[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited Q1 2022 financial statements, management's analysis, and market risk disclosures [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited Q1 2022 financial statements, showing a net loss of $4.8 million and key balance sheet changes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows total assets of $137.5 million and a decrease in cash and stockholders' equity as of March 31, 2022 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $131,486 | $136,377 | | Total current assets | $136,848 | $141,240 | | **Total Assets** | **$137,478** | **$141,262** | | **Liabilities & Equity** | | | | Total current liabilities | $2,322 | $3,126 | | **Total Liabilities** | **$2,322** | **$3,126** | | **Total Stockholders' Equity** | **$135,156** | **$138,136** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss of $4.8 million for Q1 2022, driven by a 34% increase in total operating expenses Condensed Consolidated Statements of Operations (Unaudited, in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Research and development | $1,499 | $1,379 | | General and administrative | $3,248 | $2,152 | | **Total operating expenses** | **$4,747** | **$3,531** | | **Operating loss** | **($4,747)** | **($3,531)** | | **Net loss** | **($4,786)** | **($3,538)** | | Loss per common share - basic and diluted | ($0.04) | ($0.04) | | Weighted average shares outstanding | 126,624 | 92,587 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased to $135.2 million, primarily due to the quarterly net loss offset by stock-based compensation - The primary drivers for the change in stockholders' equity during Q1 2022 were the **net loss of $4,786 thousand** and **stock-based compensation expense of $1,806 thousand**[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was $4.9 million, with no financing activities, resulting in an ending cash balance of $131.6 million Cash Flow Summary (Unaudited, in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,878) | ($4,408) | | Net cash used in investing activities | ($13) | $0 | | Net cash provided by financing activities | $0 | $102,428 | | **Net (decrease) increase in cash** | **($4,891)** | **$98,020** | | **Cash at end of period** | **$131,596** | **$137,684** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's focus, liquidity, R&D rebates, and stock-based compensation policies - The company is focused on developing pharmaceuticals for COVID-19, breast cancer, and other breast conditions[19](index=19&type=chunk) - Management believes its current funding of **$131.5 million in cash and cash equivalents is sufficient** to finance operations for at least one year[20](index=20&type=chunk) - The company receives a **43.5% R&D cash rebate** from Australia for qualified activities, which reduced Q1 2022 R&D expenses by $140 thousand[37](index=37&type=chunk) - **Stock-based compensation expense increased to $1,806 thousand** in Q1 2022 from $640 thousand in Q1 2021, with the majority allocated to G&A expenses[76](index=76&type=chunk)[77](index=77&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses its clinical programs, a 34% rise in operating expenses, and its current liquidity position - The company's leading programs are **Endoxifen for breast cancer**, **AT-301 nasal spray** for at-home COVID-19 treatment, and **AT-H201 inhalation therapy** for hospitalized patients[85](index=85&type=chunk)[87](index=87&type=chunk)[94](index=94&type=chunk) Comparison of Operating Expenses (in thousands) | Expense Category | Q1 2022 | Q1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Research & Development | $1,499 | $1,379 | +9% | | General & Administrative | $3,248 | $2,152 | +51% | | **Total Operating Expenses** | **$4,747** | **$3,531** | **+34%** | - The increase in R&D expense was mainly due to drug manufacturing costs, while G&A expense rose due to **non-cash stock-based compensation of $734 thousand** and higher legal fees[111](index=111&type=chunk)[112](index=112&type=chunk) - As of March 31, 2022, the company had **$131.5 million in cash and cash equivalents** and believes it has sufficient funds for at least the next twelve months of operations[113](index=113&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are credit risk from its large cash balance and minor foreign currency exposure - The company holds **$131.5 million in cash and cash equivalents**, with the majority in a commercial money market account at one financial institution, exceeding FDIC insured limits[124](index=124&type=chunk) - The company is subject to foreign currency risk from its Australian subsidiary's cash and R&D rebate receivable, but did not recognize significant exchange rate losses[125](index=125&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal controls over financial reporting were effective - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of March 31, 2022[128](index=128&type=chunk) - There were **no material changes in internal control** over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[129](index=129&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, and other required disclosures for the reporting period [Item 1. Legal Proceedings](index=33&type=section&id=ITEM%201.%20Legal%20Proceedings) The company believes current legal matters will not have a material effect on its financial position or operations - The company believes that current legal proceedings and claims **will not have a material effect** on its financial position, results of operations, or cash flows[131](index=131&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces significant risks related to its operating history, capital needs, clinical development, and the COVID-19 pandemic - The company has a **limited operating history**, a history of operating losses, and will need to raise substantial additional capital to fund operations[133](index=133&type=chunk)[136](index=136&type=chunk)[140](index=140&type=chunk) - Development of pharmaceutical products is **highly uncertain**, with risks of regulatory failure, clinical trial delays, and compound failure in later stages[145](index=145&type=chunk)[147](index=147&type=chunk) - The business is **dependent on third-party service providers** for manufacturing, testing, and clinical trial activities, and failure by these parties could harm the business[153](index=153&type=chunk)[154](index=154&type=chunk) - The COVID-19 pandemic could **adversely impact operations**, while its end could make the company's COVID-19 programs obsolete[203](index=203&type=chunk)[204](index=204&type=chunk) - The company faces risks related to **protecting its intellectual property**, potential infringement claims, and changes in U.S. patent law[165](index=165&type=chunk)[173](index=173&type=chunk)[179](index=179&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities or use of proceeds during the period - This item is **not applicable** for the reporting period[217](index=217&type=chunk) [Item 3. Defaults upon Senior Securities](index=51&type=section&id=ITEM%203.%20Defaults%20upon%20Senior%20Securities) The company reports no defaults upon senior securities occurred during the period - This item is **not applicable** for the reporting period[217](index=217&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company reports this item as not applicable as it is not involved in mining operations - This item is **not applicable** for the reporting period[217](index=217&type=chunk) [Item 5. Other Information](index=51&type=section&id=ITEM%205.%20Other%20Information) The company reports no other material information was required to be disclosed during the period - This item is **not applicable** for the reporting period[217](index=217&type=chunk) [Item 6. Exhibits](index=52&type=section&id=ITEM%206.%20Exhibits) This section lists the required CEO/CFO certifications and Inline XBRL financial data files filed with the report - The exhibits filed with this report include **CEO and CFO certifications** pursuant to Sarbanes-Oxley Sections 302 and 906, and various Inline XBRL documents[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) [Signatures](index=53&type=section&id=SIGNATURES) The report was officially signed by the CEO and CFO on behalf of the company on May 9, 2022 - The report was **signed and authorized on May 9, 2022**, by the company's CEO and CFO[229](index=229&type=chunk)

Company Overview - Atossa Therapeutics is a clinical-stage biopharma company focused on oncology and infectious diseases, particularly breast cancer and COVID-19 [4] - As of March 31, 2021, Atossa Therapeutics had $137.6 million in cash and no debt [8] - As of May 14, 2021, the company's capital structure included 120.8 million shares of common stock [8] Drug Development Pipeline - AT-301 is a nasal spray for reducing COVID-19 symptoms, currently in Phase 2 [10] - AT-H201 is an inhalation therapy for improving lung function in COVID-19 patients, currently in Phase 1 [10] - Oral Endoxifen is in Phase 2 development for breast cancer, including a Window of Opportunity study in Australia and a Mammographic Breast Density study planned for Stockholm [10] Oral Endoxifen - Window of Opportunity (WOO) Study - Interim results from the Australian WOO study showed a 74% overall reduction in Ki-67 activity in the first 6 patients (P=.031) [22] - All patients in the WOO study had >50% reduction in Ki-67 activity and <25% Ki-67 at surgery [22] - The WOO study was halted early due to substantially positive interim results, saving time and money [21, 22] COVID-19 Therapeutics - AT-H201 is under development for moderate to severely ill COVID-19 patients to improve lung function [30] - AT-301 is a nasal spray targeting infections in the nasal passage for outpatient/home use [32] Market Opportunities - AT-H201 targets a market of >3.3 million worldwide deaths from COVID-19 [11] - AT-301 nasal spray targets a market of >163 million COVID-19 cases worldwide [11]

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)