NAUTILUS BIOTECHNOLOGY, INC. The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding ofNautilus 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 endedDecember 31, 2020 and the related notes included in the Company's Current Report on Form 8-K filed with theSEC onJune 10, 2021 . 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 human 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 single-molecule instrument, our Proteomic Analysis System, 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
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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 are seeking to enter 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 our early access program partners with
broad-scale analysis and profiling of samples analyzed in our facility and
shared via a cloud platform. We do not anticipate that the second phase will
begin any earlier than the second half of 2022 and do not anticipate that it
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 proteomics product platform. We expect this second phase to continue
through the end of 2023 and lead into the third phase of broad commercialization
at the end of 2023 and the beginning of 2024. We do not expect to realize any
material revenue prior to the second half 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 September 30, 2021 , we had cash, cash equivalents and
short-term investments of $347.3 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 $33.6 million during the nine months ended September 30, 2021 ,
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 September 30, 2021 , we had
an accumulated deficit of $64.0 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.
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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;
•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 has continued with
staggered lab employee work shifts to minimize risk of exposure to COVID-19,
which has and may continue to disrupt or delay 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 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 until August 2021 . We will continue to actively monitor the rapidly
evolving situation related to COVID-19 and may take further actions that
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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 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
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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 and benefits, and
stock-based compensation expense for personnel in executive, operations, legal,
human resources, finance 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 non recurring expenses.
Results of Operations
Comparison of the Three Months Ended September 30, 2021 to the Three Months
Ended September 30, 2020
The following table shows our statements of operations for the periods
indicated:
Three Months Ended September 30,
2021 2020 Change Change
(in thousands) ($) (%)
Operating expenses:
Research and development $ 8,244 $ 3,317 $ 4,927 149 %
General and administrative 6,324 710 5,614 791 %
Total operating expenses 14,568 4,027 10,541 262 %
Other income (expense), net 64 49 15 31 %
Net loss $ (14,504) $ (3,978) $ (10,526) 265 %
Research and Development Expenses
Research and development expenses were $8.2 million for the three months ended
September 30, 2021 , compared to $3.3 million for the three months ended
September 30, 2020 , an increase of $4.9 million , or 149%. The increase was
primarily due to a $2.3 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 and a $0.8 million increase in costs for development services.
General and Administrative Expenses
General and administrative expenses were $6.3 million for the three months ended
September 30, 2021 , compared to $0.7 million for the three months ended
September 30, 2020 , an increase of $5.6 million , or 791%. The increase was
primarily due to a $2.8 million increase in salaries, related benefits, and
stock-based compensation, a $1.2 million increase in professional services,
primarily related to audit and legal activities and a $0.8 million increase in
insurance costs.
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Other Income (Expense), Net
Other income (expense), net for the three months ended September 30, 2021 as
compared to the three months ended September 30, 2020 changed primarily due to
higher interest income, offset by state franchise taxes incurred, in the three
months ended September 30, 2021 .
Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended
September 30, 2020
The following table shows our statements of operations for the periods
indicated:
Nine Months Ended September 30,
2021 2020 Change Change
(in thousands) ($) (%)
Operating expenses:
Research and development $ 19,459 $ 8,538 $ 10,921 128 %
General and administrative 14,223 1,886 12,337 654 %
Total operating expenses 33,682 10,424 23,258 223 %
Other income (expense), net 56 157 (101) (64) %
Net loss $ (33,626) $ (10,267) $ (23,359) 228 %
Research and Development Expenses
Research and development expenses were $19.5 million for the nine months ended
September 30, 2021 , compared to $8.5 million for the nine months ended September
30, 2020 , an increase of $10.9 million , or 128%. The increase was primarily due
to a $5.7 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 $2.6 million increase in laboratory supplies and equipment
expense, a $1.0 million increase in costs for development services and a $0.6
million increase in facilities cost.
General and Administrative Expenses
General and administrative expenses were $14.2 million for the nine months ended
September 30, 2021 , compared to $1.9 million for the nine months ended September
30, 2020 , an increase of $12.3 million , or 654%. The increase was primarily due
to a $6.5 million increase in salaries, related benefits, and stock-based
compensation, a $3.0 million increase in professional services, and a $1.0
million increase in insurance costs.
Other Income (Expense), Net
Other income (expense), net for the nine months ended September 30, 2021 as
compared to the nine months ended September 30, 2020 changed primarily as a
result of state franchise taxes incurred in the nine months ended September 30,
2021 .
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 $33.6 million for the nine months ended September
30, 2021 . As of September 30, 2021 , we had an accumulated deficit of $64.0
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
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underwriters' fees relating to the closing of the Business Combination. As of
September 30, 2021 , we had cash, cash equivalents and short-term investments of
$347.3 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 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
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.
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Historical Cash Flows
For the Nine Months Ended September 30, 2021 and 2020
The following table summarizes our cash flows for the nine months ended
September 30, 2021 and 2020:
Nine Months Ended September 30,
2021 2020
(in thousands)
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
Operating Activities During the nine months endedSeptember 30, 2021 , net cash used in operating activities was$28.7 million , primarily resulting from our operating loss of$33.6 million , offset by non-cash charges aggregating$7.6 million , which primarily included$5.4 million of stock-based compensation and$1.2 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$2.7 million , primarily driven by$3.9 million increase in prepaid expenses and other assets. During the nine months endedSeptember 30, 2020 , net cash used in operating activities was$9.3 million , primarily resulting from our operating loss of$10.3 million , offset by non-cash charges aggregating$2.0 million , which primarily included$1.2 million amortization of operating lease right-of-use assets and depreciation of$0.5 million . Net cash used in operating activities was increased by net changes in assets and liabilities aggregating$1.0 million , primarily driven by$1.2 million decrease in operating lease liability. Investing Activities During the nine months endedSeptember 30, 2021 , net cash used in investing activities was$145.0 million , primarily resulting from$183.7 million in purchases of securities, partially offset by$40.0 million in proceeds from sale and maturities of securities. During the nine months endedSeptember 30, 2020 , net cash used in investing activities was$54.0 million , primarily resulting from$68.4 million in purchases of securities, partially offset by$15.0 million in proceeds from sale and maturities of securities. Financing Activities During the nine months endedSeptember 30, 2021 , net cash provided by financing activities was$327.4 million , primarily resulting from$335.4 million in proceeds from the Business Combination and PIPE Financing, partially offset by$8.1 million in payments of deferred offering costs. During the nine months endedSeptember 30, 2020 , net cash provided by financing activities was$75.9 million from proceeds from issuance of convertible preferred stock, net of issuance costs. 29 -------------------------------------------------------------------------------- Contractual Obligations and Commitments The following table summarizes our contractual obligations as ofSeptember 30, 2021 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods: Payments Due by Period Less than 1 More than 5 Total Year 1-3 Years 3-5 Years years (in thousands) Operating lease obligations(1)(2)$ 4,361 $ 43 $ 1,263 $ 1,322 $ 1,733 Purchase obligations 2,949 2,949 - - - Total$ 7,310 $ 2,992 $ 1,263 $ 1,322 $ 1,733 __________________ (1)Reflects minimum payments due for office space and laboratory space under our short-term and long-term leases inSan Carlos, California andSeattle, Washington . (2)InDecember 2020 , we entered into a new lease inSan Carlos, California for ten years commencing inOctober 2021 and expiring inOctober 2031 with total minimum lease payments of$40.7 million . This lease has not commenced as ofSeptember 30, 2021 , and therefore is not included in the operating lease obligations. Off-Balance Sheet Arrangements We currently do not have, and did not have during the periods presented, any off-balance sheet arrangements, as defined in the rules and regulations of theSEC . 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 inthe 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 endedDecember 31, 2020 and 2019. 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 30 -------------------------------------------------------------------------------- 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 theSecurities 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 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. 31
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