Business context and reporting period
The supplied filing is AntriaBio, Inc.’s unaudited Form 10-Q for the quarter and nine months ended March 31, 2013—not a Rezolute, Inc. filing for 2012 Q3 as indicated in the request metadata. The company was a development-stage biopharmaceutical business with no revenue. A January 2013 reverse merger made Antria Delaware the accounting acquirer; the public company’s reported business and financial information primarily reflects Antria Delaware.
Financial performance and position
- Revenue: None since inception.
- Net loss: $4.534 million for the quarter and $5.698 million for the nine months ended March 31, 2013, versus $0.177 million and $0.562 million, respectively, in the comparable 2012 periods. The MD&A gives the 2013 quarterly loss as $4.534 million with a slightly different figure ($4,533,997) than the financial statements ($4,533,977).
- Operating expenses: $4.054 million for the quarter and $5.093 million for the nine months, including $3.270 million of stock-based compensation in the 2013 periods. Payroll and professional fees also rose substantially.
- Cash flow: Operating activities used $1.395 million in the nine months ended March 31, 2013, compared with $0.462 million in the prior-year period. Cash was $394,110 at period-end.
- Liquidity: Current assets were $1.279 million and current liabilities $5.118 million, implying a $3.839 million working-capital deficit. Total stockholders’ deficit was $3.550 million.
- Debt: Convertible notes payable totaled $3.733 million, with $1.763 million of notes maturing during the nine-month period left unpaid. Matured notes continued accruing interest at 8% or 12%, depending on the note. Interest payable was $299,000.
- Margins: Not applicable; the company had no revenue.
Material changes and unusual items
- The company acquired PR Pharmaceuticals’ assets for $500,000 cash, including inventory, fixed assets and intangible assets. The acquired lead candidate, AB101, is a potential once-weekly basal insulin injection.
- The acquisition agreement also provides for up to $44 million of contingent payments tied to development, licensing, regulatory approval and sales milestones. No milestone had occurred by the report date.
- January 2013 officer and director option grants totaled 9 million shares at a $0.75 exercise price. The filing recorded approximately $3.270 million of stock-based compensation; 5.097 million options were exercisable at March 31.
- A warrant derivative liability of $312,000 was recorded, with a corresponding derivative expense. The filing identifies the valuation as Level 3.
- Related-party balances included a $164,000 note receivable, $129,000 due from a related party, and $523,000 of related-party payables and accrued expenses. The related-party line of credit had matured in August 2012.
- The reverse merger closed in January 2013; Antria Delaware shareholders received 35.284 million shares and owned 88.2% of the public company after the transaction.
Outlook, risks and contingencies
- Management planned preclinical AB101 studies in 2013, a Phase 1 study outside the United States in the second half of 2013, and a Phase 2 study in the fourth quarter of 2014, subject to successful earlier work. These are stated plans, not assurances of execution or results.
- Management estimated it could need as much as $30 million through completion of the initial Phase 2 study, and targeted raising $5 million to $10 million as soon as possible. It also discussed raising $15 million to $20 million in 2013 and potentially another $10 million in 2014.
- The company stated its cash and expected operating cash flows would not sustain operations for more than one year. The filing identifies substantial doubt about the company’s ability to continue as a going concern and says additional financing is necessary, with no assurance it will be available or acceptable.
- Management warned that inadequate or unsuitable acquired AB101 material could delay studies by 12–18 months. The company anticipated needing additional clinical material for Phase 2.
- Management reported ineffective disclosure controls and procedures due to a material weakness involving insufficient segregation of duties and the need for a stronger internal-control environment.
- The company reported no material pending or threatened litigation and no off-balance-sheet transactions.
Important facts for investors to verify
- Confirm the intended issuer and period: the provided document is AntriaBio’s March 31, 2013 Form 10-Q, not a Rezolute 2012 Q3 filing.
- Assess financing needs, fundraising progress and the going-concern risk against cash of $394,110 and the company’s stated need for substantial additional capital.
- Review the terms, maturity status, accrued interest and potential dilution from the $3.733 million of convertible notes and associated warrants.
- Verify AB101 preclinical and clinical progress, the availability and quality of clinical materials, and whether stated timelines remain current.
- Review the related-party receivable and payable balances, and the assumptions underlying stock-option and warrant valuations.