Company: SION
Filing Date: 2025-02-03
Form Type: S-1/A
Source: 0001193125-25-018825
Chunk: 150

Company: Sionna Therapeutics, Inc.
Filing Date: 2025-02-03
Form: S-1/A
Chunk 150
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 certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option and our
expected dividend yield. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require judgment to develop. See Note 12,
“Stock-based Compensation” in our annual consolidated financial statements included elsewhere in this prospectus for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing
model to determine the estimated fair value of our stock options granted for the nine-month periods ended September 30, 2024 and 2023 and the years ended December 31, 2023 and 2022. For awards to
non-employees, the expected term of the option is equal to the contractual term of the non-employees’ service agreement. The fair value of each restricted common
stock award is estimated on the date of grant based on the fair value of our common stock on that same date.

Determination of Fair Value of Common Stock Valuations

As there has been no public market for our common stock to date, the estimated fair value of our common stock has been determined by
our board of directors as of the date of each option grant with input from management, considering our most recently available third-party valuations of common

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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 valuation was prepared using either the option-pricing method (“OPM”) or the hybrid method, both of which used a market approach to estimate our equity value. The OPM treats common stock and convertible preferred stock as call options on the equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under the OPM, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the convertible preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. The hybrid method is a probability-weighted expected return