Xilio Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures 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 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 Chief Executive Officer (our principal executive officer) and our Senior Vice President, Finance and Accounting (our principal financial and accounting officer) evaluated the effectiveness of our disclosure controls and procedures as of 136 Table of Contents December 31, 2023. Based upon such evaluation, our Chief Executive Officer and Senior Vice President, Finance and Accounting have concluded that, as of December 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level. Management’s Annual Report on Internal Control over Financial Reporting Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and our principal 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; and (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 officer and our principal 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, 2023. 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.” 137 Table of Contents Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Annual Report on Form 10-K that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information On March 30, 2024, Tomas Heyman notified us of his resignation as a Class I director, effective as of our 2024 annual meeting of stockholders, which is currently expected to be held in June 2024. Mr. Heyman’s resignation did not result from any disagreement with us on any matter relating to our operations, policies or practices. Director and Officer Trading Arrangements A portion of the compensation of our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) is in the form of equity awards and, from time to time, directors and officers may engage in open-market transactions with respect to the securities acquired pursuant to such equity awards or other of our securities, including to satisfy tax withholding obligations when equity awards vest or are exercised, and for diversification or other personal reasons. Transactions in our securities by directors and officers are required to be made in accordance with our insider trading policy, which requires that the transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables directors and officers to prearrange transactions in our securities in a manner that could negate a claim of insider trading for transactions undertaken while in possession of material nonpublic information. None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as such terms are defined in Items 408(a) and 408(c) of Regulation S-K, respectively) during the fourth quarter of 2024. Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections Not applicable. PART III Item 10. Directors, Executive Officers, and Corporate Governance Except to the extent provided below, the information required by this Item 10 will be included in our definitive proxy statement to be filed with the Securities and Exchange Commission, or the SEC, with respect to our 2024 Annual Meeting of Stockholders within 120 days of the end of the fiscal year to which this report relates, which information is incorporated herein by reference. 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. 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. Item 11. Executive Compensation The information required by this Item 11 will be included in the section captioned “Executive Compensation” in our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the 138 Table of Contents end of the fiscal year to which this Annual Report on Form 10-K relates, which information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12 will be included in the section captioned “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for our 2024 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. Item 13. 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 for Related Person Transactions” and “Director Independence” in our definitive proxy statement for our 2024 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. Item 14. Principal Accountant’s Fees and Services The information required by this Item 14 will be included in the section captioned “Audit Fees and Services” our definitive proxy statement for our 2024 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. 139 Table of Contents Part IV Item 15. Exhibits and Financial Statement Schedules (1) Financial Statements ​ The following documents are included on pages set forth in Part II, Item 8 of this Annual Report on Form 10-K and are filed as part of this Annual Report on Form 10-K. ​ Index to Consolidated Financial Statements ​ Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 ​ (2) Financial Statement Schedules ​ All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto. ​ (3) Exhibits ​ The following is a list of exhibits filed as part of this Annual Report on Form 10-K. ​ EXHIBIT INDEX ​ ​ ​ ​ ​ ​ Incorporated by Reference ​ ​ Exhibit Number Description of Exhibit Form File No. Exhibit Number Filing Date ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3.1 ​ Restated Certificate of Incorporation of the Registrant ​ 8-K ​ 001-40925 ​ 3.1 ​ October 26, 2021 3.2 ​ Second Amended and Restated Bylaws of the Registrant ​ 8-K ​ 001-40925 ​ 3.1 ​ April 3, 2023 4.1 ​ Specimen Stock Certificate evidencing the shares of common stock ​ S-1 ​ 333-259973 ​ 4.1 ​ October 1, 2021 4.2 ​ Form of Prefunded Warrant ​ 8-K ​ 001-40925 ​ 4.1 ​ March 28, 2024 4.3 ​ Description of the Registrant’s securities registered pursuant to Section 12 of the Securities and Exchange Act of 1934, as amended ​ 10-K ​ 001-40925 ​ 4.3 ​ March 1, 2022 10.1 ​ 2020 Stock Incentive Plan, as amended ​ S-1 ​ 333-259973 ​ 10.2 ​ October 1, 2021 10.2 ​ Form of Stock Option Agreement under 2020 Stock Incentive Plan ​ S-1 ​ 333-259973 ​ 10.3 ​ October 1, 2021 10.3 ​ Form of Restricted Stock Agreement under 2020 Stock Incentive Plan ​ S-1 ​ 333-259973 ​ 10.4 ​ October 1, 2021 10.4 ​ 2021 Stock Incentive Plan ​ S-1 ​ 333-259973 ​ 10.5 ​ October 18, 2021 10.5 ​ Form of Stock Option Agreement under the 2021 Stock Incentive Plan ​ S-1 ​ 333-259973 ​ 10.6 ​ October 18, 2021 10.6 ​ Form of Non-Employee Director Stock Option Agreement under the 2021 Stock Incentive Plan ​ S-1 ​ 333-259973 ​ 10.7 ​ October 18, 2021 140 Table of Contents 10.7 ​ Form of Restricted Unit Agreement under the 2021 Stock Incentive Plan ​ 8-K ​ 001-40925 ​ 10.1 ​ January 3, 2024 10.8 ​ 2021 Employee Stock Purchase Plan ​ S-1 ​ 333-259973 ​ 10.8 ​ October 18, 2021 10.9 ​ 2022 Inducement Stock Incentive Plan ​ 10-K ​ 001-40925 ​ 10.8 ​ March 2, 2023 10.10 ​ Form of Stock Option Agreement under the 2022 Inducement Stock Incentive Plan ​ 10-K ​ 001-40925 ​ 10.9 ​ March 2, 2023 10.11 ​ Form of Restricted Stock Unit Agreement under the 2022 Inducement Stock Incentive Plan ​ 10-K ​ 001-40925 ​ 10.10 ​ March 2, 2023 10.12 ​ Sales Agreement, dated September 9, 2022, by and between the Registrant and Cowen and Company, LLC ​ S-3 ​ 333-268264 ​ 1.2 ​ November 9, 2022 10.13# ​ Employment Agreement, dated September 30, 2021, by and between the Registrant and René Russo ​ S-1 ​ 333-259973 ​ 10.15 ​ October 1, 2021 10.14# ​ Amended and Restated Employment Agreement, dated June 15, 2022, by and between the Registrant and Martin Huber, M.D. ​ 8-K ​ 001-40925 ​ 10.1 ​ June 16, 2022 10.15# ​ Consulting Agreement, dated September 8, 2023, by and between the Registrant and Martin Huber, M.D. ​ 10-Q ​ 001-40925 ​ 10.3 ​ November 9, 2023 10.16# ​ Second Amended and Restated Employment Agreement, dated August 3, 2023, by and between the Registrant and Christopher Frankenfield ​ 8-K ​ 001-40925 ​ 10.1 ​ August 3, 2023 10.17# ​ Employment Agreement, dated September 5, 2023, by and between the Registrant and Kevin Brennan ​ 8-K ​ 001-40925 ​ 10.1 ​ September 5, 2023 10.18# ​ Employment Agreement, dated September 5, 2023, by and between the Registrant and Katarina Luptakova, M.D . ​ ​ ​ ​ ​ ​ ​ * 10.19 ​ Form of Indemnification Agreement between the Registrant and each of its Executive Officers and Directors ​ S-1 ​ 333-259973 ​ 10.20 ​ October 1, 2021 10.20 ​ Amended and Restated Non-Employee Director Compensation Policy ​ 10-Q ​ 001-40925 ​ 10.1 ​ August 14, 2023 10.21† ​ Cross-License Agreement, dated as of December 16, 2020, by and between the Registrant and AskGene Pharma, Inc. ​ S-1 ​ 333-259973 ​ 10.11 ​ October 1, 2021 10.22† ​ Amended and Restated Exclusive License Agreement, dated as of August 16, 2016, by and between the Registrant and City of Hope ​ S-1 ​ 333-259973 ​ 10.12 ​ October 1, 2021 10.23† ​ License Agreement, dated as of September 26, 2016, as amended, by and between the Registrant and WuXi Biologics (Hong Kong) Limited ​ S-1 ​ 333-259973 ​ 10.13 ​ October 1, 2021 10.24 ​ Lease, dated as of August 26, 2019, by and between the Registrant and PPF OFF 828-830 Winter Street, LLC ​ S-1 ​ 333-259973 ​ 10.14 ​ October 1, 2021 10.25 ​ Securities Purchase Agreement, dated March 28, 2024, among the Registrant and the persons party thereto ​ 8-K ​ 001-40925 ​ 10.1 ​ March 28, 2024 10.26 ​ Registration Rights Agreement, dated March 28, 2024, among the Registrant and the persons party thereto ​ 8-K ​ 001-40925 ​ 10.2 ​ March 28, 2024 21.1 ​ Subsidiaries of the Registrant ​ ​ ​ ​ ​ ​ ​ * 23.1 ​ Consent of Ernst & Young LLP, independent registered public accounting firm ​ ​ ​ ​ ​ ​ ​ * 31.1 ​ 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 ​ ​ ​ ​ ​ ​ ​ * 141 Table of Contents 31.2 ​ 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 ​ ​ ​ ​ ​ ​ ​ * 32.1+ ​ Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ​ ​ ​ ​ ​ ​ ​ * 97# ​ Executive Compensation Clawback Policy ​ ​ ​ ​ ​ ​ ​ * 101.INS ​ XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document ​ ​ ​ ​ ​ ​ ​ * 101.SCH ​ Inline XBRL Taxonomy Extension Calculation Linkbase Document ​ ​ ​ ​ ​ ​ ​ * 101.CAL ​ Inline XBRL Taxonomy Extension Definition Linkbase Document ​ ​ ​ ​ ​ ​ ​ * 101.DEF ​ Inline XBRL Taxonomy Extension Label Linkbase Document ​ ​ ​ ​ ​ ​ ​ * 101.LAB ​ Inline XBRL Taxonomy Extension Presentation Linkbase Document ​ ​ ​ ​ ​ ​ ​ * 104 ​ Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) ​ ​ ​ ​ ​ ​ ​ ​ * Filed herewith. # Indicates management contract or compensatory plan or arrangement. † Portions of this exhibit have been omitted pursuant to Item 601 of Regulation S-K promulgated under the Securities Act because the information is not material and is a type of information that the registrant treats as private or confidential. + The certifications attached as Exhibit 32.1 are being furnished solely to accompany this Annual Report on Form 10-K and will not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference into such filing. Item 16. Form 10-K Summary None. 142 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ ​ ​ ​ ​ ​ XILIO THERAPEUTICS, INC. ​ ​ ​ Date: April 1, 2024 ​ By: /s/ René Russo ​ ​ ​ René Russo ​ ​ ​ President and 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. ​ ​ ​ ​ ​ ​ ​ Signature ​ Title ​ ​ Date ​ ​ ​ ​ ​ ​ /s/ René Russo ​ President, Chief Executive Officer and Director ​ ​ April 1, 2024 René Russo ​ (Principal Executive Officer) ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Kevin Brennan ​ Senior Vice President, Finance and Accounting ​ ​ April 1, 2024 Kevin Brennan ​ (Principal Financial and Accounting Officer) ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Paul J. Clancy ​ Chair of the Board ​ ​ April 1, 2024 Paul J. Clancy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Sara M. Bonstein ​ Director ​ ​ April 1, 2024 Sara M. Bonstein ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Daniel Curran ​ Director ​ ​ April 1, 2024 Daniel Curran ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Tomas J. Heyman ​ Director ​ ​ April 1, 2024 Tomas J. Heyman ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Robert Ross ​ Director ​ ​ April 1, 2024 Robert Ross ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Christina Rossi ​ Director ​ ​ April 1, 2024 Christina Rossi ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Yuan Xu ​ Director ​ ​ April 1, 2024 Yuan Xu ​ ​ ​ ​ ​ ​ ​ ​ 143 Table of Contents ​ Xilio Therapeutics, Inc. Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 42) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 ​ ​ ​ ​ F-1 Table of Contents ​ ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Xilio Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Xilio Therapeutics, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended in conformity with U.S. generally accepted accounting principles. The Company's Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2020. Boston, Massachusetts April 1, 2024 ​ F-2 Table of Contents XILIO THERAPEUTICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 ASSETS ​ ​ Current assets ​ ​ Cash and cash equivalents ​ $ 44,704 ​ $ 120,385 Prepaid expenses and other current assets ​ 3,423 ​ 4,111 Total current assets ​ 48,127 ​ 124,496 Restricted cash ​ 1,587 ​ 1,562 Property and equipment, net ​ 5,942 ​ 7,255 Operating lease right-of-use asset ​ 5,125 ​ 5,585 Other non-current assets ​ 145 ​ 267 Total assets ​ $ 60,926 ​ $ 139,165 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ Current liabilities ​ ​ Accounts payable ​ $ 1,050 ​ $ 3,125 Accrued expenses ​ 10,497 ​ 10,327 Operating lease liability, current portion ​ 1,047 ​ 918 Note payable, current portion ​ 3,315 ​ 6,667 Other current liabilities ​ 48 ​ 82 Total current liabilities ​ 15,957 ​ 21,119 Note payable, net of current portion ​ — ​ 3,165 Operating lease liability, net of current portion ​ 8,142 ​ 9,189 Other non-current liabilities ​ — ​ 45 Total liabilities ​ 24,099 ​ 33,518 Commitments and contingencies (Note 8) ​ ​ Stockholders’ equity ​ ​ Preferred stock, $ 0.0001 par value; 5,000,000 shares authorized, no shares issued or outstanding ​ ​ — ​ ​ — Common stock, $ 0.0001 par value; 200,000,000 shares authorized at December 31, 2023 and December 31, 2022; 27,613,263 shares issued and 27,607,646 shares outstanding at December 31, 2023; 27,471,607 shares issued and 27,425,447 shares outstanding at December 31, 2022 ​ 3 ​ 3 Additional paid-in capital ​ 362,336 ​ 354,752 Accumulated deficit ​ ( 325,512 ) ​ ( 249,108 ) Total stockholders’ equity ​ 36,827 ​ 105,647 Total liabilities and stockholders’ equity ​ $ 60,926 ​ $ 139,165 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-3 Table of Contents XILIO THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 2022 Operating expenses ​ ​ Research and development ​ $ 52,136 ​ $ 59,201 General and administrative ​ 26,997 ​ 29,948 Total operating expenses ​ 79,133 ​ 89,149 Loss from operations ​ ( 79,133 ) ​ ( 89,149 ) Other income, net ​ ​ Other income, net ​ 2,729 ​ 927 Total other income, net ​ 2,729 ​ 927 Net loss and comprehensive loss ​ $ ( 76,404 ) ​ $ ( 88,222 ) Net loss per share, basic and diluted ​ $ ( 2.78 ) ​ $ ( 3.22 ) Weighted average common shares outstanding, basic and diluted ​ 27,496,107 ​ 27,392,087 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-4 Table of Contents ​ XILIO THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-In ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Deficit Equity Balance at December 31, 2021 ​ 27,358,375 ​ $ 3 ​ $ 346,312 ​ $ ( 160,886 ) ​ $ 185,429 Vesting of restricted common stock 64,415 ​ — ​ — ​ — ​ — Exercise of stock options 2,657 ​ — ​ 16 ​ — ​ 16 Stock-based compensation expense — ​ — ​ 8,424 ​ — ​ 8,424 Net loss — ​ — ​ — ​ ( 88,222 ) ​ ( 88,222 ) Balance at December 31, 2022 27,425,447 ​ $ 3 ​ $ 354,752 ​ $ ( 249,108 ) ​ $ 105,647 Issuance of common stock under employee stock purchase plan ​ 140,192 ​ ​ — ​ ​ 194 ​ ​ — ​ ​ 194 Vesting of restricted common stock 39,250 ​ — ​ — ​ — ​ — Exercise of stock options 2,757 ​ — ​ 8 ​ — ​ 8 Stock-based compensation expense — ​ — ​ 7,382 ​ — ​ 7,382 Net loss — ​ — ​ — ​ ( 76,404 ) ​ ( 76,404 ) Balance at December 31, 2023 27,607,646 ​ $ 3 ​ $ 362,336 ​ $ ( 325,512 ) ​ $ 36,827 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-5 Table of Contents XILIO THERAPEUTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net loss $ ( 76,404 ) $ ( 88,222 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ Depreciation and amortization ​ 1,900 ​ 1,847 Non-cash interest expense ​ 157 ​ 223 Stock-based compensation expense ​ 7,382 ​ 8,424 Loss on disposal of property and equipment ​ ​ 3 ​ ​ 1 Changes in operating assets and liabilities: ​ ​ ​ ​ Prepaid and other assets ​ 688 ​ 344 Operating lease right-of-use asset ​ 460 ​ 391 Accounts payable ​ ( 2,063 ) ​ 485 Accrued expenses and other liabilities ​ 175 ​ 1,585 Operating lease liability ​ ( 918 ) ​ ( 801 ) Net cash used in operating activities ​ ( 68,620 ) ​ ( 75,723 ) Cash flows from investing activities: ​ ​ Purchases of property and equipment ​ ( 486 ) ​ ( 1,867 ) Net cash used in investing activities ​ ( 486 ) ​ ( 1,867 ) Cash flows from financing activities: ​ ​ Repayments of debt principal ​ ​ ( 6,667 ) ​ ​ — Payments of finance lease ​ ( 85 ) ​ ( 85 ) Proceeds from issuance of common stock under employee stock purchase plan ​ ​ 194 ​ ​ — Proceeds from exercise of stock options ​ 8 ​ 16 Net cash used in financing activities ​ ( 6,550 ) ​ ( 69 ) Decrease in cash, cash equivalents and restricted cash ​ ( 75,656 ) ​ ( 77,659 ) Cash, cash equivalents and restricted cash, beginning of period ​ 121,947 ​ 199,606 Cash, cash equivalents and restricted cash, end of period $ 46,291 $ 121,947 Supplemental cash flow disclosure: ​ ​ Cash paid for interest $ 573 $ 555 Supplemental disclosure of non-cash activities: ​ ​ ​ Capital expenditures included in accounts payable or accrued expenses ​ $ — ​ $ 19 Reconciliation to amounts within the consolidated balance sheets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 44,704 ​ $ 120,385 Restricted cash ​ ​ 1,587 ​ ​ 1,562 Cash, cash equivalents and restricted cash, end of period ​ $ 46,291 ​ $ 121,947 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-6 Table of Contents XILIO THERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, unless otherwise stated) 1. Description of Business, Liquidity and Going Concern Description of Business Xilio Therapeutics, Inc. (“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 Going Concern Since its inception, the Company has devoted substantially all of its financial resources and efforts to research and development activities. As of December 31, 2023, the Company had an accumulated deficit of $ 325.5 million and has incurred significant operating losses, including net losses of $ 76.4 million and $ 88.2 million for the years ended December 31, 2023 and 2022, respectively. The Company expects its operating losses and negative operating cash flows to continue for the foreseeable future as it continues to advance its product candidates through clinical trials, maintains the infrastructure necessary to support these activities and continues to incur costs associated with operating as a public company. As of December 31, 2023, the Company had cash and cash equivalents of $ 44.7 million. The Company anticipates that its cash and cash equivalents as of December 31, 2023, together with (i) the $ 30.0 million upfront payment under the exclusive license agreement with Gilead Sciences, Inc. (“Gilead”), (ii) the approximately $ 13.5 million in proceeds from the initial private placement with Gilead, which closed on March 28, 2024, and (iii) the approximately $ 11.3 million in gross proceeds from the Company’s private placement, which is expected to close on April 2, 2024 (subject to customary closing conditions), and after giving effect to (a) one-time costs and anticipated future cost savings associated with the Company’s strategic portfolio reprioritization and workforce reduction announced in March 2024 and (b) the repayment in the first quarter of 2024 of the outstanding loan balance under the Company’s loan and security agreement with Pacific Western Bank (“PacWest”), will be sufficient to fund the Company’s operating expenses and capital expenditure requirements into the second quarter of 2025. For further information regarding these transactions and other subsequent events, please see Note 14, Subsequent Events . However, the Company has based this estimate on assumptions that may prove to be wrong, and the Company could exhaust its available capital resources sooner than it anticipates. In addition, since these amounts may not be sufficient to fund its operations for at least twelve months from the date of issuance of the consolidated financial statements, there is substantial doubt about the Company’s ability to continue as a going concern. To continue to fund the operations of the Company, management has developed plans, which in the near term primarily consist of raising additional capital through one or more of the following: additional equity or debt financings; additional collaborations, partnerships or licensing transactions; or other sources. However, there can be no assurance that the Company will be able to complete any such transaction on acceptable terms or otherwise, and the Company may be unable to obtain sufficient additional capital. If the Company is not able to secure sufficient additional capital in the near term, the Company may in the future need to implement additional cost reduction strategies, which could include delaying, limiting, further reducing or eliminating both internal and external costs related to its operations and research and development programs. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. F-7 Table of Contents 2. 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 (“GAAP”) and pursuant to the rules and regulations of the U.S. 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. 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 December 31, 2026, or such earlier time that it is no longer an emerging growth company. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Xilio Development, Inc. (“Xilio Development”), a Delaware corporation, and Xilio Securities Corporation, a Massachusetts corporation. All intercompany accounts and transactions have been eliminated in consolidation. 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 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 consolidated financial statements include, but are not limited to, estimates related to accrued expenses, the valuation of stock-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. Segment Information The Company has one operating segment. Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company’s chief operating decision-maker is its chief executive officer. The Company and its chief operating decision-maker view the Company’s operations and manage its business as a single operating segment. All of the Company’s long-lived assets are held in the United States. F-8 Table of Contents 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. Restricted cash 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. Concentrations of Credit Risk and Significant Suppliers 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 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. The Company is dependent on a third-party manufacturer to supply material and manufacturing process development services for its product candidates and related research and development activities. These research and development programs and activities could be adversely affected by a significant interruption in the supply of such products and services which could have a material adverse effect on the Company’s business, financial position and results of operations. Fair Value Measurements Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: ● Level 1— Quoted prices in active markets for identical assets or liabilities. ● Level 2— Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. ● Level 3— Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The carrying values of the Company’s cash, prepaid expenses, accounts payable and accrued expenses approximate their fair value due to their short-term nature. The carrying value of the Company’s outstanding debt as of December 31, 2023 and 2022 approximates fair value based on the variable interest rate for the borrowings as well as the short duration of the term of the note. F-9 Table of Contents Property and Equipment Property and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets, which are as follows: ​ ​ ​ ​ ​ Estimated Useful Life Computers and software ​ 3 years Laboratory equipment ​ 5 years Furniture and fixtures ​ 5 years Leasehold improvements ​ Shorter of the useful life or the remaining term of the lease ​ Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance that do not improve or extend the lives of the respective assets are charged to expense as incurred, while costs of major additions and betterments are capitalized. Impairment of Long-Lived Assets 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 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. The estimated fair value of the long-lived assets is determined based on the estimated discounted cash flows expected to be generated from the long-lived assets. The Company did not recognize impairment charges during the years ended December 31, 2023 and 2022, respectively. Leases 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 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 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 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. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Certain adjustments to the ROU asset may be required for items such as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments. 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 F-10 Table of Contents 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. Research and Development Costs and Accruals Research and development expenses are expensed as incurred and consist of costs incurred in performing research and development activities, including compensation related expenses for research and development personnel, preclinical and clinical activities including cost of supply and manufacturing process development activities, overhead expenses including facilities expenses, materials and supplies, amounts paid to consultants and outside service providers, and depreciation of equipment. Upfront payments made for the licensing of technology are expensed as research and development expenses in the period in which they are incurred. In general, contingent payments are recognized when it becomes probable the payment will be required. Any contingent payments that qualify as a derivative liability are recognized at fair value on the Company’s consolidated balance sheets. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. The Company records accruals for estimated ongoing research and development costs, including costs associated with contracts with third-party contract research organizations and contract manufacturing organizations. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the preclinical studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs. Collaboration Agreements The Company analyzes its collaboration agreements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC 808, Collaborative Arrangements (“ASC 808”). For arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and which elements of the collaboration are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”). For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, either by analogy to authoritative accounting literature or by applying a reasonable and rational policy election. For collaboration agreements where the Company is reimbursed for a portion of its research and development expenses or participates in the cost-sharing of such research and development expenses, such reimbursements and cost-sharing arrangements are reflected as a reduction of research and development expenses in the Company’s consolidated statements of operations and comprehensive loss, as the Company does not consider performing research and development services for reimbursement to be a part of its ongoing major or central operations. Patent Costs All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss. Stock-Based Compensation The Company issues stock-based awards to employees, directors and non-employees, generally in the form of stock options. The Company measures employee stock-based compensation based on the grant date fair value of the stock-based awards and recognizes stock-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 F-11 Table of Contents Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees, which includes grants of employee stock 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. The Company considers the fair value of common stock to be equal to its current share price. The Company estimates the fair value of stock options using the Black-Scholes option pricing model, which uses as inputs the estimated fair value of common stock, and certain management estimates, including the expected stock price volatility, the expected term of the award, the risk-free rate, and expected dividends. Expected volatility is calculated based on reported volatility data for a representative group of publicly traded companies for which historical information is available. The Company selects companies with comparable characteristics with historical share price information that approximates the expected term of the stock-based awards. The Company computes the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period that approximates the calculated expected term of the stock options. The Company will continue to apply this method until a sufficient amount of historical information regarding the volatility of its stock price becomes available. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The Company uses the simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107, Share-Based Payment , 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 and the plain nature of its stock-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. The Company recognizes forfeitures as they occur. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss consistent with the classification of the award recipient’s salary and related costs or the award recipient’s service payments, as applicable. Comprehensive Loss Comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss includes net loss and the change in accumulated other comprehensive loss for the period. The Company did not have any items of comprehensive income or loss other than net loss for the years ended December 31, 2023 and 2022. Net Loss Per Share The Company calculates basic net loss per share attributable to common stockholders by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, which excludes shares of restricted common stock that are not vested. Diluted net loss per share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding, as applicable, after giving consideration to the dilutive effect of stock options, restricted common stock and warrants that are outstanding during the period. 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. Income Taxes Income taxes for Xilio Therapeutics, Inc. are recorded in accordance with ASC Topic 740, Income Taxes , which provides for deferred taxes using an asset and liability approach. Under this method, deferred income tax assets and liabilities are recognized based on future income tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities, and their respective income tax basis. 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 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. F-12 Table of Contents The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions. The tax benefits recorded are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more likely than not” to be realized following resolution of any uncertainty related to the tax benefit, assuming that the matter in question will be raised by the tax authorities. At December 31, 2023 and 2022, the Company had not identified any significant uncertain tax positions. Recent Accounting Pronouncements Not Yet Adopted In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker. The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures. In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. This Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures. 3. Property and Equipment, Net Property and equipment, net consists of the following as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 Laboratory equipment ​ $ 5,815 ​ $ 5,587 Computers and software ​ 183 ​ 228 Furniture and fixtures ​ 681 ​ 636 Leasehold improvements ​ 5,124 ​ 5,124 Construction in process ​ — ​ 98 Total property and equipment ​ ​ 11,803 ​ ​ 11,673 Less: accumulated depreciation ​ ( 5,861 ) ​ ( 4,418 ) Property and equipment, net ​ $ 5,942 ​ $ 7,255 ​ The Company incurred depreciation and amortization expense related to property and equipment of $ 1.8 million and $ 1.7 million for the years ended December 31, 2023 and 2022, respectively. ​ ​ ​ F-13 Table of Contents 4. Accrued Expenses Accrued expenses consist of the following as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 External research and development ​ $ 4,867 ​ $ 3,178 Personnel-related ​ 4,690 ​ 5,413 Professional and consulting fees ​ 845 ​ 1,536 Other ​ ​ 95 ​ ​ 200 Total accrued expenses ​ $ 10,497 ​ $ 10,327 ​ ​ 5. Loan and Security Agreement In November 2019, the Company’s wholly owned subsidiary, Xilio Development, entered into a loan and security agreement (as amended and restated in May 2023, the “Loan Agreement”) with PacWest, with the Company as a guarantor. Under the Loan Agreement, in November 2019, Xilio Development borrowed $ 10.0 million under a term loan. Interest on amounts outstanding under the Loan Agreement accrued at a variable annual rate equal to the greater of (i) the prime rate plus 0.25 % or (ii) 4.75 %. As of December 31, 2023, the interest rate on the term loan was 8.75 %. Xilio Development was required to make interest-only payments on any outstanding balances through December 31, 2022. Xilio Development commenced making equal monthly payments of principal plus interest in January 2023. As of December 31, 2023, the Company and Xilio Development were in compliance with all covenants under the Loan Agreement. Xilio Development had the following future loan principal payments under the Loan Agreement at December 31, 2023: ​ ​ ​ ​ ​ ​ Minimum Loan ​ ​ Payments 2024 ​ $ 3,333 Total future principal payments ​ 3,333 Less: unamortized discount ​ ( 18 ) Total note payable ​ $ 3,315 ​ The Company recognized $ 0.7 million and $ 0.8 million of interest expense related to the Loan Agreement for the years ended December 31, 2023 and 2022, respectively, which is reflected in other income, net on the consolidated statements of operations and comprehensive loss. In the first quarter of 2024, Xilio Development repaid all amounts outstanding under the Loan Agreement, and PacWest released all security interests in Xilio Development’s and its affiliates’ assets. 6. Collaboration Agreements and Intellectual Property Licenses Clinical Trial Collaboration with F. Hoffmann-La Roche In July 2023, the Company and F. Hoffmann-La Roche Ltd. (“Roche”) entered into a clinical trial collaboration (the “Roche Clinical Collaboration”) pursuant to a clinical supply agreement to evaluate XTX101 in combination with atezolizumab (Tecentriq®) in a Phase 1/2 clinical trial consisting of a Phase 1 dose escalation cohort assessing the combination in patients with advanced solid tumors and a planned Phase 2 clinical trial assessing the combination in patients with microsatellite stable colorectal cancer. Under the clinical supply agreement, the Company is eligible to receive specified cost-sharing payments from Roche, and each company will supply its respective anti-cancer agent to support the Phase 1/2 clinical trial. The Company is responsible for conducting the Phase 1/2 clinical trial and retains global development and commercialization rights to XTX101. F-14 Table of Contents The Company concluded that the cost-sharing payments from the Roche Clinical Collaboration are not in the scope of ASC 606 because the Company does not consider performing research and development services for reimbursement to be part of its ongoing major or central operations. Therefore, the Company applied a reasonable, rational, and consistently applied accounting policy election to record the cost-sharing payments from the Roche Clinical Collaboration as a reduction of research and development expenses in the consolidated statements of operations and comprehensive loss for the period in which a study development event is achieved. During the year ended December 31, 2023, the Company recognized a reduction of research and development expenses of $ 2.0 million. Cross-License Agreement with AskGene In December 2020, Xilio Development entered into a cross-license agreement with AskGene Pharma, Inc. (“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. 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 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. 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. 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. 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, 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 F-15 Table of Contents 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 years ended December 31, 2023 and 2022. 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. CTLA-4 Monoclonal Antibody License Agreement with WuXi Biologics In September 2016, the Company entered into a license agreement with WuXi Biologics (Hong Kong) Limited (“WuXi Biologics”), as amended in December 2017, pursuant to which WuXi Biologics granted the Company an exclusive worldwide license to specified monoclonal antibodies and patent rights and know-how controlled by WuXi Biologics, including certain patent rights related to the Company’s anti-CTLA-4 monoclonal antibody program. For each product that exploits the rights licensed under the agreement, the Company is obligated to pay WuXi Biologics up to approximately $ 25.8 million in the aggregate for specified development and regulatory milestones. 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 no costs related to the payment of specified development milestones under the agreement during the years ended December 31, 2023 and 2022. 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. 7. Leases 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 a right to a five-year option to extend 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 December 31, 2023 and 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 account, which is recorded as restricted cash on the consolidated balance sheets. The components of lease expense were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 ​ 2022 Operating lease cost ​ $ 1,225 ​ $ 1,225 Variable lease cost ​ ​ 982 ​ ​ 959 Total lease costs ​ $ 2,207 ​ $ 2,184 Finance lease cost: ​ ​ Amortization of right-of-use asset ​ $ 85 ​ $ 85 Interest on lease liability ​ 6 ​ 12 F-16 Table of Contents ​ Supplemental balance sheet information related to the leases was as follows (in thousands, except for remaining lease term and discount rates): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ December 31, ​ ​ 2023 ​ 2022 ​ Operating Lease: ​ ​ ​ ​ ​ ​ ​ Operating lease right-of-use asset $ 5,125 ​ $ 5,585 ​ Operating lease liability, current portion $ 1,047 ​ ​ $ 918 ​ Operating lease liability, net of current portion $ 8,142 ​ ​ $ 9,189 ​ Finance Lease: ​ ​ ​ Other non-current assets $ 134 ​ ​ $ 219 ​ Other current liabilities 48 ​ ​ 82 ​ Other liabilities, long-term — ​ ​ 45 ​ Weighted-average remaining lease term (in years): ​ ​ ​ Operating lease 6.2 ​ ​ 7.2 ​ Finance lease 0.7 ​ ​ 1.7 ​ Weighted-average discount rate: ​ ​ ​ Operating lease 8.0 % ​ 8.0 % Finance lease 6.9 % ​ 6.9 % ​ Supplemental cash flow information related to leases was as follows: ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 ​ 2022 Cash paid for amounts included in the measurement of lease liabilities: ​ ​ Operating cash flows from operating leases $ 1,683 $ 1,634 Financing cash flows from finance leases 85 85 ​ Future minimum lease payments under non-cancellable leases as of December 31, 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Lease Finance Lease 2024 ​ $ 1,733 ​ $ 49 2025 ​ 1,785 ​ — 2026 ​ 1,839 ​ — 2027 ​ 1,894 ​ — 2028 ​ 1,951 ​ — Thereafter ​ 2,516 ​ — Total future minimum lease payments ​ ​ 11,718 ​ ​ 49 Present value adjustment ​ ( 2,529 ) ​ ( 1 ) Present value of lease liabilities ​ $ 9,189 ​ $ 48 ​ F-17 Table of Contents 8. Commitments and Contingencies Indemnification Agreements In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. 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’ 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, 2023 or 2022. Legal Proceedings The Company is not currently a party to any material legal proceedings. 9. Preferred Stock and Common Stock Undesignated Preferred Stock As of December 31, 2023 and 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 December 31, 2023 and 2022, there were no shares of preferred stock issued or outstanding. Common Stock As of December 31, 2023 and 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. 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: Voting The holders of shares of common stock are 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. Dividends The holders of shares of common stock are entitled to receive dividends, if and when declared by the Company’s board of directors. No dividends have been declared by the Company’s board of directors or paid by the Company to the holders of common stock since the issuance of the common stock. Liquidation Upon the dissolution, liquidation or winding up of the Company, whether voluntary or involuntary, holders of the common stock will be entitled to receive, pro rata based on the number of shares held by each such holder, all assets of the Company F-18 Table of Contents available for distribution to its stockholders, subject to any preferential or other rights of any then outstanding preferred stock. Shares Reserved for Future Issuance The Company has reserved for future issuances the following shares of common stock as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2023 ​ 2022 Stock options 9,456,237 8,084,121 Employee Stock Purchase Plan 701,244 566,720 Warrants 2,631 2,631 Total shares reserved for future issuance 10,160,112 8,653,472 ​ ​ ​ ​ 10. Stock-Based Compensation Equity Incentive Plans 2020 Stock Incentive Plan Under the 2020 Stock Incentive Plan (as amended, 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. 2021 Stock Incentive Plan In September 2021, the Company’s board of directors and stockholders adopted the 2021 Stock Incentive Plan (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 Company initially reserved 6,579,016 shares of common stock under the 2021 Plan. The 2021 Plan provides that the number of shares reserved and available for issuance under the 2021 Plan will be cumulatively increased on January 1 of each calendar year by 5 % of the number of shares of common stock outstanding on such date or such lesser amount determined by the Company’s board of directors. On January 1, 2024, the number of shares reserved for issuance under the 2021 Plan automatically increased by 1,380,663 shares. As of December 31, 2023, there were 1,780,442 shares available for future grant under the 2021 Plan. 2022 Inducement Plan In 2022, the Company’s board of directors adopted the 2022 Inducement Stock Incentive Plan pursuant to Nasdaq Rule 5635(c)(4) (the “2022 Inducement Plan”). 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. As of December 31, 2023, there were 220,000 shares available for future grant under the 2022 Inducement Plan. 2021 Employee Stock Purchase Plan In 2021, the Company’s board of directors and stockholders adopted the 2021 Employee Stock Purchase Plan (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. The 2021 ESPP provides that the number of shares of common F-19 Table of Contents stock reserved for issuance under the 2021 ESPP will be cumulatively increased on January 1 of each calendar year by 1 % of the number of shares of the Company’s common stock outstanding on such date or such lesser amount determined by the Company’s board of directors (up to a maximum increase of 584,062 shares of common stock per year). On January 1, 2024, the number of shares reserved for issuance under the 2021 ESPP was increased by 276,132 shares. The Company issued 140,192 shares under the 2021 ESPP during the year ended December 31, 2023 and no shares under the 2021 ESPP during the year ended December 31, 2022. As of December 31, 2023, there were 701,244 shares available for future issuance under the 2021 ESPP. Total Stock-Based Compensation Expense During the years ended December 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 consolidated statements of operations and comprehensive loss: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Research and development expense ​ $ 2,189 ​ $ 2,427 General and administrative expense ​ 5,193 ​ 5,997 Total stock-based compensation expense ​ $ 7,382 ​ $ 8,424 ​ Stock Options A summary of stock option activity under the Company’s Stock Incentive Plans is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ Aggregate ​ ​ ​ ​ Weighted ​ Contractual ​ Intrinsic ​ ​ Number of ​ Average ​ Term ​ Value (1) ​ Stock Options Exercise Price (In years) (In thousands) Outstanding as of December 31, 2022 4,960,553 $ 8.04 8.6 ​ $ 89 Granted 3,738,555 ​ $ 2.75 ​ Exercised ( 2,757 ) ​ $ 2.82 ​ Cancelled/forfeited ( 1,240,556 ) ​ $ 7.26 ​ Outstanding as of December 31, 2023 7,455,795 ​ $ 5.52 8.0 ​ $ - Exercisable as of December 31, 2023 3,103,732 ​ $ 7.04 6.6 ​ $ - ​ (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, 2023 and 2022 was $ 2.02 per share and $ 5.58 per share, respectively. The Company satisfies stock option exercises with newly issued shares of common stock. The aggregate intrinsic value of stock options exercised during each of the years ended December 31, 2023 and 2022 was less than $ 0.1 million. F-20 Table of Contents The following assumptions were used in determining the fair value of options granted to employees during the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2023 ​ 2022 ​ Risk-free interest rate ​ ​ 3.57 - 4.40 % ​ 1.47  –  4.22 % Expected dividend yield ​ ​ 0 % ​ 0 % Expected term (in years) ​ ​ 5.5 - 6.1 ​ ​ 5.3  –  6.1 ​ Expected volatility ​ ​ 81.7 - 87.3 % ​ 80.8  – 87.6 % ​ As of December 31, 2023, the Company had unrecognized stock-based compensation expense of $ 12.5 million related to stock options issued to employees and directors, which is expected to be recognized over a weighted average period of 2.0 years. Restricted Stock A summary of the Company’s restricted stock activity and related information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ Number Weighted ​ ​ of Shares ​ Average ​ ​ of Restricted ​ Grant Date ​ Stock Fair Value Unvested as of December 31, 2022 ​ 46,160 ​ $ 5.51 Vested ​ ( 39,250 ) ​ $ 5.51 Canceled/Forfeited ( 1,293 ) $ 5.51 Unvested as of December 31, 2023 5,617 $ 5.51 ​ 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 stock-based compensation expense for restricted stock granted to employees, directors and non-employees of $ 0.3 million and $ 0.4 million for the years ended December 31, 2023 and 2022. During the years ended December 31, 2023 and 2022, the aggregate fair value of the restricted stock awards that vested was $ 0.1 million and $ 0.3 million, respectively. As of December 31, 2023, total unrecognized compensation cost related to unvested restricted stock awards was less than $ 0.1 million, which is expected to be recognized during the first quarter of 2024. 11. 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. ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 ​ 2022 Unvested restricted common stock 5,617 46,160 Outstanding stock options 7,455,795 4,960,553 Warrants 2,631 2,631 Unvested employee stock purchase plan shares ​ 68,642 ​ 77,222 Total common stock equivalents 7,532,685 5,086,566 ​ ​ F-21 Table of Contents 12. Income Taxes The Company has no t recorded a current or deferred tax provision for the years ended December 31, 2023 and 2022. The effective income tax rate differed from the amount computed by applying the federal statutory rate to the Company’s loss before income taxes as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 Tax effected at statutory rate 21.0 % 21.0 % State taxes 6.5 ​ 5.2 ​ Stock-based compensation ( 1.4 ) ( 0.6 ) ​ Non-deductible expenses ( 0.8 ) ( 0.9 ) ​ Federal research and development credits 3.5 2.8 ​ Change in valuation allowance ( 28.8 ) ( 27.5 ) ​ Effective income tax rate 0.0 % 0.0 % ​ Deferred tax assets consist of the following as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 Deferred tax assets: ​ ​ Federal net operating loss carryforwards ​ $ 43,953 ​ $ 37,277 State net operating loss carryforwards ​ ​ 11,433 ​ ​ 9,267 Capitalized research and development expenditures ​ ​ 24,485 ​ ​ 14,469 Research and development credit carryforwards ​ 10,359 ​ 7,104 Lease liability ​ 2,510 ​ 2,761 Accruals and reserves ​ 210 ​ 241 Intangible assets ​ 1,793 ​ 1,917 Stock-based compensation ​ 1,213 ​ 1,374 Total deferred tax assets: ​ 95,956 ​ 74,410 Valuation allowance ​ ( 92,978 ) ​ ( 71,003 ) Subtotal ​ 2,978 ​ 3,407 Deferred tax liabilities: ​ ​ ​ ​ ​ ​ Property and equipment ​ ( 1,578 ) ​ ( 1,881 ) Right of use asset ​ ( 1,400 ) ​ ( 1,526 ) Total deferred tax liabilities ​ ​ ( 2,978 ) ​ ​ ( 3,407 ) Net deferred tax assets ​ $ — ​ $ — ​ The Company has had no income tax expense due to operating losses incurred since inception. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. 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, 2023, the valuation allowance increased by $ 22.0 million primarily due to the Company’s book loss and capitalized research and development expenditures reported in the period and the generation of additional research and development credits. As of December 31, 2023, the Company had $ 209.3 million and $ 180.9 million of federal and state operating loss carryforwards, respectively. Of the federal net operating loss carryovers, $ 204.5 million are not subject to expiration and the remaining federal and state net operating loss carryovers begin to expire in 2035. These loss carryforwards are available to reduce future federal taxable income, if any. As of December 31, 2023, the Company had federal and state research and development credit carryovers of $ 7.8 million and $ 3.1 million, which may be available to offset any future income tax and which will begin to expire in 2033. These loss and credit carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. F-22 Table of Contents Utilization of the Company’s net operating loss (“NOL”) carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”) as well as similar state provisions. These ownership changes may limit the amount of NOL and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change as defined by Section 382 results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. Since its formation, the Company has raised capital through the issuance of capital stock on several occasions. These financings could result in an “ownership change” as defined by Section 382. The Company has not yet completed a detailed study of its inception to date ownership change activity. The Company follows the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes , which specifies how tax benefits for uncertain tax positions are to be recognized, measured, and recorded in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the balance sheet; and provides transition and interim period guidance, among other provisions. As of December 31, 2023, and 2022, 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, 2023, and 2022, the Company had no reserves for uncertain tax positions. For the years ended December 31, 2023 and 2022, no estimated interest or penalties were recognized on uncertain tax positions. The Company has not recorded any interest or penalties on any unrecognized tax benefits since its inception. The Company has not conducted a study of its research and development credit carryforwards. This study may result in an adjustment to research and development credit carryforwards; however, until a study is completed, and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. 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 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, 2020 to December 31, 2022. In addition, the Company’s tax carryover attributes such as net operating losses or credits from earlier periods are also subject to examination. The Company is currently not subject to any examinations by the Internal Revenue Service or any other tax authorities for any tax years. 13. 401(k) Plan The Company maintains a defined contribution savings plan for employees that is defined to qualify under Section 401(k) of the Internal Revenue Code, as amended, (the “401(k) Plan”) in which substantially all employees are eligible to participate. Under the 401(k) Plan, all employees who meet minimum age and service requirements may elect 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. For each participating employee, the Company makes matching contributions equal to 100 % of the first 3 % of compensation contributed, plus 50 % of the next 2 % of compensation contributed, for a maximum of up to 4 % of the employee’s eligible compensation. Matching contributions are fully vested at the time of contribution. The Company incurred expenses related to matching contributions on behalf of employees to the 401(k) Plan of $ 0.7 million and $ 0.3 million during the years ended December 31, 2023 and 2022, respectively. F-23 Table of Contents ​ 14. Subsequent Events License Agreement and Issuance of Common Stock On March 27, 2024, Xilio Development entered into an exclusive license agreement with Gilead Sciences, Inc. (“Gilead”), pursuant to which it granted Gilead an exclusive global license to develop and commercialize XTX301, the Company’s tumor-activated IL-12 product candidate, and specified other molecules directed to IL-12. Under the license agreement, the Company is eligible to receive approximately $ 43.5 million in upfront payments, including a cash payment of $ 30.0 million and an initial equity investment by Gilead of approximately $ 13.5 million in the Company’s common stock at a purchase price of $ 1.97 per share. In connection with the execution of the license agreement, on March 27, 2024, the Company entered into a stock purchase agreement with Gilead pursuant to which the Company agreed to initially issue and sell 6,860,223 of its shares of common stock to Gilead in a private placement at a purchase price of $ 1.97 per share for an aggregate purchase price of approximately $ 13.5 million. ​ The initial Gilead private placement closed on March 28, 2024, and the $ 30.0 million upfront cash payment is payable by Gilead within a specified time period promptly following signing of the license agreement. ​ March 2024 Private Placement On March 28, 2024, the Company entered into a securities purchase agreement with certain existing accredited investors pursuant to which the Company agreed to sell and issue to the investors in a private placement an aggregate of 1,953,125 shares of the Company’s common stock at a purchase price of $ 0.64 per share, and to certain investors in lieu of shares of the Company’s common stock, prefunded warrants to purchase up to an aggregate of 15,627,441 shares of the Company’s common stock at a purchase price of $ 0.6399 per prefunded warrant. The private placement is anticipated to close on April 2, 2024, subject to customary closing conditions. Strategic Portfolio Reprioritization and Workforce Reduction On March 27, 2024, the board of directors of the Company approved a strategic portfolio reprioritization and restructuring. As part of the strategic portfolio reprioritization and restructuring, the Company plans to undertake efforts to further reduce its expenses and streamline its operations, including a reduction in headcount of 15 employees, representing approximately 21 % of the Company’s workforce immediately prior to the workforce reduction. ​ ​ ​ ​ F-24