Atossa Therapeutics(ATOS) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements 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 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] - Total liabilities increased by approximately 37.3% during the first six months of 2020, mainly due to a significant rise in accounts payable[7] Condensed Consolidated Statements of Operations 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] Condensed Consolidated Statements of Cash Flows 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] - 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] Notes to Condensed Consolidated Financial Statements - 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][21] - 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][24] - 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][38] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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][73][76] 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][104] - 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][112] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company has indicated that this section is not applicable - Not applicable[120] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2020[123] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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][129] - 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][148] - 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][154][160] - 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][227] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has indicated that this section is not applicable - Not applicable[248] Item 3. Defaults upon Senior Securities The company has indicated that this section is not applicable - Not applicable[248] Item 4. Mine Safety Disclosures The company has indicated that this section is not applicable - Not applicable[248] Item 5. Other Information The company has indicated that this section is not applicable - Not applicable[248] Item 6. Exhibits 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]