Rein Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures. Limitations on Effectiveness of Controls and Procedures The term “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, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits 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 ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Evaluation of Disclosure Controls and Procedures 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 Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022. 94 Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 95 Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 framework) (COSO). Based on its assessment, management believes that, as of December 31, 2022, our internal control over financial reporting is effective at the reasonable assurance level. Changes in Internal Control Over Financial Reporting 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. Item 9B. Other Information. None. Ite m 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. PART III Item 10. Directors, Executive Off icers and Corporate Governance. The information required by this Item 10 will be included under the captions “Executive Officers,” “Election of Directors” and “Delinquent Section 16(a) Reports” in our definitive proxy statement to be filed with the Securities and Exchange Commission, or SEC, with respect to our 2023 Annual Meeting of Stockholders, which is expected to be filed no later than 120 days after the end of our last fiscal year ended December 31, 2022 and is incorporated herein by reference. We have adopted a Code of Business Conduct and Ethics that applies to our officers, including our principal executive, financial and accounting officers, and our directors and employees. We have posted the text of our Code of Business Conduct and Ethics under the “Investors & Media — Corporate Governance” section of our website, www.aileronrx.com . We intend to disclose on our website any amendments to, or waivers from, the Code of Business Conduct and Ethics that are required to be disclosed pursuant to the disclosure requirements of Item 5.05 of Form 8-K. Item 11. Executiv e Compensation. The information required by this Item 11 will be included under the captions “Executive and Director Compensation” and “Compensation Committee Interlocks and Insider Participation” 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 Item 12. Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters. The information required by this Item 12 will be included under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” 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. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item 13 will be included, as applicable, under the captions “Employment Agreements,” “Director Independence” and “Related Person Transactions” in our definitive proxy statement to be 96 filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference. Item 14. Principal Accoun ting Fees and Services. The information required by this Item 14 will be included under the captions “Audit Fees and Services” and “Pre-Approval Policies and Procedures” 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. 97 PART IV Item 15. Exhibits, Financ ial Statement Schedules. The following documents are filed as part of this Report: (a) Financial Statements . The following documents are included on pages F2-F25 attached hereto and are filed as part of this Annual Report on Form 10-K: Ite m 16. Form 10-K Summary. None. INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) F- 1 Balance Sheets as of December 31, 2022 and 2021 F- 3 Statements of Operations and Comprehensive Loss for the Years ended December 31, 2022 and 2021 F- 4 Statements of Stockholders’ Equity for the Years ended December 31, 2022 and 2021 F- 5 Statements of Cash Flows for the Years ended December 31, 2022 and 2021 F- 6 Notes to Financial Statements F- 7 (b) Financial Statement Schedules . Schedules have been omitted since they are either not required or not applicable or the information is otherwise included herein. (c) Exhibits . Incorporation by Reference Exhibit Number Description Form Date of Filing Exhibit Number Filed Herewith 3.1 Restated Certificate of Incorporation of the Registrant, as amended 10-Q 8/11/2021 3.1 3.2 Certificate of Amendment of Restated Certificate of Incorporation of the Registrant 8-K 11/10/2022 3.2 3.3 Amended and Restated By-laws of the Registrant 8-K 7/5/2017 3.3 4.1 Specimen stock certificate evidencing shares of common stock S-1^ 6/19/2017 4.1 4.2 Description of Securities of the Registrant 10-K 3/30/2020 4.3 10.1* 2006 Stock Incentive Plan, as amended S-1^ 6/2/2017 10.1 10.2* Form of Incentive Stock Option Agreement under 2006 Stock Incentive Plan S-1^ 6/2/2017 10.2 10.3* Form of Nonstatutory Stock Option Agreement under 2006 Stock Incentive Plan S-1^ 6/2/2017 10.3 10.4* 2016 Stock Incentive Plan S-1^ 6/2/2017 10.4 10.5* Form of Incentive Stock Option Agreement under 2016 Stock Incentive Plan S-1^ 6/2/2017 10.5 98 10.6* Form of Nonstatutory Stock Option Agreement under 2016 Stock Incentive Plan S-1^ 6/2/2017 10.6 10.7* 2017 Stock Incentive Plan S-1^ 6/19/2017 10.8 10.8* Form of Incentive Stock Option Agreement under 2017 Stock Incentive Plan S-1^ 6/19/2017 10.9 10.9* Form of Nonstatutory Stock Option Agreement under 2017 Stock Incentive Plan S-1^ 6/19/2017 10.10 10.10* 2017 Employee Stock Purchase Plan S-1^ 6/19/2017 10.11 10.11* 2021 Stock Incentive Plan 8-K 6/17/2021 99.1 10.12* Form of Stock Option Agreement under 2021 Stock Incentive Plan X 10.13* Form of Restricted Stock Unit Agreement under 2021 Stock Incentive Plan X 10.14 Form of Director and Officer Indemnification Agreement S-1^ 6/19/2017 10.12 10.15 License Agreement, dated as of December 31, 2006, by and between the Registrant and Materia, Inc. (now Umicore Precious Metals Chemistry USA, LLC) S-1^ 6/2/2017 10.13 10.16+ Amended and Restated License Agreement, dated as of February 19, 2010, by and among the Registrant, President and Fellows of Harvard College and Dana-Farber Cancer Institute, Inc. S-1^ 6/19/2017 10.14 10.17* Amended and Restated Employment Agreement, dated as of September 6, 2018, between the Registrant and Manuel C. Alves Aivado, M.D., Ph.D. 10-Q 11/7/2018 10.2 10.18* Severance Agreement, dated as of September 6, 2018, between the Registrant and Manuel C. Alves Aivado, M.D., Ph.D. 10-Q 11/7/2018 10.3 10.19* Offer Letter, dated as of November 15, 2007, between the Registrant and D. Allen Annis, Ph.D. 10-K 3/29/2019 10.21 10.20* Severance Agreement, dated as of November 5, 2018, between the Registrant and D. Allen Annis, Ph.D. 10-K 3/29/2019 10.22 10.21 Securities Purchase Agreement, dated March 28, 2019, by and among the Registrant and the persons party thereto 8-K 4/1/2019 10.1 99 10.22 Registration Rights Agreement, dated March 28, 2019, by and among the Registrant and the persons party thereto 8-K 4/1/2019 10.4 10.23 Form of Warrant to Purchase Common Stock 8-K 4/1/2019 10.3 10.24 Purchase Agreement, dated as of September 21, 2020, by and between the Company and Lincoln Park Capital Fund, LLC 8-K 9/22/2020 10.1 10.25 Registration Rights Agreement, dated as of September 21, 2020, by and between the Company and Lincoln Park Capital Fund, LLC 8-K 9/22/2020 10.2 10.26 Capital on Demand ™ Sales Agreement, dated January 29, 2021, by and among Aileron Therapeutics, Inc. and JonesTrading Institutional Services LLC and William Blair & Company, L.L.C. 8-K 1/29/2021 1.1 10.27 Sublease Agreement, dated March 26, 2021, by and among the Company, Vittoria Industries North America, Inc. and Waterfront Equity Partners, LLC 10-Q 5/11/2021 10.1 10.28* Separation and Release of Claims Agreement, dated July 8, 2022, by and between the Company and Vojislav Vukovic, M.D., Ph.D. 10-Q 8/15/2022 10.1 23.1 Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm. X 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 100 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Indicates management contract or compensatory plan. + Confidential treatment has been requested and/or granted as to certain portions, which portions have been omitted and filed separately with the U.S. Securities and Exchange Commission. ^ SEC File No. 333-218474 101 SIGNAT URES 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 . Aileron Therapeutics, Inc. Date: March 20, 2023 By: /s/ Manuel C. Alves Aivado, M.D., Ph.D. Manuel C. Alves Aivado, M.D., Ph.D. President and Chief Executive Officer (principal executive officer) 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/ Manuel C. Alves Aivado, M.D., Ph.D. President, Chief Executive Officer and Director (principal executive officer) March 20, 2023 Manuel C. Alves Aivado, M.D., Ph.D. /s/ Susan L. Drexler Interim Chief Financial Officer (principal financial officer and principal accounting officer) March 20, 2023 Susan L. Drexler /s/ Jeffrey A. Bailey Chairman of the Board of Directors March 20, 2023 Jeffrey A. Bailey /s/ Reinhard J. Ambros, Ph.D. Director March 20, 2023 Reinhard J. Ambros, Ph.D. /s/ William T. McKee Director March 20, 2023 William T. McKee /s/ Jodie P. Morrison Director March 20, 2023 Jodie P. Morrison /s/ Nolan Sigal, M.D., Ph.D. Director March 20, 2023 Nolan Sigal, M.D., Ph.D. /s/ Joseph H. Von Rickenbach Director March 20, 2023 Joseph H. Von Rickenbach 102 Re port of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Aileron Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of Aileron Therapeutics, Inc. (the “Company”) as of December 31, 2022 and 2021, and the related statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “financial statements”). 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 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 of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits 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. 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 F- 1 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 Boston, Massachusetts March 20, 2023 We have served as the Company's auditor since 2009. F- 2 AILERON THERAPEUTICS, INC. BALANCE SHEETS (In thousands, except share and per share data) December 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 5,194 $ 3,600 Investments 16,048 42,333 Prepaid expenses and other current assets 606 2,219 Restricted cash 25 25 Total current assets 21,873 48,177 Operating lease, right-of-use asset 40 152 Other non-current assets 24 24 Property and equipment, net 70 128 Total assets $ 22,007 $ 48,481 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,720 $ 1,210 Accrued expenses and other current liabilities 1,631 3,205 Operating lease liabilities, current portion 33 93 Total current liabilities 3,384 4,508 Operating lease liabilities, net of current portion — 69 Total liabilities 3,384 4,577 Commitments and contingencies (Note 12) Stockholders’ equity: Preferred stock, $ 0.001 par value; 5,000,000 shares authorized at December 31, 2022 and December 31, 2021; no shares issued and outstanding at December 31, 2022 and December 31, 2021 — — Common stock, $ 0.001 par value; 45,000,000 and 15,000,000 shares authorized at December 31, 2022 and December 31, 2021; respectively; 4,541,167 and 4,528,667 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively 91 91 Additional paid-in capital 291,365 289,282 Accumulated other comprehensive (loss) ( 48 ) ( 13 ) Accumulated deficit ( 272,785 ) ( 245,456 ) Total stockholders’ equity 18,623 43,904 Total liabilities and stockholders’ equity $ 22,007 $ 48,481 The accompanying notes are an integral part of these financial statements. F- 3 AILERON THERAPEUTICS, INC. STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share data) Year Ended December 31, 2022 2021 Revenue $ — $ — Operating expenses: Research and development 17,967 17,008 General and administrative 9,680 9,597 Total operating expenses 27,647 26,605 Loss from operations ( 27,647 ) ( 26,605 ) Other income (expense), net 318 441 Net loss $ ( 27,329 ) $ ( 26,164 ) Net loss per share—basic and diluted $ ( 6.02 ) $ ( 5.89 ) Weighted average common shares outstanding—basic and diluted 4,539,318 4,440,338 Comprehensive loss: Net loss $ ( 27,329 ) $ ( 26,164 ) Other comprehensive gain (loss): Unrealized (loss) on investments, net of tax of $ 0 ( 35 ) ( 11 ) Total other comprehensive (loss) ( 35 ) ( 11 ) Total comprehensive loss $ ( 27,364 ) $ ( 26,175 ) The accompanying notes are an integral part of these financial statements. F- 4 AILERON THERAPEUTICS, INC. STATEMENT OF STOCKHOLDERS ’ EQUITY (In thousands, except share data) Common Stock Additional Accumulated Other Total Shares Par Value Paid-in Capital Comprehensive (Loss) Accumulated Deficit Stockholders' Equity Balances at December 31, 2020 2,190,208 $ 44 $ 231,412 $ ( 2 ) $ ( 219,292 ) $ 12,162 Issuance of common stock 2,320,313 46 59,042 — — 59,088 Issuance costs — — ( 3,506 ) — — ( 3,506 ) RSUs vested, net of shares repurchased for tax 12,500 — — — — 0 Exercise of stock options 5,646 1 74 — — 75 Stock-based compensation expense — — 2,260 — — 2,260 Unrealized loss on investments — — — ( 11 ) — ( 11 ) Net loss — — — — ( 26,164 ) ( 26,164 ) Balances at December 31, 2021 4,528,667 $ 91 $ 289,282 $ ( 13 ) $ ( 245,456 ) $ 43,904 RSUs vested, net of shares repurchased for tax 12,500 — — — — — Stock-based compensation expense — — 2,083 — — 2,083 Unrealized loss on investments — — — ( 35 ) — ( 35 ) Net loss — — — — ( 27,329 ) ( 27,329 ) Balances at December 31, 2022 4,541,167 $ 91 $ 291,365 $ ( 48 ) $ ( 272,785 ) $ 18,623 The accompanying notes are an integral part of these financial statements. F- 5 AILERON THERAPEUTICS, INC. STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 27,329 ) $ ( 26,164 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 169 121 Net amortization of premiums and discounts on investments ( 208 ) 240 Stock-based compensation expense 2,083 2,260 Forgiveness of Paycheck Protection Program loan — ( 387 ) (Gain) on disposition of property and equipment — ( 66 ) Changes in operating assets and liabilities: Prepaid expenses and other current assets 1,613 ( 291 ) Other assets — ( 24 ) Accounts payable 510 ( 386 ) Operating lease liabilities ( 129 ) ( 66 ) Accrued expenses and other current liabilities ( 1,574 ) 1,009 Net cash used in operating activities ( 24,865 ) ( 23,754 ) Cash flows from investing activities: Purchases of investments ( 21,850 ) ( 73,577 ) Proceeds from sales or maturities of investments 48,309 37,751 Purchases of property and equipment — ( 157 ) Proceeds from sale of fixed asset — 66 Net cash (used in) provided by investing activities 26,459 ( 35,917 ) Cash flows from financing activities: Proceeds from issuance of common stock, common warrants and pre-funded warrants, net of issuance costs — 55,583 Proceeds from exercise of stock options — 74 Net cash provided by financing activities — 55,657 Net Increase (decrease) in cash, cash equivalents and restricted cash 1,594 ( 4,014 ) Cash, cash equivalents and restricted cash at beginning of period 3,625 7,639 Cash, cash equivalents and restricted cash at end of period $ 5,219 $ 3,625 Cash and cash equivalents, end of year $ 5,194 $ 3,600 Restricted cash, end of year 25 25 Cash and cash equivalents and restricted cash, end of year $ 5,219 $ 3,625 The accompanying notes are an integral part of these financial statements. F- 6 A ILERON THERAPEUTICS, INC. NOTES TO FINANCIAL ST ATEMENTS (Amounts in thousands, except share and per share data) 1. Nature of the Business and Basis of Presentation Aileron Therapeutics, Inc. (“Aileron” 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. ALRN-6924 will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities. 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. F- 7 Liquidity In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued. The Company’s financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Through December 31, 2022, the Company has financed operations primarily through $ 145,467 in net proceeds from sales of common stock and warrants, $ 131,211 from sales of preferred stock prior to its IPO, and $ 34,910 from a collaboration agreement in 2010. As of December 31, 2022, the Company had cash, cash equivalents and investments of $ 21,242 . The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $ 272,785 as of December 31, 2022. The Company expects to continue to generate losses for the foreseeable future. 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. 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 . F- 8 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of common stock and stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates. Cash Equivalents 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 and commercial paper, are stated at fair value. Restricted Cash 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. Investments 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. The Company classifies all of its investments as available-for-sale securities. The Company’s investments are measured and reported at fair value using quoted prices in active markets for similar securities or using other inputs that are observable or can be corroborated by observable market data. Unrealized gains and losses on available-for-sale securities are reported as accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity (deficit). The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income (expense) within the statements of operations and comprehensive loss. The Company evaluates its investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary”, the Company reduces the investment to fair value through a charge to the statements of operations and comprehensive loss. No such adjustments were necessary during the periods presented. Concentration of Credit Risk and of Significant Suppliers Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. From time to time, the Company has maintained all of its cash, cash equivalents and investment balances at three accredited financial institutions, in amounts that exceed federally insured limits. The Company generally invests its excess cash in money market funds, commercial paper and corporate notes that are subject to minimal credit and market risks. Management has established guidelines relative to credit ratings and maturities intended to safeguard principal balances and maintain liquidity. 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. F- 9 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 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 principal 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, of which the first two are considered observable and the last is considered unobservable. • Level 1—Quoted prices in active markets for identical assets or liabilities. • Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The Company’s cash equivalents and investments are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair value due to the short-term nature of these liabilities. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the following estimated useful lives: Computer equipment and software Furniture and fixtures 3 to 5 years 7 years Expenditures for repairs and maintenance of assets are charged to expense as incurred. 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. F- 10 Leases 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. Operating lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments, initial direct costs paid or incentives received. The Company’s leases do not contain an implicit rate, and therefore the Company uses an estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. Options to extend or terminate the lease are reflected in the calculation when it is reasonably certain that the option will be exercised. The Company has elected to account for lease and non-lease components as a single lease component, however non-lease components that are variable, such as common area maintenance and utilities, are generally paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and operating lease liability and are reflected as an expense in the period incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Impairment of Long-Lived Assets Long-lived assets consist of property and equipment. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully 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. If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows. To date, the Company has not recorded any impairment losses on long-lived assets. Research and Development Costs Research and development expenditures are expensed as incurred. Research and development expenses are comprised of salaries, stock-based compensation and benefits of employees, third-party license fees and other operational costs related to the Company’s research and development activities, including allocated facility-related expenses and external costs of outside vendors engaged to conduct both preclinical studies and clinical trials. Research Contract Costs and Accruals 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. 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. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs. F- 11 Patent Costs All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses. F- 12 Accounting for Stock-Based Compensation The Company measures all stock options and other stock-based awards granted to employees and directors based on the fair value on the date of the grant and recognizes compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. The Company applies the straight-line method of expense recognition to all awards with only service-based vesting conditions and applies the graded vesting method to all awards with performance-based vesting conditions or both service-based and performance-based vesting conditions. The Company recognizes compensation expense for only the portion of awards that are expected to vest. In developing a forfeiture rate estimate, the Company has considered its historical experience to estimate pre-vesting forfeitures for awards with service-based vesting conditions. The impact of a forfeiture rate adjustment will be recognized in full in the period of adjustment, and if the actual forfeiture rate is materially different from the Company’s estimate, the Company may be required to record adjustments to stock-based compensation expense in future periods. The Company classifies share-based compensation expense in its statement of operations and comprehensive loss in the same manner in which the award recipient's payroll costs are classified or in which the award recipient's service payments are classified. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. 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. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. F- 13 Segment Data The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is on developing a novel class of therapeutics for the treatment of cancer and other diseases. All of the Company’s tangible assets are held in the United States. Comprehensive Loss Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. The Company’s only element of other comprehensive loss in all periods presented was unrealized gains (losses) on available-for-sale investments. Net Income (Loss) per Share Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by adjusting income (loss) per share attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. 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 weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding options to purchase common stock are considered potential dilutive common shares. Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes , or ASC 740, which simplifies the accounting for income taxes. The ASU was effective for the Company in the first quarter of fiscal 2021. Adoption of ASU2019-12 did not have a material effect on the Company’s consolidated financial statements or disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (ASU 2016-13 or Topic 326): Measurement of Credit Losses on Financial Instruments, 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 methodology, which will result in more timely recognition of credit losses. The ASU will be effective for the Company's fiscal year beginning January 1, 2023. The Company is currently evaluating the impact of the adoption of ASU 2016-13 and does not expect adoption to have a material effect on the Company’s consolidated financial statements or disclosures. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption. 3. Fair Value of Financial Assets The following tables present information about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values: Fair Value Measurements as of December 31, 2022 using: Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ 1,661 $ — $ — $ 1,661 Investments: Commercial paper — 12,814 — 12,814 Treasury bills — 3,234 — 3,234 $ 1,661 $ 16,048 $ — $ 17,709 F- 14 Fair Value Measurements as of December 31, 2021 using: Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds 2,438 — — 2,438 Investments: Commercial paper — 33,969 — 33,969 Corporate notes — 6,366 — 6,366 Treasury bills — 1,998 — 1,998 $ 2,438 $ 42,333 $ — $ 44,771 F- 15 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, 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. All available-for-sale investments have contractual maturities of less than one year . During the years ended December 31, 2022 and 2021 , there were no transfers in or out of Level 3. 4. Investments As of December 31, 2022 and 2021, the fair value of available-for-sale investments by type of security was as follows: December 31, 2022 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Investments: Commercial paper $ 12,846 $ — $ ( 32 ) $ 12,814 Treasury bills 3,250 — ( 16 ) 3,234 $ 16,096 $ — $ ( 48 ) $ 16,048 December 31, 2021 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Investments: Commercial paper $ 33,976 $ — $ ( 7 ) $ 33,969 Corporate notes 6,368 — ( 2 ) 6,366 Treasury bills 2,002 — ( 4 ) 1,998 $ 42,346 $ — $ ( 13 ) $ 42,333 5. Property and Equipment, Net Property and equipment, net consisted of the following: December 31, 2022 2021 Computer equipment and software $ 340 $ 340 340 340 Less: Accumulated depreciation and amortization ( 270 ) ( 212 ) $ 70 $ 128 Depreciation and amortization expense for the years ended December 31, 2022 and 2021 w as $ 169 and $ 121 , respectively . During the year ended December 31, 2021, the Company received payment for disposed, fully depreciated assets, resulting in a gain on sale of $ 66 . F- 16 6. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: December 31, 2022 December 31, 2021 External research and development services $ 533 $ 1,575 Payroll and payroll-related costs 425 1,182 Professional fees 492 388 Other 181 60 $ 1,631 $ 3,205 7. Paycheck Protection Loan On April 30, 2020, the Company received loan proceeds in the amount of approximately $ 384 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan and accrued interest are forgivable after eight weeks if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1 %, with a deferral of payments for the first six months . The Company used the proceeds for purposes consistent with the PPP . The Company determined to account for the PPP loan as debt under Accounting Standards Update (“ASC 470”), “Debt”, and allocated and recorded the loan proceeds between current and non-current liabilities. On May 20, 2021 the Small Business Administration notified the Company that the PPP loan had been forgiven in full. During the year ended December 31, 2021 the Company recognized income for debt extinguishment pursuant to ASC 470-50-15-4 as other income. 8. Preferred Stock O n July 5, 2017, in connection with the closing of the Company’s IPO, the Company filed its restated certificate of incorporation, which authorizes the Company to issue up to 5,000,000 shares of preferred stock, $ 0.001 par value per share. As of December 31, 2022 and 2021 , the Company had no shares of preferred stock issued or outstanding. 9. Common Stock On June 16, 2021, the Company filed a certificate of amendment to its restated certificate of incorporation which increased the authorized number of shares of common stock from 7,500,000 shares of $ 0.001 par value common stock to 15,000,000 shares of common stock. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the Company’s board of directors, if any, subject to the preferential dividend rights of the preferred stock. 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. 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 F- 17 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”). The aggregate gross proceeds of the Offering were $ 35,894 , before deducting $ 2,887 of fees payable to the placement agent and other offering expenses payable by the Company. The Offering closed on January 8, 2021 . Between January 1, 2021 and January 28, 2021, the Company issued and sold an aggregate 358,749 shares of its common stock pursuant to its sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”), resulting in gross proceeds of $ 9,658 , before deducting expenses of $ 290 . The Company terminated its sales agreement with Jones Trading in January 2021. On January 29, 2021, the Company entered into a Capital on Demand™ Sales Agreement (the “ATM Sales Agreement”) with JonesTrading and William Blair & Company, L.L.C. (“William Blair” and, collectively with JonesTrading, the “Agents”), pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 30,000 from time to time through or to the Agents (the “ATM Offering”). 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. The Company received aggregate gross proceeds from the public offering of approximately $ 11,178 , before deducting underwriting discounts and commissions and offering expenses of $ 932 . On April 2, 2019, the Company issued and sold in a private placement an aggregate of (i) 591,922 units, consisting of 591,922 shares of its common stock and associated warrants, or the common warrants, to purchase an aggregate of 591,922 shares of common stock, for a combined price of $ 40.20 per unit and (ii) 54,837 units, consisting of (a) pre-funded warrants to purchase 54,837 shares of our common stock and (b) associated common warrants to purchase 54,837 shares of common stock, for a combined price of $ 40.20 per unit. The pre-funded warrants had an exercise price of $ 0.20 per share and had no expiration. In July 2019, all outstanding pre-funded warrants were exercised for 54,837 shares of common stock. At December 31, 2021 there were 646,759 common warrants outstanding with an exercise price of $ 40.00 per share. F- 18 The Company has assessed the warrants for appropriate equity or liability classification and determined the warrants are freestanding instruments that do not meet the definition of a liability pursuant to ASC 480 and do not meet the definition of a derivative pursuant to ASC 815. The warrants are indexed to the Company’s common stock and meet all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, the warrants are classified as equity and accounted for as a component of additional paid-in capital at the time of issuance. As of December 31, 2022 , the Company had reserved 612,269 shares for the exercise of outstanding stock options and grant of future awards under the Company’s stock incentive plans (see Note 10). 10. Stock-Based Awards 2021 Stock Incentive Plan The Company’s 2021 Stock Incentive Plan (the “2021 Plan”) was approved by the Company’s stockholders on June 15, 2021 and became effective on June 16, 2021. Under the 2021 Plan, the Company may grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, awards of restricted stock units and other stock-based awards. The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2021 Plan; however, incentive stock options may only be granted to employees. The 2021 Plan is administered by the board of directors or, at the discretion of the board of directors, by a committee of the board. The number of shares of common stock covered by options and the date those options become exercisable, type of options to be granted, exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated. Stock options granted under the 2021 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 . The total number of shares of common stock that may be issued under the 2021 Plan was 728,685 a s of December 31, 2022, of which 315,948 s hares remained available for grant. The Company initially reserved 625,000 shares of common stock, plus the number of shares of common stock subject to outstanding awards under the Company’s 2017 Stock Incentive Plan (the “2017 Plan”), and the Company’s 2016 Stock Incentive Plan (“the 2016 Plan”) and the Company’s 2006 Stock Incentive Plan, as amended (the “2006 Plan”) that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right up to 314,006 shares. Shares that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future awards. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards. 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. 2017 Stock Incentive Plan The 2017 Plan was approved by the Company’s stockholders on June 16, 2017, and became effective on June 28, 2017. Under the 2017 Plan, the Company could grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, awards of restricted stock units and other stock-based awards. The Company’s employees, officers, directors, consultants and advisors were eligible to receive awards under the 2017 Plan; however, incentive stock options could only be granted to employees. The 2017 Plan is administered by the board of directors or, at the discretion of the board of directors, by a committee of the board. 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 F- 19 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. As of the effective date of the 2021 Plan, the board of directors determined to grant no further awards under the 2017 Plan. Shares that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future awards under the 2021 Plan. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards under the 2021 Plan. 2017 Employee Stock Purchase Plan On June 16, 2017, the Company’s stockholders approved the 2017 Employee Stock Purchase Plan (the “2017 ESPP”), which became effective on June 28, 2017. A total of 375 shares of common stock were initially reserved for issuance under this plan. Under the 2017 ESPP, the number of shares of common stock that may be issued under the 2017 ESPP will automatically increase on each January 1, beginning with the fiscal year ending December 31, 2018 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2027, equal to the least of (i) 1,556 shares, (ii) 1 % of the outstanding shares of common stock on such date and (iii) an amount determined by the Company’s board of directors. The compensation committee of the board of directors determined that the number of shares of common stock that may be issued under the 2017 ESPP would no t be increased on January 1, 2022 or January 1, 2023. The Company has no t issued any shares under the 2017 ESPP. Stock Option Valuation The assumptions that the Company used to determine the grant-date fair value of the stock options granted to employees and directors during the year ended December 31, 2022 and 2021 were as follows, presented on a weighted average basis: Year Ended December 31, 2022 2021 Risk-free interest rate 2.50 % 0.96 % Expected term (in years) 6.1 6.2 Expected volatility 94.2 % 91.0 % Expected dividend yield 0 % 0 % F- 20 Stock Options The following table summarizes the Company’s stock option activity since January 1, 2022: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in years) Outstanding at December 31, 2021 468,799 $ 35.78 8.5 $ 4 Granted 157,789 9.27 Exercised — 0.00 Canceled — 0.00 Forfeited ( 73,653 ) 20.31 Expired ( 15,823 ) 47.25 Outstanding at December 31, 2022 537,112 $ 29.77 7.9 $ — Options exercisable at December 31, 2022 288,821 $ 40.15 7.1 $ — Options vested and expected to vest at December 31, 2022 529,549 $ 29.95 7.8 $ — Options exercisable at December 31, 2021 2,944,622 $ 2.89 6.9 $ 4 Options vested and expected to vest at December 31, 2021 9,164,726 $ 1.80 8.4 $ 4 The weighted average grant-date fair value of stock options granted during the year ended December 31, 2022 and 2021 was $ 7.32 and $ 19.40 , respectively. The aggregate fair value of stock options that vested during the year ended December 31, 2022 and 2021 was $ 2,808 and $ 1,106 , respectively. 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, 2022 and 2021 was $ 0 and $ 68 , respectively. Restricted Stock Units The following table summarizes the Company’s restricted stock unit activity since December 31, 2021: Weighted-Average Grant Date Units per Unit Outstanding, non-vested at December 31, 2021 — $ — Issued 12,500 7.80 Vested ( 12,500 ) 7.80 Canceled/forfeited — — Outstanding, non-vested at December 31, 2022 — — F- 21 Stock-Based Compensation The Company recorded stock-based compensation expense related to stock options and restricted stock units in the following expense categories of its statements of operations and comprehensive loss: Year Ended December 31, 2022 2021 Research and development expenses $ 600 $ 531 General and administrative expenses 1,483 1,729 $ 2,083 $ 2,260 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. 11. Net Loss per Share Basic and diluted net loss per share attributable to common stockholders was calculated as follows : Year Ended December 31, 2022 2021 Numerator: Net loss $ ( 27,329 ) $ ( 26,164 ) Denominator: Weighted average common shares outstanding—basic and diluted 4,539,318 4,440,338 Net loss per share attributable to common stockholders—basic and diluted $ ( 6.02 ) $ ( 5.89 ) F- 22 The Company’s potential dilutive securities, which include stock options as of December 31, 2022 and 2021 , have been excluded from the computation of diluted net loss per share attributable to common stockholders whenever the effect of including them would be to reduce the net loss per share. In periods where there is a net loss, the weighted average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The following potential shares of common stock, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: Year Ended December 31, 2022 2021 Warrants to purchase common stock 646,759 646,759 Stock options to purchase common stock 537,112 468,799 Total 1,183,871 1,115,558 12. Commitments and Contingencies Operating Leases 285 Summer Street 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, 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 . The Company classified this lease as an operating lease and recorded a right-of-use asset of $ 228 and lease liability of $ 228 on the effective date. The Company recognizes rent expense on a straight-line basis throughout the remaining term of the lease. 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: Twelve Months Ended December 31, 2022 Twelve Months Ended December 31, 2021 Lease cost (1) Operating lease cost $ 125 $ 93 Total lease cost $ 125 $ 93 Other Information Cash paid for amounts included in the measurement of lease liabilities $ 143 $ 82 Weighted average remaining lease term (in years) 0.3 1.3 Weighted average discount rate 12 % 12 % (1) Short-term lease costs and variable lease costs incurred by the Company for the twelve months ended December 31, 2022 and 2021 were not material. F- 23 As of December 31, 2022, future minimum commitments under ASC 842 under the Company’s operating leases were as follows: 2022 2023 35 2024 and thereafter - Total lease payments 35 Less: imputed interest ( 2 ) Total operating lease liabilities $ 33 Intellectual Property Licenses Harvard and Dana-Farber Agreement In August 2006, the Company entered into an exclusive license agreement with President and Fellows of Harvard College (“Harvard”) and Dana-Farber Cancer Institute (“DFCI”). The agreement granted the Company an exclusive worldwide license, with the right to sublicense, under specified patents and patent applications to develop, obtain regulatory approval for and commercialize specified product candidates based on cell-permeating peptides. Under the agreement, the Company is obligated to use commercially reasonable efforts to develop and commercialize one or more licensed products and to achieve specified milestone events by specified dates. In connection with entering into the agreement, the Company paid an upfront license fee and issued to Harvard and DFCI shares of its common stock. In February 2010, the agreement was amended and restated (the “Harvard/DFCI agreement”) under which additional patent rights were added to the scope of the license agreement and the annual license maintenance fees were increased. Under the Harvard/DFCI agreement, the Company is obligated to make aggregate milestones payments of up to $ 7,700 per licensed therapeutic product upon the Company’s achievement of specified clinical, regulatory and sales milestones with respect to such product and up to $ 700 per licensed diagnostic product upon the Company’s achievement of specified regulatory and sales milestones with respect to such product. In addition, the Company is obligated to pay royalties of low single-digit percentages on annual net sales of licensed products sold by the Company, its affiliates or its sublicensees. The royalties are payable on a product-by-product and country-by-country basis and may be reduced in specified circumstances. In addition, the agreement obligates the Company to pay a percentage, up to the mid-twenties, of fees received by the Company in connection with its sublicense of the licensed products. In accordance with the terms of the agreement, the Company’s sublicense payment obligations may be subject to specified reductions. The Harvard/DFCI agreement requires the Company to pay annual license maintenance fees of $ 110 each year. Any payments made in connection with the annual license maintenance fees will be credited against any royalties due. 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. During the years ended December 31, 2022 and 2021 , no milestones were achieved and no liabilities for milestone payments were recorded in the Company’s financial statements. From 2010 through December 31, 2022 and December 31, 2021 , the Company had made non-refundable cash payments, consisting of license and maintenance fees, milestone payments and sublicense fees, totaling $ 5,118 and $ 5,008 , respectively. As of December 31, 2022 , the Company had not developed a commercial product using the licensed technologies and no royalties under the agreement had been paid or were due. Under the Harvard/DFCI agreement, the Company is responsible for all patent expenses related to the prosecution and maintenance of the licensed patents and applications in-licensed under the agreement as well as cost reimbursement of amounts incurred for all documented patent-related expenses. The agreement will expire on a product-by-product and country-by-country basis upon the last to expire of any valid patent claim pertaining to licensed products covered under the agreement. F- 24 Umicore Agreement In December 2006, the Company entered into a license agreement with Materia, Inc. (“Materia”), under which it was granted a non-exclusive worldwide license, with the right to sublicense, under specified patent and patent applications to utilize Materia’s catalysts to develop, obtain regulatory approval for and commercialize specified peptides owned or controlled by Materia and the right to manufacture specified compositions owned or controlled by Materia. In February 2017, Materia assigned the license agreement (the “Umicore agreement”) to Umicore Precious Metals Chemistry USA, LLC (“Umicore”), and Umicore agreed to continue to supply the Company under the agreement. Under the Umicore agreement, the Company is obligated to make aggregate milestone payments to Umicore of up to $ 6,400 upon the Company’s achievement of specified clinical, regulatory and sales milestones with respect to each licensed product. In addition, the Company is obligated to pay tiered royalties ranging in the low single-digit percentages on annual net sales of licensed products sold by the Company or its sublicensees. The royalties are payable on a product-by-product and country-by-country basis, and may be reduced in specified circumstances. The Umicore agreement requires the Company to pay annual license fees of $ 50 . The Company incurred license fees of $ 50 during each of the years ended December 31, 2022 and 2021 . The Company did no t make any milestone payments during the years ended December 31, 2022 and 2021. During the year ended December 31, 2022 , no milestones were achieved and no liabilities for additional milestone payments were recorded in the Company’s financial statements. The agreement expires upon the expiration of the Company’s obligation to pay royalties in each territory covered under the agreement. Indemnification Agreements In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it had not accrued any liabilities related to such obligations in its financial statements as of December 31, 2022 or December 31, 2021 . 13. Income Taxes There is no provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. The reported amount of income tax expense for the years differs from the amount that would result from applying domestic federal statutory tax rates to pretax losses primarily because of changes in valuation allowance. F- 25 A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows: Year Ended December 31, 2022 2021 Federal statutory income tax rate ( 21.0 )% ( 21.0 )% State taxes, net of federal benefit ( 5.4 ) ( 6.4 ) Research and development and orphan drug tax credits ( 2.9 ) ( 2.7 ) Other permanent items 0.9 0.5 Change in deferred tax asset valuation allowance 28.4 29.6 Effective income tax rate — % — % Net deferred tax assets as of December 31, 2022 and 2021 consisted of the following: December 31, 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 64,959 $ 61,934 Research and development and orphan drug tax credit carryforwards 6,606 5,725 Capitalized research and development expenses 4,380 52 Accrued expenses and reserves 61 290 Depreciation and amortization — 445 Lease Liability 9 44 Stock compensation 1,442 1,231 Total deferred tax assets 77,457 69,721 Valuation allowance ( 77,441 ) ( 69,680 ) Net deferred tax assets $ 16 $ 41 Deferred Tax Liabilities: Depreciation and amortization $ ( 5 ) Right of Use Asset $ ( 11 ) $ ( 41 ) Total Deferred Tax Liabilities $ ( 16 ) $ ( 41 ) Net Deferred Tax Asset (Liability) $ — $ — Since inception in 2001, the Company has not recorded any U.S. federal or state income tax benefits for the net losses the Company has incurred in any year or for its earned research and development tax credits, due to its uncertainty of realizing a benefit from those items. As of December 31, 2022, the Company had net operating loss carryforwards for federal and state purposes of $ 239,638 and $ 231,570 , respectively. $ 129,596 of the U.S. federal tax operating loss carryforwards will begin to expire in 2029 . Approximately $ 110,042 of the U.S. federal tax operating losses can be carried forward indefinitely. The state tax operating loss carryforwards expire beginning in 2030 . 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 . 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 and similar state statutes, results from F- 26 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 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. Further, until a study is completed and any limitation is known, no amounts are being presented as an uncertain tax position. F- 27 The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s cumulative net losses and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2022 and 2021. Management reevaluates the positive and negative evidence at each reporting period. The increase in the valuation allowance for deferred tax assets during the years ended December 31, 2022 and 2021 related primarily to the increase in net operating loss carryforwards. Changes in the valuation allowance were as follows: Year Ended December 31, 2022 2021 Valuation allowance at beginning of year $ ( 69,680 ) $ ( 61,932 ) Increases recorded to income tax provision ( 7,761 ) ( 7,748 ) Valuation allowance at end of year $ ( 77,441 ) $ ( 69,680 ) The Company has no t recorded any amounts for unrecognized tax benefits as of December 31, 2022 or 2021. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from 2019 to the present. Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in future periods. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. As of December 31, 2022 and 2021 , the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations and comprehensive loss . 14. 401(k) Plan The Company has a 401(k) plan available for participating employees who meet certain eligibility requirements. Eligible employees may defer a portion of their salary as defined by the plan. The Company provides a safe harbor match with a maximum amount of 4.0 % of the participant’s compensation, and vests 100 % at time of match. The Company accrued approximately $ 105.0 for the estimated safe harbor matching contribution for the year ended December 31, 2022. 15. 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 F- 28 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. F- 29