ATOSSA THERAPEUTICS INC

Previous wording

general macroeconomic conditions, including the impact of inflation, high interest rates, general economic slowdown or a recession, the prospect of a shutdown of the U.S. federal government, foreign exchange rate volatility, financial institution instability, changes in monetary policy and increasing geopolitical instability, including the conflict in Ukraine, the conflict in the Middle East and rising tensions between China and Taiwan, on our business, our ability to access capital markets, our operating costs and our supply chain;

Current wording

the impact of general macroeconomic conditions, including the impact of inflation, high interest rates, general economic slowdown or a recession, foreign exchange rate volatility, financial institution instability, changes in monetary policy and increasing geopolitical instability, including the conflict in Ukraine, the conflict in the Middle East and rising tensions between China and Taiwan, on our business, our ability to access capital markets, our operating costs and our supply chain;

Previous wording

These and other forward-looking statements made in this report are presented as of the date of the filing of this report. We have discussed certain important factors, risks and uncertainties in the cautionary statements included in this report, particularly in the sections titled “ITEM 1A. RISK FACTORS,” and elsewhere in this report that we believe could cause our actual results, events or outcomes, or the timing of these results or outcomes, to differ materially from our anticipated results, events or outcomes, or the anticipated timing of these results or outcomes. Our forward-looking statements do not reflect the potential impact of any new information, future events or circumstances that may affect our business after the date of this report. Except as required by law, we expressly disclaim any intent to update any forward-looking statements after the date on which the statement is made, whether as a result of new information, future events or future circumstances or otherwise.

Current wording

These and other forward-looking statements made in this report are presented as of the date of the filing of this report. We have discussed certain important factors, risks and uncertainties in the cautionary statements included in this report, particularly in the sections titled “ITEM 1A. RISK FACTORS,” “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” and elsewhere in this report, that we believe could cause our actual results, events or outcomes, or the timing of these results or outcomes, to differ materially from our anticipated results, events or outcomes, or the anticipated timing of these results or outcomes. Our forward-looking statements do not reflect the potential impact of any new information, future events or circumstances that may affect our business after the date of this report. Except as required by law, we expressly disclaim any intent to update any forward-looking statements after the date on which the statement is made, whether as a result of new information, future events or future circumstances or otherwise.

Previous wording

We are a clinical-stage biopharmaceutical company developing proprietary innovative medicines in areas of significant unmet medical need in oncology, with a focus on women’s breast cancer and other breast conditions. Our lead drug candidate under development is oral (Z)-endoxifen, which we are developing for both the prevention and treatment of breast cancer.

Current wording

We are a clinical-stage biopharmaceutical company developing proprietary innovative medicines in areas of significant unmet medical need in oncology, with a focus on women’s breast cancer and other breast conditions. Our lead drug candidate under development is oral (Z)-endoxifen, which we are developing for both the prevention and treatment of breast cancer and other therapeutics areas.

Previous wording

In October 2023, Quantum Leap Healthcare Collaborative announced the initiation of the Phase 2 DCIS: Re-Evaluating Conditions for Active Surveillance Suitability as Treatment (RECAST) study. (Z)-endoxifen is being investigated as part of this platform trial, which offers women with DCIS six months of neoadjuvant treatment with the intent of determining their suitability for long-term active surveillance without surgery. Approximately 100 patients will be treated with (Z)-endoxifen. The study incorporates both a neoadjuvant therapy phase, with patients at high risk for progression to invasive disease proceeding to surgery, followed by an extended surveillance phase for low-risk patients.

Current wording

In October 2023, Quantum Leap Healthcare Collaborative (QLHC) announced the initiation of the Phase 2 DCIS: Re-Evaluating Conditions for Active Surveillance Suitability as Treatment (RECAST) study. (Z)-endoxifen is being investigated as part of this platform trial, which offers women with DCIS six months of neoadjuvant treatment with the intent of determining their suitability for long-term active surveillance without surgery. Approximately 100 patients will be treated with (Z)-endoxifen. The study incorporates both a neoadjuvant therapy phase, with patients at high risk for progression to invasive disease proceeding to surgery, followed by an extended surveillance phase for low-risk patients.

Previous wording

(Z)-endoxifen for Neoadjuvant Treatment of Breast Cancer. We are also developing (Z)-endoxifen to treat ER+ HER2- breast cancer in the neoadjuvant setting, which is the administration of a therapy before the main treatment, which is usually surgery. Although there are neoadjuvant treatments for breast cancers that are not ER+, there are few neoadjuvant treatments for ER+ breast cancer which comprises about 78% of all breast cancers.

Current wording

(Z)-endoxifen for Neoadjuvant Treatment of Breast Cancer. We are also developing (Z)-endoxifen to treat estrogen receptor positive (ER+) / human epidermal growth factor receptor 2 negative (HER2-) breast cancer in the neoadjuvant setting, which is the administration of a therapy before the main treatment, which is usually surgery. Although there are neoadjuvant treatments for breast cancers that are not ER+, there are few neoadjuvant treatments for ER+ breast cancer which comprises about 78% of all breast cancers.

Previous wording

In March 2023, a second Phase 2 trial investigating oral (Z)-endoxifen as a neoadjuvant treatment for women diagnosed with locally advanced ER+ breast cancer was initiated. This trial is a study arm in the ongoing I‑SPY 2 clinical trial. The I-SPY 2 TRIAL is a collaborative effort among academic investigators from major cancer research centers across the U.S., Quantum Leap Healthcare Collaborative, the U.S. FDA, and the Foundation for the National Institutes of Health (FNIH) Cancer Biomarkers Consortium. Approximately 20 patients are being treated with (Z)-endoxifen for up to 24 weeks prior to surgery. Enrollment was completed in January 2024 for the Phase 2 I-SPY clinical trial.

Current wording

In March 2023, a second Phase 2 trial investigating oral (Z)-endoxifen as a neoadjuvant treatment for women diagnosed with locally advanced ER+ breast cancer was initiated. This trial is a study arm in the ongoing I‑SPY 2 clinical trial. The I-SPY 2 TRIAL is a collaborative effort among academic investigators from major cancer research centers across the U.S., QLHC, the U.S. FDA, and the Foundation for the National Institutes of Health (FNIH) Cancer Biomarkers Consortium. Approximately 20 patients are being treated with (Z)-endoxifen for up to 24 weeks prior to surgery. Enrollment was completed in January 2024 for the Phase 2 I-SPY clinical trial.

Previous wording

On April 15, 2024, we announced that a new study was initiated to evaluate our proprietary (Z)-endoxifen in combination with abemaciclib (VERZENIO®), a cyclin-dependent kinase (CDK) 4/6 inhibitor marketed by Eli Lilly and Company, in women with ER+/HER2- breast cancer. The new study arm is expected to enroll approximately 20 women with newly diagnosed Estrogen Receptor positive (ER+) / Human Epidermal Growth Factor Receptor 2 negative (HER2-) invasive breast cancer. Participants are expected to receive 40mg (Z)-endoxifen once daily in combination with 150mg abemaciclib twice daily for a total of 24 weeks prior to surgery.

Current wording

On April 15, 2024, we announced that a new study was initiated to evaluate our proprietary (Z)-endoxifen in combination with abemaciclib (VERZENIO®), a cyclin-dependent kinase (CDK) 4/6 inhibitor marketed by Eli Lilly and Company, in women with ER+/HER2- breast cancer. This trial is a study arm of the I-SPY 2 Endocrine Optimization Pilot (I-SPY 2 EOP). The I-SPY 2 EOP trial is a collaborative effort among academic investigators from major cancer research centers across the U.S., QLHC, the FDA, and the FNIH. On June 28, 2024, we announced that the study has been expanded to include 80 women with newly diagnosed ER+ / HER2- invasive breast cancer. Participants are expected to receive 80mg (Z)-endoxifen once daily in combination with 150mg abemaciclib twice daily for a total of 24 weeks prior to surgery.

Previous wording

We have an operating lease for office space in Seattle, Washington with WW 107 Spring Street LLC. Monthly rent is $2 thousand a month, and this lease terminates on June 30, 2024. On February 29, 2024, we entered into an operating lease with Regus International Workplace Group for office space in Seattle, Washington. The lease commencement date is June 1, 2024, and we agreed to pay monthly rent of $1 thousand per month for 12 months.

Current wording

We had an operating lease for office space in Seattle, Washington with WW 107 Spring Street LLC. Rent was $2 thousand a month, and this lease terminated on June 30, 2024. On February 29, 2024, we entered into an operating lease with Regus International Workplace Group for office space in Seattle, Washington. The lease commencement date was June 1, 2024, and we agreed to pay monthly rent of $1 thousand per month for 12 months.

Previous wording

There have been no material changes to our critical accounting estimates during the three months ended March 31, 2024 from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 1, 2024.

Current wording

There have been no material changes to our critical accounting estimates during the six months ended June 30, 2024 from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 1, 2024.

Previous wording

Revenue and Cost of Revenue. For the three months ended March 31, 2024 and 2023, we had no source of revenue and no associated cost of revenue.

Current wording

Revenue and Cost of Revenue. For the three and six months ended June 30, 2024 and 2023, we had no source of revenue and no associated cost of revenue.

Previous wording

Operating Expenses. Total operating expenses were $7.0 million for the three months ended March 31, 2024, which was a decrease of $0.1 million, from total operating expenses for the three months ended March 31, 2023 of $7.1 million. Factors contributing to the decreased operating expenses in the three months ended March 31, 2024 are explained below.

Current wording

Operating Expenses. Total operating expenses were $7.1 million and $14.1 million for the three and six months ended June 30, 2024, respectively, which was a decrease of $0.7 million and $0.8 million, respectively, from total operating expenses for the three and six months ended June 30, 2023 of $7.8 million and $14.9 million, respectively. Factors contributing to the decrease in operating expenses in the three and six months ended June 30, 2024 are explained below.

Previous wording

The following table provides a breakdown of major categories within R&D expense for the three months ended March 31, 2024 and 2023, together with the dollar change in those categories (in thousands):

Current wording

R&D Expenses. The following table provides a breakdown of major categories within R&D expense for the three and six months ended June 30, 2024 and 2023, together with the dollar change in those categories (dollars in thousands):

Previous wording

The following table provides a breakdown of major categories within G&A expenses for the three months ended March 31, 2024 and 2023, together with the dollar change in those categories (in thousands):

Current wording

General and Administrative (G&A) Expenses. The following table provides a breakdown of major categories within G&A expenses for the three and six months ended June 30, 2024 and 2023, together with the dollar change in those categories (dollars in thousands):

Previous wording

Interest Income. Interest income was $1.1 million for the three months ended March 31, 2024, an increase of $0.2 million from interest income of $0.9 million for the three months ended March 31, 2023. The increase was due to a change in the mix of our money market accounts which yielded a higher rate of return.

Current wording

Interest Income. Interest income was $1.1 million and $2.2 million for the three and six months ended June 30, 2024, respectively, an increase of $0.1 million and $0.4 million, respectively, from interest income of $1.0 million and $1.8 million for the three and six months ended June 30, 2023, respectively. The increase was due to a change in the mix of our money market accounts which yielded a higher rate of return in 2024.

Previous wording

Income Taxes. We did not record an income tax expense or benefit for the three months ended March 31, 2024 and 2023 due to uncertainty regarding utilization of our net operating loss carryforwards and our history of losses.

Current wording

Income Taxes. We did not record an income tax expense or benefit for the three and six months ended June 30, 2024 and 2023 due to uncertainty regarding utilization of our net operating loss carryforwards and our history of losses.

Previous wording

We have incurred net losses and negative operating cash flows since inception. For the three months ended March 31, 2024, we recorded a net loss of $5.9 million and used $4.7 million of cash in operating activities. As of March 31, 2024, we had $84.0 million in cash and cash equivalents and working capital of $81.7 million. We believe we have sufficient cash on hand to fund our projected operating requirements for at least the next 12 months.

Current wording

We have incurred net losses and negative operating cash flows since inception. For the six months ended June 30, 2024, we recorded a net loss of $11.9 million and used $9.2 million of cash in operating activities. As of June 30, 2024, we had $79.5 million in cash and cash equivalents and working capital of $76.0 million. We believe we have sufficient cash on hand to fund our projected operating requirements for at least the next 12 months.

Previous wording

Net Cash Flows from Operating Activities. Net cash used in operating activities was $4.7 million for the three months ended March 31, 2024, compared to net cash used of $7.0 million for the same period in 2023, a decrease of $2.3 million. Cash used in operating activities for the three months ended March 31, 2024 primarily consisted of our net loss of $5.9 million, adjusted for non-cash items including non-cash stock-based compensation expense of $0.4 million, and net cash inflows from a change in our operating assets and liabilities of $0.8 million. Cash used in operating activities for the three months ended March 31, 2023 primarily consisted of our net loss of $6.3 million, adjusted for non-cash stock-based compensation expense of $1.6 million and net cash outflows from a change in our operating assets and liabilities of $2.3 million.

Current wording

Net Cash Flows from Operating Activities. Net cash used in operating activities was $9.2 million for the six months ended June 30, 2024, compared to net cash used in operating activities of $11.5 million for the same period in 2023, a decrease of $2.3 million compared to the prior year period. Cash used in operating activities for the six months ended June 30, 2024 primarily consisted of our net loss of $11.9 million adjusted for non-cash items, including non-cash stock-based compensation expense of $0.8 million, and net cash inflows from a change in our operating assets and liabilities of $2.0 million. Cash used in operating activities for the six months ended June 30, 2023 primarily consisted of our net loss of $16.1 million, adjusted for non-cash stock-based compensation expense of $3.2 million, and net cash outflows from a change in our operating assets and liabilities of $1.5 million.

Previous wording

Net Cash Flows from Investing Activities. Net cash used in investing activities was $6 thousand for the three months ended March 31, 2024, primarily related to purchases of computers. No cash was used in investing activities for the three months March 31, 2023.

Current wording

Net Cash Flows from Investing Activities. Net cash used in investing activities was $9 thousand and $13 thousand for the six months ended June 30, 2024 and 2023, respectively, primarily related to purchases of computers.

Previous wording

Net Cash Flows from Financing Activities. Net cash provided by financing activities was $0.2 million for the three months ended March 31, 2024 and primarily consisted of proceeds from warrants exercised during the period. No cash was used or provided in financing activities during the three months ended March 31, 2023.

Current wording

Net Cash Flows from Financing Activities. Net cash provided by financing activities was $0.3 million for the six months ended June 30, 2024 and primarily consisted of proceeds from warrants exercised during the period. No cash was used or provided in financing activities during the six months ended June 30, 2023.

Previous wording

Additional funding may not be available to us on acceptable terms or at all. Continued uncertain market and macroeconomic conditions, including due to inflationary pressures, high interest rates, general economic slowdown or a recession, the prospect of a shutdown of the U.S. federal government, foreign exchange rate volatility, financial institution instability, changes in monetary policy and increasing geopolitical instability, may limit our ability to access capital. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, we may raise additional funds by issuing equity securities or by equity offerings, collaboration agreements, debt financings or licensing arrangements.

Current wording

Additional funding may not be available to us on acceptable terms or at all. Continued uncertain market and macroeconomic conditions, including due to inflationary pressures, high interest rates, general economic slowdown or a recession, foreign exchange rate volatility, financial institution instability, changes in monetary policy and increasing geopolitical instability, may limit our ability to access capital. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, we may raise additional funds by issuing equity securities or by equity offerings, collaboration agreements, debt financings or licensing arrangements.

Previous wording

Our contractual obligations represent our future cash commitments and liabilities under agreements with third party clinical trial service providers. Apart from contracts with one third party clinical trial service provider, such agreements are cancellable upon written notice by us. The non-cancellable contracts expire upon completion of the clinical trial and release of the final report, or the contract may be terminated by the clinical trial service provider, by the FDA or another governmental agency. As of March 31, 2024, our estimated non-cancellable commitment was $5.7 million which will be paid over the term of the clinical trials which are expected to be complete in 2025.

Current wording

Our contractual obligations represent our future cash commitments and liabilities under agreements with third-party clinical trial service providers. Apart from contracts with one third party clinical trial service provider, such agreements are cancellable upon written notice by us. The non-cancellable contracts expire upon completion of the clinical trial and release of the final report, or the contract may be terminated by the clinical trial service provider, by the FDA or another governmental agency. As of June 30, 2024, our estimated non-cancellable commitment was $7.6 million which will be paid over the term of the clinical trials which are expected to be complete in 2025.

Previous wording

In June 2023, our Board of Directors (the Board) authorized a program to repurchase up to $10.0 million of our common stock (the Share Repurchase Program). The Share Repurchase Program does not obligate us to acquire any specific number of shares. Under the Share Repurchase Program, shares of common stock may be repurchased using a variety of methods, including privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act, as part of accelerated share repurchases and other methods. The timing, manner, price and amount of any repurchases are determined by the Board in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. On December 18, 2023 the Board authorized an extension of the program through December 31, 2024. No shares were repurchased during the three months ended March 31, 2024 and 2023. As of March 31, 2024, $8.5 million remained available for future stock repurchases under the Share Repurchase Program.

Current wording

In June 2023, our Board of Directors (the Board) authorized a program to repurchase up to $10.0 million of our common stock (the Share Repurchase Program). The Share Repurchase Program does not obligate us to acquire any specific number of shares. Under the Share Repurchase Program, shares of common stock may be repurchased using a variety of methods, including privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act, as part of accelerated share repurchases and other methods. The timing, manner, price and amount of any repurchases are determined by the Board in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. During the three and six months ended June 30, 2024, no shares were repurchased. Please refer to Note 10“Stockholders’ Equity”to the Condensed Consolidated Financial Statements.