What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-09 · 110 added, 186 removed, 170 unchanged (64% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

September 30,

Current assets

11 unchanged sentences

Operating lease liability, current portion

Notes payable, current portion

Note payable, current portion

Other current liabilities

Total current liabilities

Notes payable, net of current portion

Note payable, net of current portion

Operating lease liability, net of current portion

Other liabilities, long-term

Other non-current liabilities

Total liabilities

2 unchanged sentences

Preferred stock, $ 0.0001 par value;

5,000,000 shares authorized, no shares issued or outstanding at September 30, 2022 and December 31, 2021

5,000,000 shares authorized, no shares issued or outstanding

Common stock, $ 0.0001 par value;

200,000,000 shares authorized at September 30, 2022 and December 31, 2021;

27,471,607 shares issued and 27,407,149 shares outstanding at September 30, 2022;

200,000,000 shares authorized at March 31, 2023 and December 31, 2022;

27,470,534 shares issued and 27,439,820 shares outstanding at March 31, 2023;

27,471,607 shares issued and 27,425,447 shares outstanding at December 31, 2022

7 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating expenses

11 unchanged sentences

XILIO THERAPEUTICS, INC.

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

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

Preferred Stock

Stockholders’

1 unchanged sentence

Balance at December 31, 2022

Issuance of Series B convertible preferred stock, net of issuance costs of $ 50

Issuance of Series C convertible preferred stock, net of issuance costs of $ 314

Vesting of restricted common stock

Exercise of stock options

Equity-based compensation expense

Stock-based compensation expense

Balance at March 31, 2023

Vesting of restricted common stock

Exercise of stock options

Equity-based compensation expense

Balance at June 30, 2021

Vesting of restricted common stock

Exercise of stock options

Equity-based compensation expense

Balance at September 30, 2021

Preferred Stock

Stockholders’

3 unchanged sentences

Exercise of stock options

Equity-based compensation expense

Stock-based compensation expense

Balance at March 31, 2022

Vesting of restricted common stock

Equity-based compensation expense

Balance at June 30, 2022

Vesting of restricted common stock

Equity-based compensation expense

Balance at September 30, 2022

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

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Non-cash interest expense

Equity-based compensation expense

Loss on disposal of property and equipment

Change in fair value of warrant and derivative liabilities

Stock-based compensation expense

Changes in operating assets and liabilities:

10 unchanged sentences

Repayments of debt principal

Proceeds from debt issuance, net of issuance costs

Payments of finance lease

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

Proceeds from exercise of stock options

Net cash (used in) provided by financing activities

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

Net cash used in financing activities

Decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

4 unchanged sentences

Capital expenditures included in accounts payable or accrued expenses

Deferred offering costs included in accounts payable or accrued expenses

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

Reconciliation to amounts within the consolidated balance sheets:

Cash and cash equivalents

Restricted cash

Cash, cash equivalents and restricted cash, end of period

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

2 unchanged sentences

(Dollars in thousands, unless otherwise stated)

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

Description of Business and Liquidity and Capital Resources

Description of Business

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 based 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.

(“Xilio” or the “Company”) is a clinical-stage biotechnology company dedicated to discovering and developing tumor-activated immuno-oncology (“I-O”) therapies with the goal of significantly improving outcomes for people living with cancer without the systemic side effects of current I-O treatments.

The Company was incorporated in Delaware in June 2020, and its headquarters are located in Waltham, Massachusetts.

Liquidity and Capital Resources

4 unchanged sentences

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

As of September 30, 2022, the Company had cash and cash equivalents of $ 139.1 million.

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 condensed consolidated financial statements.

As of March 31, 2023, the Company had cash and cash equivalents of $ 93.3 million.

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 end of the second quarter of 2024, which is at least twelve months from the date of issuance of these condensed consolidated financial statements.

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

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

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 its initial public offering (“IPO”), completed in the fourth quarter of 2021, in which the Company received net proceeds of $ 116.4 million.

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.

2 unchanged sentences

Basis of Presentation

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

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

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

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

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

Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.

Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

The Company has elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that the Company either (1) irrevocably elects to “opt out” of such extended transition period or (2) no longer qualifies as an emerging growth company.

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

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

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

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

The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

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

GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).

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

GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations.

Accordingly, these financial

statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2022 and notes thereto, included in the Company’s Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission (“SEC”) on March 2, 2023.

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

In the opinion of the Company’s management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of March 31, 2023 and the results of its operations and cash flows for the three months ended March 31, 2023 and March 31, 2022.

Such adjustments are of a normal and recurring nature.

The results for the three months ended March 31, 2023 are not necessarily indicative of the results for the year ending December 31, 2023 or for any future period.

Principles of Consolidation

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

Xilio Development, Inc., 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.

as the surviving corporation.

Xilio Development, Inc., a Delaware corporation and Xilio Securities Corporation, a Massachusetts security corporation.

All intercompany accounts and transactions have been eliminated in consolidation.

2 unchanged sentences

There have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Unaudited Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated financial statements are unaudited.

The financial data and other information contained in these notes are also unaudited.

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

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2022, the results of its operations for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021.

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

The results for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ended December 31, 2022, or any other interim periods, or any future year or period.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of expenses during the reporting period.

Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements.

Factors that may affect estimates include expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends.

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

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

Actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

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

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 condensed consolidated balance sheets.

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

September 30,

Cash and cash equivalents

Restricted cash

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

Recently Adopted 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 , as amended (“ASU 2016-13”).

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

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

In August 2020, the FASB issued ASU No.

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

derivatives scope exception for contracts in an entity’s own equity.

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

Fair Value Measurements

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

The fair value of these assets was determined as follows:

September 30,

Financial assets:

Cash equivalents—money market funds

Total financial assets

Financial assets:

Cash equivalents—money market funds

Total financial assets

During the nine months ended September 30, 2022 and 2021, there were no transfers between Level 1, Level 2, and Level 3.

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents.

The Company holds all cash and cash equivalents at accredited financial institutions.

Bank accounts in the United States are generally insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

Substantially all of the Company’s cash and cash equivalents are FDIC insured, including funds held through an insured cash sweep program.

The Company has not experienced any losses in its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Property and Equipment, Net

Property and equipment, net consists of the following as of September 30, 2022 and December 31, 2021:

September 30,

Property and equipment, net consists of the following as of March 31, 2023 and December 31, 2022:

Laboratory equipment

4 unchanged sentences

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 of $ 1.3 million and $ 1.0 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company incurred depreciation and amortization expense related to property and equipment of $ 0.5 million and $ 0.4 million for the three months ended March 31, 2023 and 2022, respectively.

Accrued Expenses

Accrued expenses consist of the following as of September 30, 2022 and December 31, 2021:

September 30,

Accrued expenses consist of the following as of March 31, 2023 and December 31, 2022:

External research and development

3 unchanged sentences

Loan and Security Agreement

In November 2019, the Company entered into a loan and security agreement with Pacific Western Bank (“PacWest”), as amended (the “Loan Agreement”), pursuant to which the Company borrowed $ 10.0 million under a term loan and has the ability to request one or more additional term loans in an aggregate principal amount of $ 10.0 million prior to December 31, 2022.

In November 2019, the Company’s wholly owned subsidiary, Xilio Development, Inc.

(“Borrower”), entered into a loan and security agreement (as amended and restated in May 2023, the “Loan Agreement”) with Pacific Western Bank (“PacWest”), with the Company as a guarantor.

Under the Loan Agreement, in November 2019, the Borrower 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 of September 30, 2022 the interest rate on the term loan is 6.5 %.

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 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 October 2021 upon the closing of the IPO.

As of March 31, 2023, the interest rate on the term loan was 8.25 %.

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

The Borrower 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.

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.

As security for its obligations under the Loan Agreement, the Company granted PacWest a first priority security interest on substantially all of the Company’s assets (other than intellectual property), subject to certain exceptions.

As security for its obligations under the Loan Agreement, the Borrower granted PacWest a first priority security interest on substantially all of the Borrower’s assets, excluding intellectual property, subject to certain exceptions.

The Company has determined that the risk of subjective acceleration under the material adverse effect clause is not probable and therefore has classified the long-term portion of the outstanding principal in non-current liabilities.

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

As of September 30, 2022, the Company was in compliance with all covenants under the Loan Agreement.

The Company has the following minimum aggregate future loan payments under the Loan Agreement as of September 30, 2022:

As of March 31, 2023, the Company and Borrower were in compliance with all covenants under the Loan Agreement.

The Borrower has the following minimum aggregate future loan principal payments under the Loan Agreement as of March 31, 2023:

2023 (remaining nine months)

Total future principal payments

unamortized discount

Total notes payable

The Company recognized $ 0.5 million of interest expense related to the Loan Agreement during each of the nine months ended September 30, 2022 and 2021, respectively, which is reflected in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss.

Total note payable

The Company recognized $ 0.2 million of interest expense related to the Loan Agreement for each of the three months ended March 31, 2023 and 2022, which is reflected in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss.

Commitments and Contingencies

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

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

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

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

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

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

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

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

As of September 30, 2022, the Company has a letter of credit for the benefit of its landlord in the amount of $ 1.6 million, collateralized by a money market fund, which is classified as restricted cash on the condensed consolidated balance sheets.

As of March 31, 2023 and December 31, 2022, the Company had a letter of credit for the benefit of its landlord in the amount of $ 1.6 million, collateralized by a money market account, which is recorded as restricted cash on the condensed consolidated balance sheets.

Preferred Stock and Common Stock

Undesignated Preferred Stock

As of September 30, 2022 and December 31, 2021, the Company’s certificate of incorporation, as amended, authorized the Company to issue up to 5,000,000 shares of undesignated preferred stock at $ 0.0001 par value per share.

Convertible Preferred Stock

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

As of September 30, 2022 and December 31, 2021, the Company’s certificate of incorporation, as amended, authorized the Company to issue up to 200,000,000 shares of common stock, $ 0.0001 par value per share.

As of March 31, 2023 and December 31, 2022, the Company’s certificate of incorporation, as amended, authorized the Company to issue up to 5,000,000 shares of undesignated preferred stock at $ 0.0001 par value per share.

As of March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding.

As of March 31, 2023 and December 31, 2022, the Company is authorized to issue up to 200,000,000 shares of common stock, $ 0.0001 par value per share under its certificate of incorporation, as amended.

Shares Reserved for Future Issuance

As of September 30, 2022 and December 31, 2021, the Company had reserved shares of common stock for future issuance, including under the Company’s 2020 Stock Incentive Plan (as amended, the “2020 Plan”), 2021 Stock Incentive Plan (the “2021 Plan”) and 2021 Employee Stock Purchase Plan (the “2021 ESPP”) as follows:

September 30,

As of March 31, 2023 and December 31, 2022, 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 2022 Inducement Stock Incentive Plan (the “2022 Inducement Plan”) and the 2021 Employee Stock Purchase Plan (the “2021 ESPP”) as follows:

Shares of common stock reserved for exercise of a warrant

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

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

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

Shares of common stock reserved for exercise of outstanding stock options under the 2021 Plan and 2020 Plan

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

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

Shares of common stock reserved for purchase under the 2021 ESPP

Total shares reserved for future issuance

Equity-Based Compensation

Stock-Based Compensation

Equity Incentive Plans

2020 Stock Incentive Plan

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

In 2020, the Company adopted the 2020 Plan.

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

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

2021 Stock Incentive Plan

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

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

In 2021, the Company’s board of directors and stockholders adopted the 2021 Plan, which became effective immediately prior to the IPO in October 2021.

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

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

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

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

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

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

As of September 30, 2022, there were 2,809,865 shares available for future issuance under the 2021 Plan.

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 2021 Plan 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 the Company 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;

On January 1, 2023, the number of shares reserved for issuance under the 2021 Plan automatically increased by 1,373,580 shares.

As of March 31, 2023, there were 3,096,174 shares available for future issuance under the 2021 Plan.

2022 Inducement Plan

In 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), stock-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 March 31, 2023, no shares have been granted under the 2022 Inducement Plan.

2021 Employee Stock Purchase Plan

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

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

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

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

As of September 30, 2022, no offering periods have commenced under the 2021 ESPP.

Equity-Based Compensation Expense

During the three and nine months ended September 30, 2022 and 2021, the Company recorded compensation expense related to stock options and restricted common stock for employees and non-employees, which was allocated as follows in the condensed consolidated statements of operations and comprehensive loss:

Three Months Ended September 30,

Nine Months Ended September 30,

In 2021, the Company’s board of directors and stockholders adopted the 2021 ESPP, which became effective immediately prior to the IPO in October 2021.

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

In addition, the 2021 ESPP provides that the number of shares of common stock reserved for issuance under the 2021 ESPP will be cumulatively increased on January 1 of each calendar year by the lesser of (i) 584,062 shares of common stock, (ii) 1 % of the number of shares of the Company’s common stock outstanding on such date, and (iii) a number of shares of common stock as determined by the Company’s board of directors.

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

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

As of March 31, 2023, no shares have been issued under the 2021 ESPP.

As of March 31, 2023, there were 841,436 shares available for future issuance under the 2021 ESPP.

Stock-Based Compensation Expense

During the three months ended March 31, 2023 and 2022, the Company recorded compensation expense related to stock options and restricted common stock for employees and non-employees, which was allocated as follows in the condensed consolidated statements of operations and comprehensive loss:

Three Months Ended March 31,

Research and development expense

General and administrative expense

Total equity-based compensation expense

For the nine months ended September 30, 2022 and 2021, general and administrative equity-based compensation expense includes $ 0.6 million and $ 0.2 million, respectively, in non-recurring compensation expense resulting from the modification of previously issued stock options.

Total stock-based compensation expense

Stock Options

A summary of stock option activity under the 2021 Plan is as follows:

A summary of stock option activity under the Company’s 2020 Plan, 2021 Plan and 2022 Inducement Plan is as follows:

Stock Options

3 unchanged sentences

Cancelled/forfeited

Outstanding as of September 30, 2022

Exercisable as of September 30, 2022

Vested and expected to vest as of September 30, 2022

Using the Black-Scholes option pricing model, the weighted average fair value of options granted to employees and directors during the nine months ended September 30, 2022 and 2021 was $ 5.88 and $ 5.16 , respectively.

The following assumptions were used in determining the fair value of options granted during the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

Outstanding as of March 31, 2023

Exercisable as of March 31, 2023

(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 three months ended March 31, 2023 and 2022 was $ 1.95 and $ 8.83 , respectively.

The following assumptions were used in determining the fair value of options granted during the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

Risk-free interest rate

3 unchanged sentences

80.75 – 80.92

80.60 – 85.26

The achievement of the performance conditions underlying outstanding performance-based awards was not probable as of September 30, 2022;

therefore, no compensation expense was recorded for these awards.

As of September 30, 2022, total unrecognized compensation costs related to performance-based awards was less than $ 0.1 million.

As of September 30, 2022, total unrecognized compensation cost related to unvested stock options, excluding performance-based awards, was approximately $ 18.4 million, which is expected to be recognized over a weighted-average period of 2.76 years.

As of March 31, 2023, the Company had unrecognized stock-based compensation expense of $ 16.1 million related to stock options issued to employees and directors, which is expected to be recognized over a weighted-average period of 2.75 years.

Restricted Stock

3 unchanged sentences

Canceled/Forfeited

Unvested as of September 30, 2022

Unvested as of March 31, 2023

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

During the nine months ended September 30, 2022, the aggregate fair value of the restricted stock awards that vested was $ 0.3 million.

As of September 30, 2022, total unrecognized compensation cost related to unvested restricted stock awards was approximately $ 0.4 million, which is expected to be recognized over a weighted-average period of 1.13 years.

The Company did no t record a provision or benefit for income taxes during the nine months ended September 30, 2022 and 2021.

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

The Company has evaluated the positive and negative evidence involving its ability to realize its deferred tax assets and has considered its history of cumulative net losses incurred since inception and its lack of any commercially ready products.

The Company has concluded that it is more likely than not that it will not realize the benefits of its deferred tax assets.

The Company reevaluates the positive and negative evidence at each reporting period.

During the three months ended March 31, 2023 and 2022, the aggregate fair value of the restricted stock awards that vested was less than $ 0.1 million and $ 0.2 million, respectively.

As of March 31, 2023, total unrecognized stock-based compensation expense related to unvested restricted stock awards was $ 0.2 million, which is expected to be recognized over a weighted-average period of 0.80 years.

Net Loss Per Share

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

Nine Months Ended

September 30,

Convertible preferred stock

Three Months Ended

Unvested restricted common stock

Outstanding stock options

Unvested employee stock purchase plan shares

Total common stock equivalents

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

What changed 10-Q

Item 1. Financial Statements