Annual report [Section 13 and 15(d), not S-K Item 405]

Net Loss Per Share

Net Loss Per Share

12 Months Ended

Dec. 31, 2024

The Company had two classes of stock outstanding during the year ended December 31, 2024, common stock and preferred stock, and had only common stock outstanding during the year ended December 31, 2023. The Company computes net loss per share using the two-class method, as the Series C Preferred Stock participates in distributions with the Company’s common stock. The two-class method of computing net loss per share is an earnings allocation formula that determines net loss for common stock and any participating securities according to dividends declared and participation rights in undistributed earnings. As the Company is in a net loss position for the year ended December 31, 2024, the two-class method of calculating net loss per share results in no allocation of undistributed losses to participating securities.

Basic net loss per share for common stock is computed by dividing the sum of distributed and undistributed earnings by the weighted average number of shares outstanding for the period. The weighted average number of common shares outstanding as of December 31, 2023, includes the weighted average effect of pre-funded warrants, the exercise of which required nominal considerations for the delivery of the shares of common stock. There were no pre-funded warrants outstanding as of December 31, 2024 and 2023.

Diluted net loss per share includes the potential dilutive effect of common stock equivalents as if such securities were converted or exercised during the period, when the effect is dilutive. Common stock equivalents include: (i) outstanding stock options and restricted stock units, which are included under the “treasury stock method” when dilutive; and (ii) common stock to be issued upon the exercise of outstanding warrants, which are included under the “treasury stock method” when dilutive, and (iii) preferred stock under the if-converted method. While the impact of these items is generally anti-dilutive during periods of net loss, the Company will determine whether the common stock equivalents should be included in diluted loss per share pursuant to sequencing rules.

The following tables set forth the computation of basic and diluted net loss per share of common stock for the years ended December 31, 2024 and 2023 (in thousands, except per share amounts):


	Year Ended
	December 31, 2024
	Common stock
Basic loss per share:
Net loss	$	(35,129)
Weighted average shares	4,426,149
Basic net loss per share	$	(7.94)

Diluted loss per share:
Numerator:
Net loss - basic	$	(35,129)
Change in fair value of warrant liability	(121,611)
Net loss - diluted	$	(156,740)
Denominator:
Effect of dilutive securities:
Weighted average shares - basic	4,426,149
Common shares issuable for warrants	$	3,070,240
Weighted average shares - diluted	7,496,389
Diluted net loss per share	$	(20.91)


	Year Ended
	December 31, 2023
	Common stock

Net loss	$	(31,544)
Weighted average shares	277,727
Basic and diluted net loss per share	$	(113.58)

The following outstanding securities have been excluded from the computation of diluted weighted shares outstanding for the years ended December 31, 2024 and 2023, as they could have been anti-dilutive:


	December 31,
	20243	2023
Stock options	1,999,749	7,559
Warrants on common stock1	148	17,254
Series C Preferred Stock (as-convertible to common stock)2	24,895,920	—
Restricted Stock Units	632,100	—

1 The weighted average number of common shares outstanding for the year ended December 31, 2023 includes the weighted average effect of 2,003 pre-funded warrants, because their exercise price was nominal. There were no pre-funded warrants outstanding as of December 31, 2024 and 2023.

2 Each share of the Company’s Series C Preferred Stock is convertible to 1,000 shares of common stock, subject to certain beneficial ownership limitations.

3 Pursuant to the AlmataBio Transaction, the Company is required to pay potential development milestone payments to the former AlmataBio stockholders in cash or Avalo stock at the election of the former AlmataBio stockholders; refer to Notes 3 and 14 for more information. In the event of share settlement, the number of Avalo shares delivered will vary based on the Company’s stock price. These additional shares are not included in the computation of basic and diluted net loss per share for the year ended December 31, 2024 pursuant to the guidance on contingently issuable shares.