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Item 9A. Controls and Procedures

2025-04-07 compared with 2024-04-15 · 463 added, 431 removed, 687 unchanged (57% of the section changed)

1 unchanged sentence

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.

The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under 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.

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 principal 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 our principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2023, because of the identified material weaknesses in our internal control over financial reporting described below.

Our management, with the participation of our Chief Executive Officer and our interim 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).

Based on that evaluation, our Chief Executive Officer and our interim Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2024, because of the identified material weaknesses in our internal control over financial reporting described below.

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, 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:

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;

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Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2023 as a result of the material weakness discussed below.

Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2024 as a result of the material weaknesses discussed below.

Material Weaknesses

We identified material weaknesses in our internal control over financial reporting.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

The material weaknesses primarily related to the accounting for the business combination with Lung Therapeutics, Inc., specifically the (i) lack of sufficient accounting and supervisory personnel to maintain appropriate segregation of duties relating to user access of the financial accounting system and who have the appropriate level of technical accounting experience and training, (ii) lack of evidence over reviews of account reconciliations and supporting schedules, and (iii) lack of adequate procedures and controls to ensure that accurate financial statements could have been prepared and reviewed on a timely basis for annual reporting purposes.

In the year ended December 31, 2023, management identified material weaknesses related to the accounting for our acquisition of Lung, including a lack of

sufficient precision in the performance of reviews supporting the purchase price allocation accounting, and a lack of timely oversight over third-party specialists and the reports they produced to support the accounting for the acquisition.

We are implementing procedures to remediate these material weaknesses, including the hiring of a full-time additional employee in our accounting department, integration into one accounting system, third party accounting specialists and a more streamlined process in order to prepare and review financial information, however, our control environment needs improvement, and as a result we may be exposed to errors.

Management identified material weaknesses related to the (i) lack of sufficient accounting and supervisory personnel to maintain appropriate segregation of duties relating to user access of the financial accounting system and who have the appropriate level of technical accounting experience and training, (ii) lack of evidence over reviews of account reconciliations and supporting schedules, and (iii) lack of adequate procedures and controls to ensure that accurate financial statements could have been prepared and reviewed on a timely basis for annual reporting purposes.

In the year ended December 31, 2023, management identified material weaknesses related to the accounting for the Lung Acquisition, including a lack of sufficient precision in the performance of reviews supporting the purchase price

allocation accounting, and a lack of timely oversight over third-party specialists and the reports they produced to support the accounting for the Lung Acquisition.

Management’s Plan to Remediate the Material Weaknesses

We have implemented and are continuing to implement procedures to remediate these material weaknesses, including the hiring of a Controller with the requisite supervisory background and knowledge in financial reporting, integration into one accounting system, engaging third party accounting specialists and building a more streamlined process in order to prepare and review financial information, however, our control environment needs improvement, and as a result we may be exposed to errors.

Our remediation plan also includes the hiring of additional accounting employees and/or consultants with the specific technical accounting experience necessary to assist with complex, non-routine transactions and to support the timely completion of financial close procedures, the implementation of robust processes, and to assist with the preparation of financial statements and our compliance with SEC reporting obligations.

Additionally, we intend to develop and implement consistent accounting policies, internal control procedures and provide additional training to our accounting and financial reporting personnel.

While we are working to remediate such weakness as quickly and efficiently as possible, we cannot at this time, provide an estimate of the timeframe we expect in connection with implementing our plan to remediate the material weaknesses.

Management has engaged a third-party to assist in evaluating and documenting the design and operating effectiveness of our internal control over financial reporting, and their work is ongoing.

With the help of third-party consultants, we have nearly completed the integration of the acquired systems from the Lung Acquisition into our financial and accounting systems.

Additionally, we intend to develop and implement consistent accounting policies and internal control procedures and provide additional training to our accounting and financial reporting personnel.

The below are actions that we have taken to date to remediate the above-mentioned material weaknesses:

• Enhanced the execution of our risk assessment activities by evaluating whether the design of our internal controls appropriately addresses changes in the business (including changes to people, processes and systems) that could impact our system of internal controls.

• Substantially completed the integration of the acquired systems from the Lung Acquisition into our financial and accounting systems to allow for systematic segregation of duties, and to enhance the accurate and timely preparation and review of financial statements and supporting schedules.

• Engaged a third-party to assist in assessing the design and implementation of controls and develop remediation plans for identified control gaps related to our timely preparation and review of account reconciliations, financial statements and supporting schedules.

• Reported regularly to the audit committee on the progress and results of the remediation plan, including the identification, status and resolution of internal control deficiencies.

In addition to implementing and executing the aforementioned activities, the following activities are expected to be completed in fiscal year 2025:

• Continue to reassess staffing and add additional resources, as required, with the requisite technical accounting experience and training, to further allow for segregation of duties and to support our system of internal control.

• Implement remediation plans for identified control design and implementation gaps.

• Define user roles within our ERP system to ensure proper segregation of duties within our accounting systems.

• Perform testing of operating effectiveness of identified controls over financial reporting including IT General Controls.

• As needed, we will also supplement our internal resources with additional third-party resources to enhance our corporate oversight and monitoring over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability.

The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above and the controls operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

Management believes that the remediation measures described above will be implemented in a manner such that the controls can be tested, and the

identified material weaknesses can be determined to be remediated, however, no assurance can be made that such remediation will occur or that additional material weaknesses will not be identified.

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, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Except for the above noted and previously reported material weaknesses and the related ongoing remediation activities described above, 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 year ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information

Rule 10b5-1 Trading Plans

During the three months ended December 31, 2023, none of the Company’s directors or executive officers adopted , modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).

During the fourth quarter of 2024, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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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 — Governance” section of our website, www.aileronrx.com.

We have posted the text of our Code of Business Conduct and Ethics under the “Investors & Media — Governance” section of our website, www.reintx.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.

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Certificate of Amendment of Restated Certificate of Incorporation of the Registrant, dated as of February, 29, 2024

Certificate of Amendment of Restated Certificate of Incorporation of the Registrant, dated as of January 10, 2025

Amended and Restated By-laws of the Registrant

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Form of Director and Officer Indemnification Agreement

License Agreement, dated as of December 31, 2006, by and between the Registrant and Materia, Inc.

(now Umicore Precious Metals Chemistry USA, LLC)

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.

Amended and Restated Employment Agreement, dated as of September 6, 2018, between the Registrant and Manuel C.

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

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

Allen Annis, Ph.D.

Severance Agreement, dated as of November 5, 2018, between the Registrant and D.

Allen Annis, Ph.D.

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

Registration Rights Agreement, dated March 28, 2019, by and among the Registrant and the persons party thereto

Form of Warrant to Purchase Common Stock

Purchase Agreement, dated as of September 21, 2020, by and between the Company and Lincoln Park Capital Fund, LLC

Registration Rights Agreement, dated as of September 21, 2020, by and between the Company and Lincoln Park Capital Fund, LLC

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.

Sublease Agreement, dated March 26, 2021, by and among the Company, Vittoria Industries North America, Inc.

and Waterfront Equity Partners, LLC

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

Separation and Release of Claims Agreement, dated as of April 24, 2023, between the Registrant and D.

Allen Annis, Ph.D.

Equity Distribution Agreement, dated July 26, 2024, by and between Aileron Therapeutics, Inc.

and Citizens JMP Securities, LLC

Consulting Agreement, dated as of April 15, 2023, between the Registrant and D.

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Lung Therapeutics, Inc.2013 Long-Term Incentive Plan, as amended

Letter from PricewaterhouseCoopers LLP regarding change in certifying accountant

Subsidiaries of Aileron Therapeutics, Inc.

Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.

Aileron Insider Trading Policy

Subsidiaries of Rein Therapeutics, Inc.

Consent of Marcum LLP, independent registered public accounting firm

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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.

Rein Therapeutics, Inc.

April 7, 2025

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Each person whose signature appears below constitutes and appoints Brian Windsor, Ph.D.

and Charles T.

Garner, each or any of them, such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for such person and in such person's name, place and stead, in any and all capacities, to sign any and all amendments to this report on Form 10-K, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as such person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

and Timothy M.

Cunningham, each or any of them, such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for such person and in such person's name, place and stead, in any and all capacities, to sign any and all amendments to this report on Form 10-K, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as such person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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.

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Brian Windsor, Ph.D.

/s/ Charles T.

Senior Vice President, Finance

/s/ Timothy M.

Interim Chief Financial Officer

(principal financial officer and principal accounting officer)

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Report of Independent Registered Public Accounting Firm (PCAOB ID 688 )

Consolidated Balance Sheets as of December 31, 2024 and 2023

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Notes to Consolidated Financial Statements

Report of Indepe ndent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Aileron Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the balance sheet of Aileron Therapeutics, Inc.

(the “Company”) as of December 31, 2022, and the related statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for the year 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 the results of its operations and its cash flows for the year 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 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 audit.

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 audit of these financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit 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 audit 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 audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

March 20, 2023

We served as the Company’s auditor from 2009 to 2023

Report of Inde pendent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

Aileron Therapeutics, Inc.

Rein Therapeutics Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Aileron Therapeutics, Inc.

(the “Company”) as of December 31, 2023, the related consolidated statements of operations and comprehensive loss, changes in convertible preferred stock and stockholders’ equity and cash flows for the year ended December 31, 2023, and 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, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Rein Therapeutics Inc.

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in convertible preferred stock and stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, based on our audits, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America .

Explanatory Paragraph – Going Concern

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

As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

As more fully described in Note 1, the Company has incurred significant losses and expects to continue to incur operating losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

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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 audit.

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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audits 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 audit 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.

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.

Such procedures included examining, on a test basis, evidence regarding the amounts

and disclosures in the financial statements.

Our audit 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 audit provides a reasonable basis for our 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

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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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combination

Goodwill and Indefinite-Lived Intangible Assets Impairment Assessment

Critical Audit Matter Description

As described in Note 3 to the financial statements, the Company acquired Lung Therapeutics, Inc.

on October 31, 2023.

This acquisition was accounted for as a business combination.

We identified the evaluation of the acquisition-date fair value of the intangible assets acquired as a critical audit matter.

The principal consideration for our determination that the evaluation of the acquisition-date fair values of the intangible assets acquired was a critical audit matter is the high degree of subjective auditor judgment associated with evaluating management’s determination of the fair values of the acquired intangible assets, which is primarily due to the complexity of the valuation models used and the sensitivity of the underlying significant assumptions.

The key assumptions used within the valuation models included prospective financial information such as future revenue growth and an applied discount rate.

The calculated fair values are sensitive to changes in these key assumptions.

As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated balances of Goodwill and In-process Research and Development (“IPR&D”) indefinite-lived intangible assets were $6.3 million and $42.2 million, respectively, as of December 31, 2024.

The Company reviews goodwill for impairment at least annually or more frequently if events or circumstances indicate the carrying value at the reporting unit level might exceed its fair value.

The IPR&D indefinite-lived intangibles are tested annually for impairment, or more frequently if events or circumstances indicate it is more likely than not the fair value is less than their carrying value.

The Company estimated the fair value of its reporting unit using an income approach.

The Company estimated the fair value of certain IPR&D assets using a multi period excess earnings model.

The Company performed impairment analyses for IPR&D and Goodwill, which resulted in an impairment charge of $37 million relating to the IPR&D and no impairment relating to Goodwill.

The principal consideration, for our determination that the evaluation of the fair values of the indefinite-lived intangible assets and the Company’s reporting unit, as a critical audit matter is the high degree of subjective auditor judgment associated with evaluating management’s determination of the fair values, which is primarily due to the complexity of the valuation models used and the sensitivity of the underlying significant assumptions.

The key assumptions used in the determination of the fair value of the reporting unit include estimates of future cash flows and the discount rate applicable to those future cash flow periods.

The key assumptions used in the determination of the fair value of certain IPR&D assets include estimates of future cash flows, the probability of success in various phases of its development programs, the discount rate applicable to those future cash flow periods, the tax rate and the timing of regulatory approval.

Changes to these key assumptions could have a significant impact on the measurement of the fair value of the reporting unit and certain IPR&D.

Auditing management’s valuation methods and these assumptions involve especially challenging and subjective auditor judgment due to the nature and extent of auditor effort required to address these matters, including the specialized knowledge and skill needed.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the evaluation of acquisition-date fair values of intangible assets acquired included the following, among others:

• We evaluated the reasonableness of the purchase price allocation analysis from management and the third-party specialist engaged by management.

Our audit procedures related to the valuation of the fair values of goodwill and indefinite-lived intangible assets included the following, among others:

We evaluated the reasonableness of the valuation analysis from management and the third-party specialist engaged by management.

We assessed the qualifications and competence of management and the third-party specialist.

• We evaluated the methodologies used to determine the fair values of the intangible assets.

• We tested the assumptions used within the discounted cash flow models to estimate the fair values of the intangible assets, which included key assumptions such as the future revenue growth and the applied discount rate.

• We assessed the reasonableness of management’s forecast by inquiring with management to understand how the forecast was developed and comparing the projections to external sources, including industry trends and peer companies’ historical data.

• We involved our internal valuation specialist who assisted in the evaluation and testing performed on the reasonableness of significant assumptions to the models, including the applied discount rate.

We evaluated the methodologies used to determine the fair values of the indefinite-lived intangible assets and goodwill.

We tested the assumptions used to estimate the fair values, which included key assumptions such as the estimates of future cash flows, the probability of success in various phases of its development programs, the discount rate applicable to those future cash flow periods, the tax rate, and the timing of regulatory approval.

We assessed the reasonableness of management’s forecast of estimated future cash flows by inquiring with management to understand how the forecast was developed and comparing the projections to external sources including industry trends and data and peer companies’ historical data.

We involved our internal valuation specialist who assisted in (i) evaluating the reasonableness of valuation methods, (ii) testing the mathematical accuracy of the Company’s calculations, (iii) evaluating the reasonableness of the implied control premium;

and (iv) evaluating the reasonableness of the significant assumptions to the models, including the discount rate applied to future cash flows.

/s/ Marcum llp

We have served as the Company’s auditor since 2024.

New York, New York

April 7, 2025

AILERON THERAPEUTICS, INC.

R EIN THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

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Total current assets

Operating lease, right-of-use asset

Property and equipment, net

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Deferred tax liability

Other long-term liability

Total liabilities

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Convertible preferred stock, $ 0.001 par value, 5,000,000 shares authorized at December 31, 2024 and at December 31, 2023;

24,610 shares issued and outstanding at December 31, 2023 and no shares issued and outstanding at December 31, 2022

24,610 shares issued and 12,232 shares outstanding at December 31, 2024 and 24,610 shares issued and outstanding at December 31, 2023

Stockholders’ equity:

Common stock, $ 0.001 par value;

45,000,000 shares authorized at December 31, 2023 and December 31, 2022;

100,000,000 shares authorized at December 31, 2024 and 45,000,000 at December 31, 2023;

21,666,012 shares and 4,885,512 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively

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Accumulated deficit

Total stockholders’ equity

Total liabilities, convertible preferred stock and stockholders’ equity

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

AILERON THERAPEUTICS, INC.

REIN THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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General and administrative

Impairment loss on intangible assets

Restructuring and other costs

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Loss from operations

Other income (expense), net

Other income, net

Income tax benefit

Net loss per share—basic and diluted

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Other comprehensive gain (loss):

Unrealized gain on short-term investments, net of tax of $ 0

Unrealized gain on investments, net of tax of $ 0

Foreign currency translation adjustments

Total other comprehensive loss

Total other comprehensive gain (loss)

Total comprehensive loss

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

AILERON THERAPEUTICS, INC.

REIN THERAPEUTICS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS ’ EQUITY

(In thousands, except share data)

Convertible Series X Preferred Stock

Series X Non-Voting Convertible Preferred Stock

Total Convertible

Comprehensive

Convertible Preferred Stock and Stockholders'

Balances at December 31, 2021

RSUs vested, net of shares repurchased for tax

Stock-based compensation expense

Unrealized loss on investments

Preferred Stock and Stockholders’

Balances at December 31, 2022

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Balances at December 31, 2023

Issuance of common stock in connection with conversion of Series X non-voting convertible preferred stock

Issuance of common stock

Issuance of warrants

Issuance cost in connection with the Offering

Stock-based compensation expense

Exercises of stock options

Unrealized gain on investments

Balance at December 31, 2024

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

AILERON THERAPEUTICS, INC.

REIN THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Gain on sale of property and equipment

Impairment loss on intangible assets

Loss on disposition of property and equipment

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Accrued expenses and other current liabilities

Other long-term liabilities

Deferred tax liabilities

Net cash used in operating activities

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Proceeds from sale of property and equipment

Purchases of investments

Proceeds from sales or maturities of investments

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Cash flows from financing activities:

Proceeds from the Financing

Proceeds from issuance of common stock, net of offering costs

Proceeds from issuance of common stock in connection with stock option exercises

Proceeds from issuance of warrants, net of offering costs

Proceeds from the PIPE Financing

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of year

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Supplemental disclosure of non-cash investing and financing activities:

Conversion of Series X non-voting convertible preferred stock into common stock shares

Unrealized gain on short-term investments

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

A ILERON THERAPEUTICS, INC.

REIN THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL ST ATEMENTS

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Nature of the Business

On January 10, 2025, Aileron Therapeutics, Inc., or Aileron, amended its Restated Certificate of Incorporation, as amended, to effect a change of the Company’s name from “Aileron Therapeutics, Inc.” to “Rein Therapeutics, Inc.” (“Rein” or the “Company”).

The name change became effective at 4:00 p.m.

Eastern Time on January 10, 2025.

The Board of Directors of the Company, or the Board, approved the name change pursuant to Section 242 of the General Corporation Law of the State of Delaware.

The name change does not affect the rights of the Company’s stockholders, and there were no other changes to the Certificate of Incorporation.

A copy of the certificate of amendment to the Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware to affect the name change was filed with the Securities and Exchange Commission, or the SEC.

In connection with the name change, the Board also approved an amendment and restatement of the Company’s Amended and Restated Bylaws solely to reflect the name change (as amended and restated, the “Amended and Restated Bylaws”) effective as of January 10, 2025.

A copy of the Amended and Restated Bylaws was filed with the SEC.

Aileron Therapeutics, Inc.

(“Aileron” or the “Company”) was a clinical stage chemoprotection oncology company.

The Company's product candidate, ALRN-6924, was a MDM2/MDMX dual inhibitor that leverages its proprietary peptide drug technology.

In February 2023, the Company decided to terminate further development of ALRN-6924.

Refer to Note 10 for more details on the restructuring event in 2023.

On October 31, 2023, Aileron acquired Lung Therapeutics, Inc.

(“Lung Therapeutics” or "Lung") pursuant to an Agreement and Plan of Merger, dated October 31, 2023 (the “Lung Acquisition Agreement”), by and among the Company, AT Merger Sub I, Inc., a Delaware corporation and its wholly owned subsidiary, or First Merger Sub, AT Merger Sub II, LLC, a Delaware limited liability company and its wholly owned subsidiary, or Second Merger Sub, and Lung.

was a clinical stage chemoprotection oncology company.

Aileron's product candidate, ALRN-6924, was a MDM2/MDMX dual inhibitor that leverages its proprietary peptide drug technology.

In February 2023, Aileron decided to terminate further development of ALRN-6924.

On October 31, 2024, Aileron entered into an exclusive option agreement with Advancium Health Network, or Advancium, for the sale of ALRN-6924.

The Company is a clinical stage biopharmaceutical company focused on developing novel therapies for the treatment of fibrosis indications with no approved or limited effective treatments.

The Company currently has two product candidates in clinical development, LTI-03 and LTI-01, and multiple candidates in preclinical development focused on fibrosis indications.

On October 31, 2023, the Company acquired Lung Therapeutics, Inc., or Lung Therapeutics or Lung, pursuant to an Agreement and Plan of Merger, dated October 31, 2023, or the Lung Acquisition Agreement, by and among the Company, AT Merger Sub I, Inc., a Delaware corporation and its wholly owned subsidiary, or the First Merger Sub, AT Merger Sub II, LLC, a Delaware limited liability company and its wholly owned subsidiary, or the Second Merger Sub, and Lung.

Pursuant to the Lung Acquisition Agreement, First Merger Sub merged with and into Lung, pursuant to which Lung was the surviving entity and became its wholly owned subsidiary, or the First Merger.

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Following the Lung Acquisition, the Company shifted its operating disease focus to advancing a pipeline of first-in-class medicines to address significant unmet medical needs in orphan pulmonary and fibrosis indications with the potential to greatly improve patient outcomes over currently available treatments.

Following expiration of the lease on March 31, 2024, the Company expects to operate virtually for the foreseeable future.

Following expiration of the lease on March 31, 2024, Rein currently operates and expects to operate virtually for the foreseeable future.

The Company is subject to risks and uncertainties common to clinical-stage companies in the biotechnology industry, including, but not limited to the risk that the Company never achieves profitability, the need for substantial additional financing, the risk of relying on third parties, risks of clinical trial failures, dependence on key personnel, protection of proprietary technology, and compliance with government regulations.

The Company’s lead product candidate, LTI-03, is being developed for the treatment of Idiopathic Pulmonary Fibrosis (“IPF”) and has completed a healthy volunteer Phase 1a clinical trial.

LTI-03 is currently in a Phase 1b clinical trial in IPF patients.

The Company’s second product candidate, LTI-01, is in development for loculated pleural effusion (“LPE”).

The Company’s lead product candidate, LTI-03, is being developed for the treatment of Idiopathic Pulmonary Fibrosis, or IPF, and has completed a healthy volunteer Phase 1a clinical trial and has conducted a Phase 1b clinical trial in IPF patients.

The Company’s second product candidate, LTI-01, is in development for loculated pleural effusion, or LPE.

The Company has completed Phase 1b and Phase 2a clinical trials in LPE patients.

Liquidity and Going Concern

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), the Company has evaluated whether there are conditions and 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 the accompanying consolidated financial statements were issued.

In accordance with Accounting Standards Update, or ASU, No.

2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether there are conditions and 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 the accompanying consolidated 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 consolidated financial statements are issued.

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The Company’s consolidated financial statements have been prepared assuming that the Company will continue to operate as a going concern, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business.

Through December 31, 2023, the Company has financed its 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 initial public offering (“IPO”), and $ 34,910 from a collaboration agreement in 2010, and $ 18,429 in gross proceeds, less issuance costs of $ 893 , in connection with the financing following the Lung Acquisition, which included the conversion of certain convertible promissory notes in the aggregate principal amount of approximately $ 1,553 issued by Lung to Bios Partners prior to the closing of the Lung Acquisition at a 10 % discount to the per share price of the Series X non-voting convertible preferred stock (“Series X Preferred Stock”), or the Financing, and collectively with the Lung Acquisition, the Transactions.

After the Lung Acquisition, management believes that, based on the Company’s current operating plan, the Company’s cash and cash equivalents of $ 17,313 as of December 31, 2023, will enable Aileron to fund its operating expenses and capital expenditure requirements for at least six months following the date of this Annual Report on Form 10-K.

Since its inception, the Company has not generated any revenue from product sales and have never generated an operating profit.

Through December 31, 2024 , the Company has financed its 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 initial public offering, or IPO, $ 34,910 from a collaboration agreement in 2010, $ 17,536 in net proceeds in connection with a private placement following the Lung Acquisition in 2023, and $ 17,675 in net proceeds in connection with an underwritten offering of the Company's common stock and accompanying warrants to purchase common stock in May 2024.

As of December 31, 2024, the Company had $ 12,865 in cash and cash equivalents.

In May 2024, the Company completed an underwritten follow-on public offering, or the Offering, pursuant to which the Company issued and sold 4,273,505 shares of the Company’s common stock, par value $ 0.001 per share, or the Offering Shares, and accompanying warrants, or the Offering Warrants, to purchase 4,273,505 shares of common stock, or the Offering Warrant Shares.

All of the Offering Shares and Offering Warrants were sold by the Company.

Each Offering Share was offered and sold together with an accompanying Offering Warrant at a combined offering price of $ 4.68 , and the underwriter purchased each Offering Share with an accompanying Offering Warrant from the Company at a combined price of $ 4.35 .

Net proceeds from the Offering were $ 17,675 , after deducting underwriting discounts and commissions and offering expenses, and excluding any proceeds that may be received from exercise of the Offering Warrants.

As of December 31, 2024, none of the Offering Warrants had been exercised.

On July 26, 2024, the Company entered into an Equity Distribution Agreement with Citizens JMP Securities, LLC, or Citizens JMP, as agent and/or principal, under which the Company may offer and sell up to $ 50,000 of shares of its common stock from time to time through or to Citizens JMP.

Sales of common stock through or to Citizens JMP may be made by any method that is deemed an “at the market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Capital Market.

There have been no sales on the “at the market” offering through December 31, 2024.

Refer to Note 17 for sales on the “at the market” offering subsequent to the consolidated balance sheet date.

Management believes that, based on the Company’s current operating plan, the Company’s cash and cash equivalents of $ 12,865 as of December 31, 2024 will not be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of these consolidated financial statements, which raises substantial doubt about our ability to continue as a going concern.

Since its inception, the Company has not generated any revenue from product sales and has never generated an operating profit.

The Company has incurred significant losses on an aggregate basis.

The Company’s net losses were $ 62,883 and $ 15,732 for the years ended December 31, 2024 and 2023, respectively.

A s of December 31, 2023, the Company had an accumulated deficit of $ 288,517 .

As of December 31, 2024, the Company had an accumulated deficit of $ 351,400 .

These losses have resulted primarily from costs incurred in connection with research and development activities, licensing and patent investment and general and administrative costs associated with the Company’s operations.

In February 2023, the Company discontinued development of ALRN-6924 which substantially reduced its operating expenses.

Notwithstanding these events, management expects to continue to incur operating losses for the foreseeable future until the Company completes development and approval of its product candidates.

The Company will continue to fund its operations primarily through utilization of its current financial resources and additional raises of capital.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date those consolidated financial statements are issued.

The Company plans to address these conditions by raising funds from its current investors, potential outside investors and other funding sources.

Management expects to continue to incur operating losses for the foreseeable future.

The Company expects to finance its operations primarily through utilization of its current financial resources and through the sale of additional equity or debt financings, collaborations, licensing arrangements or other sources.

The Company plans to address these conditions by, among other things, raising additional funds through equity or debt financings, strategic collaborations, licensing arrangements or other sources.

However, there is no assurance that such funding will be available to the Company, will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives.

The Company’s funding estimates are based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than it currently expects.

If additional funds are not available, the Company could be forced to delay, reduce or eliminate its research and development programs or future commercialization efforts and its business could be materially harmed.

The Company’s future viability is dependent on its ability to raise additional capital, enter into a financing, consummate a successful acquisition, merger, business combination, or a sale of assets or other transaction.

If the Company becomes unable to continue as a going concern, it may have to liquidate its assets and the values it receives for its assets in liquidation or dissolution could be significantly lower than the values reflected in its consolidated financial statements.

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

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by ASUs of the Financial Accounting Standards Board (“FASB”).

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or U.S.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification, or ASC, and as amended by ASUs of the Financial Accounting Standards Board, or FASB.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Lung Therapeutics, LLC, Lung Therapeutics Australia Pty Ltd, and Lung Therapeutics Limited.

Lung Therapeutics Limited is currently inactive.

All intercompany balances and transactions have been eliminated in consolidation.

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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 consolidated financial statements include, but are not limited to, the accrual for research and development expenses, the value of stock-based

compensation, the purchase price allocation for the Lung Acquisition, and the valuation of warrants.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual for research and development expenses, the prepaid research and development expenses, valuation of intangibles and goodwill, the valuation of warrants, and the value of stock-based compensation.

Estimates are periodically reviewed in light of changes in circumstances, facts and experience.

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

The Company’s cash equivalents are comprised of funds held in money market accounts and are measured at fair value on a recurring basis .

Restricted Cash

As of December 31, 2023 and December 31, 2022 , restricted cash of $ 25 consisted of cash deposited in a separate restricted bank account as a security deposit for the Company’s corporate credit cards.

The Company’s cash equivalents are comprised of funds held in money market accounts and treasury bills account and are measured at fair value on a recurring basis .

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP.

ASC 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).

ASC 820, Fair Value Measurement , or ASC 820, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).

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.

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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

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 consolidated statements of operations and comprehensive loss.

The Company accounts for leases under ASC Topic 842, Leases (“ASC 842”).

The Company accounts for leases under ASC Topic 842, Leases , or ASC 842.

Under ASC 842, at inception of a contract, the Company determines whether an arrangement is or contains a lease.

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The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

If a lease does not provide information to determine an implicit interest rate, the Company uses its incremental borrowing rate in determining the present value of lease payments.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments under the lease.

If a lease does not provide information to determine an

implicit interest rate, the Company uses its incremental borrowing rate in determining the present value of lease payments.

Right-of-use, or ROU, assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments under the lease.

ROU assets also include any lease payments made prior to the commencement date and exclude lease incentives received.

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The Company has elected to apply the practical short-term expedient to leases with a lease term of 12 months or less, which does not subject the leases to capitalization.

The Company has an operating lease of office space, which has a remaining lease term of less than one 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 consolidated balance sheet.

The Company had an operating lease of office space.

The lease expired March 31, 2024 , and the Company did not renew the lease.

Following expiration of the lease, the Company is operating virtually, and expects to do so for the foreseeable future.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed.

The Company's indefinite-lived intangible assets, which consist of in-process research and development ("IPR&D"), acquired in the Lung Acquisition were recorded at fair value on their acquisition date.

The Company's indefinite-lived intangible assets, which consist of in-process research and development, or IPR&D, acquired in the Lung Acquisition were recorded at fair value on their acquisition date.

Goodwill and indefinite-lived intangible assets are not amortized but are subject to impairment testing on an annual basis as of December 31 or more frequently if events or circumstances indicate a potential impairment.

The Company accounts for goodwill and indefinite-lived intangible assets in accordance with ASC 350, Intangibles Goodwill and Other, and Accounting Standards Update, or ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):

The Company accounts for goodwill and indefinite-lived intangible assets in accordance with ASC 350, Intangibles Goodwill and Other , and ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

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If the fair value is less than the carrying amount, a goodwill impairment loss is measured and recorded.

To date, the Company has no t recorded any impairment losses on long-lived assets.

In the fourth quarter of 2024, the Company recorded an impairment loss on intangible assets of $ 37,000 .

For additional details regarding goodwill and intangible assets, refer to Note 6.

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For performance-based awards, the Company does not recognize expense until the underlying vesting conditions are deemed to be probable of occurrence.

The Company classifies share-based compensation expenses 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, either to general and administrative expenses or research and development expenses.

The Company classifies share-based compensation expenses in its consolidated 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, either to general and administrative expenses or research and development expenses.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

The Company estimates its expected stock volatility based on the historical volatility of its own traded stock price.

The Company estimates its expected stock volatility using a combination of its own historical stock price volatility and the historical volatilities of a group of peer companies in its industry with similar market characteristics.

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 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.

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The quoted market price of the Company’s common stock is used to estimate the fair value of the stock-based awards at grant date.

Restructuring and Other Costs

The Company incurred restructuring-related charges of $ 928 for the year ended December 31, 2023 relating to the Company's decision to terminate its Phase 1b breast cancer trial of ALRN-6924 and further development of ALRN-6924.

One-time termination costs were in connection with the reduction-in-workforce, including severance, benefits, and related costs.

The Company paid all restructuring-related charges during the year ended December 31, 2023.

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.

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Inflation Reduction Act of 2022

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law.

On August 16, 2022, the Inflation Reduction Act of 2022, or IR Act, was signed into federal law.

The IR Act provides for, among other things, a new U.S.

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In addition, certain exceptions apply to the excise tax.

Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

Department of the Treasury, or Treasury, has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

Any redemption or other repurchase that occurs after December 31, 2022, in connection with a business combination, extension vote or otherwise, may be subject to the excise tax.

Whether and to what extent the Company would be subject to the excise tax in connection with a business combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the business combination, extension or otherwise, (ii) the structure of a business combination, (iii) the nature and amount of any private investment in public equity ( “PIPE”) or other equity issuances in connection with a business combination (or otherwise issued not in connection with a business combination but issued within the same taxable year of a business combination) and (iv) the content of regulations and other guidance from the Treasury.

Whether and to what extent the Company would be subject to the excise tax in connection with a business combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the business combination, extension or otherwise, (ii) the structure of a business combination, (iii) the nature and amount of any private investment in public equity, or the PIPE, or other equity issuances in connection with a business combination (or otherwise issued not in connection with a business combination but issued within the same taxable year of a business combination) and (iv) the content of regulations and other guidance from the Treasury.

In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined.

The foregoing could cause a reduction in the cash available on hand to complete a business combination and in the Company’s ability to complete a business combination.

Segment Information

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 novel therapies for the treatment of orphan pulmonary and fibrosis indications with no approved or limited effective treatments .

All of the Company’s tangible assets are held in the United States.

The Company views its operations and manages its business in one operating segment operating exclusively in the United States.

Segment reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or CODM, in deciding how to allocate resources and in assessing performance.

The Company’s CODM is its Chief Executive Officer , or CEO.

The Company operates and manages its business as a single operating and reportable segment on a consolidated basis, which is consistent with how its CODM reviews financial performance and allocates resources.

Comprehensive Loss

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Diluted net loss attributable to common stockholders is computed by adjusting loss per share attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net 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 and warrants to purchase common stock are considered potential dilutive common shares.

Diluted net loss per share attributable to common stockholders is computed by dividing the net 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, Series X non-voting convertible preferred stock, outstanding options and warrants to purchase common stock are considered potentially dilutive securities.

Acquisition Accounting

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Recently Adopted Accounting Pronouncements

On January 1, 2023, the Company adopted ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, for the fiscal year beginning January 1, 2023 using the modified retrospective approach, and no cumulative effect adjustment to accumulated deficit was needed as of the adoption date.

Additionally, no prior period amounts were adjusted.

The new standard adjusts the accounting for assets held on an amortized cost basis, including short-term investments accounted for as available-for-sale, and receivables.

The standard eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses.

The allowance for credit losses is a valuation account that is deducted from the amortized

cost basis of the financial assets to present the net amount expected to be collected.

The adoption of this standard did no t have a material impact on the Company’s consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Segment Disclosures , to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

On January 1, 2023 , the Company adopted this ASU.

The Company has evaluated the impact of the new requirements and prepared the required disclosures.

Refer to Note 2 for the Company's segment reporting accounting policy and Note 15 for a summary of the segment loss, including significant segment expenses.

Accounting Pronouncements Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06—Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to clarify or improve disclosure and presentation requirements of a variety of Topics.

ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the Codification.

However, each amendment in the ASU will only become effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027.

The effective dates of ASU 2023-06 will depend, in part, on whether an entity is already subject to the SEC’s current disclosure requirements.

For such entities and those that must “file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer,” the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

For all other entities, the amendments will be effective two years after the date of such removal.

In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date , to clarify the effective date of ASU 2024-03, Income Statement—Reporting Comprehensive Income:

Disaggregation of Income Statement Expenses.

FASB clarified that all public business entities should initially adopt the disclosure requirements in the ASU 2024-03 in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.

The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07—Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, to improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses.

All public entities will be required to report segment information in accordance with the new guidance starting in annual periods beginning after December 15, 2023.

The Company plans to adopt the ASU for the fiscal year beginning January 1, 2024.

Since the Company has only one reportable segment, the Company will need to disclose the title and position of the chief operating decision maker (“CODM”) and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources, as well as disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the CODM.

In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments , to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20.

The ASU 2024-04 is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption is permitted as of the beginning of the annual reporting period for all entities that have adopted the amendments in ASU 2020-06, Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity:

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Topic 220):

Disaggregation of Income Statement Expenses , to enhance the transparency and decision usefulness of financial information presented in the income statement by requiring disaggregated information about certain income statement expense line items.

The amendments apply to all public business entities.

This ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements , that contains amendments to the Codification that remove references to various FASB Concepts Statements.

This effort facilitates Codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other minor

improvements.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted.

Early application of the amendments in this ASU is permitted for all entities, for any fiscal year or interim period for which financial statements have not yet been issued (or made available for issuance).

If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period.

The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards , to improve GAAP by adding an illustrative example that includes four fact patterns to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with Topic 718, Compensation—Stock Compensation .

For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

If an entity adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes that interim period.

The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information as well as certain other amendments to improve the effectiveness of income tax disclosures.

The amendments in this update are effective for annual periods beginning after December 15, 2024.

The Company does not expect adoption of this ASU to have a material impact on its results of operations, financial condition, and its consolidated financial statements other than adding new disclosures, which the Company is currently evaluating, as the Company has not recorded any net tax provision for the periods presented due to the losses incurred and the need for a full valuation allowance on net deferred tax assets.

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 consolidated financial statements and related disclosures upon adoption.

Improvements to Income Tax Disclosures , to enhance the transparency and decision usefulness of income tax disclosures by requiring disaggregated information about an entity’s effective tax rate reconciliation, as well as information on taxes paid.

This ASU is effective for annual periods beginning after December 15, 2024.

The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

Business Acquisition

On October 31, 2023, Aileron acquired 100 % of Lung, pursuant to the Lung Acquisition Agreement.

At the closing of the Lung Acquisition, Aileron issued to the stockholders of Lung 344,345 shares of its common stock (excluding 221 fractional shares from the total 344,566 shares pursuant to the Lung Acquisition Agreement) and 19,903 shares of its newly designated Series X Preferred Stock (excluding 238 fractional shares from the total 20,141 shares pursuant to the Lung Acquisition Agreement).

On October 31, 2023, the Company acquired 100 % of Lung, pursuant to the Lung Acquisition Agreement.

At the closing of the Lung Acquisition, the Company issued to the stockholders of Lung 344,345 shares of its common stock (excluding 221 fractional shares from the total 344,566 shares pursuant to the Lung Acquisition Agreement) and 19,903 shares of its newly designated Series X non-voting convertible preferred stock, or the Series X Preferred Stock, (excluding 238 fractional shares from the total 20,141 shares pursuant to the Lung Acquisition Agreement).

Each share of Series X Preferred Stock is convertible into 1,000 shares of common stock.

The Company paid $ 290 cash in lieu of fractional shares of both common stock and Series X Preferred Stock.

In addition, Aileron assumed all Lung's stock options ( 1,780,459 ) and all warrants ( 726,437 )

exercisable for Lung common stock immediately outstanding prior to the closing of the Lung Acquisition, each subject to adjustment pursuant to the terms of the Lung Acquisition Agreement.

Immediately following the closing of the Lung Acquisition, on October 31, 2023, Aileron entered into a Stock and Warrant Purchase Agreement (the “Purchase Agreement” or the "PIPE") with a group of accredited investors, pursuant to which Aileron issued and sold (i) an aggregate of 4,707 shares of Series X Preferred Stock, and (ii) warrants (the “Warrants”) to purchase up to an aggregate of 2,353,500 shares of Aileron common stock (the “Warrant Shares”), for an aggregate purchase price of approximately $ 18,429 , which included the conversion of certain convertible promissory notes in the aggregate principal amount of $ 1,553 issued by Lung to Bios Partners, the majority stockholder of Lung prior to the closing of the Lung Acquisition, at a 10 % discount to the per share price of the Series X Preferred Stock.

The Financing closed on November 2, 2023.

Subject to stockholder approval for the conversion rights of the Series X Preferred Stock, each share of Series X Preferred Stock is convertible into 1,000 shares of common stock.

The net proceeds from the Financing of approximately $ 17,536 are expected to be used to advance Aileron’s clinical development pipeline, business development activities, working capital and other general corporate purposes.

The Lung Acquisition was accounted for under the acquisition method of accounting under ASC 805.

In addition, the Company assumed all of Lung’s stock options ( 1,780,459 ) and all warrants ( 726,437 ) exercisable for Lung common stock immediately outstanding prior to the closing of the Lung Acquisition, each subject to adjustment pursuant to the terms of the Lung Acquisition Agreement.

Immediately following the closing of the Lung Acquisition, on October 31, 2023, the Company entered into a Stock and Warrant Purchase Agreement, or the Purchase Agreement, with a group of accredited investors, pursuant to which the Company issued and sold (i) an aggregate of 4,707 shares of Series X Preferred Stock, and (ii) warrants, or the PIPE Warrants, to purchase up to an aggregate of 2,353,500 shares of the Company’s common stock, or the PIPE Warrant Shares, for an aggregate purchase price of approximately $ 18,429 , which included the conversion of certain convertible promissory notes in the aggregate principal amount of $ 1,553 issued by Lung to Bios Partners, the majority stockholder of Lung prior to the closing of the Lung Acquisition, at a 10 % discount to the per share price of the Series X Preferred Stock (collectively, the “PIPE Financing”).

The PIPE Financing closed on November 2, 2023.

Each share of Series X Preferred Stock is convertible into 1,000 shares of common stock.

The net proceeds from the Financing of approximately $ 17,536 are expected to be used to advance Rein’s clinical development pipeline, business development activities, working capital and other general corporate purposes.

The Lung Acquisition was accounted for under the acquisition method of accounting under ASC 805, Business Combinations .

Under the acquisition method, the total purchase price of the acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on the fair values as of the date of the acquisition.

Consideration transferred is the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred by the acquirer to the former owners of the acquiree, and the equity interests issued by the acquirer to the former owners of the acquiree (except for the measurement of share-based payment awards).

to the former owners of the acquiree (except for the measurement of share-based payment awards).

The total purchase price consideration consisted of the following:

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Net assets acquired

Pro Forma Financial Information

The following pro forma financial information reflects the consolidated results of operations of the Company for the years ended December 31, 2023 and 2022, as if the Lung Acquisition had taken place on January 1, 2022.

The unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date.

Year Ended December 31,

Total net revenue

The unaudited pro forma financial information above gives effect primarily to the following:

• The exclusion of Lung Acquisition related transaction costs from the year ended December 31, 2023, and the addition of these items to the year ended December 31, 2022.

At the 2023 annual meeting of stockholders, or the 2023 Annual Meeting, the Company’s stockholders approved the issuance, in accordance with Nasdaq Listing Rule 5635(a), of shares of common stock, upon conversion of the Company’s outstanding Series X Preferred Stock.

On March 5, 2024, subject to then existing beneficial ownership limitations, 11,957 shares of Series X Preferred Stock were automatically converted into 11,957,000 shares of common stock.

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:

December 31, 2024

Cash equivalents:

Money market funds

Treasury bills

December 31, 2023

Cash equivalents:

Money market funds

Commercial paper

Treasury bills

During the years ended December 31, 2024 and 2023, there were no transfers between levels.

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Total prepaid expenses and other current assets

Property and Equipment, Net

Property and equipment, net consisted of the following:

Computer equipment and software

Furniture and fixtures

Accumulated depreciation and amortization

Depreciation expense for the years ended December 31, 2023 and 2022 w as $ 49 and $ 169 , respectively .

During the year ended December 31, 2023, the Company received payment for disposed, fully depreciated assets, resulting in a gain on sales of $ 42 .

Goodwill and Indefinite-Lived Intangible Assets

$ 6,330 of goodwill and $ 79,200 of indefinite-lived intangible assets acquired in the Lung Acquisition were recorded at fair value on the Lung Acquisition date (refer to Note 3 for more information).

The Company performed a qualitative assessment of goodwill and indefinite-lived intangible assets for potential impairment as of December 31, 2023, and concluded that there was no goodwill or intangible assets impairment as of December 31, 2023.

In the fourth quarter of 2024, the Company determined that the temporary delay of further clinical development of LTI-01 until additional funds are raised may not be a short-term measure.

The assessment of recoverability and impairment was performed at the individual indefinite-lived intangible asset level.

The Company concluded that the fair value of the LTI-01 was less than its carrying value and recognized an impairment loss for this asset of approximately $ 37,000 .

This impairment charge is classified within impairment loss on intangible assets in the consolidated statements of operations and comprehensive loss.

The fair value of intangible assets was determined using multi-period excess earning method and using Level 3 inputs, which included estimates of forecasted cash flows for each candidate.

The Company performed an impairment assessment of its goodwill, both qualitatively and quantitatively, and concluded that the fair value of goodwill exceeds its carrying value and there were no qualitative factors that would have triggered impairment, therefore no goodwill impairment was recognized as of December 31, 2024.

The fair value of reporting unit was determined using the income approach with a reconciliation to market capitalization.

Goodwill and indefinite-lived intangible assets consisted of the following:

Indefinite-lived intangible assets

Other assets consisted of the following:

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Total other non-current assets

The non-current prepaid research and development asset was fully expensed during the year ended December 31, 2024 due to the temporary delay of clinical development of LTI-01.

Accrued Expenses and Other Current Liabilities

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Total accrued expenses and other current liabilities

Restructuring and Other Costs

On February 16, 2023, the Board of Directors of the Company determined to reduce the Company’s remaining workforce from nine to three full-time employees.

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

As a result of the above restructuring initiatives, the Company incurred restructuring-related charges of $ 928 for the year ended December 31, 2023.

Restructuring-related charges were comprised of one-time termination costs in connection with the reduction-in-workforce, including severance, benefits, and related costs.

The Company paid all restructuring-related charges during the year ended December 31, 2023.

Preferred Stock

As of December 31, 2023, the Company had 5,000,000 shares of preferred stock, par value $ 0.001 per share, authorized, out of which 24,610 shares of Series X Preferred Stock were issued and outstanding.

As of December 31, 2022, the Company had 5,000,000 shares of preferred stock, par value $ 0.001 per share, authorized, and no shares of preferred stock issued or outstanding.

On October 31, 2023 Aileron acquired Lung.

Under the terms of the Lung Acquisition Agreement, at the closing of the Lung Acquisition, Aileron issued to the stockholders of Lung 344,345 shares of the common stock of Aileron, par value $ 0.001 per share, and 19,903 shares of Series X Preferred Stock.

Immediately following the closing of the Lung Acquisition, on October 31, 2023, Aileron entered into the Purchase Agreement with a group of accredited investors, pursuant to which Aileron issued and sold 4,707 shares of Series X Preferred Stock and Warrants to purchase up to an aggregate of 2,353,500 shares of Aileron common stock.

Refer to Note 3 for more details on the Financing in connection with the Purchase Agreement.

Since the Series X Preferred Stock was sold as a unit with the Warrants according to the Purchase Agreement, the proceeds received were allocated to each instrument on a relative fair value basis.

Total gross proceeds of $ 18,429 reduced by $ 893 of the issuance costs were allocated as follows:

$ 16,795 to the Series X Preferred Stock and $ 741 to the Warrants.

The Series X Preferred Stock and the Warrants issued in the Financing were recorded at par value of $ 0.001 .

The Company evaluated the Series X Preferred Stock for liability classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity ("ASC 480"), and determined that equity treatment was appropriate because the Series X Preferred Stock did not meet the definition of the liability instruments.

The Company is authorized to issue 5,000,000 shares of preferred stock, par value $ 0.001 per share.

As of December 31, 2024, the Company had issued 24,610 shares of Series X Preferred Stock, of which 12,232 shares of Series X Preferred Stock remained outstanding.

As of December 31, 2023, 24,610 shares of Series X Preferred Stock were issued and outstanding.

On October 31, 2023, under the terms of the Lung Acquisition Agreement, at the closing of the Lung Acquisition, Aileron issued to the stockholders of Lung 344,345 shares of common stock, and 19,903 shares of Series X Preferred Stock.

Immediately following the closing of the Lung Acquisition, on October 31, 2023, Aileron entered into the Purchase Agreement with a group of accredited investors, pursuant to which Aileron issued and sold an aggregate of 4,707 shares of Series X Preferred Stock and PIPE Warrants to purchase up to an aggregate of 2,353,500 shares of Aileron common stock.

Refer to Note 3 for more details on the PIPE Financing in connection with the Purchase Agreement.

Since the Series X Preferred Stock was sold as a unit with the PIPE Warrants according to the Purchase Agreement, the proceeds received were allocated to each instrument on a relative fair value basis.

Total gross proceeds of $ 18,429 , less $ 893 of issuance costs were allocated as follows:

$ 16,795 to the Series X Preferred Stock and $ 741 to the PIPE Warrants.

The Series X Preferred Stock and the PIPE Warrants issued in the PIPE Financing were recorded at par value of $ 0.001 .

At the 2023 Annual Meeting, the Company’s stockholders approved the issuance, in accordance with Nasdaq Listing Rule 5635(a), of shares of common stock, upon conversion of the Company’s outstanding Series X Preferred Stock.

On March 5, 2024, based upon then existing beneficial ownership limitations, 11,957 shares of Series X Preferred Stock were automatically converted into 11,957,000 shares of common stock.

On May 8, 2024, the Bios Entities (as defined below) provided notice to the Company and converted 421 shares of Series X Preferred Stock held by them into 421,000 shares of common stock.

As of December 31, 2024, 12,232 shares of Series X Preferred Stock (which are convertible into 12,232,000 shares of common stock) remained convertible at the option of the holder thereof, subject to certain beneficial ownership limitations (as described below).

The Company evaluated the Series X Preferred Stock for liability classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity , or ASC 480, and determined that equity treatment was appropriate because the Series X Preferred Stock did not meet the definition of the liability instruments.

Specifically, the Series X Preferred Stock is not mandatorily redeemable and does not embody an obligation to buy back the shares outside of the Company’s control in a manner that could require the transfer of assets.

The Company determined that the Series X Preferred Stock would be recorded as temporary equity, based on the guidance of ASC 480, given that it is contingently redeemable (see below).

Subject to stockholders’ approval, each share of Series X Preferred Stock is convertible into 1,000 shares of Common Stock.

The preferences, rights, and limitations initially applicable to the Series X Preferred Stock are set forth in the Certificate of Designation.

The Company determined that the Series X Preferred Stock would be recorded as temporary equity, based on the guidance of ASC 480, given that it is contingently redeemable.

Each share of Series X Preferred Stock is convertible into 1,000 shares of Common Stock.

The preferences, rights, and limitations initially applicable to the Series X Preferred Stock are set forth in the Certificate of Designation of Series X Non-Voting Convertible Preferred Stock, or the Certificate of Designation.

The Series X Preferred Stock has the following characteristics:

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However, as long as any shares of Series X Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series X Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series X Preferred Stock or alter or amend the Certificate of Designation, amend or repeal any provision of, or add any provision to, the Certificate of Incorporation or by-laws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of preferred stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series X Preferred Stock, (ii) issue further shares of Series X Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of Series X Preferred Stock, or (iii) enter into any agreement with respect to any of the foregoing.

Additionally, the approval of the holders of a

majority of the Series X Preferred Stock is required for certain change of control transactions, provided that this approval right will terminate upon stockholders’ approval of the conversion proposal.

Holders of Series X Preferred Stock are entitled to receive dividends on shares of Series X Preferred Stock equal, on an as-if-converted-to-common-stock basis, and in the same form as dividends actually paid on shares of the common stock.

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Upon liquidation, dissolution or winding up of the Company, the Series X preferred stockholders shall be entitled to receive an equivalent amount of distributions as would be paid on the common stock underlying the Series X Preferred Stock, determined on an as-converted basis, pari passu with any distributions to the common stock shareholders.

Subject to stockholders’ approval of the conversion proposal, the Series X Preferred Stock is convertible into common stock at a rate of 1,000 shares of common stock for every one share of Series X Preferred Stock that is converted.

The Series X Preferred Stock is convertible into common stock at a rate of 1,000 shares of common stock for every one share of Series X Preferred Stock that is converted.

The Series X Preferred Stock is subject to certain beneficial ownership limitations, including that a holder of Series X Preferred Stock is prohibited from converting shares of Series X Preferred Stock into shares of common stock if, as a result of such conversion, such holder (together with its affiliates and any other persons acting as a group together with the holder or any of its affiliates) would beneficially own more than a specified percentage (to be initially set at 19.99 % and thereafter adjusted by the holder to a number not to exceed 19.99 %) of the total number of shares of common stock issued and outstanding immediately after giving effect to such conversion.

At the 2023 Annual Meeting on February 28, 2024, the Company’s stockholders approved the issuance of shares of common stock, upon conversion of its outstanding Series X Preferred Stock.

Refer to Note 18 for more details on the 2023 Annual Meeting.

Shares of the Series X Preferred Stock are not redeemable at the election of the holder except for in the event the Company would have been unable to obtain an affirmative stockholder vote at the 2023 Annual Meeting to permit conversion, each holder of Series X Preferred Stock would have been entitled to elect, at the holder’s option, to have the shares of Series X Preferred Stock be redeemed by the Company and equal to the estimated fair value of the Series X Preferred Stock share at the time of redemption.

Due to this redemption feature, as of December 31, 2023, the Series X Preferred Stock was classified within temporary equity on the consolidated balance sheet.

Shares of the Series X Preferred Stock are not redeemable at the election of the holder.

The Series X Preferred Stock shall be perpetual unless converted.

As of December 31, 2023 and 2022, the Company was authorized to issue 45,000,000 shares of common stock, par value $ 0.001 per share.

On February 28, 2024, the Company held the 2023 Annual Meeting, at which the Company’s stockholders approved an amendment to the Company’s Restated Certificate of Incorporation, as amended, to increase the number

of authorized shares of common stock of the Company from 45,000,000 to 100,000,000 shares.

The Company filed the Certificate of Amendment to implement the increase in the number of authorized shares, which was effective upon filing, with the Secretary of State of the State of Delaware on February 28, 2024.

The additional shares of common stock authorized by the Certificate of Amendment have rights identical to the Company’s currently outstanding common stock.

As of December 31, 2024 and December 31, 2023, the Company was authorized to issue 100,000,000 and 45,000,000 shares of common stock, respectively, par value $ 0.001 per share.

As of December 31, 2024, the Company had 21,666,012 shares of common stock issued and outstanding.

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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.

As of December 31, 2023 and 2022, no dividends had been declared.

Common stockholders are entitled to receive dividends, as may be declared by the Company’s Board, if any.

As of December 31, 2024 and December 31, 2023, no dividends had been declared.

In the event of liquidation or dissolution, the holders of the common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock.

Issuance of Common Stock

As disclosed above, on October 31, 2023, the Company issued to the stockholders of Lung 344,345 shares of the common stock of Aileron, par value $ 0.001 per share, under the terms of the Lung Acquisition Agreement.

In addition, Aileron assumed (i) all Lung stock options immediately outstanding prior to the First Merger, each becoming an option for common stock subject to adjustment pursuant to the terms of the Lung Acquisition Agreement, and (ii) all warrants exercisable for Lung common stock immediately outstanding prior to the First Merger, each becoming a warrant to purchase common stock, subject to adjustment pursuant to the terms of the Lung Acquisition Agreement.

Immediately following the closing of the Lung Acquisition, the Company had 4,885,512 shares of common stock issued and outstanding.

As disclosed in the Note 3 above, immediately following the closing of the Lung Acquisition, on October 31, 2023, Aileron entered into the Purchase Agreement with a group of accredited investors, pursuant to which Aileron issued and sold 4,707 shares of Series X Preferred Stock and warrants to purchase up to an aggregate of 2,353,500 shares of Aileron common stock.

The exercise price of the Warrants is $ 4.89 per share, subject to certain price and share adjustments, including for stock splits, stock dividends, recapitalizations, subdivisions, combinations, reclassifications, noncash distributions, and cash dividends.

The Warrants will be exercisable any time after the later of May 2, 2024, the date the requisite stockholder approval is obtained, and on or prior to May 2, 2027.

Payment for Warrant shares upon exercise of the Warrants may be (i) in cash or (ii) in the event that there is no registration statement available for the resale of Warrant shares, by cashless exercise.

Under the terms of the Warrants, the Company shall not effect the exercise of any portion of any Warrant, and a holder shall not have the right to exercise any portion of any Warrant, to the extent that after giving effect to such exercise, the holder (together with its affiliates and any other persons acting as a group together with the holder or any of its affiliates), would beneficially own in excess of a percentage elected by the holder up to 19.99 % of the number of shares of common stock outstanding immediately after giving effect to such exercise, as such percentage ownership is determined in accordance with the terms of the Warrants.

Issuance of Common Stock and Warrants

On July 26, 2024, the Company entered into an Equity Distribution Agreement with Citizens JMP, as agent and/or principal, under which the Company may offer and sell up to $ 50,000 of shares of its common stock from time to time through or to Citizens JMP.

The Company did not sell any shares of common stock pursuant to the Equity Distribution Agreement during the year ended December 31, 2024.

Refer to Note 18 for sales on the “at the market” offering subsequent to the consolidated balance sheet date.

In May 2024, the Company completed the Offering pursuant to which the Company issued and sold 4,273,505 shares of the Company’s common stock and accompanying warrants to purchase 4,273,505 shares of common stock.

All of the Offering Shares and Offering Warrants were sold by the Company.

Each Offering Share was offered and sold together with an accompanying Offering Warrant at a combined offering price of $ 4.68 , and the underwriter purchased each Offering Share and accompanying Offering Warrant at a combined price of $ 4.35 .

Net proceeds from the Offering were approximately $ 17,675 , after deducting underwriting discounts and commissions and offering expenses, and excluding any proceeds that may be received from exercise of the Offering Warrants.

The Offering closed on May 3, 2024.

Each Offering Warrant has an exercise price per share of common stock equal to $ 4.68 .

Each Offering Warrant may be exercised until May 1, 2027.

Each Offering Warrant is exercisable solely by means of a cash exercise, except that an Offering Warrant is exercisable via cashless exercise if at the time of exercise, a registration statement registering the issuance of Offering Warrant Shares is not then effective or the prospectus contained therein is not available for the issuance of Offering Warrant Shares.

The Offering Warrants include certain rights upon “fundamental transactions” as described in the Offering Warrants, including the right of the holders thereof to receive from the Company or a successor entity the same type or form of consideration (and in the same proportion) that is being offered and paid to the holders of common stock in such fundamental transaction (as described in such Offering Warrants) of the unexercised portion of the applicable Warrants immediately prior to such fundamental transaction.

A holder of Offering Warrants (together with its affiliates) may not exercise any portion of an Offering Warrant to the extent that the holder would beneficially own more than 4.99 % (or, at the election of the holder, 9.99 %) of the Company’s outstanding common stock immediately after exercise.

The Company has assessed the Offering Warrants for appropriate equity or liability classification and determined the Offering 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, Derivatives and Hedging , or ASC

The Offering 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 Offering Warrants are classified as equity and accounted for as a component of additional paid-in capital at the time of issuance.

The Offering Warrants were initially recognized at their relative fair value in the amount of $ 8.0 million at the time of issuance determined using Black-Scholes option-pricing model and will not be remeasured.

The following assumptions were used to perform the Offering Warrants valuation:

Risk-free interest rate

Expected term (in years)

Expected volatility

Expected dividend yield

Exercise price

At the 2023 Annual Meeting, the Company’s stockholders also approved the issuance, in accordance with Nasdaq Listing Rule 5635(a), of shares of common stock, upon conversion of the Company’s outstanding Series X Preferred Stock.

On March 5, 2024, based upon then existing beneficial ownership limitations, 11,957 shares of Series X Preferred Stock were automatically converted into 11,957,000 shares of common stock.

On October 31, 2023, Aileron acquired Lung.

Under the terms of the Lung Acquisition Agreement, at the closing of the Lung Acquisition, Aileron issued to the stockholders of Lung 344,345 shares of common stock and 19,903 shares of Series X Preferred Stock.

Immediately following the closing of the Lung Acquisition, on October 31, 2023, the Company entered into the Purchase Agreement with a group of accredited investors, pursuant to which the Company issued and sold an aggregate of 4,707 shares of Series X Preferred Stock and PIPE Warrants to purchase up to an aggregate of 2,353,500 shares of the Company ’s common stock.

Refer to Note 3 for more details on the PIPE Financing in connection with the Purchase Agreement.

The exercise price of the PIPE Warrants is $ 4.89 per share, subject to certain price and share adjustments, including for stock splits, stock dividends, recapitalizations, subdivisions, combinations, reclassifications, noncash distributions, and cash dividends.

The PIPE Warrants are exercisable on or prior to May 2, 2027.

Payment for the PIPE Warrant Shares upon exercise of the PIPE Warrants may be (i) in cash or (ii) in the event that there is no registration statement available for the resale of the PIPE Warrant Shares, by cashless exercise.

Under the terms of the PIPE Warrants, the Company shall not effect the exercise of any portion of any PIPE Warrant, and a holder shall not have the right to exercise any portion of any PIPE Warrant, to the extent that after giving effect to such exercise, the holder (together with its affiliates and any other persons acting as a group together with the holder or any of its affiliates), would beneficially own in excess of a percentage elected by the holder up to 19.99 % of the number of shares of common stock outstanding immediately after giving effect to such exercise, as such percentage ownership is determined in accordance with the terms of the PIPE Warrants.

However, any holder may, upon written notice to the Company, increase or decrease such percentage to any other percentage not in excess of 19.99 %;

provided that any increase or decrease in such percentage will not be effective until 61 days after such notice is delivered to the Company.

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, Derivatives and Hedging (“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.

The Warrants were initially recognized at their relative fair value in the amount of $ 741 at the time of issuance determined using Black-Scholes option-pricing model and will not be remeasured.

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 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.

As of December 31, 2023, 4,885,512 shares of common stock were issued and outstanding, no shares were held in treasury, and 24,610 shares of Series X Preferred Stock were issued and outstanding.

The Company has assessed the PIPE Warrants for appropriate equity or liability classification and determined the PIPE 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 PIPE 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 PIPE Warrants are classified as equity and accounted for as a component of additional paid-in capital at the time of issuance.

The PIPE Warrants were initially recognized at their relative fair value in the amount of $ 741 at the time of issuance determined using Black-Scholes option-pricing model and will not be remeasured.

As of December 31, 2024, 21,666,012 shares of common stock were issued and outstanding, no shares were held in treasury, and 24,610 shares of Series X Preferred Stock had been issued, of which 12,232 shares of Series X Preferred Stock remained outstanding.

In addition, as of December 31, 2024, there were:

• 12,469,000 shares of common stock reserved for issuance upon conversion of the Series X Preferred Stock;

• 2,212,102 shares of common stock issuable upon the exercise of options under existing equity incentive plans, of which 1,780,459 options were assumed through the Lung Acquisition;

• 416,617 and 7,500 shares of common stock reserved for issuance under the 2021 Plan and 2017 Employee Stock Purchase Plan, respectively, as well as any automatic increases in the number of shares of the common stock reserved under these plans;

• 3,169,468 shares of common stock issuable upon the exercise of options under existing equity incentive plans;

• 2,330,256 and 7,500 shares of common stock reserved for issuance under the 2021 Plan (as defined below) and 2017 ESPP (as defined below), respectively, as well as any automatic increases in the number of shares of the common stock reserved under these plans;

• 7,353,442 shares of common stock reserved for issuance upon exercise of outstanding warrants.

The warrants consist of (i) warrants to purchase 646,759 shares of the Company’s common stock, with an exercise price of $ 40.00 per share, which were issued in the April 2019 private placement, which expire on April 2, 2024 ;

(ii) warrants to purchase 726,437 shares of the Company’s common stock, with an exercise price of $ 5.66 , which expire on May 20, 2029 , which were assumed in connection with the Lung Acquisition, and (iii) warrants to purchase 2,353,500 shares of the Company’s common stock, which were issued and sold in the Financing as described above.

The warrants consist of (i) warrants to purchase 726,437 shares of the Company’s common stock, with an exercise price of $ 5.66 , which expire on May 20, 2029 , which were assumed in connection with the Lung Acquisition, (ii) warrants to purchase 2,353,500 shares of the Company’s common stock, with an exercise price of $ 4.89 per share, which were issued and sold in the PIPE Financing as described above and expire on May 2, 2027 , and (iii) warrants to purchase 4,273,505 shares of the Company’s common stock, with an exercise price of $ 4.68 per share, which were issued and sold in the Offering as described above and expire on May 3, 2027 .

Accordingly, as of December 31, 2024, out of the 100,000,000 shares of common stock presently authorized, 46,995,678 shares are issued and outstanding or reserved for issuance and 53,004,322 shares of common stock remain available for future issuance.

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 an employer match, which is 100 % of employee deferrals up to the first 3 % of compensation for the period and 50 % of the next 2 % of compensation for the period and is immediately vested.

The Company made matching contributions in the amount of $ 101 and $ 47 for the years ended December 31, 2024 and 2023, respectively.

Stock-Based Awards

As of December 31, 2024, the Company had five equity compensation plans, each of which was approved by its stockholders:

2006 Equity Incentive Plan, as amended (the “2006 Plan”), 2016 Stock Incentive Plan (the “2016 Plan”), 2017 Stock Incentive Plan (the “2017 Plan”), 2021 Stock Incentive Plan (the “2021 Plan”), and 2017 Employee Stock Purchase Plan (the “2017 ESPP”).

The Company also assumed Lung’s 2013 Long-Term Incentive Plan (the “2013 Plan”) as a result of the Lung Acquisition.

As of December 31, 2023, the Company had 9,482 shares to be issued upon exercise of outstanding options under the 2006 Plan;

8,404 shares to be issued upon exercise of outstanding options under the 2016 Plan, and 130,903 shares to be issued upon exercise of outstanding options under the 2017 Plan.

No outstanding options under the 2006 Plan, the 2016 Plan, or the 2017 Plan as of December 31, 2023.

As such, no shares remained available for future issuance under the 2006 Plan, the 2016 Plan, or the 2017 Plan as of December 31, 2023.

Shares that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future awards.

2006 Equity Incentive Plan, as amended, or the 2006 Plan, 2016 Stock Incentive Plan, or the 2016 Plan, 2017 Stock Incentive Plan, or the 2017 Plan, 2021 Stock Incentive Plan, or the 2021 Plan, and 2017 Employee Stock Purchase Plan, or the 2017 ESPP.

The Company also assumed Lung’s 2013 Long-Term Incentive Plan, or the 2013 Plan, as a result of the Lung Acquisition.

As of December 31, 2024, the Company had 6,693 shares issuable upon exercise of outstanding options under the 2006 Plan;

8,404 shares to be issued upon exercise of outstanding options under the 2016 Plan, 98,528 shares to be issued upon exercise of outstanding options under the 2017 Plan, and 1,477,679 shares to be issued upon exercise of outstanding options under the 2021 Plan.

No shares remained available for future awards under the 2006 Plan, the 2016 Plan, and the 2017 Plan as of December 31, 2024.

Under the 2021 Plan, 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.

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The Company’s 2021 Plan was approved by the Company’s stockholders on June 15, 2021 and became effective on June 16, 2021.

At the 2023 Annual Meeting, the stockholders of the Company approved an amendment, or the Plan Amendment, to the 2021 Plan to increase the number of shares of common stock issuable under the 2021 Plan by 3,000,000 shares to 3,840,254 .

Other than increasing the number of shares issuable under the 2021 Plan, the Plan Amendment does not make any changes to the 2021 Plan.

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.

Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2021 Plan;

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 Company’s Board of Directors (the “Board”) or, at the discretion of the Board, by a committee of the Board.

The 2021 Plan is administered by the Board or, at the discretion of the Board, 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, or its committee if so delegated.

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The Company initially reserved 625,000 shares of common stock, plus the number of shares of common stock subject to outstanding awards under the 2017 Plan, the 2016 Plan and 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.

As of December 31, 2024, the Company had 1,477,679 shares to be issued upon exercise of outstanding options under the 2021 Plan.

2017 Stock Incentive Plan

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On June 16, 2017, the Company’s stockholders approved the 2017 ESPP, which became effective on June 28, 2017.

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 ended 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) 31,120 shares, (ii) 1 % of the outstanding shares of common stock on such date and (iii) an amount determined by the Company’s Board.

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 ended 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) 31,120 shares, (ii) 1 % of the outstanding shares of common stock on such date and (iii) an amount determined by the Company’s Board.

On January 1, 2023 and January 1, 2024, no additional shares were reserved for issuance under the 2017 ESPP pursuant to this provision.

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2013 Stock Incentive Plan

The Company assumed the Lung’s 2013 Plan as a result of the Lung Acquisition.

In October 2013, Lung’s Board of Directors (“Lung’s Board”) approved the 2013 Plan to provide long-term incentives for its employees, non-employee directors and certain consultants.

As of December 31, 2023, 1,780,459 shares were reserved to be issued upon exercise of options outstanding under the 2013 Plan, and 726,437 shares to be issued upon exercise of outstanding warrants under Lung’s 2013 Plan.

These options and warrants were assumed by the Company in connection with the Lung Acquisition.

Before the Lung Acquisition, the 2013 Plan was administered by the Lung’s Board or, at the discretion of the Lung’s Board, by a committee of the Lung’s Board.

The exercise prices, vesting and other restrictions are determined at the discretion of the Lung’s Board, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100 % of the fair market value of the share of common stock on the date of grant and the term of stock option may not be greater than ten years .

The vesting periods for equity awards are determined by the Board, but generally are four years .

The Company assumed the 2013 Plan as a result of the Lung Acquisition.

In October 2013, Lung’s Board of Directors, or the Lung Board, approved the 2013 Plan to provide long-term incentives for its employees, non-employee directors and certain consultants.

As of December 31, 2024, 1,578,164 shares were reserved to be issued upon exercise of options outstanding under the 2013 Plan.

These options were assumed by the Company in connection with the Lung Acquisition.

Before the Lung Acquisition, the 2013 Plan was administered by the Lung Board or, at the discretion of the Lung Board, by a committee of the Lung Board.

The exercise prices, vesting and other restrictions were determined at the discretion of the Lung Board, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100 % of the fair market value of the share of common stock on the date of grant and the term of stock option may not be greater than ten years .

The contractual term for stock option awards is ten years .

The vesting periods for equity awards were determined by Lung’s Board, but generally are four years .

The vesting periods for equity awards were determined by the Lung Board, but generally were four years .

The contractual term for stock option awards is ten years .

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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 years ended December 31, 2023 and 2022 and at the Lung Acquisition date were as follows, presented on a weighted average basis:

The assumptions that the Company used to determine the grant-date fair value of the stock options granted during the years ended December 31, 2024 and 2023 were as follows, presented on a weighted average basis:

Year Ended December 31,

Risk-free interest rate

4.82 - 5.58 %

Expected term (in years)

Expected volatility

Expected dividend yield

Expected dividend rate

Stock Options

The following table summarizes the Company’s stock option activity since January 1, 2024:

Term (in years)

Outstanding at December 31, 2022

Price Per Share

Outstanding at January 1, 2024

Forfeited/Canceled

Options assumed through business combination

Outstanding at December 31, 2024

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The weighted average grant-date fair value of stock options granted during the year ended December 31, 2024 was $ 2.46 .

The weighted average grant-date fair value of stock options granted during the year ended December 31,

2022 was $ 7.32 .

The weighted average grant-date fair value of stock options granted during the year ended December 31, 2023 was $ 0.80 .

The aggregate fair value of stock options that vested during the years ended December 31, 2024 and 2023, was $ 1,520 and $ 1,191 , 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.

There were no options exercised during the year ended December 31, 2023.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2024 was $ 354 .

There were no stock options exercised during the year ended December 31, 2023.

Stock-Based Compensation

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General and administrative expenses

Total stock-based compensation expense

As of December 31, 2024 , the Company had an aggregate of $ 2,505 of unrecognized stock-based compensation expense, which it expects to recognize over a weighted average period of 3.28 years.

As of December 31, 2023, the Company had an aggregate of $ 1,702 of unrecognized stock-based compensation expense, which it expects to recognize over a weighted average period of 1.73 years.

On March 11, 2024, the Company and Manuel C.

Alves-Aivado, M.D., Ph.D., agreed that his employment with the Company would cease and he would resign from his position as Chief Executive Officer, or CEO, of the Company, effective as of March 11, 2024.

Aivado remains a member of the Company’s Board.

Aivado’s resignation from the Company was not the result of any disagreement with the Company on any matter relating to its operations,

policies or practices.

As a non-employee director, following the separation date, Dr.

Aivado will be compensated in accordance with the terms of the Company’s non-employee director compensation program.

In addition, Dr.

Aivado will continue to vest in all unvested stock option awards pursuant to the amended vesting terms.

The resignation of Dr.

Aivado as CEO was considered a significant reduction in service and his original awards were deemed to have been modified and accounted for as a Type III modification with no material effect on these consolidated financial statements.

Net Loss per Share

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Year Ended December 31,

Weighted average common shares

outstanding—basic and diluted

Net loss per share attributable to common

stockholders—basic and diluted

Weighted average common shares outstanding—basic and diluted

Net loss per share attributable to common stockholders—basic and diluted

The Company’s potential dilutive securities, which include stock options as of December 31, 2024 and 2023 , 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.

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Operating Leases

On March 26, 2021, the Company entered into a sublease agreement (the “Sublease”) by and among the Company, Vittoria Industries North America, Inc.

(the “Sublessor”) and Waterfront Equity Partners, LLC (the “Lessor”), under which the Company was leasing approximately 3,365 square feet of office space located at 285 Summer Street, Unit 101, Boston, Massachusetts (the “Premises”).

The Sublease was subject and subordinate to a lease agreement, dated as of July 13, 2012, by and between the Sublessor and Lessor, pursuant to which the Sublessor is leasing the Premises from the Lessor.

The Sublease expired March 31, 2023 , and the Company did not renew the Sublease.

Following expiration of the Sublease, the Company is operating virtually, and expects to do so in the foreseeable future.

On August 16, 2021, Lung Therapeutics entered into an operating lease agreement to rent approximately 6,455 square feet of office space for its corporate headquarters in Austin, Texas, beginning on October 1, 2021.

The lease agreement is for a 30-month term that ended on March 31, 2024, and includes a rent escalation clause and a rent holiday.

In addition to the base rent, the Company was also responsible for its share of operating expenses, electricity and real estate taxes, in accordance with the terms of the lease agreement.

Following expiration of the lease, the Company expects to operate virtually for the foreseeable future.

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 and other information pertaining to the Company’s operating leases for the years ended December 31, 2023 and 2022:

Year Ended December 31,

Operating lease cost

Total lease cost

Other Information

Cash paid for amounts included in the measurement of lease liabilities

Weighted average remaining lease term (in years)

Weighted average discount rate

As of December 31, 2023, future minimum commitments under the Company’s operating leases were as follows:

2025 and thereafter

Total lease payments

imputed interest

Total operating lease liabilities

On August 16, 2021, Lung entered into an operating lease agreement to rent approximately 6,455 square feet of office space for its corporate headquarters in Austin, Texas, beginning on October 1, 2021.

The lease expired March 31, 2024 , and the Company did not renew the lease.

Following expiration of the lease, the Company is operating virtually, and expects to do so for the foreseeable future.

Legal Proceedings

The Company may from time to time be party to litigation arising in the ordinary course of business.

As of December 31, 2023 and 2022, the Company was not party to any legal proceedings and no material legal proceedings are currently pending or, to the best of the Company’s knowledge, threatened.

As of December 31, 2024, the Company was not party to any legal proceedings and no material legal proceedings are currently pending or, to the best of the Company’s knowledge, threatened.

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.

In August 2006, the Company entered into an exclusive license agreement with President and Fellows of Harvard College, or Harvard, and Dana-Farber Cancer Institute, or 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.

In February 2010, the agreement was amended and restated, or 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.

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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.

The Harvard/DFCI agreement requires the Company to pay annual license maintenance fees of $ 110 each year, which was reduced to $ 35 starting in 2023.

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

The Company incurred license maintenance fees of $ 35 and $ 110 during each of the years ended December 31, 2023 and 2022, respectively.

In addition, the Company did no t make any milestone payments during the years ended December 31, 2023 and 2022.

During the years ended December 31, 2023 and 2022, no milestones were achieved and no liabilities for milestone payments were recorded in the Company’s consolidated financial statements.

From 2010 through December 31, 2023 and December 31, 2022, the Company had made non-refundable cash payments, consisting of license and maintenance fees, milestone payments and sublicense fees, totaling $ 5,153 and $ 5,118 , respectively.

As of December 31, 2024, the Company had not developed a commercial product using the licensed technologies and no royalties under the agreement had been paid or were due.

1 unchanged sentence

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.

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.

The Company incurred license fees of $ 50 during each of the years ended December 31, 2023 and 2022.

The Company did no t make any milestone payments during the years ended December 31, 2023 and 2022.

During the year ended December 31, 2023, no milestones were achieved and no liabilities for additional milestone payments were recorded in the Company’s consolidated financial statements.

The Umicore Agreement terminated in July 2023 with the expiration of the last patent the Company had licensed.

The Company incurred $ 35 in license maintenance fees during the years ended December 31, 2024 and 2023, respectively.

Agreement with the University of Texas Health Science Center at Tyler

In June 2013, Lung entered into a patent and technology license agreement with the Board of Regents of the University of Texas System, or UT System, on behalf of University of Texas Health Science Center at Tyler, or UTHSCT.

The patent and technology license agreement with UT System, or the UTHSCT Agreement, provides Lung access to patents and technology related to the development of LTI-01 and LTI-03.

As part of the UTHSCT Agreement, Lung has (i) a royalty-bearing, exclusive license under the patent rights to manufacture, distribute, and sell certain intellectual property;

In June 2013, the Company entered into a patent and technology license agreement with UT System, on behalf of UTHSCT.

The patent and technology license agreement with UT System, or the UTHSCT Agreement, provides the Company access to patents and technology related to the development of LTI-01 and LTI-03.

As part of the UTHSCT Agreement, the Company has (i) a royalty-bearing, exclusive license under the patent rights to manufacture, distribute, and sell certain intellectual property;

(ii) a non-exclusive license under the technology rights to manufacture, distribute and sell the licensed product;

and (iii) a sublicensing right that allows Lung to grant sublicenses to affiliates and third parties to use the licensed product in the field of use and approved territories outlined in the UTHSCT Agreement.

and (iii) a sublicensing right that allows the Company to grant sublicenses to affiliates and third parties to use the licensed product in the field of use and approved territories outlined in the UTHSCT Agreement.

In December 2013, the UTHSCT Agreement was amended and restated to include certain patents in all fields worldwide.

In May 2017, the UTHSCT Agreement was amended and restated to modify the specific milestone criteria.

In consideration of the UTHSCT Agreement, Lung granted UT System (via UTHSCT and UT Horizon Fund affiliates) (i) 2,000,000 shares of Lung common stock and (ii) 400,000 shares of Lung non-convertible preferred stock.

On February 6, 2015, UT System exchanged the 400,000 shares of Lung non-convertible preferred stock for 4,000,000 shares of Lung common stock.

In addition, Lung agreed to pay past and ongoing patent expenses, and Lung owes UTHSCT sublicensing fees, assignment fees, and single digit royalties on worldwide net product sales, with fixed minimum royalty payments that started in 2015.

Pursuant to the UTHSCT Agreement, Lung is required to use diligent efforts to commercialize the licensed technology as soon as commercially practicable, including maintaining active research and development, regulatory, marketing and sales program, all as commercially reasonable.

In consideration of the UTHSCT Agreement, the Company agreed to pay past and ongoing patent expenses, and the Company owes UTHSCT sublicensing fees, assignment fees, and single digit royalties on worldwide net product sales, with fixed minimum royalty payments that started in 2015.

Pursuant to the UTHSCT Agreement, the Company is required to use diligent efforts to commercialize the licensed technology as soon as commercially practicable, including maintaining active research and development, regulatory, marketing and sales program, all as commercially reasonable.

The Company may terminate the UTHSCT Agreement for convenience with 90 days’ notice.

UTHSCT may also terminate the UTHSCT Agreement, but only if the Company breaches the terms of the agreement.

The Company incurred $ 100 in a minimum royalty fee during the years ended December 31, 2024 and 2023, respectively.

Agreement with the University of Texas at Austin

In May 2015, Lung entered into a patent license agreement with UT Austin on behalf of the UT System.

In May 2015, the Company entered into a patent license agreement with UT Austin on behalf of UT System.

This license agreement with UT Austin, or the UT Austin 6607 Agreement, relates to the patent rights to polypeptide therapeutics and uses thereof.

Pursuant to the UT Austin 6607 Agreement Lung has (i) a royalty-bearing, exclusive license under the patent rights to manufacture, distribute, and sell the licensed product;

and (ii) a sublicensing right that allows Lung to grant sublicenses to affiliates and third parties to use the licensed product in the field of use and approved territories outlined in the agreement.

Pursuant to the UT Austin 6607 Agreement the Company has (i) a royalty-bearing, exclusive license under the patent rights to manufacture, distribute, and sell the licensed product;

and (ii) a sublicensing right that allows the Company to grant sublicenses to affiliates and third parties to use the licensed product in the field of use and approved territories outlined in the agreement.

The UT Austin 6607 Agreement was amended and restated in January 2017, November 2018, and June 2019.

The amendments related to extension of milestone payment dates and specific terminology around the milestone achievement criteria.

In consideration of the UT Austin 6607 Agreement, Lung agreed to pay past and ongoing patent expenses, milestone fees upon certain development and regulatory milestone events, annual license fees, tiered sublicense fees, assignment fees, low single digit royalties on net sales and an FDA Priority Review Voucher fee if Lung sells or transfers this voucher.

Pursuant to the UT Austin 6607 Agreement, Lung is required to use diligent efforts to commercialize the licensed products, including maintaining active research and development, regulatory, marketing and sales program.

Moreover, Lung is required to meet certain development and regulatory milestones by specific dates.

In consideration of the UT Austin 6607 Agreement, the Company agreed to pay past and ongoing patent expenses, milestone fees upon certain development and regulatory milestone events, annual license fees, tiered sublicense fees, assignment fees, low single digit royalties on net sales and a Food and Drug Administration, or FDA, Priority Review Voucher fee if the Company sells or transfers this voucher.

Pursuant to the UT Austin 6607 Agreement, the Company is required to use diligent efforts to commercialize the licensed products, including maintaining active research and development, regulatory, marketing and sales program.

Moreover, the Company is required to meet certain development and regulatory milestones by specific dates.

The Company may terminate the UT Austin 6607 Agreement for convenience with 90 days’ notice.

UT Austin may also terminate the UT Austin 6607 Agreement, but only if the Company breaches the terms of the agreement.

The Company did not incur any expenses under the UT Austin 6607 Agreement during the years ended December 31, 2024 and 2023.

Agreement with Medical University of South Carolina

In March 2016, Lung entered into a license agreement with Medical University of South Carolina Foundation for Research Development, or MUSC.

Pursuant to this license agreement with MUSC, or the MUSC Agreement, Lung has patent rights related to protecting against lung fibrosis by up regulating Cav1.

In March 2016, the Company entered into a license agreement with Medical University of South Carolina Foundation for Research Development, or MUSC.

Pursuant to this license agreement with MUSC, or the MUSC Agreement, the Company has patent rights related to protecting against lung fibrosis by up regulating Cav1.

The MUSC Agreement granted (i) a royalty-bearing, exclusive license under the patent rights to make, use and sell the license product;

and (ii) a sublicensing right that allows Lung to grant sublicenses to affiliates and third parties to use the licensed product in the field of use and approved territories outlined in the agreement.

In September 2018, the agreement was amended and restated to include definitions of related methods, related products and related rights.

In consideration of the MUSC Agreement, Lung agreed to pay a non-refundable license fee, patent expenses, milestone fees upon certain development, regulatory and commercial milestone events, sublicense fees, assignment fees and low single digit royalties on net sales, with a fixed minimum royalty payment starting in 2019 and a transaction fee upon Lung's liquidation.

Pursuant to the MUSC Agreement, Lung is required to use diligent efforts to develop, manufacture and sell the licensed products.

In consideration of the MUSC Agreement, the Company agreed to pay a non-refundable license fee, patent expenses, milestone fees upon certain development, regulatory and commercial milestone events, sublicense fees, assignment fees and low single digit royalties on net sales, with a fixed minimum royalty payment starting in 2019 and a transaction fee upon the Company’s liquidation.

Pursuant to the MUSC Agreement, the Company is required to use diligent efforts to develop, manufacture and sell the licensed products.

The Company may terminate the MUSC Agreement for convenience by providing a written notice to MUSC effective 90 days following the receipt of notice, and either party may terminate the agreement for a breach of contract.

The Company incurred $ 25 in a minimum royalty fee during the year ended December 31, 2024.

The Company did not incur any expenses under the MUSC Agreement during the year ended December 31, 2023.

Agreement with Vivarta Therapeutics LLC

In March 2018, Lung entered into a license agreement with Vivarta Therapeutics, LLC, or Vivarta.

In March 2018, the Company entered into a license agreement with Vivarta Therapeutics, LLC, or Vivarta.

This license agreement with Vivarta, or the Vivarta Agreement, relates to intellectual property relating to epithelial sodium channel inhibitors and methods to treat pulmonary disease.

Pursuant to the Vivarta Agreement Lung has (i) a royalty-bearing, exclusive license under the intellectual property rights to make, use and sell the licensed product, and (ii) a sublicensing right that allows Lung to grant sublicenses to affiliates and third parties to use the licensed product in the field of use and approved territories outlined in the agreement.

In consideration for the Vivarta Agreement, Lung agreed to grant Vivarta a warrant to purchase an aggregate of 75,000 shares of Lung common stock for $ 0.12 per share, to pay a license fee of $ 10,000 upon the Vivarta Agreement effective date and $ 40,000 within 30 days of the receipt of a positive freedom to operate analysis from legal counsel.

Lung also agreed to pay patent expenses, milestone fees upon certain development and regulatory milestone events, sublicense fees, assignment fees and low single digit royalties on net sales.

Pursuant to the Vivarta Agreement, Lung is required to use diligent efforts to develop, manufacture and sell the licensed products.

Pursuant to the Vivarta Agreement the Company has (i) a royalty-bearing, exclusive license under the intellectual property rights to make, use and sell the licensed product, and (ii) a sublicensing right that allows the Company to grant sublicenses to affiliates and third parties to use the licensed product in the field of use and approved territories outlined in the agreement.

In consideration for the Vivarta Agreement, the Company agreed to grant Vivarta a warrant to purchase an aggregate of 75,000 shares of common stock of Lung for $ 0.12 per share, to pay a license fee of $ 10,000 upon the Vivarta Agreement effective date and $ 40,000 within 30 days of the receipt of a positive freedom to operate analysis from legal counsel.

the Company also agreed to pay patent expenses, milestone fees upon certain development and regulatory milestone events, sublicense fees, assignment fees and low single digit royalties on net sales.

Pursuant to the Vivarta Agreement, the Company is required to use diligent efforts to develop, manufacture and sell the licensed products.

The Company may terminate the Vivarta Agreement for convenience by providing a written notice to Vivarta effective 90 days following the receipt of notice, and either party may terminate the agreement for a breach of contract.

Manufacturing Commitments

As of December 31, 2023, the Company has non-cancellable purchase obligations and a prepaid balance with its contract manufacturer in the amount of $ 2,312 and $ 1,432 , respectively.

Aggregate future service and purchase commitments with manufacturer as of December 31, 2023 are as follows:

2025 and thereafter

Total purchase commitments

The Company did not incur any expenses under the Vivarta Agreement during the years ended December 31, 2024 and 2023.

Indemnification Agreements

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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 consolidated financial statements as of December 31, 2023 or December 31, 2022.

On October 31, 2023, the Company acquired, in accordance with the terms of the Lung Acquisition Agreement, the stock of Lung Therapeutics ("Target").

Segment Reporting

The Company has one reportable segment which focuses on developing novel therapies for the treatment of orphan pulmonary and fibrosis indications with no approved or limited effective treatments.

The Company’s CODM, the CEO , manages the Company’s operations on a consolidated basis as one operating segment for the purposes of evaluating financial performance and allocating resources.

The Company has not generated any revenue yet.

The CODM assesses the financial performance of the segment and decides how to allocate resources based on net loss on a consolidated basis.

The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets.

The CODM uses net loss predominantly in the annual operating budget and in the strategic planning and forecasting process.

Such loss measure is used to monitor budget versus actual results on an ongoing basis by the

CODM and determine how resources are allocated to the various activities of the Company.

The CODM also uses net loss to evaluate the Company’s performance and assist in determination of management’s incentive compensation.

All of the Company’s tangible assets are held in the United States.

The Company views its operations and manages its business in one operating segment operating exclusively in the United States.

The table below is a summary of the segment loss, including significant segment expenses:

Year Ended December 31,

Research and development expenses:

LTI-01 program-related expenses:

Preclinical study costs

CMC activities

Clinical operation activities

Total LTI-01 program-related expenses

LTI-03 program-related expenses:

Preclinical study costs

CMC activities

Clinical operation activities

Total LTI-03 program-related expenses

Other program-related expenses

Employee related expenses

Professional fees for services

Facilities and other expenses

Total research and development expenses

General and administrative expenses:

Employee related expenses

Professional fees for services

Facilities and other expenses

Total general and administrative expenses

Impairment loss on intangible assets

Restructuring and other costs

Other income, net

Income tax benefit

Segment and consolidated net loss

On October 31, 2023, the Company acquired, in accordance with the terms of the Lung Acquisition Agreement, the stock of Lung.

In accordance with ASC 805-740-25-3, recognition of deferred tax assets and liabilities is required for substantially all temporary differences and acquired tax carryforwards and credits.

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Though the tax effects may be delayed indefinitely, ASC 740-10-55-63 states that “deferred tax liabilities may not be eliminated or reduced because a reporting entity may be able to delay the settlement of those liabilities by delaying the events that would cause taxable temporary differences to reverse.” As such, the Company has recorded a deferred tax liability for the portion of the liability that cannot be offset with indefinite lived deferred tax assets.

The Company reported no income tax expense or benefit for the year ended December 31, 2023.

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.

The Company reported an income tax benefit of $ 1,544 for the year ended December 31, 2024.

Income tax (benefit) expense consist of the following:

Year Ended December 31,

Current tax provision (benefit):

Total current tax provision (benefit)

Deferred tax provision (benefit):

Total deferred tax provision (benefit)

Total income tax provision (benefit)

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,

Federal statutory income tax rate

1 unchanged sentence

Research and development and orphan drug tax credits

Stock compensation

Other permanent items

18 unchanged sentences

Total deferred tax liabilities

Net deferred tax asset (liability)

Net deferred tax liability

As of December 31, 2024, the Company had net operating loss carryforwards for federal and state purposes of $ 77,313 and $ 18,789 , respectively.

8 unchanged sentences

Of this amount, $ 2,222 of research and development credit carryforwards and $ 5,644 of orphan drug credit carryforwards came over from the Lung Acquisition.

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

On December 22, 2017, the Tax Cuts and Jobs Act, or 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.

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The Company expects to have all prior year net operating losses and tax credits of its legacy business to be completely limited going forward due to the lack of continuation in its legacy business.

As such, all prior year net operating losses and tax credits have been written down to zero as of December 31, 2023.

As such, all prior year net operating losses and tax credits have been written down to zero as of December 31, 2023 and December 31, 2024, respectively.

The remaining net operating losses and tax credits as of December 31, 2024 relate to post-merger activity in the year, as well as acquired attributes as part of the merger in the year.

1 unchanged sentence

As a result, the Company has written down the $ 1,673 portion of the Target net operating losses expected to expire unutilized and include the $ 44,420 of remaining net operating losses and $ 7,638 of federal tax credits as part of its available attributes.

As of December 31,

2023, the total federal net operating losses are $ 56,518 and federal research and development tax credits are $ 7,825 , which could be subject to future limitations under these rules.

As of December 31, 2024, the total federal net operating losses are $ 77,313 and federal research and development tax credits are $ 8,226 , which could be subject to future limitations under these rules.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets.

2 unchanged sentences

Management reevaluates the positive and negative evidence at each reporting period.

The decrease in the valuation allowance relates primarily to the deferred tax liability recognized as a result of the transaction as well as the reduction in prior year deferred tax assets due to Section 382 limitations.

The increase in the valuation allowance for deferred tax assets during the year ended December 31, 2023 related primarily to an increase in net operating loss carryforwards.

The decrease in the valuation allowance as of December 31, 2023 of $ 58,935 related primarily to the deferred tax liability recognized as a result of the transaction as well as the reduction in prior year deferred tax assets due to Section 382 limitations.

The increase in the valuation allowance for deferred tax assets during the year ended December 31, 2024 of $ 11,948 related primarily to an increase in net operating loss carryforwards.

Changes in the valuation allowance were as follows:

1 unchanged sentence

Valuation allowance at beginning of year

Decreases/(increases) recorded to income tax provision

Increases recorded to invested capital

Increases recorded to income tax provision

Decreases recorded as a benefit to income tax provision

Valuation allowance at end of year

8 unchanged sentences

Related Party Transactions

Immediately following the closing of the Lung Acquisition, the Company entered into the Purchase Agreement with a group of accredited investors led by Bios Partners, the majority stockholder of Lung prior to the closing of Lung Acquisition, and including Nantahala Capital, as well as additional undisclosed investors, pursuant to which the Company issued and sold (i) an aggregate of 4,707 shares of Series X Preferred Stock, and (ii) up to an aggregate of 2,353,500 Warrant Shares, as described in the Note 3, which included the conversion of convertible promissory notes in the aggregate principal amount of $ 1,553 issued by Lung to Bios Partners prior to the closing of the acquisition at a 10 % discount to the per share price of Series X Preferred Stock.

The Financing closed on November 2, 2023.

On May 8, 2024, a greater than 5 % shareholder converted 421 shares of the Company’s Series X Preferred Stock into 421,000 shares of common stock.

Subsequent Event

On February 28, 2024, the Company held its 2023 annual meeting of stockholders (the “2023 Annual Meeting”) at which the stockholders of the Company approved an amendment (the “Plan Amendment”) to the Aileron’s 2021 Plan to increase the number of shares of common stock issuable under the 2021 Plan by 3,000,000 shares to 3,840,254 .

On January 17, 2024, upon the recommendation of the compensation committee and subject to stockholder approval, the Company’s Board of Directors adopted the Plan Amendment.

Other than increasing the number of shares issuable under the 2021 Plan, the Plan Amendment does not make any changes to the 2021 Plan.

The material terms of the 2021 Plan are described in the Company’s definitive proxy statement for the 2023 Annual Meeting filed with the Securities and Exchange Commission on January 29, 2024 (the “Proxy Statement”).

At the 2023 Annual Meeting, the Company’s stockholders approved an amendment to the Company’s Restated Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock of the Company from 45,000,000 to 100,000,000 shares.

The Company filed the Certificate of Amendment to implement

the increase in the number of authorized shares, which was effective upon filing, with the Secretary of State of the State of Delaware on February 28, 2024.

The additional shares of common stock authorized by the Certificate of Amendment have rights identical to the Company’s currently outstanding Common Stock.

Following approval of the conversion of outstanding Series X Preferred Stock, the Company had 29,495,512 shares of common stock issued and outstanding on a pro forma basis, which gives effect to the full conversion of the Series X Preferred Stock as of the date of the 2023 Annual Meeting, without regard to beneficial ownership limitations that may limit the ability of certain holders of Series X Preferred Stock to convert such shares to common stock as such time.

On March 5, 2024, based upon existing beneficial ownership limitations, 12,087 shares of Series X Preferred Stock were automatically converted into 12,087,000 shares of common stock.

The remaining approximately 12,523 shares of Series X Preferred Stock (which are convertible into 12,523,000 shares of common stock) will remain convertible at the option of the holder thereof, subject to certain beneficial ownership limitations.

On February 29, 2024, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying the Company that it has regained compliance with the annual meeting requirement for continued listing on the Nasdaq Capital Market set forth in Nasdaq Listing Rule 5620.

On March 11, 2024, the Company and Manuel C.

Alves-Aivado, M.D., Ph.D., agreed that his employment with the Company would cease and he would resign from his position as Chief Executive Officer of the Company, effective as of March 11, 2024 (the “Separation Date”).

Aivado will remain a member of the Company’s Board.

Aivado’s resignation from the Company was not the result of any disagreement with the Company on any matter relating to its operations, policies or practices.

In connection with Dr.

Aivado’s separation from the Company, and in accordance with the severance agreement, dated as of September 6, 2018, between the Company and Dr.

Aivado is entitled to receive his base salary for eighteen months of $ 881 following the separation date, payments on Dr.

Aivado’s behalf of the monthly premiums for medical insurance coverage under COBRA until the earlier of the date that is eighteen months following the separation date or the date on which Dr.

Aivado becomes eligible to receive group health insurance coverage through another employer, a lump sum payment of $ 441 equal to one and one-half times Dr.

Aivado’s target bonus for the 2024 calendar year, and acceleration in full of the vesting of any unvested equity awards.

Aivado’s receipt of these post-separation benefits under the severance agreement is conditioned upon his execution of a severance and release of claims agreement with the Company.

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued.

Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

Subsequent to the consolidated balance sheet date, the Company continued its “at the market” offering program under the Equity Distribution Agreement (described in Note 1).

In January 2025, the Company issued and sold 317,772 shares of common stock pursuant to the “at the market” offering program for total net proceeds of $ 712 , after deducting transaction fees of $ 22 paid by the Company.

On March 29, 2025, the Company entered into a payment plan agreement to settle an outstanding obligation related to LTI-01 manufacturing.

Under the terms of the agreement, the Company has agreed to pay a total of $ 1,676 in equal installments over the course of twelve months, with the final payment due on February 14, 2026.

This agreement does not bear interest.

This agreement was executed after the balance sheet date but prior to the issuance of this Annual Report on Form 10-K.

Management has evaluated the financial impact of this agreement and determined that it does not materially affect the Company’s financial position as of December 31, 2024 as the Company has recorded the proper liability balance in proper accounts for such outstanding obligation as of December 31, 2024.

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

What changed 10-K

Item 9A. Controls and Procedures