Aura Biosciences, Inc. 10-K

Item 9A. Controls and Procedures . Evaluation of disclosure controls and procedures . We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. As of December 31, 2022, our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in the Exchange Act Rule 13a-15(f). Management conducted an assessment of our internal control over financial reporting based on the framework established in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on the assessment, management concluded that, as of December 31, 2022, our internal control over financial reporting was effective. This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting as required by Section 404(c) of the Sarbanes Oxley Act of 2002. Because we qualify as an emerging growth company under the JOBS Act, management's report was not subject to attestation by our independent registered public accounting firm. Limitations on Effectiveness of Controls and Procedures Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of these limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become ineffective because of changes in conditions or that the degree of compliance with established policies or procedures may deteriorate. 103 Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Annual Report was (a) reported within the time periods specified by the SEC rules and regulations, and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure. Changes in Internal Control over Financial Reporting There was no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2022, that have materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Attestation Report of the Registered Public Accounting Firm This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Additionally, our independent registered public accounting firm will not be required to opine on our internal control over financial reporting until we are no longer an emerging growth company. Item 9B. Other Information . None. Item 9C. Disclosure Regarding Forei gn Jurisdictions that Prevent Inspections. None. 104 PART III Item 10. Directors, Executive Offic ers and Corporate Governance. The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2022. Item 11. Executive Compensation . The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2022. Item 12. Security Ownership of Certain Beneficial Own e rs and Management and Related Stockholder Matters. The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2022. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2022. Item 14. Principal Accoun ting Fees and Services. The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2022. 105 PART IV Item 15. Exhibits, Financial Statement Schedules . (1) For a list of the consolidated financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference. (2) Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the financial statements or the notes thereto. (3) Exhibits: Exhibit Number Description 3.1 Tenth Amended and Restated Certificate of Incorporation of Registrant, as currently in effect (incorporated by reference to Exhibit 3.1 of the Registrants’ Annual Report on Form 10-K (File No. 001-40971)) 3.2 Amended and Restated Bylaws of Registrant, as currently in effect (incorporated by reference to Exhibit 3.2 of the Registrants’ Annual Report on Form 10-K (File No. 001-40971)) 4.1* Description of Securities 4.2 Fifth Amended and Restated Investors’ Rights Agreement (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 8, 2021) 10.1# 2009 Amended and Restated Stock Option and Restricted Stock Plan, and form of award agreements thereunder (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-8 (File No. 333-260589) filed on October 29, 2021) 10.2# 2018 Equity Incentive Plan, and form of award agreements thereunder (incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 25, 2021) 10.3# 2021 Stock Option and Incentive Plan, and form of award agreements thereunder (incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 25, 2021) 10.4# 2021 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 25, 2021) 10.5# Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 25, 2021) 10.6# Senior Executive Cash Bonus Plan (incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 25, 2021) 10.7# Form of Indemnification Agreement between the Registrant and each of its directors and executive officers (incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 25, 2021) 10.8# Employment Agreement between the Registrant and Elisabet de los Pinos, dated January 1, 2015, as amended on October 13, 2017 (incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 25, 2021) 10.9# Employment Offer Letter between the Registrant and Julie Feder, dated August 10, 2018 (incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 25, 2021) 10.10# Employment Offer Letter between the Registrant and Cadmus Rich, dated October 14, 2017 (incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 25, 2021) 10.11† Exclusive Patent License Agreement with the National Institutes of Health, dated September 3, 2013 as amended (incorporated by reference to Exhibit 10.11 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 8, 2021) 106 10.12† Exclusive License and Supply Agreement with LI-COR, Inc., dated January 31, 2014, as amended (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 8, 2021) 10.13† License Agreement with Clearside Biomedical, Inc., dated July 3, 2019 (incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 8, 2021) 10.14 Lease Agreement with Bolton Street Partners, LLC, dated June 9, 2011, as amended (incorporated by reference to Exhibit 10.14 of the Registrant’s Registration Statement on Form S-1 (File No. 333-260156) filed on October 8, 2021) 10.15 Lease Agreement, between Registrant and Ice Box, LLC, dated as of May 16, 2022 (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-40971) filed on August 11, 2022) 21.1* List of Subsidiaries of Registrant 23.1* Consent of Ernst & Young, independent registered public accounting firm. 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. **These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. # Indicates a management contract or any compensatory plan, contract or arrangement. 107 † Confidential treatment has been granted for portions of this Exhibit pursuant to Rule 406 promulgated under the Securities Act of 1933, as amended. Item 16. Form 10-K Summary None. 108 Index to CONSOLIDATED Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) F- 2 Consolidated Balance Sheets F- 3 Consolidated Statements of Operations and Comprehensive Loss F- 4 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity F- 5 Consolidated Statements of Cash Flows F- 6 Notes to Consolidated Financial Statements F- 7 F- 1 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Aura Biosciences, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Aura Biosciences, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2016. Boston, Massachusetts March 15, 2023 F- 2 Aura Biosciences, Inc. C onsolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 121,582 $ 149,063 Marketable securities 67,229 — Restricted cash and deposits 20 23 Prepaid expenses and other current assets 7,871 4,618 Total current assets 196,702 153,704 Restricted cash and deposits, net of current portion 768 125 Right of use assets - operating lease 20,671 950 Other long-term assets 423 — Property and equipment, net 5,371 5,251 Total Assets $ 223,935 $ 160,030 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable 2,921 2,401 Short-term operating lease liability 2,963 615 Accrued expenses and other current liabilities 4,573 4,339 Total current liabilities 10,457 7,355 Long-term operating lease liability 17,895 360 Total Liabilities 28,352 7,715 Commitments and Contingencies (Note 12) Stockholders’ Equity: Common stock, $ 0.00001 par value, 150,000,000 authorized at December 31, 2022 and December 31, 2021, and 37,771,918 and 29,211,643 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively — — Additional paid-in capital 406,555 304,452 Accumulated deficit ( 210,900 ) ( 152,137 ) Accumulated other comprehensive loss ( 72 ) — Total Stockholders’ Equity 195,583 152,315 Total Liabilities and Stockholders’ Equity $ 223,935 $ 160,030 The accompanying notes are an integral part of these consolidated financial statements. F- 3 Aura Biosciences, Inc. C onsolidated Statements of Operations and Comprehensive Loss (in thousands except share and per share data) Year Ended December 31, 2022 2021 Operating Expenses: Research and development $ 42,238 $ 25,161 General and administrative 18,057 10,089 Total operating expenses 60,295 35,250 Total operating loss ( 60,295 ) ( 35,250 ) Other income (expense): Interest income, including amortization and accretion income 1,864 13 Realized loss on marketable securities ( 9 ) — Loss on disposal of assets ( 318 ) ( 3 ) Other expense ( 5 ) (11 ) Total other income (expense) 1,532 ( 1 ) Net loss ( 58,763 ) $ ( 35,251 ) Net loss attributable to common stockholders—basic and diluted (Note 13) ( 58,763 ) ( 46,193 ) Net loss per share attributable to common stockholders—basic and diluted ( 1.96 ) ( 8.95 ) Weighted average common stock outstanding—basic and diluted 29,937,228 5,159,973 Comprehensive loss: Net loss $ ( 58,763 ) $ ( 35,251 ) Other comprehensive items: Unrealized loss on marketable securities ( 72 ) — Total other comprehensive loss ( 72 ) — Total comprehensive loss $ ( 58,835 ) $ ( 35,251 ) The accompanying notes are an integral part of these consolidated financial statements. F- 4 Aura Biosciences, Inc. C onsolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (in thousands, except share data) Convertible Preferred Stock Additional Total Series A Series A-1 Series A-2 Series B Series C-1 and C-2 Series D-1 and D-2 Series E Common Stock Paid-In Accumulated Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Equity (Deficit) Balance, December 31, 2020 1,701,141 $ 3,368 3,298,732 $ 7,837 4,324,998 $ 5,373 22,531,819 $ 20,806 91,327,903 $ 41,099 72,348,452 $ 49,593 — $— 381,123 $- $ 8,173 $( 116,886 ) $( 108,713 ) Issuance of Series D Tranche 2, convertible preferred stock, net of issuance costs of $ 18 — — — — — — — — — — 10,128,771 6,982 — — — — — — — Issuance of Series E convertible preferred stock, net of issuance costs of $ 237 — — — — — — — — — — — — 102,671,041 80,246 — — — — — Issuance of common stock - as a result of IPO, net of issuance costs $ 2,247 — — — — — — — — — — — — — — 6,210,000 — 78,320 — 78,320 Conversion of convertible preferred stock to common stock upon closing of IPO ( 1,701,141 ) ( 3,368 ) ( 3,298,732 ) ( 7,837 ) ( 4,324,998 ) ( 5,373 ) ( 22,531,819 ) ( 20,806 ) ( 91,327,903 ) ( 41,099 ) ( 82,477,223 ) ( 56,575 ) ( 102,671,041 ) ( 80,246 ) 22,550,561 — 215,304 — 215,304 Stock based compensation expense — — — — — — — — — — — — — — — — 2,307 — 2,307 Stock option exercises — — — — — — — — — — — — — — 69,959 — 348 — 348 Net loss — — — — — — — — — — — — — — — — — ( 35,251 ) ( 35,251 ) Balance, December 31, 2021 — $— — $— — $— — $— — $— — $— — $— 29,211,643 $— $ 304,452 $( 152,137 ) $ 152,315 Additional Accumulated Total Common Stock Paid-In Accumulated Other Comprehensive Stockholders’ Shares Amount Capital Deficit Loss Amount Equity Balance, December 31, 2021 29,211,643 $— $ 304,452 $( 152,137 ) $— $ 152,315 Issuance of common stock - follow-on offering, net of issuance costs of $ 263 7,705,000 — 86,650 — — 86,650 Issuance of common stock under ATM facility, net of issuance costs of $ 336 732,189 — 8,549 — — 8,549 Stock-based compensation expense — — 6,412 — 6,412 Vesting of restricted stock 51,444 — — — — Stock option exercises 71,642 — 430 — — 430 Unrealized loss on marketable securities — — — — ( 72 ) ( 72 ) Other — — 62 — — 62 Net loss — — — ( 58,763 ) — ( 58,763 ) Balance, December 31, 2022 37,771,918 $— $ 406,555 $( 210,900 ) $( 72 ) $ 195,583 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Aura Biosciences, Inc. C onsolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 58,763 ) $ ( 35,251 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 1,177 831 Stock-based compensation expense 6,412 2,307 Accretion on marketable securities ( 527 ) — Gain (loss) on disposal of property and equipment ( 22 ) 3 Other 224 15 Changes in operating assets and liabilities: Prepaid expenses and other assets ( 3,253 ) ( 3,575 ) Other long-term assets ( 423 ) - Accounts payable 340 1,054 Accrued expenses and other liabilities 234 2,206 Net cash used in operating activities ( 54,601 ) ( 32,410 ) Cash flows from investing activities: Purchases of property and equipment ( 1,094 ) ( 2,125 ) Purchase of marketable securities ( 119,784 ) — Maturities and proceeds from the sale of marketable securities 53,009 — Net cash used in investing activities ( 67,869 ) ( 2,125 ) Cash flows from financing activities: Proceeds from issuance of common stock upon initial public offering, net of issuance costs — 78,697 Proceeds from issuance of common stock from follow-on offering, net of issuance costs 86,650 — Proceeds from issuance of common stock under ATM facility, net of issuance costs 8,549 — Proceeds from exercise of stock options 430 349 Proceeds from issuance of Series D convertible preferred stock, net of issuance costs — 6,982 Proceeds from issuance of Series E convertible preferred stock, net of issuance costs — 80,246 Other — ( 15 ) Net cash provided by financing activities 95,629 166,259 Net (decrease) increase in cash, cash equivalents and restricted cash ( 26,841 ) 131,724 Cash, cash equivalents and restricted cash at beginning of period 149,211 17,487 Cash, cash equivalents and restricted cash at end of period $ 122,370 $ 149,211 Supplemental disclosure of cash flow information: Purchases of property and equipment in accounts payable and accrued expenses and other liabilities $ 180 $ 386 Initial measurement of operating lease right-of-use assets and liabilities $ — $ 536 Right-of-use assets obtained in exchange for operating lease liabilities $ 21,210 $ 516 Remeasurement of operating lease right-of-use assets and liabilities for lease modification $ — $ 390 Deferred offering costs in accounts payable $ — $ 377 Loss on termination of operating lease $ 296 $ — 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 consolidated statements of cash flows (in thousands): Year ended December 31, 2022 2021 Cash and cash equivalents, end of period $ 121,582 $ 149,063 Short-term restricted cash, end of period 20 23 Long-term restricted cash, end of period 768 125 Cash, cash equivalents and restricted cash at end of period $ 122,370 $ 149,211 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Aura Biosciences, Inc. Notes to Consolidated Financial Statements 1. Description of Business Aura Biosciences, Inc. (the “Company” or “Aura”) is a clinical-stage biotechnology company envisioning a new way to treat cancer. Leveraging a novel targeted oncology platform, the Company has the goal to develop a new standard of care across multiple cancer indications. Within these consolidated financial statements, unless the context otherwise requires, references to the Company or Aura refer to Aura Biosciences, Inc and its subsidiary on a consolidated basis. The Company's initial focus is on ocular and urologic oncology where the disease is diagnosed early and there is a high unmet medical need. 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. The Company's VDCs are largely agnostic to tumor type and can recognize tumor associated glycosaminoglycans with unique heparan sulphate epitopes that are expressed on the cell surface of many tumor cells and in the tumor microenvironment. Bel-sar, the Company's first VDC candidate, is being developed for the first-line treatment of early-stage choroidal melanoma, a rare disease with no drugs approved where the standard of care leaves many patients with blindness. The Company is also developing bel-sar for additional ocular oncology indications, including choroidal metastasis, and in non-muscle invasive bladder cancer, or NMIBC. Aura’s headquarters are located in Boston, Massachusetts. The Company’s operations to date have consisted primarily of conducting research and development and raising capital. 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. 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 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 (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 $ 78.3 million in net proceeds after deducting underwriting discounts, commissions and offering expenses. F- 7 Liquidity Through December 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, through its IPO, follow-on offering and ATM transaction. On December 5, 2022, the Company issued and sold 7,705,000 shares of common stock, including the full exercise of the underwriters’ option to purchase additional shares at a price to the public of $ 12.00 per share for aggregate gross proceeds of $ 92.5 million in the Follow-On Offering. The Company received approximately $ 86.7 million in net proceeds from the Follow-On Offering after deducting underwriting discounts, commissions and offering expenses. On November 1, 2022, the Company filed the 2022 Shelf with the SEC in relation to the registration of up to an aggregate offering price of $ 250.0 million of common stock, preferred stock, debt securities, warrants and units or any combination thereof. The Company also simultaneously entered into the Sales Agreement with the Sales Agent to provide for the offering, issuance and sale by the Company of up to an aggregate of $ 75.0 million of common stock from time to time in the ATM under the 2022 Shelf and subject to the limitations thereof. The Company issued 732,189 shares of common stock at an average price of $ 12.51 for aggregate gross proceeds of $ 9.2 million as of December 31, 2022. 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 $ 78.3 million in net proceeds after deducting underwriting discounts, commissions and offering expenses. The Company has incurred recurring losses and negative operating cash flows from operations since its inception, including net losses of $ 58.8 million and $ 35.3 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company had cash and cash equivalents and marketable securities of $ 188.8 million and an accumulated deficit of $ 210.9 million. The Company expects to continue to generate operating losses for the foreseeable future. As of the issuance date of these consolidated financial statements for the year ended December 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 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. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements include those accounts of the Company and its subsidiaries after elimination of all intercompany accounts and transactions. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Significant items subject to such estimates and assumptions include the fair value of stock-based compensation and accrued research and development costs. Management bases its estimates on historical experience and on various other market-specific relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates. Segment Information Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment operating exclusively in the United States. Cash and Restricted Cash Cash consists of standard checking accounts. As of December 31, 2022, the restricted cash account is comprised of a $ 0.8 million security deposit held by the lessor for the Company’s operating lease, and a less than $ 0.1 million deposit that is collateral for the Company’s corporate credit card. F- 8 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. 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’ equity. 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 consolidated statement of operations and comprehensive loss. Fair Value Measurements Accounting Standards Codification 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following: ▪ Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. ▪ Level 2—Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. ▪ Level 3—Inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash. F- 9 Property and Equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of the assets. Upon sale or retirement, the cost and accumulated depreciation is eliminated from their respective accounts and the resulting gain or loss is included in income or loss for the period. Repair and maintenance expenditures are charged to expense as incurred. The estimated useful lives of the Company’s respective assets are as follows: Estimated Useful Life Leasehold improvements The shorter of the life of the leasehold improvement or the remaining term of the lease IT equipment 3 years Laboratory equipment 5 years Office furniture 7 years Costs for capital assets not yet placed into service are capitalized as assets under construction and depreciated in accordance with the above guidelines once placed into service. Upon retirement or disposal of property and equipment, the cost and related accumulated depreciation are removed from the consolidated balance sheet and any gain or loss is reflected in the consolidated statements of operations and comprehensive loss. Impairment of Long-Lived Assets The Company reviews all long-lived assets for impairment whenever events or circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying value of the assets to the future undiscounted net cash flows expected to be generated by the asset. If such asset is considered to be unrecoverable, the impairment recognized is measured by the difference between the estimated fair value of the asset and its carrying value. The Company did not recognize any impairments during the years ended December 31, 2022 or 2021. Research and Development Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries, stock-based compensation and benefits, facilities costs, depreciation, third-party license fees, and external costs of outside vendors engaged to conduct preclinical development activities and clinical trials as well as to manufacture research and development materials. The Company accrues costs for clinical trial activities and contract manufacturers based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the contract research organizations, clinical study sites, contract manufacturers, laboratories, consultants, or other vendors that perform the activities. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are deferred. Such amounts are expensed as the goods are delivered or the related services are performed or until it is no longer expected that the goods will be delivered, or the services rendered. Costs incurred in obtaining technology licenses are recognized as research and development expense as incurred if the technology licensed has not reached technological feasibility and has no alternative future uses. Patent and Trademark Costs All patents and trademark related costs incurred in connection with filing and prosecuting patent and trademark applications are expensed as incurred due to uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses in the consolidated statements of operations and comprehensive loss. F- 10 Leases 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 new 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. 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 consolidated 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. Income Taxes The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements and/or tax returns. Deferred tax assets and liabilities are based upon the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all the deferred tax asset will not be realized. The Company provides reserves related to uncertain tax positions when management determines the related tax benefit is not more likely than not to be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as the consideration of the available facts and circumstances. The Company has no reserves related to uncertain tax positions as of December 31, 2022 and 2021. F- 11 Interest and penalty charges, if any, related to uncertain tax positions would be classified as income tax expense in the accompanying consolidated statements of operations and comprehensive loss. As of December 31, 2022, and 2021 the Company had no accrued interest related to uncertain tax positions. 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 the closing of the IPO, follow-on offering and the ATM draw downs, these costs were recorded in stockholders' equity as a reduction of additional paid-in capital generated as a result of the financings. Stock-Based Compensation The Company recognizes stock-based compensation expense for all stock-based awards based on their grant date fair value. The Company recognizes compensation expense over the requisite service period, which is generally the vesting period of the award. For awards that include performance-based vesting conditions, expense is recognized using the accelerated attribution method when the performance condition is deemed to be probable of being satisfied. As of December 31, 2022 , the Company has no performance-based awards. The Company accounts for forfeitures as they occur. The Company determines the fair value of restricted stock awards in reference to the fair value of its common stock less any applicable purchase price. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option and the Company’s expected dividend yield. The Company determines the volatility for awards granted based on an analysis of reported data for a group of guideline companies that have issued options with substantially similar terms. The expected volatility has been determined using a weighted-average of the historical volatility measures of this group of guideline companies. The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options granted to employees has been determined utilizing the “simplified” method, using the midpoint between the vesting date and the contractual term. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero . Before the IPO, as there has been no public market for the Company's common stock, the estimated fair value of its common stock was been determined by its Board of Directors, with input from management, considering third-party valuations of the common stock as well as the 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. The Company's 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 the Company's 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. F- 12 In addition to considering the results of these third-party valuations, the Company's Board of Directors considered various objective and subjective factors to determine the fair value of the Company's common stock as of each grant date, including: ∎ The prices at which the Company sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to its common stock at the time of each grant; ∎ The progress of Aura's research and development programs, including the status and results of preclinical studies for its product candidates; ∎ The Company's stage of development and commercialization and its business strategy; ∎ External market conditions affecting the biotechnology industry and trends within the biotechnology industry; ∎ The Company's financial position, including cash on hand, and its historical and forecasted performance and operating results; ∎ The lack of an active public market for Aura's common stock and convertible preferred stock; ∎ The likelihood of achieving a liquidity event, such as an IPO, or sale of the Company in light of prevailing market conditions; and ∎ The analysis of an IPO 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 the Company had used different assumptions or estimates, the fair value of its common stock and stock-based compensation expense could have been materially different. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s cash compensation costs are classified. Net Loss per Share Net loss per share attributable to common stockholders is computed by using the two-class method, which is an earnings allocation formula that determines loss per share for the holders of the Company’s common stock and participating securities. All series of preferred stock contain participation rights in any dividend declared or accumulated by the Company and are deemed to be participating securities. Income available to common stockholders and participating convertible preferred stock is allocated to each share on an as-converted basis as if all of the earnings for the period had been distributed. The participating securities do not include a contractual obligation to share in losses of the Company and are not included in the calculation of net loss per share in the periods that have a net loss. Diluted net income per share is computed using the if-converted method. The Company allocates earnings first to preferred stockholders based on dividend rights and then to common and preferred stockholders based on ownership interests. The weighted-average number of common stock included in the computation of diluted loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, warrants, and convertible preferred stock. Common stock equivalent shares are excluded from the computation of diluted loss per share if their effect is antidilutive. Comprehensive Loss Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Recently Adopted Accounting Pronouncements The Company assessed the recent accounting pronouncements for the year ended December 31, 2022 and determined no pronouncements have material impact to the consolidated financial statements. F- 13 Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which was subsequently amended in November 2018 through ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses.” ASU No. 2016-13 will require entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financing receivables, debt securities and other instruments, which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for losses for receivables that are current with respect to their payment terms. ASU No. 2018-19 further clarifies that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment from receivables of operating leases should be accounted for in accordance with Topic 842, Leases. As per the latest ASU 2020-02, FASB deferred the timelines for certain small public and private entities, thus the new guidance will be adopted by the Company for the annual reporting period beginning January 1, 2023, including interim periods within that annual reporting period. The standard will apply as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company does not expect adoption of this new guidance to have a material impact on its results of operations, financial condition, and financial statement disclosures. 3. 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 December 31, 2022 and 2021 (in thousands): Description December 31, 2022 Quoted prices active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant other observable inputs (Level 3) Financial assets Cash equivalents: Money market funds $ 118,582 $ 118,582 $ — $ — Marketable securities: Commercial paper 27,476 — 27,476 — Corporate bonds 18,099 — 18,099 — U.S. Government agencies 21,654 — 21,654 — Total financial assets $ 185,811 $ 118,582 $ 67,229 $ — Description December 31, 2021 Quoted prices active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant other observable inputs (Level 3) Financial assets Cash equivalents: Money market funds $ 24,063 $ 24,063 $ — $ — Total financial assets $ 24,063 $ 24,063 $ — $ — There have been no transfers between levels for the years ended December 31, 2022 and 2021. F- 14 4. Property and Equipment, Net P roperty and equipment, net, consisted of the following (in thousands): Year Ended December 31, 2022 2021 Assets under construction $ 1,805 $ 2,365 IT equipment 133 85 Leasehold improvements — 13 Lab equipment 7,297 5,489 Office furniture — 63 $ 9,235 $ 8,015 Less—accumulated depreciation ( 3,864 ) ( 2,764 ) Property and equipment, net $ 5,371 $ 5,251 Depreciation expense was $ 1.2 million and $ 0.8 million for the years ended December 31, 2022 and 2021, respectively. 5. Prepaid Expenses and Other Current Assets P repaid expenses and other current assets consisted of the following (in thousands): Year Ended December 31, 2022 2021 Prepaid insurance $ 2,174 $ 2,734 Prepaid research and development expenses 4,982 1,754 Prepaid license agreements 3 64 Other 712 66 Prepaid expenses and other current assets $ 7,871 $ 4,618 6. Marketable Securities Marketable securities consist of the following (in thousands): December 31, 2022 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Commercial paper $ 27,476 $ — $ — $ 27,476 Corporate bonds 18,191 — ( 92 ) $ 18,099 U.S. Government agencies 21,635 20 ( 1 ) $ 21,654 Total $ 67,302 $ 20 $ ( 93 ) $ 67,229 As of December 31, 2022, the unrealized losses on the Company’s investments in U.S. government agencies securities and corporate bonds were caused by interest rate increases. The current credit ratings are all within the guidelines of the investment policy of the Company and the Company does not expect the issuers to settle any security at a price less than the amortized cost basis of the investment. The Company does not intend to sell the investments and it is not probable that the Company will be required to sell the investments before recovery of their amortized cost basis. As of December 31, 2022, $ 0.1 million unrealized losses were associated with marketable securities with contractual maturities of one year or less. As of December 31, 2022, all marketable securities held by the Company had remaining contractual maturities of one year or less, except for corporate bonds and U.S. government agencies securities with a fair value of $ 4.2 million that had maturities of one to two years. There were no impairments of the Company’s assets measured and carried at fair value during the year ended December 31, 2022. F- 15 7. Accrued Expenses and Other Current Liabilities A ccrued expenses and other current liabilities consisted of the following (in thousands): Year Ended December 31, 2022 2021 Accrued research and development expenses $ 1,543 $ 1,686 Accrued compensation 2,705 2,147 Other 325 506 Accrued expenses and other current liabilities $ 4,573 $ 4,339 8. Equity The Company had 150,000,000 authorized shares of common stock, par value $ 0.00001 per share, of which 37,771,918 and 29,211,643 shares were issued and outstanding at December 31, 2022 and 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. Financings On December 5, 2022, the Company issued and sold 7,705,000 shares of common stock, including the full exercise of the underwriters’ option to purchase additional shares at a price to the public of $ 12.00 per share for aggregate gross proceeds of $ 92.5 million (the “Follow-On Offering”). The Company received approximately $ 86.7 million in net proceeds from the Follow-On Offering after deducting underwriting discounts, commissions and offering expenses. On November 1, 2022, the Company filed a shelf registration statement on Form S-3 (the “2022 Shelf”) with the SEC in relation to the registration of up to an aggregate offering price of $ 250.0 million of common stock, preferred stock, debt securities, warrants and units or any combination thereof. The Company also simultaneously entered into the Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC (the “Sales Agent”) to provide for the offering, issuance and sale by the Company of up to an aggregate of $ 75.0 million of common stock from time to time in “at-the-market” offerings (the “ATM”) under the 2022 Shelf and subject to the limitations thereof. The Company issued 732,189 shares of common stock at an average price of $ 12.51 for aggregate gross proceeds of $ 9.2 million as of December 31, 2022 under the Sales Agreement. 9. Stock-Based Compensation 2018 Stock Option and Incentive Plan On December 12, 2018, the Company adopted the Aura Biosciences, Inc. 2018 Equity Incentive Plan (the “2018 Plan”). 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 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. F- 16 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 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, 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 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 purchase price of the shares under the ESPP are at 85 % of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the purchase date. As of December 31, 2022, 627,333 shares were available to be issued under the ESPP. The Company recognized $ 0.02 million share-based compensation expense related to the ESPP for the year ended December 31, 2022. Stock Options With the transfer of the available options from the 2018 Plan to the 2021 Plan, there were 3,387,895 options available for grant under the 2021 Plan at December 31, 2022. The Board is authorized to administer the 2021 Plan. In accordance with the provisions of the 2021 Plan, the Board determines the terms of Aura options and other awards issued pursuant thereto, including the following: ▪ which employees, directors and consultants shall be granted awards; ▪ the number of shares of common stock subject to options and other awards; ▪ the exercise price of each option, which generally shall not be less than fair market value of the common stock on the date of grant; ▪ the termination or cancellation provisions applicable to options; ▪ the terms and conditions of other awards, including conditions for repurchase, termination or cancellation, issue price and repurchase price; and ▪ all other terms and conditions upon which each award may be granted in accordance with the 2018 Plan. 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. F- 17 The following table summarizes stock option activity under the 2018 Plan and 2021 Plan for the year ended December 31, 2022: Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2021 4,232,991 $ 7.43 8.66 $ 40,437 Granted 544,321 15.81 Exercised ( 71,642 ) 6.00 Cancelled/Forfeited ( 402,334 ) 12.25 Outstanding at December 31, 2022 4,303,336 $ 8.06 7.92 $ 16,204 Exercisable at December 31, 2022 2,099,094 $ 6.10 7.08 $ 10,610 The weighted-average grant date fair value of stock options granted during the years ended December 31, 2022 and 2021 was $ 10.79 and $ 5.84 per share, respectively. The total intrinsic value of options exercised was $ 0.8 million and $ 0.1 million for the years ended December 31, 2022 and 2021, respectively. The fair value of the stock options issued as of December 31, 2022 and 2021 was measured with the following weighted-average assumptions: Year Ended December 31, 2022 2021 Risk-free interest rate 3.00 % 1.15 % Expected term (years) 5.91 6.03 Expected volatility of the underlying stock 78.10 % 73.87 % Expected dividend rate — % — % Restricted Stock Units The Company has granted restricted stock units with service-based vesting conditions. Unvested shares of restricted common stock may not be sold or transferred by the holder. A summary of the restricted stock unit activity during the year ended December 31, 2022 is as follows: Restricted Stock Units Weighted- Average Grant Date Fair Value Unvested at December 31, 2021 231,920 $ 14.00 Vested/Released ( 51,444 ) 14.00 Forfeited ( 26,526 ) 14.00 Unvested at December 31, 2022 153,950 $ 14.00 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 . During the year ended December 31, 2022, 51,444 restricted stock units vested with a fair value of $ 0.7 million. Stock-based Compensation Expense The Company recorded stock-based compensation expense as follows (in thousands): Year Ended December 31, 2022 2021 Research and development $ 2,389 $ 702 General and administrative 4,023 1,605 Total $ 6,412 $ 2,307 F- 18 As of December 31, 2022, there was $ 13.5 million of unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.54 years. As of December 31, 2022, there was $ 2.0 million of unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 2.82 years. 10. 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 were re-measured to fair value at each balance sheet date. A total of 173,827 of the Series B Warrants were outstanding and 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. As a result, the 12,686 common stock warrants were converted into equity instruments and remain outstanding as of December 31, 2022 . 11. Compensation 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. Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits. The Company makes matching contributions of 100 % of the first 6 % of employee contributions. The Company made matching contributions in the amount of $ 0.5 million and $ 0.3 million for the years ended December 31, 2022 and 2021, respectively. 12. Commitments and Contingencies Lease Commitments The Company has historically entered into lease arrangements for its facilities. The Company has one operating lease for its office and laboratory facility with required future minimum payments as of December 31, 2022 and one operating lease that was terminated in August 2022. On March 31, 2021, the Company executed an amendment to the previous facility lease in Cambridge, MA which included an extension of the expiration date of the original leased premises, the addition of 4,516 square feet of laboratory space with a commencement date of May 1, 2021 , and the addition of 1,000 square feet of laboratory space with a commencement date of June 15, 2021 . The lease term for the original and new spaces will expire on July 31, 2023 , with an option to renew for an additional 12 months . Upon the execution of the amendment, which was deemed to be a lease modification, the Company re-evaluated the assumptions made at the original lease commencement date. The Company determined the amendment consists of two separate contracts under ASC 842. One contract is related to the modification of term for the original space, and the other is related to a new right-of-use for the two additional spaces, which are to be accounted for as new leases. The Company remeasured the lease liability and corresponding right-of-use asset for the original space as of the effective date of the amendment to reflect the extended term and recorded in the second quarter of 2021 an additional right-of-use asset and lease liability upon lease commencement of each of the additional space. In August 2022, the Company entered into a termination agreement with the landlord to the end this lease effective August 31, 2022, which resulted in the Company paying the landlord a termination expense of $ 0.3 million. The Company recognized a loss on the lease of $ 0.3 million which was recorded as a loss on disposal of assets on the statements of operations and comprehensive loss and derecognized $ 0.6 million in lease liabilities and corresponding right-of-use asset on the balance sheets. F- 19 On May 16, 2022, the Company entered into an office and laboratory lease in Boston, MA with an initial 10-year term and one renewal option to extend the lease for an additional seven years . The lease commenced on August 1, 2022 , and estimated payments due under the initial term total $ 35.2 million. The lease requires a letter of credit totaling $ 0.8 million which is classified as long-term restricted cash and deposits on the consolidated balance sheet. The landlord will reimburse the Company up to $ 0.5 million for certain costs related to expansion of the laboratory space. As of December 31, 2022, the Company has incurred $ 0.1 million of expenses related to the expansion. The Company also leases office 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 years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, 2022 2021 Lease Cost Amortization of finance right-of-use assets $ — $ 11 Operating lease costs 1,879 524 Variable lease costs 1,258 322 Short-term lease costs 8 4 Total lease costs $ 3,145 $ 861 Cash paid for amounts included in the measurement of lease liability—finance leases $ — $ 15 Cash paid for amounts included in the measurement of lease liabilities—operating leases $ 1,690 $ 519 Weighted-average remaining lease term—operating leases (years) 9.59 1.58 Weighted-average discount rate—finance leases — 7.94 % Weighted-average discount rate—operating leases 10.71 % 3.51 % The following table reconciles the future minimum commitments to the Company’s operating lease liabilities at December 31, 2022 (in thousands): Operating lease payments as of December 31, 2022 2023 $ 3,111 2024 3,205 2025 3,301 2026 3,400 2027 3,502 Thereafter 17,430 Total lease payments 33,949 Less: interest ( 13,091 ) Total operating lease liabilities at December 31, 2022 20,858 Less: current portion of lease liabilities 2,963 Lease liabilities, net of current portion $ 17,895 F- 20 License Agreements The Company has entered into the following key agreements that relate to the core technology under development: 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. (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 years ended December 31, 2022 and 2021. LI-COR Non-Exclusive License and Supply Agreement 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 aggregate. During the years ended December 31, 2022 and 2021, the Company recognized immaterial milestones related to this agreement. Life Technologies Corporation In December 2014, the Company entered into a non-exclusive, perpetual license agreement with Life Technologies Corporation, or the Life Technologies, which allows for five licensed 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 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, 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 years ended December 31, 2022 and 2021, the Company recognized $ 0.05 million and $ 0.1 million of expenses related to this agreement, respectively. Effective in September 2022, the Company entered into a new non-exclusive, perpetual license agreement with Life Technologies for licensed products. Under this agreement, the Company is required to pay an initial license fee of $ 0.4 million for the first licensed product and $ 0.5 million for each additional licensed product. In addition, the agreement allows the Company the right to sublicense which would lead to a $ 0.2 million payment for each sublicense per licensed product and a $ 0.03 million payment for use of the cell line document package. In the event of a change of control, there will be a change of control fee of $ 0.5 million. During the year ended December 31, 2022, the Company recognized $ 0.4 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 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. F- 21 National Institute of Health (NIH)-Collaboration Research and Development Agreement 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 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 the years ended December 31, 2022 and 2021, the Company paid $ nil million and $ 0.03 million of research collaboration fees related to this agreement. 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 milestones related to this agreement and related amendments for the years ended December 31, 2022 and 2021. An eighth amendment was effective in September 2022, requiring payment of $ 0.04 million within 30 days of November 1, 2022, and payment of another $ 0.03 million within 30 days of the 12th anniversary of the CRADA, which will be in August 2023. This eighth amendment extended the term of the CRADA to September 30, 2024. During the year ended December 31, 2022, the Company recognized $ 0.1 million of expenses related to this agreement. National Institute of Health (NIH)-Exclusive Patent License Agreement 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 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 the NIH are subject to an annual minimum royalty payment of low five figures. The Company recognized $ 0.02 million and $ 0.03 million for patent licensing fees for the years ended December 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. 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 December 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 years ended December 31, 2022 and 2021. F- 22 Clearside 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 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 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 years ended December 31, 2022 and 2021. 13. Net Loss Per Share Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. 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 years ended December 31, 2022 and 2021 as follows (in thousands, except share and per share data): Year Ended December 31, 2022 2021 Numerator: Net loss $ ( 58,763 ) $ ( 35,251 ) Less: Accruals of dividends of preferred stock — ( 10,942 ) Net loss attributable to common stockholders—basic and diluted $ ( 58,763 ) $ ( 46,193 ) Denominator: Weighted-average common stock outstanding 29,937,228 5,159,973 Net loss per share attributable to common stockholders—basic and diluted $ ( 1.96 ) $ ( 8.95 ) 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: Year Ended December 31, 2022 2021 Stock options to purchase common stock 4,303,336 4,232,991 Restricted stock units that vest into common stock 153,950 231,920 Warrants to purchase common stock 12,686 12,686 Total potential dilutive shares 4,469,972 4,477,597 F- 23 14. Income Taxes The Company has no t recorded any net tax provision for the periods presented due to the losses incurred and the need for a full valuation allowance on net deferred tax assets. The difference between the income tax expense at the U.S. federal statutory rate and the recorded provision is primarily due to the valuation allowance provided on all deferred tax assets. The Company’s loss before income tax for the periods presented was generated entirely in the United States: A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate as of December 31, 2022 and 2021 is as follows: 2022 2021 Tax provision at statutory rate 21.0 % 21.0 % State taxes, net of federal benefit 5.6 % 5.3 % Federal tax credits 2.9 % 2.6 % Permanent items ( 1.1 )% ( 0.4 )% Other 0.1 % ( 0.3 )% Decrease in valuation reserve ( 28.5 )% ( 28.2 )% Total 0.0 % 0.0 % Temporary differences that give rise to significant deferred tax assets (liabilities) as of December 31, 2022 and 2021 are as follows (in thousands): 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 40,617 $ 36,287 Stock-based compensation expense 1,235 635 Capitalized research and development expenses 10,200 — Tax credit carryforwards 7,924 5,821 Accrued expenses — 517 Lease liability 5,461 248 Other 307 194 Total deferred tax assets 65,744 43,702 Deferred tax liabilities: Right of use asset ( 5,412 ) ( 241 ) Depreciable assets ( 207 ) ( 182 ) Accrued expenses ( 93 ) — Valuation allowance ( 60,032 ) ( 43,279 ) Net deferred tax asset $ — $ — As of December 31, 2022, the Company had federal gross operating loss carryforwards of approximately $ 155.1 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 $ 110.9 million do not expire. The Company had state gross operating loss carryforwards of $ 127.5 million, which may be available to offset future taxable income and which would begin to expire in 2030 , except for $ 0.7 million of state NOLs that do not expire. As of December 31, 2022, the Company had federal and state research and experimentation credit carryforwards of $ 6.4 million and $ 1.9 million, respectively, which may be available to offset future income tax liabilities and which would begin to expire in 2029 and 2028 , respectively. F- 24 The Company’s ability to use its operating loss carryforwards and tax credit carryforwards to offset taxable income is subject to restrictions under Sections 382 and 383 of the United States Internal Revenue Code (the “Internal Revenue Code”). Under the Internal Revenue Code provisions, certain substantial changes in the Company’s ownership, including the sale of the Company or significant changes in ownership due to sales of equity, have limited and may limit in the future, the amount of net operating loss carryforwards which could be used annually to offset future taxable income. The Company has not yet completed an analysis of ownership changes. The Company may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside the Company’s control. As a result, the Company’s ability to use our pre-change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to the Company. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. All Federal NOLs generated post tax reform have an indefinite life, are not subject to carryback provisions, and limited to 80 % of income in any year. The Company has not conducted a study of its research and development credit carryforwards. A study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed, and any adjustment is known, no amounts will be presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credit carryforwards and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheet or statement of operations at this time, if an adjustment were required. Management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are principally comprised of NOL carryforwards and tax credit carryforwards. Management has determined that it is more likely than not that the Company will not realize the benefits of its deferred tax assets, and as a result, a valuation allowance of $ 60.0 million has been recorded at December 31, 2022. The increase in the valuation allowance of $ 16.8 million during the year ended December 31, 2022 was primarily due to the increase in net operating loss generated by the Company and capitalized R&D expenses related to the new Section 174 requirements. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures currently and requires taxpayers to amortize them, over five years for domestically incurred expenditures and over fifteen years for foreign incurred expenditures, pursuant to Internal Revenue Code Section 174. As of December 31, 2022, the Company has recorded a gross deferred tax asset of $ 39.0 million related to the Capitalized IRC Section 174 expenditures. As of December 31, 2022 and 2021, the Company had no unrecognized tax benefits. Interest and penalty charges, if any, related to income taxes would be classified as a component of the provision for income taxes in the consolidated statements of operations. The Company does not expect any significant change in its uncertain tax positions in the next twelve months. The Company files income tax returns in the United States federal tax jurisdiction and several state tax jurisdictions. Since the Company is in a loss carryforward position, it is generally subject to examination by federal and state tax authorities for all tax years in which a loss carryforward is available. The Inflation Reduction Act signed into law on Aug. 16, 2022 and includes several provisions, including the largest investment in combating climate change in U.S. history, lowers the cost of prescription drugs and raises taxes on corporations. The effects of the bill were considered and based on the Company’s taxable loss position, there is no tax impact to the provision. F- 25 15. Related Parties During the year ended December 31, 2021, the Company incurred $ 0.04 million in expenses to a legal firm whose partner is also an investor and former officer of the Company. As of December 31, 2021, this amount was no t included in accounts payable. During the year ended December 31, 2021, the Company incurred $ 0.3 million in expenses to a stockholder that provided research and development related services. As of December 31, 2021, this amount was no t included in accounts payable. During the year ended December 31, 2022, the Company had no related party transactions. 16. Subsequent Events The Company has not identified any subsequent events that require disclosure. F- 26 SIGNA TURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . Aura Biosciences, Inc. Date: March 15, 2023 By: /s/ Elisabet de los Pinos Elisabet de los Pinos President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Elisabet de los Pinos President and Chief Executive Officer March 15, 2023 Elisabet de los Pinos /s/ Julie Feder Chief Financial Officer March 15, 2023 Julie Feder /s/ David Johnson Chairman of the Board of Directors March 15, 2023 David Johnson /s/ Giovanni Mariggi Director March 15, 2023 Giovanni Mariggi /s/ Antony Mattessich Director March 15, 2023 Anthony Mattessich /s/ Raj Parekh Director March 15, 2023 Raj Parekh /s/ Sapna Srivastava Director March 15, 2023 Sapna Srivastava /s/ Karan Takhar Director March 15, 2023 Karan Takhar