UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                    

Commission File Number: 001-40925

Xilio Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware	85-1623397
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

828 Winter Street, Suite 300 Waltham, Massachusetts	02451
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (857) 524-2466

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	XLO	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒    No   ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒    No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐    No  ☒

Number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding on November 4, 2022: 27,471,607

References to Xilio

Unless otherwise stated, all references to “us,” “our,” “we,” “Xilio,” “Xilio Therapeutics,” “the Company” and similar references in this Quarterly Report on Form 10-Q refer to Xilio Therapeutics, Inc. and its consolidated subsidiaries. Xilio Therapeutics and its associated logos are registered trademarks of Xilio Therapeutics, Inc. Other brands, names and trademarks contained in this Quarterly Report on Form 10-Q are the property of their respective owners.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” or the negative of these words or other comparable terminology, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

● the initiation, timing, progress and results of our research and development programs and preclinical studies and clinical trials;

● our plans to develop and, if approved, subsequently commercialize any product candidates we may develop;

● the timing of and our ability to submit applications for, and obtain and, if approved, maintain regulatory approvals for our product candidates;

● our estimates regarding expenses, future revenue, capital requirements and our need for additional capital;

● our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash and cash equivalents;

● the potential advantages of our current and future product candidates;

● the rate and degree of market acceptance of our product candidates, if approved;

● our estimates regarding the addressable patient population and potential market opportunity for our current and future product candidates;

● our commercialization, marketing and manufacturing capabilities and strategy;

● our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;

● our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

● the impact of government laws and regulations;

● our competitive position and expectations regarding developments and projections relating to our current or future competitors and any competing therapies that are or become available;

● developments relating to our competitors and our industry;

● our ability to establish and maintain collaborations or obtain additional funding;

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● our expectations regarding the time during which we will be an emerging growth company under the JOBS Act; and

● the impact and scope of COVID-19 and its variants on our business, operations, strategy, goals and anticipated milestones, as well as our response to the COVID-19 pandemic.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly those described below in the “Risk Factor Summary” and in the “Risk Factors” section in Part II, Item 1A of this Quarterly Report on Form 10-Q, that could cause actual results or events to differ materially from the forward-looking statements that we make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations, partnerships or investments we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results, performance or achievements may be materially different from what we expect. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Risk Factor Summary

Our business is subject to numerous risks that, if realized, could materially and adversely affect our business, financial condition, results of operations and future growth prospects. These risks are discussed more fully in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:

● Our business is highly dependent on the success of our current product candidates, which are in the early stages of development and will require significant additional preclinical and clinical development before we can seek regulatory approval for and commercially launch a product.

● Our approach to the discovery and development of product candidates based on our technological approaches is unproven, and we do not know whether we will be able to develop any products of commercial value.

● Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all, which would have an adverse effect on our business.

● We may encounter substantial delays in the commencement or completion, or termination or suspension, of our clinical trials, which could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

● We will need to obtain substantial additional capital to finance our operations and complete the development and any commercialization of any current or future product candidates. If we are unable to raise this capital when needed, we may be forced to delay, reduce or eliminate one or more of our research and development programs or other operations.

● Our product candidates may cause undesirable or unexpectedly severe side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

3

● Interim top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

● We expect to develop certain of our product candidates in combination with third-party drugs and we will have limited or no control over the safety, supply, regulatory status or regulatory approval of such drugs.

● Manufacturing biologics is complex, and we may experience manufacturing problems that result in delays in our development or commercialization programs.

● We face risk related to our reliance on our current and any future third-party contract manufacturers, or CMOs. For example, the CMOs on which we rely may not continue to meet regulatory requirements, may have limited capacity, or may experience interruptions in supply, any of which could adversely affect our development and commercialization plans for our product candidates.

● We expect to rely on third parties to conduct, supervise and monitor IND-enabling studies and clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business, reputation and results of operations.

● We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

● If we are unable to obtain and maintain patent protection for any product candidates we develop or for other proprietary technologies we may develop, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize product candidates and technology similar or identical to our product candidates and technology, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected.

● We rely on in-license agreements for patent rights with respect to our product candidates and may in the future acquire or in-license additional third-party intellectual property rights on which we may similarly rely. We face risks with respect to such reliance, including the risk that we could lose these rights that are important to our business if we fail to comply with our obligations under these licenses or that we may be unable to acquire or in-license third-party intellectual property that may be necessary or important to our business operations.

● The impact of the COVID-19 pandemic may affect our ability to initiate and complete preclinical studies, delay the initiation of our planned and any future clinical trials, disrupt regulatory activities, or have other adverse effects on our business and operations. In addition, this pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, each of which could result in adverse effects on our business, on raising capital and on our operations.

Availability of Other Information About Xilio Therapeutics

Investors and others should note that Xilio Therapeutics communicates with its investors and the public using its company website (www.xiliotx.com), including but not limited to investor presentations and scientific presentations, filings with the U.S. Securities and Exchange Commission, press releases, public conference calls and webcasts. You can also connect with Xilio Therapeutics on Twitter (@xiliotx) or LinkedIn. The information that Xilio Therapeutics posts on these channels and websites could be deemed to be material information. As a result, Xilio Therapeutics encourages investors, the media and others interested in Xilio Therapeutics to review the information that it posts on these channels, including Xilio Therapeutics’ investor relations website, on a regular basis. This list of channels may be updated from time to time on Xilio Therapeutics’ investor relations website (ir.xiliotx.com) and may include other social media channels than the ones described above. The contents of Xilio Therapeutics’ website or these channels, or any other website that may be accessed from its website or these channels, shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

4

TABLE OF CONTENTS

		Page
Part I	Financial Information
Item 1.	Financial Statements (unaudited)	6
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	6
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021	7
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2022 and 2021	8
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	31
Part II	Other Information	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	96
Item 5.	Other Information	97
Item 6.	Exhibits	98
Signatures

5

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

XILIO THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

	September 30,		December 31,
	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	139,143	$	198,053
Prepaid expenses and other current assets		3,171		4,464
Total current assets		142,314		202,517
Restricted cash		1,557		1,553
Property and equipment, net		7,553		7,620
Operating lease right-of-use asset		5,689		5,977
Other non-current assets		301		393
Total assets	$	157,414	$	218,060
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,810	$	3,144
Accrued expenses		9,062		8,751
Operating lease liability, current portion		888		801
Notes payable, current portion		5,000		—
Other current liabilities		82		82
Total current liabilities		16,842		12,778
Notes payable, net of current portion		4,781		9,628
Operating lease liability, net of current portion		9,429		10,107
Other liabilities, long-term		64		118
Total liabilities		31,116		32,631
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.0001 par value; 5,000,000 shares authorized, no shares issued or outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock, $0.0001 par value; 200,000,000 shares authorized at September 30, 2022 and December 31, 2021; 27,471,607 shares issued and 27,407,149 shares outstanding at September 30, 2022; 27,468,950 shares issued and 27,358,375 shares outstanding at December 31, 2021		3		3
Additional paid-in capital		352,937		346,312
Accumulated deficit		(226,642)		(160,886)
Total stockholders’ equity		126,298		185,429
Total liabilities and stockholders’ equity	$	157,414	$	218,060

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

6

XILIO THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating expenses
Research and development	$	13,038	$	10,470	$	44,204	$	39,836
General and administrative		7,168		5,491		21,778		15,652
Total operating expenses		20,206		15,961		65,982		55,488
Loss from operations		(20,206)		(15,961)		(65,982)		(55,488)
Other income (expense), net
Other income (expense), net		416		(290)		226		(611)
Total other income (expense), net		416		(290)		226		(611)
Net loss and comprehensive loss	$	(19,790)	$	(16,251)	$	(65,756)	$	(56,099)
Net loss per share, basic and diluted	$	(0.72)	$	(21.27)	$	(2.40)	$	(76.18)
Weighted average common shares outstanding, basic and diluted		27,399,906		763,869		27,384,085		736,416

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

7

XILIO THERAPEUTICS, INC.

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

(In thousands, except share data)

(Unaudited)

	Series A			Series A-1			Series B			Series C
	Convertible			Convertible			Convertible			Convertible										Total
	Preferred Stock			Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			Additional		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Deficit
Balance at December 31, 2020	7,500,000	$	7,309	19,565,216	$	20,740	39,723,312	$	49,953	—	$	—	689,929	$	—	$	1,799	$	(85,086)	$	(83,287)
Issuance of Series B convertible preferred stock, net of issuance costs of $50	—		—	—		—	39,723,312		50,200	—		—	—		—		—		—		—
Issuance of Series C convertible preferred stock, net of issuance costs of $314	—		—	—		—	—		—	68,271,641		94,686	—		—		—		—		—
Vesting of restricted common stock	—		—	—		—	—		—	—		—	27,989		—		—		—		—
Exercise of stock options				—		—	—		—	—		—	4,473		—		25		—		25
Equity-based compensation expense	—		—	—		—	—		—	—		—	—		—		794		—		794
Net loss	—		—	—		—	—		—	—		—	—		—		—		(16,667)		(16,667)
Balance at March 31, 2021	7,500,000	$	7,309	19,565,216	$	20,740	79,446,624	$	100,153	68,271,641	$	94,686	722,391	$	—	$	2,618	$	(101,753)	$	(99,135)
Vesting of restricted common stock	—		—	—		—	—		—	—		—	26,676		—		—		—		—
Exercise of stock options	—		—	—		—	—		—	—		—	1,034		—		5		—		5
Equity-based compensation expense	—		—	—		—	—		—	—		—	—		—		1,002		—		1,002
Net loss	—		—	—		—	—		—	—		—	—		—		—		(23,181)		(23,181)
Balance at June 30, 2021	7,500,000	$	7,309	19,565,216	$	20,740	79,446,624	$	100,153	68,271,641	$	94,686	750,101	$	—	$	3,625	$	(124,934)	$	(121,309)
Vesting of restricted common stock	—		—	—		—	—		—	—		—	26,263		—		—		—		—
Exercise of stock options	—		—	—		—	—		—	—		—	2,585		—		14		—		14
Equity-based compensation expense	—		—	—		—	—		—	—		—	—		—		1,091		—		1,091
Net loss	—		—	—		—	—		—	—		—	—		—		—		(16,251)		(16,251)
Balance at September 30, 2021	7,500,000	$	7,309	19,565,216	$	20,740	79,446,624	$	100,153	68,271,641	$	94,686	778,949	$	—	$	4,730	$	(141,185)	$	(136,455)

	Series A			Series A-1			Series B			Series C
	Convertible			Convertible			Convertible			Convertible										Total
	Preferred Stock			Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			Additional		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Equity
Balance at December 31, 2021	—	$	—	—	$	—	—	$	—	—	$	—	27,358,375	$	3	$	346,312	$	(160,886)	$	185,429
Vesting of restricted common stock	—		—	—		—	—		—	—		—	15,441		—		—		—		—
Exercise of stock options	—		—	—		—	—		—	—		—	2,657		—		16		—		16
Equity-based compensation expense	—		—	—		—	—		—	—		—	—		—		2,029		—		2,029
Net loss	—		—	—		—	—		—	—		—	—		—		—		(21,353)		(21,353)
Balance at March 31, 2022	—	$	—	—	$	—	—	$	—	—	$	—	27,376,473	$	3	$	348,357	$	(182,239)	$	166,121
Vesting of restricted common stock	—		—	—		—	—		—	—		—	15,361		—		—		—		—
Equity-based compensation expense	—		—	—		—	—		—	—		—	—		—		2,709		—		2,709
Net loss	—		—	—		—	—		—	—		—	—		—		—		(24,613)		(24,613)
Balance at June 30, 2022	—	$	—	—	$	—	—	$	—	—	$	—	27,391,834	$	3	$	351,066	$	(206,852)	$	144,217
Vesting of restricted common stock	—		—	—		—	—		—	—		—	15,315		—		—		—		—
Equity-based compensation expense	—		—	—		—	—		—	—		—	—		—		1,871		—		1,871
Net loss	—		—	—		—	—		—	—		—	—		—		—		(19,790)		(19,790)
Balance at September 30, 2022	—	$	—	—	$	—	—	$	—	—	$	—	27,407,149	$	3	$	352,937	$	(226,642)	$	126,298

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

8

XILIO THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(65,756)	$	(56,099)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,358		1,105
Non-cash interest expense		164		121
Equity-based compensation expense		6,609		2,887
Loss on disposal of property and equipment		1		19
Change in fair value of warrant and derivative liabilities		—		199
Changes in operating assets and liabilities:
Prepaid and other assets		1,283		(3,597)
Operating lease right-of-use asset		288		244
Accounts payable		(972)		(1,626)
Accrued expenses and other liabilities		116		(6,459)
Operating lease liability		(591)		(383)
Net cash used in operating activities		(57,500)		(63,589)
Cash flows from investing activities:
Purchases of property and equipment		(1,358)		(722)
Net cash used in investing activities		(1,358)		(722)
Cash flows from financing activities:
Repayments of debt principal		—		(1,000)
Proceeds from debt issuance, net of issuance costs		—		975
Payments of finance lease		(64)		(63)
Proceeds from issuance of convertible preferred stock, net of issuance costs		—		144,886
Proceeds from exercise of stock options		16		44
Net cash (used in) provided by financing activities		(48)		144,842
(Decrease) increase in cash, cash equivalents and restricted cash		(58,906)		80,531
Cash, cash equivalents and restricted cash, beginning of period		199,606		20,789
Cash, cash equivalents and restricted cash, end of period	$	140,700	$	101,320
Supplemental cash flow disclosure:
Cash paid for interest	$	380	$	371
Supplemental disclosure of non-cash activities:
Capital expenditures included in accounts payable or accrued expenses	$	371	$	47
Deferred offering costs included in accounts payable or accrued expenses	$	—	$	879
Recognition of derivative liability in connection with long-term debt facility	$	—	$	250

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

9

XILIO THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

(Dollars in thousands, unless otherwise stated)

(Unaudited)

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 based in Waltham, Massachusetts.

Initial Public Offering

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

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 September 30, 2022, the Company had cash and cash equivalents of $139.1 million. The Company believes that its existing cash and cash equivalents will be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements into the second quarter of 2024, which is at least twelve months from the date of issuance of these condensed consolidated financial statements. The Company expects to continue to generate negative cash flows from operations and net losses for the foreseeable future and will need additional capital in the future to support its continuing operations and growth strategy as it continues to invest significantly in research and development of its product candidates, including preclinical and clinical testing and manufacturing process development. To date, the Company has primarily funded its operations with proceeds from the sale of convertible preferred units and convertible preferred stock, a debt financing and the IPO. 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.

10

2. Summary of Significant Accounting Policies

Basis of Presentation

These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission, (the “SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).

In April 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that the Company either (1) irrevocably elects to “opt out” of such extended transition period or (2) no longer qualifies as an emerging growth company. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of its initial public offering or such earlier time that it is no longer an emerging growth company.

In connection with its IPO, the Company effected a 1-for-9.5 reverse stock split of the Company’s issued and outstanding shares of common stock. The reverse stock split was effective on October 15, 2021. Accordingly, all share and per share amounts of common stock for all periods presented in these condensed consolidated financial statements and related notes have been retroactively adjusted to give effect to the reverse stock split.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Xilio Development, Inc., a Delaware corporation and Xilio Securities Corporation, a Massachusetts corporation, created to buy, sell and hold securities. Effective as of September 30, 2022, the Company’s wholly owned subsidiaries, Xilio Therapeutics, LLC and Xilio Concerto, LLC, were merged with and into Xilio Development, Inc., with Xilio Development, Inc. as the surviving corporation. All intercompany accounts and transactions have been eliminated in consolidation.

Significant Accounting Policies

The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements are described in Note 2, “Summary of Significant Accounting Policies” of the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Unaudited Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated financial statements are unaudited. The financial data and other information contained in these notes are also unaudited. The condensed consolidated balance sheet data as of December 31, 2021 was derived from the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2022, the results of its operations for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of expenses during the reporting period. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Factors that may affect estimates include expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Significant estimates of accounting reflected in these condensed consolidated financial statements include, but are not limited to, estimates related to accrued expenses, the valuation of equity-based compensation, including stock options and restricted common stock, the useful life of long-lived assets and income taxes. Actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

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

	September 30,		September 30,
	2022		2021
Cash and cash equivalents	$	139,143	$	99,767
Restricted cash		1,557		1,553
Total cash, cash equivalents and restricted cash as shown on the consolidated statement of cash flows	$	140,700	$	101,320

Recently Adopted Accounting Pronouncements

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

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which reduces the number of accounting models for convertible debt instruments and convertible preferred stock as well as amends the

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derivatives scope exception for contracts in an entity’s own equity. The Company adopted ASU 2020-06 as of January 1, 2022, and the adoption did not have a material effect on its condensed consolidated financial statements and related disclosures.

3. Fair Value Measurements

The Company measures the following financial assets at fair value on a recurring basis. The fair value of these assets was determined as follows:

			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs
	2022		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents—money market funds	$	936	$	936	$	—	$	—
Total financial assets	$	936	$	936	$	—	$	—

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

4. Property and Equipment, Net

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

	September 30,		December 31,
	2022		2021
Laboratory equipment	$	5,433	$	3,805
Computers and software		228		228
Furniture and fixtures		636		636
Leasehold improvements		5,124		5,124
Construction in process		95		539
Total property and equipment	$	11,516	$	10,332
Less accumulated depreciation		(3,963)		(2,712)
Property and equipment, net	$	7,553	$	7,620

The Company incurred depreciation and amortization expense related to property and equipment of $1.3 million and $1.0 million for the nine months ended September 30, 2022 and 2021, respectively.

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5. Accrued Expenses

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

	September 30,		December 31,
	2022		2021
External research and development	$	4,306	$	2,794
Personnel-related		3,728		5,145
Professional and consulting fees		764		491
Other		264		321
Total accrued expenses	$	9,062	$	8,751

6. Loan and Security Agreement

In November 2019, the Company entered into a loan and security agreement with Pacific Western Bank (“PacWest”), as amended (the “Loan Agreement”), pursuant to which the Company borrowed $10.0 million under a term loan and has the ability to request one or more additional term loans in an aggregate principal amount of $10.0 million prior to December 31, 2022. Interest on amounts outstanding under the Loan Agreement accrue at a variable annual rate equal to the greater of (i) the prime rate plus 0.25% or (ii) 4.75%. As of September 30, 2022 the interest rate on the term loan is 6.5%. The Company is required to make interest-only payments on any outstanding balances through December 31, 2022. Subsequent to the interest-only period, the Company will be required to make equal monthly payments of principal plus interest until the term loan matures on June 30, 2024. In addition, under the Loan Agreement, the Company paid a one-time success fee of $0.8 million to PacWest in October 2021 upon the closing of the IPO.

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

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

	Minimum Loan
	Payments
2022	$	—
2023		6,667
2024		3,333
Total future principal payments		10,000
Less: unamortized discount		(219)
Total notes payable	$	9,781

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

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7. Commitments and Contingencies

Leases

The Company has an operating lease for its facility and a finance lease for certain lab equipment. In August 2019, the Company entered into a lease agreement with a landlord providing funding for tenant improvements and occupancy of approximately 27,830 square feet of office and laboratory space at 828 Winter Street, Waltham, Massachusetts. The initial term of the lease expires in March 2030, unless terminated earlier in accordance with the terms of the lease. The Company has an option to extend the lease for a period of five years at then-market rates. The Company is obligated to pay its portion of real estate taxes and costs related to the premises, including costs of operations, maintenance, repair, replacement, and management of the leased premises, which it began paying simultaneous with the rent commencement date in March 2020. As of September 30, 2022, the Company has a letter of credit for the benefit of its landlord in the amount of $1.6 million, collateralized by a money market fund, which is classified as restricted cash on the condensed consolidated balance sheets.

8. Preferred Stock and Common Stock

Undesignated Preferred Stock

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

Convertible Preferred Stock

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

Common Stock

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

Shares Reserved for Future Issuance

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

	September 30,	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	4,999,256	4,088,456
Shares of common stock reserved for future awards under the 2021 Stock Incentive Plan	2,809,865	2,349,875
Shares of common stock reserved for purchase under the 2021 Employee Stock Purchase Plan	566,720	292,031
Total shares reserved for future issuance	8,378,472	6,732,993

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9. 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, 2022, the number of shares reserved for issuance under the 2021 Plan increased by 1,373,447 shares in accordance with the Evergreen Provision.

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

2021 Employee Stock Purchase Plan

In September 2021, the Company’s board of directors adopted the 2021 ESPP, which was approved by the stockholders and became effective on October 21, 2021, immediately prior to the effectiveness of the Registration Statement. The Company initially reserved 292,031 shares of the Company’s common stock for future issuance under the 2021 ESPP. The number of shares of common stock reserved for issuance under the 2021 ESPP will automatically increase on each January 1, beginning on January 1, 2022 and ending on January 1, 2031, by the lesser of (i) 584,062 shares of common stock, (ii) 1% of the number of shares of the Company’s common stock outstanding on such date, and (iii) a number of shares of common stock as determined by the Company’s board of directors (the “ESPP Evergreen Provision”). Effective January 1, 2022, the number of shares reserved for issuance under the 2021 ESPP increased by 274,689 shares in accordance with the ESPP Evergreen Provision. As of September 30, 2022, no offering periods have commenced under the 2021 ESPP.

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Equity-Based Compensation Expense

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development expense	$	594	$	378	$	1,827	$	864
General and administrative expense		1,277		713