May 2016, the Company issued to a consultant a warrant to purchase 25,000 Series A preferred units at a price of $ 1.00 per unit.

Effective upon the Reorganization, the preferred unit warrant was converted into a warrant to purchase 25,000 shares of Series A convertible preferred stock at a price of $ 1.00 per share.

In May 2016, the Company issued to a consultant a warrant to purchase 25,000 Series A preferred units at a price of $ 1.00 per unit, and in June 2020, the preferred unit warrant was converted into a warrant to purchase 25,000 shares of Series A convertible preferred stock at a price of $ 1.00 per share.

The fair value of the warrant liability utilized the Black-Scholes option-pricing model which incorporated significant inputs not observable in the market, and thus represented a Level 3 measurement within the fair value hierarchy.

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The debt derivative liability and other derivative liability were paid during the year ended December 31, 2021 subsequent to the completion of the Company’s IPO.

Accordingly, there was no amount recorded for the debt derivative liability and other derivative liability in the Company’s consolidated balance sheet as of December 31, 2021.

Accordingly, there was no amount recorded for the debt derivative liability and other derivative liability in the Company’s consolidated balance sheets as of December 31, 2022 and 2021.

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

Recognition of other derivative liability

Change in fair value of liability

Balance at December 31, 2020

Change in fair value of liability

Settlement of liability

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Total property and equipment

Less accumulated depreciation

accumulated depreciation

Property and equipment, net

The Company incurred depreciation and amortization expense related to property and equipment, net of $ 1.4 million and $ 1.1 million for the years ended December 31, 2021 and 2020, respectively.

The Company incurred depreciation and amortization expense related to property and equipment of $ 1.7 million and $ 1.4 million for the years ended December 31, 2022 and 2021, respectively.

Accrued Expenses

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Loan and Security Agreement

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.

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 %.

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

Subsequent to the interest-only period, the Company was required to make equal monthly payments of principal plus interest until the scheduled loan maturity on November 21, 2023.

In addition, under the Initial Loan Agreement, the Company was obligated to pay a one-time $ 0.5 million fee to PacWest upon the occurrence of specified liquidation events, including an initial public offering.

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 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.

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.

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.

In November 2019, the Company entered into a loan and security agreement (as amended, the “Loan Agreement”) with Pacific Western Bank (“PacWest”), pursuant to which the Company borrowed $ 10.0 million under a term loan.

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 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.

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, which is approximately one year from the date of the amendment to the loan and security agreement.

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.

As of December 31, 2022, the interest rate on the term loan is 7.75 %.

The Company was required to make interest-only payments on any outstanding balances through December 31, 2022.

The Company commenced making equal monthly payments of principal plus interest in January 2023, and it will be required to make such payments until the term loan matures on June 30, 2024.

In addition, under the Loan Agreement, the Company paid a one-time success fee of $ 0.8 million to PacWest in the fourth quarter of 2021 upon the closing of the IPO.

The Loan Agreement contains customary representations, warranties and covenants and also includes customary terms covering events of default, including payment defaults, breaches of covenants, a change of control provision and occurrence of a material adverse effect.

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Total notes payable

The Company recognized $ 0.6 million of interest expense related the Loan Agreement during each of the years ended December 31, 2021 and 2020, respectively, which is reflected in other income (expense), net on the consolidated statements of operations and comprehensive loss.

The Company recognized $ 0.8 million and $ 0.6 million of interest expense related to the Loan Agreement for the years ended December 31, 2022 and 2021, respectively, which is reflected in other income (expense), net on the consolidated statements of operations and comprehensive loss.

Intellectual Property Licenses

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(“AskGene”) pursuant to which AskGene granted Xilio Development certain exclusive licenses for AskGene patent rights related to non-antigen binding IL-2 products in the field of oncology and certain co-exclusive licenses for AskGene patent rights related to antigen binding IL-2 products in all fields.

In addition, subject to the terms of the agreement and during the time period specified, AskGene granted Xilio Development an option to certain exclusive licenses for AskGene patent rights related to non-antigen binding IL-15 products in the field of oncology and certain co-exclusive licenses for AskGene patent rights related to antigen binding IL-15 products in all fields.

Under the agreement, AskGene retains rights to the AskGene patent rights in Singapore, Thailand, Malaysia, Vietnam, the People’s Republic of China, Taiwan, Macau, Hong Kong, Korea and India (the “AskGene territory”), and granted licenses to Xilio Development for the AskGene patent rights worldwide, excluding the AskGene territory (the “Xilio Development territory”).

Under the agreement, Xilio Development was required to pay AskGene an upfront payment of $ 6.0 million, and for each licensed product, Xilio Development is obligated to pay AskGene up to $ 13.0 million in the aggregate upon the achievement of specified regulatory milestones.

If Xilio Development exercises its option for the IL-15 licenses during the option period, Xilio Development will be obligated to pay AskGene a $ 4.0 million option exercise fee.

In addition, subject to specified conditions, for any IL-2 licensed product, Xilio Development is obligated to pay AskGene percentage royalties in the mid-single digits on aggregate annual net sales of IL-2 licensed products in the Xilio Development territory during the applicable royalty term, and if Xilio Development exercises its option for AskGene’s IL-15 patent rights, then for any IL-15 licensed product, Xilio Development is obligated to pay AskGene percentage royalties in the low single digits on aggregate annual net sales of IL-15 licensed products in the Xilio Development territory during the applicable royalty term.

During the term of the agreement, AskGene has agreed not to exploit the following in the field of oncology in the Xilio Development territory:

(i) any non-antigen binding IL-2 product, and (ii) if Xilio Development exercises its option for AskGene’s IL-15 patent rights, any non-antigen binding IL-15 product.

In addition, under the agreement, Xilio Development granted a non-exclusive, royalty-free, non-transferable, worldwide license to AskGene for specified Xilio Development patent rights related to non-antigen binding IL-2 products in the field of immunology and for specified Xilio Development patent rights related to antigen binding IL-2 products in all fields.

In addition, subject to the terms of the agreement and during the time period specified, Xilio Development granted AskGene an option to obtain an exclusive, royalty-bearing, non-transferable, worldwide license for specified Xilio Development patent rights related to non-antigen binding IL-2 products in the field of immunology and an option to obtain a co-exclusive, royalty-bearing, non-transferable, worldwide license for specified Xilio Development patent rights related to antigen binding IL-2 products in all fields.

If AskGene exercises its option, the parties would negotiate and enter into a

license agreement, and AskGene would be obligated to pay Xilio Development up to $ 17.0 million in aggregate upfront and milestone payments for each licensed product.

In addition, subject to specified conditions, for any IL-2 licensed product, AskGene is obligated to pay Xilio Development percentage royalties in the low single digits on aggregate annual net sales of IL-2 licensed products in the AskGene territory during the applicable royalty term.

Under the agreement, Xilio Development paid AskGene an upfront payment of $ 6.0 million, and for any licensed IL-2 product, Xilio Development is obligated to pay AskGene up to $ 13.0 million in the aggregate upon the achievement of specified regulatory milestones.

During the term of the agreement, AskGene has agreed not to exploit any non-antigen binding IL-2 product comprised of specified masking technology in the field of oncology in the Xilio Development territory.

In addition, Xilio Development granted a non-exclusive, royalty-free, non-transferable, worldwide license to AskGene for specified Xilio patent rights related to non-antigen binding IL-2 products in the field of immunology and for specified Xilio patent rights related to antigen binding IL-2 products in all fields.

Subject to the terms of the agreement and during the time period specified, Xilio Development also granted AskGene an option to obtain a license in the AskGene territory

to develop and commercialize IL-2 licensed products.

If AskGene exercises its option to develop and commercialize IL-2 licensed products in the AskGene territory, then the parties will negotiate and enter into a license agreement for AskGene’s exclusive development and commercialization of such products in the AskGene territory, and AskGene would be obligated to pay Xilio Development percentage royalties in the mid-single digits on aggregate annual net sales of such licensed products in the AskGene territory.

The Company accounted for the agreement as an asset acquisition, as the Company only acquired licenses to specified patents from AskGene (an input) and no additional processes or outputs as a part of the agreement.

The $ 6.0 million upfront payment was recorded as research and development expense in the consolidated statement of operations and comprehensive loss during the year ended December 31, 2020, as the acquired licenses were determined to have no alternative future use and the technological feasibility of the intellectual property has not yet been reached.

The upfront payment was paid in installments between December 2020 and February 2021, with $ 1.0 million paid as of December 31, 2020.

The remaining $ 5.0 million was paid during the three months ended March 31, 2021 and was recorded within accrued expenses in the accompanying consolidated balance sheets as of December 31, 2020.

Any additional payments that are contingent upon achievement of development and regulatory milestones or upon sales of licensed products will not be recognized until it becomes probable that the Company will be required to make such payments.

Amended and Restated Exclusive License Agreement with City of Hope

In August 2016, the Company entered into an amended and restated exclusive license agreement with City of Hope pursuant to which City of Hope granted the Company an exclusive worldwide license to specified patent rights related to the Company’s anti-CTLA-4 monoclonal antibody program.

Under the agreement, the Company issued 24,019 common units to City of Hope.

For the first three licensed products or licensed services to achieve specified development and regulatory milestones, the Company is obligated to pay City of Hope up to $ 10.3 million in the aggregate per licensed product or licensed service.

In addition, subject to specified conditions, the Company is obligated to pay City of Hope tiered royalties in the low single digits on aggregate annual net sales of licensed products or licensed services on a country-by-country basis until the expiration of the last-to-expire patent or patent application licensed from City of Hope covering the applicable licensed product or licensed service in such country.

The Company is also obligated to pay City of Hope a portion of any consideration the Company receives for the grant of sublicenses under the agreement ranging from a low double digit to mid-twenties percentage of such consideration to low double digit percentage of such consideration, subject to specified conditions under that agreement at the time that the Company grants any such sublicense.

The Company incurred $ 0.3 million in costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2021.

In August 2016, Xilio Development entered into an amended and restated exclusive license agreement with City of Hope pursuant to which City of Hope granted Xilio Development an exclusive worldwide license to specified patent rights related to the Company’s anti-CTLA-4 monoclonal antibody program.

Under the agreement, the Company issued 24,019 shares of common stock to City of Hope.

For the first three licensed products or licensed services to achieve specified development and regulatory milestones, Xilio Development is obligated to pay City of Hope up to $ 10.3 million in the aggregate per licensed product or licensed service.

In addition, subject to specified conditions, Xilio Development is obligated to pay City of Hope tiered royalties in the low single digits on aggregate annual net sales of licensed products or licensed services on a country-by-country basis until the expiration of the last-to-expire patent or patent application licensed from City of Hope covering the applicable licensed product or licensed service in such country.

Xilio Development is also obligated to pay City of Hope a portion of any consideration Xilio Development receives for the grant of sublicenses under the agreement ranging from a low double digit to mid-twenties percentage of such consideration, subject to specified conditions under that agreement at the time that Xilio Development grants any such sublicense.

The Company incurred no costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2022.

The Company incurred $ 0.3 million in costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2021.

In each of the years ended December 31, 2022 and 2021, the Company incurred $ 10,000 under this agreement, which was recognized as research and development expense in the consolidated statements of operations and comprehensive loss.

In addition, the Company was obligated to pay $ 0.5 million to City of Hope in connection with the consummation of specified transactions, including an initial public offering.

The Company accounted for the $ 0.5 million contingent payment as a derivative liability.

The derivative liability was initially recognized at fair value with any changes in such fair value recorded to other income (expense), net in the accompanying consolidated statement of operations and comprehensive loss.

The derivative liability was included in other liabilities, long term on the consolidated balance sheet as of December 31, 2020, and was paid during the fourth quarter of the year ended December 31, 2021 subsequent to the completion of the Company’s IPO.

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In addition, subject to specified conditions, the Company is obligated to pay WuXi Biologics tiered royalties in the low to mid-single digits on aggregate annual worldwide net sales of licensed products during the applicable royalty term.

The Company incurred $ 0.8 million and $ 1.0 million in costs related to the payment of specified development milestones under the agreement during the years ended December 31, 2021 and 2020, respectively.

Any additional payments that are contingent upon the achievement of development and regulatory milestones or sales of licensed products will not be recognized until it becomes probable that the Company will be required to make such payments.

Commitments and Contingencies

Purchase Commitments

In the normal course of business, the Company enters into agreements with contract research organizations for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes, and such contracts are generally cancellable by the Company for convenience by providing up to 90 days notice.

The Company may be subject to certain termination fees or wind down costs upon termination of these agreements.

The Company incurred no costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2022.

The Company incurred $ 0.8 million in costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2021.

Any additional payments that are

contingent upon the achievement of development and regulatory milestones or sales of licensed products will not be recognized until it becomes probable that the Company will be required to make such payments.

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

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The Company has a right to a five-year option to extend at then-market rates.

The Company took possession of the premises in August 2019 and began tenant improvement, toward which the landlord agreed to fund a maximum of $ 4.9 million of such improvements.

The Company included the expected landlord reimbursement amount of $ 4.9 million as a reduction to the amount of future minimum lease payments used to calculate the lease liability at lease commencement.

The Company received reimbursement for tenant improvements in the amount of $ 2.0 million during the year ended December 31, 2019 and $ 2.9 million during the year ended December 31, 2020.

Any reimbursement payments either received from the landlord, or due to be received from the landlord, have been recorded as an increase to the operating lease liability.

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 new leased premises, which it began paying simultaneous with the rent commencement date in March 2020.

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 December 31, 2022 and 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, which is recorded as restricted cash on the consolidated balance sheets.

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Present value of lease liabilities

Legal Proceedings

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

The Company was not subject to any material legal proceedings during the years ended December 31, 2021 and 2020.

Guarantees and Indemnifications

Commitments and Contingencies

Indemnification Agreements

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

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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 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.

The Company has also entered into indemnification agreements with its directors that may require the Company to indemnify its directors against liabilities that may arise by reason of their status or service as directors to the fullest extent permitted by Delaware corporate law.

The Company currently has directors’ and officers’ insurance.

Prior to the Reorganization, all interests of members in distributions and other amounts were represented by their units of membership in the Company as specified in its LLC Agreement.

There were two classes of units, capital units and incentive units.

Capital units were comprised of common units and preferred units, which represented a capital interest in the Company, while incentive units represented profits interests within the meaning of IRS Revenue Procedures 93-27 and 2001-43.

The various classes of capital units are described below.

As part of the Reorganization in June 2020, all common units were converted to common stock.

As a result, as of December 31, 2021 and 2020, there were no outstanding common units.

Preferred Units

Prior to the Reorganization in June 2020, the Company had sold Series A, A‑1, and B preferred units, including a tranche of 7,905,138 Series B Convertible Preferred Units issued in February 2020 that resulted in proceeds of $ 10.0 million net of issuance costs, which were collectively considered the preferred units.

As part of the Reorganization in June 2020, all preferred units were converted to preferred stock.

As a result, as of December 31, 2021 and 2020, there were no outstanding preferred units.

Reorganization

In connection with the Reorganization:

● Holders of Xilio Therapeutics LLC outstanding Series A preferred units received one share of Xilio Therapeutics, Inc.

Series A convertible preferred stock for each Series A preferred unit held immediately prior to the Reorganization, with an aggregate of 7,500,000 shares of Xilio Therapeutics, Inc.

Series A convertible preferred stock issued in the Reorganization;

● Holders of Xilio Therapeutics LLC outstanding Series A-1 preferred units received one share of Xilio Therapeutics, Inc.

Series A-1 convertible preferred stock for each Series A-1 preferred unit held immediately prior to the Reorganization, with an aggregate of 19,565,216 shares of Xilio Therapeutics, Inc.

Series A-1 convertible preferred stock issued in the Reorganization;

● Holders of Xilio Therapeutics LLC outstanding Series B preferred units received one share of Xilio Therapeutics, Inc.

Series B convertible preferred stock for each Series B preferred unit held immediately prior to the Reorganization, with an aggregate of 39,723,312 shares of Xilio Therapeutics, Inc.

Series B convertible preferred stock issued in the Reorganization;

● Holders of Xilio Therapeutics LLC outstanding common units received one share of Xilio Therapeutics, Inc.

common stock for each outstanding common unit held immediately prior to the Reorganization, with an aggregate of 409,303 shares of common stock issued in the Reorganization;

● Holders of Xilio Therapeutics LLC outstanding incentive units received shares of Xilio Therapeutics, Inc.

restricted common stock in an amount equal in value of such incentive units as determined by the applicable provisions of the Xilio Therapeutics LLC Agreement in effect immediately prior to the Reorganization, with an

aggregate of 552,546 shares of common stock and restricted stock issued in the Reorganization.

The restricted common stock awards in Xilio Therapeutics, Inc.

were issued with the same vesting terms as the incentive units held immediately prior to the Reorganization;

● The outstanding warrant to purchase 25,000 Series A preferred units of Xilio Therapeutics LLC at $ 1.00 per unit was converted to a warrant to purchase 25,000 shares of Xilio Therapeutics, Inc.

Series A convertible preferred stock at the same purchase price.

In evaluating the Reorganization, the Company considered that (i) with the exception of holders of incentive units, there were no changes in ownership interest held by each stockholder as a result of the Reorganization, (ii) the changes in the overall ownership interest of the Company resulting from the changes in ownership interest related to the holders of incentive units as a result of the Reorganization is not significant and (iii) the Reorganization occurred between a parent and wholly owned subsidiary, where the parent, Xilio Therapeutics LLC, had no substantive operations.

Based on this evaluation, the Company determined that the Reorganization lacked economic substance and should be accounted for in a manner consistent with a common control transaction.

Similarly, there was no significant change in fair value between the stockholders, individually or as a class, and the Company determined that the exchange of shares occurring in the Reorganization should be accounted for as a modification of equity securities.

The Company currently has directors’ and officers’ liability insurance.

To date, the Company has not incurred any material costs as a result of such indemnifications.

The Company is not aware of any claims under indemnification arrangements, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2022 or 2021.

Legal Proceedings

The Company is not currently a party to any material legal proceedings.

Preferred Stock and Common Stock

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

There was no convertible preferred stock outstanding as of December 31, 2021.

As of December 31, 2020, the Company had authorized 126,000,000 shares of common stock and 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 (collectively, the “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 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.

As of December 31, 2020, Convertible Preferred Stock consisted of the following (in thousands, except share amounts):

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

The terms of the Convertible Preferred Stock prior to the conversion to common stock were as follows:

In the event of any liquidation, dissolution or winding up of affairs of the Company (including a change of control), distributions would have first been made to holders of the Series B convertible preferred stock until, on a share by share basis, each share of Series B convertible preferred stock has been distributed its original issuance price ($ 1.265 ) plus any declared but unpaid dividends.

After distribution to the Series B convertible preferred stock holders, the holders of Series A, Series A-1, Series A-2(A) and Series A-2(A-1) convertible preferred stock would have received a distribution until, on a share by share basis, each share of Series A, Series A-1, Series A-2(A) and Series A-2(A-1) convertible preferred stock had been distributed an amount equal to the Series A, Series A-1, Series A-2(A) and Series A-2(A-1) convertible preferred stock original issuance price plus any declared but unpaid dividends.

The Series A, Series A-1, Series A-2(A) and Series A-2(A-1) convertible preferred stock issuance prices were $ 1.00 , $ 1.15 , $ 1.00 , and $ 1.15 per stock, respectively.

After distribution to the Series A, Series A-1, Series A-2(A) and Series A-2(A-1) holders, the holders of all securities as if all such securities had been converted to common stock, would have received a distribution until, on a share by share basis, each share of Convertible Preferred Stock holder had been distributed an amount equal to two and one-half times the sum of its respective original issuance price and declared but unpaid dividends after which the holders of common stock would have received a distribution until, on a common stock by common stock basis, each share of common stock had been distributed a catch-up amount such that the aggregate distributions made to the common stock were the same as the average aggregate distributions made to the Convertible Preferred Stock.

Any remaining amounts would have been distributed to the holders of the common stock and Convertible Preferred Stock in proportion to the number of shares of stock held by each (on an as-converted basis).

Shares of Convertible Preferred Stock may have been converted by the holder at any time into a number of shares of common stock equal to such number of shares as determined by dividing the original issue price by the conversion price in effect at the time.

The conversion price of the Series A convertible preferred stock was equal to $ 9.50 , the conversion price of the Series A-1 convertible preferred stock was equal to $ 10.93 and the conversion price of the Series B convertible preferred stock was equal to $ 12.02 , in each case as of December 31, 2020.

The conversion price was subject to adjustments in the event of any stock dividend, stock split, combination or other similar recapitalization and other adjustments as set forth in the Company’s certificate of incorporation.

Upon the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended,

in which the aggregate gross proceeds to the Company are at least $ 50 million, all outstanding Convertible Preferred Stock were to be automatically converted into a number of shares of common stock at the then applicable conversion rate.

If a defaulting purchaser failed to purchase the Series B convertible preferred stock it was required to purchase pursuant to the Series B Agreement, then each share of Convertible Preferred Stock held by such defaulting purchaser (and by any of such defaulting purchaser’s affiliates or any predecessor, transferor or assignor, successor, transferee or assign of such defaulting purchaser or such defaulting purchaser’s affiliates) would have automatically converted as follows:

each 10 shares of Series B convertible preferred stock would have converted into 0.1053 shares of common stock, each share of Series A convertible preferred stock would have converted into one share of Series A-2(A) convertible preferred stock and each share of Series A-1 convertible preferred stock would have converted into one share of Series A-2(A-1) convertible preferred stock.

Holders of Convertible Preferred Stock vote together with the holders of common stock as a single class.

Any action to be taken by the stockholders requires the approval of stockholders holding a majority of the outstanding shares of Convertible Preferred Stock and common stock, voting together as a single class on an as-converted basis, unless a different threshold is specifically required by law or by the Company’s certificate of incorporation.

If any dividends were declared by the board of directors on the Convertible Preferred Stock, such dividends would have been at an annual rate of $ 0.060 per share of Series A convertible preferred stock, $ 0.069 per share of Series A-1 convertible preferred stock and $ 0.0759 per share of Series B convertible preferred stock, subject in each case to appropriate adjustment in the event of any dividend, split, combination or other similar recapitalization with respect to the applicable series of Convertible Preferred Stock, and were to be non-cumulative.

Holders of Series A-2(A) and A-2(A-1) convertible preferred stock were not entitled to receive any dividends.

Since inception, the Company has not declared any dividends.

Prior to the completion of the Company’s IPO, the voting, dividend and liquidation rights of the holders of shares of common stock were subject to and qualified by the rights, powers and preferences of the holders of shares of the Company’s convertible preferred stock.

The rights, preferences and privileges of the Company’s common stock were as follows:

The holders of shares of common stock were entitled to one vote for each share of common stock held at any meeting of stockholders and at the time of any written action in lieu of a meeting of stockholders.

The holders of shares of common stock were entitled to receive dividends, if and when declared by the Company’s board of directors.

Cash dividends could not be declared or paid to holders of shares of common stock until all unpaid dividends on Preferred Stock had been paid in accordance with their terms.

Subsequent to the completion of the Company’s IPO, the voting, dividend and liquidation rights of the holders of shares of common stock are subject to and qualified by the rights, powers and preferences of the holders of shares of the Company’s undesignated preferred stock, if and when such shares are issued.

There was no convertible preferred stock outstanding as of December 31, 2022 and 2021.

As of December 31, 2022 and 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.

On November 9, 2022, the Company filed a registration statement on Form S-3 (the “2022 Shelf Registration Statement”), covering the offering of up to $ 250.0 million of common stock, preferred stock, debt securities, units and warrants.

The 2022 Shelf Registration Statement became effective on November 18, 2022.

On November 9, 2022, the Company also entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), under which the Company may, from time to time, sell shares of its common stock through Cowen (the “2022 ATM Program”).

The 2022 Shelf Registration Statement included a prospectus covering the offering, issuance and sale of up to $ 75.0 million of the Company’s common stock from time to time through the 2022 ATM Program.

Through December 31, 2022, the Company has not sold any common stock through the 2022 ATM Program.

The voting, dividend and liquidation rights of the holders of shares of common stock are subject to and qualified by the rights, powers and preferences of the holders of shares of the Company’s undesignated preferred stock, if and when such shares are issued.

The rights, preferences and privileges of the Company’s common stock are as follows:

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Shares Reserved for Future Issuance

As of December 31, 2021 and 2020, 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”), the 2021 Stock Incentive Plan (the “2021 Plan”) and the 2021 Employee Stock Purchase Plan (the “2021 ESPP”) as follows:

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

As of December 31, 2022 and 2021, the Company had reserved shares of common stock for future issuance under the 2020 Stock Incentive Plan (as amended, the “2020 Plan”), the 2021 Stock Incentive Plan (the “2021 Plan”), the 2021

Employee Stock Purchase Plan (the “2021 ESPP”) and the 2022 Inducement Stock Incentive Plan (the “2022 Inducement Plan”) 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 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

Shares of common stock reserved for future awards under the 2022 Inducement Plan

Total shares reserved for future issuance

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

Under the 2020 Plan, the Company was initially authorized to issue up to 991,021 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.

The 2020 Plan is administered by the board of directors, which has the power to determine the terms of the awards agreements, including the vesting requirements, provided that generally the exercise price per share of stock options granted could not be less than 100 % of the fair market value of a share of the Company’s common stock on the date of grant, and the term of stock options granted could not exceed ten years .

Vesting of stock options and restricted stock is subject to the recipient’s continued employment or service.

The Company has the right to repurchase any unvested shares of restricted stock held by a recipient during the vesting period if the relationship between the recipient and the Company has terminated.

For any awards under the 2020

Plan that expire or are terminated, surrendered, or canceled without having been fully exercised, if forfeited in whole or in part (including as the result of shares of common stock subject to such award being repurchased by the Company), the unused common stock subject to such award shall again be available for the grant of future awards.

Shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for future awards.

Shares of common stock may be withheld to satisfy applicable federal, state or local employment tax withholding obligations related to equity awards.

Upon stock option exercise, the Company issues new shares and delivers them to the participant.

As of December 31, 2020, the Company had issued service-based and performance-based stock options under the 2020 Plan.

Stock options issued comprise awards granted to employees, non-employees, and directors.

During the year ended December 31, 2021, the Company amended its 2020 Plan to increase the common stock issuable under the 2020 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.

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, and in October 2021, the Company’s stockholders approved, 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”).

Upon effectiveness of the 2021 Plan, the Company ceased granting awards under the 2020 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 is the sum of (1) 2,654,828 ;

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.

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

Effective January 1, 2023, the number of shares reserved for issuance under the 2021 Plan increased by 1,373,580 shares in accordance with the Evergreen Provision.

As of December 31, 2022, there were 2,848,568 shares available for future issuance under the 2021 Plan.

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Effective January 1, 2023, the number of shares reserved for issuance under the 2021 ESPP increased by 274,716 shares.

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

The first offering period under the 2021 ESPP commenced on December 1, 2022 and ends May 31, 2023.

As of December 31, 2022, no shares have been issued under the 2021 ESPP.

As of December 31, 2022, there were 566,720 shares available for future issuance under the 2021 ESPP.

2022 Inducement Plan

On November 18, 2022, the Company’s board of directors adopted the 2022 Inducement Plan pursuant to Nasdaq Rule 5635(c)(4).

In accordance with Rule 5635(c)(4), cash and equity-based incentive awards under the 2022 Inducement Plan may only be made to a newly hired employee who has not previously been a member of the Company’s board of directors, or an employee who is being rehired following a bona fide period of non-employment by the Company as a material inducement to the employee’s entering into employment with the Company.

An aggregate of 275,000 shares of the Company’s common stock has been reserved for issuance under the 2022 Inducement Plan.

The exercise price of stock options granted under the 2022 Inducement Plan will not be less than the fair market value of a share of the Company’s common stock on the grant date.

Other terms of awards, including vesting requirements, are determined by the Company’s board of directors and are subject to the provisions of the 2022 Inducement Plan.

As of December 31, 2022, no shares have been granted under the 2022 Inducement Plan.

Total Equity-Based Compensation Expense

During the years ended December 31, 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 consolidated statements of operations and comprehensive loss (in thousands):

During the years ended December 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 consolidated statements of operations and comprehensive loss (in thousands):

Year Ended December 31,

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Vested and expected to vest as of December 31, 2022

(1) The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock as of the end of the period.

Using the Black-Scholes option pricing model, the weighted average fair value of options granted to employees and directors during the years ended December 31, 2022 and 2021 was $ 5.58 per share and $ 6.28 per share, respectively.

The Company satisfies stock option exercises with newly issued shares of common stock.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2021 and 2020 was $ 0.5 million and none , respectively.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022 and 2021 was less than $ 0.1 million and $ 0.5 million, respectively.

The following assumptions were used in determining the fair value of options granted to employees during the years ended December 31, 2022 and 2021:

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80.55 – 85.26

The performance conditions underlying the performance-based awards are not probable of achievement as of December 31, 2021.

Therefore, no compensation expense has been recorded for these awards.

At December 31, 2021, total unrecognized compensation expense related to performance-based awards was insignificant.

As of December 31, 2021, the Company had unrecognized equity-based compensation expense of $ 19.7 million related to stock options issued to employees and directors, excluding performance-based awards for which vesting is not considered probable, which is expected to be recognized over a weighted average period of 3.11 years.

During the year ended December 31, 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 continued to vest.

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

Because the services to be performed during the consulting period were 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 year ended December 31, 2021.

As of December 31, 2022, the Company had unrecognized equity-based compensation expense of $ 16.8 million related to stock options issued to employees and directors, which is expected to be recognized over a weighted average period of 2.58 years.

Restricted Stock

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Unvested as of December 31, 2022

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

No restricted stock awards were granted during the year ended December 31, 2021.

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.

The Company recorded equity-based compensation expense for restricted stock granted to employees, directors and non-employees of $ 0.4 million and $ 0.5 million for the years ended December 31, 2022 and 2021, respectively.

During the year ended December 31, 2021, the aggregate fair value of the restricted stock awards that vested was $ 1.0 million.

During the years ended December 31, 2022 and 2021, the aggregate fair value of the restricted stock awards that vested was $ 0.3 million and $ 1.0 million, respectively.

As of December 31, 2022, total unrecognized compensation cost related to unvested restricted stock awards was approximately $ 0.3 million, which is expected to be recognized over a weighted-average period of 0.94 years.

Incentive Units

Prior to the Reorganization, the Company periodically granted incentive units to employees, directors and non-employees.

The incentive units represented a separate substantive class of equity with defined rights within the LLC Agreement then in effect.

The incentive units represented profits interests in the Company, which was an interest in the increase in the value of the Company over the strike price, or threshold dollar amount, determined at the time of grant.

The holder, therefore, had the right to participate in distributions of profits only in excess of the threshold dollar amount.

The threshold dollar amount was based on the valuation of the Company’s common units on or around the grant date.

The Company determined that incentive units issued to employees, directors and non-employees were analogous to share-based payments and, as such, the Company measured and recognized the related compensation expense in a manner consistent with its accounting policy for its other equity-based awards.

Pursuant to the LLC Agreement, the board of directors established a threshold dollar amount with respect to each incentive unit grant equal to the value of each common unit, determined by the amount of distributions that the holder of such a common unit would be entitled to receive in a hypothetical liquidation of the Company on the date of issuance of such incentive unit.

Incentive unit grants generally vested over a four-year period.

Certain grants vested upon the achievement of specific performance based milestones.

If there was a liquidation or sale of the Company or one of the Company’s subsidiaries, a fair market value analysis would have been performed to determine the value of the common unit.

If the value of the common unit was to be determined to have been greater than the threshold set upon the date of grant, then the holder of the common incentive unit would have been entitled to receive

proceeds from such liquidation or sale.

Unvested incentive units were automatically cancelled and forfeited without any consideration upon termination of the participant’s continuous service to the Company.

At December 31, 2018, 3,570,000 incentive units were authorized to be granted.

In June 2019, the Company amended and restated its LLC Agreement and increased the total number of incentive units authorized for issuance to 5,830,000 incentive units.

In December 2019 the Company amended its LLC Agreement to increase the authorized number of incentive units available for issuance to 14,669,430 .

As of December 31, 2019, the Company had issued 585,777 incentive units, of which 571,712 units were outstanding.

A summary of the Company’s incentive units through the date of the Reorganization was as follows:

Weighted-average

threshold price

Outstanding at December 31, 2019

Exchanged for restricted common stock pursuant to the Reorganization

( 1,080,858 )

Outstanding at December 31, 2020

The weighted average grant date fair value for incentive units granted during the year ended December 31, 2020 was $ 3.61 per unit.

There were no incentive units granted during the year ended December 31, 2021.

A summary of incentive units vested immediately prior to the date of the Reorganization is as follows:

Vested at December 31, 2019

Vested immediately prior to the Reorganization

Vested as of the Reorganization

Prior to the Reorganization, the Company recorded equity-based compensation expense for incentive units granted to employees, directors and non-employees of approximately $ 0.2 million for the year ended December 31, 2020.

The fair value of the incentive units issued was determined using a Black-Scholes option pricing model with the following assumptions (weighted-average):

Grant date price per common unit

Threshold price per incentive unit

Risk-free interest rate

Expected dividend yield

Expected term (years)

Expected volatility

Reorganization

Pursuant to the Reorganization, outstanding vested and unvested incentive units of Xilio Therapeutics LLC were converted into restricted stock awards in Xilio Therapeutics, Inc.

based upon a determined conversion ratio.

The restricted common stock awards in Xilio Therapeutics, Inc.

were issued with the same vesting terms as the vested and unvested incentive units

held immediately prior to the Reorganization.

An aggregate of 552,546 shares of restricted common stock were issued to holders of incentive units in connection with the Reorganization.

The Company accounted for the exchange of incentive units in Xilio Therapeutics LLC for restricted common stock of Xilio Therapeutics, Inc.

as a modification in accordance with the requirements of ASC Topic 718.

Accordingly, the Company determined the fair value of the replacement awards was less than the fair value of the incentive units exchanged in connection with the Reorganization and therefore no incremental compensation expense will be recognized related to the modification.

As the vesting and service period of the replacement awards did not change from the originally issued incentive awards, the Company will continue to recognize the grant date fair value of the incentive units as compensation expense over the remaining vesting period.

Net Loss Per Share

The following table sets forth the outstanding common stock equivalents, presented based on amounts outstanding at each period end, that were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have been anti-dilutive.

Convertible preferred stock

Unvested restricted common stock

Outstanding stock options

Unvested employee stock purchase plan shares

Total common stock equivalents

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Effective income tax rate

Deferred tax assets consist of the following at December 31, 2021 and 2020 (in thousands):

Deferred tax assets consist of the following as of December 31, 2022 and 2021 (in thousands):

Year Ended December 31,

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Research and development credit carryforwards

Capitalized research and development expenditures

Lease liability

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Based on this, the Company has provided a valuation allowance for the full amount of the net deferred tax assets as the realization of the deferred tax assets is not determined to be more likely than not.

During the year ended December 31, 2021, the valuation allowance increased by $ 21.7 million primarily due to the increase in the Company’s book loss reported in the period and the generation of additional research and development credits.

During the year ended December 31, 2022, the valuation allowance increased by $ 24.3 million primarily due to the increase in the Company’s book loss reported in the period, capitalized research and development expenditures and the generation of additional research and development credits.

As of December 31, 2022, the Company had $ 177.5 million and $ 146.6 million of federal and state operating loss carryforwards, respectively.

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and provides transition and interim period guidance, among other provisions.

As of December 31, 2021, and 2020, the Company has not recorded tax reserves associated with any unrecognized tax benefits.

The Company’s

policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its statements of income.

As of December 31, 2022,

and 2021, the Company has not recorded tax reserves associated with any unrecognized tax benefits.

The Company’s policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its statements of income.

As of December 31, 2022, and 2021, the Company had no reserves for uncertain tax positions.

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Thus, there would be no impact to the consolidated balance sheets or statements of operations and comprehensive loss if an adjustment were required.

The 2017 Tax Cuts and Jobs Act (“TCJA”) included a multitude of tax provisions, including several deferred changes that became effective for tax years ending after December 31, 2021.

Included in the provisions was the TCJA’s amendment to Section 174 of the Internal Revenue Code of 1986, as amended (“Section 174”), which now requires U.S.-based and non-U.S-based research and experimental expenditures to be capitalized and amortized over a period of five or 15 years, respectively, for amounts paid in tax years starting after December 31, 2021.

Prior to the TCJA amendment, Section 174 allowed taxpayers to either immediately deduct research and experimental expenditures in the year paid or incurred.

The Company has applied this required change in accounting method beginning in 2022.

The Company’s tax returns remain open to examination by the Internal Revenue Service and the Commonwealth of Massachusetts for the years ended December 31, 2019 to December 31, 2021.

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401(k) Plan (the “401(k) Plan”).

The 401(k) Plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis.

The Company is not required to make and has not made any contributions to the 401(k) Plan through December 31, 2021.

The 401(k) Plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis or post-tax basis, up to the maximum amount prescribed by statute.

The Company incurred an expense related to contributions on behalf of employees of $ 0.3 million to the 401(k) Plan during the year ended December 31, 2022.

The Company did not incur an expense related to contributions on behalf of employees to the 401(k) Plan during the year ended December 31, 2021.

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-K

Item 9A. Controls and Procedures