Atossa Genetics, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2016; filed November 14, 2016. The filing identifies the registrant as Atossa Genetics, Inc. (the requested metadata refers to Atossa Therapeutics, Inc.). The company was a clinical-stage pharmaceutical business focused on breast-cancer therapeutics and drug-delivery methods, including intraductal fulvestrant and oral endoxifen.
Financial condition and results
| Metric | Three months ended Sept. 30 | Nine months ended Sept. 30 |
|---|---|---|
| Net revenue | $0 | $0 |
| Operating expenses | $1.56 million | $5.44 million |
| Operating loss | $(1.56) million | $(5.44) million |
| Other income, net | $1.76 million | $1.60 million |
| Net income (loss) | $0.20 million | $(3.85) million |
| Net income (loss) per share | $0.07 | $(1.72) |
- Third-quarter net income reflected approximately $1.76 million of other income, primarily the termination payment received from Besins Healthcare.
- There were no income taxes due to continuing operating losses and a full valuation allowance against deferred tax assets.
- Cash and cash equivalents were $4.39 million at September 30, 2016, compared with $3.72 million at December 31, 2015. Restricted cash was $55,000.
- Working capital was approximately $3.7 million. Current liabilities were $864,000, and the filing reports no material debt balance.
- Cash used in operating activities was $4.02 million for the first nine months of 2016. Investing cash use was $5,000, while financing activities provided $4.70 million.
- Total assets were $6.28 million and stockholders’ equity was $5.41 million at September 30, 2016.
Material changes versus the prior comparable period
- Revenue declined from discontinued NRLBH laboratory operations reported in the 2015 periods to zero in 2016. The 2015 discontinued operations generated revenue of $772,591 in the quarter and $5.34 million year to date, but produced losses of $545,000 and $630,000, respectively.
- Continuing-operation operating expenses decreased 59.4% to $1.56 million in the quarter and 47.1% to $5.44 million for the nine months. Selling expense fell to zero, general and administrative expense declined, and research and development expense decreased substantially.
- Year-to-date net loss improved from $10.80 million in 2015 to $3.85 million in 2016, primarily because of lower operating expenses and the Besins settlement income.
- During the first nine months, the company issued 1,561,080 common shares and warrants for net proceeds of $4.70 million, including 1,150,000 shares sold in an August public offering at $2.50 per share.
- The company completed a 1-for-15 reverse stock split on August 26, 2016. Share and per-share information was retroactively restated.
Outlook, risks and unusual items
- Management expects continuing operating losses while it develops fulvestrant delivered through intraductal microcatheters and oral endoxifen. Research and development spending is expected to increase through 2016 and 2017.
- Management stated that existing resources were expected to fund planned operations for at least six to nine months from September 30, 2016, while also seeking additional financing through securities sales and other possible funding sources.
- The financial statements disclose substantial doubt about the company’s ability to continue as a going concern. Management may seek equity financing and short-term borrowings, but provides no assurance that sufficient capital will be available on acceptable terms.
- The Afimoxifene Topical Gel program and related litigation with Besins were terminated and settled in August 2016. Besins received the program rights, and Atossa received a total termination payment of $1,762,931.
- The company had 402,228 warrants outstanding at September 30, 2016, with exercise prices ranging from $18.75 to $186.45, creating potential future dilution but limited apparent near-term exercise value based on the filing’s disclosed terms.
- A securities class action remained on appeal. The company recorded no liability because the potential amount could not reasonably be estimated.
- The company’s principal development programs depend on successful clinical trials, regulatory approvals, third-party manufacturing and adequate intellectual-property protection. No material change to the risk factors in the 2015 Form 10-K was reported.
Important facts for investors to verify
- Cash runway, quarterly cash burn and the timing and terms of any additional equity or debt financing.
- Enrollment, safety, efficacy and regulatory progress of the Phase 2 intraductal fulvestrant study.
- Development milestones, manufacturing arrangements and intellectual-property status for oral endoxifen.
- Whether the Besins termination payment is nonrecurring and whether any earn-out proceeds from the former laboratory business become realizable.
- Status and potential exposure of the securities litigation appeal, for which no liability was recorded.
- Potential dilution from outstanding warrants, stock options and the Aspire Capital equity purchase agreement.