Nautilus Biotechnology(NAUT) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section details Nautilus's unaudited financial statements, management's analysis, market risks, and internal controls Item 1. Financial Statements Nautilus's unaudited financial statements show increased cash from the Business Combination and ongoing net losses from R&D and G&A expenses Condensed Consolidated Balance Sheets This section presents the company's financial position, highlighting assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | September 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------------- | :------------------ | | Cash and cash equivalents | $190,241 | $36,607 | | Short-term investments | $157,104 | $40,135 | | Total current assets | $352,222 | $77,659 | | Total assets | $385,347 | $85,011 | | Total current liabilities | $4,209 | $3,018 | | Total liabilities | $7,500 | $6,314 | | Total stockholders' equity (deficit)| $377,847 | $(29,721) | - Total assets increased significantly from $85.0 million at December 31, 2020, to $385.3 million at September 30, 2021, primarily due to the Business Combination and PIPE Financing proceeds[20] - Stockholders' equity shifted from a deficit of $(29.7) million to a positive $377.8 million, reflecting the capital infusion from the Business Combination[20] Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $8,244 | $3,317 | $19,459 | $8,538 | | General and administrative | $6,324 | $710 | $14,223 | $1,886 | | Total operating expenses | $14,568 | $4,027 | $33,682 | $10,424 | | Net loss | $(14,504) | $(3,978) | $(33,626) | $(10,267) | | Net loss per share (basic & diluted) | $(0.12) | $(0.13) | $(0.47) | $(0.36) | - Net loss for the nine months ended September 30, 2021, increased by 228% to $33.6 million from $10.3 million in the prior year, primarily due to increased R&D and G&A expenses[21][141] - Research and development expenses increased by 128% for the nine months ended September 30, 2021, driven by higher headcount, lab supplies, and development services[21][142] - General and administrative expenses surged by 654% for the nine months ended September 30, 2021, mainly due to increased salaries, professional services, and insurance costs[21][143] Condensed Consolidated Statements of Comprehensive Loss This section presents the net loss and other comprehensive income (loss) components for the periods Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(14,504) | $(3,978) | $(33,626) | $(10,267) | | Unrealized gain (loss) on securities available-for-sale | $1 | $— | $(12) | $9 | | Comprehensive loss | $(14,503) | $(3,978) | $(33,638) | $(10,258) | Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) This section tracks changes in preferred stock and stockholders' equity, reflecting capital transactions - As of September 30, 2021, all redeemable convertible preferred stock was converted to common stock due to the Business Combination, resulting in no outstanding preferred shares[26][75] - Total stockholders' equity increased from a deficit of $(29.7) million at December 31, 2020, to a positive $377.8 million at September 30, 2021, primarily driven by the reverse recapitalization and PIPE financing[26][145] - Common stock shares outstanding increased to 124,166,776 as of September 30, 2021, from 33,069,513 at December 31, 2020, reflecting the Business Combination and related issuances[26][78] Condensed Consolidated Statements of Cash Flows This section summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :----------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(28,722) | $(9,269) | | Net cash used in investing activities | $(145,028) | $(53,975) | | Net cash provided by financing activities | $327,384 | $75,889 | | Net increase in cash, cash equivalents and restricted cash | $153,634 | $12,645 | | Cash, cash equivalents and restricted cash at end of period | $190,853 | $13,240 | - Net cash used in operating activities increased to $28.7 million for the nine months ended September 30, 2021, from $9.3 million in the prior year, driven by higher operating losses[28][152] - Net cash provided by financing activities significantly increased to $327.4 million for the nine months ended September 30, 2021, primarily due to $335.4 million from the Business Combination and PIPE Financing[28][156] Notes to Condensed Consolidated Financial Statements This section provides additional details and explanations for the financial statement line items - The Company is a development-stage biotechnology company focused on its proteomics platform, with substantially all resources devoted to R&D since 2016[29][113] - On June 9, 2021, Nautilus completed a Business Combination (reverse recapitalization) with ARYA Sciences Acquisition Corp. III and a PIPE Financing, raising approximately $345.5 million gross proceeds[31][32][129] - The Company has incurred net operating losses and negative cash flows since inception, with an accumulated deficit of $64.0 million as of September 30, 2021[35][119] - Management believes existing cash, cash equivalents, and short-term investments of $347.3 million are sufficient to fund operations for at least the next 12 months[36][118] - The COVID-19 pandemic has caused supply disruptions and delays in R&D activities, and its ultimate impact on the business remains uncertain[38][123] - Stock-based compensation expense totaled $5.4 million for the nine months ended September 30, 2021, significantly higher than $0.1 million in the prior year[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Nautilus's financial condition, highlighting the Business Combination, increased expenses, net losses, and commercialization plans - Nautilus is a development-stage life sciences company creating a proteomics platform, with no products commercially available and no revenue generated since inception[112][113] - The company plans a three-phase commercial launch: collaboration, early access limited release (not before H2 2022, limited revenue), and broader commercial launch (end of 2023/beginning of 2024, no material revenue prior to H2 2023)[116] - Net loss for the nine months ended September 30, 2021, was $33.6 million, and the company expects to incur significant losses for the foreseeable future due to R&D and commercialization efforts[119] - Cash, cash equivalents, and short-term investments totaled $347.3 million as of September 30, 2021, following $345.5 million gross proceeds from the Business Combination and PIPE Financing[118] - Operating expenses increased significantly year-over-year, with R&D up 128% to $19.5 million and G&A up 654% to $14.2 million for the nine months ended September 30, 2021[141][142][143] - Future capital requirements are substantial, and the company may need additional funding through equity, debt, or collaborations, with potential risks of dilution or unfavorable terms[121][148][149] Item 3. Quantitative and Qualitative Disclosures About Market Risk Nautilus discusses market risks, primarily interest rate fluctuations, with no material exposure due to short-term investments or inflation impact - Nautilus's primary market risk exposure is from fluctuations in interest rates, but due to the short-term nature of cash and cash equivalents, material exposure to fair value changes is not anticipated[169][170] - A hypothetical 1.00% change in interest rates would not have materially impacted the fair value of marketable securities as of September 30, 2021, and December 31, 2020[171] - Inflation has not had a material effect on the company's financial results during the periods presented[172] Item 4. Controls and Procedures Management deemed disclosure controls effective, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of September 30, 2021[174] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2021[175] - Control systems provide reasonable, not absolute, assurance, and inherent limitations mean misstatements due to error or fraud may occur and not be detected[176] PART II - OTHER INFORMATION This section details legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings Nautilus is not currently involved in any legal proceedings that would materially adversely affect its business or financial condition - The Company is not currently involved in any legal proceedings that would have a material adverse effect on its business, financial condition, or results of operations[179] Item 1A. Risk Factors This section outlines significant risks including development stage, commercialization delays, capital needs, supply chain, IP, regulatory, and market volatility - Nautilus is a development-stage company with no commercialized products, incurring net losses, and its business is entirely dependent on the success of its proteomics platform, which is still in development[181][182][188][189] - The company may experience material delays in its three-phase commercialization plan, with no material revenue expected prior to the second half of 2023[182][191] - Significant additional capital will be required to fund development and commercialization plans, and there is no assurance that such funding will be available on favorable terms or at all[183][223][227] - The company relies on single-source suppliers for critical components and materials, and the loss of any could severely harm the business[183][240][241] - Protecting intellectual property is crucial, but patent terms may be inadequate, and the company may face challenges from third-party infringement claims or difficulties in licensing necessary technologies[184][252][267][282][289] - The COVID-19 pandemic has adversely impacted operations, supply chains, and development timelines, with the ultimate impact remaining highly uncertain[187][337][342] - The market price of common stock may be volatile, and an active trading market may not be sustained, potentially leading to substantial losses for investors[187][353] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Nautilus issued 7,402 common shares on August 5, 2021, from option exercises at $1.14 per share, exempt under Rule 701 - On August 5, 2021, 7,402 shares of common stock were issued upon option exercise under the 2017 Plan at $1.14 per share, exempt from registration under Rule 701[379] Item 3. Defaults Upon Senior Securities Nautilus reported no defaults upon senior securities during the period - There were no defaults upon senior securities[380] Item 4. Mine Safety Disclosures Nautilus reported no mine safety disclosures - There were no mine safety disclosures[381] Item 5. Other Information Nautilus reported no other information for this item - There was no other information to report[382] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including officer certifications and Inline XBRL documents - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[384] SIGNATURES This section contains the official signatures for the report, confirming its submission Signatures The report was signed on November 2, 2021, by Sujal Patel (CEO) and Anna Mowry (CFO) for Nautilus Biotechnology, Inc - The report was signed on November 2, 2021, by Sujal Patel (CEO) and Anna Mowry (CFO)[390]