10-Q 1 naut-20220331.htm 10-Q naut-20220331
0001808805FALSE12/312022Q100018088052022-01-012022-03-3100018088052022-04-29xbrli:shares00018088052022-03-31iso4217:USD00018088052021-12-31iso4217:USDxbrli:shares0001808805us-gaap:CommonStockMember2022-03-3100018088052021-01-012021-03-310001808805naut:SeriesSeedRedeemableConvertiblePreferredStockMember2021-12-310001808805us-gaap:SeriesAPreferredStockMember2021-12-310001808805us-gaap:SeriesBPreferredStockMember2021-12-310001808805us-gaap:CommonStockMember2021-12-310001808805us-gaap:AdditionalPaidInCapitalMember2021-12-310001808805us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001808805us-gaap:RetainedEarningsMember2021-12-310001808805us-gaap:CommonStockMember2022-01-012022-03-310001808805us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001808805us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001808805us-gaap:RetainedEarningsMember2022-01-012022-03-310001808805naut:SeriesSeedRedeemableConvertiblePreferredStockMember2022-03-310001808805us-gaap:SeriesAPreferredStockMember2022-03-310001808805us-gaap:SeriesBPreferredStockMember2022-03-310001808805us-gaap:AdditionalPaidInCapitalMember2022-03-310001808805us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001808805us-gaap:RetainedEarningsMember2022-03-310001808805naut:SeriesSeedRedeemableConvertiblePreferredStockMember2020-12-310001808805us-gaap:SeriesAPreferredStockMember2020-12-310001808805us-gaap:SeriesBPreferredStockMember2020-12-310001808805us-gaap:CommonStockMember2020-12-310001808805us-gaap:AdditionalPaidInCapitalMember2020-12-310001808805us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001808805us-gaap:RetainedEarningsMember2020-12-3100018088052020-12-310001808805us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001808805us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001808805us-gaap:RetainedEarningsMember2021-01-012021-03-310001808805naut:SeriesSeedRedeemableConvertiblePreferredStockMember2021-03-310001808805us-gaap:SeriesAPreferredStockMember2021-03-310001808805us-gaap:SeriesBPreferredStockMember2021-03-310001808805us-gaap:CommonStockMember2021-03-310001808805us-gaap:AdditionalPaidInCapitalMember2021-03-310001808805us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001808805us-gaap:RetainedEarningsMember2021-03-3100018088052021-03-31xbrli:pure0001808805us-gaap:PrivatePlacementMember2021-06-092021-06-090001808805us-gaap:PrivatePlacementMember2021-06-0900018088052021-06-012021-06-30naut:segment00018088052021-06-092021-06-090001808805us-gaap:EmployeeStockOptionMember2021-06-092021-06-0900018088052021-06-090001808805naut:AryaSciencesAcquisitionCorpIIIMember2021-06-090001808805naut:AryaSciencesAcquisitionCorpIIIMember2021-06-080001808805naut:AryaSciencesAcquisitionCorpIIIMember2021-06-092021-06-090001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MutualFundMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MutualFundMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:MutualFundMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:MutualFundMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:USTreasurySecuritiesMemberus-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:CorporateDebtSecuritiesMemberus-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:FairValueInputsLevel2Member2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMember2022-03-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMember2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMember2022-03-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MutualFundMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MutualFundMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:MutualFundMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:MutualFundMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:USTreasurySecuritiesMemberus-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:CorporateDebtSecuritiesMemberus-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMember2021-12-310001808805us-gaap:CashAndCashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ShortTermInvestmentsMember2021-12-310001808805us-gaap:FairValueMeasurementsRecurringMembernaut:LongTermInvestmentsMember2021-12-310001808805naut:LaboratoryEquipmentMember2022-03-310001808805naut:LaboratoryEquipmentMember2021-12-310001808805us-gaap:ComputerEquipmentMember2022-03-310001808805us-gaap:ComputerEquipmentMember2021-12-310001808805naut:FurnitureFixturesAndOfficeEquipmentMember2022-03-310001808805naut:FurnitureFixturesAndOfficeEquipmentMember2021-12-310001808805us-gaap:LeaseholdImprovementsMember2022-03-310001808805us-gaap:LeaseholdImprovementsMember2021-12-310001808805us-gaap:ConstructionInProgressMember2022-03-310001808805us-gaap:ConstructionInProgressMember2021-12-3100018088052021-06-300001808805naut:A2021EquityIncentivePlanMember2022-03-310001808805naut:A2021EquityIncentivePlanMember2021-12-310001808805naut:A2021EmployeeStockPurchasePlanMember2022-03-310001808805naut:A2021EmployeeStockPurchasePlanMember2021-12-310001808805naut:A2021EmployeeStockPurchasePlanMemberus-gaap:EmployeeStockMember2022-01-012022-03-310001808805naut:A2021EmployeeStockPurchasePlanMember2022-01-012022-03-310001808805naut:A2021EmployeeStockPurchasePlanMember2022-01-010001808805naut:A2021EquityIncentivePlanMember2022-01-012022-03-310001808805naut:A2021EquityIncentivePlanMember2022-01-010001808805naut:A2017EquityIncentivePlanMember2022-03-310001808805srt:MinimumMemberus-gaap:EmployeeStockOptionMember2022-01-012022-03-310001808805srt:MaximumMemberus-gaap:EmployeeStockOptionMember2022-01-012022-03-310001808805srt:MinimumMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-310001808805srt:MaximumMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-310001808805us-gaap:EmployeeStockOptionMember2022-01-012022-03-310001808805us-gaap:EmployeeStockOptionMember2021-01-012021-03-310001808805us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:EmployeeStockOptionMember2022-01-012022-03-310001808805us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-310001808805us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:EmployeeStockOptionMember2022-01-012022-03-310001808805us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:EmployeeStockOptionMember2021-01-012021-03-3100018088052021-08-1000018088052021-08-3100018088052021-02-012021-02-280001808805naut:September2021ToSeptember2031Member2020-12-310001808805naut:February2021ToOctober2021Member2020-12-310001808805naut:October2022ToOctober2031Member2021-12-310001808805us-gaap:EmployeeStockOptionMember2022-01-012022-03-310001808805us-gaap:EmployeeStockOptionMember2021-01-012021-03-310001808805naut:EmployeeStockPurchasePlanMember2022-01-012022-03-310001808805naut:EmployeeStockPurchasePlanMember2021-01-012021-03-310001808805us-gaap:ConvertiblePreferredStockMember2022-01-012022-03-310001808805us-gaap:ConvertiblePreferredStockMember2021-01-012021-03-310001808805us-gaap:WarrantMember2022-01-012022-03-310001808805us-gaap:WarrantMember2021-01-012021-03-31

         
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 001-39434
NAUTILUS BIOTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

Delaware98-1541723
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

2701 Eastlake Avenue East Seattle, Washington

98102
(Address of principal executive offices)(Zip Code)
(206) 333-2001
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)    
Name of each exchange on which registered
Common Stock, par value $0.0001 per shareNAUT
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   o     No  x
As of April 29, 2022, the registrant had 124,461,653 shares of common stock, $0.0001 par value per share, outstanding.



NAUTILUS BIOTECHNOLOGY, INC.
TABLE OF CONTENTS
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

i


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the section entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements concerning the following:
our dependence on the success of our proteomics platform (the “Nautilus platform”), which remains in the development stage and subject to scientific and technical validation;
our expectations regarding the timing and progress of the development of the Nautilus platform;
our estimates of our addressable market, market growth, future revenue, key performance indicators, expenses, capital requirements and needs for additional financing;
our expectations regarding the rate and degree of market acceptance of the Nautilus platform;
the impact of the Nautilus platform on the field of proteomics and the size and growth of the addressable proteomics market;
our ability to manage and grow our business and commercialize our Nautilus platform;
our ability to successfully implement our three phase commercial launch plan;
the implementation of our business model and strategic plans for the Nautilus platform;
our ability to establish and maintain intellectual property protection for our products or avoid or defend claims of infringement;
our ability to recognize the anticipated benefits of the Business Combination (as defined in Part I, Item I, Note 1, “Description of Business and Basis of Presentation,” in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q), which may be affected by, among other things, competition, our ability to grow and manage future growth effectively, and our ability to retain our key employees;
our expectations regarding the use of proceeds from the Business Combination;
the performance of third-party manufacturers and suppliers;
changes in applicable laws or regulations;
our ability to raise financing in the future;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors or other key personnel;
the volatility of the trading price of our common stock;
our ability to develop and commercialize new products;
our expectations about market trends;
the impact of local, regional, national and international economic conditions and events;
the effect of COVID-19 on the foregoing; and
other factors including but not limited to those detailed under the section entitled “Risk Factors.”
ii


Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in Part II, Item 1A, “Risk Factors,” elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and market opportunity, including data regarding the estimated size of the market. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.
This Quarterly Report on Form 10-Q contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of it by, any other companies.

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

iii

Nautilus Biotechnology, Inc.
Condensed Consolidated Balance Sheets
As of March 31, 2022 and December 31, 2021 (Unaudited)
(in thousands, except share and per share amounts)March 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$188,622 $185,619 
Short-term investments135,495 160,110 
Prepaid expenses and other current assets2,948 3,493 
Total current assets327,065 349,222 
Property and equipment, net2,841 2,483 
Operating lease right-of-use assets28,852 29,377 
Long-term investments24,918 16,371 
Other long term assets997 997 
Total assets$384,673 $398,450 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$1,487 $1,723 
Accrued expenses and other liabilities3,427 3,119 
Current portion of operating lease liability1,492 970 
Total current liabilities6,406 5,812 
Operating lease liability, net of current portion28,558 29,062 
Total liabilities34,964 34,874 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 200,000,000 authorized as of March 31, 2022 and December 31, 2021; 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021
  
Common stock, $0.0001 par value, 1,000,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 124,456,653 and 124,303,083 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
12 12 
Additional paid-in capital446,654 444,388 
Accumulated other comprehensive loss(554)(184)
Accumulated deficit(96,403)(80,640)
Total stockholders’ equity349,709 363,576 
Total liabilities and stockholders’ equity$384,673 $398,450 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1

Nautilus Biotechnology, Inc.
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2022 and 2021 (Unaudited)
Three Months Ended March 31,
(in thousands, except share and per share amounts)20222021
Operating expenses
Research and development$9,658 $4,835 
General and administrative6,364 3,582 
Total operating expenses16,022 8,417 
Other income (expense), net259 8 
Net loss$(15,763)$(8,409)
Net loss per share attributable to common stockholders, basic and diluted$(0.13)$(0.25)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted124,418,580 32,999,880 
    
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Nautilus Biotechnology, Inc.
Condensed Consolidated Statements of Comprehensive Loss
Three Months Ended March 31, 2022 and 2021 (Unaudited)
Three Months Ended March 31,
(in thousands)20222021
Net loss$(15,763)$(8,409)
Other comprehensive loss:
Unrealized loss on securities available-for-sale(370)(1)
Total other comprehensive loss(370)(1)
Comprehensive loss$(16,133)$(8,410)
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Nautilus Biotechnology, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Three Months Ended March 31, 2022 and 2021 (Unaudited)

Three Months Ended March 31, 2022Redeemable Convertible Preferred StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’Equity
Series SeedSeries ASeries BCommon Stock
(in thousands, except share amounts)SharesAmountSharesAmountSharesAmountSharesAmount
Balances at December 31, 2021 $  $  $ 124,303,083 $12 $444,388 $(184)$(80,640)$363,576 
Issuance of common stock upon exercise of vested stock options— — — — — — 153,570 — 156 — — 156 
Stock-based compensation expense— — — — — — — — 2,110 — — 2,110 
Other comprehensive loss— — — — — — — — — (370)— (370)
Net loss— — — — — — — — — — (15,763)(15,763)
Balances at March 31, 2022
 $  $  $ 124,456,653 $12 $446,654 $(554)$(96,403)$349,709 
Three Months Ended March 31, 2021Redeemable Convertible Preferred StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders’ Deficit
Series SeedSeries ASeries BCommon Stock
(in thousands, except share amounts)
Shares (1)
Amount
Shares (1)
Amount
Shares (1)
Amount
Shares (1)
Amount
Balances at December 31, 202013,174,805 $5,494 16,836,436 $27,067 22,164,724 $75,857 33,069,513 $1 $600 $3 $(30,325)$(29,721)
Stock-based compensation expense— — — — — — — — 1,336 — — 1,336 
Other comprehensive loss— — — — — — — — — (1)— (1)
Net loss— — — — — — — — — — (8,409)(8,409)
Balances at March 31, 2021
13,174,805 $5,494 16,836,436 $27,067 22,164,724 $75,857 33,069,513 $1 $1,936 $2 $(38,734)$(36,795)
(1)    The shares of the Company’s common and redeemable convertible preferred stock, prior to the Business Combination (as defined in Note 1) have been retroactively restated to reflect the exchange ratio of approximately 3.6281 established in the Business Combination as described in Note 3.

The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Nautilus Biotechnology, Inc.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2022 and 2021 (Unaudited)
Three Months Ended March 31,
(in thousands)20222021
Cash flows from operating activities
Net loss$(15,763)$(8,409)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation281 214 
Stock-based compensation2,110 1,336 
Amortization of premiums on securities, net26 115 
Amortization of operating lease right-of-use assets525 413 
Changes in operating assets and liabilities:
Prepaid expenses and other assets554 (391)
Accounts payable(394)724 
Accrued expenses and other liabilities308 (9)
Operating lease liability18 (246)
Net cash used in operating activities(12,335)(6,253)
Cash flows from investing activities
Proceeds from maturities of securities 38,575 24,000 
Purchases of securities (22,912) 
Purchases of property and equipment(481)(482)
Net cash provided by investing activities15,182 23,518 
Cash flows from financing activities
Proceeds from exercise of stock options156  
Payments of offering costs (2,069)
Net cash provided by (used in) financing activities156 (2,069)
Net increase in cash, cash equivalents and restricted cash3,003 15,196 
Cash, cash equivalents and restricted cash at beginning of period186,461 37,219 
Cash, cash equivalents and restricted cash at end of period$189,464 $52,415 
Supplementary cash flow information on non-cash activities
Acquisitions of property and equipment included in accounts payable$222 $142 
Deferred offering costs in accounts payable and accrued expenses and other liabilities$ $1,133 
Modification to reduce right-of-use assets and lease liability$ $3,254 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.Description of Business and Basis of Presentation
Nautilus Biotechnology, Inc. (the “Company”) is a biotechnology company incorporated in 2016 and based in Seattle, Washington with laboratory operations in San Carlos, California. Since the Company’s incorporation in 2016, the Company has devoted substantially all of its resources to research and development activities, including with respect to its proteomics platform, business planning, establishing and maintaining its intellectual property portfolio, hiring personnel, raising capital and providing general and administrative support for these operations.
On June 9, 2021 (the “Closing Date”), Nautilus Biotechnology, Inc. a Delaware corporation (f/k/a ARYA Sciences Acquisition Corp. III, a Cayman Islands exempted company and the Company’s predecessor company (“ARYA”)), consummated the previously announced business combination (the “Business Combination”) pursuant to the terms of that certain Business Combination Agreement, dated as of February 7, 2021 (the “BCA”), by and among ARYA, Mako Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of ARYA (“Mako Merger Sub”), and Nautilus Subsidiary, Inc., a Delaware corporation (f/k/a Nautilus Biotechnology, Inc.) (“Legacy Nautilus”). As a result of the Business Combination, ARYA changed its name to “Nautilus Biotechnology, Inc.” and Mako Merger Sub merged with and into Legacy Nautilus with Legacy Nautilus surviving as the surviving company and becoming a wholly-owned subsidiary of ARYA (the “Merger” and, collectively with the other transactions described in the BCA, the “Reverse Recapitalization”).
In addition, in conjunction with the completion of the Business Combination, certain investors (“PIPE Investors”) subscribed for the purchase of an aggregate of 20,000,000 shares of common stock of the Company (“New Nautilus Common Stock”) at a price of $10.00 per share for aggregate gross proceeds of $200.0 million (“PIPE Financing”).
Please refer to Note 3 “Reverse Recapitalization” for further details of the Business Combination.
Basis of Presentation
The condensed consolidated financial statements and accompanying notes are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial reporting. The accompanying financial statements are consolidated as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and include the accounts of Nautilus Biotechnology, Inc. (i.e. former ARYA) and its wholly-owned subsidiary, Legacy Nautilus, following the Reverse Recapitalization as further discussed in Note 3 “Reverse Recapitalization.” All other accompanying financial statements for the three months ended March 31, 2021 include only the accounts of Legacy Nautilus. All intercompany transactions and balances have been eliminated upon consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated financial statements were prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2022 and the results of operations and cash flows for the three months ended March 31, 2022 and 2021. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 on file with the SEC. The Company’s reporting currency is the U.S. dollar.
Going Concern
The Company’s condensed consolidated financial statements have been prepared on the basis of continuity of operations, the realization of assets, and the satisfaction of liabilities in the ordinary course of business. Since inception, the Company has been engaged in developing its technology, raising capital, and recruiting personnel. The Company’s operating plan may change as a result of many factors currently unknown and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by the Company, and it may
6

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
need to seek additional funds sooner than planned. If adequate funds are not available to the Company on a timely basis, it may be required to delay, limit, reduce, or terminate certain commercial efforts, or pursue merger or acquisition strategies, all of which could adversely affect the holdings or the rights of the Company’s stockholders. The Company has incurred net operating losses and negative cash flows from operations in every year since inception and expects this to continue for the foreseeable future. As of March 31, 2022, the Company had an accumulated deficit of $96.4 million.
The Company has funded its operations primarily with proceeds from the issuance of redeemable convertible preferred stock and common stock. The Company had cash, cash equivalents, and short-term investments of $324.1 million as of March 31, 2022. In June 2021, the Company received gross proceeds of approximately $345.5 million from PIPE Investors and the Business Combination offset by approximately $18.2 million of transaction costs and underwriters’ fees relating to the closing of the Business Combination. As of the date on which these condensed consolidated financial statements were available to be issued, the Company believes that its cash, cash equivalents, and short-term investments will be sufficient to fund its operations for the next twelve months following the issuance of the condensed consolidated financial statements. The Company’s assessment of the period of time through which its financial resources will be adequate to support its operations is a forward-looking statement and involves risks and uncertainties. The Company’s actual results could vary as a result of, and its near and long-term future capital requirements will depend on many factors, including its growth rate and the timing and extent of spending to support its research and development efforts. The Company has based its estimates on assumptions that may prove to be wrong, and it could use its available capital resources sooner than it currently expects. The Company may be required to seek additional equity or debt financing. Future liquidity and cash requirements will depend on numerous factors. In the event that additional financing is required, the Company may not be able to raise it on acceptable terms or at all. If the Company is unable to raise additional capital when desired, or if it cannot expand its operations or otherwise capitalize on its business opportunities because it lacks sufficient capital, its business, operating results, and financial condition would be adversely affected.
Impact of the COVID-19 Coronavirus
In December 2019, COVID-19 was first reported to the World Health Organization (“WHO”), and in January 2020, the WHO declared the outbreak to be a public health emergency. In March 2020, the WHO characterized COVID-19 as a pandemic. Since then, the COVID-19 pandemic and efforts to control its spread have significantly curtailed the movement of people, goods, and services worldwide. As a result, the Company has taken certain measures in response to COVID-19.
While the duration and extent of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the extent and effectiveness of containment and mitigation actions, it has already had an adverse effect on the global economy, and the ultimate societal and economic impact of the COVID-19 pandemic remains unknown. Additionally, concerns over the economic impact of COVID-19 have caused extreme volatility in financial and other capital markets, which may adversely affect the Company’s ability to access capital markets in the future. Furthermore, the impact of the COVID-19 pandemic could adversely impact the Company’s cash flows and operations and delay the Company’s research and development activities.
While the Company has developed and continues to develop plans to help mitigate the potential negative impact of COVID-19, these efforts may not be effective, and any protracted economic downturn will likely limit the effectiveness of its efforts. Accordingly, it is not possible for the Company to predict the duration and ultimate extent to which this will affect its business, future results of operations, and financial condition at this time.
2.Significant Accounting Policies
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include determining the estimated lives of property and equipment, stock-based compensation
7

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
including the estimated fair value per share of common stock prior to the date the Company became public, research and development accruals, and the valuation allowance for deferred tax assets. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.
Concentrations of Credit Risk and Other Risks and Uncertainties
Credit risk represents the accounting loss that would be recognized as of the reporting date if counterparties failed completely to perform as contracted.
Financial instruments, which potentially subject the Company to concentration of credit risk, consist of cash balances maintained in excess of federal depository insurance limits and investments in U.S. Treasury securities that are not federally insured. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk on cash or investments. The Company relies, and expects to continue to rely, on a number of vendors to provide services, supplies and materials related to its research and development programs. The Company relies on single source suppliers for certain components and materials used in the Nautilus platform. The loss of any of these single source suppliers would require the Company to expend significant time and effort to locate and qualify an alternative source of supply for these components. The Company also relies, and expects to continue to rely, on third-party manufacturers and, in many cases, single third-party manufacturers for the production of certain reagents and antibodies. These programs could be adversely affected by a significant interruption in these services or the availability of materials.
The Company is subject to risks similar to those of other pre-clinical stage companies in the biopharmaceutical industry, including dependence on key individuals, the need to develop commercially viable products, competition from other companies, many of whom are larger and better capitalized, the impact of the COVID-19 pandemic and the need to obtain adequate additional financing to fund the development of its products. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be maintained, that any products developed will obtain required regulatory approval or that any approved products will be commercially viable. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from the sale of its products.
Segment Reporting
Operating segments are defined as components of an entity where discrete financial information is evaluated regularly by the chief operating decision market (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer is its CODM. The Company’s CODM reviews financial information presented on a consolidated basis for the purposes of making operating decisions, allocating resources and evaluating financial performance. As such, the Company has determined that it operates in one operating and one reportable segment. The Company’s long-lived assets are entirely based in the United States.
Cash and Cash Equivalents
The Company considers all highly-liquid investments with an original maturity of three months or less as of the date of acquisition to be cash equivalents.
Investments
The Company considers investments with an original maturity greater than three months and remaining maturities less than one year to be short-term investments. The Company classifies those investments that are not required for use in current operations and that mature in more than 12 months as long-term investments.
8

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
The Company classifies its investments as available for sale and reports them at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). For investments sold prior to maturity, the cost of investments sold is based on the specific identification method. Realized gains and losses on the sale of investments are recorded in other income (expense), net in the condensed consolidated statement of operations.
Other-than-temporary Impairment
The Company evaluates its investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, the Company considers factors such as, among other things, the extent and length of time the investment’s fair value has been lower than its cost basis, the financial condition and near-term prospects of the investment, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value, and the expected cash flows from the security. If any adjustments to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the condensed consolidated statement of operations and condensed consolidated statement of comprehensive loss. No such adjustments were necessary during the periods presented.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The carrying amounts of cash and cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses and other liabilities approximate their respective fair values due to their short-term nature.
Leases
The Company determines if an arrangement includes a lease at inception by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration. Operating leases with a term of more than one year are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the Company's condensed consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments. Operating lease ROU assets and liabilities are recognized on the lease commencement date based on the present value of the future minimum lease payments over the lease term. The Company uses the incremental borrowing rate commensurate with the lease term based on the information available at the lease commencement date in determining the present value of the lease payments as the Company's leases generally do not provide an implicit rate. ROU assets initially equal the lease liability, adjusted for any prepaid lease payments and initial direct costs incurred, less any lease incentives received. Certain of the Company's leases
9

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
include renewal options which allow the Company to, at its election, renew or extend the lease for a fixed or indefinite period of time. These renewal periods are included in the lease terms when the Company is reasonably certain the options will be exercised. Lease expense is recognized on a straight-line basis over the lease term when leases are operating leases. If it is considered a finance lease, expense is recognized over the lease term within interest expense and amortization in the Company’s condensed consolidated statements of operations. The Company also has lease arrangements with lease and non-lease components. The Company elected the practical expedient not to separate non-lease components from lease components for the Company's facility leases and to account for the lease and non-lease components as a single lease component. The Company also elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with terms of 12 months or less.
Comprehensive Loss
Comprehensive loss consists of net loss and other gains or losses affecting stockholders’ equity that, under U.S. GAAP are excluded from net loss. For the three months ended March 31, 2022 and 2021, unrealized losses on debt securities were included as components of comprehensive loss.
Accounting Pronouncements
The Company is provided the option to adopt new or revised accounting guidance as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) either (1) within the same periods as those otherwise applicable to public business entities, or (2) within the same time periods as non-public business entities, including early adoption when permissible. With the exception of standards the Company elected to early adopt, when permissible, the Company has elected to adopt new or revised accounting guidance within the same time period as non-public business entities, as indicated below.
Recently Adopted Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” The amendments in ASU 2020-04 provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company adopted this guidance effective January 1, 2022 using the prospective method, which did not have a material impact on the Company’s condensed consolidated financial statements.
Recently Issued 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 amends existing guidance on the impairment of financial assets and adds an impairment model that is based on expected losses rather than incurred losses and requires an entity to recognize as an allowance its estimate of expected credit losses for its financial assets. An entity will apply this guidance through a cumulative-effect adjustment to retained earnings upon adoption (a modified-retrospective approach) while a prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. This ASU is effective for the Company for its fiscal year ending December 31, 2023. Early adoption is permitted. The Company is in the process of evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements and related disclosures. The Company does not anticipate adoption to have a material impact on its condensed consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as the elimination of exceptions related to the approach for intraperiod tax
10

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
allocation, the methodology for calculating income taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences, ownership changes in investments, and tax basis step-up in goodwill obtained in a transaction that is not a business combination. This ASU is effective for the Company for its fiscal year ending December 31, 2022. Early adoption is permitted. The Company is in the process of evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements and related disclosures. The Company does not anticipate adoption to have a material impact on its condensed consolidated financial statements.
3.Reverse Recapitalization
On June 9, 2021, Mako Merger Sub merged with Legacy Nautilus, with Legacy Nautilus surviving as the surviving company and as a wholly-owned subsidiary of ARYA.
As a result of the Business Combination, Legacy Nautilus equity holders received an aggregate number of shares of New Nautilus Common Stock equal to (i) $900.0 million plus $24.3 million, which reflects the aggregate exercise price of all stock options (whether vested or unvested) of Legacy Nautilus at the consummation of the Business Combination, divided by (ii) $10.00 giving effect to the exchange ratio of approximately 3.6281 (“Exchange Ratio”) based on the terms of the Business Combination Agreement. For purposes of calculating the aggregate number of New Nautilus Common Stock issuable to each holder of Legacy Nautilus Common Stock pursuant to the Business Combination Agreement, all Legacy Nautilus Common Stock held by such holder was aggregated, and the Exchange Ratio was applied to that aggregate number of shares held by such holder, and not on a share-by-share basis, and the number of New Nautilus Common Stock issued was rounded down to the nearest whole share. At the Closing Date, (i) an aggregate of 18,721,137 shares of Class A and Class B ordinary shares of ARYA were exchanged for an equivalent number of Common Stock, (ii) an aggregate of 85,324,118 shares of Common Stock were issued in exchange for the shares of Nautilus outstanding as of immediately prior to the Business Combination and (iii) an aggregate of 20,000,000 shares of Common stock were issued to the PIPE Investors in the PIPE Financing with total gross proceeds of $200.0 million. Moreover, at the Closing, all options to purchase shares of Nautilus were exchanged for comparable options to purchase shares of Common Stock based on an implied Legacy Nautilus equity value of $900.0 million. Immediately after giving effect to the transactions, there were 124,045,255 shares of Common Stock outstanding and 7,106,767 shares of Common Stock subject to outstanding options under the 2017 Plan.
The Business Combination is accounted for as a reverse recapitalization under U.S. GAAP. This determination is primarily based on Legacy Nautilus stockholders comprising a relative majority of the voting power of Nautilus and having the ability to nominate the members of the Board, Legacy Nautilus’s operations prior to the acquisition comprising the only ongoing operations of Nautilus, and Legacy Nautilus’s senior management comprising a majority of the senior management of Nautilus. Under this method of accounting, ARYA is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of Nautilus represent a continuation of the financial statements of Legacy Nautilus with the Business Combination being treated as the equivalent of Nautilus issuing stock for the net assets of ARYA, accompanied by a recapitalization. The net assets of ARYA are stated at historical costs, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are presented as those of Nautilus. All periods prior to the Business Combination have been retrospectively adjusted using the Exchange Ratio for the equivalent number of shares outstanding immediately after the Business Combination to effect the reverse recapitalization.
In connection with the Business Combination, the Company raised $335.4 million of net proceeds. This amount was comprised of $135.4 million of cash held in ARYA’s trust account from its initial public offering, net of ARYA’s transaction costs and underwriters’ fees of $10.1 million, and $200.0 million of cash in connection with the PIPE Financing. The Company incurred $8.1 million of transaction costs, consisting of banking, legal, and other professional fees which were recorded as a reduction to additional paid-in capital.
The number of shares of Common Stock issued immediately following the consummation of the Business Combination was:
11

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
Number of Shares
Common Stock of ARYA outstanding prior to the Business Combination19,186,500 
Less redemption of ARYA shares(465,363)
Common Stock of ARYA18,721,137 
Shares issued in PIPE Financing20,000,000 
Business Combination and PIPE Financing shares38,721,137 
Legacy Nautilus shares85,324,118 
Total shares of Common Stock immediately after the Business Combination124,045,255 

4.Fair Value Measurements
The following table details the assets carried at fair value and measured on a recurring basis within the three levels of fair value as of March 31, 2022 and December 31, 2021:
(in thousands)Gross UnrealizedReported as:
March 31, 2022Amortized CostGainsLossesFair ValueCash and cash equivalentsShort-term investmentsLong-term investments
Level 1
Mutual funds$9,037 $ $ $9,037 $9,037 $ $ 
U.S. treasury securities28,803 11 (75)28,739  15,030 13,709 
Total Level 137,840 11 (75)37,776 9,037 15,030 13,709 
Level 2
Commercial paper292,994 2 (235)292,761 179,585 113,176  
Corporate debt securities7,406  (117)7,289  7,289  
Agency bonds11,349 1 (141)11,209   11,209 
Total Level 2311,749 3 (493)311,259 179,585 120,465 11,209 
Total Level 1 and Level 2$349,589 $14 $(568)$349,035 $188,622 $135,495 $24,918 
(in thousands)Gross UnrealizedReported as:
December 31, 2021Amortized CostGainsLossesFair ValueCash and cash equivalentsShort-term investmentsLong-term investments
Level 1
Mutual funds$21,925 $ $ $21,925 $21,925 $ $ 
U.S. treasury securities15,156  (20)15,136  15,136  
Total Level 137,081  (20)37,061 21,925 15,136  
Level 2
Commercial paper301,906 2 (90)301,818 163,694 138,124  
Corporate debt securities14,299  (36)14,263  6,850 7,413 
Agency bonds8,998  (40)8,958   8,958 
Total Level 2325,203 2 (166)325,039 163,694 144,974 16,371 
Total Level 1 and Level 2$362,284 $2 $(186)$362,100 $185,619 $160,110 $16,371 
Contractual maturities of short-term investments as of March 31, 2022 and December 31, 2021 are due in one year or less. Contractual maturities of long-term investments as of March 31, 2022 and December 31, 2021 are due after 1 year through 2 years.
12

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
5.Composition of Certain Condensed Consolidated Financial Statement Line Items
Property and Equipment, Net
Property and equipment consisted of the following:
(in thousands)March 31,
2022
December 31,
2021
Laboratory equipment$4,297 $4,032 
Computer hardware157 157 
Furniture, fixtures and office equipment26 1 
Leasehold improvements8 8 
Construction in progress628 279 
5,116 4,477 
Less: Accumulated depreciation(2,275)(1,994)
Total$2,841 $2,483 
The Company recorded depreciation expense of $0.3 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively, which was primarily allocated to research and development expense.
Other Long Term Assets
Other long term assets consisted of the following:
(in thousands)March 31,
2022
December 31,
2021
Restricted cash$842 $842 
Deposits
155 155 
Total$997 $997 
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the following:
(in thousands)March 31,
2022
December 31,
2021
Employee compensation$1,515 $1,465 
Accrued research and development1,296 518 
Accrued professional and consulting fees472 411 
Accrued facilities 337 
Other144 388 
Total$3,427 $3,119 
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following:
(in thousands)March 31,
2022
December 31,
2021
Cash and cash equivalents$188,622 $185,619 
Restricted cash included in other long term assets842 842 
Total$189,464 $186,461 
13

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
6.Redeemable Convertible Preferred Stock
On June 9, 2021, upon the closing of the Business Combination (as defined in Note 1 and further described in Note 3), all of the outstanding redeemable convertible preferred stock was converted to New Nautilus Common Stock pursuant to the Exchange Ratio effective immediately prior to the Business Combination and the remaining amount was reclassified to additional paid-in capital. As of March 31, 2022 the Company had no issued and outstanding Preferred Stock shares.
7.Common Stock
On June 9, 2021, the Business Combination (as defined in Note 1 and further described in Note 3) was consummated and the Company issued 38,721,137 shares for an aggregate purchase price of $327.3 million, net of issuance costs of $8.1 million. Immediately following the Business Combination, there were 124,045,255 shares of Common Stock outstanding. The holder of each share of Common Stock is entitled to one vote.
The Company has retroactively adjusted the shares issued and outstanding prior to June 9, 2021 to give effect to the exchange ratio established in the Business Combination Agreement to determine the number of shares of Common Stock into which they were converted.
In June 2021, pursuant to the Business Combination, the Company amended its certificate of incorporation to increase the number of authorized common stock shares to 1,000,000,000 shares. There were 124,456,653 shares issued and outstanding as of March 31, 2022.
Common Stock Reserved for Future Issuance
Shares of common stock reserved for future issuance on an as-if converted basis, were as follows:
March 31,
2022
December 31,
2021
Stock options issued and outstanding9,971,247 8,550,076 
Shares available for grant under 2021 Equity Incentive Plan19,121,876 14,481,463 
Shares available for grant under 2021 Employee Stock Purchase Plan
2,487,930 1,244,900 
Total shares of common stock reserved31,581,053 24,276,439 
8.Income Taxes
The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. For the three months ended March 31, 2022 and 2021, no income tax expense or benefit was recognized, primarily due to a full valuation allowance recorded against its deferred tax asset.
9.Stock Option Plan and Stock-based Compensation
On June 8, 2021, the stockholders of the Company approved the 2021 Equity Incentive Plan (“2021 Plan”) and the 2021 Employee Stock Purchase Plan (“2021 ESPP”). As of March 31, 2022, 19,121,876 and 2,487,930 shares were available for grant under the 2021 Plan and 2021 ESPP, respectively.
2021 Employee Stock Purchase Plan
Under the 2021 ESPP, the Company can grant stock options to employees to purchase shares of Common Stock at a purchase price which equal to 85% of the fair market value of common stock on the enrollment date or on the exercise date, whichever is lower. Participants are permitted to purchase shares of the Company’s Common Stock at 85% of the lower of the fair market value of the Company’s Common Stock on the first trading day of an offering period or on the last trading date in each purchase period. Participants may end their participation at any time during
14

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
an offering and will be paid their accrued contributions that have not yet been used to purchase shares. Participation ends automatically upon termination of employment with the Company. The number of shares of common stock available for issuance under the 2021 ESPP will be increased on the first day of each fiscal year beginning on January 1, 2022, in an amount equal to the least of (i) 3,734,500 shares of common stock, (ii) a number of shares of common stock equal to one percent (1%) of the total number of shares of all classes of common stock of the Company on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Administrator no later than the last day of the immediately preceding fiscal year. On January 1, 2022, the number of shares available under the ESPP increased by 1,243,030 shares pursuant to this feature.
The first offering period is from October 1, 2021 through May 31, 2022. For subsequent offering periods, the Company will be offering a six month purchase period. As of March 31, 2022, no shares of common stock were purchased under the 2021 ESPP.
2021 Equity Incentive Plan
Under the 2021 Plan, the Company can grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units and performance awards to employees, directors and consultants. Options generally expire ten years after the date of grant. The number of shares available for issuance under the 2021 Plan will be increased on the first day of each fiscal year, beginning on January 1, 2022, in an amount equal to the least of (i) 18,672,200 shares, (ii) a number of shares equal to five percent (5%) of the total number of shares of all classes of common stock of the Company outstanding on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Administrator no later than the last day of the immediately preceding fiscal year. On January 1, 2022, the number of shares available under the 2021 Plan increased by 6,215,154 shares pursuant to this feature.
2017 Equity Incentive Plan
At the time of adoption of the 2021 Plan and the 2021 ESPP, no further awards will be granted under the 2017 Equity Incentive Plan (“2017 Plan”) and 7,106,767 shares of common stock were initially reserved for outstanding awards issued under the 2017 Plan.
In determining the compensation cost of the option awards, the fair value for each option award has been estimated using the Black Scholes model. The significant assumptions used in these calculations are summarized as follows:
Three Months Ended March 31,
20222021
Expected term (in years)
5.8 - 6.1
5.5 - 6.6
Expected volatility
109.0% - 110.0%
92.0% - 94.2%
Expected dividend rate0.0 %0.0 %
Risk free interest rate
1.73% - 2.42%
0.53% - 0.73%
Stock price
$3.78 - $4.24
$7.56 - $10.00
Expected term: The expected term of stock options represents the weighted-average period the stock options are expected to remain outstanding. The Company does not have sufficient historical exercise and post-vesting termination activity to provide accurate data for estimating the expected term of options and has opted to use the “simplified method,” whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.
Expected volatility: Historically, the Company has been a private company and lacked company‑specific historical and implied volatility information for its common stock. Therefore, the expected volatility of the Company’s common stock was determined by using an average of historical volatilities of selected industry peers deemed to be comparable to the Company’s business corresponding to the expected term of the awards and the Company expects to continue to do so until such time as the Company has adequate historical data regarding the volatility of its traded common stock price.
15

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
Expected dividend yield: The expected dividend rate is zero as the Company has no history or expectation of declaring dividends on its common stock.
Risk-free interest rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities corresponding to the expected term of the awards.
Fair value of common stock: Prior to the Business Combination, the fair value of the shares of common stock underlying the stock options has historically been determined by the Company’s Board of Directors. Because there has been no public market for the common stock, the Board of Directors has determined the fair value of the common stock at the time of grant of the option by contemporaneous valuations performed by an unrelated third-party valuation firm as well as a number of objective and subjective factors including valuation of comparable companies, sales of convertible preferred stock to unrelated third parties, operating and financial performance, the implied equity value of the Company as contemplated by the Business Combination, the lack of liquidity of capital stock and general and industry specific economic outlook, among other factors. The fair value of common stock was determined in accordance with applicable elements of the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Subsequent to the completion of the Business Combination (as defined in Note 1 and further described in Note 3) the fair value of the Company’s common stock is determined based on its closing market price.
The awards granted in late January 2021 had an exercise price equal to the grant date fair value of the Company’s common stock. The Company’s board of directors made a determination of the fair market value of the Company’s common stock which contemplated the implied equity value of the Company per the Business Combination Agreement that was executed on February 7, 2021.
The following table summarizes option award activity during the three months ended March 31, 2022:
Number of Stock Option AwardsWeighted Average Exercise PriceWeighted Average Remaining Contractual Life (Years)Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2021
8,550,076 $4.66 
Granted1,948,998 $3.83 
Exercised(153,570)$1.02 
Forfeited(374,257)$8.34 
Outstanding as of March 31, 2022
9,971,247 $4.41 8.8$16,544 
Options vested and expected to vest as of March 31, 2022
9,971,247 $4.41 
Vested and exercisable at March 31, 2022
2,759,100 $3.01 7.8$7,569 
As of March 31, 2022, there was $29.1 million of total unrecognized compensation expense expected to be recognized over a weighted average-period of 3.10 years. Aggregate intrinsic value represents the difference between the fair market value of the common stock and the exercise price of outstanding, in-the-money options.

16

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
Stock-based Compensation Expense
The following sets forth the total stock-based compensation expense for the Company’s stock options included in the Company’s condensed consolidated statement of operations:
Three Months Ended March 31,
(in thousands)20222021
Research and development$867 $497 
General and administrative1,243 839 
Total stock-based compensation expense$2,110 $1,336 
10.Commitments and Contingencies
Purchase Commitments
Open purchase commitments are for the purchase of goods and services related to, but not limited to, research and development, facilities, and professional services under non-cancellable contracts. They were not recorded as liabilities on the condensed consolidated balance sheet as of March 31, 2022 as the Company had not yet received the related goods or services. As of March 31, 2022, the Company had open purchase commitments for goods and services of $2.6 million, which are expected to be received through the next 12 months.
Legal Proceedings
From time to time, the Company may become involved in litigation relating to claims arising from the ordinary course of business. Management believes that there are currently no claims or actions pending against the Company where the ultimate disposition could have a material adverse effect on the Company’s results of operations, financial condition or cash flows.
Leases
The Company is obligated under certain non-cancellable operating leases for office space and laboratory space. This space includes operating leases in Seattle, Washington, and San Carlos, California.
Seattle Leases
The operating lease in Seattle, Washington expired in April 2021 and continued to be renewed month to month until August 2021. In July 2021, the Company entered into a 7-year non-cancellable operating lease, which commenced in August 2021, for an additional office space in Seattle, Washington. Total non-cancellable payments under this lease aggregate $4.5 million through June 2028.
San Carlos Leases
In February 2021, the Company amended its existing facility lease contract in San Carlos, California which was executed to shorten the remaining term of the lease to expire in December 2021 and reduce monthly lease payments and was accounted for as a modification. The impact of this modification reduced the operating lease right-of-use asset and lease liability balance as a $3.3 million non-cash adjustment. In September 2021, the Company further amended the facility lease contract in San Carlos, California to shorten the remaining term of the lease to expire in October 2021 and was also accounted for as a modification.
In December 2020, the Company entered into a new lease in San Carlos, California for ten years which commenced in October 2021 and expiring in October 2031 with total minimum lease payments of $40.7 million.
In December 2020, the Company also entered into a temporary office space lease agreement in San Carlos, California which commenced in February 2021 and expired in October 2021 with total minimum lease payments of $1.2 million. The temporary office space lease agreement was recognized as a short-term lease due to the election of the short-term lease measurement and recognition exemption.
17

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
In December 2021, the Company entered into another lease in San Carlos, California for nine years expected to commence in October 2022 and expiring in October 2031. The Company can terminate this lease after five years from October 1, 2022 without bearing any significant termination penalties and therefore the Company concluded that the lease term is five years with total minimum lease payments of $7.2 million.
The components of lease costs, which were included in operating expenses in condensed consolidated statements of operations, were as follows:
Three Months Ended March 31,
(in thousands)20222021
Fixed operating lease costs$1,183 $501 
Variable operating lease costs438 10 
Short-term lease costs5 179 
Total lease costs$1,626 $690 
For the three months ended March 31, 2022 and 2021, cash paid for amounts included in the measurement of operating lease liabilities included in cash flows used in operating activities was $0.6 million and $0.3 million, respectively.
As of March 31, 2022, the weighted-average remaining lease term and weighted-average discount rate for operating leases is 9.2 years and 8.9% respectively.
The following table summarizes the Company's future principal contractual obligations for operating lease commitments as of March 31, 2022:
Lease Obligations
(in thousands)
Nine months ending December 31, 2022$2,885 
20234,440 
20244,570 
20254,701 
20264,837 
2027 and thereafter22,942 
Total future minimum lease payments44,375 
Less: Imputed interest(14,325)
Total operating lease liabilities$30,050 
Guarantees and Indemnifications
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnifications will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.
The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by them in any action or proceeding to which any of them are, or are threatened to be, made a party by reason of their service as a director or officer. The Company maintains director and officer insurance coverage that would generally enable it to recover a portion of any future amounts paid. The Company may be subject to indemnification obligation by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.
18

Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements—(Continued)
(Unaudited)
Letter of Credit
In conjunction with the San Carlos lease agreement entered in December 2020, the Company issued a cash-collateralized letter of credit in lieu of security deposit of $0.6 million. In conjunction with the San Carlos lease agreement entered in December 2021, the Company amended the existing cash-collateralized letter of credit and increased the amount to $0.8 million. The cash amount is recorded as restricted cash under Other long-term assets on the Company’s condensed consolidated balance sheets.
11.Basic and Diluted Net Loss per Share
The following tables set forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
(in thousands, except share and per share amounts)20222021
Numerator:
Net loss attributable to common stockholders$(15,763)$(8,409)
Denominator:
Weighted average common shares outstanding124,418,580 33,069,513 
Less: Weighted-average unvested restricted shares and shares subject to repurchase
 (69,633)
Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted124,418,580 32,999,880 
Net loss per share attributable to common stockholders, basic and diluted:$(0.13)$(0.25)
As a result of the Business Combination, the Company has retroactively adjusted the weighted-average number of shares of Common Stock outstanding prior to the Closing Date by multiplying them by the Exchange Ratio of 3.6281 used to determine the number of shares of New Nautilus Common Stock into which they converted (as described in Note 3). The Common Stock issued as a result of the redeemable convertible preferred stock conversion on the Closing Date was included in the basic net loss per share calculation on a prospective basis.
The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have had an antidilutive effect were as follows:
Three Months Ended
March 31,
20222021
Options to purchase common stock9,971,2477,193,881
Employee stock purchase plan56,470
Convertible preferred stock (on an as-converted basis)52,175,965
Common stock warrants63,491
Total potentially dilutive common share equivalents10,027,71759,433,337
19


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of Nautilus Biotechnology, Inc.’s (“Nautilus” or the “Company”) condensed consolidated results of operations and financial condition. The discussion should be read together with the condensed consolidated financial statements and the accompanying notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements for the year ended December 31, 2021 and the related notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2022. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Nautilus’ actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” in Part II, Item 1A as set forth in this Quarterly Report on Form 10-Q.
Unless otherwise indicated or the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section to “Nautilus,” “we,” “us,” “our” and other similar terms refer to the business and operations of Legacy Nautilus prior to the Business Combination and to New Nautilus and its consolidated subsidiary following the Business Combination.

Overview
We are a development stage life sciences company creating a platform technology for quantifying and unlocking the complexity of the proteome. Our mission is to transform the field of proteomics by democratizing access to the proteome and enabling fundamental advancements across human health and medicine. We were founded on the belief that incremental advancements of existing technologies are inadequate, and that a bold scientific leap would be required to radically reinvent proteomics and revolutionize precision medicine. Our vision is to integrate our breakthrough innovations in computer science, engineering, and biochemistry to develop and commercialize a proteomic analysis technology of extreme sensitivity and scale. To accomplish this, we have built a prototype of a proteome analysis system, an instrument to perform massively parallel single protein molecule measurements which will be further developed to deliver the speed, simplicity, accuracy, and versatility that we believe is necessary to establish a new gold standard in the field.
Since our incorporation in 2016, we have devoted substantially all of our resources to research and development activities, including with respect to our proteomics platform, or Nautilus platform, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital and providing general and administrative support for these operations. We do not have any products available for commercial sale, and we have not generated any revenue from our Nautilus platform or other sources since inception. Our ability to generate revenue sufficient to achieve profitability, if ever, will depend on the successful development and eventual commercialization of our Nautilus platform, which we expect, if it ever occurs, will take a number of years. Our Nautilus platform, which includes our end-to-end solution comprised of instruments, consumables, and software analysis, is currently under development and will require significant additional research and development efforts, including extensive testing prior to commercialization. These efforts require significant amounts of additional capital and adequate personnel infrastructure. There can be no assurance that our research and development activities will be successfully completed, or that our Nautilus platform will be commercially viable.
In order to commercialize our Nautilus platform in volume, we will need to establish internal manufacturing capacity or to contract with one or more manufacturing partners, or both. Our technology is complex, and the manufacturing process for our products will be similarly complex, involving a large number of unique precision parts in addition to the production of various reagents and antibodies. We may encounter unexpected difficulties in manufacturing our Nautilus platform, instruments, and related consumables. Among other factors, we will need to develop reliable supply chains for the various components in the Nautilus platform, instruments, and consumables to support large-scale commercial production. In connection with our Nautilus platform, we intend to utilize over 300 complex reagents and various antibodies in order to generate deep proteomic information at the speed and scale
20


which we expect our Nautilus platform to perform. Such reagents and antibodies are expected to be more difficult to manufacture and more expensive to procure. There is no assurance that we will be able to build manufacturing or consumable production capacity internally or find one or more suitable manufacturing or production partners, or both, to meet the volume and quality requirements necessary to be successful in the proteomics market.
Given our stage of development, we have not yet established a commercial organization or distribution capabilities. We do intend to build a commercial infrastructure to support sales of our products. We expect to manage sales, marketing and distribution through both internal resources and third-party relationships. We plan to commercialize our proteomics platform using a three-phase plan that has been shown to be effective and optimal for introducing disruptive products in numerous life sciences technology markets. The first phase is expected to involve collaboration with biopharmaceutical companies and key opinion leaders to validate the performance and utility of Nautilus’ product, during which we do not expect to recognize significant revenue, if any. The second phase will include an early access limited release phase in which we expect to recognize limited revenue. Finally, the third phase is anticipated to include a broader commercial launch. We are currently in the collaboration phase during which we have entered into and are seeking to enter into collaborations with a small number of research customers, including with biopharmaceutical companies and key opinion leaders in proteomics whose assessment and validation of our products can significantly influence other researchers in their respective markets and/or fields. During the early access limited release phase, we plan to leverage our publications to drive awareness and customer demand to pre-sell instruments and reagents to select customers performing large-scale proteomics research. During this phase, we plan to provide early access program partners with broad-scale analysis and profiling of samples analyzed in its facility and shared via a cloud platform. We do not anticipate that these activities will result in any material revenue. During this phase, we expect to work closely with early access customers to demonstrate a unique value proposition for our Nautilus platform. We expect this second phase to lead into the third phase of broad commercialization by the end of 2023.
We intend to commercialize our Nautilus platform through a direct sales channel in the United States, and through both direct and distributor sales channels in regions outside the United States. Given our stage of development, we currently have no marketing, sales, commercial product distribution or service and support capabilities. We intend to build the necessary infrastructure for these activities in the United States, European Union, the United Kingdom, and potentially other countries and regions, including Asia-Pacific, as we execute on our three phase commercial launch strategy for our Nautilus platform.
Prior to the Business Combination, we financed our operations primarily through private placements of convertible preferred stock and had raised aggregate net proceeds of $108.4 million from these private placements. In connection with the consummation of the Business Combination and PIPE Financing, we received additional gross proceeds of approximately $345.5 million from PIPE Investors and the Business Combination, offset by approximately $18.2 million of transaction costs and underwriters’ fees relating to the closing of the Business Combination. As of March 31, 2022, we had cash, cash equivalents and short-term investments of $324.1 million. Based on this, we believe that our existing cash, cash equivalents, and short-term investments will enable us to fund our planned operating expenses and capital expenditures through at least the next 12 months.
We have incurred significant losses since the commencement of our operations. Our net loss was $15.8 million during the three months ended March 31, 2022, and we expect to continue to incur significant losses for the foreseeable future as we continue our research and development activities and planned commercialization of our proteomics platform. As of March 31, 2022, we had an accumulated deficit of $96.4 million. These losses have resulted primarily from costs incurred in connection with research and development activities and to a lesser extent from general and administrative costs associated with our operations. We expect to incur significant and increasing expenses and operating losses for the foreseeable future. Our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned commercialization and research and development activities.
We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities as we:
continue our research and development activities, including with respect to our Nautilus platform;
21


undertake activities to establish sales, marketing and distribution capabilities for our Nautilus platform;
setup costs related to production tooling and required testing;
maintain, protect and expand our intellectual property portfolio, including patents, trade secrets and know how;
implement operational, financial and management information systems;
attract, hire and retain additional management, scientific and administrative personnel; and
operate as a public company.
As a result, we will require substantial additional funding to develop our products and support our continuing operations. Until such time that we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties or from grants. We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, and could force us to delay, reduce or eliminate our product development or future commercialization efforts. We may also be required to grant rights to develop and market products that we would otherwise prefer to develop and market ourselves. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Impact of COVID-19 Pandemic
The global COVID-19 pandemic continues to rapidly evolve. The extent of the impact of the COVID-19 pandemic on our business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the outbreak and its impact on our development activities, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. As the COVID-19 pandemic has developed, we have taken numerous steps to help ensure the health and safety of our employees. We are maintaining hygiene and respiratory protocols; controls for social distancing; enhanced cleaning, disinfecting, decontamination, and ventilation protocols; health policies; and usage of personal protective equipment, where appropriate. During March and April of 2020 in which stay at home orders were in place in the state of California and Washington, the volume of ongoing lab work was reduced, and only critical program work in the lab continued with staggered lab employee work shifts to minimize risk of exposure to COVID-19, which disrupted and delayed our ability to conduct development activities. While we were broadly able to resume normal operations in August 2021, if any resurgence or worsening of the COVID-19 pandemic causes us to reinstitute these measures we may experience additional disruption and/or delays in our ability to conduct development activities.
We have been and continue to actively monitor our supply chain during the COVID-19 pandemic, including third-party materials and suppliers. To date, we have experienced some supply disruptions due to the pandemic, including closures at certain chip manufacturers, which led to extended lead times for certain chips; diversion of certain lab materials needed to support COVID-19 relief efforts; and lower availability of certain reagents. While certain of these disruptions have been resolved since the start of the COVID-19 pandemic, we are continuing to monitor our supply chain and contingency planning is ongoing with our partners to reduce the possibility of an interruption to our development activities or the availability of necessary materials.
The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and with our employees working remotely fully or intermittently as able from March 2020 until August 2021. We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. At
22


this point, the extent to which the COVID-19 pandemic may affect our future business, operations and development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain.
Reverse Recapitalization Transaction
On June 9, 2021 (the “Closing Date”), Nautilus Biotechnology, Inc., a Delaware corporation (f/k/a ARYA Sciences Acquisition Corp III, a Cayman Islands exempted company and our predecessor company (“ARYA”)) (the “Company”), consummated its previously announced business combination (the “Business Combination”) pursuant to the terms of that certain Business Combination Agreement, dated as of February 7, 2021 (the “Business Combination Agreement”), by and among ARYA, Mako Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of ARYA (“Mako Merger Sub”), and Nautilus Subsidiary, Inc., a Delaware corporation (f/k/a Nautilus Biotechnology, Inc.) (“Legacy Nautilus”).
Pursuant to the terms of the Business Combination Agreement, on the Closing Date, (i) ARYA changed its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”), upon which ARYA changed its name to “Nautilus Biotechnology, Inc.” (together with its consolidated subsidiary, “New Nautilus” or “Nautilus”) and (ii) Mako Merger Sub merged with and into Legacy Nautilus (the “Merger”), with Legacy Nautilus as the surviving company in the Merger and, after giving effect to such Merger, Legacy Nautilus becoming a wholly-owned subsidiary of New Nautilus.
In accordance with the terms and subject to the conditions of the Business Combination Agreement, at the effective time of the Merger (the “Effective Time”), (i) each share of Legacy Nautilus outstanding as of immediately prior to the Effective Time was exchanged for shares of common stock of New Nautilus, par value $0.0001 per share (“Common Stock”), and (ii) all vested and unvested options to purchase shares of Legacy Nautilus were exchanged for comparable options to purchase shares of Common Stock, in each case, based on an implied Legacy Nautilus equity value of $900,000,000.
As of the open of trading on June 10, 2021, the Common Stock of the Company, formerly those of ARYA, began trading on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “NAUT.”
In conjunction with the consummation of the Business Combination with ARYA, we received gross proceeds of approximately $345.5 million from PIPE Investors and the Business Combination, offset by approximately $18.2 million of transaction costs and underwriters’ fees relating to the closing of the Business Combination.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue and we may not generate any revenue from the sale of products or from other sources in the near future.
Operating Expenses
Research and Development Expense
Research and development expenses account for a significant portion of our operating expenses and consist primarily of salaries, related benefits and stock-based compensation expense of product development personnel, facilities costs, laboratory supplies and equipment, depreciation and amortization, external costs of vendors engaged to conduct research and development activities, and allocated expenses for technology and facilities. We expense research and development expenses in the periods in which they are incurred.
We plan to continue to invest in our research and development efforts and to increase our investment in research and development efforts related to our product development. As a result, we expect research and development expenses to increase in absolute dollars as we continue to advance our product development, hire additional personnel and retain existing personnel, purchase supplies and materials and allocate expense to our research and development facilities.
23


General and Administrative Expenses
General and administrative expenses consist of salaries and benefits, and stock-based compensation expense for personnel in executive, operations, legal, human resources, finance, marketing, commercial, IT personnel and administrative functions, professional fees for legal, patent, consulting, accounting and audit services, and allocated expenses for technology and facilities. We expense general and administrative expenses in the periods in which they are incurred.
We expect that our general and administrative expenses will increase substantially over the next several years as we hire additional personnel to support the continued research and development of our products and growth of our business. We also anticipate that we will incur substantially higher expenses as a result of operating as a public company, including expenses related to accounting, audit, legal, regulatory, insurance, compliance with the rules and regulations of the SEC, Sarbanes-Oxley Act and those of any national securities exchange on which our securities are traded, director and officer insurance, investor and public relations, and other administrative and professional services.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income on our cash, cash equivalents and investments and other miscellaneous nonrecurring expenses such as loss on disposal of property and equipment.
Results of Operations
Comparison of the Three Months Ended March 31, 2022 to the Three Months Ended March 31, 2021
The following table shows our condensed consolidated statements of operations for the periods indicated:
Three Months Ended March 31,Change
($)
Change
(%)
20222021
(in thousands)
Operating expenses:
Research and development$9,658 $4,835 $4,823 100 %
General and administrative6,364 3,582 2,782 78 %
Total operating expenses16,022 8,417 7,605 90 %
Other income (expense), net259 251 3138 %
Net loss$(15,763)$(8,409)$(7,354)87 %
Research and Development Expenses
Research and development expenses were $9.7 million for the three months ended March 31, 2022, compared to $4.8 million for the three months ended March 31, 2021, an increase of $4.8 million, or 100%. The increase was primarily due to a $2.1 million increase in salaries, related benefits, and stock-based compensation due to an increase in headcount to support on-going development of our products, a $1.1 million increase in laboratory supplies and equipment expense, a $0.9 million increase in costs for development services and a $0.7 million increase in facilities costs.
General and Administrative Expenses
General and administrative expenses were $6.4 million for the three months ended March 31, 2022, compared to $3.6 million for the three months ended March 31, 2021, an increase of $2.8 million, or 78%. The increase was primarily due to a $1.3 million increase in salaries, related benefits, and stock-based compensation due to an increase in headcount, a $0.8 million increase in insurance costs, and a $0.3 million increase in facilities cost.
24


Other Income (Expense), Net
Other income (expense), net for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 changed primarily due to income from accretion and amortization on investments.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net loss was $15.8 million for the three months ended March 31, 2022. As of March 31, 2022, we had an accumulated deficit of $96.4 million. Prior to the Business Combination, we funded our operations primarily with proceeds from the sale of convertible preferred stock. Prior to the Business Combination, we had raised net proceeds of $108.4 million from these private placements of our convertible preferred stock. In June 2021, in conjunction with the consummation of the Business Combination with ARYA, we received additional gross proceeds of approximately $345.5 million from PIPE Investors and the Business Combination, offset by approximately $18.2 million of transaction costs and underwriters’ fees relating to the closing of the Business Combination. As of March 31, 2022, we had cash, cash equivalents and short-term investments of $324.1 million.    
Our primary uses of cash to date have been to fund our research and development activities, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.
Funding Requirements
To date, we have not generated any revenue and we may not generate any revenue from the sale of products or from other sources in the near future. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities as we:
continue our research and development activities, including with respect to our proteomics platform;
undertake activities to establish sales, marketing and distribution capabilities for our proteomics platform;
incur setup costs related to production tooling and required testing;
maintain, protect and expand our intellectual property portfolio, including patents, trade secrets and know how;
implement operational, financial and management information systems;
attract, hire and retain additional management, scientific and administrative personnel; and
operate as a public company.
Based on our planned operations, we expect our current cash, cash equivalents, and short-term investments will be sufficient to fund our operating expenses and capital expenditures for at least the next 12 months. We continue to face challenges and uncertainties and, as a result, our available capital resources may be consumed more rapidly than currently expected due to: delays in execution of our development plans; the scope and timing of our investment in our sales, marketing, and distribution capabilities; changes we may make to the business that affect ongoing operating expenses; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; changes we may make in our business or commercialization strategy; changes we may make in our research and development spending plans; our need to implement additional infrastructure and internal systems; the impact of the COVID-19 pandemic; and other items affecting our forecasted level of expenditures and use of cash resources including potential acquisitions.
Until such time as we can generate significant revenue from commercialization of our products, if ever, we will continue to require substantial additional capital to develop our proteomics platform and fund operations for the
25


foreseeable future. We intend to obtain such capital through public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these funding sources. We may also seek additional financing opportunistically. We may be unable to raise additional funds on favorable terms or at all. Our failure to raise additional capital, if needed, would have a negative impact on our financial condition and our ability to execute our business plan.
Our expected future capital requirements depend on many factors including expansion of our product portfolio and the timing and extent of spending on sales and marketing and the development of our technology. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.
Historical Cash Flows
For the Three Months Ended March 31, 2022 and 2021
The following table summarizes our cash flows for the three months ended March 31, 2022 and 2021:
 Three Months Ended March 31,
20222021
(in thousands)
Net cash used in operating activities$(12,335)$(6,253)
Net cash provided by investing activities15,182 23,518 
Net cash provided by (used in) financing activities156 (2,069)
Net increase in cash, cash equivalents and restricted cash$3,003 $15,196 
Operating Activities
During the three months ended March 31, 2022, net cash used in operating activities was $12.3 million, primarily resulting from our operating loss of $15.8 million, offset by non-cash charges aggregating $2.9 million, which primarily included $2.1 million of stock-based compensation and $0.5 million amortization of operating lease right-of-use assets. Net cash used in operating activities was increased by net changes in assets and liabilities aggregating $0.5 million, primarily driven by $0.6 million decrease in prepaid expenses and other assets.
During the three months ended March 31, 2021, net cash used in operating activities was $6.3 million, primarily resulting from our operating loss of $8.4 million, offset by non-cash charges aggregating $2.1 million, which primarily included $1.3 million of stock-based compensation and $0.4 million amortization of operating lease right-of-use assets.
Investing Activities
During the three months ended March 31, 2022, net cash provided by investing activities was $15.2 million, primarily resulting from $38.6 million in proceeds from maturities of securities, partially offset by $22.9 million in purchases of securities and $0.5 million in purchases of property and equipment.
During the three months ended March 31, 2021, net cash provided by investing activities was $23.5 million, primarily resulting from $24.0 million in proceeds from maturities of securities, partially offset by $0.5 million in purchases of property and equipment.
Financing Activities
During the three months ended March 31, 2022, net cash provided by financing activities was $0.2 million of proceeds from exercise of stock options.
26


During the three months ended March 31, 2021, net cash used in financing activities was $2.1 million from payments of offering costs.
Contractual Obligations and Commitments
For a discussion of our contractual obligations and commitments, refer to Part I, Item 1, Note 10, “Commitments and Contingencies,” in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q.



Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. We evaluate our estimates and assumptions on an ongoing basis, and base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for the judgments we make about the carrying value of assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and statement of cash flows.
Other than the policies noted in Part I, Item 1, Note 2, “Significant Accounting Policies,” in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our audited financial statements as of and for the years ended December 31, 2021 and 2020.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements, see Part I, Item 1, Note 2 “Significant Accounting Policies” in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
Emerging Growth Company Accounting Election
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use this extended transition period under the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.
We will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more, (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of ARYA’s initial public offering, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.
Further, even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and
27


proxy statements. We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.
28


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Qualitative and Quantitative Disclosures About Market Risk
Our market risk exposure is primarily a result of fluctuations in interest rates and inflation. We do not hold or issue financial instruments for trading purposes.
Interest Rate Risk
We had cash, cash equivalents, short-term and long-term investments of $349.0 million as of March 31, 2022. The primary goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes. The carrying amount of our cash equivalents reasonably approximates fair value, due to the short maturities of these instruments. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect the fair market value of our investments in marketable securities. As of March 31, 2022, the effect of a hypothetical 1.00% (100 basis point) change in interest rates would have changed the fair value of our marketable securities by $1.0 million. Such change would only be realized if we sold the marketable securities prior to maturity.
Inflation Risk
Inflation generally affects us by increasing our cost of labor and goods and services. We believe that inflation has had some effect on our financial results during the periods presented. If we experience continued or future inflationary pressure, it may impact the costs of our operations as well as the costs to manufacture, sell and distribute our products and provide our services in the future. We may not be able to fully offset those increased costs through reduced spending or price increases to our products and services.

29


ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation 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 Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible 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 March 31, 2022.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of 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, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.
30


PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various claims and legal proceedings. Regardless of outcome, litigation and other legal and administrative proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. We are currently not a party to any legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations.
ITEM 1A. RISK FACTORS
You should consider carefully the following information about the risks described below, together with the other information contained in this Quarterly Report on Form 10-Q and in our other public filings, in evaluating our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock would likely decline.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in our company, as more fully described below. The principal factors and uncertainties that make investing in our company risky include, among others:
Risks Related to Our Business