Nautilus Biotechnology, Inc. 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information in this discussion and analysis contains forward-looking statements based upon current expectations that involve risk and uncertainties. Nautilus’s 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 I, Item 1A and elsewhere in this Annual Report on Form 10-K. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.” 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 Nautilus and its consolidated subsidiary. Overview We are a development stage life sciences company focused on creating a platform technology to quantify and unlock the complexity of the proteome. We were founded to address longstanding challenges in proteomics through the development of a new analysis method, Iterative Mapping, for the quantification of single, intact protein molecules at scale. Our mission is to transform the field of proteomics by broadening access to high-quality proteomic data and enabling fundamental advancements across human health and medicine. Iterative Mapping is designed to enable broad and deep characterization of the proteome while delivering high reproducibility through direct single-molecule counting. By repeatedly interrogating individual protein molecules and aggregating results across billions of measurements, Iterative Mapping generates digital protein counts that are intended to support consistent comparison across samples, experiments, and time. The Nautilus Voyager TM platform is designed to implement the Iterative Mapping method. The Nautilus Voyager platform integrates nanofabricated protein arrays, affinity reagent probing, advanced optics and fluidics, and machine learning–based analysis into an end-to-end workflow inclusive of instrumentation, consumables, and software. 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 Voyager 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 Voyager 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 Voyager 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 Voyager platform, instruments, and related consumables. Among other factors, we will need to develop reliable supply chains for the various components in our Nautilus Voyager platform, instruments, and consumables to support large-scale commercial production. In connection with our Nautilus platform, we intend to utilize approximately 300 unique multi-affinity reagents and various antibodies in order to generate deep proteomic information at the speed and scale which we expect our Nautilus Voyager 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 anticipate commercializing our Nautilus Voyager platform in phases that began with research collaborations with leading biopharmaceutical companies, academic institutions, and research organizations exploring utility of pre-commercial versions of the platform. The next phases of our strategy involve a land-and-expand strategy in which we provide customers with access to the Iterative Mapping method on the Nautilus Voyager platform for an initial application, and over time, add additional applications in both targeted proteoform analysis and broadscale proteomics, which customers would access depending upon their specific proteomics needs. Initial customer access to the Nautilus Voyager platform is expected to be through our Early Access Program in which Nautilus will perform analysis and profiling of samples analyzed in our facility and shared via a cloud platform. We expect to work closely with early access collaborators to demonstrate the unique value proposition of our Nautilus Voyager platform. With data gained from our Early Access Program customers, we plan to leverage publications to drive 73 awareness and customer demand and later sell instruments and reagents to select customers performing targeted proteoform and broadscale proteomics research.We announced the launch of our Iterative Mapping Early Access Program starting with target specific service offerings in January 2026 for the analysis of the microtubule-associated protein tau (or “Tau” for short), which has been broadly associated with the onset and progression of Alzheimer’s disease in human patients. Over time, we plan to extend this early access framework to include additional proteoforms in new disease areas like oncology and into a dual model that supports both targeted assays, and broadscale workflows, which are designed to offer broader proteome coverage. We do not anticipate that these early access activities will result in any material revenue. We expect to initiate our commercial launch in late 2026 by opening the Nautilus Voyager TM platform for pre-orders, with instrument installations at customer sites beginning in early 2027. At launch, we expect general availability to include the Voyager instrument, our Tau proteoform assay, and a second proteoform assay. We anticipate general availability of Broadscale proteomics capabilities in the first half of 2027, as we continue expanding the platform’s assay portfolio. Our first generally available broadscale consumable kits are designed to deliver strong initial performance, with subsequent releases expected to further expand capabilities and enable the platform to meet or exceed our previously announced product specifications. 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 limited 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 phased commercial launch strategy for our Nautilus Voyager platform. On June 9, 2021, 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 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”). 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 December 31, 2025, we had cash, cash equivalents and short-term investments of $103.4 million. As of 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 $59.0 million during the year ended December 31, 2025, 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 Voyager platform. As of December 31, 2025, we had an accumulated deficit of $332.0 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 Voyager platform; • conduct activities to develop and deliver service offerings and to establish and operate service laboratory operations; • undertake activities to establish sales, marketing and distribution capabilities for our Nautilus Voyager 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; 74 • attract, hire and retain additional management, scientific and administrative personnel; and • 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. 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 ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, 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. 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 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 extreme weather conditions, economic uncertainty, increased tariffs, inflation, changing interest rates, 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. 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. We have, in the past, experienced some supply disruptions, including closures at certain chip manufacturers, which led to extended lead times for certain chips; and lower availability of certain reagents. While certain of these disruptions have been resolved, 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 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 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, 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. We expense research and development expenses in the periods in which they are incurred. 75 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. While we experienced certain cost-savings associated with our workforce reductions implemented in the first quarter of 2025, 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, allocated expenses for technology and facilities, loss contingency accruals, and marketing expenses. We expense general and administrative expenses in the periods in which they are incurred. While we experienced certain cost-savings associated with our workforce reductions implemented in the first quarter of 2025, 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). Other miscellaneous non-recurring expenses such as gains or losses on disposal of property and equipment are also included. Results of Operations Comparison of Fiscal Years Ended December 31, 2025 to December 31, 2024 The following table shows our consolidated statements of operations for the periods indicated: Year Ended December 31, 2025 2024 Change ($) Change (%) (in thousands) Operating expenses: Research and development $ 41,110 $ 50,477 $ (9,367) (19) % General and administrative 25,727 30,999 (5,272) (17) % Total operating expenses 66,837 81,476 (14,639) (18) % Other income (expense): Interest income 7,868 10,780 (2,912) (27) % Other expense (32) (84) 52 (62) % Total other income $ 7,836 $ 10,696 $ (2,860) (27) % Net loss $ (59,001) $ (70,780) $ 11,779 (17) % Research and Development Expenses Research and development expenses were $41.1 million for the year ended December 31, 2025, compared to $50.5 million for the year ended December 31, 2024, a decrease of $9.4 million, or 19%. The decrease was due to a $4.5 million decrease in laboratory supplies and equipment expense due to operating efficiencies, lower development-related costs, and continued focus on cost optimization. Also contributing to the decrease was a $2.4 million decrease in salaries and related benefits driven by savings from the reduction in force implemented in the first quarter of 2025, a $1.9 million decrease in stock-based compensation expense, and a $0.7 million decrease in in-process research and development expense primarily resulting from an asset acquisition in the prior year. The decrease in stock-based compensation expense is driven by stock options granted at the time of the Merger becoming fully expensed in 2025 and lower expense associated with stock options granted since the Merger. 76 General and Administrative Expenses General and administrative expenses were $25.7 million for the year ended December 31, 2025, compared to $31.0 million for the year ended December 31, 2024, a decrease of $5.3 million, or 17%. The decrease was primarily due to a $3.9 million decrease in stock-based compensation expense. The decrease in stock-based compensation expense is driven by stock options granted at the time of the Merger becoming fully expensed in 2025 and lower expense associated with stock options granted since the Merger. Also contributing to the decrease was a $1.3 million decrease in professional services attributable to legal and consulting fees, primarily driven by professional services fees for the shelf registration statement filed in February 2024 and the resolution of the Standard Biotools legal matter. These decreases were partially offset by a $0.5 million increase in facilities expenses. Other Income (Expense) Other income (expense) was $7.8 million for the year ended December 31, 2025, compared to $10.7 million for the year ended December 31, 2024, a decrease of $2.9 million or 27%. The net decrease was primarily due to a $2.9 million decrease in interest income driven by a lower cash, cash equivalents, and investments balance as well as decreased yield rates on investments during the period. 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 $59.0 million for the year ended December 31, 2025. As of December 31, 2025, we had an accumulated deficit of $332.0 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 December 31, 2025, we had cash, cash equivalents, and investments of $156.1 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. 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, 2025, we did not sell any shares of common stock pursuant to the Sales Agreement. The shares of our common stock to be offered and sold under the Sales Agreement will be issued and sold pursuant to our shelf registration statement on Form S-3 (File No. 333-277437) (the “Shelf Registration Statement”), which was filed with the SEC on February 28, 2024 and which became effective March 6, 2024. No securities have yet been sold under the Shelf Registration Statement. The Shelf Registration Statement will remain in effect for up to three years and allows us to sell from time to time up to $300.0 million of common stock, preferred stock, debt securities, depositary shares, warrants, subscription rights, purchase contracts or units comprised of any combination of these securities, for our own account in one or more offerings and is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions and our future capital needs. The terms of any offering thereunder will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering. 77 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 implemented workforce reduction in the first quarter of 2025. The cost-saving initiatives resulted in reductions to personnel-related expenses during the period. 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 Voyager TM platform; • conduct activities to develop and deliver service offerings and to establish and operate service laboratory operations; • undertake activities to establish sales, marketing and distribution capabilities for our Nautilus Voyager 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 • 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: 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 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 Nautilus Voyager 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 disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, 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, including any issuances pursuant to our “at the market” equity offering program under our Sales Agreement with TD Cowen or our Shelf Registration Statement, 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. 78 Historical Cash Flows For the Fiscal Years Ended December 31, 2025 and 2024 The following table summarizes our cash flows for the periods indicated: Year Ended December 31, (in thousands) 2025 2024 Net cash used in operating activities $ (50,696) $ (59,145) Net cash provided by investing activities 35,224 66,250 Net cash provided by financing activities 214 1,144 Net increase (decrease) in cash, cash equivalents and restricted cash $ (15,258) $ 8,249 Operating Activities During the year ended December 31, 2025, net cash used in operating activities was $50.7 million, resulting from our net loss of $59.0 million and a decrease in net changes in assets and liabilities aggregating $3.6 million. Net cash used in operating activities includes non-cash charges aggregating $11.9 million, which is driven by $6.8 million of stock-based compensation expense, $4.7 million amortization of operating lease right-of-use assets, and $1.8 million in depreciation expense. These non-cash charges were partially offset by $1.4 million in net accretion of discounts on securities. During the year ended December 31, 2024, net cash used in operating activities was $59.1 million, resulting from our net loss of $70.8 million and a decrease in net changes in assets and liabilities aggregating $5.5 million. Net cash used in operating activities includes non-cash charges aggregating $17.1 million, which is driven by $12.7 million of stock-based compensation expense, $4.4 million of amortization of operating lease right-of-use assets, $2.1 million of depreciation expense, and $0.8 million in non-cash adjustments related to in-process research and development. These non-cash charges were partially offset by $2.8 million in net accretion of discounts on securities. Investing Activities During the year ended December 31, 2025, net cash provided by investing activities was $35.2 million, resulting from $109.0 million in proceeds from the maturities of securities, partially offset by $72.5 million in purchases of securities, and $1.3 million in purchases of property and equipment. 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. Financing Activities During the year ended December 31, 2025, net cash provided by financing activities was comprised of $0.2 million of proceeds from the exercise of stock options and issuance of common stock under the employee stock purchase plan. During the year ended December 31, 2024, net cash provided by financing activities was comprised of $1.1 million of proceeds from the exercise of stock options and issuance of common stock under the employee stock purchase plan. Contractual Obligations and Commitments 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 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. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates. 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 79 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. Research and Development 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 benefits and stock-based compensation expense 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. This process involves reviewing quotations and contracts, identifying services that have been performed on our behalf and estimating the level of services performed and the associated cost incurred for services for which we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses at the end of each reporting period based on the facts and circumstances known to us at that time. The significant estimates in our accrued research and development expenses relate to expenses incurred with respect to academic research centers and other vendors in connection with research and development activities for which we have not yet been invoiced. 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” in our notes to the consolidated financial statements in this Annual Report on Form 10-K. Smaller Reporting Company Status Previously, we were an emerging growth company as defined by the JOBS Act. The JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a U.S. Securities Act of 1933, as amended, registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. As of December 31, 2025, we ceased to be an emerging growth company. We are currently still a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements, as well as reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by non-affiliates exceeds $250 million as of the last business day of our second fiscal quarter, or (ii) our annual revenue exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the last business day of our second fiscal quarter. 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.