Common Stock

6 Months Ended

Jun. 30, 2024

Equity [Abstract]

Common Stock

10. Common Stock

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 June 30, 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 June 30, 2024, the Company had 21,625,085 shares of common stock issued and outstanding. As of December 31, 2023, the Company had 4,885,512 shares of common stock issued and outstanding.

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 (the “Board”), if any. As of June 30, 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 and Warrants

In May 2024, the Company completed an underwritten follow-on public 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 $18,162, 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 (“ASC 815”). 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:

	May 3,
	2024
Risk-free interest rate		4.6	%
Expected term (in years)		3.0
Expected volatility		113.5	%
Expected dividend yield		0	%
Stock price	$	3.76
Exercise price	$	4.68

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 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, 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. 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 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 June 30, 2024, 21,625,085 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 June 30, 2024, there were:

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

•2,196,327 shares of common stock issuable upon the exercise of options under existing equity incentive plans;

•3,212,623 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; and

•7,353,442 shares of common stock reserved for issuance upon exercise of outstanding warrants. 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 June 30, 2024, out of the 100,000,000 shares of common stock presently authorized, 46,863,977 shares are issued and outstanding or reserved for issuance and 53,136,023 shares of common stock remain available for future issuance.