What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-20 compared with 2022-03-28 · 112 added, 94 removed, 696 unchanged (23% of the section changed)

8 unchanged sentences

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934).

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021.

Based on that evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022.

Management’s Annual Report on Internal Control over Financial Reporting

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No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) has occurred during the quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of the Independent Registered Public Accounting Firm

This Annual Report on Form 10-K does not include a report of management’s assessment regarding our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered accounting firm due to a transition period established by rules of the SEC for newly public companies.

Additionally, our independent registered accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company”

as defined in the JOBS Act.

Other Information.

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and “Compensation Committee Interlocks and Insider Participation”

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.

in our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is, other than the information required by Item 402(v) of Regulation S-K, incorporated herein by reference

Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters.

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and “Related Person Transactions”

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.

in our definitive proxy statement to be

filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Principal Accoun ting Fees and Services.

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Balance Sheets as of December 31, 2022 and 2021

Statements of Operations for the Years ended December 31, 2021 and 2020

Statements of Operations and Comprehensive Loss for the Years ended December 31, 2022 and 2021

Statements of Stockholders’

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Restated Certificate of Incorporation of the Registrant, as amended

Certificate of Amendment of Restated Certificate of Incorporation of the Registrant

Amended and Restated By-laws of the Registrant

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Alves Aivado, M.D., Ph.D.

Offer Letter and Severance Agreement, dated as of November 1, 2018, between the Registrant and Vojislav Vukovic, M.D., Ph.D.

Offer Letter, dated as of November 15, 2007, between the Registrant and D.

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Allen Annis, Ph.D.

Offer Letter, dated as of June 7, 2018, between the Registrant and Richard Wanstall.

Severance Agreement, dated as of December 12, 2019, between the Registrant and Richard Wanstall.

Securities Purchase Agreement, dated March 28, 2019, by and among the Registrant and the persons party thereto

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and Waterfront Equity Partners, LLC

Separation and Release of Claims Agreement, dated July 8, 2022, by and between the Company and Vojislav Vukovic, M.D., Ph.D.

Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.

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Alves Aivado, M.D., Ph.D.

/s/ Richard J.

Chief Financial Officer & Treasurer (principal financial officer)

Interim Chief Financial Officer (principal financial officer and principal accounting officer)

March 20, 2023

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has incurred losses and negative cash flows from operations and had an accumulated deficit that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates

Research Contract Costs and Accruals

As described in Notes 2 and 6 to the financial statements, research and development expenses were $18.0 million for the year ended December 31, 2022.

The Company has entered into various research and development contracts with research institutions and other companies.

These agreements are cancelable, and related payments are recorded as research and development expenses as incurred.

The Company records accruals for estimated ongoing research costs, with $0.5 million recorded as of December 31, 2022 within accrued expenses and other current liabilities.

This process involves reviewing open contracts and purchase orders, communicating with personnel to identify services that have been performed and estimating level of service performed and the associated costs incurred for the services for which the Company has not yet been invoiced.

Significant judgment and estimates are made in determining the accrued balances at the end of any reporting period.

The principal considerations for our determination that performing procedures relating to research contract costs and accruals is a critical audit matter are the significant judgment by management when recording accruals for estimated ongoing research costs and a high degree of auditor effort in performing procedures related to the Company’s research contract costs and accruals.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

These procedures included, among others (i) evaluating, on a sample basis, accruals for estimated ongoing research costs, by (a) testing the completeness and accuracy of costs incurred for services that have been performed and for which the Company has been invoiced by comparing amounts to third-party vendor contracts and invoices and (b) evaluating the reasonableness of the cost incurred for the services for which the Company has not yet been invoiced by comparing estimated amounts to information received from third-party vendors and (ii) testing, on a sample basis, classification of research and development expenses.

/s/ PricewaterhouseCoopers LLP

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Accrued expenses and other current liabilities

Paycheck Protection Program loan, current portion

Operating lease liabilities, current portion

Total current liabilities

Paycheck Protection Program loan, net of current portion

Operating lease liabilities, net of current portion

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Additional paid-in capital

Accumulated other comprehensive income/(loss)

Accumulated other comprehensive (loss)

Accumulated deficit

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Comprehensive

Income/(Loss)

Stockholders'

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RSUs vested, net of shares repurchased for tax

Exercise of stock options

Stock-based compensation expense

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Balances at December 31, 2021

Issuance of common stock

Issuance costs

RSUs vested, net of shares repurchased for tax

Exercise of stock options

Stock-based compensation expense

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Forgiveness of Paycheck Protection Program loan

(Gain)/loss on disposition of property and equipment

(Gain) on disposition of property and equipment

Changes in operating assets and liabilities:

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Proceeds from issuance of common stock, common warrants and pre-funded warrants, net of issuance costs

Proceeds from Paycheck Protection Program Loan

Proceeds from exercise of stock options

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Cash and cash equivalents and restricted cash, end of year

Supplemental disclosure of non-cash financing activities:

Common stock issuance costs included in accounts payable and accrued expenses

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

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(“Aileron”

or the “Company”) is a clinical stage chemoprotection oncology company focused on fundamentally transforming the experience of chemotherapy for cancer patients.

ALRN-6924, the Company’s first-in-class MDM2/MDMX dual inhibitor, is designed to activate p53, which in turn upregulates p21, a known inhibitor of the cell replication cycle.

ALRN-6924 is the only reported chemoprotective agent in clinical development to employ a biomarker strategy, in which the Company exclusively focuses on treating patients with p53-mutated cancers.

The Company’s targeted strategy is designed to selectively protect multiple healthy cell types throughout the body from chemotherapy without protecting cancer cells.

or the “Company”) is a clinical stage chemoprotection oncology company.

Our product candidate, ALRN-6924, is a MDM2/MDMX dual inhibitor that leverages our proprietary peptide drug technology.

When used as a chemoprotective agent, ALRN-6924 is designed to activate p53, which in turn upregulates p21, a known inhibitor of the cell replication cycle.

ALRN-6924 was the only reported chemoprotective agent in clinical development to employ a biomarker strategy, in which we exclusively focused on treating patients with p53-mutated cancers.

We originally initiated development of ALRN-6924 as an anti-cancer agent to restore p53-dependent tumor suppression in p53 wild-type tumors.

When used as an anti-cancer agent, ALRN-6924 is designed to disrupt the interaction of p53 suppressors MDM2 and MDMX with tumor suppressor p53 to reactivate tumor suppression in non-mutant, or wild-type, p53 cancers.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations, uncertainties in the clinical development of product candidates and in the ability to obtain needed additional financing.

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These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.

There can be no assurance that the Company’s research and development of ALRN-6924 will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that ALRN-6924 will obtain necessary governmental regulatory approval or that if approved, will be commercially viable.

Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales.

The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

In addition, the Company is dependent upon the services of its key employees and consultants.

In February 2023, the Company decided to terminate further development of ALRN-6924 and to reduce its workforce from nine to three full-time employees.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

On November 10, 2022, the Company effected a one-for-twenty reverse stock split on its common stock (the “Reverse Stock Split”).

The Reverse Stock Split was reflected on the Nasdaq Capital Market beginning with the opening of trading on November 11, 2022.

Pursuant to the Reverse Stock Split, every 20 shares of the Company's issued and outstanding shares of common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share of the common stock.

The Reverse Stock Split reduced the authorized number of shares of common stock from 300,000,000 to 15,000,000 and, pursuant to the certificate of amendment, such reduced authorized number of shares of common stock was subsequently multiplied by three, such that following the Reverse Stock Split the Company has 45,000,000 shares of common stock authorized.

The Reverse Stock Split affected all issued and outstanding shares of the Company's common stock, and the respective numbers of shares of common stock underlying the Company’s outstanding stock options, outstanding warrants and the Company's equity incentive plans were proportionately adjusted.

All share and per share amounts of the common stock included in the accompanying consolidated financial statements have been retrospectively adjusted to give effect to the Reverse Stock Split for all periods presented.

In accordance with Accounting Standards Update (“ASU”) No.

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The Company expects to continue to generate losses for the foreseeable future.

The Company believes that, based on its current operating plan, its cash, cash equivalents and investments of $ 45,933 as of December 31, 2021 will enable the Company to fund its operating expenses for greater than twelve months from the date of issuance of these financial statements.

The Company will need substantial funding to support its continuing operations and pursue its growth strategy.

Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through the sale of common stock in public offerings and/or private placements, debt financings or other capital sources, including collaborations with other companies or other strategic transactions.

On February 21, 2023, the Company has decided to terminate the Phase 1b breast cancer trial and further development of ALRN-6924.

The Company determined to reduce the Company’s remaining workforce from nine to three employees.

The Company also announced that it is exploring a range of strategic alternatives to maximize stockholder value.

The Company has engaged a third party to act as a strategic advisor for this process.

Strategic alternatives that are being evaluated may include, but are not limited to, an acquisition, a merger, a business combination, a sale of assets or other transaction.

There is no set timetable for this process and there can be no assurance that this process will result in the Company pursuing a transaction or that any transaction, if pursued, will be completed.

While the Company has cash, cash equivalents and investments of $ 21,242 as of December 31, 2022, due to the inherent uncertainty in the timing and cost of potential strategic alternatives, including their impact on its cash consumption, the Company has concluded that as of the date of this Annual Report on Form 10-K there is substantial doubt about its ability to continue as a going concern for a period of twelve months from the issuance of these financial statements.

The Company will need substantial funding to support its continuing operations.

Until such time as the Company can generate significant revenue, if ever, it expects to finance its operations through the sale of common stock in public offerings and/or private placements, debt financings or other capital sources, including third-party funding.

The Company may not be able to obtain financing when needed, on acceptable terms or at all.

The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.

If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its clinical programs, product portfolio expansion plans or commercialization efforts, which could adversely affect its business prospects.

There can be no assurance that a strategic transaction will be completed and our board of directors may decide to pursue a dissolution and liquidation.

If the Company is unable to raise additional funds when needed or enter into a transaction, the Company may be required to delay, limit, reduce or terminate its strategic process and it may consider seeking protection under the bankruptcy laws.

If the Company decides to seek protection under the bankruptcy laws, the Company would expect that it would file for bankruptcy at a time that is significantly earlier than when it would otherwise exhaust its cash resources.

If the Company decides to dissolve and liquidate its assets or to seek protection under the bankruptcy laws, it is unclear to what extent the Company will be able to pay its obligations, and, it is further unclear whether and to what extent any resources will be available for distributions to its stockholders.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty .

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The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents.

Cash equivalents, which consist of money market accounts, corporate notes and commercial paper are stated at fair value.

Cash equivalents, which consist of money market accounts and commercial paper, are stated at fair value.

Restricted Cash

As of December 31, 2021 , restricted cash of $ 25 consisted of cash deposited in a separate restricted bank account as a security deposit for the Company’s corporate credit cards.

As of December 31, 2020, re stricted cash consisted of $ 568 of cash deposited in a separate restricted bank account as a security deposit for the lease of the Company’s facility and $ 25 of cash deposited in a separate restricted bank account as a security deposit for the Company’s corporate credit cards.

As of December 31, 2022 and December 31, 2021 , restricted cash of $ 25 consisted of cash deposited in a separate restricted bank account as a security deposit for the Company’s corporate credit cards.

The Company classifies its available-for-sale debt security investments as current assets on the balance sheet if they mature within one year from the balance sheet date.

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The investment portfolio is maintained in accordance with the Company’s investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer.

The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing.

In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs.

These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

Prior to the February 2023 decision to discontinue development of ALRN-6924, the Company was dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing.

In particular, the Company relied on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs.

These programs could have been adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs .

Fair Value Measurements

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Depreciation and amortization expense is recognized using the straight-line method over the following estimated useful lives:

Laboratory equipment

Computer equipment and software

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Upon retirement or sale, the cost and related accumulated depreciation and amortization of assets disposed of are removed from the accounts and any resulting gain or loss is included in the statements of operations and comprehensive loss.

On January 1, 2019 , the Company adopted a new U.S.

GAAP accounting standard which requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements (ASC 842).

The new standard was adopted using the modified retrospective transition method, which requires the Company to apply the standard as of the effective date and does not require restatement of prior periods.

The Company elected to apply the package of practical expedients, which allowed the Company to not reassess:

(i) whether expired or existing contracts contain leases;

(ii) lease classification for any expired or existing leases;

and (iii) initial direct costs for any existing leases.

The Company has an operating lease of office space, which has a remaining lease term of less than 2 years and includes one or more options to renew or terminate early.

The Company has an operating lease of office space, which has a remaining lease term of less than 1 year and includes one or more options to renew or terminate early.

The Company determines if an arrangement contains a lease at inception.

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For purpose of this calculation, outstanding options to purchase common stock are considered potential dilutive common shares.

Risks and Uncertainties

The ongoing COVID-19 pandemic and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce.

The future progression of the pandemic and its effects on our business and operations are uncertain.

Potential impacts to the Company’s business include disruptions in supply of the Company’s product candidate and/or procuring items that are essential for the Company’s research and development activities, including, for example, raw materials used in the manufacturing of ALRN-6924, medical and laboratory supplies used in the Company’s clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the COVID-19 pandemic.

While the Company believes that it currently has sufficient supply of its product candidate to continue the Company’s ongoing and planned clinical trials, its product candidate, or materials contained therein, come from facilities located in areas impacted by the COVID-19 pandemic.

Additionally, the Company has enrolled, and is seeking to enroll, cancer patients in the Company’s clinical trials at sites located both in the United States and Europe, which are areas that continue to be impacted by the COVID-19 pandemic.

Enrollment at clinical trial sites may be disrupted as the effects of the COVID-19 pandemic persist.

In the event that clinical trial sites close to enrollment in the Company’s trials or shift resources to address COVID-19, this could have a material adverse impact on the Company’s clinical trial plans and timelines.

The Company may face difficulties recruiting or retaining patients in its ongoing and planned clinical trials if patients are affected by the virus or are fearful of visiting or traveling to our clinical trial sites because of the COVID-19 pandemic.

Any negative impact that the COVID-19 pandemic has on the ability of the Company’s suppliers to provide materials necessary for the Company’s product candidate or on recruiting or retaining patients in the Company’s clinical trials could cause costly delays to clinical trial activities, which could adversely affect the Company’s ability to obtain regulatory approval for and to commercialize the Company’s product candidate, increase the Company’s operating expenses, affect the Company’s ability to raise additional capital, and impact the Company’s operating and financial results.

The capital markets have also experienced significant volatility as a result of the pandemic.

Future disruptions in the capital markets could negatively impact the Company’s ability to raise capital in the future.

Recently Issued Accounting Pronouncements

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Commercial paper

Corporate notes

Treasury bills

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Cash equivalents:

Commercial paper

Money market funds

Commercial paper

Corporate notes

Treasury bills

As of December 31, 2022 and 2021 , the Company’s cash equivalents and investments were invested in money market funds, corporate notes and commercial paper and were valued based on Level 1 and Level 2 inputs.

In determining the fair value of its corporate notes and commercial paper at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data.

In determining the fair value of its corporate notes, commercial paper, and treasury bills at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data.

The Company’s cash equivalents have original maturities of less than 90 days from the date of purchase.

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Commercial paper

Corporate notes

Treasury bills

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Commercial paper

Corporate notes

Treasury bills

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During the year ended December 31, 2021, the Company received payment for disposed, fully depreciated assets, resulting in a gain on sale of $ 66 .

During the year ended December 31, 2020 , assets with a cost of $ 640 were disposed of for $ 208 in proceeds, resulting in a gain on sale of $ 86 .

Accrued Expenses and Other Current Liabilities

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As of December 31, 2022 and 2021, no dividends had been declared.

Reverse Stock Split

The Company’s stockholders approved a reverse stock split of the Company’s common stock on June 15, 2022.

The Company effected the Reverse Stock Split on November 10, 2022.

stock was subsequently multiplied by three, such that following the Reverse Stock Split the Company has 45,000,000 shares of common stock authorized.

The Reverse Stock Split affected all issued and outstanding shares of the Company's common stock, and the respective numbers of shares of common stock underlying the Company’s outstanding stock options, outstanding warrants and the Company’s equity incentive plans were proportionately adjusted.

All share and per share amounts disclosed give effect to the Reverse Stock Split on a retroactive basis.

Sales of Common Stock

On January 6, 2021, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company issued and sold, in a registered direct offering (the “Offering”), an aggregate of 1,631,549 shares of common stock, $ 0.001 par value per share, at a purchase price per share of $ 22.00 (the “Shares”).

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During the year ended December 31, 2021, the Company issued and sold an aggregate of 261,270 shares of its common stock pursuant to the ATM Sales Agreement, resulting in gross proceeds of $ 10,922 before deducting expenses of $ 329 .

Pursuant to a prospectus relating to the ATM Sales Agreement filed by the Company with the SEC on June 21, 2022, the Company may from time to time offer and sell shares of its common stock having an aggregate offering price of up to $ 14,024 under the ATM Sales Agreement.

There were no sales under the ATM Sales Agreement during the twelve months ended December 31, 2022.

During the year ended December 31, 2021, the Company issued and sold an aggregate of 68,750 shares of its common stock to Lincoln Park Capital, LLC pursuant to a purchase agreement entered into between Lincoln Park Capital, LLC and the Company in September 2020, resulting in gross proceeds of $ 2,614 .

During the year ended December 31, 2020, the Company issued and sold 29,411 shares to LPC under the purchase agreement for proceeds of $ 500 .

There were no sales under the purchase agreement during the twelve months ended December 31, 2022 .

Under the purchase agreement, the Company may not effect any sales of shares of common stock on any purchase date that the closing sale price of its common stock on Nasdaq is less than the floor price of $ 6.00 per share, which will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction

In June 2020, the Company issued and sold in an underwritten public offering an aggregate of 508,102 shares of common stock, including an additional 53,557 shares of common stock upon the partial exercise of an option of the underwriter to purchase additional shares, for a purchase price to the public of $ 22.00 per share.

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The number of shares of common stock covered by options and the date those options become exercisable, type of options granted, exercise prices, vesting and other restrictions were determined at the discretion of the board of directors, or its committee if so delegated.

Stock options granted under the 2017 Plan with service-based vesting conditions generally vest over four years and may not have a duration in excess of ten years , although options have been granted with vesting terms of less than four years .

less than four years .

The exercise price for stock options granted may not be less than the fair market value of the common stock as of the date of grant.

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The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2021 and 2020 was $ 68 a nd $ 0 , respectively.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2022 and 2021 was $ 0 and $ 68 , respectively.

Restricted Stock Units

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General and administrative expenses

The Company used an estimated forfeiture rate of 2.43 % to calculate its stock compensation expense for each of the years ended December 31, 2021 and 2020.

As of December 31, 2022, the Company had a n aggregate of $ 3,187 of unrecognized stock-based compensation expense, which it expects to recognize over a weighted average period of 2.49 yea rs.

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On March 26, 2021, the Company entered into a lease agreement for office space located at 285 Summer Street, Boston, Massachusetts (the “285 Summer Street Lease”).

Under the terms of the 285 Summer Street Lease, starting on April 1, 2021, the Company leases approximately 3,365 square feet of office space at $ 42.00 per square foot per year, or $ 141 per year in base rent, which is subject to scheduled annual rent increases plus certain operating expenses and taxes.

Under the terms of the 285 Summer Street Lease, starting on April 1, 2021, and has a two year term, the Company leases approximately 3,365 square feet of office space at $ 42.00 per square foot per year, or $ 141 per year in base rent, which is subject to scheduled annual rent increases plus certain operating expenses and taxes.

The lease expires March 31, 2023 and we do not plan to renew the lease.

Following expiration of the lease, we plan to operate virtually.

The Company accounted for this lease under ASC 842 using its initial two-year term through March 31, 2023 .

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The Company recognizes rent expense on a straight-line basis throughout the remaining term of the lease.

490 Arsenal Way

On April 4, 2018, the Company entered into a lease agreement for office and laboratory space located in a building (the “Building”) at 490 Arsenal Way, Watertown, Massachusetts (the “490 Arsenal Way Lease”).

Under the terms of the 490 Arsenal Way Lease, starting on August 21, 2018, the Company leased approximately 18,768 square feet of office and laboratory space at $ 52.55 per square foot per year, or $ 986 per year in base rent, which is subject to scheduled annual rent increases plus certain operating expenses and taxes.

The Company maintained $ 568 security deposit related to the 490 Arsenal Way Lease.

Pursuant to the 490 Arsenal Way Lease, the landlord contributed an aggregate of $ 2,419 toward the cost of construction and tenant improvements for the Building.

The Company occupied the Building from August 21, 2018 through November 11, 2020 when the 490 Arsenal Way Lease was terminated.

The Company accounted for this lease under ASC 842 using its initial eight-year term through August 31, 2026.

As part of its adoption of ASC 842, the Company de-recognized the building asset and corresponding financing obligation recorded on the Company’s consolidated balance sheets as of January 1, 2019, in accordance with the ASC 842 transition guidance.

In applying the ASC 842 transition guidance, the Company classified this lease as an operating lease and recorded a right-of-use asset of $ 6,697 and lease liability of $ 5,401 on the effective date.

The Company recognizes rent expense on a straight-line basis throughout the remaining term of the lease.

On November 11, 2020, the Company entered into a lease termination agreement with respect to its former corporate headquarters at 490 Arsenal Way, Watertown, Massachusetts.

In connection with the lease termination the right of use assets and operating lease liabilities associated with the lease were derecognized.

The derecognition of these assets and liabilities resulted in a charge of $ 823 in other income.

Summary of all lease costs recognized under ASC 842

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the year ended December 31, 2022 and 2021:

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As of December 31, 2022, future minimum commitments under ASC 842 under the Company’s operating leases were as follows:

As of December 31, 2021

2024 and thereafter

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Any payments made in connection with the annual license maintenance fees will be credited against any royalties due.

The Company incurred license fees of $ 145 during each of the years ended December 31, 2021 and 2020 .

The Company incurred license fees of $ 110 and $ 145 during each of the years ended December 31, 2022 and 2021, respectively .

In addition, the Company did no t make any milestone payments during the years ended December 31, 2022 and 2021.

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State taxes, net of federal benefit

Research and development tax credits

Research and development and orphan drug tax credits

Other permanent items

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Net operating loss carryforwards

Research and development tax credit carryforwards

Research and development and orphan drug tax credit carryforwards

Capitalized research and development expenses

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Deferred Tax Liabilities:

Depreciation and amortization

Right of Use Asset

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The state tax operating loss carryforwards expire beginning in 2030 .

As of December 31, 2021, the Company also had available research and development tax credit carryforwards for federal and state income tax purposes of $ 2,655 and $ 1,823 , respectively, which begin to expire in 2025 .

As of December 31, 2022, the Company also had available research and development tax credit carryforwards for federal and state income tax purposes of $ 2,664 and $ 1,922 , respectively, which begin to expire in 2025 and 2026 , respectively .

As of December 31, 2022 , the Company also had available orphan drug credit carryforwards of $ 2,423 for federal income tax purposes, which begin to expire in 2039 .

Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future.

On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was signed into law.

Under the TCJA provisions, effective with tax years beginning on or after January 1, 2022, taxpayers can no longer immediately expense research and development expenditures.

Taxpayers are now required to capitalize and amortize these costs over 5 years for research conducted within the United States or 15 years for research conducted abroad.

As a result, the Company capitalized $ 17,705 of research and development expenses for the year ended December 31, 2022.

Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 and similar state statutes due to ownership changes that have occurred previously or that could occur in the future.

These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income.

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period.

In general, an ownership change, as defined by Section 382 and similar state statutes, results from

transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period.

The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study.

If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382 and similar state statutes, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

21 unchanged sentences

The Company accrued approximately $ 105.0 for the estimated safe harbor matching contribution for the year ended December 31, 2022.

Subsequent Event

On February 16, 2023, the Board of Directors (the “Board”) of the Company determined to reduce the Company’s remaining workforce from nine to three employees.

The determination to effect the workforce reduction was made in connection with the Company’s decision, further described below, to terminate its Phase 1b breast cancer trial of ALRN-6924 and further development of ALRN-6924.

The workforce reduction is designed to reduce the Company’s operating expenses while the Company explores a range of strategic alternatives.

The workforce reduction is expected to be completed in the second quarter of 2023.

Affected employees will be offered separation benefits, including severance payments along with temporary healthcare coverage assistance.

The Company estimates that the severance and termination-related costs will be approximately $ 1.0 to $ 1.1 million and expects to record these costs in the first quarter of 2023.

The Company expects that payment of these costs will be made through the second quarter of 2023.

The Company’s estimate of costs and the expected timing for recording and paying those costs are subject to a number of assumptions and actual results may differ.

The Company may also incur other costs not currently contemplated due to events that may occur as a result of, or associated with, the workforce reduction.

The Company also announced that it is exploring a range of strategic alternatives to maximize stockholder value.

The Company has engaged Ladenburg Thalmann & Co., Inc.

to act as a strategic advisor for this process.

Strategic alternatives that are being evaluated may include, but are not limited to, an acquisition, a merger, a business combination, a sale of assets or other transaction.

There is no set timetable for this process and there can be

no assurance that this process will result in the Company pursuing a transaction or that any transaction, if pursued, will be completed on attractive terms.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures