What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-28 · 61 added, 61 removed, 195 unchanged (38% of the section changed)

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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.

The first phase is expected to involve research collaborations with biopharmaceutical companies and key academic opinion leaders exploring utility of pre-commercial versions of the platform, during which we do not expect to recognize significant revenue, if any.

The second phase will include an early access limited release in which we expect to engage with customers using a service model to generate pilot data on the platform in our facilities, or through on-site installation and testing to evaluate the platform at the customers’ facilities.

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 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.

We are currently in the collaboration phase during

which we have entered into collaborations with a small number of research customers, including with biopharmaceutical companies and key academic 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 the second phase, we expect to work closely with early access collaborators to demonstrate a unique value proposition for our Nautilus platform.

During this phase, we plan to provide early access to our collaborators with broad-scale and targeted analyses and profiling of samples analyzed in our facility and shared via a cloud platform.

We believe there is significant interest in our platform for targeted proteoform analysis.

As such, we expect to be working with our initial early access collaborators in this area, and to leverage our learnings from those collaborations for the benefit of both our broad-scale and targeted products and services.

We do not anticipate that these activities will result in any material revenue.

During the second phase, we expect to work closely with early access customers to demonstrate a unique value proposition for our Nautilus platform.

During this phase, we plan to provide early access program partners with broad-scale analysis and profiling of samples analyzed in our facility and shared via a cloud platform.

We anticipate early access engagements and associated revenue in 2025.

We expect this second phase to lead into the third phase of broad commercialization and launch of our proteome analysis platform in 2025.

We expect this second phase to lead into the third phase of launch of our proteome analysis platform in late 2026 and subsequent broad commercialization thereafter.

Voice of customer studies have suggested that there is market demand for a proteomics platform with specifications that are initially lower than what we have previously disclosed, for example, around characteristics such as sample input and proteome coverage.

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As of December 31, 2024, we had cash, cash equivalents and short-term investments of $129.9 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.

As of the the filing of this Annual Report on Form 10-K, 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 $63.7 million during the year ended December 31, 2023, 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.

Our net loss was $70.8 million during the year ended December 31, 2024, 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 Nautilus platform.

As of December 31, 2024, we had an accumulated deficit of $273.0 million.

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• attract, hire and retain additional management, scientific and administrative personnel;

• operate as a public company.

• continue to operate as a public company.

As a result, we will require substantial additional funding to develop our products and support our continuing operations.

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We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID‑19 pandemic, recent and any potential future financial institution failures, the conflicts in Eastern Europe, the Middle East and in other countries, and otherwise.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the COVID‑19 pandemic, recent and any potential future financial institution failures, the conflicts in Eastern Europe, the Middle East and in other countries, and otherwise.

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.

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Impact of Negative Global or National Events

Businesses have been and will continue to be impacted by a number of challenging global and national events and circumstances that continue to evolve, including the COVID-19 pandemic, extreme weather conditions, increased economic uncertainty, inflation, rising interest rates, recent and any potential future financial institution failures, and conflicts in Eastern Europe, the Middle East and in other countries.

Businesses have been and will continue to be impacted by a number of challenging global and national events and circumstances that continue to evolve, including extreme weather conditions, economic uncertainty, inflation, changing interest rates, recent and any potential future financial institution failures, and conflicts in Eastern Europe, the Middle East and in other countries.

The extent of the impact of these events and circumstances on our business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration and scope of the events and their 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.

We have been and continue to actively monitor the potential impacts that these various events and circumstances may have on our business and we take steps, where warranted, to minimize any potential negative impacts on our business resulting from these events and circumstances.

For example, as the COVID-19 pandemic has developed, we have taken numerous steps to help ensure the health and safety of our employees.

We continue to employ hygiene protocols;

controls for social distancing;

enhanced cleaning, disinfecting, decontamination, and ventilation protocols;

health policies;

and usage of personal protective equipment, in all cases where appropriate.

While we have resumed normal operations, any resurgence or worsening of the COVID-19 pandemic may cause us to reinstitute certain measures to protect employee safety, including staggered work hours or reduced in-person staffing, that could result in additional disruption and/or delays in our ability to conduct development activities.

We have been and continue to actively monitor our supply chain in light of these challenging global and national events and circumstances, including our third-party materials suppliers.

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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 these global and national events and circumstances, either individually or in the aggregate, is highly uncertain and subject to change.

In April 2023, President Biden signed legislation that ended the COVID-19 national emergency on May 11, 2023.

The full impact of this termination of the national emergency and the wind-down of the public health emergency on FDA and other regulatory policies and operations are unclear.

To the extent possible, we are conducting business as usual, with necessary or advisable modifications to mitigate potentially negative impacts to our business.

For example, during the COVID-19 pandemic, we made certain modifications to employee travel, with masking and vaccination requirements in our offices, and with our employees working remotely fully or intermittently as able from March 2020 until August 2022.

We will continue to actively monitor the rapidly evolving situation related to these global and national events, and may take further actions to mitigate potential negative impacts to our business, and that may 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 this point, the extent to which these global or national events and

circumstances may affect our future business, operations and development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain.

The ultimate impact of these global and national events and circumstances, either individually or in aggregate, is highly uncertain and subject to change.

We will continue to actively monitor any developments related to these global and national events, and may take actions to mitigate potential negative impacts to our business, and that may 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 this point, the extent to which these global or national events and circumstances may affect our future business, operations and development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain.

Components of Our Results of Operations

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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, 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.

depreciation and amortization, external costs of vendors engaged to conduct research and development activities, acquired in-process research and development, 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.

While we anticipate certain cost-savings associated with our recently announced workforce reductions, in the future, we continue to 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.

General and Administrative Expenses

General and administrative expenses consist of salaries, related 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, directors and officers insurance, and allocated expenses for technology and facilities.

General and administrative expenses consist of salaries, related 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, directors and officers insurance, allocated expenses for technology and facilities, legal settlement expenses, and marketing expenses.

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 growth in research and development activities for our products and commercial activities supporting the growth of our business.

We also anticipate that we will incur higher expenses as a result of 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, investor and public relations, and other administrative and professional services.

While we anticipate certain cost-savings associated with our recently announced workforce reductions, in the future, we expect that our general and administrative expenses will increase substantially over the next several years as we hire additional personnel to support the growth in research and development activities for our products and commercial activities supporting the growth of our business, including sales, marketing, service, support, and distribution infrastructure.

We also anticipate that we will incur higher 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, investor and public relations, and other administrative and professional services.

Other Income (Expense)

Other income (expense) consists primarily of interest income on our cash, cash equivalents and investments (including accretion and amortization of discounts and premiums on marketable debt securities), gains and losses on foreign currency transactions, and other miscellaneous non-recurring expenses such as gains or losses on disposal of property and equipment.

Other miscellaneous non-recurring expenses such as gains or losses on disposal of property and equipment are also included.

Results of Operations

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The following table shows our consolidated statements of operations for the periods indicated:

Year Ended December 31, 2023 to 2022

Year Ended December 31,

2024 2023 Change

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Research and development expenses were $50.5 million for the year ended December 31, 2024, compared to $47.3 million for the year ended December 31, 2023, an increase of $3.2 million, or 7%.

The increase was primarily due to a $5.6 million increase in salaries, related benefits, and stock-based compensation, a $3.2 million increase in facilities cost, a $2.8 million increase in laboratory supplies and equipment expense, and a $0.5 million increase in depreciation expense.

These increases were primarily caused by increased hiring and new leases commencing during the period.

These increases were partially offset by a $2.7 million decrease in costs for external development services as more development efforts were performed by the Company.

The increase was primarily due to a $2.0 million increase in salaries, related benefits, and stock-based compensation driven by increased headcount throughout the year, a $0.8 million increase in in-process research and development expense resulting from an asset acquisition during the year, a $0.5 million increase in laboratory supplies and equipment expense, and a $0.3 million increase in costs for external development services.

These increases were partially offset by a $0.7 million decrease in professional services attributable to consulting fees.

General and Administrative Expenses

General and administrative expenses were $31.0 million for the year ended December 31, 2024, compared to $28.9 million for the year ended December 31, 2023, an increase of $2.1 million, or 7%.

The increase was primarily due to a $4.1 million increase in salaries, related benefits, and stock-based compensation due to an increase in headcount to support general and administrative activities and supply chain and manufacturing readiness, and a $0.2 million increase in facilities costs driven by new leases commencing during the period.

These increases were partially offset by a $1.1 million decrease in insurance costs, and a $0.7 million decrease in professional services, including accounting and recruiting services, as more of these activities were completed by the Company.

The increase was primarily due to a $0.8 increase in professional services attributable to legal and consulting fees, $0.5 million increase in professional services from fees related to the shelf registration statement filed during the period, a $0.5 million increase in salaries, related benefits, and stock-based compensation driven by annual merit increases and stock-option awards, and a $0.4 million increase in facilities costs driven by new leases that commenced during the year ended December 31, 2023.

These increases were partially offset by a $0.4 million decrease in insurance costs.

Other Income (Expense)

Other income (expense) for the year ended December 31, 2023 as compared to the year ended December 31, 2022 changed primarily due to higher interest income from marketable debt securities driven by higher interest rates.

Other income (expense) for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The decrease is attributable to the decrease in interest income as our cash, cash equivalents, and investments balance decreased during the period.

Liquidity and Capital Resources

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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.

In February 2024, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“TD Cowen”) under which we may offer and sell up to $125.0 million of shares of our common stock from time to time through an “at the market” offering program under which TD Cowen will act as sales agent.

Under the Sales Agreement, we will set the parameters for the sale of shares, including the number or dollar amount of shares to be issued, the time period during which sales are requested to be made, limitations on the number or dollar amount of shares that may be sold in any one trading day and any minimum price below which sales may not be made.

The Sales Agreement provides that TD Cowen will be entitled to compensation for its services in an amount equal to up to 3.0% of the gross proceeds of all shares of common stock sold through TD Cowen under the Sales Agreement.

We have no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement.

During the year ended December 31, 2024, we did not sell any shares of common stock pursuant to the Sales Agreement.

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:

We approved and began implementing workforce reductions in the first quarter of 2025.

The cost-savings initiatives are expected to reduce certain operating expenses, primarily personnel-related expense, in the near-term.

However, we expect our expenses and capital requirements will continue to increase substantially in connection with our ongoing activities as we:

• continue our research and development activities, including with respect to our Nautilus platform;

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• attract, hire and retain additional management, scientific and administrative personnel;

• 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.

• continue to operate as a public company.

As of the filing of this Annual Report on Form 10-K, 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:

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our need to implement additional infrastructure and internal systems;

the impact of the COVID-19 pandemic, the conflicts in Eastern Europe the Middle East and in other countries;

the impact of global and national conflicts or other disruptions;

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 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.

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 Nautilus platform and fund operations for the foreseeable future.

We intend to obtain such capital through public or private equity offerings or debt financings (including potential sales under the Sales Agreement), 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 ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the COVID‑19 pandemic, recent and any potential future financial institution failures, the conflicts in Eastern Europe, the Middle East and in other countries, and otherwise.

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.

If we raise additional funds by issuing equity securities, including any issuances pursuant to our “at the market” equity offering program under our Sales Agreement with TD Cowen, 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.

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Net cash used in operating activities $ (59,145) $ (51,711)

Net cash used in investing activities (43,735) (25,740)

Net cash provided (used) by investing activities

66,250 (43,735)

Net cash provided by financing activities 1,144 368

Net increase in cash, cash equivalents and restricted cash $ (95,078) $ (70,984)

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

$ 8,249 $ (95,078)

Operating Activities

During the year ended December 31, 2023, net cash used in operating activities was $51.7 million, primarily resulting from our net loss of $63.7 million, a decrease in the net changes in assets and liabilities aggregating $3.2 million.

During the year ended December 31, 2024, net cash used in operating activities was $59.1 million, primarily resulting from our net loss of $70.8 million and a decrease in the net changes in assets and liabilities aggregating $5.5 million.

The net loss and decrease in net changes in assets and liabilities was partially offset by $17.1 million of non-cash expenses.

The non-cash expenses included $12.1 million of stock-based compensation, $3.9 million amortization of operating lease right-of-use assets, $1.8 million in depreciation, partially offset by $2.7 million in accretion of discounts of investments.

The non-cash expenses included $12.7 million of stock-based compensation, $4.4 million amortization of operating lease right-of-use assets, $2.0 million in depreciation, and $0.8 million in non-cash adjustments related to in-process research and development, partially offset by $2.8 million in accretion of discounts of investments.

During the year ended December 31, 2023, net cash used in operating activities was $51.7 million, primarily resulting from our net loss of $63.7 million and a decrease in the changes in assets and liabilities aggregating $3.2 million.

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Investing Activities

During the year ended December 31, 2023, net cash used in investing activities was $43.7 million, resulting from $112.9 million in purchases of securities and $2.4 million in purchases of property and equipment, partially offset by $71.6 million in proceeds from the maturities of securities.

During the year ended December 31, 2024, net cash provided by investing activities was $66.3 million, resulting from $155.4 million in proceeds from the maturities of securities, partially offset by $86.3 million in purchases of securities, $2.1 million in purchases of property and equipment, and 0.8 million in cash paid in connection with an asset acquisition.

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Contractual Obligations and Commitments

For a discussion of our contractual obligations and commitments, refer to Part II, Item 8, Note 8, “Commitments and Contingencies” to the consolidated financial statements in this Annual Report on Form 10-K.

For a discussion of our contractual obligations and commitments, refer to Part II, Item 8, Note 8, “Commitments and Contingencies” in our notes to the consolidated financial statements in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition results of operations are based upon our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses.

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Our critical accounting policies are those that materially affect our financial statements and involve difficult, subjective or complex judgments by management.

A thorough understanding of these critical accounting policies is essential when reviewing

our financial statements.

A thorough understanding of these critical accounting policies is essential when reviewing our financial statements.

We believe that the critical accounting policies listed below are the most difficult management decisions as they involve the use of significant estimates and assumptions as described above.

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Costs for research and development activities are expensed in the period in which they are incurred.

Research and development expenses consist of costs incurred in performing research and development activities, including salaries, related bonuses, stock-based compensation, employee benefits, 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.

Research and development expenses consist of costs incurred in performing research and development activities, including salaries, bonuses, stock-based compensation, employee benefits for product development personnel, laboratory supplies and equipment, depreciation and amortization, external costs of vendors engaged to conduct research and development activities, acquired in-process research and development, and allocated expenses for technology and facilities.

As part of the process of preparing our financial statements, we estimate our accrued expenses.

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Our stock-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes option pricing model.

To the extent any stock option grants are made subject to the achievement of a performance-based milestone, management evaluates when the achievement of any such performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date.

To the extent any stock option grants are made subject to the achievement of a

performance-based milestone, management evaluates when the achievement of any such performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date.

The Black-Scholes option pricing model utilizes inputs which are highly subjective assumptions and generally require significant judgment.

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Recent Accounting Pronouncements

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Part II, Item 8, Note 2, “Significant Accounting Policies” to the consolidated financial statements in this Annual Report on Form 10-K.

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Part II, Item 8, Note 2, “Significant Accounting Policies” in our notes to the consolidated financial statements in this Annual Report on Form 10-K.

Emerging Growth Company Accounting Election

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis