Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. Unless the context requires otherwise, references in this Annual Report on Form 10-K to “Pyxis Oncology,” the “Company,” “we,” “us,” and “our” refer to Pyxis Oncology, Inc. and its subsidiary.

Overview

We are a preclinical oncology company focused on developing an arsenal of next-generation therapeutics to target difficult-to-treat cancers and improve quality of life for patients. We develop our product candidates with the objective to directly kill tumor cells, and to address the underlying pathologies created by cancer that enable its uncontrollable proliferation and immune evasion. We are developing multi-asset, multi-modality portfolio aimed at defeating difficult-to-treat cancers. Since our launch in 2019, we have developed a broad portfolio of novel antibody drug conjugates, or ADCs, immuno-oncology, or (“IO”), product candidates and monoclonal antibody, or mAb, preclinical discovery programs that we are developing as monotherapies and in combination with other therapies.

We take a holistic view of attacking the key drivers of tumor growth and progression within the tumor microenvironment, or TME, including targeting of tumor antigens and modulating the innate and adaptive immune response. The TME is an immunosuppressive environment consisting of cancer cells and stroma, which includes the blood vessels, immune cells, fibroblasts, signaling molecules, and the extracellular matrix that surrounds the tumor. The TME plays multiple roles in tumor formation, progression and metastasis as well as anti-tumor immune activity. We are developing our ADC and IO product candidates and mAb preclinical discovery programs to precisely target key modulators of the adaptive and innate immune system within the TME for difficult-to-treat solid and hematologic tumors. We believe that the diversification of a multi-modality approach optimizes our ability to effectively progress multiple assets for the benefit of patients.

Our ADCs utilize next-generation technologies that, based on observations from preclinical studies, may allow for increased stability and a reduced off target side-effect profile. We in-licensed two ADC programs in March 2021 from Pfizer, one ADC program from LegoChem in December 2020 and one IO program from Biosion in March 2022. Two of our product candidates, PYX-201, and PYX-106 are scheduled for IND submission in the second half of 2022 whereas PYX-203 and PYX-102 are scheduled for IND submission in the second half of 2023.We have additional preclinical mAb discovery programs derived from work at the laboratory of Dr. Thomas Gajewski. We retain full worldwide development and commercialization rights to all our product candidates, with the exception of PYX-202 in South Korea and PYX-106 in Greater China (mainland China, Hong Kong, Macau and Taiwan). We are focusing our efforts on eliminating tumor cells through the selective antibody mediated delivery of cytotoxic payloads and by modulating key immune-associated pathways in the TME. We intend to develop each of our programs as a monotherapy and potentially also in combination with other therapies. We have designed our product candidates to overcome the limitations of ADCs that use conventional conjugation with the aim of providing patients with safer and more efficacious treatment options.

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Recent Developments

PYX-106

On March 28, 2022, we entered into a license agreement, or the “Biosion License Agreement,” with Biosion USA, Inc., or Biosion, pursuant to which we licensed worldwide (other than Greater China (mainland China, Hong Kong, Macau and Taiwan)) development and commercialization rights for BSI-060T, a Siglec-15 targeting antibody, an IO product candidate (now referred to as PYX-106), and products containing the licensed compound. PYX-106 is a fully human monoclonal antibody and is engineered with high affinity to block Siglec-15 induced immune suppression and therefore restore T cell proliferation, function and anti-tumor immunity in the TME. PYX-106 is a novel immune checkpoint inhibitor targeting Siglec-15, whose expression profile is generally non-overlapping with PD-L1. Siglec-15 is expressed on M2 macrophages but can also be expressed by tumor cells. Binding of Siglec-15 to an as of yet unknown receptor on T cells leads to suppression of T cell proliferation and function. This inhibition also reduces IFNγ secretion which may further promote Siglec-15 expression. PYX-106 may synergize with and rescue PD(L)-1 targeted therapy activity, with the potential for sequential drug administration to synergize for enhanced anti-tumor activity.

We are initially evaluating our Siglec-15 targeting antibody for the treatment of advanced or metastatic solid tumors, which could include thyroid cancer, HNSCC, NSCLC and other solid tumors where high unmet need exists. We plan to submit an IND for PYX-106 in the second half of 2022.

PYX-102

The anti-KLRG1 mAb, which we referred to as PYX-102, is our first organically built IO development candidate from our internal discovery engine. PYX-102 was identified as a promising IO target through our proprietary target catalog licensed from Tom Gajewski’s lab at the University of Chicago. PYX-102 is an inhibitory immunoreceptor trysine-based inhibitory motif-containing receptor expressed on T cells and NK cells in the tumor microenvironment and acts as an inhibitory immune checkpoint receptor via its interactions with E- and N-Cadherin ligands. We believe that targeting KLRG1 to reprogram these suppressed T and NK cells represents an exciting strategy to promote the full anti-tumor activity of cytotoxic T cells and NK cells in the tumor microenvironment. We are working through our development plans and we anticipate IND submission in the second half of 2023.

PYX-202

In December 2020, we entered into a license agreement, or the “LegoChem License Agreement,” with LegoChem Biosciences, Inc., or LegoChem, pursuant to which we licensed worldwide (other than Korea) development and commercialization rights for LCB67, an ADC product candidate targeting DLK1 (now referred to as PYX-202), and products containing the licensed compound. In studies conducted by LegoChem of preclinical small cell lung cancer, or SCLC, PDX models, as well as in a human cell line-based, or CDX, mouse model of cancer, we have observed significant anti-tumor activity as measured by durable tumor regression. In preparation for our IND filing and based on observation of our GLP studies to date, we have determined that we will need to conduct additional GLP and non-GLP toxicity studies to determine whether PYX-202 is a viable clinical candidate. We will continue to monitor the progress of our PYX-202 program and expect to provide an update about PYX-202 in mid-2022.

Our current pipeline is summarized below.

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PYX-106 is an investigational fully human IgG1 isotype Siglec-15 targeting antibody that is designed to block Siglec-15 mediated suppression of T-cell proliferation and function. We plan to initially develop this asset for the treatment of thyroid cancer, Head & Neck Squamous Cell Carcinoma, or HNSCC, non-small cell lung cancer, or NSCLC, and other solid tumors. We licensed worldwide rights, other than in Greater China (mainland China, Hong Kong, Macau and Taiwan), to our Siglec-15 targeting antibody from Biosion USA, Inc. We expect to submit an IND in the second half of 2022.

PYX-102 is an investigational immune-therapeutic consisting of a ligand-blocking antibody which rescues KLRG1-mediated suppression of human CD8+ T cells. KLRG1 ligands E-and N-cadherin are expressed in numerous solid cancers. KLRG1 is an inhibitory ITIM-containing receptor expressed on T cells and NK cells. Blocking ligand/receptor interaction will relieve immune inhibition in these tumors. We anticipate submitting an IND in the second half of 2023.

PYX-201 is an investigational, novel ADC consisting of an Immunoglobulin G1, or IgG1, anti-fibronectin Extradomain-B, or EDB, mAb site-specifically conjugated to auristatin via a cathepsin B-cleavable linker. Fibronectin is a glycoprotein found in the extracellular matrix. Fibronectin EDB regulates blood vessel morphogenesis, which provides the tumor access to nutrition and oxygen, a means to remove waste, and a pathway for metastasizing cells. EDB is overexpressed in many malignancies and is minimally expressed in most normal adult tissues, making it a potentially attractive means to target tumors while sparing healthy cells. In preclinical models of patient derived xenograft, or PDX models, we observed tumor regression with single agent PYX-201. In addition, we observed that the treatment of preclinical syngeneic tumor models with PYX-201 resulted in enhanced T cell infiltration into the TME, which is a hallmark of immunogenic cell death, or ICD, enabling synergistic activity in combination with a checkpoint inhibitor. We anticipate submitting an IND in the second half of 2022.

PYX-202 is an investigational, novel ADC consisting of an IgG1 anti-Delta-like 1 homolog, or DLK1, mAb conjugated to MMAE via a site-specific plasma-stable ß-glucuronide linker. DLK1 is a transmembrane protein normally expressed in embryonic tissues but highly restricted in healthy adult tissues. DLK1 becomes re-expressed in certain solid tumor malignancies. PYX-202 is designed to use the microtubule-disrupting MMAE payload, which is utilized in three currently marketed ADCs providing clinical support that the payload has anti-tumor effect potential. As discussed in Recent Development section above, we are currently in process of doing further testing and analysis and expect to provide an update about PYX-202 in mid-2022.

PYX-203 is an investigational ADC consisting of an IgG1 anti-CD123 mAb antibody conjugated to a novel cyclopropylpyrroloindoline, or CPI dimer payload via a site-specific plasma-stable, cleavable linker. CD123, or IL-3Ra, is a cell surface antigen highly expressed on leukemic stem cells and leukemic blasts in acute myeloid leukemia, or AML. PYX-203, utilizes a novel DNA-damaging toxin, CPI, and we have observed significant anti-tumor activity as measured by the reduction in the frequency of the leukemic cells in the blood and bone marrow in nine disseminated preclinical AML models. We anticipate submitting an IND in the second half of 2023.

In addition to the programs identified above, we are conducting research and development activities on various targets, leveraging our expertise in monoclonal antibodies and understanding of immuno-oncology. Our preclinical discovery programsare novel antibody programs intended to enhance the anti-tumor activity of natural killer, or NK cells, and T cells and to overcome immunosuppressive activity of tumor resident myeloid cells such as tumor associated macrophages, or TAMs, and myeloid derived suppressor cells, or MDSCs.

Since our inception, we have focused substantially all our resources on organizing and staffing our company, business planning, raising capital, conducting research and development activities, filing and prosecuting patent applications, identifying potential product candidates and undertaking preclinical studies and a clinical trial. We do not have any products approved for sale and have not generated any revenue from product sales or from any other sources. To date, we have funded our operations with proceeds from sales of convertible preferred stock and our recent IPO. Our ability to generate any product revenue, and in particular to generate product revenue sufficient to achieve profitability, will depend on the successful development and eventual commercialization of one or more of our product candidates.

We have incurred significant operating losses since our inception. We reported net losses of $76.0 million and $12.8 million for the years ended December 31, 2021 and 2020. As of December 31, 2021, we had an accumulated deficit of $91.7 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We expect that our expenses and capital expenditures will increase substantially in connection with our ongoing activities.

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COVID-19 Business Update

We are monitoring the potential impact of the COVID-19 pandemic on our business and consolidated financial statements. To date, we have not experienced material business disruptions. We are following, and will continue to follow, recommendations from the U.S. Centers for Disease Control and Prevention as well as federal, state and local governments regarding working-from-home practices for non-essential employees. For example, the COVID-19 pandemic in Massachusetts resulted in a temporary reduction in workforce presence at our Cambridge research facility. While we have increased workforce presence at our facility, not all employees have returned to our facility, and we cannot be certain that we will not be required to close our facility in the future as a result of the COVID-19 pandemic. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business, and it has the potential to adversely affect our business. For additional information about risks and uncertainties related to the COVID-19 pandemic that may impact our business, financial condition and results of operations, see the section titled “Risk Factors” under Part I, Item 1A in this Annual Report.

Licensing and Collaboration Agreements

License Agreement with Pfizer, Inc.

In December 2020, we entered into a license agreement, as amended, the “Pfizer License Agreement,” with Pfizer, Inc., or Pfizer, for worldwide development and commercialization rights to two of Pfizer’s proprietary ADC product candidates (now referred to as PYX-201 and PYX-203), as well as other ADC product candidates directed to the licensed targets. The Pfizer License Agreement became effective in March 2021. The initial exclusively licensed targets are extra domain B (EBD of fibronectin) and CD123 and we have the option to expand the scope of our license to add other licensed targets. Pfizer has also granted us a non-exclusive license to use Pfizer’s FACT platform technology to develop and commercialize the licensed ADCs. In March 2021, we entered into an amendment to the Pfizer License Agreement to include additional know-how within the scope of our license.

Pursuant to the Pfizer License Agreement, we incurred a combined $25.0 million for license fee, consisting of an upfront fee of $5.0 million and issued 12,152,145 shares of Series B convertible preferred stock in 2021 to Pfizer, and are obligated to pay future contingent payments and royalties, including up to an aggregate of $660 million in milestones for the first four licensed ADCs. Additional ADC targets may be licensed for an additional upfront fee, and such targets would be subject to additional regulatory and commercial sales milestones.

Additionally, if products are launched, we will pay Pfizer tiered royalties on net sales of licensed products in varying royalty rates ranging from low single digits to mid-teens. Our royalty obligations apply on a licensed product-by-licensed product and country-by-country basis from first commercial sale until the latest to occur of: (1) 12 years from first commercial sale; (2) the expiration of all regulatory or data exclusivity; and (3) the expiration of the last valid claim of a licensed patent covering the licensed product in a country. We are also obligated to pay Pfizer a percentage of certain sublicensing revenue ranging from low-double digits to thirty percent based on the stage of development of the licensed product at the time of entering into the applicable sublicense.

License Agreement with the University of Chicago

In April 2020, we entered into a license agreement, or the “University License Agreement,” with the University of Chicago, or the University, to obtain an exclusive license under certain patents resulting from research performed, in-part, by our scientific founder, Dr. Thomas Gajewski, as well as a non-exclusive license to certain know-how and materials. Under the terms of the license, we have the exclusive global right to develop and commercialize products that are covered by a valid claim of a licensed patent, incorporate or use the licensed know-how and materials or are known to assess, modulate or utilize the activity of certain specified biological targets.

In partial consideration for the license from the University, we issued to the University 48,919 shares of our Common Stock in 2020. Pursuant to the University License Agreement, we are obligated to pay to the University an annual maintenance fee of $10 thousand commencing on the third anniversary of the effective date, potential development and commercial milestones of up to an aggregate of $7.7 million as well as running royalties on net sales of licensed products at varying rates ranging from less than one percent to the low single digits, subject to a minimum annual royalty ranging from $1.0 million to $3.0 million during certain years following the first commercial sale of a licensed product. Our royalty obligations apply on a licensed product-by-licensed product and country-by-country basis until: (1) for licensed products covered by a valid claim of a licensed patent in a given country, the expiration of such valid claims; and (2) for all other licensed products, 10 years from the first commercial sale of a licensed product in a given country. We are also obligated to pay the University a percentage of certain sublicensing revenue ranging from low- to mid-teens based on the date of entering into the applicable sublicense.

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Agreements with LegoChem Biosciences, Inc.

In December 2020, we entered into a license agreement, or the “LegoChem License Agreement,” with LegoChem Biosciences, Inc., or LegoChem, pursuant to which we licensed worldwide (other than Korea) development and commercialization rights for LCB67, an ADC product candidate targeting DLK1 (now referred to as PYX-202), and products containing the licensed compound. We have the right to ask LegoChem to use commercially reasonable efforts at our cost to modify the licensed compound if there are certain technical failures of the licensed compound that we believe are attributable to the linker or the payload used in the licensed compound, and the modified compound will replace the unmodified version as the licensed compound. In February 2021, we entered into an amendment to the LegoChem License Agreement to include additional patents within the scope of our license.

Pursuant to the LegoChem License Agreement, we paid an upfront fee of $0.5 million in 2020 and $9.0 million in 2021 and are required to purchase certain initial quantities of licensed product from LegoChem for an estimated cost of $7.0 million. We are also obligated to pay up to an aggregate of $284.5 million to LegoChem if certain development, regulatory and sales milestones are achieved, as well as tiered royalties on net sales of licensed products ranging from mid-single digit to high single digit royalty rates. Our royalty obligations apply on a licensed product-by-licensed product and country-by-country basis until the latest to occur of: (1) the date of expiration of the last valid claim of a licensed patent covering the licensed product; (2) 10 years from first commercial sale; and (3) the expiration of regulatory or data exclusivity.

In December 2020, we also entered into an opt-in, investment and additional consideration agreement with LegoChem, or the “Opt-In Agreement.” Under the Opt-In Agreement, we issued to LegoChem shares of Series B convertible preferred stock as part of our Series B financing in March 2021. We are also obligated to pay LegoChem a percentage of sublicensing revenue ranging from low-double digits to thirty percent based on the stage of development of the licensed product at the time of entering into the applicable sublicense, which percentage may be increased to up to fifty percent for any upfront payment from a sublicensee under certain circumstances. LegoChem has exercised its option under the Opt-In Agreement to make a $8.0 million payment to us, which payment was made in April 2021, in exchange for the right to receive an extra milestone payment of $9.6 million upon the earliest to occur of certain events, including the date of pricing or offer of the first public offering of our common stock or if we are the subject of a change of control transaction. Upon our IPO in October 2021, the extra milestone payment event triggered and we paid $9.6 million in January 2022 to LegoChem.

The Voxall Joint Venture with Alloy Therapeutics, Inc.

In March 2021, we entered into definitive transaction agreements with Alloy to finance and operate Voxall, a joint venture company formed in collaboration with Alloy to leverage Pyxis Oncology’s site-specific target catalog and Alloy’s ATX-GxTM platform and antibody discovery services.

Voxall granted to both Pyxis Oncology and Alloy 50% of the voting membership units of Voxall in exchange for certain initial contributions. Our initial contribution included $50 thousand and a non-exclusive fully paid-up license to certain intellectual property owned or controlled by us to enable the collaboration with Voxall. Alloy’s initial contribution included $50 thousand and the execution of a license agreement and a services agreement to enable the collaboration with Voxall. Voxall is governed by a board of directors consisting of an equal number of our representatives and Alloy’s representatives. The protective provisions under Voxall’s operating agreement require the approval of both Pyxis Oncology and Alloy before Voxall may take certain actions.

In connection with the formation of Voxall, we entered into a three-year research collaboration with Alloy and Voxall to identify and select certain biological targets and create development candidate antibodies directed to those targets for further preclinical development, clinical development and commercialization. Under the collaboration agreement, the parties will conduct research under a mutually agreed research plan and budget for up to six research programs focused on mutually selected targets. Each of us and Alloy will provide research support for the collaboration through separate services agreements with Voxall, which services will be paid in the form of promissory notes issued by Voxall. Voxall will own all intellectual property arising from the collaboration, subject to certain exceptions for intellectual property relating to Alloy’s ATX-GxTM platform.

If a development candidate antibody under a research program meets certain mutually agreed selection criteria, we will have the exclusive option to obtain an exclusive license from Voxall to further develop and commercialize all the development candidate antibodies discovered under that research program. We may in-license one research program on certain pre-agreed financial terms. For all other in-licensed research programs, we will be obligated to pay fair market value as determined by a third-party valuation. Any research program that we do not in-license may be licensed by Voxall to a third party.

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License Agreement with Biosion USA, Inc.

On March 28, 2022, we entered into a license agreement, or the “Biosion License Agreement,” with Biosion USA, Inc., or Biosion, pursuant to which we obtained exclusive, worldwide (other than Greater China (mainland China, Hong Kong, Macau and Taiwan)), licenses for development, manufacture and commercialization rights for BSI-060T, a potentially best-in-class Siglec-15 targeting antibody, an IO product candidate (now referred to as PYX-106), and products containing the licensed compound.

Pursuant to the Biosion License Agreement, we agreed to pay an upfront fee of $10 million and are obligated to pay future contingent payments including development, regulatory and commercial milestone up to an aggregate of $217.5 million in case of normal approval and $222.5 million in case of accelerated approval. Additionally, if products are launched, we will pay Biosion tiered royalties on net sales of licensed products in varying royalty rates ranging from low single digits to low teens. Our royalty obligations apply on a licensed product-by-licensed product and country-by-country basis from first commercial sale until the latest to occur of: (1) 12 years from first commercial sale; (2) the expiration of all regulatory or data exclusivity; and (3) the expiration of the last valid claim of a licensed patent covering the licensed product in a country.

Components of Our Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses consist of costs incurred for our research activities, including our discovery efforts, and the development of our programs. These expenses include:

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employee-related expenses, including salaries, payroll taxes, related benefits and stock-based compensation expense for employees engaged in research and development activities;

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expenses incurred in connection with our product candidates and the development of research programs, including under agreements with third parties, such as consultants, contractors, contract manufacturing organizations, or CMOs, and contract research organizations, or CROs;

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laboratory supplies and research materials; and

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facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance.

We expense research and development costs as incurred. Non-refundable advance payments that we make 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, or when it is no longer expected that the goods will be delivered, or the services rendered.

Our direct external research and development expenses consist of costs that include fees, reimbursed materials and other costs paid to consultants, contractors, CMOs and CROs in connection with our preclinical and clinical activities. We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform and, as such, are not separately classified.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our ongoing and planned preclinical and clinical development activities in the near term and in the future. The successful development of our product candidates is highly uncertain. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates and we may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our personnel in executive, legal, finance and accounting, human resources and other administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees paid for accounting, auditing, consulting and tax services; insurance costs; travel expenses; and facility costs not otherwise included in research and development expenses.

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We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our programs and platform. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a public company.

Other (Expense) Income

Interest income primarily consists of interest earned on our invested cash and cash equivalent balances.

The change in fair value of derivative liability represents the increase in the fair value of the derivative liability recorded as a result of an opt-in, investment and additional consideration agreement with LegoChem.

Loss from Equity Method Investment in Joint Venture

In March 2021, we entered into definitive transaction agreements with Alloy Therapeutics, Inc. (“Alloy”) and Voxall Therapeutics, LLC to finance and operate Voxall, a joint venture company formed in collaboration with Alloy to leverage our technology and Alloy’s ATX-GxTM platform and antibody discovery services. We account for our investment in the Voxall joint venture under the equity method of accounting.

Income Taxes

Since our inception, we have not recognized any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each year and interim period, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss, or NOL, carryforwards and tax credit carryforwards will not be realized.

As of December 31, 2021, our federal and state net operating losses in the United States were $10.1 million ($48.0 million before tax) and $2.8 million ($45.9 million before tax) respectively. The federal net operating loss carryforwards in the United States can be carried forward indefinitely but may be subject to annual usage limitations to the extent certain substantial changes our ownership occur. The state net operating loss carryforwards begin expiring in 2039. In addition, as of December 31, 2021, we had $1.0 million and $0.6 million of federal and state credit carryovers which begin to expire in 2039. These loss and credit carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.

Results of Operations

Comparison of the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020 (in thousands):

Year Ended December 31,

Operating expenses:

Other (expense) income:

Service fee income from related party 181 — 181

Change in fair value of derivative liability (6,231 ) — (6,231 )

Loss from equity method investment in joint venture (231 ) — (231 )

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Research and Development Expenses

The following table summarizes our research and development expenses for the years ended December 31, 2021 and 2020 (in thousands):

Year Ended December 31,

Personnel-related expenses including stock-based compensation 7,836 2,645 5,191

Research and development expenses increased by $42.0 million, from $9.1 million for the year ended December 31, 2020, to $51.1 million for the year ended December 31, 2021. The program expenses increased by $35.4 million, which was primarily due to license fee of $25.0 million related to Pfizer License Agreement, license fee of $4.4 million related to LegoChem License Agreement, increased cell line development fees of $4.5 million and laboratory supplies of $1.0 million. Personnel-related expenses including stock-based compensation increased by $5.2 million, which was primarily due to higher personnel-related expenses of $2.7 million and higher stock-based compensation of $2.5 million, both of which were due to an increase in headcount to support our research and development activities. Other research and development expenses increased by $1.4 million, which primarily related to the increase in facility maintenance costs and higher depreciation on laboratory equipment.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the years ended December 31, 2021 and 2020 (in thousands):

Year Ended December 31,

General and administrative expenses increased by $14.8 million, from $3.8 million for the year ended December 31, 2020, to $18.6 million for the year ended December 31, 2021. Personnel-related expenses including stock-based compensation increased by $7.2 million primarily due to higher personnel-related expenses of $3.3 million and higher stock-based compensation of $3.9 million, both of which were due to an increase in headcount. Professional and consultant fees increased by $6.0 million related to recruiting fees, intellectual property counsel fees, accounting fees, audit fees and corporate counsel fees, to support our growth and operations as a public company. Facilities, insurance and other costs increased by $1.6 million to support our internal growth and operations.

Other (Expense) Income

Interest income for the years ended December 31, 2021 and 2020 was less than $0.1 million consisting of interest earned on invested cash and cash equivalent balances.

Other expense consists of change in fair value of the derivative liability of $6.2 million for the year ended December 31, 2021, as a result of the Opt-In Agreement. Service fee income from related party consists of income from services provided to the Voxall joint venture of $0.2 million for the year ended December 31, 2021.

Liquidity and Capital Resources

We had cash and cash equivalents of $274.7 million as of December 31, 2021. For the years ended December 31, 2021 and 2020, we had net losses of $76.0 million and $12.8 million, respectively. As of December 31, 2021, we had an accumulated deficit of $91.7 million.

In October 2021, we completed our IPO in which we sold 10,500,000 shares of our common stock at $16.00 per share and received net proceeds of approximately $152.3 million, after deducting underwriters’ discounts and commissions and other issuance costs.

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We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for our product candidates in development. The timing and amount of our funding requirements will depend on many factors, including:

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the manufacture of product candidates, completion of our IND enabling studies and initiation of Phase 1 clinical trials for PYX-201, PYX-202, PYX-203, PYX-106, and PYX-102;

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the timing and progress of our other preclinical and clinical development activities;

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the number and scope of other preclinical and clinical programs we decide to pursue;

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the progress of the development efforts of parties with whom we have entered or may in the future enter into in-licensing, collaborations and research and development agreements;

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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing licensure;

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our ability to maintain our current licenses and research and development programs and to establish new collaboration arrangements;

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the costs involved in prosecuting, maintaining and enforcing patent and other intellectual property rights;

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any delays or interruptions, including due to the COVID-19 pandemic, that we experience in our preclinical studies, future clinical trials and/or supply chain;

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the cost and timing of regulatory licenses; and

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our efforts to hire additional clinical, regulatory, scientific, operational, financial and management personnel; and

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incur insurance, legal and other regulatory compliance expenses to operate as a public company.

Until such time, if ever, we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions, engaging in acquisition, merger or collaboration transactions, selling or licensing our assets, making capital expenditures, redeeming our stock, making certain investments or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Cash Flows

The following table provides information regarding our cash flows for the periods presented (in thousands):

Year Ended December 31,

Net cash used in operating activities $ (35,326 ) $ (10,084 )

Net cash used in investing activities (590 ) (1,483 )

Net cash provided by financing activities 304,044 35

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Operating Activities

During the year ended December 31, 2021, operating activities used $35.3 million of cash, primarily resulting from our net loss of $76.0 million, partially offset by non-cash charges of $34.0 million and net change in our operating assets and liabilities of $6.7 million. The non-cash charges of $34.0 million was primarily due to the $20.0 million of research and development license fees for Pfizer settled in Series B convertible preferred stock, the $6.2 million change in the fair value of derivative liability and $6.4 million in stock-based compensation. The change in our operating assets and liabilities was primarily due to an increase of $9.7 million in accounts payable and accrued expenses and other current liabilities, partially offset by changes in prepaid and other current assets and lease payments of $3.0 million, all of which were due to growth in our business, the advancement of our research programs, and the timing of vendor invoicing and payments.

During the year ended December 31, 2020, operating activities used $10.1 million of cash, primarily resulting from our net loss of $12.8 million, partially offset by non-cash charges of $0.9 million and net cash used in changes in our operating assets and liabilities of $1.8 million. Net cash used in changes in our operating assets and liabilities for the year ended December 31, 2020, consisted primarily of increase of $2.3 million in accounts payable and accrued liabilities.

Investing Activities

During the years ended December 31, 2021 and 2020, net cash used in investing activities was $0.6 million and $1.5 million, respectively, due to purchases of property and equipment. The purchases of property and equipment consists of laboratory equipment, leasehold improvements, and furniture and fixtures. During the year ended December 31, 2021, we also made an investment in our joint venture, Voxall Therapeutics, LLC, for $0.1 million.

Financing Activities

During the year ended December 31, 2021, net cash provided by financing activities was $304.0 million, consisting primarily of net proceeds of $152.3 million from the issuance of our common stock in the initial public offering and net proceeds of $151.6 million from the sale of our Series B convertible preferred stock.

No significant financing activities other than exercise of stock options during the year ended December 31, 2020.

Outlook

Based on our cash balance as of December 31, 2021 of $274.7 million and our research & development and business development plans, we expect to be able to fund our operating expenses and capital expenditure requirements into the third quarter of 2024. However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. In addition, we could utilize our available capital resources sooner than we expect.

Contractual Obligations and Commitments

The following summarizes our contractual obligations as of December 31, 2021, and the effects that such obligations are expected to have on our liquidity and cash flows in future periods.

We lease our operating facility in Cambridge, Massachusetts under a non-cancellable operating lease agreement for our corporate headquarters and laboratory space which expires in March 2022, with a remaining lease obligation of $0.5 million. On September 29, 2021, we entered into a lease agreement for an office and laboratory space in Boston, Massachusetts. The lease will expire on December 31, 2032, with future undiscounted operating lease payments (base rent) under the lease agreement of $33.8 million over an initial lease period of approximately ten years.

During 2020 and 2021, we entered into a few licensing and related agreements in the normal course of business. In accordance with the agreements, we are obligated to pay, among other items, future contingent payments, royalties, and sublicensing revenue in the future, as applicable. We have not included potential future payments due under these licensing and collaboration agreements in a table of contractual obligations because the payment obligations under this agreement are contingent upon future events.

Pursuant to the Pfizer License Agreement, we are obligated to pay future contingent payments and royalties, including up to an aggregate of $660 million in milestones for the first four licensed ADCs. Additional ADC targets may be licensed for an additional upfront fee, and such targets would be subject to additional regulatory and commercial sales milestones. Additionally, if products are launched, we will pay Pfizer tiered royalties on net sales of licensed products in varying royalty rates ranging from low single digits to mid-teens. Our royalty obligations apply on a licensed product-by-licensed product and country-by-country basis from first commercial sale until the latest to occur of: (1) 12 years from first commercial sale; (2) the expiration of all regulatory or data exclusivity; and (3) the expiration of the last valid claim of a licensed patent covering the licensed product in a country. We are also obligated to pay Pfizer a percentage of certain sublicensing revenue ranging from low-double digits to thirty percent based on the stage of development of the licensed product at the time of entering into the applicable sublicense.

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Pursuant to the LegoChem License Agreement, we are obligated to pay up to an aggregate of $284.5 million to LegoChem if certain development, regulatory and sales milestones are achieved, as well as tiered royalties on net sales of licensed products ranging from mid-single digit to high single digit royalty rates. Our royalty obligations apply on a licensed product-by-licensed product and country-by-country basis until the latest to occur of: (1) the date of expiration of the last valid claim of a licensed patent covering the licensed product; (2) 10 years from first commercial sale; and (3) the expiration of regulatory or data exclusivity.

Pursuant to the University License Agreement with the University of Chicago (the “University”), we are obligated to pay to the University an annual maintenance fee of $10 thousand commencing on the third anniversary of the effective date, potential development and commercial milestones of up to an aggregate of $7.7 million as well as running royalties on net sales of licensed products at varying rates ranging from less than one percent to the low single digits, subject to a minimum annual royalty ranging from $1.0 million to $3.0 million during certain years following the first commercial sale of a licensed product. Our royalty obligations apply on a licensed product-by-licensed product and country-by-country basis until: (1) for licensed products covered by a valid claim of a licensed patent in a given country, the expiration of such valid claims; and (2) for all other licensed products, 10 years from the first commercial sale of a licensed product in a given country. We are also obligated to pay the University a percentage of certain sublicensing revenue ranging from low- to mid-teens based on the date of entering into the applicable sublicense.

Pursuant to the Biosion License Agreement, we are obligated to pay future contingent payments including development, regulatory and commercial milestone up to an aggregate of $217.5 million in case of normal approval and $222.5 million in case of accelerated approval. Additionally, if products are launched, we will pay Biosion tiered royalties on net sales of licensed products in varying royalty rates ranging from low single digits to low teens. Our royalty obligations apply on a licensed product-by-licensed product and country-by-country basis from first commercial sale until the latest to occur of: (1) 12 years from first commercial sale; (2) the expiration of all regulatory or data exclusivity; and (3) the expiration of the last valid claim of a licensed patent covering the licensed product in a country.

We also enter into contracts in the normal course of business with CMOs, and other third parties for preclinical studies. These contracts do not contain minimum purchase commitments and are cancelable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation. These payments are not included in contractual obligations above as the amount and timing of such payments are not known.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are the critical accounting policies used in the preparation of our consolidated financial statements that require significant estimates and judgments.

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Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. At each period end, we corroborate the accuracy of these estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include those related to fees paid to:

•

vendors in connection with discovery and preclinical development activities; and

•

CROs in connection with preclinical studies and clinical trials.

We record the expense and accrual related to contract research and manufacturing based on our estimates of the services received and efforts expended considering a number of factors, including our knowledge of the progress towards completion of the research, development and manufacturing activities; invoicing to date under contracts; communication from the CROs, CMOs and other companies of any actual costs incurred during the period that have not yet been invoiced; and the costs included in the contracts and purchase orders. In accruing service fees, we estimate the period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expense accordingly. There have not been any material adjustments to our prior estimates of accrued research and development expenses.

Fair Value Measurements

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 principle or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A framework is used for measuring fair value utilizing a three-tier hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy are as follows:

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2—Quoted prices in markets that are not considered to be active or financial instrument valuations for which all significant inputs are observable, either directly or indirectly; and

Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

Financial instruments are categorized in their entirety based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the investment. To the extent that 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 us in determining fair value is greatest for instruments categorized in Level 3.

Stock-Based Compensation

We maintain an equity incentive plan as a long-term incentive for employees, consultants, and directors. We account for all stock-based awards granted to employees and non-employees based on their fair value on the date of the grant and recognize compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The grant date fair value of the stock-based awards with graded vesting is recognized on a straight-line basis over the requisite service period. We recognize forfeitures related to stock-based compensation awards as they occur and reverse any previously recognized compensation cost associated with forfeited awards in the period the forfeiture occurs.

We value stock options with service conditions using the Black-Scholes option pricing model. The Black-Scholes option-pricing model uses various inputs and we make certain assumptions regarding the fair value of our common stock, the expected volatility of our common stock, the expected term of stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options and our expected dividend yield. The following summarizes the inputs used and assumptions made:

Expected Volatility—We lack company-specific historical and implied volatility information. Therefore, we estimate the expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until we have adequate historical data regarding the volatility of our traded stock price.

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Expected Term—We use the simplified method described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment (“SAB 107”), to determine the expected life of the option grants.

Risk-Free Interest Rate—The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Dividends—Expected dividend yield is zero because we have not paid cash dividends on shares of common stock and do not expect to pay any cash dividends in the foreseeable future.

Determination of Fair Value of Common Stock

Prior to the our IPO on October 8, 2021, the estimated fair value of our common stock has been determined by our board of directors as of the date of grant of each option award, with input from management, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations were prepared using either an option pricing method, or OPM, or a hybrid method, both of which used market approaches to estimate our enterprise value.

The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.

Since the completion of our IPO on October 8, 2021, it is no longer necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for stock option grants and other such awards that we may grant, as the fair value of our common stock is based on the publicly quoted market price of our common stock.

Leases

Operating lease right-of-use (“ROU”) assets represent our right to use an underlying asset during the lease term, and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are initially recognized and measured based on the present value of the future fixed lease payments over the expected lease term at commencement date calculated using our incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. We determine the lease term as the non-cancelable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease ROU assets also include any initial direct costs incurred and any lease payments made on or before the lease commencement date, less lease incentives received. Operating lease ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Leases with a term of 12 months or less are not recognized on the consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease costs such as common area costs and other operating costs are expensed as incurred. We account for lease and non-lease components as a single lease component for all its facilities leases. We had no finance leases as of December 31, 2021 and 2020.

Income Taxes

We account for income taxes in accordance with FASB ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between amounts in the consolidated financial statements and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income tax (benefit) expense in the consolidated statements of operations and comprehensive loss in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

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Recent Accounting Pronouncements

For information with respect to recently issued accounting standards and the impact of these standards on our consolidated financial statements, refer to “Note 2 — Summary of Significant Accounting Policies” in our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Jumpstart Our Business Startups Act

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) permits an “emerging growth company” to take advantage of an extended transition period to comply with new or revised accounting standards. We are an “emerging growth company,” as defined in the JOBS Act. 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. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We are also a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and have reduced disclosure obligations regarding executive compensation, and, similar to emerging growth companies, if we are a smaller reporting company with less than $100 million in annual revenue, we would not be required to obtain an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Under SEC rules and regulations, because we are considered to be a “smaller reporting company”, we are not required to provide the information required by this item in this report.

Item 8. Financial Statements and Supplementary Data.

The financial information required by Item 8 is located beginning on page F-1 of this report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None

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Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021, the end of the period covered by this Annual Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2021, at the reasonable assurance level.

Management’s Report on Internal Controls over Financial Reporting.

This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.

Changes in Internal Control Over Financial Reporting.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on the Effectiveness of Internal Control.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

Attestation Report of the Registered Public Accounting Firm.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”

Item 9B. Other Information.

On March 28, 2022, we entered into a license agreement, or the “Biosion License Agreement,” with Biosion USA, Inc., or Biosion, pursuant to which we obtained exclusive, worldwide (other than Greater China (mainland China, Hong Kong, Macau and Taiwan)), licenses for development, manufacture and commercialization rights for BSI-060T, a Siglec-15 targeting antibody, an IO product candidate (now referred to as PYX-106), and products containing the licensed compound.

Item 9C. Disclosure regarding foreign jurisdictions that prevent inspections

Not applicable

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item will be included in our definitive proxy statement to be filed with the SEC, with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(1)

For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference.

(2)

Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto.

(3)

Exhibits:

ExhibitNumber Description Form File No. Exhibit Filing Date Filed Herewith

4.1 Description of registrant’s securities X

21.1 List of Subsidiaries X

127

101.SCH Inline XBRL Taxonomy Extension Schema Document X

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X

* The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in such filing.

+ Indicates management contract or compensatory plan.

† Certain confidential information contained in this exhibit, marked by [***], has been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

Item 16. Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pyxis Oncology, Inc.

Date: March 29, 2022 By: /s/ Lara Sullivan

Lara Sullivan, M.D.

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lara Sullivan, M.D. and Pamela Connealy and each of them, as such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

/s/ Lara Sullivan Chief Executive Officer; Director March 29, 2022

Lara Sullivan, M.D. (Principal Executive Officer)

/s/ Pamela Connealy Chief Financial Officer March 29, 2022

Pamela Connealy (Principal Financial and Accounting Officer)

/s/ John Flavin Chairman of the Board of Directors March 29, 2022

John Flavin

/s/ Mark Chin Director March 29, 2022

Mark Chin

/s/ Freda Lewis-Hall Director March 29, 2022

Freda Lewis-Hall, M.D.

/s/ Thomas Civik Director March 29, 2022

Thomas Civik

/s/ Darren Cline Director March 29, 2022

Darren Cline

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PYXIS ONCOLOGY, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) F-2

Consolidated Balance Sheets as of December 31, 2021 and 2020 F-3

Notes to Consolidated Financial Statements F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Pyxis Oncology, Inc.

Opinion on the Consolidated financial statements

We have audited the accompanying consolidated balance sheets of Pyxis Oncology, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2021.

Boston, Massachusetts

March 29, 2022

F-2

PYXIS ONCOLOGY, INC.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

December 31,

Assets

Current assets:

Restricted cash 1,472 —

Prepaid expenses and other current assets 2,466 23

Operating lease right-of-use assets 232 836

Other assets, noncurrent 109 109

Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Current liabilities:

Accrued expenses and other current liabilities 6,592 1,997

Operating lease liabilities, current portion 165 615

Operating lease liabilities, net of current portion — 165

Commitments and contingencies (Note 16)

Stockholders’ equity (deficit):

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

F-3

PYXIS ONCOLOGY, INC.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

Year Ended December 31,

Operating expenses:

Other (expense) income:

Interest income 23 66

Service fee income from related party 181 —

Change in fair value of derivative liability (6,231 ) —

Total other (expense) income (6,027 ) 66

Loss from equity method investment in joint venture (231 ) —

Net loss and comprehensive loss $ (75,975 ) $ (12,828 )

Net loss per common share - basic and diluted $ (8.95 ) $ (12.45 )

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

F-4

PYXIS ONCOL OGY, INC.

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

(In thousands, except share data)

Shares Amount Shares Amount Capital Deficit Equity (Deficit)

Issuance of common stock — — 49,061 — 3 — 3

Vesting of restricted common stock — — 411,925 — 10 — 10

Stock-based compensation — — — — 44 — 44

Vesting of restricted common stock — — 306,998 — 3 — 3

Stock-based compensation — — — — 6,441 — 6,441

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

F-5

PYXIS ONCOLOGY, INC.

Consolidated Statements of Cash Flows

(In thousands)

Year Ended December 31,

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 647 469

Stock-based compensation 6,441 44

Non-cash research and development expenses 20,000 —

Non-cash loss from equity method investment in joint venture 50 —

Changes in fair value of derivative liability 6,231 —

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (2,444 ) (13 )

Accrued expenses and other current liabilities 5,092 1,742

Operating lease liabilities (615 ) (421 )

Net cash used in operating activities (35,326 ) (10,084 )

Investing activities

Purchase of property and equipment (540 ) (1,483 )

Investment in joint venture (50 ) —

Net cash used in investing activities (590 ) (1,483 )

Financing activities

Proceeds from issuance of common stock — 3

Proceeds from the exercise of stock options 167 32

Net cash provided by financing activities 304,044 35

Cash, cash equivalents and restricted cash at beginning of year 8,188 19,720

Cash, cash equivalents and restricted cash at end of year $ 276,316 $ 8,188

Supplemental schedule of noncash investing and financing activities:

Reconciliation of cash, cash equivalents and restricted cash:

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

F-6

PYXIS ONCOLOGY, INC.

Notes to Consolidated Financial Statements

1. Organization and Nature of Business

Nature of Business

Pyxis Oncology, Inc. (the “Company”), a Delaware corporation, was founded in June 2018 and launched its operations in July 2019. The Company is a preclinical oncology company focused on developing an arsenal of next-generation therapeutics to target difficult-to-treat cancers and improve quality of life for patients. The Company develops its product candidates with the objective to directly kill tumor cells, and to address the underlying pathologies created by cancer that enable its uncontrollable proliferation and immune evasion. Since the Company’s launch in 2019, the Company has developed a broad portfolio of novel antibody drug conjugate, or ADC, product candidates and monoclonal antibody, or mAb, preclinical discovery programs that the Company is developing as monotherapies and in combination with other therapies.

The Company has determined that it has one operating and reporting segment.

Reverse Stock Split

On October 1, 2021, the Company effected a 1-for-6.359 reverse stock split of its issued and outstanding common stock and stock option awards. The par value of the common stock and preferred stock was not adjusted as a result of the reverse stock split. The reverse stock split resulted in an adjustment to the convertible preferred stock conversion price to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. The shares of common stock underlying outstanding stock options and restricted stock units were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities.

All issued and outstanding shares of common stock, restricted stock units, stock option awards and per share data have been adjusted on a retrospective basis in these consolidated financial statements, to reflect the reverse stock split for all periods presented.

Initial Public Offering

On October 8, 2021, the Company completed an initial public offering (“IPO”) in which the Company issued and sold 10,500,000 shares of its common stock at a public offering price of $16.00 per share, for aggregate gross proceeds of $168.0 million. The Company raised approximately $152.3 million in net proceeds after deducting underwriting discounts and commissions of $11.8 million and offering expenses of $3.9 million.

Upon closing of the IPO, all of the outstanding shares of Series A Convertible Preferred stock (“Series A Preferred Stock”), and Series B Convertible Preferred Stock (“Series B Preferred Stock”) automatically converted into 20,056,145 shares of common stock of the Company. Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding.

In connection with the closing of the IPO, the Company filed an amended and restated certificate of incorporation (“Amended Certificate of Incorporation”) to change the authorized capital stock to 200,000,000 shares of which 190,000,000 are designated as voting common stock and 10,000,000 are designated as undesignated preferred stock, all with a par value of $0.001 per share.

Liquidity

As of December 31, 2021, the Company had an accumulated deficit of $91.7 million. The Company has incurred losses and negative cash flows from operations since inception, including net losses of $76.0 million and $12.8 million for the years ended December 31, 2021 and 2020, respectively.

To date, the Company has primarily financed its operations through the sale of convertible preferred stocks and the proceeds from IPO. The Company has not generated any revenues to date and does not anticipate generating any revenues unless and until it successfully completes development and obtains regulatory approval for its current or any future product candidates. The Company expects that its operating losses and negative cash flows will continue for the foreseeable future as the Company continues to expand its research and development programs, business development activities and develop its product candidates.

The Company currently expects that its existing cash and cash equivalents of $274.7 million as of December 31, 2021 will be sufficient to fund its operating expenses and capital requirements at least twelve months from the date these consolidated financial statements are issued. Additional funding may be necessary to fund future clinical and preclinical activities.

The Company plans to continue to fund its losses from operations and capital funding needs through issuance of equity securities, convertible or debt financings or other sources. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

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2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Company’s fiscal year ends on December 31 and its first three quarters end on March 31, June 30 and September 30. The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). 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 (“ASU”) of the Financial Accounting Standards Board (“FASB”). The consolidated financial statements include the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated upon consolidation.

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). 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 irrevocably elected not to avail itself of this extended transition period, and, as a result, the Company will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expense, and related disclosures. The Company regularly evaluates estimates and assumptions related to assets, liabilities, stock-based compensation, derivative liability, research and development accruals, operating leases, assessment of the useful lives of property and equipment, valuation of deferred tax assets and liabilities, impairment of investment in joint venture, and research and development costs. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Additionally, the management considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there was not a material impact to the Company’s consolidated financial statements as of and for the year ended December 31, 2021. However, the extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s financial statements is highly uncertain and subject to change.

Actual results could differ from those estimates and there may be changes to management’s estimates in future periods.

Risks and Uncertainties

The Company is subject to risks common to early-stage companies in the biopharmaceutical industry including, but not limited to, uncertainties related to commercialization of products, regulatory approvals, dependence on key suppliers for active ingredients and third-party service providers such as contract research organizations, protection of intellectual property rights and the ability to make milestone, royalty or other payments due under any license, collaboration or supply agreements.

Concentration of Credit Risks

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company’s cash and cash equivalents are held at an accredited financial institution and the Company has not experienced any losses in such accounts. The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company’s cash equivalents consist primarily of short-term money market funds held in accredited financial institutions. The Company believes it is not exposed to any significant risk in cash and cash equivalents.

Cash and Cash Equivalents

The Company considers all short term, highly liquid investments with original maturities of 90 days or less to be cash equivalents. Cash equivalents consist primarily of money market funds as of December 31, 2021 and 2020.

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 principle 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, the first two are considered observable and the last is considered unobservable:

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2—Quoted prices in markets that are not considered to be active or financial instrument valuations for which all significant inputs are observable, either directly or indirectly; and

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Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

To the extent that 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.

Property and Equipment, net

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful lives of the related assets as follows:

Estimated UsefulLife (Years)

Laboratory equipment 3

Furniture and office equipment 3

Leasehold improvements Shorter of remaining lifeof lease or useful life

Depreciation and amortization expense is included in research and development and general and administrative expenses. Major additions and upgrades are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred. Upon retirement or sale, the cost of assets disposed of, and the related accumulated depreciation and amortization are removed from the respective accounts and any resulting gain or loss is included in income (loss) from operations.

Impairment of Long-Lived Assets

The Company evaluates the long-lived assets, which consist of property and equipment and operating lease right-of-use assets, for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. Management then determines whether the remaining useful life continues to be appropriate, or whether there has been an impairment of long-lived assets based primarily upon whether expected future undiscounted cash flows are sufficient to support the assets’ recovery. Recoverability of these assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. The Company recognized no impairment losses for the years ended December 31, 2021 and 2020.

Leases

Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are initially recognized and measured based on the present value of the future fixed lease payments over the expected lease term at the commencement date calculated using the Company’s incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. The Company determines the lease term as the non-cancelable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease ROU assets also include any initial direct costs incurred and any lease payments made on or before the lease commencement date, less lease incentives received. Operating lease ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Leases with a term of 12 months or less are not recognized on the consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease costs such as common area costs and other operating costs are expensed as incurred. The Company accounts for lease and non-lease components as a single lease component for all its facilities leases. The Company had no finance leases as of December 31, 2021 and 2020.

Investment in Joint Venture

Investment in the Company’s joint venture is accounted for using the equity method of accounting. The Company apply the equity method of accounting to investments when the Company has significant influence, but not controlling interest in the investee. Judgment regarding the level of influence over equitymethodinvestment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. Under the equity method, investments are initially recorded at cost and are adjusted for dividends, distributed and undistributed earnings and losses, and additional investments. In the event the Company’s share of a joint venture’s cumulative losses exceeds the Company’s investment balance, the balance is reported at zero value until proportionate income exceeds the losses. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable.

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Contingencies

The Company, from time to time, may be a party to various disputes and claims arising from normal business activities. The Company continually assesses disputes and claims including resulting litigation to determine if an unfavorable outcome would lead to a probable loss or reasonably possible loss which could be estimated. The Company accrues for all contingencies at the earliest date at which the Company deems it probable that a liability has been incurred and the amount of such liability can be reasonably estimated. If the estimate of a probable loss is a range and no amount within the range is more likely than another, the Company accrues the minimum of the range. In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the contingencies, including an estimable range, if possible.

Research and Development Expenses

The Company expenses research and development costs as incurred. The Company’s research and development expenses consist primarily of license fees to acquire intellectual property which does not meet the definition of intangible assets and costs incurred in performing research and development activities, including personnel-related expenses such as salaries, stock-based compensation and benefits, facilities costs, depreciation as well as external costs for outside vendors engaged to conduct preclinical development activities and license fees. The Company accrues expenses related to development activities performed by third parties based on an evaluation of services received and efforts expended pursuant to the terms of the contractual arrangements. Payments under some of these contracts depend on preclinical trial milestones. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of expenses. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts the accrual or prepaid expense accordingly.

Stock-Based Compensation

The Company maintains an equity incentive plan as a long-term incentive for employees, consultants, and directors. The Company accounts for all stock-based awards granted to employees and non-employees based on their fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The grant date fair value of the stock-based awards with graded vesting is recognized on a straight-line basis over the requisite service period. The Company recognizes forfeitures related to stock-based compensation awards as they occur and reverses any previously recognized compensation cost associated with forfeited awards in the period the forfeiture occurs. The Company classifies stock-based compensation expense in the statement of operations in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.

The Company values its stock options with service conditions using the Black-Scholes option pricing model. The Company use certain assumptions to determine fair value of the stock options pursuant to the Black-Scholes option pricing model, including the expected life of the award, volatility of the underlying shares, the risk-free interest rate, expected dividend yield and the fair value of the Company’s common stock. Since the Company has no option exercise history, the Company uses the simplified method described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment (“SAB 107”), to determine the expected life of the option grants. The Company lacks sufficient company-specific historical and implied volatility information. Therefore, the Company estimates the expected stock volatility based on the historical volatility of a publicly traded set of peer companies. The risk-free interest rate is based on the rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of the equity award. As the Company has never paid and does not anticipate paying cash dividends on its common stock, the expected dividend yield is considered as zero.

Prior to the completion of the Company’s IPO, the fair value of the Company's common stock which is one of the key input in Black-Scholes option pricing model, was determined by the board of directors with input from management and based on certain assumptions including probability weighting of events, business and market conditions, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability. The Company used 409A valuations to determine the fair value of the shares of common stock. The 409A valuations were performed using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. After completion of the IPO, on October 8, 2021, the Company uses the fair value of its publicly traded common stock to determine grant date fair value.

For restricted stock awards issued pursuant to standalone restricted stock purchase agreements, the fair value of each award was estimated based on the estimated fair value of the Company’s common stock, less the amount paid by the grantee. The Company recognized deposit liability for restricted stock awards issued pursuant to standalone restricted stock purchase agreements. As the awards of restricted stock vest, the Company reclassifies the deposit liability to additional paid-in capital.

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Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between amounts in the consolidated financial statements and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income tax (benefit) expense in the consolidated statements of operations and comprehensive loss in the period that includes the enactment date.

The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

Classification and Accretion of Convertible Preferred Stock

Classification of the Company’s convertible preferred stock was treated as mezzanine financing and not as part of stockholders’ equity (deficit) because the holders of such shares had liquidation rights in the event of a deemed liquidation that, in certain situations, were not solely within the control of the Company and would require the redemption of the then-outstanding convertible preferred stock. The convertible preferred stock was not redeemable, except in the event of certain deemed liquidation events enumerated in the Company’s certificate of incorporation. Because the occurrence of a deemed liquidation event was not probable, the carrying values of the convertible preferred stock were not accreted to their redemption values. Subsequent adjustments to the carrying values of the convertible preferred stock would be made only when a deemed liquidation event becomes probable. Shares of preferred stock were automatically convertible into shares of common stock at the earlier of (i) the closing of a firm-commitment underwritten public offering resulting in at least $50.0 million of gross proceeds in the aggregate to the Company, prior to deductions for underwriting discounts, commission and expenses or (ii) the date and time, or occurrence of an event, specified by a vote of the Series A and Series B Stockholders. Upon closing of the IPO, all of the outstanding Series A and Series B convertible preferred stock automatically converted into common stock, resulting in no outstanding convertible preferred stock as of December 31, 2021.

Net Loss per Share

The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (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 income (loss) available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to share in the earnings as if all income (loss) for the period had been distributed.

Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the diluted weighted average number of common shares outstanding for the period, including potential dilutive common shares.

The Company’s participating securities contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

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Recently Adopted Accounting Pronouncements

In January 2020, the FASB issued ASU 2020-01, Investments — Equity Securities (Topic 321), Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The new guidance addresses accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted this ASU from January 1, 2021 and the adoption did not have any impact on the Company’s consolidated financial position, results of operations, or cash flows.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses on available-for-sale debt securities to be recorded through an allowance for credit losses instead of as a reduction in the amortized cost basis of the securities. As an emerging growth company, ASU 2016-13 will become effective for the Company for fiscal years beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the new standard and expects it to have no material impact on the Company’s consolidated financial statements and related disclosures.

Recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC did not, or are not expected to, have a material impact on the Company’s unaudited consolidated financial statements and related disclosures.

3. Licensing Agreements

The University of Chicago Agreement

In April 2020, the Company entered into a license agreement (the “University License Agreement”), as well as a sponsored research agreement, with the University of Chicago (the “University”) to obtain an exclusive license under certain patents resulting from research performed, in-part, by the Company’s scientific founder, as well as a non-exclusive license to certain know-how and materials relating thereto. Under the terms of the license, the Company has the global right to develop and commercialize products that are covered by a valid claim of a licensed patent, incorporate or use the licensed know-how and materials or are known to assess, modulate or utilize the activity of certain specified biological targets.

In partial consideration for the license from the University, the Company issued to the University 48,919 shares of its common stock in 2020. The Company recorded the value of the shares issued of $3 thousand as research and development expenses during the year ended December 31, 2020. The Company has not incurred any expenses relating to the University License Agreement during the year ended December 31, 2021. Pursuant to the University License Agreement, the Company is obligated to pay to the University an annual maintenance fee of $10,000 commencing on the third anniversary of the effective date, potential development and commercial milestones of up to $7.7 million as well as running royalties on net sales of licensed products at varying rates ranging from less than a percent to the low single digits, subject to a minimum annual royalty of up to $3.0 million during certain years following the effective date. The Company’s royalty obligations apply on a licensed product-by-licensed product and country-by-country basis until: (1) for licensed products covered by a valid claim of a licensed patent in a given country, the expiration of such valid claims; and (2) for all other licensed products, ten (10) years from the first commercial sale of a licensed product in a given country. The Company is also obligated to pay the University a percentage of certain sublicensing revenue ranging from low- to mid-teens based on the date of entering into the applicable sublicense.

The Company assessed the milestone and royalty events under University License Agreement as of December 31, 2021 and 2020, and determined that no such amounts were required.

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Pfizer, Inc. Agreement

In December 2020, the Company entered into a license agreement, as amended (the “Pfizer License Agreement”) with Pfizer, Inc. (“Pfizer”) for worldwide development and commercialization rights to antibody drug conjugate ("ADC") product candidates directed to certain licensed targets, including PYX-201 and PYX-203, and products containing the ADC product candidates. The Pfizer License Agreement became effective for the Company in March 2021. The Company’s rights are exclusive with respect to certain patents owned or controlled by Pfizer covering the licensed ADCs. Pfizer has also granted the Company a non-exclusive license to use Pfizer’s ADC technology platform to develop and commercialize the licensed ADCs and licensed products. The initial licensed targets include CD123 and extra domain B (EBD of fibronectin) and the Company has the option to expand the scope of its license to add additional licensed targets that have not been licensed to a third party or are not the subject of a Pfizer ADC development program. In March 2021, the Company entered into an amendment to the Pfizer License Agreement to include additional know-how within the scope of its license. The Company determined that substantially all of the fair value of the Pfizer License Agreement was attributable to in-process research and development and no substantive processes were acquired that would constitute a business. The Company concluded that it did not have any alternative future use for the acquired in-process research and development associated with the agreements. Thus, the Company recorded payments made under the License Agreement as research and development expenses in the consolidated statements of operations and comprehensive loss.

Pursuant to the Pfizer License Agreement, the Company paid a combined $25.0 million for license fee, which was recorded in research and development expense in the consolidated statement of operations and consists of an upfront fee equal to a cash payment of $5.0 million and the issuance of 12,152,145 shares of Series B convertible preferred stock with a value of $20.0 million in 2021 to Pfizer, and is obligated to pay future contingent payments and royalties, including up to an aggregate of $660 million in milestones for the first four licensed ADCs. Additional ADC targets may be licensed for a nominal upfront and milestones. Additionally, if products are launched, the Company will pay Pfizer tiered royalties on net sales of licensed products in varying royalty rates ranging from low single digits to mid-teens. The Company’s royalty obligations apply on a licensed product-by-licensed product and country-by-country basis from first commercial sale until the latest to occur of: (1) 12 years from first commercial sale; (2) the expiration of all regulatory or data exclusivity; and (3) the expiration of the last valid claim of a licensed patent covering the licensed product in a country. The Company is also obligated to pay Pfizer a percentage of certain sublicensing revenue ranging from thirty percent to low-double digits based on the stage of development of the licensed product at the time of entering into the applicable sublicense. If the Company effected a change of control transaction or sold all or substantially all of its assets relating to the Pfizer License Agreement within 12 months from the effective date or closing of the IPO, the Company would have been required to make a one-time payment to Pfizer of up to $20.0 million. No such event took place during the year and the one-time payment was not required.

The Company assessed the milestone, royalty and other events under Pfizer License Agreement as of December 31, 2021, and determined that no such amounts were required.

LegoChem Biosciences, Inc. Agreements

In December 2020, the Company entered into a license agreement (the “LegoChem License Agreement”) with LegoChem Biosciences, Inc. (“LegoChem”) pursuant to which the Company licensed worldwide (other than Korea) development and commercialization rights for LCB67, an ADC product candidate targeting DLK-1, and products containing the licensed compound. The Company has the right to request that LegoChem use commercially reasonable efforts at the Company’s cost to modify the licensed compound if there are certain technical failures of the licensed compound that the Company believes are attributable to the linker or the payload used in the licensed compound, and the modified compound will replace the unmodified version as the licensed compound. In February 2021, the Company entered into an amendment to the LegoChem License Agreement to include additional patents within the scope of its license. The Company determined that substantially all of the fair value of the LegoChem License Agreement was attributable to in-process research and development and no substantive processes were acquired that would constitute a business. The Company concluded that it did not have any alternative future use for the acquired in-process research and development associated with the agreements. Thus, the Company recorded payments made under the LegoChem License Agreement as research and development expenses in the consolidated statements of operations and comprehensive loss.

Pursuant to the LegoChem License Agreement, the Company paid $0.5 million in 2020 and $9.0 million in 2021 and is required to purchase certain initial quantities of licensed product from LegoChem for an estimated cost of $7.0 million. The Company recorded upfront payment of $0.5 million in 2020 and $9.0 million in 2021 as research and development expenses. No expenses incurred related to the manufacturing of the initial quantities of licensed product for the year ended December 31, 2021. The Company is also obligated to pay up to $284.5 million to LegoChem if certain development, regulatory and sales milestones are achieved, as well as tiered royalties on net sales of licensed products ranging from mid-single digit to high-single digit royalty rates. The Company’s royalty obligations apply on a licensed product-by-licensed product and country-by-country basis until the latest to occur of: (1) the date of expiration of the last valid claim of a licensed patent covering the licensed product; (2) 10 years from first commercial sale; and (3) the expiration of regulatory or data exclusivity. The Company assessed the milestones and royalties under the LegoChem License Agreement as of December 31, 2021 and 2020 and determined that no such amounts were required.

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In December 2020, the Company also entered into an opt-in, investment and additional consideration agreement with LegoChem (the “Opt-In Agreement”). Pursuant to the Opt-in Agreement, the Company settled $0.5 million of upfront payment for license fee through the issuance of 303,804 shares of Series B convertible preferred stock in March 2021. The Company is also obligated to pay LegoChem a percentage of certain sublicensing revenue ranging from thirty percent to low-double digits based on the stage of development of the licensed product at the time of entering into the applicable sublicense, which percentage may be increased to up to fifty percent for any upfront payment from a sublicensee under certain circumstances. LegoChem exercised its option in December 2020 under the Opt-In Agreement and paid $8.0 million to the Company in April 2021, in exchange for the right to receive a milestone payment (the “Extra Milestone Payment”) of $9.6 million upon the earliest to occur of certain events, including the date of pricing or offer of the first public offering of the Company's common stock or if the Company is the subject of a change in control transaction. The Company determined that the Extra Milestone Payment meets the definition and recognition condition of derivative under ASC 815, “Derivatives and Hedging” for which there was a binding contract and firm commitment as of January 2021. An initial derivative liability was recognized for $3.4 million with an offset to research and development expenses in January 2021. The derivative liability was re-measured at each reporting date, with changes recorded in “Other (expense) income” in the consolidated statements of operations and comprehensive loss. Upon the Company’s IPO in October 2021, the Extra Milestone Payment event triggered resulting in realization of derivative liability, for which the Company recognized $9.6 million within accounts payable as of December 31, 2021 and subsequently paid in January 2022. The Company assessed the remaining milestones and royalties under the Opt-In Agreement as of December 31, 2021 and determined that no such amounts were required.

4. Joint Venture

In March 2021, the Company entered into definitive transaction agreements with Alloy Therapeutics, Inc. (“Alloy”) and Voxall Therapeutics, LLC (“Voxall”), to finance and operate Voxall, a joint venture company formed in collaboration with Alloy to leverage the Company’s technology and Alloy’s ATX-GxTM platform and antibody discovery services. Voxall granted to the Company and Alloy, 50% of the voting membership units of Voxall in exchange for certain initial contributions. The Company’s initial contribution included $50 thousand and a non-exclusive fully paid-up license to certain intellectual property owned or controlled by the Company and the execution of the services agreement to enable the collaboration with Voxall. Alloy’s initial contribution included $50 thousand and the execution of the Alloy license agreement and the Alloy services agreement to enable the collaboration with Voxall. Voxall is governed by a board of directors consisting of an equal number of the Company’s representatives and Alloy’s representatives. The protective provisions under Voxall’s operating agreement require the approval of both the Company and Alloy before Voxall may take certain actions.

The Company accounted for investment in Voxall under the equity method of accounting. The initial contribution was recorded as “Investment in equity method investment in joint venture”. Additionally, the Company has recognized $0.2million in service fee income from a related party within other income for services provided to Voxall during the year ended December 31, 2021, for which Voxall issued a promissory note to the Company.

Voxall has incurred losses since inception and the Company’s share in the losses of Voxall aggregated to $1.2million for the year ended December 31, 2021. The Company recognized its share of losses of Voxall only to the extent of the carrying value of its investment in Voxall and the promissory note issued by Voxall, which aggregated to $0.2million for the year ended December 31, 2021. The remaining unabsorbed loss will be offset against future income, if any. As the Company has no commitment to fund the losses of the equity method investment, the carrying value of the equity method investment has not been reduced below zero.

5. Fair Value Measurements

The following tables present the financial instruments carried at fair value on a recurring basis as of December 31, 2021 and 2020, respectively, in accordance with the FASB ASC 820 hierarchy (in thousands):

Fair Value Measurements atDecember 31, 2021

Level 1 Level 2 Level 3 Total

Assets

Fair Value Measurements atDecember 31, 2020

Level 1 Level 2 Level 3 Total

Assets

Money market funds $ 6,996 $ — $ — $ 6,996

F-14

The Company’s cash equivalents represent deposits in a short-term United States Treasury money market fund quoted in an active market and classified as a Level 1 asset. There were no assets or liabilities measured at fair value on a nonrecurring basis at December 31, 2021 and 2020. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the years ended December 31, 2021 and 2020.

The fair value of the derivative liability was initially determined using a probability-weighted income approach and is revalued at each reporting date or more frequently if circumstances dictate. Changes in the fair value of the derivative liability are recorded as expense within other (expense) income in the consolidated statements of operations and comprehensive loss. The significant unobservable inputs used in the fair value measurement of the derivative liability include probability of payment factors and the discount rate. Refer to Note 3, Licensing Agreements, for additional information on the derivative liability.

The following tables provide a summary of changes in Level 3 fair value measurements for the year ended December 31, 2021:

Year Ended

($ in thousands)

Derivative liability balance as of January 1, 2021 $ —

Initial recognition of derivative liability 3,369

Change in fair value recorded in earnings 6,231

Transfer to accounts payable (9,600 )

Balance as of December 31, 2021 $ —

The Company paid the $9.6 million of Extra Milestone Payment, for which it previously recognized a derivative liability, in January 2022.

6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

December 31,

Research and development 619 —

Total prepaid expenses and other current assets $ 2,466 $ 23

7. Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

December 31,

Furniture and office equipment 94 95

Less: accumulated depreciation and amortization (1,116 ) (469 )

Total property and equipment, net $ 1,007 $ 1,103

Depreciation and amortization expense for the years ended December 31, 2021 and 2020 was $0.6 million and $0.5million, respectively.

F-15

8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

December 31,

Employee compensation and benefits $ 2,963 $ 1,002

External research and development expenses 2,381 712

Total accrued expenses and other current liabilities $ 6,592 $ 1,997

9. Operating Leases

As of December 31, 2021 and 2020, the Company had one and two operating leases, respectively, where the Company is the lessee or sublessee, for office and laboratory space. Lease terms are through 2022. The Company had no finance leases as of December 31, 2021 and 2020.

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

Year Ended December 31,

Lease cost

Operating lease cost $ 650 $ 497

Short-term lease cost 5 146

Variable lease cost (1) 75 70

Other information

Weighted-average remaining lease term (in years) 0.25 1.25

Weighted-average discount rate 10.00 % 9.98 %

(1)

Variable lease cost includes common area maintenance charges

Maturities of lease liabilities as of December 31, 2021, were as follows (in thousands):

Year Ending December 31, Operating lease

Total lease payments 168

Less: amount representing imputed interest (3 )

Total future minimum lease obligations $ 165

In addition to above, on September 29, 2021, the Company entered into a lease agreement for an office and laboratory space in Boston, Massachusetts. The lease will expire on December 31, 2032, and has scheduled rent increases each year of 3%. There is an additional five-year option to extend the lease beyond December 31, 2032. The future undiscounted operating lease payments (base rent) under the lease agreement is $33.8 million over an initial lease period of approximately ten years. The Company will record the right-of-use asset and operating lease liability upon obtaining the possession of the property, which it expects to occur in the second quarter of 2022.

10. Convertible Preferred Stock

Series A Convertible Preferred Stock

In June 2019, the Company entered into a securities purchase agreement (as amended, “Series A Agreement”) with certain investors to sell shares of Series A convertible preferred stock (“Series A”) at $0.9681 per share. In June and July 2019, the Company issued 22,724,925 shares of Series A to institutional investors at $0.9681 per share for gross cash proceeds of $22.0 million, less issuance costs of $0.1 million, resulting in net proceeds of $21.9 million. On October 1, 2021, the Company effected a 1-for-6.359 reverse stock split. Upon completion of the initial public offering, 22,724,925 shares of Series A were converted to 3,573,659 shares of common stock.

F-16

Series B Convertible Preferred Stock

On March 5, 2021, the Company entered into a securities purchase agreement (as amended, “Series B Agreement”) with certain investors to sell shares of Series B convertible preferred stock (“Series B”) at $1.6458 per share. In March 2021, the Company issued 92,356,299 shares of Series B to institutional investors at $1.6458 per share for gross cash proceeds of $152.0 million, less issuance costs of $0.4 million, resulting in net proceeds of $151.6 million. In addition, the Company granted 12,455,949 shares, or $20.5 million, of Series B convertible preferred stock through separate agreements with Pfizer, Inc. and LegoChem Biosciences Inc. On October 1, 2021, the Company effected a 1-for-6.359 reverse stock split. Upon completion of the initial public offering, the entire outstanding shares of 104,812,248 of Series B were converted to 16,482,486 shares of common stock.

11. Stockholders’ Equity

Preferred Stock

In connection with the closing of the IPO, the Company filed an Amended Certificate of Incorporation and authorized 10,000,000 shares of preferred stock, with a par value of $0.001 per share. The board of directors has the authority, without further action by the stockholders to issue such shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, and to fix the dividend, dividend rights, conversion rights, voting, redemption terms, liquidation preference and other rights, preferences and privileges of the shares. There were no issued and outstanding shares of preferred stock as of December 31, 2021.

Common Stock

The Company was authorized to issue up to 190,000,000 and 40,300,000 shares of common stock as of December 31, 2021 and 2020, respectively, of which 32,792,867 and 2,177,956 shares were issued as of December 31, 2021 and 2020, respectively, 32,222,881 and 1,289,342 shares were outstanding at December 31, 2021 and 2020, respectively.

Voting, dividend and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers and preferences of the holders of the preferred stock.

Voting—Each holder of outstanding shares of common stock shall be entitled to one vote in respect of each share.

Reserved Shares— The Company reserved the following shares of common stock for issuance:

December 31,

Series A convertible preferred stock — 3,573,659

Employee stock purchase plan 424,595 —

12. Stock-Based Compensation

2021 Equity Incentive Plan

On September 27, 2021, the Company’s board of directors and stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”), which became effective on October 7, 2021, when the Company’s registration statement was declared effective by the SEC. The 2021 Plan replaced the 2019 Plan as the Company’s board of directors has determined not to make additional awards under the 2019 Plan following the closing of the Company’s initial public offering. However, the 2019 Plan will continue to govern outstanding equity awards granted under the plan. The 2021 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors and consultants. The Company has initially reserved 3,852,807 shares of its common stock for the issuance of awards under the 2021 Plan. The number of shares of common stock reserved for issuance under the 2021 Plan will automatically increase annually on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2022, and continuing until (and including) the fiscal year ending December 31, 2031 by lesser of 5% of the total number of shares of common stock outstanding on December 31st of the immediately preceding fiscal year or number of shares as may be determined by the board of directors. The maximum number of shares of common stock that may be issued pursuant to the exercise of incentive options under the 2021 Plan is 7,705,614. As of December 31, 2021, options to purchase 2,515,040 shares of common stock and 48,508 restricted stock units were outstanding under the 2021 plan and 1,289,259 shares remained available for future issuance under the 2021 plan.

F-17

2019 Equity Incentive Plan

In 2019, the Company established the 2019 Plan, under which the Company grant options and restricted stock to its employees and certain non-employees. The maximum number of shares of common stock reserved for issuance under the 2019 Plan was 4,042,408 shares.

Options granted under the 2019 Plan include incentive stock options that can be granted only to the Company’s employees and non-statutory stock options that can be granted to the Company’s employees, consultants, advisors and directors. The 2019 Plan also permits the Company to issue restricted stock awards.

The exercise prices, vesting and other restrictions of the awards to be granted under the 2019 Plan are determined by the board of directors, except that no stock option may be issued with an exercise price less than the fair market value of the common stock at the date of the grant or have a term in excess of ten years. Options granted under the 2019 Plan are exercisable in whole or in part at any time subsequent to vesting. All the shares of common stock were issued under the 2019 Plan. As of December 31, 2021, options to purchase 3,411,929 shares of common stock were outstanding under the 2019 plan.

Stock Options

The following table summarizes stock option activity for the year ended December 31, 2021 (in thousands, except share and per share amounts):

(Years)

The weighted-average grant-date fair value of options granted during the years ended December 31, 2021 and 2020, was $7.57 and $0.62per share, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price of all outstanding and exercisable stock options and the fair value of the Company’s common stock as of December 31, 2021. The intrinsic value of stock options exercised for the year ended December 31, 2021 was $0.6 million.

The Company estimated the fair value of each option on the date of grant using the Black-Scholes option pricing model applying the range of assumptions in the following table:

Year Ended December 31,

Expected dividend yield 0.00% 0.00%

Stock-based compensation expense related to stock options recorded in the statements of operations is as follows (in thousands):

Year Ended December 31,

Research and development $ 2,396 $ 10

General and administrative 3,976 8

The Company has an aggregate $38.1million of gross unrecognized stock-based compensation expense as of December 31, 2021, remaining to be amortized over a weighted average period of 2.9 years. The Company has not recognized and does not expect to recognize in the near future, any tax benefit related to employee stock-based compensation expense as a result of the full valuation allowance related to its net deferred tax assets.

F-18

Restricted Stock Awards

In 2019, the Company issued 994,650 shares of restricted common stock to the employee co-founders and certain non-employee consultants. The shares of restricted common stock were issued pursuant to standalone restricted stock purchase agreements that are independent of the 2019 Plan. The shares of restricted common stock carried a purchase price equivalent of $0.01 per share. The compensation cost was measured based on the fair value of the underlying common stock less the purchase price of the restricted common stock and the Company recognizes compensation costs over the requisite service period.

Under the terms of the restricted stock purchase agreements, the Company has a repurchase option whereby it has the right to repurchase any unvested shares upon termination at a price per share equal to the lesser of: (i) the fair market value of the Company’s common stock on the date of repurchase and (ii) the original purchase price. The shares of restricted common stock issued to the Company’s co-founders and non-employee consultants vest based on a predefined number of shares.

The Company recognized an associated deposit liability for restricted stock awards issued pursuant to standalone restricted stock purchase agreements upon issuance based on the purchase price of the awards as the unvested shares are subject to repurchase upon termination. As the awards of restricted stock vest, the Company reclassifies the deposit liability to additional paid-in capital.

In 2021, the Company issued 48,508 shares of restricted common stock to employees and certain non-employee consultants under 2021 Plan. Compensation cost related to these awards were recorded based on the Company's stock price on the date of issuance.

The following table summarizes restricted stock activity for the year ended December 31, 2021:

Restricted Stock

Number of Shares WeightedAverageGrant Date Fair Value

The aggregate fair value of restricted stock vested during the years ended December 31, 2021 and 2020, was $5 thousand and $4 thousand, respectively. The Company has recorded stock-based compensation expense related to the restricted stock of $0.1 million and $26 thousand for the years ended December 31, 2021 and 2020, respectively. The Company has an aggregate $0.7 million of gross unrecognized restricted stock-based compensation expense as of December 31, 2021, remaining to be amortized over a weighted average period of 1.5 years.

2021 Employee Stock Purchase Plan

On September 27, 2021, the Company’s board of directors and stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective on October 7, 2021, when the Company’s registration statement was declared effective by the SEC. The 2021 ESPP reserved and authorized the issuance of up to a total of 424,595 shares of common stock to participating employees. No shares are issued under 2021 ESPP plan as of the date of issuance of these consolidated financial statements.

13. Income Taxes

During the years ended December 31, 2021 and 2020, the Company recorded no current or deferred income tax expenses or benefits as the Company has incurred losses since inception and has provided a full valuation allowance against its deferred tax assets.

F-19

A reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31, 2021 and 2020:

Year Ended December 31,

Income tax computed at federal statutory rate % 21.00 % 21.00 %

State taxes, net of federal benefit 5.70 5.60

Change in valuation allowance (27.70 ) (27.90 )

Research and development credit carryovers 1.90 1.50

Permanent differences (0.90 ) (0.20 )

Effective income tax rate % 0.00 % 0.00 %

The Company's effective tax rate was 0% for the years ended December 31, 2021 and 2020, as a result of the valuation allowance that eliminates the company's net deferred tax assets.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred tax assets as of December 31, 2021 and 2020 are as follows (in thousands):

PYXS US Equity

PYXS · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure regarding foreign jurisdictions that prevent inspections

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

PYXS US Equity☆

PYXS · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure regarding foreign jurisdictions that prevent inspections

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

PYXS US Equity