Filing Summary
Issuer and period: The supplied filing is AntriaBio, Inc.’s unaudited Form 10-Q for the three months ended September 30, 2017, not a filing under the name Rezolute, Inc. The company describes itself as a clinical-stage biopharmaceutical business. The quarter is referred to in the filing as the first quarter of fiscal 2018.
Financial Results and Position
| Metric | Quarter ended September 30, 2017 | Comparable 2016 quarter / prior balance date |
|---|---|---|
| Revenue | None | None; the company reports no revenue since inception |
| Research and development expense | $4.31 million | $2.49 million |
| General and administrative expense | $2.41 million | $1.34 million |
| Total operating expenses | $6.72 million | $3.82 million |
| Net loss | $6.68 million; $0.13 per share | $3.82 million; $0.11 per share |
| Cash and cash equivalents | $4.02 million | $4.49 million at June 30, 2017 |
| Working capital | $2.67 million | Not clearly provided for the comparison date |
| Total assets | $9.80 million | $10.63 million at June 30, 2017 |
| Total liabilities | $1.99 million | $2.10 million at June 30, 2017 |
| Stockholders’ equity | $7.81 million | $8.53 million at June 30, 2017 |
Net cash used in operating activities was $4.91 million, compared with $2.97 million in the 2016 quarter. Investing activities used $5,816; financing activities provided $4.44 million, principally from a common-stock placement. Cash declined by $471,000 during the quarter. With no revenue, profit and operating margins are not meaningful.
The company had $10,000 of convertible notes payable, matured and due, accruing interest at 8%. It reported no off-balance-sheet transactions. Outstanding common shares rose from 49.23 million at June 30 to 53.73 million at September 30; 53,728,640 shares were reported outstanding on November 14, 2017.
Changes, Outlook, and Risks
- Net loss increased about 75% year over year. R&D expense increased mainly due to the ActiveSite license and costs of the AB101 clinical study. G&A expense also increased, with management citing higher compensation and benefits, including stock-based compensation.
- The company paid $750,000 upfront for rights to ActiveSite’s plasma kallikrein inhibitor program. The agreement includes up to $36.5 million in development and regulatory milestones and up to $10 million in sales milestones.
- Management said additional capital was imperative to sustain operations and continue AB101’s Phase 1 study. It targeted raising at least $15 million to fund operations, clinical work, pipeline development, and G&A through the end of calendar 2018. The filing provides no assurance that financing will be available on acceptable terms, or at all.
- Management reported that the first of up to five potential AB101 study cohorts had been completed and planned to proceed to a higher dose after interim review, but would not dose the next cohort until additional capital was raised. The company did not anticipate announcing study results until the following year.
- The company announced preclinical kallikrein programs AB402 and AB602 in October 2017, targeting IND filings in Q4 2018 and Q1 2019, respectively. These are forward-looking plans, not reported clinical results.
- The filing states that cash resources and expected operating cash flows would not sustain operations for more than one year from the date the financial statements were available for issuance. Management identified substantial doubt about the company’s ability to continue as a going concern.
- Operating lease commitments, net of disclosed sublease income, totaled $2.73 million. The company also disclosed a $10.27 million balance of unrecognized stock-based compensation expense.
- Management concluded disclosure controls were ineffective due to a material weakness involving inadequate segregation of duties, a need for a stronger control environment, and limited review of complex accounting issues. The filing reported no material change in internal control over financial reporting during the quarter.
- No material litigation or changes to previously disclosed risk factors were reported. The company identified clinical, regulatory, financing, competition, intellectual-property, and execution risks.
Investor Verification Priorities
- Confirm the issuer identity: the request names Rezolute, Inc., but the filing identifies AntriaBio, Inc.; verify any subsequent name change, merger, or corporate succession before attributing these results.
- Verify subsequent financing, cash runway, and whether the targeted $15 million raise was completed, including its terms and dilution to existing shareholders.
- Check subsequent AB101 study progress and results, and whether planned dose escalation and kallikrein-program IND timelines were achieved.
- Assess the going-concern disclosure alongside current cash burn, lease obligations, the matured convertible note, and potential license milestone obligations.
- Review remediation of the disclosed material weakness and the potential dilution from outstanding options and warrants.