What changed in this filing

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Item 1. Financial Statements

2022-05-12 compared with 2021-11-24 · 296 added, 520 removed, 396 unchanged (67% of the section changed)

1 unchanged sentence

Aura Biosciences, Inc.

Condensed Balance Sheets (Unaudited)

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

September 30, 2021

March 31, 2022

December 31, 2021

1 unchanged sentence

Cash and cash equivalents

Marketable securities

Restricted cash and deposits

4 unchanged sentences

Property and equipment, net

Deferred offering costs

Liabilities, Convertible Preferred Stock, and Stockholders’

Liabilities and Stockholders’

Current liabilities:

Accounts payable

Current portion of operating lease liabilities

Short-term operating lease liability

Accrued expenses and other current liabilities

Total current liabilities

Deferred rent

Operating lease liabilities, net of current portion

Long-term operating lease liability

Warrant liability

1 unchanged sentence

Commitments and Contingencies (Note 12)

Series A convertible preferred stock, $ 0.00001 par value, 1,701,141 shares authorized , issued and outstanding at September 30, 2021 and December 31, 2020, respectively, and a liquidation preference of $ 3,403 at September 30, 2021 and December 31, 2020, respectively

Series A-1 convertible preferred stock, $ 0.00001 par value, 3,298,732 shares authorized , issued, and outstanding at September 30, 2021 and December 31, 2020, respectively, and a liquidation preference of $ 8,196 at September 30, 2021 and December 31, 2020, respectively

Series A-2 convertible preferred stock, $ 0.00001 par value, 4,325,021 shares authorized, and 4,324,998 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively, and a liquidation preference of $ 5,373 at September 30, 2021 and December 31, 2020, respectively

Series B convertible preferred stock, $ 0.00001 par value, 22,705,646 shares authorized, and 22,531,819 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively, and a liquidation preference of $ 38,894 and $ 37,429 at September 30, 2021 and December 31, 2020, respectively

Series C-1 convertible preferred stock, $ 0.00001 par value, 58,109,711 shares authorized , issued and outstanding at September 30, 2021 and December 31, 2020, respectively, and a liquidation preference of $ 37,736 and $ 36,150 at September 30, 2021 and December 31, 2020, respectively

Series C-2 convertible preferred stock, $ 0.00001 par value, 33,218,192 shares authorized , issued and outstanding at September 30, 2021 and December 31, 2020, respectively, and a liquidation preference of $ 15,332 and $ 14,697 at September 30, 2021 and December 31, 2020, respectively

Series D-1 convertible preferred stock, $ 0.00001 par value, 57,878,742 shares authorized , issued and outstanding at September 30, 2021 and December 31, 2020, respectively, and a liquidation preference of $ 46,003 and $ 43,908 at September 30, 2021 and December 31, 2020, respectively

Series D-2 convertible preferred stock, $ 0.00001 par value, 24,598,481 shares authorized , and 24,598,481 and 14,469,710 issued and outstanding at September 30, 2021 and December 31, 2020, respectively, and a liquidation preference of $ 17,982 and $ 10,176 at September 30, 2021 and December 31, 2020, respectively

Series E convertible preferred stock, $ 0.00001 par value, 102,671,041 shares authorized, issued and outstanding at September 30, 2021, and a liquidation preference of $ 83,525 at September 30, 2021;

no shares authorized, issued or outstanding at December 31, 2020, respectively

Stockholders’

Common stock, $ 0.00001 par value, 470,183,383 and 232,697,999 authorized at September 30, 2021 and December 31, 2020, and 442,717 and 381,123 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.00001 par value, 150,000,000 authorized at March 31, 2022 and December 31, 2021, and 29,217,236 and 29,211,643 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive loss

Total Stockholders’

Total Liabilities, Convertible Preferred Stock, and Stockholders’

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

Condensed Statements of Operations and Comprehensive Loss (Unaudited)

Total Liabilities and Stockholders’

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

Aura Biosciences, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands except for share and per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating Expenses:

5 unchanged sentences

Change in fair value of warrant liability

Change in fair value of derivative liability

Interest income (expense), including amortization

Loss from disposal of assets

Total other income (expense)

Net loss and comprehensive loss

Net loss attributable to common stockholders—

basic and diluted

Net loss per share attributable to common stockholders—

basic and diluted

Weighted average common stock outstanding—

basic and diluted

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

Interest income (expense), including amortization and accretion income

Loss on disposal of assets

Total other expense

Net loss attributable to common stockholders—basic and diluted (Note 13)

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

Weighted average common stock outstanding—basic and diluted

Comprehensive loss:

Net loss attributable to common stockholders

Other comprehensive items:

Unrealized loss on marketable securities

Total other comprehensive loss

Total comprehensive loss

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

Aura Biosciences, Inc.

Condensed Statements of Convertible Preferred Stock and Stockholders’

Deficit (Unaudited)

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’

Equity (Deficit)

(in thousands, except share data)

2 unchanged sentences

Series D-1 and D-2

Stockholders'

Other Comprehensive

Stockholders’

Income (Loss) Amount

Equity (Deficit)

Balance, December 31, 2020

Stock-based compensation

Issuance of Series D Tranche 2, convertible preferred stock, net of issuance costs of $ 18

Issuance of Series E convertible preferred stock, net of issuance costs of $ 232

Stock-based compensation expense

Stock option exercises

Balance, March 31, 2021

Stock-based compensation

Stock option exercises

Balance, June 30,

Stock-based compensation

Stock option exercises

Balance, September 30,

Convertible Preferred Stock

Series C-1 and C-2

Series D-1 and D-2

Other Comprehensive

Stockholders’

Income (Loss) Amount

Equity (Deficit)

Balance, December 31, 2021

Issuance of Series D

Tranche 2, convertible

preferred stock, net of

issuance costs of $ 18

Issuance of Series E

convertible preferred

stock, net of issuance

costs of $ 237

Stock-based compensation

Stock-based compensation expense

Stock option exercises

Unrealized loss on marketable securities

Balance, March 31, 2022

Stock-based compensation

Stock option exercises

Balance, June 30,

Stock-based compensation

Stock option exercises

Balance, September 30,

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

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

Aura Biosciences, Inc.

Condensed Statements of Cash Flows (Unaudited)

Condensed Consolidated Statements of Cash Flows

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

3 unchanged sentences

Stock-based compensation expense

Loss on disposal of property and equipment

Operating lease expense

Changes in operating assets and liabilities:

5 unchanged sentences

Purchases of property and equipment

Purchase of marketable securities

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of Series E convertible preferred stock, net of issuance costs

Proceeds from exercise of stock options

Advanced proceeds from issuance of Series D convertible preferred stock, net of issuance

Proceeds from issuance of Series D convertible preferred stock, net of issuance

Proceeds from issuance of Series E convertible preferred stock, net of issuance

Payments made for deferred offering costs

Payments made for deferring financing costs related to issuance of Series D

convertible preferred stock

Proceeds from issuance of Series D convertible preferred stock, net of

issuance costs

Net cash provided by financing activities

Net increase (decrease) 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 period

1 unchanged sentence

Supplemental disclosure of cash flow information:

Purchases of property and equipment in accounts payable and accrued

expenses and other liabilities

Initial measurement of right-of-use assets and lease liabilities for operating lease

Remeasurement of right-of-use assets and lease liabilities for lease modification

Right-of-use assets obtained in exchange for operating lease liabilities

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that sum to the total of the same such amounts shown in the condensed statements of cash flows (in thousands):

September 30,

Purchases of property and equipment in accounts payable and accrued expenses and other liabilities

Remeasurement of operating lease right-of-use assets and liabilities for lease modification

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows (in thousands):

Three Months Ended

Cash and cash equivalents, end of period

2 unchanged sentences

Cash, cash equivalents and restricted cash at end of period

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

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

Aura Biosciences, Inc.

Notes to Unaudited Condensed Financial Statements

Notes to Unaudited Condensed Consolidated Financial Statements

Description of Business

Aura Biosciences, Inc.

is a clinical-stage biotechnology company leveraging its novel targeted oncology platform to develop a potential new standard of care across multiple cancer indications, with an initial focus on ocular and urologic oncology.

Within these condensed financial statements, unless the context otherwise requires, references to the Company or Aura refer to Aura Biosciences, Inc.

(the “Company”

or “Aura”) is a clinical-stage biotechnology company leveraging its novel targeted oncology platform to develop a potential new standard of care across multiple cancer indications, with an initial focus on ocular and urologic oncology.

Within these unaudited condensed consolidated financial statements, unless the context otherwise requires, references to the Company or Aura refer to Aura Biosciences, Inc.

The Company’s proprietary platform enables the targeting of a broad range of solid tumors using Virus-Like Particles, or VLPs, that can be conjugated with drugs or loaded with nucleic acids to create Virus-Like Drug Conjugates, or VDCs.

6 unchanged sentences

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, the successful development and commercialization of products, fluctuations in operating results and financial risks, need for additional financing or alternative means of financial support or both to fund its current operating plan, protection of proprietary technology and patent risks, compliance with government regulations, dependence on key personnel and collaborative partners, competition, customer demand, management of growth, and the effectiveness of marketing by the Company.

Liquidity and Going Concern

Through September 30, 2021, the Company has funded its operations primarily with proceeds from the initial closing and additional closings of its convertible preferred stock financings.

The Company has incurred recurring losses and negative cash flows from operations since its inception, including net losses of $ 23.6 million and $ 17.3 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, the Company had cash and cash equivalents of $ 82.0 million and an accumulated deficit of $ 140.5 million.

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

Reverse Stock Split

On October 22, 2021, the Company effected a reverse stock split of the Company’s common stock on a 1-for-13.7 basis, or the Reverse Stock Split.

In connection with the Reverse Stock Split, the conversion ratio for the Company’s convertible preferred stock was proportionately adjusted such that the common stock issuable upon conversion of such preferred stock was decreased in proportion to the Reverse Stock Split.

Accordingly, all common stock share and per share amounts, for all periods presented in these unaudited condensed consolidated financial statements, have been retroactively adjusted, to reflect this reverse stock split and adjustment of the convertible preferred stock conversion ratios.

Initial Public Offering

On November 2, 2021, the Company completed its initial public offering or the IPO, in which it issued and sold 6,210,000 shares of common stock, including the full exercise of the underwriters’

option to purchase additional shares at a price to the public of $ 14.00 per share for aggregate gross proceeds of $ 86.9 million.

The Company received approximately $ 77.9 million in net proceeds after deducting underwriting discounts, commissions and estimated offering expenses.

As of November 24, 2021, the issuance date of these condensed financial statements, the Company expects that its cash and cash equivalents and total net proceeds from the IPO of $ 77.9 million will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance of these condensed financial statements.

The Company received approximately $ 78.3 million in net proceeds after deducting underwriting discounts, commissions and offering expenses.

Liquidity and Going Concern

Through March 31, 2022, the Company has funded its operations primarily with proceeds from the initial closing and additional closings of its convertible preferred stock financings, through its license agreements, and through its IPO.

The Company has incurred recurring losses and negative operating cash flows from operations since its inception, including net losses of $ 12.8 million and $ 5.9 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the Company had cash and cash equivalents and marketable securities of $ 133.3 million and an accumulated deficit of $ 165.0 million.

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

As of the issuance date of these unaudited condensed consolidated financial statements for the three months ended March 31, 2022, the Company expects that its cash and cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance of these condensed consolidated financial statements.

The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.

Impact of COVID-19

In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced.

Since then, COVID-19 coronavirus has spread globally.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the U.S.

government- imposed travel restrictions on travel between the United States, Europe and certain other countries.

The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as certain worker shortages have occurred, supply chains have been disrupted, and facilities and production have been suspended.

The future progression of the pandemic and its effects on the Company’s business and operations are uncertain.

The Company is monitoring the potential impact of COVID-19 on its business and condensed financial statements.

The effects of the public health directives and the Company’s work-from-home policies may negatively impact productivity, disrupt its business, and delay clinical programs and timelines and future clinical trials, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on its ability to conduct business in the ordinary course.

These and similar, and perhaps more severe, disruptions in the Company’s operations could negatively impact business, results of operations and financial condition, including its ability to obtain financing.

To date, the Company has not incurred impairment losses in the carrying values of its assets as a result of the pandemic and are not aware of any specific related event or circumstance that would require the Company to revise its estimates reflected in the condensed financial statements.

The Company cannot be certain what the overall impact of the COVID-19 pandemic will be on its business and prospects.

The extent to which the COVID-19 pandemic will directly or indirectly impact its business, results of operations, financial condition, and liquidity, including planned and future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, and the duration and intensity of the related effects.

Summary of Significant Accounting Policies

Basis of Presentation

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

In management’s opinion, the accompanying unaudited condensed financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company’s financial position, results of operations, and cash flows.

Unaudited Interim Financial Information

The accompanying condensed balance sheet as of September 30, 2021, the condensed statements of operations and comprehensive loss, condensed statement of convertible preferred stock and stockholders’

deficit for the three and nine months ended September 30, 2021 and 2020, and the condensed statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited.

The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2021 and the results of its operations for the three and nine months ended September 30, 2021 and 2020 and its cash flows for the nine months ended September 30, 2021 and 2020.

The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2021 and 2020 are also unaudited.

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

In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company’s financial position, results of operations, and cash flows.

The financial data and other information disclosed in these notes related to the three months ended March 31, 2022 and 2021 are also unaudited.

The unaudited condensed results of operations are not necessarily indicative of the operating results that may occur for the full fiscal year ending December 31, 2022.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.

Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S.

GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission, or the SEC.

Management believes that the disclosures provided here are adequate to make the information presented not misleading when these unaudited condensed financial statements are read in conjunction with the audited financial statements and notes thereto as of and for the year ended December 31, 2020.

The balance sheet data as of December 31, 2020 was derived from the Company’s audited financial statements included in the final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on November 1, 2021.

Management believes that the disclosures provided here are adequate to make the information presented not misleading when these unaudited condensed consolidated financial statements are read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2020, filed with the SEC as a part of the final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on November 1, 2021.

Since the date of those financial statements, there have been no changes to the Company's significant accounting policies except as noted below.

Cash Equivalents

Cash equivalents are highly liquid investments with an original maturity of 90 days or less at the date of purchase and consist of time deposits and investments in money market funds that invest in U.S.

Treasury obligations and government funds with commercial banks and financial institutions.

Prior to January 1, 2021, the Company accounted for leases in accordance with ASC 840, Leases.

At lease inception, the Company determined if an arrangement was an operating or capital lease.

For operating leases, the Company recognized rent expense, inclusive of rent escalation, holidays and lease incentives, on a straight-line basis over the lease term.

The difference between rent expense recorded and the amount paid was charged to deferred rent.

The Company presented lease incentives as deferred rent and amortized the incentives as a reduction to rent expense on a straight-line basis over the lease term.

The Company classified deferred rent as current and noncurrent liabilities based on the portion of the deferred rent that was scheduled to mature within the proceeding twelve months.

Effective January 1, 2021, the Company accounts for leases in accordance with ASU No.

2016-02, Leases (Topic 842) (“ASC 842”) .

At contract inception, the Company determines if an arrangement is or contains a lease.

A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

If determined to be or contain a lease, the lease is assessed for classification as either an operating or finance lease at the lease commencement date, defined as the date on which the leased asset is made available for use by the Company, based on the economic characteristics of the lease.

For each lease with a term greater than twelve months, the Company records a right-of-use asset and lease liability.

The Company adopted the n ew leasing standard effective January 1, 2021 , using the modified retrospective transition approach which uses the effective date, or January 1, 2021, as the date of initial application.

As a result, prior periods are presented in accordance with the previous guidance in ASC 840.

ASC 842 provides several optional practical expedients in transition.

The Company has elected to apply the package of practical expedients requiring no reassessment of whether any expired or existing contracts are or contain leases, the lease classification of any expired or existing leases, or the capitalization of initial direct costs for any existing leases.

A right-of-use asset represents the economic benefit conveyed to the Company by the right to use the underlying asset over the lease term.

A lease liability represents the obligation to make lease payments arising from the lease.

The Company elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets and therefore measures each lease payment as the total of the fixed lease and associated non-lease components.

Lease liabilities are measured at lease commencement and calculated as the present value of the future lease payments in the contract using the rate implicit in the contract, when available.

If an implicit rate is not readily determinable, the Company uses an incremental borrowing rate measured as the rate at which the Company could borrow, on a fully collateralized basis, a commensurate loan in the same currency over a period consistent with the lease term at the commencement date.

Right-of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments, less lease incentives granted by the lessor.

The lease term is measured as the noncancelable period in the contract, adjusted for any options to extend or terminate when it is reasonably certain the Company will extend the lease term via such options based on an assessment of economic factors present as of the lease commencement date.

The Company elected the practical expedient to not recognize leases with a lease term of twelve months or less.

Components of a lease are split into three categories:

lease components, non-lease components, and non-components.

The fixed and in-substance fixed contract consideration (including any consideration related to non-components) are allocated, based on the respective relative fair values, to the lease components and non-lease components.

The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets and allocate all of the contract consideration to the lease component only.

The Company’s operating leases are presented in the condensed balance sheet as operating lease right-of-use assets, classified as noncurrent assets, and operating lease liabilities, classified as current and noncurrent liabilities.

Operating lease expense is recognized on a straight-line basis over the lease term.

Variable costs associated with a lease, such as maintenance and utilities, are not included in the measurement of the lease liabilities and right-of-use assets but rather are expensed when the events determining the amount of variable consideration to be paid have occurred.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process preferred stock or common stock financings as deferred offering costs until such financings are consummated.

After consummation of the equity financing, these costs are recorded as a reduction to the carrying value of convertible preferred stock or in stockholders’

equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering.

Should a planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the statements of operations and comprehensive loss.

As of September 30, 2021, the Company had deferred offering costs of $ 1.6 million.

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021, in the Company's Annual Report on Form 10-K filed with the SEC on March 23, 2022, there have been no changes to the Company's significant accounting policies except as noted below.

Marketable Securities

All marketable securities have original maturities greater than 90 days.

The Company has classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

The Company considers its investment portfolio of marketable securities to be available-for-sale.

Accordingly, these investments are recorded at fair value.

Unrealized gains and losses are reported as the accumulated other comprehensive items in stockholders’

Amortization and accretion of premiums and discounts are recorded in other income (expense) within the consolidated statements of operations and comprehensive loss.

Realized gains or losses are included in interest income or interest expense, respectively.

If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence such as industry, financial inputs, and capital markets data to evaluate the extent to which the decline is other than temporary and, if so, marks the investment to market on the Company’s condensed consolidated statement of operations and comprehensive loss.

Recently Adopted Accounting Pronouncements

Upon adoption of ASC 842, the Company recorded lease liabilities and their corresponding right-of-use assets based on the present value of lease payments over the remaining lease term.

The adoption of ASC 842 resulted in the recognition of operating lease liabilities of $ 0.6 million and operating lease right-of-use assets of $ 0.5 million and the derecognition of deferred rent liabilities of $ 0.02 million on the Company’s balance sheet as of January 1, 2021.

The adoption impact relates to the Company’s existing operating lease for operating and laboratory space.

The adoption of ASC 842 did not have a material impact on the Company’s statements of operations and comprehensive loss or statements of cash flows.

The Company assessed the recent accounting pronouncements for the three months ended March 31, 2022 and determined no pronouncements have material impact to the condensed consolidated financial statements.

Fair Value of Assets and Liabilities

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of September 30, 2021 and December 31, 2020 (in thousands):

September 30,

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of March 31, 2022 and December 31, 2021 (in thousands):

Quoted prices

1 unchanged sentence

for identical

Financial assets

Cash equivalents:

Money market funds

Marketable securities:

Commercial paper

Corporate bonds

Government agencies

Total financial assets

Financial liabilities

Warrant Liability

3 unchanged sentences

for identical

Financial assets

Cash equivalents:

Money market funds

Total financial assets

Financial liabilities

Warrant Liability

Total financial liabilities

At September 30, 2021, the Company’s cash equivalents include investments in money market funds that invest in U.S.

Treasury obligations and government funds, the fair value of which is valued using level 1 inputs.

The fair value of the warrant liability was determined based on Level 3 inputs and utilizing the Black-Scholes option pricing model (see Note 10).

Significant changes to these assumptions would result in increases or decreases to the fair value of the warrant liability.

During the nine months ended September 30, 2021 and 202 0 , there were no transfers into or out of Level 3.

The following table set forth a summary of changes in the fair value of the Series B Warrants, which represents a recurring fair value measurement that is classified within Level 3 of the fair value hierarchy.

During the three months ended March 31, 2022 and 2 0 21, there were no transfers into or out of Level 3.

The following table set forth a summary of changes in the fair value of the common stock warrants, which represents a recurring fair value measurement that is classified within Level 3 of the fair value hierarchy.

Changes in fair value are recognized in other (expense) income as “Change in fair value of warrant liability”

in the Company’s condensed statements of operations and comprehensive loss (in thousands):

Series B Warrants ( 173,827 warrants)

in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss (in thousands):

Common Stock ( 12,686 warrants)

Fair value at December 31, 2021

Change in fair value

Fair value at September 30, 2021

Fair value at March 31, 2022

Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

September 30, 2021

December 31, 2020

Assets under construction

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Office furniture

Total property and equipment

Less—accumulated depreciation

Property and equipment, net

Depreciation expense was $ 0.2 million for the three months ended September 30, 2021 and 2020, and was $ 0.6 million for the nine months ended September 30, 2021 and 2020.

Depreciation expense was $ 0.3 million and $ 0.2 million for the three months ended March 31, 2022 and 2021, respectively.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

September 30, 2021

December 31, 2020

Prepaid insurance

Prepaid research and development expenses

Prepaid license agreements

Prepaid expenses and other current assets

Marketable securities consist of the following (in thousands):

March 31, 2022

Amortized Cost

Unrealized Gains

Unrealized Losses

Commercial paper

Corporate bonds

Government agencies

There were no impairments of the Company’s assets measured and carried at fair value during the three months ended March 31, 2022.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

September 30, 2021

December 31, 2020

Accrued research and development expenses

1 unchanged sentence

Accrued expenses and other current liabilities

Convertible Preferred Stock

As of September 30, 2021, the Company had 1,701,141 authorized, issued and outstanding shares of Series A Preferred stock, par value $ 0.00001 , or the Series A, 3,298,732 authorized, issued and outstanding shares of Series A-1 Preferred stock, par value $ 0.00001 , or the Series A-1, 4,325,021 authorized shares and 4,324,998 issued and outstanding shares of Series A-2 Preferred stock, par value $ 0.00001 , or the Series A-2, and 22,705,646 authorized shares and 22,531,819 issued and outstanding shares of Series B Preferred stock, par value $ 0.00001 , or the Series B, 58,109,711 authorized, issued and outstanding shares of Series C-1 Preferred stock, par value $ 0.00001 , or the Series C-1, 33,218,192 authorized, issued and outstanding shares of Series C-2 Preferred stock, par value $ 0.00001 , or the Series C-2, together with Series C-1, the Series C, 57,878,742 authorized, issued and outstanding shares of Series D-1 Preferred stock, par value $ 0.00001 , or the Series D-1, and 24,598,481 authorized, issued and outstanding shares of Series D-2 Preferred stock, par value $ 0.00001 , or the Series D-2, together with the Series D-1, the Series D, 102,671,041 authorized, issued, and outstanding shares of Series E Preferred stock, par value $ 0.00001 , or the Series E, and together with the Series D, the Series C and the Series B, collectively the Senior Preferred Stock.

All series of convertible preferred stock are collectively referred to as the Preferred Stock, each with a par value of $ 0.00001 per share.

Series D-2 Offering

On June 25, 2020, the Company entered into a Series D-2 Convertible Preferred Stock Purchase Agreement, or the Series D-2 Agreement, with certain investors to sell up to 24,598,481 shares of the Series D-2 stock at a purchase price of $ 0.6911 per share.

The Series D-2 Agreement provides for two closings, the first on October 1, 2020, and the second upon the achievement or waiver of certain milestone events.

The Company sold 14,469,710 shares of the Series D-2 on October 1, 2020, at the first tranche closing for gross proceeds of $ 10.0 million.

On March 5, 2021, the Company completed the second tranche of the Series D-2 offering and issued 10,128,771 shares of the Series D-2 at a purchase price of $ 0.6911 per share for gross proceeds of $ 7.0 million.

Costs incurred in connection with the Series D-2 offering totaled $ 0.1 million and were recorded as a reduction of proceeds from the Series D-2.

The majority of offering costs were incurred during the year ended December 31, 2020.

Offering costs incurred during the nine months ended September 30, 2021, were $ 0.02 million.

Series E Offering

On March 18, 2021, the Company completed its Series E offering and issued 102,671,041 shares of Series E stock, $ 0.00001 par value per share, at a purchase price of $ 0.7839 per share for gross proceeds of $ 80.5 million.

Costs incurred in connection with the Series E offering totaled $ 0.2 million during the nine months September 30, 2021 and were recorded as a reduction to the Series E convertible preferred stock.

The rights and privileges of the Company’s Preferred Stock are as follows:

Except as otherwise required by law or by other provisions, holders of the Preferred Stock vote together with the holders of common stock as a single class.

Holders of the Preferred Stock may cast the number of votes equal to the number of shares of common stock to which such shares of the Preferred Stock are convertible into.

Series C, D, and E Dividends:

From and after the date of the issuance of any shares of the Series C-1, Series C-2, Series D-1, Series D-2, and Series E, dividends at the annual rate of seven percent ( 7 %) per annum of the original share price per share accrue on such shares of the Series C-1, Series C-2, Series D-1, Series D-2, and Series E.

Dividends accrue from day to day, whether or not declared, and are cumulative, but not compounding.

Such dividends are only payable when and if declared by the Board of Directors (the "Board") or in the event of a Deemed Liquidation Event (as defined in the amended and restated Certificate of Incorporation).

No other dividends may be declared or paid on any other class of stock unless the holders of the shares of the Series E then outstanding first receive, or simultaneously receive, their applicable dividend.

As of September 30, 2021, $ 7.4 million, $ 3.2 million, $ 6.0 million, $ 1.0 million, and $ 3.0 million of cumulative dividends on the Series C-1, Series C-2, Series D-1, Series D-2, and Series E respectively, are included in the liquidation preference amount indicated on the balance sheet.

Series B Dividends:

From and after the date of the issuance of any shares of the Series B, dividends at the annual rate of $ 0.0869645 per share accrue on such shares of the Series B.

Dividends accrue from day to day, whether or not declared, and are cumulative, but not compounding.

Such dividends are only payable when and if declared by the Company’s Board or in the event of a Deemed Liquidation Event (as defined in the amended and restated Certificate of Incorporation).

No other dividends may be declared or paid on any other class of stock unless the holders of the shares of the Series B then outstanding first receive, or simultaneously receive, their applicable dividend.

As of September 30, 2021, $ 10.9 million of cumulative dividends on the Series B are included in the liquidation preference amount indicated on the balance sheet.

Series A Dividends

From and after the date of the issuance of the Series A, Series A-1, and Series A-2, if the Company declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Company, the dividend payable to the holders of the Series A, Series A-1, and Series A-2 convertible preferred stock shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest dividend.

No other dividends, or dividends on common stock payable in shares of common stock, may be declared or paid unless the holders of the Series A, Series A-1, and Series A-2 then outstanding first receive, or simultaneously receive, their applicable dividend.

As of September 30, 2021, no dividends have been declared on the common stock or the Preferred Stock.

Liquidation Rights

In the event of a Deemed Liquidation Event, as defined in the Company’s amended and restated Certificate of Incorporation, the assets of the Company will be distributed first to the holders of the Series E.

The holders of the Series E will receive, in preference to all other stockholders, an amount equal to the sum of the Series E original issue price (equal to the cash price paid per share of $ 0.783900 ), plus unpaid dividends on such shares.

Next, the holders of the Series D will receive, in preference to all other stockholders other than the Series E, an amount equal to the sum of the Series D original issue price, plus unpaid dividends on such shares.

Next, the holders of the Series C will receive, in preference to all stockholders other than the Series E and D holders, an amount equal to the sum of the Series C original issue price plus unpaid dividends on such shares.

Next, the holders of the Series B will receive, in preference to the holders of the Series A, Series A-1, Series A-2 and common stock, an amount equal to the sum of the Series B original issue price plus unpaid dividends on such shares.

Next, the holders of the Series A, Series A-1, and Series A-2 will receive, in preference to the holders of common stock, an amount equal to the greater of their applicable liquidation preference or what they would have received had their shares converted into common stock.

If the proceeds available are not sufficient to satisfy the full liquidation preference, the entire proceeds are to be distributed pro-rata among the Series E holders in proportion to the full preferential amount the Series E holders are entitled to receive.

The Senior Preferred Stock converts into common stock on a one-for- one basis .

Each share of the Series B, Series C-1, Series C-2, Series D-1, Series D-2, and Series E is convertible into the number of shares of common stock as is determined by dividing the respective original issue price by the conversion price in effect at the time of conversion.

The Series E conversion price is set at $ 0.7839 per share, the Series D-1 and Series D-2 conversion price is set at $ 0.6911 per share, the Series C-1 conversion price is set at $ 0.5213 per share, the Series C-2 conversion price is set at $ 0.36491 per share, and the Series B conversion price is set at $ 1.24235 per share;

none represents a beneficial conversion feature.

Subject to certain exceptions, the Senior Preferred Stock has the benefit of anti- dilution protection on a weighted-average basis in the event that the Company sells stock at less than the applicable conversion price per share.

Each share of the Series A and Series A-1 was originally convertible into the number of shares of common stock determined by dividing the respective Series A and Series A-1 original issue price by the conversion price in effect at the time of conversion.

The Series A conversion price was originally equal to $ 2.00 per share and the Series A-1 conversion price was originally equal to $ 2.4847 per share.

As the Series A-2 was sold at $ 1.24235 per share, less than the per share prices of the Series A and Series A-1, anti-dilution protections were triggered.

Pursuant to the anti-dilution protection terms, on February 24, 2015, the Series A conversion price was reduced from $2.00 to $ 1.8191 per share of common stock and the Series A-1 conversion price was reduced from $2.4847 to $ 2.1898 per share of common stock and, therefore, the Series A conversion ratio was changed from 1 to 1 to 1 to 1.099 and the Series A-1 conversion ratio was changed from 1 to 1 to 1 to 1.135 .

The Company evaluated the Series A and Series A-1 with the updated conversion ratios and determined that there was no beneficial conversion feature.

The Series A-2 converts into common stock on a one-for- one basis .

The Series A-2 conversion price is set at $ 1.24235 per share and does not represent a beneficial conversion feature.

According to the terms of the Company’s amended and restated Certificate of Incorporation, in the event that the applicable conversion price for any series of Senior Preferred Stock is reduced, then the applicable conversion price for each series of the Series A convertible preferred stock shall be uniformly and concurrently reduced.

Each share of the Preferred Stock will automatically convert into common stock upon (a) the occurrence of an event, specified by vote or written consent of certain stockholders or (b) the completion of a public stock offering involving a price per share of common stock of not less than $ 1.554975 per share, subject to certain adjustments, where such offering results in aggregate gross proceeds to the Company of at least $ 50.0 million and the common stock is listed for trading on either the New York Stock Exchange or the Nasdaq Stock Market.

The Company must reserve and keep available out of its authorized but unused capital stock such number of authorized shares of common stock to sufficiently effect the conversion of all outstanding Preferred Stock.

In considering the features of the convertible preferred stock, the Company determined that none of the features, including the conversion features, requires bifurcation during the nine months ended September 30, 2021 and 2020.

The conversion ratios for the Series A was changed to 13.700 to 1.099 , Series A-1 was changed to 13.7 to 1.135 , and the Series A-2 through the Series E was changed to 13.7 to 1 upon the Company’s filing of its amendment to its amended and restated Certificate of Incorporation on October 22, 2021 (see Note 16).

The Company had 470,183,383 and 232,697,999 authorized shares of common stock, par value $ 0.00001 per share, of which 442,717 and 381,123 shares were issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.

The Company had 150,000,000 authorized shares of common stock, par value $ 0.00001 per share, of which 29,217,236 and 29,211,643 shares were issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.

Upon closing of the IPO on November 2, 2021, all of the Company's outstanding shares of convertible preferred stock automatically converted into 22,550,561 shares of common stock.

In addition, the Company authorized 10,000,000 shares of preferred stock, par value $ 0.00001 per share, all of which shares of preferred stock will be undesignated.

Stock-Based Compensation

On January 15, 2009, the Company’s Board adopted the 2009 Long-Term Incentive Stock Option Plan (the “2009 Plan”) for the issuance of stock-based compensation to both employees and non- employees.

The awards under this plan typically vest over a 24, 36 or 48-month period, depending on the option agreement and have a 10-year term.

On December 12, 2018 , the 2009 Plan expired, and the Company adopted the Aura Biosciences, Inc.

2018 Stock Option and Incentive Plan

On December 12, 2018, the Company adopted the Aura Biosciences, Inc.

2018 Equity Incentive Plan (the “2018 Plan”).

and collectively with the 2009 Plan, the "Plans”).

No options were modified in conjunction with the expiration of the 2009 Plan.

The options granted under the 2009 Plan continue to be outstanding in accordance with their original terms.

The 2018 Plan will expire in 2028.

Under the 2018 Plan, Aura may grant incentive stock options, non-qualified stock options, restricted and unrestricted stock awards and stock rights.

Under the 2018 Plan, Aura may grant incentive stock options, non-qualified stock options, restricted and unrestricted stock awards and stock right.

The Board of Directors (the "Board") has determined not to make any further awards under the 2018 Plan as of November 2, 2021.

However, the 2018 Plan will continue to govern outstanding equity awards granted thereunder.

2021 Stock Option and Incentive Plan

The 2021 Stock Option and Incentive Plan, (the "2021 Plan"), was adopted by the Board on October 7, 2021, approved by the Company’s stockholders on October 22, 2021 and became effective on November 1, 2021.

The 2021 Plan permits the granting of both options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code and options that do not so qualify.

The number of shares initially reserved for issuance under the 2021 Plan was 3,352,166 , which increased on January 1, 2022 and will continue to increase each January 1 thereafter, by 5 % of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee.

The maximum number of shares of common stock that may be issued in the form of incentive stock options shall not exceed the initial limit, cumulatively increased on January 1, 2022 and on each January 1 thereafter by the lesser of the annual increase for such year or 3,352,166 shares of common stock.

On January 1, 2022, the shares reserved for issuance was increased to 4,812,748 shares.

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan, (the "ESPP"), was adopted by the Board on October 7, 2021, approved by the Company’s stockholders on October 22, 2021 and became effective on November 1, 2021.

A total of 335,217 shares of common stock were initially reserved for issuance under this plan, which increased on January 1, 2022 and will continue to increase each January 1 thereafter through January 1, 2031, by the least of (i) 335,217 shares of common stock, (ii) 1 % of the outstanding number of shares of common stock on the immediately preceding December 31 or (iii) such lesser number of shares of common stock as determined by the administrator of the ESPP.

On January 1, 2022, the shares reserved for issuance was increased to 627,333 shares.

The first offering period has not yet been decided by the Company’s Board of Directors or designated committee of the Company’s Board of Directors.

With the transfer of the available options from the 2018 Plan to the 2021 Plan, there were 3,447,892 options available for grant under the 2021 Plan at March 31, 2022.

The Board is authorized to administer the 2021 Plan.

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all other terms and conditions upon which each award may be granted in accordance with the 2018 Plan.

In addition, the Board or any committee to which the Board delegates authority may, with the consent of the affected plan participants, re-price or otherwise amend outstanding awards consistent with the terms of the 2018 Plan.

On March 18, 2021, the Board approved an increase to the 2018 Plan available option pool of 2,346,228 options.

With this increase and the transfer of the available options from the 2009 Plan, there were 650,795 options available for grant under the 2018 Plan at September 30, 2021.

The following table summarizes the combined stock option activity under the 2009 and the 2018 Plan for the nine months ended September 30, 2021:

In addition, the Board may award restricted shares of common stock and restricted stock units to participants subject to such conditions and restrictions as it may determine.

The Board or any committee to which the Board delegates authority may, with the consent of the affected plan participants, re-price or otherwise amend outstanding awards consistent with the terms of the 2021 Plan.

The following table summarizes stock option activity under the 2018 Plan and 2021 Plan for the three months ended March 31, 2022:

Aggregate Intrinsic

Outstanding at December 31, 2021

Cancelled or forfeited

Outstanding at September 30, 2021

Exercisable at September 30, 2021

The weighted-average grant date fair value of stock options granted during the nine months ended September 30, 2021 and 2020 is $ 3.97 and $ 2.74 per share, respectively.

The total intrinsic value of options exercised was $ 0.01 million and $ 0.02 million for the nine months ended September 30, 2021 and 2020, respectively.

Cancelled/Forfeited

Outstanding at March 31, 2022

Exercisable at March 31, 2022

The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2022 and 2021 is $ 11.98 and $ 3.56 per share, respectively.

The total intrinsic value of options exercised was $ 0.1 million and $ 0.01 million for the three months ended March 31, 2022 and 2021, respectively.

The Company has elected to use the Black-Scholes option pricing model to determine the fair value of options granted and generally recognizes the compensation cost of stock-based awards on a straight-line basis over the vesting period of the award.

The determination of the fair value of stock-based payment awards utilizing the Black-Scholes option pricing model is affected by the estimated fair value of the Company’s common stock and a number of other assumptions, including expected volatility, expected life, risk-free interest rate, and expected dividends.

The fair value of the stock options issued for the three and nine months ended September 30, 2021 and 2020 was measured with the following weighted-average assumptions:

The fair value of the stock options issued for the three months ended March 31, 2022 and 2021 was measured with the following weighted-average assumptions:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Weighted average risk-free interest rate

Expected term (years)

Expected volatility

Expected dividend yield

Risk-free interest rate, %

Expected term

Expected volatility of the underlying stock, %

Expected dividend rate, %

Restricted Stock Units

The Company has granted restricted stock units with service vesting based conditions.

Unvested shares of restricted common stock may not be sold or transferred by the holder.

They are legally issued and outstanding.

These restrictions lapse accordingly to the time-based vesting of each award.

A summary of the restricted stock units activity during the three months ended March 31, 2022 is as follows:

Restricted Stock Units

Grant Date Fair Value

Unvested at December 31, 2021

Unvested at March 31, 2022

As a result of the 2021 Equity Incentive Plan, the Company granted restricted stock units which vest in increments of 25 % annually over a period of four years .

No restricted stock units vested during the three months ended March 31, 2022.

Stock-based Compensation Expense

The Company recorded stock-based compensation expense as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

General and administrative

As of September 30, 2021, there was $ 7.9 million of unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.61 years.

Series B Warrants

In February 2015 and May 2015, the Company issued warrants to purchase 1,650,098 and 887,536 shares of the Series B convertible preferred stock, respectively, at an exercise price of $ 1.24235 per share.

Each Series B Warrant was immediately exercisable and expires in ten years from the original date of issuance.

As of March 31, 2022, there was $ 16.0 million of unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 3.14 years.

As of March 31, 2022, there was $ 2.9 million of unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 3.58 years.

Common Stock Warrants

In February 2015 and May 2015, the Company issued warrants to purchase 1,650,098 and 887,536 shares of Series B convertible preferred stock, respectively, at an exercise price of $ 1.24235 per share (the "Series B Warrants").

Each Series B Warrant was immediately exercisable and expires ten years from the original date of issuance.

Pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity, the Series B Warrants were classified as a liability and are re-measured to fair value at each balance sheet date and immediately prior to exercise.

The Series B Warrants were converted into warrants to purchase 12,686 shares of common stock upon the completion of the IPO in November 2021.

A total of 173,827 of the Series B Warrants remained outstanding at September 30, 2021 and December 31, 2020.

A total of 12,686 of The Series B Warrants were outstanding as of March 31, 2021.

The Series B Warrants were converted into warrants to purchase 12,686 shares of common stock with an exercise price of $ 17.03 upon the completion of the IPO in November 2021.

A total of 12,686 of the common stock warrants remained outstanding at March 31, 2022.

The warrants were valued using the Black-Scholes option pricing model.

The estimated fair value of the warrants and the significant assumptions used were as follows:

Series B Warrants

September 30, 2021

December 30, 2021

Series B estimated fair value

Common Stock Warrants

Expected term (years)

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Dividend yield

During the nine months ended September 30, 2021, the change in fair value of the warrant liability was deemed immaterial.

In January 2012, the Company adopted the Aura Biosciences 401(k) Profit Sharing Plan and Trust (the “401(k) Plan”) for its employees, which is designed to be qualified under Section 401(k) of the Internal Revenue Code.

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The Company makes matching contributions of 100 % of the first 6 % of employee contributions.

The Company made matching contributions in the amount of $ 0.2 million and $ 0.1 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company made matching contributions in the amount of $ 0.1 million for the three months ended March 31, 2022 and 2021.

Commitments and Contingencies

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The Company has historically entered into lease arrangements for its facilities.

As of December 31, 2020, the Company had one operating lease for its office and laboratory facility with required future minimum payments.

The lease does not contain any options to renew, terminate, or purchase the underlying asset, and was set to expire on July 31, 2022 .

As part of its adoption of ASC 842, the Company recorded a right-of-use asset and operating lease liability for this lease as of the effective date.

The Company has one operating lease for its office and laboratory facility with required future minimum payments.

The lease does not contain any options to renew, terminate, or purchase the underlying asset.

On March 31, 2021, the Company executed an amendment to the facility lease which included an extension of the expiration date of the original leased premises, the addition of 4,516 square feet of laboratory space with an expected commencement date of May 1, 2021 , and the addition of 1,000 square feet of laboratory space with an expected commencement date of June 15, 2021 .

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The Company also leases office and laboratory equipment for which the related expense is immaterial.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s leases for the three and nine months ended September 30, 2021 (in thousands):

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s leases for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended

September 30, 2021

Nine Months Ended

September 30, 2021

Financing lease costs:

Amortization of finance right-of-use assets

1 unchanged sentence

Variable lease costs

Short-term lease costs

Total lease costs

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Cash paid for amounts included in the measurement of lease liability—operating leases

Weighted-average remaining lease term—finance leases (years)

Weighted-average remaining lease term—operating leases (years)

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Weighted-average discount rate—operating leases

The following table reconciles the future minimum commitments to the Company’s operating lease liabilities at September 30, 2021 (in thousands):

Operating lease payments as of September 30, 2021

2021 (excluding nine months ended September 30, 2021)

The following table reconciles the future minimum commitments to the Company’s operating lease liabilities at March 31, 2022 (in thousands):

Operating lease payments as of

March 31, 2022

Total lease payments

Total operating lease liabilities at September 30, 2021

Total operating lease liabilities at March 31, 2022

current portion of lease liabilities

Lease liabilities, net of current portion

In May 2021, the Company paid in full its finance lease.

Laser Purchasing Commitment

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LI-COR Exclusive License and Supply Agreement

In January 2014, the Company entered into an Exclusive License and Supply Agreement, or the LI-COR Exclusive License Agreement, with LI-COR, Inc., or LI-COR, for the license of IRDye 700DX and related licensed patents for the treatment and diagnosis of ocular cancers in humans, and as amended in January 2016, July 2017, April 2018 and April 2019.

LI-COR is a related party owning shares of the Company’s capital stock.

The LI-COR Exclusive License Agreement required a one-time upfront license issue fee of $ 0.1 million and requires aggregate milestone payments of up to $ 0.2 million upon certain regulatory and development milestones.

In January 2014, the Company entered into an Exclusive License and Supply Agreement, or the LI-COR Exclusive License agreement with LI-COR, Inc.

(LI-COR) for the license of IRDye 700DC and related licensed patents for the treatment and diagnosis of ocular cancers in humans as amended in January 2016, July 2017, April 2018 and April 2019.

The LI-COR Exclusive License Agreement required a one-time upfront license issue fee of $ 0.1 million and aggregate milestone payments of up to $ 0.2 million upon certain regulatory and development milestones.

The Company is also required to pay LI-COR low-single digit royalties on net sales.

The term of the LI-COR Exclusive Agreement expires on a country-by-country basis, until the longer of (i) ten years from the first commercial sale of a licensed product in such country and (ii) the last to expire valid claim in such country.

The Company recognized no expenses related to this agreement and related amendments for the nine months ended September 30, 2021 and 2020, respectively.

The Company recognized no expenses related to this agreement and related amendments for the three months ended March 31, 2022, and 2021, respectively.

LI-COR Non-Exclusive License and Supply Agreement

In December 2014, the Company entered into a Non-Exclusive License Agreement, or the 2014 Non-Exclusive Agreement, for LI-COR to supply IRDye 700DX to the Company for the treatment and diagnosis of non-ocular cancers in humans.

Under the 2014 Non-Exclusive Agreement, the Company paid a license issue fee of $ 0.03 million on the effective date.

The Company must also pay LI-COR a non-refundable, non-creditable fee of $ 0.03 million per each licensed product upon pre-IND designation, as defined, of such licensed product.

During the term, the Company must pay LI-COR low-single digit royalties on net sales.

In December 2014, the Company entered into a Non-Exclusive License Agreement with LI-COR for the supply of IRDye 700DX to the Company for the treatment and diagnosis of non-ocular solid tumor cancers in humans.

Under the 2014 Non-Exclusive, the Company paid a license issue fee of $ 0.03 million on the effective date.

The Company must also pay LI-COR a non-refundable, non-creditable fee of $ 0.03 million per each licensed product upon pre-IND designation, as defined of such licensed product, aggregate milestone payments of up to $ 0.3 million upon certain regulatory and development milestones;

and during the term, the Company must pay LI-COR a low-single digit percentage royalty on net sales.

LI-COR receives 10% of all sublicensee income within 30 days of the Company’s receipt from the sublicensee.

The 2014 Non-Exclusive Agreement also required the Company to make certain payments upon the achievement of specified development and commercial milestones of up to $ 0.4 million in the aggregate.

The 2014 Non-Exclusive Agreement also required the Company to make certain payments upon the achievement of specified development and commercial milestones of up to $ 0.4 million in aggregate.

Life Technologies Corporation

In December 2014, the Company entered into a non-exclusive, perpetual license agreement with Life Technologies Corporation, or Life Technologies, which allows the use of their HEK293 cell lines to manufacture Aura’s products.

Under this agreement the Company is required to pay an initial license fee of $ 0.1 million for each product.

An annual development fee of $ 0.1 million is due within a year from the payment of the initial license fee and due annually until the earlier of (i) payment of a commercialization fee or (ii) all development work is terminated.

In December 2014, the Company entered into a non-exclusive, perpetual license agreement with Life Technologies Corporation (“Life Technologies”), which allows for five licensed products.

Under this agreement the Company is required to pay an initial license fee of $ 0.1 each product.

An annual development fee of $ 0.1 million is due within a year from payment of the initial license fee and due annually or earlier of (i) payment of a commercialization fee or (ii) all development work is terminated.

The commercialization fee is a one-time, non-refundable, non-creditable fee of $ 0.3 million due upon receipt of approval of a licensed product.

In the event of a change of control of an above 50 % change in voting share, there will be a change of control fee of $ 0.2 million.

The Company recorded a derivative liability due an increased probability of payment assessed in June 2021 to account for the change of control fee.

Such amount was reduced to nil during the three months ended September 30, 2021 as the probability of a change of ownership above 50 % of voting shares for the pending IPO was deemed probable not to occur.

During the nine months ended September 30, 2021 and 2020, the Company recognized $ 0.03 million of expenses related to this agreement.

In the event of a change of control, there will be a change of control fee of $ 0.2 million.

In January 2022, the Company entered into the First Amendment to the non-exclusive, perpetual license agreement with Life Technologies for use of the license in an additional indication.

The cost of this amendment was a one-time fee of $ 0.05 million.

During the three months ended March 31, 2022, and 2021, the Company recognized $ 0.05 million and $ 0.02 million of expenses related to this agreement.

National Institute of Health (NIH)-Biologic Materials License Agreement

In December 2010, the Company entered into a Biologic Materials License Agreement with National Institutes of Health, or the NIH, for a non-exclusive right to use materials described in Schiller et al., Virology 2004 Apr.10, 321(2):205-16, which required a one-time non-refundable license issuance fee of $ 0.02 million.

In December 2010, the Company entered into a Biologic Materials License Agreement with NIH for a non-exclusive right to use materials described in Schiller et al., Virology 2004 Apr.10, 321(2):205-16.

This agreement required a one-time non-refundable license issuance fee of $ 0.02 million.

No future milestone payments or royalties are due under this agreement.

National Institute of Health (NIH)-Collaboration Research and Development Agreement

In July 2011, the Company entered into a Collaboration Research and Development Agreement, or CRADA, with Dr.

In July 2011, the Company entered into a Collaboration Research and Development Agreement (CRADA), with Dr.

John Schiller at the NIH, for a period of two years with the rights to an exclusive license to all technology generated within the collaboration.

Under the agreement, the Company was required to make annual payments each year to fund the research activities, with the first payment due within 30 days of the effective date and subsequent payments due within 30 days of the anniversary date.

This agreement was further amended in 2012, 2013, 2014, 2015, 2016, 2018 and most recently in September of 2020.

During 2011-2020, the Company paid an aggregate of $ 0.3 million in research collaboration fees, $ 0.04 million of which was paid in 2020.

In September 2020, the Company executed the seventh amendment to the CRADA agreement.

In this amendment the term of this agreement is extended until September 30, 2022, and the Company paid $ 0.03 million on the tenth anniversary of the CRADA agreement which occurred in July of 2021.

Under this agreement, the Company is required to make annual payments of $ 0.03 million to fund the research activities, the first payment of which was paid within 30 days of the effective date.

Subsequent payments are due within 30 days of the anniversary of the effective date.

This agreement was first amended in 2012, 2013, 2014, 2015, 2016, 2018 and most recently in September of 2020.

During 2011-2022, the Company paid an aggregate of $ 0.4 million in research collaboration fees, $ nil and $ 0.03 million of which was paid in 2022 and 2021, respectively.

A seventh amendment was made in October 2020, requiring payment of $ 0.04 million within 30 days of October 1, 2020, and another $ 0.03 million within 30 days of the 10th anniversary of the CRADA, which was paid in July 2021.

This seventh amendment extended the term of the CRADA to September 30, 2022.

The Company recognized no expenses related to this agreement and related amendments for the three months ended March 31, 2022, and 2021, respectively

National Institute of Health (NIH)-Exclusive Patent License Agreement

In 2013, the Company entered into an exclusive patent license agreement that required the Company to pay a license issue royalty fee of $ 0.1 million and reimburse the NIH for any patent expenses incurred.

In September 2013, the Company entered into an exclusive patent license agreement (the “NIH Exclusive License Agreement”) with the NIH, that required the Company to pay a license issue royalty of $ 0.1 million and reimburse the NIH for any patent expenses incurred.

Under the agreement, the Company is required to make low single-digit percentage royalty payments based on specified levels of annual net sales of licensed products subject to certain specified reductions.

The Company is required to make development and regulatory milestone payments up to $ 0.7 million in the aggregate and sales milestone payments up to $ 0.6 million in the aggregate.

The Company is required to make development and regulatory milestone payments of up to $ 0.7 million in aggregate and sales milestone payments up to $ 0.6 million in the aggregate.

The Company is also required to pay NIH a mid-single to low teen-digit percentage of any sublicensing revenue the Company receives.

Additionally, the Company’s payment obligations to NIH are subject to an annual minimum royalty payment of low five figures.

As of September 30, 2021, the Company has paid NIH approximately $ 0.4 million in aggregate milestones under the NIH license agreement.

In addition to milestones under the agreement, the Company reimburses the NIH for any patent filing costs incurred.

As of September 30, 2021, the Company has reimbursed the NIH approximately $ 0.3 million in aggregate.

The Company accrued $ 0.03 million and $ 0.02 million in patent licensing reimbursement fees as of September 30, 2021 and December 31, 2020.

Additionally, the Company’s payment obligations to the NIH are subject to an annual minimum royalty payment of low five figures.

As of March 31, 2022, the Company has paid NIH approximately $ 0.4 million in aggregate milestones under the NIH license agreement.

The Company recognized no expenses for patent licensing fees for the three months ended March 31, 2022, and 2021, respectively.

In 2015, 2018 and 2019, the Company amended its exclusive patent license to include updates on the status of the commercial development and update/expand the list of licensed patents and patent applications.

Each of those amendments required a $ 0.03 million payment that the Company paid.

In November 2009, the Company entered into an exclusive, royalty-bearing license agreement with Inserm-Transfert of France for use of its patents.

The agreement expires on a country by country basis based on the last to expire of any patent encompassed within the scope of the patent rights or 10 years from the date of the first commercial sale by the Company, whichever is later.

There are potential milestone payments of €

0.5 million ($ 0.5 million at December 31, 2020) in the aggregate associated with this agreement.

Inserm-Transfert License Agreement

In November 2009, the Company entered into an exclusive, royalty-bearing patent license agreement with Inserm-Transfert of France.

The agreement expires on a country by country basis based on the last to expire any patent encompassed within the scope of the patent rights or 10 years from the date of the first commercial sales by the Company, whichever is later.

The IND filing milestone of €

0.01 million was accrued in 2016 and paid in 2017 by the Company.

The milestones for the successful Phase I, II and III clinical trials are based on receiving a final report and achieving the primary endpoints defined in that trial and those milestones have not been achieved as of September 30, 2021.

Upon the sublicense by the Company of a product for which royalties are payable under this agreement, low- to mid-single-digit royalty payments would be due by the Company.

If Aura sublicenses the delivery platform for use with multiple drugs, low- to mid-teen payments on receipts would be due by the Company .

The milestones for the successful Phase I, II and III clinical trials are based on receiving a final report and achieving the primary endpoints defined in that trial, and those milestones have not been achieved as of March 31, 2022.

Upon the sublicense by the Company of a product for which royalties are payable under the agreement, low- to mid-single-digit royalty payments would be due by the Company.

The non-milestone payments in this agreement are subject to an anti-stacking clause.

The Company did no t incur any expense in the period ended September 30, 2021 and 2020.

In July 2019, the Company entered into an exclusive license agreement with Clearside Biomedical, Inc., or Clearside, for the license of Clearside’s Suprachoroidal Microneedle Technology for use in the treatment of indeterminate lesions, and choroidal tumors.

The Company did no t incur any expense in the three months ended March 31, 2022, and 2021.

In July 2019, the Company entered into an exclusive license agreement with Clearside Biomedical, Inc.

(“Clearside”), for the license of Clearside’s Suprachoroidal Microneedle Technology for use in the treatment of indeterminate lesions and choroidal tumors.

Upon execution of the License Agreement, the Company paid Clearside an upfront payment of $ 0.1 million which was expensed as incurred.

Under the Clearside license agreement, the Company is required to pay milestones up to $ 21.0 million in the aggregate to Clearside upon the achievement of specified regulatory and development milestones, and upon the achievement of certain commercial sales milestones The Company is also required to pay low single digit royalties on net sales.

Under the Clearside License Agreement, the Company is required to pay milestones up to $ 21.0 million in the aggregate upon the achievement of specified regulatory and development milestones, and upon the achievement of certain commercial sales milestones.

The Company is also required to pay low to mid-single digit royalties on net sales.

If the Company sublicenses a product for which royalties are payable, then the Company is required to pay the greater of 20 % received or low single digit royalties on net sales.

The Company has made no milestone or royalty payments as of September 30, 2021.

The Clearside License agreement expires on a country-by-country basis upon the later of the last to expire patent or ten years from the date of the first commercial sale of a product.

The Company recognized no expenses related to this agreement and related amendments for the three months ended March 31, 2022, and 2021, respectively.

Net Loss Per Share

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Diluted net loss per share is the same as basic net loss per share for the periods presented since the effects of potentially dilutive securities are antidilutive given the net loss of the Company.

The Company has calculated basic and diluted net loss per share for the three and nine months ended September 30, 2021 and 2020 as follows (in thousands, except share and per share data):

The Company has calculated basic and diluted net loss per share for the three months ended March 31, 2022 and 2021 as follows (in thousands, except share and per share data):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Accruals of dividends of preferred stock

Net loss attributable to common stockholders—basic and

Net loss attributable to common stockholders—basic and diluted

Weighted-average common stock outstanding

Net loss per share attributable to common stockholders—

basic and diluted

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

The following potentially dilutive securities were excluded from the computation of the diluted net loss per share for the periods presented because their effect would have been antidilutive:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Convertible preferred stock on as if converted basis

Convertible preferred stock

Stock options to purchase common stock

Restricted stock units that vest into common stock

Warrants to purchase preferred stock

Warrants to purchase common stock

Total potential dilutive shares

The Company estimates an annual effective tax rate of 0 % for the year ending December 31, 2021 as the Company incurred losses for the nine months ended September 30, 2021, and is forecasting additional losses through the remainder of fiscal year ending December 31, 2021, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2021.

The Company estimates an annual effective tax rate of 0 % for the year ending December 31, 2022 as the Company incurred losses for the three months ended March 31, 2022, and is forecasting additional losses through the remainder of fiscal year ending December 31, 2022, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2022.

Therefore, no federal or state income taxes are expected and none have been recorded at this time.

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Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company does not currently believe that realization of its deferred tax assets is more likely than not.

As of September 30, 2021, the Company had no unrecognized income tax benefits that would reduce the Company’s effective tax rate if recognized.

Related Parties

During the nine months ended September 30, 2021 and 2020, the Company incurred $ 0.4 million and $ 0.3 million in expenses to a stockholder that provided research and development related services.

Of these amounts, $ 0.01 and $ 0.1 million were in accrued expenses as of September 30, 2021 and 2020.

As of March 31, 2022, the Company had no unrecognized income tax benefits that would reduce the Company’s effective tax rate if recognized.

Subsequent Events

Subsequent events have been evaluated through the date of filing of the unaudited condensed financial statements.

The Company has identified the following subsequent events that require disclosure:

Election of Automatic Conversion of Preferred Stock

On October 7, 2021, the required convertible preferred stockholders authorized the automatic conversion of all shares of convertible preferred stock in an initial public offering, subject to the price per share of the common stock in the Company’s sale of shares of common stock to the public in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $ 75.0 million of gross proceeds to the Company and such shares being listed on the Nasdaq Stock Market, or a Public Offering, being at least $ 0.94068 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the common stock), (ii) subject to and effective upon the closing of the Public Offering and (iii) subject to the Public Offering being consummated no later than February 28, 2022 .

Reverse Stock Split

On October 22, 2021, the Company effected a reverse stock split of the Company’s common stock on a 1-for-13.7 basis, or the Reverse Stock Split.

Accordingly, all common stock share and per share amounts, for all periods presented in these condensed financial statements, have been retroactively adjusted, to reflect this reverse stock split and adjustment of the convertible preferred stock conversion ratios.

Initial Public Offering

On November 2, 2021, the Company completed its IPO, in which it issued and sold 6,210,000 shares of common stock, including the full exercise of the underwriters’

option to purchase additional shares at a price to the public of $ 14.00 per share for aggregate gross proceeds of $ 86.9 million.

The Company received approximately $ 77.9 million in net proceeds after deducting underwriting discounts, commissions and estimated offering expenses.

2021 Stock Option and Incentive Plan

The 2021 Stock Option and Incentive Plan, or the 2021 Plan, was adopted by the Board on October 7, 2021, approved by the Company’s stockholders on October 22, 2021 and became effective on November 1, 2021.

The 2021 Plan permits the granting of both options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code and options that do not so qualify.

The number of shares initially reserved for issuance under the 2021 Plan was 3,352,166 , which will automatically increase on January 1, 2022 and each January 1 thereafter, by 5 % of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee.

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan, or the ESPP, was adopted by the Board on October 7, 2021, approved by the Company’s stockholders on October 22, 2021 and became effective on November 1, 2021.

A total of 335,217 shares of common stock were initially reserved for issuance under this plan, which will automatically increase on January 1, 2022 and each January 1 thereafter through January 1, 2031, by the least of (i) 335,217 shares of common stock, (ii) 1 % of the outstanding number of shares of common stock on the immediately preceding December 31 or (iii) such lesser number of shares of common stock as determined by the administrator of the ESPP.

Subsequent events have been evaluated through the date of filing of the unaudited condensed consolidated financial statements.

The Company has not identified any subsequent events that require disclosure.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Our proprietary platform enables the targeting of a broad range of solid tumors using Virus-Like Particles, or VLPs, that can be conjugated with drugs or loaded with nucleic acids to create Virus-Like Drug Conjugates, or VDCs.

Our VDCs are largely agnostic to tumor type and can recognize a surface marker, known as heparin sulfate proteoglycans, or HSPGs, that are specifically modified and broadly expressed on many tumors.

We are focusing our initial development of VDCs to treat tumors of high unmet need in ocular and urologic oncology.

Our VDCs are largely agnostic to tumor type and can recognize a surface marker, known as heparan sulfate proteoglycans, or HSPGs, that are specifically modified and broadly expressed on many tumors.

AU-011, our first VDC candidate, is being developed for the first line treatment of primary choroidal melanoma, a rare disease with no drugs approved.

We have completed a Phase 1b/2 trial using intravitreal administration that has demonstrated a statistically significant growth rate reduction in patients with prior active growth and high levels of tumor control with visual acuity preservation in a majority of patients, as assessed using clinical endpoints in alignment with feedback from the FDA.

Food and Drug Administration, or the FDA.

These data supported advancement into a Phase 2 dose escalation trial, where we are currently evaluating suprachoroidal, or SC, administration of AU-011.

We plan to present six to twelve months safety and efficacy data from this trial in 2022.

We intend to select the route of administration and initiate a pivotal trial in the second half of 2022.

We plan to present six to twelve-month safety and efficacy data from this trial in 2022 and, make a decision on the route of administration to, initiate a pivotal trial in the second half of 2022.

We are also developing AU-011 for additional ocular oncology indications and plan to file an IND in the United States in the second half of 2022 for choroidal metastases.

Leveraging our VDCs’

broad tumor targeting capabilities, we also plan to initiate a Phase 1a trial in non-muscle invasive bladder cancer, or NMIBC, our first non-ophthalmic solid tumor indication, in the second half of 2022 and present Phase 1a data from this trial in 2023.

We were incorporated as a Delaware corporation in 2009 and our headquarters are located in Cambridge, Massachusetts.

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We do not have any product candidates approved for sale and have not generated any revenue to date.

We have funded our operations primarily through the sale of convertible preferred stock, common stock, and convertible debt.

From inception through September 30, 2021, we have raised an aggregate of approximately $218.5 million of gross proceeds primarily from private placements of our equity and convertible debt securities as well as through the issuance of our common stock.

We have funded our operations primarily through the sale of convertible preferred stock, common stock, and warrants.

From inception through March 31, 2022, we have raised an aggregate of approximately $218.6 million of gross proceeds primarily from private placements of our equity and convertible preferred stock as well as through the issuance of our common stock.

In November 2021, we issued and sold 6,210,000 shares of our common stock, including the full exercise of the underwriters’

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Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates.

Our net losses were $23.6 million and $17.3 million for the nine months ended September 30, 2021 and 2020, respectively, and $22.2 million for the year ended December 31, 2020.

As of September 30, 2021, we had an accumulated deficit of $140.5 million.

Our net losses were $12.8 million and $5.9 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of $165.0 million.

In addition, our losses from operations may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We anticipate that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly as we advance the preclinical studies and clinical trials of our product candidates.

In addition, we expect to incur additional costs associated with operating as a public company following the completion of the IPO.

In addition, we incur additional costs associated with operating as a public company.

We expect that our expenses and capital requirements will increase substantially if and as we :

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If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of September 30, 2021, we had cash and cash equivalents of $82.0 million.

In November 2021, we issued and sold 6,210,000 shares of our common stock, including the full exercise of the underwriters’

option to purchase additional shares at a price to the public of $14.00 per share for aggregate gross proceeds of $86.9 million in our IPO.

We received approximately $77.9 million in net proceeds after deducting underwriting discounts, commissions and estimated offering expenses.

We believe that the anticipated net proceeds from the IPO, together with our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2024.

As of March 31, 2022, we had cash and cash equivalents and marketable securities of $133.3 million.

We believe that our existing cash and cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into 2024.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

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Impact of the COVID-19 Pandemic

The COVID-19 pandemic continues to present substantial public health and economic challenges around the world, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders, travel restrictions, mandated business closures and other public health safety measures.

The ongoing COVID-19 pandemic continues to present substantial public health and economic challenges around the world, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders, travel restrictions, mandated business closures and other public health safety measures.

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it has and will continue to impact our operations and the operations of our suppliers, vendors and business partners, and may take further precautionary and preemptive actions as may be required by federal, state or local authorities.

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Although to date, our business has not been materially impacted by COVID-19, it is possible that our clinical development timelines could be negatively affected by COVID-19, which could materially and adversely affect our business, financial condition and results of operations.

See “Risk Factors”

for a discussion of the potential adverse impact of the COVID-19 pandemic on our business, financial condition and results of operations.

See Item 1A “Risk Factors”

of this Quarterly Report on Form 10-Q for a discussion of the potential adverse impact of the COVID-19 pandemic on our business, financial condition and results of operations.

Components of Our Results of Operations

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We expect that our general and administrative expenses will increase in the near-term as we continue to build a team to support our administrative, accounting and finance, communications, legal and business development efforts.

Following this offering, we expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax compliance services;

We expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax compliance services;

director and officer insurance costs;

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Other Income (Expense)

Our other income (expense) consists of changes in the fair value of our warrant liability and derivative, gain/loss on disposal of fixed assets, and interest income on our invested cash balances.

Our other income (expense) consists of changes in the fair value of our warrant liability, accretion and interest income on marketable securities, loss on disposal of fixed assets, and interest income on our invested cash balances.

Since our inception, we have not recorded any U.S.

federal or state income tax benefits for the net losses we have incurred in any year or for our earned research and development tax credits, due to the uncertainty of realizing a benefit from those items.

As of December 31, 2020, we had federal and state gross operating loss carryforwards of $106.1 million and $89.3 million, respectively, which may be used to offset future taxable income, if any.

Federal gross operating loss carryforwards of $44.2 million begin to expire in 2029 and go through 2037 and federal gross operating loss carryforwards of $61.9 million do not expire.

The state gross operating loss carryforwards begin to expire in 2030.

As of December 31, 2020, we had federal and state research and development tax credit carryforwards of $3.8 million and $1.1 million, respectively, which may be used to offset future income tax liabilities and begin to expire in 2029 and 2027, respectively.

As of December 31, 2021, we had federal gross operating loss carryforwards of approximately $138.7 million which may be available to offset future taxable income, of which $44.2 million begin to expire in 2029 and go through 2037 and $94.5 million do not expire.

The state gross operating loss carryforwards of $113.6 million, which may be available to offset future taxable income and which would begin to expire in 2030.

As of December 31, 2021, we had federal and state research and experimentation credit carryforwards of $4.7 million and $1.4 million, respectively, which may be available to offset future income tax liabilities and which would begin to expire in 2029 and 2028, respectively.

Due to the degree of uncertainty related to the ultimate use of the deferred tax assets, we have fully reserved these tax benefits, as the determination of the realization of the deferred tax benefits was not determined to be more likely than not.

Results of Operations

Comparison of the Three Months Ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:

Three Months Ended

September 30,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Change in fair value of derivative liability

Interest income, including amortization of discount

Total other income (expense)

Net loss and comprehensive loss

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2021 and 2020:

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

Three Months Ended

September 30,

(in thousands)

Clinical trials

Manufacturing development

Personnel/overhead expenses

Total research and development expenses

Research and development expenses increased to $6.4 million for the three months ended September 30, 2021 from $2.9 million for the three months ended September 30, 2020, primarily due to progression of clinical trials and ongoing manufacturing development costs for AU-011.

In addition, research and development expenses related to personnel increased from growing headcount due to the progression of clinical trials .

General and Administrative Expenses

General and administrative expenses increased to $2.5 million for the three months ended September 30, 2021 from $0.8 million for the three months ended September 30, 2020.

General and administrative expenses include $0.4 million and $0.1 million of stock-based compensation for the three months ended September 30, 2021 and 2020, respectively.

The increase was primarily related to an increase in personnel expenses due to an increase in headcount, as well as general increases in audit, legal, consulting and facilities expenses in anticipation of becoming a public company.

Comparison of the Nine Months Ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:

Nine Months Ended

September 30,

(in thousands)

Operating expenses:

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Loss from disposal of assets

Total other income (expense)

Total other expense

Net loss and comprehensive loss

Research and Development Expenses

The following table summarizes our research and development expenses for the nine months ended September 30, 2021 and 2020:

Nine Months Ended

September 30,

The following table summarizes our research and development expenses for the three months ended March 31, 2022 and 2021:

Three Months Ended

(in thousands)

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Total research and development expenses

Research and development expenses increased to $17.2 million for the nine months ended September 30, 2021 from $14.5 million for the nine months ended September 30, 2020, due to ongoing manufacturing development costs for AU-011 and higher personnel expenses from growing headcount due to the progression of clinical trials.

Research and development expenses increased to $8.3 million for the three months ended March 31, 2022 from $4.2 million for the three months ended March 31, 2021, primarily due to ongoing manufacturing and development costs for AU-011 and higher personnel expenses from growing headcount .

General and Administrative Expenses

General and administrative expenses increased to $6.4 million for the nine months ended September 30, 2021 from $2.8 million for the nine months ended September 30, 2020.

General and administrative expenses include $0.7 million and $0.4 million of stock-based compensation for the nine months ended September 30, 2021 and 2020, respectively.

General and administrative expenses increased to $4.5 million for the three months ended March 31, 2022 from $1.7 million for the three months ended March 31, 2021, primarily driven by personnel expenses, as well as increases in general corporate expenses related to operating as a public company.

Liquidity and Capital Resources

To date we have funded our operations primarily through the sale of convertible preferred stock, common stock, and convertible debt.

Through September 30, 2021, we have raised an aggregate of approximately $218.5 million of gross proceeds primarily from private placements of our equity and convertible debt securities and warrants, as well as through the issuance of our common stock.

To date we have funded our operations primarily through the sale of convertible preferred stock, and common stock.

Through March 31, 2022, we have raised an aggregate of approximately $218.6 million of gross proceeds primarily from private placements of our equity and convertible preferred stock and warrants, as well as through the issuance of our common stock.

In November 2021, we issued and sold a total of 6,210,000 shares in our IPO of our common stock, including the full exercise of the underwriters’

option to purchase additional shares, at a price to the public of $14.00 per share for aggregate gross proceeds of $86.9 million.

We received approximately $77.9 million in net proceeds after deducting underwriting discounts, commissions and estimated offering expenses.

As of September 30, 2021, we had cash and cash equivalents of $82.0 million and an accumulated deficit of $140.5 million.

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations.

We have not yet commercialized our product candidate for any of its multiple indications, which is in various phases of preclinical and clinical development, depending on the indication, and we do not expect to generate revenue from sales of any products for the foreseeable future, if at all.

Since our inception we have incurred losses and negative cash flows from operations and expect these conditions to continue for the foreseeable future.

We received approximately $78.3 million in net proceeds after deducting underwriting discounts, commissions and offering expenses.

The following table summarizes our cash flows for each of the periods presented:

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

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Net cash provided by financing activities

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

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

Operating Activities

During the nine months ended September 30, 2021, net cash used in operating activities was $20.3 million, primarily due to our net loss of $23.6 million partially offset by the non-cash charge related to stock compensation expense of $1.0 million and an increase in accrued expenses and other liabilities related to personnel expenses and clinical trials.

During the nine months ended September 30, 2020, net cash used in operating activities was $20.6 million, primarily due to our net loss of $17.3 million and a decrease in accrued expenses and other liabilities and accounts payable due to growth in our business, the advancement of our product candidates, and the timing of vendor invoicing and payments partially offset by non-cash charges related to $0.5 million in stock-based compensation expense.

During the three months ended March 31, 2022, net cash used in operating activities was $15.2 million, primarily due to our net loss of $12.8 million and decrease in accrued expenses and other liabilities related to less employee accrued compensation and clinical trial accruals, partially offset by the non-cash charge related to stock compensation expense.

During the three months ended March 31, 2021, net cash used in operating activities was $5.1 million, primarily due to our net loss of $6.0 million and a decrease in accrued expenses and other liabilities related to less clinical trial accruals partially offset by an increase in accounts payable due to growth in our business, the advancement of our product candidates, and the timing of vendor invoicing and payments.

Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2021 and 2020 was $1.3 million and $0.6 million, respectively, due to purchases of property and equipment.

Net cash used in investing activities during the three months ended March 31, 2022 was $25.5 million due to purchases of property and equipment and marketable securities.

Net cash used in investing activities during the three months ended March 31, 2021 was $0.1 million due to purchases of property and equipment.

Financing Activities

During the nine months ended September 30, 2021, net cash provided by financing activities was $86.1 million from net proceeds from the sale of Series E and second tranche of the Series D-2 and proceeds from stock options exercises, offset by payments made for deferred offering costs.

During the nine months ended September 30, 2020, net cash provided by financing activities was $4.9 million from the advanced net proceeds from the sale of the first tranche of the Series D-2 which was issued in October 2020 and proceeds from stock option exercises.

During the three months ended March 31, 2022, net cash provided by financing activities was $0.01 million from proceeds from stock options exercises.

During the three months ended March 31, 2021, net cash provided by financing activities was $87.5 million from the net proceeds from the sale of the second tranche of the Series D-2 preferred stock, net proceeds from the sale of Series E preferred stock, and proceeds from stock option exercises.

Funding Requirements

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We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our current and future product candidates.

In addition, we expect to incur additional costs associated with operating as a public company.

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

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A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.

As of September 30, 2021, we had cash and cash equivalents of $82.0 million.

In November 2021, we issued and sold 6,210,000 shares of our common stock, including the full exercise of the underwriters’

option to purchase additional shares at a price to the public of $14.00 per share for aggregate gross proceeds of $86.9 million in our IPO.

We received approximately $77.9 million in net proceeds after deducting underwriting discounts, commissions and offering expenses.

As of March 31, 2022, we had cash and cash equivalents and marketable securities of $133.3 million.

Based on our research and development plans, we believe that our existing cash and cash equivalents, will be sufficient to fund our operations into 2024.

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In the event that additional financing is required, we may not be able to raise it on terms acceptable to us, or at all.

If we raise additional funds through the issuance of equity or convertible debt securities, it may result in dilution to our existing stockholders.

If we raise additional funds through the issuance of equity or convertible preferred stock, it may result in dilution to our existing stockholders.

Debt financing or preferred equity financing, if available, may result in increased fixed payment obligations, and the existence of securities with rights that may be senior to those of our common stock.

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If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2020.

Material Cash Requirements

The following table summarizes our contractual obligations and commitments as of March 31, 2022.

Payments Due by Period

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(1) Amounts in the table above reflect payments due for our lease of office space in Cambridge, Massachusetts, that expires in July 2023.

There were no material changes to our contractual obligations and commitments during the nine months ended September 30, 2021, from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

included in the final prospectus for our IPO filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on November 1, 2021.

Except as disclosed in the table above, we have no long-term debt or finance leases and no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase-order basis.

We enter into contracts in the normal course of business with equipment and reagent vendors, CROs, CMOs and other third parties for clinical trials, preclinical research studies and testing and manufacturing services.

These contracts are cancelable by us upon prior notice.

Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation.

These payments are not included in the preceding table as the amount and timing of such payments are not known.

There were no material changes to our contractual obligations and commitments during the three months ended March 31, 2022, from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

included in the Annual Report on the Form 10-K.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S.

The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements.

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles, or U.S.

The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements.

We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in greater detail in Note 2 to our annual financial statements included in the final prospectus for our IPO filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on November 1, 2021, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our condensed financial statements.

Research and Development Costs

We expense all costs in performing research and development activities in the periods in which they are incurred.

Research and development expenses include salaries and benefits, stock-based compensation expense, lab supplies and facility costs, as well as fees paid to nonemployees and entities that conduct certain research and development activities on our behalf and expenses incurred in connection with license agreements.

Non-refundable advance payments for goods or services that will be used for rendered or future research and development activities are deferred and amortized over the period that the goods are delivered, or the related services are performed, subject to an assessment of recoverability.

As part of the process of preparing our condensed financial statements, we are required to estimate our accrued research and development expenses.

We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time.

There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense.

In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

Stock-Based Compensation

We account for our stock-based compensation as expense in the statements of operations and comprehensive loss based on the awards’

grant date fair values.

We account for forfeitures as they occur by reversing any expense recognized for unvested awards.

We estimate the fair value of options granted using the Black-Scholes option pricing model.

The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of expected term of the award, (c) the risk-free interest rate and (d) expected dividends.

Due to the lack of a public market for our common stock and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded.

The historical volatility is calculated based on a period of time commensurate with the expected term assumption.

The computation of expected volatility is based on the historical volatility of a representative group of companies with similar characteristics to us, including stage of product development and life science industry focus.

We use the simplified method as allowed by the SEC, Staff Accounting Bulletin, or SAB, No.

107, Share-Based Payment , to calculate the expected term for options granted to employees as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options.

The expected dividend yield is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on our common stock.

The fair value of stock-based payments is recognized as expense over the requisite service period which is generally the vesting period.

Determination of the Fair Value of Common Stock

As there has been no public market for our common stock to date, the estimated fair value of our common stock has been determined by our Board, with input from management, considering third-party valuations of our common stock as well as our board of directors’

assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent third-party valuation through the date of the option grant.

These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’

Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation .

Our common stock valuations were prepared using either an option pricing method, or OPM, or a hybrid method, both of which used market approaches to estimate our enterprise value.

The hybrid method is a probability-weighted expected return method, or PWERM, where the equity value in one or more of the scenarios is calculated using an OPM.

The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the company, assuming various outcomes.

The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock.

The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock.

A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock.

The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes.

Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger.

These third-party valuations were performed at various dates, which resulted in valuations of our common stock of $4.25 per share as of December 6, 2019, $4.38 per share as of August 25, 2020 and December 31, 2020, $5.48 per share as of March 15, 2021 and $9.59 per share as of August 31, 2021.

In addition to considering the results of these third-party valuations, our Board considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, including:

the prices at which we sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to our common stock at the time of each grant;

the progress of our research and development programs, including the status and results of preclinical studies for our product candidates;

our stage of development and commercialization and our business strategy;

external market conditions affecting the biotechnology industry and trends within the biotechnology industry;

our financial position, including cash on hand, and our historical and forecasted performance and operating results;

the lack of an active public market for our common stock and our preferred stock;

the likelihood of achieving a liquidity event, such as an initial public offering, or sale of our company in light of prevailing market conditions;

the analysis of initial public offerings and the market performance of similar companies in the biotechnology industry.

The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment.

As a result, if we had used different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.

The fair value of our common stock is determined based on the quoted market price of our common stock on the date of option grant.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

During the three months ended March 31, 2022, there were no material changes to our critical accounting policies from those described in the section titled “Management’s Discussion and Analysis of Financial Condition and Operations”

included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.

Recent Accounting Pronouncements

We early adopted ASU No.

2016-02, Leases (Topic 842) effective January 1, 2021 as disclosed in Note 2 to our condensed financial statements.

The adoption of ASC 842 resulted in the recognition of operating lease liabilities of $0.6 million and operating lease right-of-use assets of $0.5 million and the derecognition of deferred rent liabilities of $0.02 million on our balance sheet as of January 1, 2021.

A description of recently issued accounting pronouncements not yet adopted that may potentially impact our financial position and results of operations is also disclosed in Note 2 to our annual financial statements included in the final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on November 1, 2021.

We assessed the recent accounting pronouncements for the three months ended March 31, 2022 and determined no pronouncements have material impact to the condensed consolidated financial statements.

Emerging Growth Company Status

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We have elected to use the extended transition period under the JOBS Act.

However, we did early adopt ASU No.

2016-02, Leases ( Topic 842 ) effective January 1, 2021 as disclosed in Note 2 to our condensed financial statements.

Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

The JOBS Act also exempts us from having to provide an auditor attestation of internal control over financial reporting under Sarbanes-Oxley Act Section 404(b).

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or the last day of the fiscal year ending after the fifth anniversary of our IPO.

We are also a “smaller reporting company,”

meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year.

We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million.

If we are a smaller reporting company at the time we cease to be an EGC, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Quantitative and Qualitative Disclosures About Market Risk.

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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-Q

Item 1. Financial Statements