AntriaBio, Inc. (formerly Fits My Style, Inc.) — Form 10-Q
Reporting period: Quarter and six months ended December 31, 2012. The filing covers the company before its January 2013 name change and merger; it identifies the registrant as AntriaBio, Inc., not Rezolute, Inc.
Business context
At December 31, 2012, the company was a development-stage business that had stopped pursuing its former home-furnishings website plan and had generated no revenue. After the reporting period, it changed its name, reincorporated in Delaware, and completed a share exchange on January 31, 2013, making AntriaBio Delaware a wholly owned subsidiary. The combined company’s stated focus became development of AB101, a diabetes treatment candidate.
Financial results and position
| Metric | Three months ended Dec. 31, 2012 | Six months ended Dec. 31, 2012 | Comparable 2011 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $9,307 | $19,056 | $7,998 / $15,392 |
| Net loss | $9,307 | $19,056 | $7,998 / $15,392 |
| Net loss per share, basic and diluted | $0.00 loss | $0.00 loss | $0.00 loss for each comparable period |
Six-month general and administrative expense was $19,056, versus $15,392 in 2011; management attributed the $3,664 increase primarily to legal and other costs associated with seeking new business opportunities. With no revenue, gross margin and operating margin are not meaningful.
- Balance sheet at Dec. 31: Cash and total assets were $0. Current liabilities totaled $24,470, comprising accounts payable of $8,602 and a $15,868 loan from an affiliate of the CEO. Stockholders’ deficit was $24,470; accumulated development-stage losses were $110,270.
- Liquidity and cash flow: Six-month cash used in operations was $21,000, compared with $21,184 in 2011. Cash fell from $5,132 at June 30 to zero at December 31. The related-party loan provided $15,868 of financing during the six months.
- Debt: The reported related-party loan is unsecured, non-interest-bearing, and due on demand. The filing also refers to convertible promissory notes assumed in the subsequent merger, but the supplied text does not provide a clear amount.
Changes, outlook, and risks
- The company disclosed substantial doubt about its ability to continue as a going concern. It expected existing cash and operating cash flows to be insufficient for more than one year and depended on raising equity financing and executing its new business plan.
- Management anticipated raising capital in the first half of 2013 to fund operations, including hiring, a manufacturing facility and equipment, and clinical trials. No specific financing amount or committed funding was stated.
- For AB101, the stated objective was to study the product clinically and assess whether it is non-inferior to Lantus in safety and efficacy. The filing describes development, regulatory approval, funding, manufacturing, supply, and market acceptance as significant uncertainties.
- The PRP asset purchase agreement includes contingent payments of up to $44 million within five years, tied to development, licensing, regulatory approval, and sales milestones; these could reduce working capital.
- Management concluded disclosure controls were ineffective at December 31, 2012 because of a material weakness involving inadequate segregation of duties and a need for a stronger control environment. No material change in internal control over financial reporting during the period was reported.
- The filing reported no legal proceedings and no off-balance-sheet arrangements. It reported no unregistered equity sales during the quarter, but disclosed that 35,284,000 shares were issued in the subsequent merger.
Important facts for investors to verify
- Whether and on what terms the company obtained financing after December 31, 2012, given zero cash and the going-concern warning.
- The merger’s assumed convertible securities and other obligations, and the resulting fully diluted share count and potential dilution.
- AB101’s development status, clinical-trial plans, supply quality, and the timing and funding needed to advance it.
- The scope and timing of the contingent payments of up to $44 million and their potential impact on liquidity.
- The filing’s cash-flow statement appears to label the website-development cash outflow under “financing activities”; verify the classification against the filed financial statements.