Company: SION
Filing Date: 2025-02-03
Form Type: S-1/A
Source: 0001193125-25-018825
Chunk: 149

Company: Sionna Therapeutics, Inc.
Filing Date: 2025-02-03
Form: S-1/A
Chunk 149
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 statements and our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus, we believe that our critical accounting estimates are as follows.

107

Research and Development Expenses and Accruals

In preparing the consolidated financial statements, we are required to estimate our accrued research and development expenses as of each balance sheet
date. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. This process involves reviewing open contracts, communicating with internal personnel to
identify services that have been performed on our behalf and 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 the actual cost. We periodically
confirm the accuracy of our estimates with our service providers and make adjustments, if necessary. The majority of our service providers invoice in arrears for services performed or when contractual milestones are met. The financial terms of
agreements with these service providers are subject to negotiation, vary from contract-to-contract and may result in uneven payment flows. In circumstances where amounts
have been paid in excess of costs incurred, we record a prepaid expense.

Contingent milestone payments, if any, are expensed when the milestone
results are probable and estimable, which is generally upon the achievement of the milestone.

Although we do not expect our estimates to be
materially different from amounts incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any
particular period. To date, there have been no material differences between our estimates of such expenses and the amounts incurred.

Stock-Based Compensation Expense

We measure stock-based awards granted to employees, directors and non-employees based on
their fair value on the date of the grant. We recognize compensation expense for awards to employees and directors over the requisite service period, which is generally the vesting period of the respective award. Compensation expense for awards to non-employees with service-based vesting conditions is recognized in the same manner as if we had paid cash in exchange for the goods or services, which is generally over the vesting period of the award. For
stock-based awards with service-based vesting conditions, we recognize compensation expense using the straight-line method. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model,
which requires inputs based on