8. Preferred Stock and Common Stock

Undesignated Preferred Stock

As of September 30, 2025 and December 31, 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 September 30, 2025 and December 31, 2024, there were no shares of preferred stock issued or outstanding.

Common Stock

As of September 30, 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.

Follow-On Public Offering

In June 2025, the Company closed a follow-on public offering of prefunded warrants and accompanying common stock warrants and received initial gross proceeds of $50.0 million before deducting underwriting discounts and commissions and offering expenses payable by the Company. In connection with the offering, the Company issued prefunded warrants to purchase 66,676,000 shares of common stock, accompanied by Series A warrants to purchase 66,676,000 shares of common stock (or, in certain circumstances, prefunded warrants) (the “Series A warrants”), Series B warrants to purchase 66,676,000 shares of common stock (or, in certain circumstances, prefunded warrants) (the “Series B warrants”), and Series C warrants to purchase 66,676,000 shares of common stock (or, in certain circumstances, prefunded warrants) (the “Series C warrants”). The combined public 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 $0.7499, which was equal to the combined offering price of the prefunded warrants, Series A warrants, Series B warrants and Series C warrants, less the $0.0001 per share exercise price of the prefunded warrants.

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.

Each Series A warrant will be exercisable on the earlier of (i) December 1, 2025 and (ii) the trading day immediately following a period of five consecutive trading days on which the closing sale price of the Company’s common stock is a minimum of $1.50 per share for one share of common stock and will have an exercise price of $0.75 per share of common stock. In addition, each Series A warrant will expire upon the earlier of (i) June 5, 2030 or (ii) immediately upon the exercise of the corresponding prefunded warrant held by a holder in proportion to the extent that such corresponding prefunded warrant is exercised prior to December 1, 2025; provided that this term (ii) will no longer apply to the Series A warrants beginning on the first trading day immediately following a period of five consecutive trading days on which the closing sale price of the Company’s common stock is a minimum of $1.50 per share for one share of common stock.

Each Series B warrant is exercisable beginning on November 1, 2025, with an exercise price of $0.75 per share of common stock, and will expire on December 2, 2025, provided that if the closing sale price of the Company’s common stock is below the exercise price on such date, the exercise price will reset to the closing sale price on December 1, 2025 and the expiration time will be extended to December 31, 2025.

Each Series C warrant will be exercisable on or after June 1, 2026, with an exercise price of $0.75 per share of common stock, and will expire on the earlier of (i) December 2, 2026 and (ii) the expiration time of the Series B warrant held by a holder in proportion to the extent that the corresponding Series B warrant expires without being exercised. 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 B warrants and 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 B warrants and Series C warrants and shares of common stock issuable upon exercise of the Series B warrants and Series C warrants. There can be no assurance that any of the warrants will be exercised for cash or at all, and it is possible that the common stock warrants may expire without being exercised. If all of the Series B warrants and the Series C warrants sold in the offering are exercised in cash at their initial exercise price, the Company will receive additional gross proceeds of approximately $100.0 million by the end of 2026.

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 Series B warrants and Series C warrants, the Company may elect to cancel a number of warrant shares equal to $1.00 divided by the $0.75 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 $1.50.

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 A warrants, the Series B warrants and the 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 (expense), net, on the condensed consolidated statements of operations and comprehensive loss during the nine months ended September 30, 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 condensed consolidated balance sheets as of September 30, 2025.

During each of the three and nine months ended September 30, 2025, the Company recognized a loss of $15.4 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 condensed consolidated statements of operations and comprehensive loss.

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 1,953,125 shares of its common stock at a purchase price of $0.64 per share and, in lieu

of shares of the Company’s common stock, prefunded warrants to purchase up to an aggregate of 15,627,441 shares of its common stock at a purchase price of $0.6399 per prefunded warrant, through a private placement. The prefunded warrants are exercisable any time at an exercise price of $0.0001 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 7,000,000 shares of its common stock pursuant to the Cowen Sales Agreement at a price of $1.00 per share for aggregate gross proceeds of $7.0 million. During the nine months ended September 30, 2025, the Company issued and sold an additional 1,550,000 shares of its common stock pursuant to the Cowen Sales Agreement at a weighted average price of $1.3348 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. 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 September 30, 2025 and December 31, 2024:


	September 30,		December 31,
	2025		2024
Stock options and unvested restricted stock units		13,992,630		11,328,134
Employee stock purchase plan		1,314,384		901,208
Prefunded warrants		92,278,707		25,602,707
Common stock warrants		200,030,631		2,631
Total shares reserved for future issuance		307,616,352		37,834,680

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Xilio Therapeutics, Inc. 10-Q