Filing identity and reporting period
The supplied filing identifies the registrant as AntriaBio, Inc. (formerly Fits My Style, Inc.), not Rezolute, Inc. It is a Form 10-Q for the quarter ended September 30, 2013, the company’s first quarter of fiscal 2014; the filing was signed November 12, 2013. AntriaBio was a development-stage company pursuing sustained-release diabetes treatments. Its lead candidate, AB101, is a potential once-weekly basal insulin. The filing says the January 2013 reverse merger was accounted for as a reverse acquisition, so the reported operating history is principally that of Antria Delaware.
Financial results and position
| Metric | Three months ended September 30, 2013 | Comparable 2012 quarter |
|---|---|---|
| Revenue | None since inception | None since inception |
| Operating expenses | $700,903 | $542,882 |
| Operating loss | $700,903 | $542,882 |
| Net loss | $819,531 | $630,850 |
| Net loss per share, basic and diluted | $0.02 | $0.02 |
| Net cash from (used in) operating activities | $3,671 | $(345,039) |
There were no revenues, so revenue growth and gross margin are not applicable. The quarter’s $165,318 stock-based compensation contributed to higher payroll expense. Operating cash flow was only marginally positive and reflected, among other factors, increases in accounts payable and accrued liabilities; it should not be read as evidence of sustainable cash generation.
At September 30, 2013, cash was $744, total current assets were $576,034, and current liabilities were $5,679,995, producing a reported working-capital deficit of $5,103,961. Total assets were $863,570 and stockholders’ deficit was $4,816,425. Convertible notes payable totaled $3,732,500; $2,907,500 had matured and was due, while the remainder matured at various dates through the first quarter of 2014. Matured notes were unpaid and continued accruing interest. Interest payable was $469,884. No cash interest was paid in the quarter.
Assets included a $163,829 related-party note receivable, $6,795 related-party interest receivable, $60,919 due from related parties, and $223,000 of inventory. The related-party note had matured in August 2012; no loss allowance was recorded. The company reported no off-balance-sheet transactions.
Material changes versus the prior comparable quarter
- Net loss increased by $188,681, from $630,850 to $819,531, and operating expenses increased by $158,021.
- Compensation and benefits rose from $200,567 to $358,453, largely due to stock-based compensation; consulting expense declined from $117,641 to $81,274.
- Interest expense increased from $104,898 to $164,817. A $42,735 derivative gain partly offset other expense in 2013; no derivative item was reported for the 2012 quarter.
- Operating cash flow improved from a $345,039 use to $3,671 provided, while cash at quarter-end fell to $744 from $291,684 at September 30, 2012.
Outlook, risks, and unusual items
Management stated that existing cash and expected operating cash flows would not support operations for more than one year and that substantial doubt existed about the company’s ability to continue as a going concern. Continued operations depend on raising equity financing; no assurance was given that financing would be available on acceptable terms. Management described a target of raising $12 million as soon as possible, anticipated up to $15 million in 2013 and potentially another $15 million in late 2014 or early 2015, and estimated a need of as much as $30 million to fund development through completion of the initial Phase 1 AB101 study in the U.S.
Plans described included animal pharmacokinetic and pharmacodynamic studies in 2014, followed—if successful—by Phase 1 and Phase 2 studies outside the U.S. Management planned to initiate the Phase 1 study in the second half of 2014 and the Phase 2 study in the fourth quarter of 2014. These are forward-looking plans, not reported outcomes. Management said existing preclinical material might be insufficient, potentially delaying studies by 12–18 months, and anticipated needing additional clinical material for Phase 2. It also described plans for a Colorado manufacturing and research facility and expected significant hiring and development spending, contingent on funding.
Other notable matters include up to $44 million of contingent consideration tied to milestones under the PR Pharmaceuticals asset purchase; no such milestone had occurred through the report date. The filing disclosed a material weakness in disclosure controls arising from insufficient segregation of duties and the small staff; management concluded disclosure controls were not effective as of September 30, 2013. It reported no material pending or threatened litigation and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Confirm the issuer identity: the supplied text is an AntriaBio, Inc. filing, despite the request metadata naming Rezolute, Inc.
- Verify the status, repayment demands, and terms of the $2.9075 million in matured notes, as well as the remaining note maturities and potential conversion dilution.
- Assess financing availability and the company’s ability to fund operations given $744 in reported cash and substantial doubt about going concern.
- Review collectability and governance around the related-party note and receivables, including the Chairman-owned company balance and the Board’s November 8, 2013 ratification.
- Track AB101 material readiness, study initiation, regulatory requirements, and whether management’s projected timelines and financing plans are achieved.
- Monitor remediation of the disclosed material weakness and the potential dilution and expense associated with outstanding options and warrants.