UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 001-35610 ATOSSA THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Delaware 26-4753208 ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements) The unaudited statements show a $6.9 million net loss, weakened equity, and substantial doubt about the company's ability to continue as a going concern [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | June 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $7,462,736 | $12,581,136 | | Total current assets | $10,061,681 | $14,319,266 | | Total Assets | $10,205,699 | $14,489,855 | | **Liabilities & Equity** | | | | Total current liabilities | $1,826,673 | $1,322,742 | | Total Liabilities | $1,831,393 | $1,333,850 | | Total Stockholders' Equity | $8,374,306 | $13,156,005 | - Total assets decreased by approximately **29.6%** from December 31, 2019, to June 30, 2020, primarily driven by a reduction in cash and cash equivalents[7](index=7&type=chunk) - Total liabilities increased by approximately **37.3%** during the first six months of 2020, mainly due to a significant rise in accounts payable[7](index=7&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1,653,239 | $2,611,948 | $2,591,859 | $4,063,184 | | General and administrative | $2,282,568 | $4,674,121 | $4,280,957 | $7,287,214 | | **Total operating expenses** | **$3,935,807** | **$7,286,069** | **$6,872,816** | **$11,350,398** | | **Operating loss** | **($3,935,807)** | **($7,286,069)** | **($6,872,816)** | **($11,350,398)** | | **Net loss** | **($3,906,142)** | **($7,262,529)** | **($6,853,562)** | **($11,335,836)** | | **Loss per common share** | **($0.43)** | **($0.80)** | **($0.75)** | **($1.44)** | - The company's **net loss decreased significantly** year-over-year for both the three and six-month periods, primarily due to lower operating expenses in both R&D and G&A[9](index=9&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,459,417) | ($4,651,051) | | Net cash used in investing activities | ($6,610) | ($7,625) | | Net cash provided by financing activities | $347,627 | $11,336,710 | | **Net (decrease) increase in cash** | **($5,118,400)** | **$6,678,034** | - Cash used in operating activities **increased by 17%** in the first six months of 2020 compared to the same period in 2019[17](index=17&type=chunk) - Financing activities in H1 2020 provided only $347,627 from stock issuance, a stark contrast to H1 2019 which saw **over $11.3 million** from warrant exercises, leading to a net decrease in cash for the 2020 period[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company is focused on developing pharmaceuticals for **COVID-19**, breast cancer, and other breast conditions, but the pandemic may cause clinical trial delays[20](index=20&type=chunk)[21](index=21&type=chunk) - There is **substantial doubt** about the company's ability to continue as a **going concern**, with current funding sufficient for only six to ten months of operations[23](index=23&type=chunk)[24](index=24&type=chunk) - In February 2020, the company entered an "at-the-market" (ATM) offering agreement to sell up to **$5.0 million** of common stock, raising gross proceeds of $526,171 by June 30, 2020[37](index=37&type=chunk)[38](index=38&type=chunk) - Subsequent to the quarter end, in July 2020, the company sold an additional 1,083,531 shares under the ATM for gross proceeds of **$4.47 million**, completing the $5.0 million offering[69](index=69&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses its clinical-stage focus on COVID-19 and breast cancer, noting reduced expenses but critical liquidity concerns and going concern doubts - The company's leading programs include: - **AT-H201:** An inhaled therapy for hospitalized COVID-19 patients - **AT-301:** A nasal spray for at-home use by COVID-19 patients not requiring hospitalization - **Endoxifen for MBD:** An oral treatment to reduce mammographic breast density - **Endoxifen for Window of Opportunity:** An oral treatment for breast cancer patients between diagnosis and surgery[72](index=72&type=chunk)[73](index=73&type=chunk)[76](index=76&type=chunk) Operating Expense Comparison (in thousands) | Expense Category | Q2 2020 | Q2 2019 | Change | H1 2020 | H1 2019 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | R&D Expenses | $1,653 | $2,612 | (37%) | $2,592 | $4,063 | (36%) | | G&A Expenses | $2,283 | $4,674 | (51%) | $4,281 | $7,287 | (41%) | | **Total Operating Expenses** | **$3,936** | **$7,286** | **(46%)** | **$6,873** | **$11,350** | **(39%)** | - The decrease in both R&D and G&A expenses for 2020 is primarily attributed to a significant reduction in **non-cash stock-based compensation expense**[103](index=103&type=chunk)[104](index=104&type=chunk) - As of June 30, 2020, the company had approximately **$7.5 million in cash**, which is only sufficient to fund operations for the next six to ten months, raising substantial doubt about its ability to continue as a **going concern**[107](index=107&type=chunk)[112](index=112&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company has indicated that this section is not applicable - Not applicable[120](index=120&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal controls - The company's management concluded that as of June 30, 2020, **disclosure controls and procedures were effective** at the reasonable assurance level[122](index=122&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended June 30, 2020[123](index=123&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=31&type=section&id=ITEM%201.%20Legal%20Proceedings) The company reports no legal proceedings expected to have a material impact on its financial condition - The company is subject to legal proceedings in the normal course of business but does not expect them to have a **material impact** on its financial condition or cash flows[123](index=123&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=ITEM%201A.%20Risk%20Factors) Key risks include going concern doubts, clinical trial and regulatory uncertainties, and stock price volatility - **Going Concern Risk:** The company's recurring losses and accumulated deficit raise **substantial doubt** about its ability to continue as a going concern, with resources to fund operations for only six to ten months[128](index=128&type=chunk)[129](index=129&type=chunk) - **Clinical and Regulatory Risk:** Successful development of pharmaceutical products is **highly uncertain**, and the company may fail to obtain regulatory approvals or demonstrate safety and efficacy in clinical trials[145](index=145&type=chunk)[148](index=148&type=chunk) - **COVID-19 Program Risks:** Development of COVID-19 therapies is a new area, with risks including potential patient deaths in trials and reduced demand if a competitor's vaccine is successful[126](index=126&type=chunk)[154](index=154&type=chunk)[160](index=160&type=chunk) - **Market and Stock Risk:** The company's common stock is volatile and has traded below the **$1.00 minimum bid requirement** for Nasdaq, creating a risk of delisting[224](index=224&type=chunk)[227](index=227&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has indicated that this section is not applicable - Not applicable[248](index=248&type=chunk) [Item 3. Defaults upon Senior Securities](index=54&type=section&id=ITEM%203.%20Defaults%20upon%20Senior%20Securities) The company has indicated that this section is not applicable - Not applicable[248](index=248&type=chunk) [Item 4. Mine Safety Disclosures](index=54&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company has indicated that this section is not applicable - Not applicable[248](index=248&type=chunk) [Item 5. Other Information](index=54&type=section&id=ITEM%205.%20Other%20Information) The company has indicated that this section is not applicable - Not applicable[248](index=248&type=chunk) [Item 6. Exhibits](index=55&type=section&id=ITEM%206.%20Exhibits) This section lists filed exhibits, including officer certifications and Interactive Data Files - The exhibits filed with this report include certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1, 32.2) and Interactive Data Files (Exhibit 101)[250](index=250&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 001-35610 ATOSSA THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Delaware 26-4753208 (Sta ...

Part I [Business](index=6&type=section&id=Item%201.%20Business) Atossa Therapeutics is a clinical-stage biopharmaceutical company focused on developing novel therapeutics for breast cancer and other breast conditions, with a lead program in oral Endoxifen - The company's lead program is the development of Endoxifen to treat and prevent breast cancer, with a primary goal of developing an oral form to reduce mammographic breast density (MBD)[16](index=16&type=chunk) - A Phase 2 double-blinded, placebo-controlled study of oral Endoxifen in approximately **1,000 pre-menopausal women** with MBD was contracted in December 2019[16](index=16&type=chunk) - Atossa is also developing a proprietary intraductal delivery technology to target therapies, including fulvestrant and CAR-T, directly to the site of breast cancer; a Phase 2 study delivering fulvestrant via this method is being conducted by Johns Hopkins University[17](index=17&type=chunk)[43](index=43&type=chunk) - The company estimates the potential U.S. market for its Endoxifen programs at up to **$1 billion annually** and for intraductal administration of drugs like fulvestrant at up to **$800 million annually**[48](index=48&type=chunk) Research and Development Expenses (2018-2019) | Year | R&D Expenses (USD) | | :--- | :--- | | 2019 | $6,645,417 | | 2018 | $4,209,981 | - As of February 29, 2020, the company owns **6 issued U.S. patents** and has **40 pending patent applications** related to its Endoxifen, Fulvestrant, and CAR-T programs[55](index=55&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks, including a limited operating history, recurring net losses, and significant doubt about its ability to continue as a going concern without securing additional capital - The company has a history of recurring losses and an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern without obtaining adequate capital[116](index=116&type=chunk) - Existing resources are expected to be sufficient to fund operations for only the next **six to nine months**, necessitating additional capital raising[118](index=118&type=chunk)[119](index=119&type=chunk) - The development of pharmaceutical products is highly uncertain; promising compounds may fail in later-stage clinical trials due to safety, efficacy, manufacturing, or other issues[135](index=135&type=chunk)[136](index=136&type=chunk) - The company is dependent on third parties for critical operations, including manufacturing (cGMP), clinical trials (GCP), and distribution; failure by these parties to perform could significantly harm the business[156](index=156&type=chunk)[157](index=157&type=chunk)[160](index=160&type=chunk) - The company's common stock has traded below the **$1.00 minimum bid price** requirement for NASDAQ, posing a risk of delisting[211](index=211&type=chunk) - The global spread of the coronavirus (COVID-19) could adversely impact operations, including interrupting the drug supply chain, delaying clinical trial enrollment, and affecting access to capital[238](index=238&type=chunk) [Unresolved Staff Comments](index=44&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that this item is not applicable, indicating there are no unresolved comments from the SEC staff - Not applicable[240](index=240&type=chunk) [Properties](index=44&type=section&id=Item%202.%20Properties) As of December 31, 2019, Atossa Therapeutics leases approximately 202 square feet of office space in Seattle, Washington, believing these facilities are adequate for its needs for the next eight months - The company leases approximately **202 square feet** of office space in Seattle, Washington[241](index=241&type=chunk) [Legal Proceedings](index=44&type=section&id=Item%203.%20Legal%20Proceedings) The company states it is not currently a party to any material legal proceedings; a prior securities class action lawsuit was settled and approved by the court in July 2018, with the settlement amount fully funded by insurers - The company is not currently a party to any material legal proceedings[242](index=242&type=chunk) - A securities class action complaint filed in 2013 was settled in 2018 for **$3.5 million**, which was completely funded by the defendants' insurers; the case is considered closed[127](index=127&type=chunk)[380](index=380&type=chunk) [Mine Safety Disclosure](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This section is not applicable to the company's business operations - Not applicable[244](index=244&type=chunk) Part II [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=45&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is traded on The NASDAQ Capital Market under the symbol 'ATOS'; as of March 24, 2020, there were approximately 33 stockholders of record, and the company has never paid cash dividends nor plans to in the foreseeable future - Common stock trades on The NASDAQ Capital Market under the symbol '**ATOS**'[245](index=245&type=chunk) - As of March 24, 2020, there were approximately **33 stockholders of record** and approximately **16,000 beneficial holders**[246](index=246&type=chunk) - The company has never declared or paid cash dividends and does not intend to in the future[247](index=247&type=chunk) [Selected Financial Data](index=45&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not applicable as the company qualifies as a smaller reporting company - Not applicable[247](index=247&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For the year ended December 31, 2019, Atossa had no revenue and incurred a net loss of **$17.2 million**, a significant increase from the **$11.4 million** loss in 2018, driven by a **51% increase** in operating expenses primarily from non-cash stock-based compensation; with **$12.6 million** in cash at year-end, management states there is substantial doubt about its ability to continue as a going concern, as funds are projected to last only **six to nine months** Comparison of Operating Results (2019 vs. 2018) | Metric | 2019 | 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $0 | $0 | N/A | | R&D Expenses | $6,645,000 | $4,210,000 | +58% | | G&A Expenses | $10,620,000 | $7,224,000 | +47% | | Total Operating Expenses | $17,265,000 | $11,434,000 | +51% | | Net Loss | $(17,239,777) | $(11,404,934) | +51% | - The increase in both R&D and G&A expenses in 2019 was primarily attributed to non-cash stock-based compensation charges related to the cancellation of 2018 liability options and the grant of replacement options in 2019[264](index=264&type=chunk)[265](index=265&type=chunk) - As of December 31, 2019, the company had **$12.6 million** in cash and cash equivalents; management believes these funds will only be sufficient to finance operations for **six to nine months**, raising substantial doubt about the company's ability to continue as a going concern[266](index=266&type=chunk) Cash Flow Summary (2019 vs. 2018) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Used in Operating | $(9,128,000) | $(8,962,000) | | Net Cash Provided by Financing | $11,337,000 | $12,291,000 | [Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - Not applicable[282](index=282&type=chunk) [Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for the fiscal years ended December 31, 2019 and 2018, with the independent auditor's report highlighting a 'Going Concern Uncertainty' due to recurring losses and an accumulated deficit - The independent auditor's report includes a paragraph expressing substantial doubt about the Company's ability to continue as a going concern due to recurring losses from operations and an accumulated deficit[299](index=299&type=chunk) Consolidated Balance Sheet Data (as of Dec 31) | Account | 2019 | 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $12,581,136 | $10,380,493 | | Total Assets | $14,489,855 | $11,720,446 | | Total Liabilities | $1,333,850 | $2,915,436 | | Total Stockholders' Equity | $13,156,005 | $8,805,010 | Consolidated Statement of Operations Data (for year ended Dec 31) | Account | 2019 | 2018 | | :--- | :--- | :--- | | Operating loss | $(17,265,425) | $(11,434,233) | | Net loss | $(17,239,777) | $(11,404,934) | | Net loss per share (basic and diluted) | $(2.03) | $(5.50) | - In March 2019, the company received approximately **$11.3 million** from the exercise of **2.8 million warrants** issued in a 2018 financing[362](index=362&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=53&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports that there were no changes in or disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None[282](index=282&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2019, with a material weakness identified in June 2018 related to the accounting for a deemed dividend remediated during 2019 - Management concluded that the Company's disclosure controls and procedures were effective as of December 31, 2019[283](index=283&type=chunk) - A material weakness identified in Q2 2018 concerning the calculation of a deemed dividend on Series B preferred stock was remediated as of December 31, 2019[286](index=286&type=chunk)[288](index=288&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019[285](index=285&type=chunk) [Other Information](index=54&type=section&id=Item%209B.%20Other%20Information) The company reports no information for this item - None[288](index=288&type=chunk) Part III Part III of the report, encompassing Items 10 through 14, incorporates information by reference from the company's definitive Proxy Statement for its 2020 Annual Meeting of Stockholders [Directors, Executive Officers and Corporate Governance](index=55&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2020 Proxy Statement[291](index=291&type=chunk) [Executive Compensation](index=55&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information regarding executive compensation is incorporated by reference from the 2020 Proxy Statement[292](index=292&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=55&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information regarding security ownership is incorporated by reference from the 2020 Proxy Statement[292](index=292&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=55&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information regarding related party transactions and director independence is incorporated by reference from the 2020 Proxy Statement[293](index=293&type=chunk) [Principal Accounting Fees and Services](index=55&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information regarding principal accounting fees and services is incorporated by reference from the 2020 Proxy Statement[293](index=293&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=55&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K report - This item lists the financial statements and exhibits filed with the 10-K, including the auditor's consent, certifications, and various corporate agreements[294](index=294&type=chunk)[295](index=295&type=chunk) [Form 10-K Summary](index=55&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section is not applicable - Not applicable[295](index=295&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 001-35610 ATOSSA GENETICS INC. (Exact name of registrant as specified in its charter) Delaware 26-4753208 (Stat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 001-35610 ATOSSA GENETICS INC. (Exact name of registrant as specified in its charter) Delaware 26-4753208 (State or ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 001-35610 ATOSSA GENETICS INC. (Exact name of registrant as specified in its charter) Delaware 26-4753208 (State or ...

Part I [Business](index=6&type=section&id=Item%201.%20Business) Atossa Genetics is a clinical-stage biopharmaceutical company developing Endoxifen and intraductal microcatheter technology for breast cancer and related conditions, operating in R&D with no sustainable revenue [Company Overview](index=6&type=section&id=Item%201.%20Business%20-%20Overview) Atossa is a clinical-stage biopharmaceutical company developing oral and topical Endoxifen and intraductal microcatheter technology, with Phase 1 completed and Phase 2 studies underway - The company's lead program is the development of oral and topical Endoxifen to treat mammographic breast density (MBD), breast cancer in the 'window of opportunity' before surgery, gynecomastia, and for patients refractory to tamoxifen[15](index=15&type=chunk) - Atossa is also developing patented intraductal microcatheter technology for targeted delivery of therapies, including fulvestrant and immunotherapies like CAR-T, directly to the site of breast cancer[15](index=15&type=chunk) - Completed a Phase 1 study of oral and topical Endoxifen in 2017, meeting all safety, tolerability, and pharmacokinetic objectives. A Phase 1 study in men was also successfully completed in September 2018[16](index=16&type=chunk) - Currently conducting two Phase 2 studies: one using topical Endoxifen for MBD reduction in Sweden (fully enrolled with 90 participants) and another using oral Endoxifen for breast cancer patients pre-surgery in Australia[17](index=17&type=chunk) [Our Programs Under Development](index=7&type=section&id=Item%201.%20Business%20-%20Our%20Programs%20Under%20Development) The company's pipeline focuses on Endoxifen, with Phase 2 trials for MBD and pre-surgery breast cancer, and intraductal delivery technology for targeted therapies - By providing Endoxifen directly, the company aims to overcome issues with tamoxifen, such as ineffectiveness in patients with certain liver enzymes (up to **50% of users**) and the long time (**50-200 days**) required to reach therapeutic levels[22](index=22&type=chunk) - A Phase 2 study of topical Endoxifen to reduce MBD was fully enrolled with **90 participants** in Sweden. Dosing is expected to complete in April 2019, with preliminary results in Q2 2019. However, approximately **72 participants** have exited the study early, primarily due to skin rashes[27](index=27&type=chunk) - A Phase 2 study of oral Endoxifen is being conducted in Australia for newly-diagnosed ER+ breast cancer patients in the **~21-day** 'window of opportunity' before surgery, with the primary endpoint being reduction in tumor activity (Ki-67)[31](index=31&type=chunk) - The company is developing a novel method for transpapillary (TRAP) delivery of CAR-T cells into breast ducts, which is currently in the R&D stage and has a foundational patent application filed[36](index=36&type=chunk)[38](index=38&type=chunk) - A Phase 2 study is ongoing at Montefiore Medical Center to deliver fulvestrant via microcatheters directly into breast ducts for patients with DCIS or Stage 1/2 breast cancer[40](index=40&type=chunk) [Markets](index=11&type=section&id=Item%201.%20Business%20-%20Markets) The company estimates potential U.S. market opportunities of up to **$800 million** annually for intraductal therapies and up to **$1 billion** annually for Endoxifen programs - The potential U.S. market for intraductal administration of fulvestrant or similar drugs in DCIS patients is estimated to be up to **$800 million** annually[44](index=44&type=chunk) - The potential U.S. market for the company's Endoxifen in treatment and prevention settings is estimated to be up to **$1 billion** annually[44](index=44&type=chunk) [Our Capital Resources](index=13&type=section&id=Item%201.%20Business%20-%20Our%20Capital%20Resources) Atossa lacks sustainable revenue and relies on external capital, holding **$10.4 million** cash as of Dec 2018, supplemented by **$11.3 million** from March 2019 warrant exercises Financing Activities (2017-2018) | Date | Type | Gross Proceeds ($) | Net Proceeds ($) | | :--- | :--- | :--- | :--- | | Apr 2017 | Public Offering | ~$4.4M | ~$3.9M | | Oct 2017 | Public Offering | ~$5.5M | ~$4.9M | | Dec 2017 | Public Offering | ~$1.4M | ~$1.2M | | May 2018 | Rights Offering | ~$13.6M | ~$12.3M | - As of December 31, 2018, the company held cash and cash equivalents of **$10,380,493**[50](index=50&type=chunk) - In March 2019, the company received approximately **$11.3 million** from the exercise of warrants issued in May 2018[50](index=50&type=chunk) [Intellectual Property](index=13&type=section&id=Item%201.%20Business%20-%20Intellectual%20Property) The company's IP strategy focuses on patents for Endoxifen, Fulvestrant, and immunotherapy programs, holding **13 issued patents** and **29 pending applications** as of February 2019 Pending Patent Applications by Program (as of Feb 28, 2019) | Program | Pending U.S. Applications | Pending International Applications | Approximate Expiry Date | | :--- | :--- | :--- | :--- | | Endoxifen Program | 3 | 16 | 2034 - 2037 | | Fulvestrant Program | 4 | 16 | 2034 - 2037 | | Immunotherapy/CAR-T Program | 1 | 2 | 2037 - 2038 | - As of February 28, 2019, the company owns **13 issued patents** and **29 pending patent applications** related to its core pharmaceutical programs[55](index=55&type=chunk) - The company is strategically allowing certain device patents (ForeCyte, FullCyte, Acueity) to lapse as they are no longer core to its business[55](index=55&type=chunk) [Government Regulation](index=15&type=section&id=Item%201.%20Business%20-%20Government%20Regulation) The company is subject to extensive FDA and EMA regulations for drug development, approval, and post-approval, alongside medical device, data privacy, and anti-fraud laws - Drug development in the U.S. requires progression through preclinical testing, an Investigational New Drug (IND) application, and three phases of clinical trials before submitting a New Drug Application (NDA) to the FDA[66](index=66&type=chunk)[67](index=67&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) - In the E.U., marketing authorizations can be obtained via centralized, decentralized, or mutual recognition procedures, with cancer products typically requiring the centralized procedure through the European Medicines Agency (EMA)[84](index=84&type=chunk) - Medical devices are classified by the FDA into Class I, II, or III based on risk. Lower-risk devices may use the 510(k) clearance pathway, while higher-risk devices generally require a more stringent Premarket Approval (PMA)[99](index=99&type=chunk)[100](index=100&type=chunk) - The company is subject to data privacy laws, including HIPAA in the U.S. and the General Data Protection Regulation (GDPR) in the E.U., which imposes strict rules on collecting and transferring personal health data[110](index=110&type=chunk)[98](index=98&type=chunk) [Employees](index=25&type=section&id=Item%201.%20Business%20-%20Employees) As of the filing date, Atossa employs **two executive officers**, **two full-time**, and **two part-time employees**, including CEO Steven C. Quay and CFO Kyle Guse - The company has a small team consisting of **two executive officers**, **two full-time employees**, and **two part-time employees**[118](index=118&type=chunk) - Dr. Steven C. Quay, founder, serves as CEO, President, and Chairman. He holds an M.D. and Ph.D. from the University of Michigan Medical School and is a former faculty member at Stanford University School of Medicine[119](index=119&type=chunk) - Kyle Guse serves as CFO, General Counsel, and Secretary. He has over **25 years** of experience with life sciences companies and is a licensed CPA (inactive) and a member of the California Bar[120](index=120&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant financial, clinical, operational, intellectual property, and market risks, including a history of losses, reliance on third parties, and stock price volatility - **Financial Risks:** The company has a history of operating losses (**$11.4 million in 2018**), an accumulated deficit of **$76.8 million**, and may not continue as a going concern without raising additional capital[128](index=128&type=chunk)[130](index=130&type=chunk)[137](index=137&type=chunk) - **Clinical & Regulatory Risks:** Product development is highly uncertain. Clinical trials may be delayed or fail, and regulatory approval from the FDA and other agencies is not guaranteed. The Phase 2 MBD study has experienced a higher-than-expected attrition rate[147](index=147&type=chunk)[149](index=149&type=chunk)[154](index=154&type=chunk) - **Operational Risks:** The company depends on third-party contractors for manufacturing and clinical research, exposing it to risks of performance failure, non-compliance with cGMP/GCP, and supply chain interruptions[167](index=167&type=chunk)[172](index=172&type=chunk) - **Intellectual Property Risks:** The company's success depends on its ability to protect its patents and trade secrets. Patent law is complex and uncertain, and the company may face infringement claims or be unable to enforce its rights globally[178](index=178&type=chunk)[180](index=180&type=chunk)[194](index=194&type=chunk) - **Market & Securities Risks:** The company's stock price is highly volatile. There is a risk of being delisted from NASDAQ if continued listing standards, such as the **$1.00 minimum bid price**, are not met. Future financing may cause significant dilution to existing stockholders[221](index=221&type=chunk)[222](index=222&type=chunk)[224](index=224&type=chunk) [Unresolved Staff Comments](index=47&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments - Not applicable[243](index=243&type=chunk) [Properties](index=47&type=section&id=Item%202.%20Properties) As of December 31, 2018, the company leases approximately **202 square feet** of office space in Seattle, Washington. Management believes these facilities are adequate for the company's needs for the next **24 months** - The company leases **202 sq. ft.** of office space in Seattle, WA, which is considered adequate for the next **24 months**[244](index=244&type=chunk) [Legal Proceedings](index=47&type=section&id=Item%203.%20Legal%20Proceedings) A securities class action lawsuit filed in October 2013 against the company, certain directors, officers, and underwriters was settled in 2018. The settlement amount was **$3.5 million**, which was fully funded by the defendants' insurers. The case is now considered closed - The securities class action lawsuit (Cook v. Atossa Genetics, Inc.) filed in 2013 was settled for **$3.5 million**[245](index=245&type=chunk) - The settlement was completely funded by defendants' insurers, and the court approved it on July 20, 2018. The case is closed[245](index=245&type=chunk) [Mine Safety Disclosure](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This item is not applicable to the company - Not applicable[247](index=247&type=chunk) Part II [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=48&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under '**ATOS**', with approximately **33 record stockholders** and **15,000 beneficial holders** as of March 2019, and no cash dividends have been paid - Common stock is traded on The NASDAQ Capital Market under the symbol '**ATOS**'[248](index=248&type=chunk) - As of March 25, 2019, there were approximately **33 record stockholders** and **15,000 beneficial holders**[249](index=249&type=chunk) - The company has never paid cash dividends and does not plan to in the future[250](index=250&type=chunk) [Selected Financial Data](index=48&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable to the company - Not applicable[250](index=250&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) As a clinical-stage biopharmaceutical firm with no sustainable revenue, the company reported a **$11.4 million** net loss in 2018 due to increased R&D and G&A expenses, relying on external funding [Results of Operations](index=52&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20-%20Results%20of%20Operations) In 2018, the company had no revenue, with total operating expenses increasing **49% to $11.4 million**, driven by an **81% rise in R&D expenses** and a **49% increase in G&A costs** Comparison of Operating Expenses (Years Ended Dec 31) | Expense Category | 2018 ($) | 2017 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Research & Development | $4,210,000 | $2,328,000 | +81% | | General & Administrative | $7,224,000 | $4,859,000 | +49% | | Impairment of Intangibles | $0 | $462,000 | -100% | | **Total Operating Expenses** | **$11,434,000** | **$7,649,000** | **+49%** | - The increase in R&D expenses is attributed to manufacturing and clinical trial costs for the Endoxifen program, as two Phase 2 studies began in 2018[266](index=266&type=chunk) - The increase in G&A expenses was mainly due to higher stock-based compensation (**+$1.05 million**), one-time bonuses (**$350k**), and increased legal and professional fees (**+$600k**)[267](index=267&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20-%20Liquidity%20and%20Capital%20Resources) The company has a history of net losses and negative operating cash flows, with **$10.4 million** cash as of Dec 2018, supplemented by **$11.3 million** from March 2019 warrant exercises, requiring future funding Cash and Liquidity Snapshot | Metric | As of Dec 31, 2018 ($) | | :--- | :--- | | Cash and Cash Equivalents | $10.4 million | | Working Capital | $8.6 million | | Net Loss (FY 2018) | $11.4 million | | Cash Used in Operations (FY 2018) | $9.0 million | - In March 2019, the company received **$11.3 million** in cash from the exercise of outstanding warrants, boosting its cash position to **$19.3 million** as of March 25, 2019[270](index=270&type=chunk) Cash Flow Summary (Years Ended Dec 31) | Cash Flow Category | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($8,962,000) | ($6,594,000) | | Net Cash Used in Investing Activities | ($111,000) | $0 | | Net Cash Provided by Financing Activities | $12,291,000 | $10,783,000 | | **Net increase in cash** | **$3,218,024** | **$4,189,507** | - Management believes existing resources, including the March 2019 proceeds, will fund operations for at least the next **12 to 18 months**, but additional capital will be required to continue development programs[274](index=274&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=56&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not applicable to the company - Not applicable[283](index=283&type=chunk) [Financial Statements and Supplementary Data](index=56&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The financial statements required for this item are included from page 53 of the report - The required financial statements are set forth beginning on page 53 of the report[283](index=283&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=56&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[283](index=283&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of Dec 2018 due to a material weakness in deemed dividend calculation, leading to a Q2 2018 restatement, with remediation focused on enhanced technical accounting review - Management concluded that disclosure controls and procedures were not effective as of December 31, 2018[284](index=284&type=chunk) - A material weakness was identified related to the incorrect calculation of a deemed dividend on Series B convertible preferred stock, which resulted in a restatement of the Q2 2018 Form 10-Q[286](index=286&type=chunk)[289](index=289&type=chunk) - The error was a miscalculation of the deemed dividend as **$4,782,100** instead of the correct **$11,479,308** for the three and six months ended June 30, 2018[286](index=286&type=chunk) - The remediation plan is to enhance procedures for reviewing technical accounting memorandums, potentially with an outside independent accounting firm[291](index=291&type=chunk) [Other Information](index=57&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[291](index=291&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=58&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 9, 2019 - Required information is incorporated by reference from the company's 2019 Proxy Statement[293](index=293&type=chunk) [Executive Compensation](index=58&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 9, 2019 - Required information is incorporated by reference from the company's 2019 Proxy Statement[294](index=294&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=58&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 9, 2019 - Required information is incorporated by reference from the company's 2019 Proxy Statement[295](index=295&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=58&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 9, 2019 - Required information is incorporated by reference from the company's 2019 Proxy Statement[296](index=296&type=chunk) [Principal Accounting Fees and Services](index=58&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 9, 2019 - Required information is incorporated by reference from the company's 2019 Proxy Statement[297](index=297&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=58&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the 10-K report. It includes the financial statements and an index of all exhibits. All financial statement schedules are omitted as they are not required or the information is included elsewhere - The financial statements are filed as part of the 10-K[298](index=298&type=chunk) - All financial statement schedules have been omitted because they are not required or the necessary information is already in the financial statements or notes[299](index=299&type=chunk) [Form 10-K Summary](index=58&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company - Not applicable[300](index=300&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=61&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) BDO USA, LLP issued an unqualified opinion on the fair presentation of the consolidated financial statements for 2018 and 2017 in accordance with U.S. GAAP, noting no internal control audit was required - BDO USA, LLP expressed an unqualified opinion that the financial statements are fairly presented in accordance with U.S. GAAP[303](index=303&type=chunk) - The audit was conducted in accordance with PCAOB standards[305](index=305&type=chunk) - The company was not required to have, nor did the firm perform, an audit of its internal control over financial reporting[305](index=305&type=chunk) [Consolidated Financial Statements](index=62&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show a net loss of **$11.4 million** for 2018, with total assets at **$11.7 million**, liabilities at **$2.9 million**, and stockholders' equity at **$8.8 million**, impacted by a **$11.5 million** deemed dividend Consolidated Balance Sheet Data (As of Dec 31) | Account | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | **Total Assets** | **$11,720,446** | **$8,164,094** | | Cash and cash equivalents | $10,380,493 | $7,217,469 | | **Total Liabilities** | **$2,915,436** | **$1,225,407** | | **Total Stockholders' Equity** | **$8,805,010** | **$6,938,687** | Consolidated Statement of Operations Data (Years Ended Dec 31) | Account | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | Research and development | $4,209,981 | $2,328,087 | | General and administrative | $7,224,252 | $4,859,369 | | **Operating loss** | **($11,434,233)** | **($7,649,171)** | | **Net loss** | **($11,404,934)** | **($8,122,581)** | | Deemed dividend | ($11,479,308) | ($2,568,132) | | **Net loss applicable to common shareholders** | **($22,884,242)** | **($10,690,713)** | | **Loss per common share - basic and diluted** | **($5.50)** | **($10.97)** | Consolidated Statement of Cash Flows Data (Years Ended Dec 31) | Category | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,961,621) | ($6,593,950) | | Net cash used in investing activities | ($110,906) | $0 | | Net cash provided by financing activities | $12,290,551 | $10,783,000 | | **Net increase in cash** | **$3,218,024** | **$4,189,507** | [Notes to Consolidated Financial Statements](index=67&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail financial condition, including going concern reliance on future funding, a **1-for-12 reverse stock split**, **$12.3 million** net from 2018 rights offering with an **$11.5 million** deemed dividend, and **$11.3 million** from March 2019 warrant exercises - **Going Concern:** Management states that while current funds are sufficient for at least one year, the company will require additional funding to continue operations beyond that date. The financial statements do not include adjustments related to this uncertainty. (Note 2)[320](index=320&type=chunk) - **Reverse Stock Split:** A **1-for-12 reverse stock split** was effectuated on April 20, 2018. All share and per-share data have been retroactively restated. (Note 3)[323](index=323&type=chunk) - **2018 Financing:** The May 2018 rights offering sold **13,624 units**, raising net proceeds of approximately **$12.3 million**. The accounting for the Series B convertible preferred stock and warrants resulted in a deemed dividend of **$11,479,308**. (Note 9)[371](index=371&type=chunk)[384](index=384&type=chunk) - **Executive Options:** In June 2018, options for **3 million shares** were granted to executives, classified as liabilities due to a cash settlement provision. These were cancelled and replaced in January 2019 with new options that do not contain the provision and are subject to shareholder approval. (Note 14 & 16)[410](index=410&type=chunk)[411](index=411&type=chunk)[421](index=421&type=chunk) - **Subsequent Events:** In March 2019, the company received approximately **$11.3 million** from the exercise of warrants issued in May 2018, resulting in the issuance of **2.8 million shares** of common stock. (Note 16)[423](index=423&type=chunk)