9. Preferred Stock and Common Stock

Undesignated Preferred Stock

As of December 31, 2025 and 2024 the Company’s restated certificate of incorporation, as amended, authorizes the Company to issue up to 5,000,000 shares of undesignated preferred stock at $0.0001 par value per share. As of December 31, 2025 and 2024, there were no shares of preferred stock issued or outstanding.

Common Stock

As of December 31, 2025, the Company’s restated certificate of incorporation, as amended, authorized the Company to issue up to 600,000,000 shares of common stock, $0.0001 par value per share. As of December 31, 2024, the Company’s restated 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.

June 2025 Follow-On Offering

In June 2025, the Company closed a follow-on offering of prefunded warrants and accompanying common stock warrants and received net proceeds of $47.0 million. In connection with the offering, the Company issued prefunded warrants to purchase 4,762,533 shares of common stock, accompanied by Series A warrants to purchase 4,762,533 shares of common stock (or, in certain circumstances, prefunded warrants) (the “Series A warrants”), Series B warrants to purchase 4,762,533 shares of common stock (or, in certain circumstances, prefunded warrants) (the “Series B warrants”), and Series C warrants to purchase 4,762,533 shares of common stock (or, in certain circumstances, prefunded warrants) (the “Series C warrants”). The combined offering price of one prefunded warrant, one Series A warrant, one Series B warrant and one Series C warrant, which were sold together but are immediately separable, was $10.4986, which was equal to the combined offering price of the prefunded warrants, Series A warrants, Series B warrants and Series C warrants, less the $0.0014 per share exercise price of the prefunded warrants.

In the event of certain fundamental transactions, each holder of the prefunded warrants and the common stock warrants has the right to receive, upon exercise of such warrant, the same amount and kind of securities, cash or property as such holder would have been entitled to receive upon the occurrence of such fundamental transaction if it had been, immediately prior to such fundamental transaction, the holder of the number of shares of common stock underlying such holder’s warrant without regard to any limitations on exercise contained in such holder’s warrant. The holders of Series A warrants are alternatively entitled to elect to receive consideration in an amount equal to the Black Scholes value of the unexercised portion of such holder’s Series A warrants and if the fundamental transaction is within the Company’s control, the Series A warrant holders can require the Black Scholes value to be paid in cash.

In addition, for each dollar of non-dilutive capital received by the Company prior to the exercise or expiration of the remaining outstanding Series C warrants, the Company may elect to cancel a number of warrant shares equal to $14.00 divided by the $10.50 warrant exercise price (or one and one-third warrants) without any compensation paid by the Company to the warrant holders. For example, if the Company received $30.0 million in non-dilutive capital, it could elect to cancel 40.0 million of warrant shares. Subject to certain specified exceptions, non-dilutive capital includes: upfront payments under any future collaboration, license or similar agreement; milestone payments and option fees under any current or future collaboration, license or similar agreement; and net proceeds pursuant to any equity issuance where the purchase price per share is above $21.00.

At the June 2025 issuance date, the Company concluded that the prefunded warrants, the Series A warrants, the Series B warrants and the Series C warrants are freestanding financial instruments because each of these instruments can be transferred or assigned by the holder subject to compliance with the applicable securities laws and are legally detachable and separately exercisable. The Company determined the classification of each warrant based on the guidance in ASC 480 and ASC 815. As part of this assessment under ASC 815, the Company was required to allocate its available authorized shares of common stock to its outstanding contracts and commitments. The Company applied an accounting policy to first allocate available authorized shares of common stock based on the earliest issuance date of the contract. To the extent more than one contract or commitment made was issued on the same date, the available shares of common stock were allocated first to the contract with the earliest potential exercise date. The Company concluded that the prefunded warrants are classified as equity. The Company concluded the Series A warrants, the Series B warrants and the Series C warrants are required to be initially classified as liabilities as a result of their settlement provisions. The Series B warrants that were exercised for common stock and prefunded warrants in lieu of shares of common stock were reclassified to equity on the later of the date of each exercise, or December 2, 2025, the date the remaining outstanding Series B warrants qualified for equity classification due to the settlement of the exercise price reset feature. The Series A warrants and the remaining outstanding Series C warrants will continue to be classified as liabilities until such time as the applicable warrant is exercised, expires, or qualifies for equity classification.

The Company received initial gross proceeds from the offering of $50.0 million, before deducting approximately $3.0 million in aggregate issuance costs related to the offering, which consisted of underwriting discounts and commissions and offering expenses

payable by the Company. The Company allocated the initial gross proceeds as follows: $26.8 million to the Series A warrants, $6.6 million to the Series B warrants and $5.1 million to the Series C warrants, in each case, based on the fair value of each instrument on the date of issuance with the remaining $11.5 million allocated to the prefunded warrants. The Company allocated the issuance costs to the financial instruments in a manner consistent with the allocation of the proceeds. The Company allocated approximately $2.3 million in issuance costs to the common stock warrants that are classified as liabilities, which was recorded as a component of other income, net, on the consolidated statements of operations and comprehensive loss during the year ended December 31, 2025. The Company allocated approximately $0.7 million in issuance costs to the prefunded warrants that are classified in equity, which was recorded as a reduction to additional paid in capital on the consolidated balance sheets as of December 31, 2025.

During the year ended December 31, 2025, the Company recognized a loss of $5.8 million, related to the change in fair value of the common stock warrants, which is recorded as a component of the change in fair value of common stock warrant liabilities on the consolidated statements of operations and comprehensive loss.

The exercisability of the prefunded warrants and common stock warrants is subject to limitations on exercise. Specifically, a holder will be prohibited from exercising any portion of any warrant if immediately prior to or following such exercise such holder (together with its affiliates) would beneficially own more than 4.99% (or up to 19.99% at the election of the holder) of the Company’s issued and outstanding common stock immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrant. However, any holder of any warrant may increase or decrease such percentage to any other percentage not in excess of 19.99%, provided that any such increase will not be effective until the 61st day after notice from the holder is delivered to the Company.

During the year ended December 31, 2025, 524,033 prefunded warrants were exercised and 4,238,500 prefunded warrants remain outstanding as of December 31, 2025.

Each Series A warrant became exercisable on December 1, 2025, with an exercise price of $10.50 per share of common stock, and will expire on June 5, 2030. During the year ended December 31, 2025, no Series A warrants were exercised and 4,762,533 Series A warrants remain outstanding as of December 31, 2025.

Each Series B warrant became exercisable on November 1, 2025 and was exercisable through December 31, 2025. During the year ended December 31, 2025, 3,443,388 of the Series B warrants were exercised for 1,008,415 shares of common stock and 2,434,973 prefunded warrants in lieu of shares of common stock. The Company received $35.8 million in total gross proceeds from the exercise of the Series B warrants, before deducting underwriting discounts and commissions and any offering expenses. The remaining 1,319,145 Series B warrants were not exercised and expired on December 31, 2025. In addition, 1,319,145 Series C warrants expired according to their terms on December 31, 2025 in connection with the expiration of unexercised Series B warrants, and 3,443,388 of the Series C warrants remained outstanding as of December 31, 2025.

Each remaining Series C warrant will be exercisable on or after June 1, 2026, with an exercise price of $10.50 per share of common stock, and will expire on December 2, 2026. In addition, if the closing sale price of the Company’s common stock is below the exercise price on December 2, 2026, the exercise price will reset to the closing sale price on December 1, 2026 and the expiration time will be extended to December 31, 2026.

The prefunded warrants and Series A warrants may be exercised for cash or on a net exercise or “cashless” basis, and the Series C warrants may be exercised for cash or on a net exercise or “cashless” basis in the event there is no effective registration statement or prospectus available which covers the Series C warrants and shares of common stock issuable upon exercise of the Series C warrants. There can be no assurance that any of the warrants that remain outstanding as of December 31, 2025 will be exercised for cash or at all, and it is possible that the remaining outstanding common stock warrants may expire without being exercised. If all of the outstanding Series C warrants are exercised for cash at their current exercise price of $10.50 per warrant, the Company will receive up to $36.2 million in additional total gross proceeds by the end of 2026, before deducting underwriting discounts and commissions and any offering expenses.

Private Placement

In March 2024, the Company entered into a securities purchase agreement with certain existing accredited investors pursuant to which the Company issued and sold an aggregate of 139,508 shares of its common stock at a purchase price of $8.96 per share and, in lieu of shares of the Company’s common stock, prefunded warrants to purchase up to an aggregate of 1,116,237 shares of its common stock at a purchase price of $8.9586 per prefunded warrant, through a private placement. The prefunded warrants are exercisable any time at an exercise price of $0.0014 per share. The private placement closed in April 2024. The Company received aggregate gross proceeds of $11.3 million from the private placement, before deducting placement agent fees and expenses payable by the Company. The shares of

common stock issued and sold in the private placement were registered for resale pursuant to the Company’s registration statement on Form S-3 filed with the SEC on April 30, 2024, which became effective on May 6, 2024.

“At-The-Market” Offering Program

In November 2022, the Company filed a universal shelf registration statement on Form S-3 with the SEC to register for sale up to $250.0 million of its common stock, preferred stock, debt securities, units and warrants, which the Company could issue and sell from time to time in one or more offerings, which became effective on November 18, 2022 (333-268264) (the “Prior S-3 Shelf”). In November 2022, the Company entered into a sales agreement (the “Cowen Sales Agreement”) with Cowen and Company LLC under which the Company could issue and sell shares of its common stock, from time to time, having an aggregate offering price of up to $75.0 million under a sales agreement prospectus filed as part of the Prior S-3 Shelf. During the year ended December 31, 2024, the Company issued and sold 500,000 shares of its common stock pursuant to the Cowen Sales Agreement at a price of $14.00 per share for aggregate gross proceeds of $7.0 million. During the year ended December 31, 2025, the Company issued and sold an additional 110,747 shares of its common stock pursuant to the Cowen Sales Agreement at a weighted average price of $18.69 per share for aggregate gross proceeds of approximately $2.1 million. In March 2025, the Company filed a universal shelf registration statement on Form S-3 with the SEC to register for sale up to $250.0 million of its common stock, preferred stock, debt securities, units and warrants, which the Company may issue and sell from time to time in one or more offerings, which became effective on May 8, 2025 (333-285703) (the “New S-3 Shelf”). In March 2025, the Company terminated the Cowen Sales Agreement, and the Company entered into a new sales agreement with Leerink Partners, LLC (the “Leerink Sales Agreement”), under which the Company may issue and sell shares of its common stock from time to time at an aggregate offering price of up to $50.0 million. In February 2026, the Company filed a prospectus supplement to its prospectus filed May 8, 2025 (333-285793) to reduce the amount of common stock it may offer and sell under the sales agreement to an aggregate offering price of up to $9.5 million. Prior to the effectiveness of the New S-3 Shelf, the offering of shares under the Leerink Sales Agreement was registered under the Prior S-3 Shelf. In connection with the effectiveness of the New S-3 Shelf, the registration of such offering under the Prior S-3 Shelf was terminated and such offering was registered under the New S-3 Shelf.

Shares Reserved for Future Issuance

The Company has reserved for future issuances the following shares of common stock underlying the securities issued below as of December 31, 2025 and 2024:


	December 31,		December 31,
	2025		2024
Stock options and unvested restricted stock units		2,963,086		808,977
Employee stock purchase plan		89,603		64,372
Common stock in process of settlement at period end		708,215		—
Prefunded warrants		8,502,224		1,828,751
Common stock warrants		8,206,109		188
Total shares reserved for future issuance		20,469,237		2,702,288

- Definition

The entire disclosure for equity.

+ References

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+ Details

Xilio Therapeutics, Inc. 10-K