0001558370-23-002687 | 10-K | XBRL Viewer

Commitments and Contingencies	12 Months Ended
Dec. 31, 2022
Commitments and Contingencies
Commitments and Contingencies	9. 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, 2022 or 2021. Legal Proceedings The Company is not currently a party to any material legal proceedings.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

9. 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, 2022 or 2021.

Legal Proceedings

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

Property and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2022

Property and Equipment, Net

Summary of property and equipment, net

Property and equipment, net consists of the following as of December 31, 2022 and 2021 (in thousands):


	December 31,		December 31,
	2022		2021
Laboratory equipment	$	5,587	$	3,805
Computers and software		228		228
Furniture and fixtures		636		636
Leasehold improvements		5,124		5,124
Construction in process		98		539
Total property and equipment	$	11,673	$	10,332
Less: accumulated depreciation		(4,418)		(2,712)
Property and equipment, net	$	7,255	$	7,620

Leases

12 Months Ended

Dec. 31, 2022

Leases

Leases

8. 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, 2022 and 2021, the Company has a letter of credit for the benefit of its landlord in the amount of $1.6 million, collateralized by a money market fund, which is recorded as restricted cash on the consolidated balance sheets.

The components of lease expense were as follows (in thousands):


	Year Ended
	December 31,
	2022		2021
Operating lease cost	$	1,225	$	1,225
Variable lease cost		959		772
Total lease costs	$	2,184	$	1,997
Finance lease cost:
Amortization of right-of-use asset	$	85	$	85
Interest on lease liability		12		16

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,
	2022			2021
Operating Lease:
Operating lease right-of-use asset	$	5,585		$	5,977
Operating lease liability, current portion	$	918		$	801
Operating lease liability, net of current portion	$	9,189		$	10,107
Finance Lease:
Other non-current assets	$	219		$	303
Other current liabilities		82			82
Other liabilities, long-term		45			118
Weighted-average remaining lease term (in years):
Operating lease		7.17			8.17
Finance lease		1.70			2.70
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 (in thousands):


		Year Ended
		December 31,
		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,634	$	1,392
Financing cash flows from finance leases		85		85

Future minimum lease payments under non-cancellable leases as of December 31, 2022 are as follows (in thousands):


	Operating Lease		Finance Lease
2023	$	1,683	$	85
2024		1,733		49
2025		1,785		—
2026		1,839		—
2027		1,894		—
Thereafter		4,467		—
Total future minimum lease payments	$	13,401	$	134
Present value adjustment		(3,294)		(7)
Present value of lease liabilities	$	10,107	$	127

Property and Equipment, Net

12 Months Ended

Dec. 31, 2022

Property and Equipment, Net

Property and Equipment, Net

4. Property and Equipment, Net

Property and equipment, net consists of the following as of December 31, 2022 and 2021 (in thousands):


	December 31,		December 31,
	2022		2021
Laboratory equipment	$	5,587	$	3,805
Computers and software		228		228
Furniture and fixtures		636		636
Leasehold improvements		5,124		5,124
Construction in process		98		539
Total property and equipment	$	11,673	$	10,332
Less: accumulated depreciation		(4,418)		(2,712)
Property and equipment, net	$	7,255	$	7,620

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

Income Taxes - Provision (Details) - USD ($) $ in Thousands	12 Months Ended
Income Taxes - Provision (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Income Taxes
Provision or benefit for income taxes	$ 0	$ 0

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Loan and Security Agreement

12 Months Ended

Dec. 31, 2022

Loan and Security Agreement

Loan and Security Agreement

6. Loan and Security Agreement

In November 2019, the Company entered into a loan and security agreement (as amended, the “Loan Agreement”) with Pacific Western Bank (“PacWest”), pursuant to which the Company borrowed $10.0 million under a term loan. Interest on amounts outstanding under the Loan Agreement accrue at a variable annual rate equal to the greater of (i) the prime rate plus 0.25% or (ii) 4.75%. As of December 31, 2022, the interest rate on the term loan is 7.75%. The Company was required to make interest-only payments on any outstanding balances through December 31, 2022. The Company commenced making equal monthly payments of principal plus interest in January 2023, and it will be required to make such payments until the term loan matures on June 30, 2024. In addition, under the Loan Agreement, the Company paid a one-time success fee of $0.8 million to PacWest in the fourth quarter of 2021 upon the closing of the IPO.

The Loan Agreement contains customary representations, warranties and covenants and also includes customary terms covering events of default, including payment defaults, breaches of covenants, a change of control provision and occurrence of a material adverse effect. As security for its obligations under the Loan Agreement, the Company granted PacWest a first priority security interest on substantially all of the Company’s assets (other than intellectual property), subject to certain exceptions.

The Company has determined that the risk of subjective acceleration under the material adverse effect clause is not probable and therefore has classified the long-term portion of the outstanding principal in non-current liabilities. Upon the occurrence and continuation of an event of default, a default interest rate of an additional 5% per annum may be applied to the outstanding loan balance, and the administrative agent, collateral agent, and lender may declare all outstanding obligations immediately due and payable and exercise all of their rights and remedies as set forth in the Loan Agreement and under applicable law. As of December 31, 2022, the Company was in compliance with all covenants under the Loan Agreement.

The Company has the following minimum aggregate future loan payments under the Loan Agreement at December 31, 2022 (in thousands):


	Minimum Loan
	Payments
2023	$	6,667
2024		3,333
Total future principal payments		10,000
Less: unamortized discount		(168)
Total notes payable	$	9,832

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

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

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+ Details

Equity-Based Compensation - Employee Stock Purchase Plan (Details) - shares			12 Months Ended
	Jan. 01, 2023	Oct. 21, 2021	Dec. 31, 2022	Dec. 31, 2021
Equity-Based Compensation
Common stock reserved for issuance (in shares)			8,653,472	6,732,993
Employee stock purchase plan
Equity-Based Compensation
Common stock reserved for issuance (in shares)		292,031
Shares issued under plan (in shares)			0
Available for future issuance (in shares)			566,720
Employee stock purchase plan \| Maximum
Equity-Based Compensation
Annual increase in number of shares reserved and available for issuance (in shares)		584,062
Annual increase in number of shares reserved for issuance (as a percent)		1.00%
Employee stock purchase plan \| Subsequent events
Equity-Based Compensation
Additional common stock issuable under the plan	274,716

Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2022

Accrued Expenses

Summary of accrued expenses

Accrued expenses consist of the following as of December 31, 2022 and 2021 (in thousands):


	December 31,		December 31,
	2022		2021
External research and development	$	3,178	$	2,794
Personnel-related		5,413		5,145
Professional and consulting fees		1,536		491
Other		200		321
Total accrued expenses	$	10,327	$	8,751

Intellectual Property Licenses - License Agreements (Details) $ in Thousands	1 Months Ended	12 Months Ended
	Aug. 31, 2016 USD ($) item shares	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	Sep. 30, 2016 USD ($)
License Agreements
Research and development		$ 59,201	$ 51,188
License Agreement \| AskGene
License Agreements
Research and development				$ 6,000
License Agreement \| AskGene \| IL-15 products
License Agreements
Upfront payments payable				6,000
License Agreement \| AskGene \| Maximum \| IL-15 products
License Agreements
Regulatory milestone payments payable				$ 13,000
License Agreement \| City of Hope
License Agreements
Research and development		10	10
Costs incurred related to payment of specified development milestones		0	300
Number of shares of common stock issued \| shares	24,019
Number of licensed products or services \| item	3
License Agreement \| City of Hope \| Maximum
License Agreements
Development and regulatory milestones payable	$ 10,300
License Agreement \| WuXi Biologics
License Agreements
Costs incurred related to payment of specified development milestones		$ 0	$ 800
Development and regulatory milestones payable					$ 25,800

401(k) Plan

12 Months Ended

Dec. 31, 2022

401(k) Plan

401(k) Plan

14. 401(k) Plan

In 2018, the Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code, as amended, the Xilio Therapeutics, Inc. 401(k) Plan (the “401(k) Plan”). The 401(k) Plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis or post-tax basis, up to the maximum amount prescribed by statute. The Company incurred an expense related to contributions on behalf of employees of $0.3 million to the 401(k) Plan during the year ended December 31, 2022. The Company did not incur an expense related to contributions on behalf of employees to the 401(k) Plan during the year ended December 31, 2021.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning balance at Dec. 31, 2020		$ 1,799	$ (85,086)	$ (83,287)
Beginning balance (in shares) at Dec. 31, 2020	689,929
Stockholders' Deficit
Conversion of convertible preferred stock into common stock upon initial public offering	$ 2	222,886		222,888
Conversion of convertible preferred stock into common stock upon initial public offering (in shares)	18,398,248
Issuance of common stock upon initial public offering, net of issuance costs of $13,547	$ 1	116,358		116,359
Issuance of common stock upon initial public offering, net of issuance costs (in shares)	8,119,106
Conversion of warrant liability to equity upon initial public offering		28		28
Vesting of restricted common stock (in shares)	103,192
Exercise of stock options		283		283
Exercise of stock options (in shares)	47,900
Equity-based compensation expense		4,958		4,958
Net loss			(75,800)	(75,800)
Ending balance at Dec. 31, 2021	$ 3	346,312	(160,886)	185,429
Ending balance (in shares) at Dec. 31, 2021	27,358,375
Stockholders' Deficit
Vesting of restricted common stock (in shares)	64,415
Exercise of stock options		16		$ 16
Exercise of stock options (in shares)	2,657			2,657
Equity-based compensation expense		8,424		$ 8,424
Net loss			(88,222)	(88,222)
Ending balance at Dec. 31, 2022	$ 3	$ 354,752	$ (249,108)	$ 105,647
Ending balance (in shares) at Dec. 31, 2022	27,425,447

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2022

Summary of Significant Accounting Policies

Schedule of cash, cash equivalents and restricted cash

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


	December 31,		December 31,
	2022		2021
Cash and cash equivalents	$	120,385	$	198,053
Restricted cash		1,562		1,553
Total cash, cash equivalents and restricted cash as shown on the consolidated statements of cash flows	$	121,947	$	199,606

Schedule of estimated useful lives of assets


		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

Loan and Security Agreement - Maturities (Details) - Loan Agreement - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Minimum aggregate future loan payments
2023	$ 6,667
2024	3,333
Total future principal payments	10,000
Less: unamortized discount	(168)
Total notes payable	9,832
Interest expense	$ 800	$ 600

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

401(k) Plan (Details) $ in Millions	12 Months Ended
401(k) Plan (Details) $ in Millions	Dec. 31, 2022 USD ($)
401(k) Plan
Amount of contributions made on behalf of employees	$ 0.3

Description of Business, Initial Public Offering and Liquidity and Capital Resources - IPO (Details) $ / shares in Units, $ in Millions	3 Months Ended	12 Months Ended
	Dec. 31, 2021 USD ($) $ / shares shares	Dec. 31, 2021 $ / shares shares
Common Stock
Sale of stock
Number of shares sold		8,119,106
IPO
Sale of stock
Offering price (in dollar per share) \| $ / shares	$ 16.00	$ 16.00
Net proceeds received \| $	$ 116.4
IPO, Excluding Over-Allotment Option \| Common Stock
Sale of stock
Number of shares sold	8,119,106
Over-Allotment Option \| Common Stock
Sale of stock
Number of shares sold	766,106

Summary of Significant Accounting Policies - Property and Equipment (Details)	12 Months Ended
	Dec. 31, 2022
Computers and software
Property and Equipment
Estimated Useful Life	3 years
Laboratory equipment
Property and Equipment
Estimated Useful Life	5 years
Furniture & fixtures
Property and Equipment
Estimated Useful Life	5 years

Fair Value Measurements - Financial assets at fair value on a recurring basis (Details) - Recurring basis - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Financial assets:
Total financial assets	$ 939	$ 8,534
Cash equivalents-money market funds
Financial assets:
Total financial assets	939	8,534
Level 1
Financial assets:
Total financial assets	939	8,534
Level 1 \| Cash equivalents-money market funds
Financial assets:
Total financial assets	$ 939	$ 8,534

Equity-Based Compensation

12 Months Ended

Dec. 31, 2022

Equity-Based Compensation

Equity-Based Compensation

11. Equity-Based Compensation

Equity Incentive Plans

2020 Stock Incentive Plan

In July 2020, the Company’s stockholders approved the 2020 Plan. Under the 2020 Plan, the Company was authorized to issue shares of common stock to the Company’s employees, officers, directors, consultants, and advisors in the form of options, restricted stock awards or other stock-based awards. Upon the effectiveness of the 2021 Plan in October 2021, the Company ceased granting awards under the 2020 Plan.

2021 Stock Incentive Plan

In September 2021, the Company’s board of directors adopted the 2021 Plan, which was approved by the Company’s stockholders and became effective immediately prior to the effectiveness of the Company’s registration statement on Form S-1, as amended (File No. 333-259973), which was declared effective by the SEC on October 21, 2021 (the “Registration Statement”). The 2021 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares of the Company’s common stock initially reserved for issuance under the 2021 Plan was the sum of (1) 2,654,828; plus (2) the number of shares (up to 3,967,038 shares) as is equal to the sum of (x) the number of shares of the Company’s common stock reserved for issuance under the 2020 Plan that remained available for grant under the 2020 Plan immediately prior to the effectiveness of the Registration Statement and (y) the number of shares of the Company’s common stock subject to outstanding awards whether granted under the 2020 Plan or outside of the 2020 Plan which awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right and that, prior to the effectiveness of the 2021 Plan, would have become available for issuance under the 2020 Plan; plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year, commencing on January 1, 2022 and continuing until, and including, January 1, 2031, equal to the lesser of (i) 5% of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (ii) the number of shares of common stock determined by the Company’s board of directors (the “Evergreen Provision”). Effective January 1, 2023, the number of shares reserved for issuance under the 2021 Plan increased by 1,373,580 shares in accordance with the Evergreen Provision.

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

2021 Employee Stock Purchase Plan

In September 2021, the Company’s board of directors adopted, and in October 2021, the Company’s stockholders approved the 2021 ESPP, which became effective on October 21, 2021, immediately prior to the effectiveness of the Registration Statement. The 2021 ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 292,031 shares of the Company’s common stock. The number of shares of common stock reserved for issuance under the 2021 ESPP will automatically increase on each January 1, beginning on January 1, 2022 and ending on January 1, 2031, by the lesser of (i) 584,062 shares of common stock, (ii) 1% of the number of shares of the Company’s common stock outstanding on such date, and (iii) a number of shares of common stock as determined by the Company’s board of directors. Effective January 1, 2023, the number of shares reserved for issuance under the 2021 ESPP increased by 274,716 shares. The first offering period under the 2021 ESPP commenced on December 1, 2022 and ends May 31, 2023. As of December 31, 2022, no shares have been issued under the 2021 ESPP.

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

2022 Inducement Plan

On November 18, 2022, the Company’s board of directors adopted the 2022 Inducement Plan pursuant to Nasdaq Rule 5635(c)(4). In accordance with Rule 5635(c)(4), cash and equity-based incentive awards under the 2022 Inducement Plan may only be made to a newly hired employee who has not previously been a member of the Company’s board of directors, or an employee who is being rehired following a bona fide period of non-employment by the Company as a material inducement to the employee’s entering into employment with the Company. An aggregate of 275,000 shares of the Company’s common stock has been reserved for issuance under the 2022 Inducement Plan.

The exercise price of stock options granted under the 2022 Inducement Plan will not be less than the fair market value of a share of the Company’s common stock on the grant date. Other terms of awards, including vesting requirements, are determined by the Company’s board of directors and are subject to the provisions of the 2022 Inducement Plan. As of December 31, 2022, no shares have been granted under the 2022 Inducement Plan.

Total Equity-Based Compensation Expense

During the years ended December 31, 2022 and 2021, the Company recorded compensation expense related to stock options and restricted common stock for employees and non-employees, which was allocated as follows in the consolidated statements of operations and comprehensive loss (in thousands):


	Year Ended December 31,
	2022		2021
Research and development expense	$	2,427	$	1,290
General and administrative expense		5,997		3,668
Total equity-based compensation expense	$	8,424	$	4,958

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, 2021	4,088,456	$	8.59	9.13	$	30,291
Granted	1,745,366	$	7.93
Exercised	(2,657)	$	5.89
Cancelled/forfeited	(870,612)	$	10.39
Outstanding as of December 31, 2022	4,960,553	$	8.04	8.59	$	89
Exercisable as of December 31, 2022	1,727,063	$	7.85	8.20	$	4
Vested and expected to vest as of December 31, 2022	4,960,553	$	8.04	8.59	$	89

(1)

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

Using the Black-Scholes option pricing model, the weighted average fair value of options granted to employees and directors during the years ended December 31, 2022 and 2021 was $5.58 per share and $6.28 per share, respectively. The Company satisfies stock option exercises with newly issued shares of common stock. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022 and 2021 was less than $0.1 million and $0.5 million, respectively.

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


	Year Ended December 31,
	2022			2021
Risk-free interest rate		1.47 – 4.22	%		0.63 – 1.39	%
Expected dividend yield		0	%		0	%
Expected term (in years)		5.27 – 6.08			5.52 – 10.00
Expected volatility		80.75 – 87.64	%		80.55 – 85.26	%

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

Restricted Stock

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, 2021	110,575	$	5.51
Vested	(64,415)	$	5.51
Canceled/Forfeited	—	$	—
Unvested as of December 31, 2022	46,160	$	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 equity-based compensation expense for restricted stock granted to employees, directors and non-employees of $0.4 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively. During the years ended December 31, 2022 and 2021, the aggregate fair value of the restricted stock awards that vested was $0.3 million and $1.0 million, respectively. As of December 31, 2022, total unrecognized compensation cost related to unvested restricted stock awards was approximately $0.3 million, which is expected to be recognized over a weighted-average period of 0.94 years.

Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Fair Value Measurements

Fair Value Measurements

3. Fair Value Measurements

The Company measures the following financial assets and liabilities at fair value on a recurring basis. The fair value of these assets and liabilities was determined as follows (in thousands):


			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
	2022		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents—money market funds	$	939	$	939	$	—	$	—
Total financial assets	$	939	$	939	$	—	$	—


			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
		December 31,	Assets		Inputs		Inputs
	2021		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents—money market funds	$	8,534	$	8,534	$	—	$	—
Total financial assets	$	8,534	$	8,534	$	—	$	—

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

In May 2016, the Company issued to a consultant a warrant to purchase 25,000 Series A preferred units at a price of $1.00 per unit, and in June 2020, the preferred unit warrant was converted into a warrant to purchase 25,000 shares of Series A convertible preferred stock at a price of $1.00 per share. The fair value of the warrant liability utilized the Black-Scholes option-pricing model which incorporated significant inputs not observable in the market, and thus represented a Level 3 measurement within the fair value hierarchy. Based on the terms and conditions of the warrant, upon the completion of the Company’s IPO the warrant to purchase 25,000 shares of Series A convertible preferred stock automatically became a warrant to purchase 2,631 shares of common stock. Upon conversion into a warrant to purchase common stock, the Company concluded that the warrant met the definition of an equity instrument and the fair value of the warrant at the time of conversion, determined using the Black-Scholes option pricing model, was reclassified from other liabilities, long-term to additional paid-in capital.

The fair values of the debt derivative liability and the other derivative liability that were contingently payable upon the consummation of specified transactions, including an initial public offering, were based on significant inputs not observable in the market, including estimates regarding the probability of certain potential future events and outcomes and estimates regarding timing of those events and outcomes, with an applied discount rate representative of time value that represents a Level 3 measurement within the fair value hierarchy. The debt derivative liability and other derivative liability were paid during the year ended December 31, 2021 subsequent to the completion of the Company’s IPO. Accordingly, there was no amount recorded for the debt derivative liability and other derivative liability in the Company’s consolidated balance sheets as of December 31, 2022 and 2021.

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


							Total
			Debt		Other		level 3
	Warrant		derivative		derivative		financial
	liability		liability		liability		liabilities
Balance at December 31, 2020	$	22	$	396	$	407	$	825
Change in fair value of liability		6		354		93		453
Settlement of liability		—		(750)		(500)		(1,250)
Conversion of warrant liability to equity upon initial public offering		(28)		—		—		(28)
Balance at December 31, 2021	$	—	$	—	$	—	$	—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Preferred Stock and Common Stock

12 Months Ended

Dec. 31, 2022

Preferred Stock and Common Stock

Preferred Stock and Common Stock

10. Preferred Stock and Common Stock

Undesignated Preferred Stock

On October 26, 2021, in connection with the closing of the Company’s IPO, the Company amended and restated its Certificate of Incorporation authorizing the Company to issue 5,000,000 shares of undesignated preferred stock at $0.0001 par value per share.

Convertible Preferred Stock

Upon the closing of the IPO in October 2021, all shares of the Company’s then outstanding convertible preferred stock automatically converted into an aggregate of 18,398,248 shares of common stock. There was no convertible preferred stock outstanding as of December 31, 2022 and 2021.

Common Stock

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

On November 9, 2022, the Company filed a registration statement on Form S-3 (the “2022 Shelf Registration Statement”), covering the offering of up to $250.0 million of common stock, preferred stock, debt securities, units and warrants. The 2022 Shelf Registration Statement became effective on November 18, 2022.

On November 9, 2022, the Company also entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), under which the Company may, from time to time, sell shares of its common stock through Cowen (the “2022 ATM Program”). The 2022 Shelf Registration Statement included a prospectus covering the offering, issuance and sale of up to $75.0 million of the Company’s common stock from time to time through the 2022 ATM Program. Through December 31, 2022, the Company has not sold any common stock through the 2022 ATM Program.

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

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 available for distribution to its stockholders, subject to any preferential or other rights of any then outstanding preferred stock.

Shares Reserved for Future Issuance

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

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


	December 31,	December 31,
	2022	2021
Shares of common stock reserved for exercise of a warrant	2,631	2,631
Shares of common stock reserved for exercise of outstanding stock options under the 2021 and 2020 Stock Incentive Plans	4,960,553	4,088,456
Shares of common stock reserved for future awards under the 2021 Stock Incentive Plan	2,848,568	2,349,875
Shares of common stock reserved for purchase under the 2021 Employee Stock Purchase Plan	566,720	292,031
Shares of common stock reserved for future awards under the 2022 Inducement Plan	275,000	—
Total shares reserved for future issuance	8,653,472	6,732,993

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-URI https://asc.fasb.org/topic&trid=2208762

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 14
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496171-112644

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 14
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496171-112644

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI https://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496189-112644

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (g)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496189-112644

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (h)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 14
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496171-112644

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 18
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496189-112644

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 16
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496180-112644

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(e)(1))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
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-Section 50
-Paragraph 6
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126731327&loc=SL126733271-114008

+ Details

Equity-Based Compensation - Stock option activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Options Outstanding
Outstanding at beginning of period (in shares)	4,088,456
Granted (in shares)	1,745,366
Exercised (in shares)	(2,657)
Cancelled/forfeited (in shares)	(870,612)
Outstanding at end of period (in shares)	4,960,553	4,088,456
Exercisable at end of period (in shares)	1,727,063
Vested and expected to vest at end of period (in shares)	4,960,553
Weighted Average Exercise Price
Outstanding (in dollars per share)	$ 8.04	$ 8.59
Granted (in dollars per share)	7.93
Exercised (in dollars per share)	5.89
Cancelled/forfeited (in dollars per share)	10.39
Exercisable at end of period (in dollars per share)	7.85
Vested and expected to vest at end of period (in dollars per share)	$ 8.04
Weighted Average Remaining Contractual Term (In years)
Outstanding (in years)	8 years 7 months 2 days	9 years 1 month 17 days
Exercisable at end of period (in years)	8 years 2 months 12 days
Vested and expected to vest at end of period (in years)	8 years 7 months 2 days
Aggregate Intrinsic Value
Outstanding (in dollars)	$ 89	$ 30,291
Exercisable (in dollars)	4
Vested and expected to vest (in dollars)	$ 89

Description of Business, Initial Public Offering and Liquidity and Capital Resources - Liquidity and Capital Resources (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Description of Business, Initial Public Offering and Liquidity and Capital Resources
Cash and cash equivalents	$ 120,385	$ 198,053

Summary of Significant Accounting Policies - Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Summary of Significant Accounting Policies
Cash and cash equivalents	$ 120,385	$ 198,053
Restricted cash	1,562	1,553
Total cash, cash equivalents and restricted cash as shown on the consolidated statements of cash flows	$ 121,947	$ 199,606	$ 20,789

Equity-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2022

Equity-Based Compensation

Schedule of recorded compensation expense related to incentive units, stock options, and restricted common stock


	Year Ended December 31,
	2022		2021
Research and development expense	$	2,427	$	1,290
General and administrative expense		5,997		3,668
Total equity-based compensation expense	$	8,424	$	4,958

Summary of stock option activity


				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, 2021	4,088,456	$	8.59	9.13	$	30,291
Granted	1,745,366	$	7.93
Exercised	(2,657)	$	5.89
Cancelled/forfeited	(870,612)	$	10.39
Outstanding as of December 31, 2022	4,960,553	$	8.04	8.59	$	89
Exercisable as of December 31, 2022	1,727,063	$	7.85	8.20	$	4
Vested and expected to vest as of December 31, 2022	4,960,553	$	8.04	8.59	$	89

(1)

Schedule of assumptions used in determining the fair value of options granted to employees


	Year Ended December 31,
	2022			2021
Risk-free interest rate		1.47 – 4.22	%		0.63 – 1.39	%
Expected dividend yield		0	%		0	%
Expected term (in years)		5.27 – 6.08			5.52 – 10.00
Expected volatility		80.75 – 87.64	%		80.55 – 85.26	%

Schedule of company's restricted stock activity


	Number	Weighted
	of Shares	Average
	of Restricted	Grant Date
	Stock	Fair Value
Unvested as of December 31, 2021	110,575	$	5.51
Vested	(64,415)	$	5.51
Canceled/Forfeited	—	$	—
Unvested as of December 31, 2022	46,160	$	5.51

Preferred Stock and Common Stock - Voting, Dividends and Liquidation (Details) - Common Stock $ in Millions	2 Months Ended
	Dec. 31, 2021 USD ($) Vote
Preferred stock and Common stock
Number of votes for each share held \| Vote	1
Dividends declared \| $	$ 0.0

Accrued Expenses

12 Months Ended

Dec. 31, 2022

Accrued Expenses

Accrued Expenses

5. Accrued Expenses

Accrued expenses consist of the following as of December 31, 2022 and 2021 (in thousands):


	December 31,		December 31,
	2022		2021
External research and development	$	3,178	$	2,794
Personnel-related		5,413		5,145
Professional and consulting fees		1,536		491
Other		200		321
Total accrued expenses	$	10,327	$	8,751

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Cash flows from operating activities:
Net loss	$ (88,222)	$ (75,800)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,847	1,499
Non-cash interest expense	223	173
Equity-based compensation expense	8,424	4,958
Loss on disposal of property and equipment	1	19
Change in fair value of warrant and derivative liabilities		203
Changes in operating assets and liabilities:
Prepaid and other assets	344	(3,136)
Operating lease right-of-use asset	391	332
Accounts payable	485	(2,818)
Accrued expenses and other liabilities	1,585	(5,617)
Operating lease liability	(801)	(564)
Net cash used in operating activities	(75,723)	(80,751)
Cash flows from investing activities:
Purchases of property and equipment	(1,867)	(1,100)
Net cash used in investing activities	(1,867)	(1,100)
Cash flows from financing activities:
Repayments of debt principal		(1,000)
Proceeds from debt issuance, net of issuance costs		975
Payments of finance lease	(85)	(85)
Payments of success fee		(750)
Proceeds from issuance of convertible preferred stock, net of issuance costs		144,886
Proceeds from initial public offering, net of issuance costs		116,359
Proceeds from exercise of stock options	16	283
Net cash (used in) provided by financing activities	(69)	260,668
(Decrease) increase in cash, cash equivalents and restricted cash	(77,659)	178,817
Cash, cash equivalents and restricted cash, beginning of period	199,606	20,789
Cash, cash equivalents and restricted cash, end of period	121,947	199,606
Supplemental cash flow disclosure:
Cash paid for interest	555	492
Supplemental disclosure of non-cash activities:
Conversion of convertible preferred stock into common stock upon initial public offering		222,888
Capital expenditures included in accounts payable or accrued expenses	$ 19	539
Recognition of derivative liability in connection with long-term debt facility		250
Conversion of warrant liability to equity upon initial public offering		$ 28

Summary of Significant Accounting Policies - Equity-Based Compensation (Details)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Stock options
Equity-Based Compensation
Expected dividend yield (as a percent)	0.00%	0.00%

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2022	Dec. 31, 2021
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	27,471,607	27,468,950
Common stock, shares outstanding	27,425,447	27,358,375

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

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 United States Securities and Exchange Commission (the “SEC”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP

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

In April 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted. 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, created to buy, sell and hold securities. Effective as of September 30, 2022, the Company’s wholly owned subsidiaries, Xilio Therapeutics, LLC and Xilio Concerto, LLC, were merged with and into Xilio Development, Inc., with Xilio Development, Inc. continuing as the surviving corporation. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

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, contingent amounts payable to third parties upon the consummation of specified transactions, including an initial public offering, the valuation of equity-based compensation, including stock options and restricted common stock, useful life of long-lived assets and income taxes. Actual results could differ from those estimates.

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.

Cash Equivalents and Restricted Cash

The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents. Cash equivalents, which consist of money market accounts, are stated at fair value. Restricted cash primarily represents a letter of credit issued to the landlord of the Company’s facility lease and is reflected in non-

current assets on the accompanying consolidated balance sheets. Cash, cash equivalents and restricted cash consists of the following (in thousands):


	December 31,		December 31,
	2022		2021
Cash and cash equivalents	$	120,385	$	198,053
Restricted cash		1,562		1,553
Total cash, cash equivalents and restricted cash as shown on the consolidated statements of cash flows	$	121,947	$	199,606

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. As of December 31, 2022 and 2021, certain of the Company’s primary operating accounts significantly exceeded the FDIC limits. The Company 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, 2022 and 2021 approximates fair value based on the variable interest rate for the borrowings as well as the short duration of the term of the note. Items measured at fair value on a recurring basis include cash equivalents, the preferred warrant and contingent liabilities associated with the consummation of specified transactions, including an initial public offering.

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, 2022 and 2021, 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

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

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

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in process equity financings as deferred offering costs until the related financings are consummated. After consummation of the equity financing, such costs are reclassified as a reduction to additional paid-in capital generated as a result of the related financing. Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately and accounted for as operating expenses in the consolidated statements of operations and comprehensive loss. Deferred offering costs are presented as a component of other current assets on the condensed consolidated balance sheets.

Research and Development Costs and Accruals

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.

Acquired In-Process Research and Development ("IPR&D")

Acquired In-Process Research and Development (“IPR&D”)

If the Company acquires an asset or group of assets under an in-licensing arrangement that does not meet the definition of a business under ASC Topic 805, Business Combinations, and the acquired IPR&D does not have an alternative future use, it is expensed on its acquisition date in accordance with guidance in ASC Topic 730, Research and Development. Contingent payments for the assets acquired are expensed or capitalized based on the nature of the associated asset at the date the payment is recognized.

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.

Equity-Based Compensation

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

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

There are significant judgments and estimates inherent in the determination of the fair value of the common securities. The Company considers the fair value of common stock to be equal to its current share price. If applicable, the current share price is adjusted to reflect material nonpublic information known to the company but unavailable to market participants. Prior to the completion of the Company’s IPO, the Company determined the fair value of the underlying common stock based on input from management and approved by the Company’s board of directors, which utilized the valuation of the Company’s enterprise value determined utilizing various methods including the market adjusted equity value method, guideline initial public offering method, transactions method, recent transactions method, option-pricing method, or a hybrid method. The total enterprise value was then allocated to the various outstanding equity instruments, including the underlying common stock, utilizing the option-pricing method.

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

For awards with service-based vesting conditions, the Company recognizes equity-based compensation expense on a ratable basis over the vesting period. For awards subject to performance conditions, the Company recognizes equity-based compensation expense using an accelerated recognition method over the remaining service period when the Company determines the achievement of the performance condition is probable. The Company uses judgement to determine whether and, if so, how many awards are deemed probable of vesting at each reporting period. The Company recognizes forfeitures as they occur. The Company classifies equity-based compensation expense in its consolidated statements of operations and comprehensive loss consistent with the classification of the award recipient’s salary and related costs or the award recipient’s service payments, as applicable.

Convertible Preferred Stock

Prior to the automatic conversion of all outstanding shares of the Company’s convertible preferred stock upon the closing of the IPO, the Company recorded all shares of convertible preferred stock at their respective fair values on the dates of issuance less issuance costs. The Company classified its convertible preferred stock outside of stockholders’ equity (deficit) when the redemption of such shares was outside the Company’s control. The Company did not adjust the carrying values of the convertible preferred stock to the liquidation preferences of such stock until such time as a deemed liquidation event was probable of occurring.

Comprehensive Loss

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, 2022 and 2021.

Net Loss Per Share

The Company applies the two-class method to compute basic and diluted net loss per share because it has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires losses available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all losses for the period had been distributed. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund the losses of the Company.

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 preferred units, convertible preferred stock, incentive units, 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.

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, 2022 and 2021, the Company had not identified any significant uncertain tax positions.

Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments, as amended (“ASU 2016-13”). The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the previously used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted ASU 2016-13 as of January 1, 2022, and the adoption did not have a material effect on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which reduces the number of accounting models for convertible debt instruments and convertible preferred stock as well as amends the derivatives scope exception for contracts in an entity’s own equity. The Company adopted ASU 2020-06 as of January 1, 2022, and the adoption did not have a material effect on its consolidated financial statements and related disclosures.

Fair Value Measurements - Change in fair market value of liability which classified as level 3 (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)
Changes in the fair market value of liabilities
Beginning balance	$ 825
Change in fair value of liability	$ 453
Fair Value, Liability, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income	Other income (expense), net
Settlement of liability	$ (1,250)
Conversion of warrant liability to equity upon initial public offering	(28)
Warrant to purchase Series A convertible preferred stock
Changes in the fair market value of liabilities
Beginning balance	22
Change in fair value of liability	6
Conversion of warrant liability to equity upon initial public offering	(28)
Debt derivative liability
Changes in the fair market value of liabilities
Beginning balance	396
Change in fair value of liability	354
Settlement of liability	(750)
Other derivative liability
Changes in the fair market value of liabilities
Beginning balance	407
Change in fair value of liability	93
Settlement of liability	$ (500)

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

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

Principles of Consolidation

Use of Estimates

Segment Information

Cash Equivalents and Restricted Cash

current assets on the accompanying consolidated balance sheets. Cash, cash equivalents and restricted cash consists of the following (in thousands):


	December 31,		December 31,
	2022		2021
Cash and cash equivalents	$	120,385	$	198,053
Restricted cash		1,562		1,553
Total cash, cash equivalents and restricted cash as shown on the consolidated statements of cash flows	$	121,947	$	199,606

Concentrations of Credit Risk and Significant Suppliers

Fair Value Measurements

●

Level 1—Quoted prices in active markets for identical assets or liabilities.

●

Property and Equipment


		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

Impairment of Long-Lived Assets

Leases

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

Deferred Offering Costs

Research and Development Costs and Accruals

Acquired In-Process Research and Development (“IPR&D”)

Patent Costs

Equity-Based Compensation

Convertible Preferred Stock

Comprehensive Loss

Net Loss Per Share

Income Taxes

Recently Adopted Accounting Pronouncements

Leases - Schedule of supplemental cash flow information related to leases (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 1,634	$ 1,392
Financing cash flows from finance leases	$ 85	$ 85

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2022	Feb. 24, 2023	Jun. 30, 2022
Document and Entity Information [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2022
Document Transition Report	false
Entity File Number	001-40925
Entity Registrant Name	Xilio Therapeutics, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	85-1623397
Entity Address, Address Line One	828 Winter Street,
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Waltham
Entity Address State Or Province	MA
Entity Address, Postal Zip Code	02451
City Area Code	857
Local Phone Number	524-2466
Title of 12(b) Security	Common stock, par value $0.0001 per share
Trading Symbol	XLO
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
ICFR Auditor Attestation Flag	false
Entity Shell Company	false
Entity Public Float			$ 70.4
Entity Common Stock, Shares Outstanding		27,471,740
Auditor Firm ID	42
Auditor Name	Ernst & Young LLP
Auditor Location	Boston, Massachusetts
Entity Central Index Key	0001840233
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	FY
Amendment Flag	false

Equity-Based Compensation - Equity Incentive Plans (Details) - shares		1 Months Ended
	Jan. 01, 2023	Oct. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Equity-Based Compensation
Common stock reserved for issuance (in shares)			8,653,472	6,732,993
2021 Stock Incentive Plan
Equity-Based Compensation
Available for future issuance (in shares)			2,848,568
2021 Stock Incentive Plan \| Subsequent events
Equity-Based Compensation
Additional common stock issuable under the plan	1,373,580
2021 Stock Incentive Plan \| Minimum
Equity-Based Compensation
Common stock reserved for issuance (in shares)		2,654,828
2021 Stock Incentive Plan \| Maximum
Equity-Based Compensation
Additional common stock reserved for issuance (in shares)		3,967,038
Annual increase in number of shares reserved for issuance (as a percent)		5.00%

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($) shares
Temporary Equity
Ending balance (in shares)	0
Series A Convertible Preferred Stock
Temporary Equity
Beginning balance \| $	$ 7,309
Beginning balance (in shares)	7,500,000
Conversion of convertible preferred stock into common stock upon initial public offering \| $	$ (7,309)
Conversion of convertible preferred stock into common stock upon initial public offering (in shares)	(7,500,000)
Series A-1 Convertible Preferred Stock
Temporary Equity
Beginning balance \| $	$ 20,740
Beginning balance (in shares)	19,565,216
Conversion of convertible preferred stock into common stock upon initial public offering \| $	$ (20,740)
Conversion of convertible preferred stock into common stock upon initial public offering (in shares)	(19,565,216)
Series B Convertible Preferred Stock
Temporary Equity
Beginning balance \| $	$ 49,953
Beginning balance (in shares)	39,723,312
Issuance of preferred stock or units, net of issuance costs \| $	$ 50,200
Issuance of preferred stock or units (in shares)	39,723,312
Conversion of convertible preferred stock into common stock upon initial public offering \| $	$ (100,153)
Conversion of convertible preferred stock into common stock upon initial public offering (in shares)	(79,446,624)
Series C Convertible Preferred Stock
Temporary Equity
Issuance of preferred stock or units, net of issuance costs \| $	$ 94,686
Issuance of preferred stock or units (in shares)	68,271,641
Conversion of convertible preferred stock into common stock upon initial public offering \| $	$ (94,686)
Conversion of convertible preferred stock into common stock upon initial public offering (in shares)	(68,271,641)

Loan and Security Agreement - Description (Details) - Loan Agreement - USD ($) $ in Millions	1 Months Ended
	Oct. 31, 2021	Nov. 30, 2019	Dec. 31, 2022
Loan and security agreement
Borrowed amount		$ 10.0
Interest rate at end of period (as a percent)			7.75%
Fee paid upon closing of IPO	$ 0.8
Additional interest rate upon event of default (as a percent)		5.00%
Minimum
Loan and security agreement
Stated interest rate		4.75%
Prime rate
Loan and security agreement
Basis spread (as percent)		0.25%

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2022

Fair Value Measurements

Schedule of financial assets and liabilities at fair value on a recurring basis

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


			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
	2022		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents—money market funds	$	939	$	939	$	—	$	—
Total financial assets	$	939	$	939	$	—	$	—


			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
		December 31,	Assets		Inputs		Inputs
	2021		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents—money market funds	$	8,534	$	8,534	$	—	$	—
Total financial assets	$	8,534	$	8,534	$	—	$	—

Schedule of change fair value of the liabilities, measured with Level 3


							Total
			Debt		Other		level 3
	Warrant		derivative		derivative		financial
	liability		liability		liability		liabilities
Balance at December 31, 2020	$	22	$	396	$	407	$	825
Change in fair value of liability		6		354		93		453
Settlement of liability		—		(750)		(500)		(1,250)
Conversion of warrant liability to equity upon initial public offering		(28)		—		—		(28)
Balance at December 31, 2021	$	—	$	—	$	—	$	—

Preferred Stock and Common Stock - Shares Reserved for Future Issuance (Details) - shares	Dec. 31, 2022	Nov. 18, 2022	Dec. 31, 2021
Shares for future issuance
Shares of common stock reserved for exercise of a warrant	2,631		2,631
Total shares reserved for future issuance	8,653,472		6,732,993
2021 and 2020 Stock Incentive Plans
Shares for future issuance
Shares of common stock reserved for exercise of outstanding stock options under the Stock Incentive Plans	4,960,553		4,088,456
2021 Stock Incentive Plan
Shares for future issuance
Shares of common stock reserved for future awards under Plan	2,848,568		2,349,875
2021 Employee Stock Purchase Plan
Shares for future issuance
Shares of common stock reserved for purchase under the Employee Stock Purchase Plan	566,720		292,031
2022 Inducement Plan
Shares for future issuance
Shares of common stock reserved for future awards under Plan	275,000
Total shares reserved for future issuance		275,000

Equity-Based Compensation - Equity-based compensation expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Equity-Based Compensation
Total compensation expense	$ 8,424	$ 4,958
Research and development expense
Equity-Based Compensation
Total compensation expense	2,427	1,290
General and administrative expense
Equity-Based Compensation
Total compensation expense	$ 5,997	$ 3,668

Equity-Based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2022	Dec. 31, 2021
Weighted Average Grant Date Fair Value
Equity-based compensation expense		$ 8,424	$ 4,958
Restricted stock
Equity Based Compensation
Outstanding at beginning of period (in shares)		110,575
Vested (in shares)		(64,415)
Outstanding at end of period (in shares)		46,160	110,575
Weighted Average Grant Date Fair Value
Outstanding at beginning of period (in dollars per share)		$ 5.51
Vested (in dollars per share)		5.51
Outstanding at end of period (in dollars per share)		$ 5.51	$ 5.51
Granted (in shares)	552,546
Equity-based compensation expense		$ 400	$ 500
Aggregate fair value of restricted stock awards that vested		300	$ 1,000
Total unrecognized compensation cost of unvested restricted stock awards		$ 300
Weighted-average period for unrecognized compensation cost to be recognized		11 months 8 days

Equity-Based Compensation - 2022 Inducement Plan (Details) - shares	12 Months Ended
	Dec. 31, 2022	Nov. 18, 2022	Dec. 31, 2021
Equity-Based Compensation
Common stock reserved for issuance (in shares)	8,653,472		6,732,993
Stock options granted during the period (in shares)	1,745,366
2022 Inducement Plan
Equity-Based Compensation
Common stock reserved for issuance (in shares)		275,000
Stock options granted during the period (in shares)	0

Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Accrued Expenses
External research and development	$ 3,178	$ 2,794
Personnel related	5,413	5,145
Professional and consulting services	1,536	491
Other	200	321
Total accrued expenses	$ 10,327	$ 8,751

Summary of Significant Accounting Policies -Segment Information (Details)	12 Months Ended
	Dec. 31, 2022 segment
Summary of Significant Accounting Policies
Number of operating segments	1

Intellectual Property Licenses

12 Months Ended

Dec. 31, 2022

Intellectual Property Licenses

Intellectual Property Licenses

7. Intellectual Property Licenses

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 specified conditions, Xilio Development is obligated to pay City of Hope tiered royalties in the low single digits on aggregate annual net sales of licensed products or licensed services on a country-by-country basis until the expiration of the last-to-expire patent or patent application licensed from City of Hope covering the applicable licensed product or licensed service in such country. Xilio Development is also obligated to pay City of Hope a portion of any consideration Xilio Development receives for the grant of sublicenses under the agreement ranging from a low double digit to mid-twenties percentage of such consideration, subject to specified conditions under that agreement at the time that Xilio Development grants any such sublicense.

The Company incurred no costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2022. The Company incurred $0.3 million in costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2021. In each of the years ended December 31, 2022 and 2021, the Company incurred $10,000 under this agreement, which was recognized as research and development expense in the consolidated statements of operations and comprehensive loss. 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 year ended December 31, 2022. The Company incurred $0.8 million in costs related to the payment of specified development milestones under the agreement during the year ended December 31, 2021. Any additional payments that are

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

Equity-Based Compensation - Stock options, fair value assumptions (Details) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Equity-Based Compensation
Fair value of options granted (in dollars per share)	$ 5.58	$ 6.28
Aggregate intrinsic value of options exercised (in dollars)		$ 0.5
Stock options granted during the period (in shares)	1,745,366
Maximum
Equity-Based Compensation
Aggregate intrinsic value of options exercised (in dollars)	$ 0.1
Stock options
Equity-Based Compensation
Risk-free interest rate, minimum (as a percent)	1.47%	0.63%
Risk-free interest rate, maximum (as a percent)	4.22%	1.39%
Expected dividend yield (as a percent)	0.00%	0.00%
Expected volatility, minimum (as percentage)	80.75%	80.55%
Expected volatility, maximum (as percentage)	87.64%	85.26%
Stock options \| Minimum
Equity-Based Compensation
Expected term (in years)	5 years 3 months 7 days	5 years 6 months 7 days
Stock options \| Maximum
Equity-Based Compensation
Expected term (in years)	6 years 29 days	10 years
Stock options, excluding performance-based awards
Equity-Based Compensation
Total unrecognized compensation cost	$ 16.8
Weighted-average period for unrecognized compensation cost to be recognized	2 years 6 months 29 days

Preferred Stock and Common Stock (Tables)

12 Months Ended

Dec. 31, 2022

Preferred Stock and Common Stock

Schedule of Shares Reserved for Future Issuance


	December 31,	December 31,
	2022	2021
Shares of common stock reserved for exercise of a warrant	2,631	2,631
Shares of common stock reserved for exercise of outstanding stock options under the 2021 and 2020 Stock Incentive Plans	4,960,553	4,088,456
Shares of common stock reserved for future awards under the 2021 Stock Incentive Plan	2,848,568	2,349,875
Shares of common stock reserved for purchase under the 2021 Employee Stock Purchase Plan	566,720	292,031
Shares of common stock reserved for future awards under the 2022 Inducement Plan	275,000	—
Total shares reserved for future issuance	8,653,472	6,732,993

Fair Value Measurements - Transfers between levels (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Fair Value Measurements
Transfer of Level 1 to level 2	$ 0	$ 0
Transfer of Level 2 to level 1	0	0
Transfer into level 3	0	0
Transfer out level 3	$ 0	$ 0

Preferred Stock and Common Stock - Authorized (Details) - USD ($) $ / shares in Units, $ in Millions		1 Months Ended	12 Months Ended
	Nov. 09, 2022	Oct. 31, 2021	Dec. 31, 2021	Dec. 31, 2022	Oct. 26, 2021	Dec. 31, 2020
Preferred stock and Common stock
Preferred stock, shares authorized			5,000,000	5,000,000	5,000,000
Preferred stock, par value (in dollars per share)			$ 0.0001	$ 0.0001	$ 0.0001
Preferred Shares/Units Outstanding			0	0
Common stock, shares authorized			200,000,000	200,000,000
Common stock, par value (in dollars per share)			$ 0.0001	$ 0.0001
2022 Shelf Registration Statement
Preferred stock and Common stock
Maximum amount of securities available	$ 250.0
Common Stock
Preferred stock and Common stock
Conversion of convertible preferred stock into common stock upon initial public offering (in shares)		18,398,248	18,398,248
Number of shares sold			8,119,106
Common Stock \| 2022 ATM Program
Preferred stock and Common stock
Maximum amount of shares available	$ 75.0
Series A Convertible Preferred Stock
Preferred stock and Common stock
Preferred Shares/Units Outstanding						7,500,000
Series A-1 Convertible Preferred Stock
Preferred stock and Common stock
Preferred Shares/Units Outstanding						19,565,216
Series B Convertible Preferred Stock
Preferred stock and Common stock
Preferred Shares/Units Outstanding						39,723,312

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

12 Months Ended

Dec. 31, 2022

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

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

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

Description of Business

Xilio Therapeutics, Inc. (“Xilio” or the “Company”) is a clinical-stage biotechnology company focused on harnessing the immune system to achieve deep and durable clinical responses to improve the lives of patients with cancer. The Company was incorporated in Delaware in June 2020, and its headquarters are located in Waltham, Massachusetts.

Initial Public Offering

In the fourth quarter of 2021, the Company completed its initial public offering (“IPO”) of common stock, in which it issued and sold an aggregate of 8,119,106 shares of its common stock, including 766,106 shares pursuant to the partial exercise by the underwriters of their option to purchase additional shares, at a public offering price of $16.00 per share. The Company received $116.4 million in net proceeds, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Liquidity and Capital Resources

Since its inception, the Company has devoted substantially all of its financial resources and efforts to research and development activities. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with the successful research, development and manufacturing of product candidates, and, if approved, any products, obtaining regulatory approvals for product candidates, and, if approved, commercialization of any products, protection and enforcement of intellectual property and proprietary technology, development by third parties of potentially competitive products or product candidates, compliance with governmental regulations, and the ability to secure additional capital to fund operations. Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and manufacturing process development and will need to obtain regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

As of December 31, 2022, the Company had cash and cash equivalents of $120.4 million. The Company believes that its existing cash and cash equivalents will be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements into the second quarter of 2024, which is at least twelve months from the date of issuance of these consolidated financial statements. The Company expects to continue to generate negative cash flows from operations and net losses for the foreseeable future and will need additional capital in the future to support its continuing operations and growth strategy as it continues to invest significantly in research and development of its product candidates, including preclinical and clinical testing and manufacturing process development. To date, the Company has primarily funded its operations with proceeds from the sale of preferred units and convertible preferred stock, a debt financing and the IPO. Management’s conclusion with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties that may prove to be incorrect. If actual results differ from management’s estimates, the Company may be required to seek additional capital sooner or curtail planned activities to reduce operating expenses, which may have an adverse impact on the Company’s ability to achieve its business objectives.

Leases (Tables)

12 Months Ended

Dec. 31, 2022

Leases

Schedule of components of lease expense

The components of lease expense were as follows (in thousands):


	Year Ended
	December 31,
	2022		2021
Operating lease cost	$	1,225	$	1,225
Variable lease cost		959		772
Total lease costs	$	2,184	$	1,997
Finance lease cost:
Amortization of right-of-use asset	$	85	$	85
Interest on lease liability		12		16

Schedule of supplemental balance sheet information related to leases

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,
	2022			2021
Operating Lease:
Operating lease right-of-use asset	$	5,585		$	5,977
Operating lease liability, current portion	$	918		$	801
Operating lease liability, net of current portion	$	9,189		$	10,107
Finance Lease:
Other non-current assets	$	219		$	303
Other current liabilities		82			82
Other liabilities, long-term		45			118
Weighted-average remaining lease term (in years):
Operating lease		7.17			8.17
Finance lease		1.70			2.70
Weighted-average discount rate:
Operating lease		8.0	%		8.0	%
Finance lease		6.9	%		6.9	%

Schedule of supplemental cash flow information related to leases

Supplemental cash flow information related to leases was as follows (in thousands):


		Year Ended
		December 31,
		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,634	$	1,392
Financing cash flows from finance leases		85		85

Schedule of Future Lease Payments Under Operating Leases

Future minimum lease payments under non-cancellable leases as of December 31, 2022 are as follows (in thousands):


	Operating Lease		Finance Lease
2023	$	1,683	$	85
2024		1,733		49
2025		1,785		—
2026		1,839		—
2027		1,894		—
Thereafter		4,467		—
Total future minimum lease payments	$	13,401	$	134
Present value adjustment		(3,294)		(7)
Present value of lease liabilities	$	10,107	$	127

Schedule of Future Lease Payments Under financing Leases

Future minimum lease payments under non-cancellable leases as of December 31, 2022 are as follows (in thousands):


	Operating Lease		Finance Lease
2023	$	1,683	$	85
2024		1,733		49
2025		1,785		—
2026		1,839		—
2027		1,894		—
Thereafter		4,467		—
Total future minimum lease payments	$	13,401	$	134
Present value adjustment		(3,294)		(7)
Present value of lease liabilities	$	10,107	$	127

Lease - Components of lease expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Leases
Operating lease cost	$ 1,225	$ 1,225
Variable lease cost	959	772
Total lease costs	2,184	1,997
Finance lease cost
Amortization of right of use asset	$ 85	$ 85
Finance Lease, Right-of-Use Asset, Statement of Financial Position	Other non-current assets	Other non-current assets
Interest on lease liability	$ 12	$ 16

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Income Taxes

Schedule of effective income tax rate differs from federal statutory rate


	Year Ended December 31,
	2022		2021
Tax effected at statutory rate	21.0	%	21.0	%
State taxes	5.2		6.7
Equity-based compensation	(0.6)		(0.5)
Non-deductible expenses	(0.9)		(0.3)
Federal research and development credits	2.8		1.7
Change in valuation allowance	(27.5)		(28.6)
Effective income tax rate	0.0	%	0.0	%

Schedule of deferred tax assets

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


	Year Ended December 31,
	2022		2021
Deferred tax assets:
Federal net operating loss carryforwards	$	37,277	$	31,387
State net operating loss carryforwards		9,267		8,910
Research and development credit carryforwards		7,104		3,873
Capitalized research and development expenditures		14,469		—
Lease liability		2,761		2,980
Accruals and reserves		241		340
Intangible assets		1,917		2,061
Equity-based compensation		1,374		733
Total deferred tax assets:		74,410		50,284
Valuation allowance		(71,003)		(46,745)
Subtotal		3,407		3,539
Deferred tax liabilities:
Property and equipment		(1,881)		(1,883)
Right of use asset		(1,526)		(1,633)
Debt discount		—		(23)
Total deferred tax liabilities		(3,407)		(3,539)
Net deferred tax assets	$	—	$	—

Income Taxes - Operating loss and tax credit Carryforwards (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Income Taxes
Provision or benefit for income taxes	$ 0	$ 0
Increase in valuation allowance	24,300
Uncertain tax benefits	0	0
Estimated interest or penalties recognized	0	$ 0
Federal
Income Taxes
Operating loss carryforwards	177,500
Operating loss carryovers	172,700
Credit carryovers	5,200
State
Income Taxes
Operating loss carryforwards	146,600
Credit carryovers	$ 2,500

Net Loss Per Share

12 Months Ended

Dec. 31, 2022

Net Loss Per Share

Net Loss Per Share

12. 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,
	2022	2021
Unvested restricted common stock	46,160	110,575
Outstanding stock options	4,960,553	4,088,456
Warrants	2,631	2,631
Unvested employee stock purchase plan shares	77,222	—
Total common stock equivalents	5,086,566	4,201,662

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Current assets
Cash and cash equivalents	$ 120,385	$ 198,053
Prepaid expenses and other current assets	4,111	4,464
Total current assets	124,496	202,517
Restricted cash	1,562	1,553
Property and equipment, net	7,255	7,620
Operating lease right-of-use asset	5,585	5,977
Other non-current assets	267	393
Total assets	139,165	218,060
Current liabilities
Accounts payable	3,125	3,144
Accrued expenses	10,327	8,751
Operating lease liability, current portion	918	801
Notes payable, current portion	6,667
Other current liabilities	82	82
Total current liabilities	21,119	12,778
Notes payable, net of current portion	3,165	9,628
Operating lease liability, net of current portion	9,189	10,107
Other liabilities, long-term	45	118
Total liabilities	33,518	32,631
Commitments and contingencies (Note 9)
Stockholders' equity
Preferred stock, $0.0001 par value; 5,000,000 shares authorized at December 31, 2022 and December 31, 2021, no shares issued or outstanding at December 31, 2022 and December 31, 2021
Common stock, $0.0001 par value; 200,000,000 shares authorized at December 31, 2022 and December 31, 2021; 27,471,607 shares issued and 27,425,447 shares outstanding at December 31, 2022; 27,468,950 shares issued and 27,358,375 shares outstanding at December 31, 2021	3	3
Additional paid-in capital	354,752	346,312
Accumulated deficit	(249,108)	(160,886)
Total stockholders' equity (deficit)	105,647	185,429
Total liabilities and stockholders' equity	$ 139,165	$ 218,060

Income Taxes - Effective income tax rate reconciliation (Details)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Effective income tax rate reconciliation
Tax effected at statutory rate	21.00%	21.00%
State taxes	5.20%	6.70%
Equity-based compensation	(0.60%)	(0.50%)
Non-deductible expenses	(0.90%)	(0.30%)
Federal research and development credits	2.80%	1.70%
Change in valuation allowance	(27.50%)	(28.60%)
Effective income tax rate	0.00%	0.00%

Net Loss Per Share (Tables)

12 Months Ended

Dec. 31, 2022

Net Loss Per Share

Schedule of antidilutive securities excluded from computation of diluted net loss per share


	Year Ended
	December 31,
	2022	2021
Unvested restricted common stock	46,160	110,575
Outstanding stock options	4,960,553	4,088,456
Warrants	2,631	2,631
Unvested employee stock purchase plan shares	77,222	—
Total common stock equivalents	5,086,566	4,201,662

Net Loss Per Share (Details) - shares	12 Months Ended
Net Loss Per Share (Details) - shares	Dec. 31, 2022	Dec. 31, 2021
Net Loss Per Share
Total common stock equivalents	5,086,566	4,201,662
Restricted stock
Net Loss Per Share
Total common stock equivalents	46,160	110,575
Stock options
Net Loss Per Share
Total common stock equivalents	4,960,553	4,088,456
Warrants
Net Loss Per Share
Total common stock equivalents	2,631	2,631
Employee stock purchase plan
Net Loss Per Share
Total common stock equivalents	77,222

Leases - Lease information (Details) $ in Millions	1 Months Ended
Leases - Lease information (Details) $ in Millions	Aug. 31, 2019 ft²	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Leases
Area leased (in square feet) \| ft²	27,830
Option to extend	true
Term of option to extend	5 years
Restricted cash
Leases
Letter of credit for the benefit of landlord \| $		$ 1.6	$ 1.6

Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

13. Income Taxes

The Company has not recorded a current or deferred tax provision for the years ended December 31, 2022 and 2021. 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,
	2022		2021
Tax effected at statutory rate	21.0	%	21.0	%
State taxes	5.2		6.7
Equity-based compensation	(0.6)		(0.5)
Non-deductible expenses	(0.9)		(0.3)
Federal research and development credits	2.8		1.7
Change in valuation allowance	(27.5)		(28.6)
Effective income tax rate	0.0	%	0.0	%

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


	Year Ended December 31,
	2022		2021
Deferred tax assets:
Federal net operating loss carryforwards	$	37,277	$	31,387
State net operating loss carryforwards		9,267		8,910
Research and development credit carryforwards		7,104		3,873
Capitalized research and development expenditures		14,469		—
Lease liability		2,761		2,980
Accruals and reserves		241		340
Intangible assets		1,917		2,061
Equity-based compensation		1,374		733
Total deferred tax assets:		74,410		50,284
Valuation allowance		(71,003)		(46,745)
Subtotal		3,407		3,539
Deferred tax liabilities:
Property and equipment		(1,881)		(1,883)
Right of use asset		(1,526)		(1,633)
Debt discount		—		(23)
Total deferred tax liabilities		(3,407)		(3,539)
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, 2022, the valuation allowance increased by $24.3 million primarily due to the increase in the Company’s book loss reported in the period, capitalized research and development expenditures and the generation of additional research and development credits.

As of December 31, 2022, the Company had $177.5 million and $146.6 million of federal and state operating loss carryforwards, respectively. Of the federal net operating loss carryovers, $172.7 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, 2022, the Company had $5.2 million and $2.5 million of federal and state credit carryovers which begin to expire in 2033. These loss and credit carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.

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 a change of control 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, 2022,

and 2021, the Company has not recorded tax reserves associated with any unrecognized tax benefits. The Company’s policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its statements of income. As of December 31, 2022, and 2021, the Company had no reserves for uncertain tax positions. For the years ended December 31, 2022 and 2021, 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 has applied this required change in accounting method beginning in 2022.

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

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

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+ Details

Property and Equipment, Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Property and Equipment
Property and equipment	$ 11,673	$ 10,332
Less accumulated depreciation	(4,418)	(2,712)
Property and equipment, net	7,255	7,620
Depreciation	1,700	1,400
Laboratory equipment
Property and Equipment
Property and equipment	5,587	3,805
Computers and software
Property and Equipment
Property and equipment	228	228
Furniture & fixtures
Property and Equipment
Property and equipment	636	636
Leasehold improvements
Property and Equipment
Property and equipment	5,124	5,124
Construction in process
Property and Equipment
Property and equipment	$ 98	$ 539

Loan and Security Agreement (Tables)

12 Months Ended

Dec. 31, 2022

Loan and Security Agreement

Schedule of minimum aggregate future loan payments

The Company has the following minimum aggregate future loan payments under the Loan Agreement at December 31, 2022 (in thousands):


	Minimum Loan
	Payments
2023	$	6,667
2024		3,333
Total future principal payments		10,000
Less: unamortized discount		(168)
Total notes payable	$	9,832

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Operating expenses
Research and development	$ 59,201	$ 51,188
General and administrative	29,948	23,856
Total operating expenses	89,149	75,044
Loss from operations	(89,149)	(75,044)
Other income (expense), net
Other income (expense), net	927	(756)
Total other income (expense), net	927	(756)
Net loss	(88,222)	(75,800)
Comprehensive loss	$ (88,222)	$ (75,800)
Net loss per share, basic (in dollars per share)	$ (3.22)	$ (13.52)
Net loss per share, diluted (in dollars per share)	$ (3.22)	$ (13.52)
Weighted average common shares outstanding, basic (in shares)	27,392,087	5,606,308
Weighted average common shares outstanding, diluted (in shares)	27,392,087	5,606,308

Income Taxes - Deferred tax assets (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Deferred tax assets:
Federal net operating loss carryforwards	$ 37,277	$ 31,387
State net operating loss carryforwards	9,267	8,910
Research and development credit carryforwards	7,104	3,873
Capitalized research and development expenditures	14,469
Lease liability	2,761	2,980
Accruals and reserves	241	340
Intangible assets	1,917	2,061
Equity-based compensation	1,374	733
Total deferred tax assets:	74,410	50,284
Valuation allowance	(71,003)	(46,745)
Subtotal	3,407	3,539
Deferred tax liabilities:
Property and equipment	(1,881)	(1,883)
Right of use asset	(1,526)	(1,633)
Debt discount		(23)
Total deferred tax liabilities	(3,407)	(3,539)
Total net deferred tax assets

Leases - Schedule of supplemental balance sheet information related to leases (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Operating Lease:
Operating lease right-of-use asset	$ 5,585	$ 5,977
Operating lease liability, current portion	918	801
Operating lease liability, net of current portion	9,189	10,107
Finance Lease:
Other non-current assets	$ 219	$ 303
Finance Lease, Right-of-Use Asset, Statement of Financial Position	Other non-current assets	Other non-current assets
Other current liabilities	$ 82	$ 82
Finance Lease, Liability, Current, Statement of Financial Position	Other current liabilities	Other current liabilities
Other liabilities, long-term	$ 45	$ 118
Finance Lease, Liability, Noncurrent, Statement of Financial Position	Other liabilities, long-term	Other liabilities, long-term
Weighted-average remaining lease term (in years):
Operating lease	7 years 2 months 1 day	8 years 2 months 1 day
Finance lease	1 year 8 months 12 days	2 years 8 months 12 days
Weighted-average discount rate:
Operating lease	8.00%	8.00%
Finance lease	6.90%	6.90%

Fair Value Measurements - Warrant (Details) - $ / shares	Oct. 26, 2021	Jun. 30, 2020	May 16, 2016
Common Stock
Warrants
Warrant to purchase	2,631
Series A Convertible Preferred Stock
Warrants
Warrant to purchase		25,000
Preferred units at a price, per unit		$ 1.00
Series A Preferred Units
Warrants
Warrant to purchase			25,000
Preferred units at a price, per unit			$ 1.00

Leases - Future minimum lease payments under non-cancellable leases (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Operating leases
2023	$ 1,683
2024	1,733
2025	1,785
2026	1,839
2027	1,894
Thereafter	4,467
Total future minimum lease payments	13,401
Present value adjustment	(3,294)
Present value of lease liabilities	$ 10,107
Operating Lease, Liability, Statement of Financial Position	Operating lease liability, current portion, Operating lease liability, net of current portion
Finance lease
2023	$ 85
2024	49
Total future minimum lease payments	134
Present value adjustment	(7)
Present value of lease liabilities	$ 127
Finance Lease, Liability, Statement of Financial Position	Other current liabilities, Other liabilities, long-term