ATOSSA THERAPEUTICS, INC.

Previous 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, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, 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, changes in monetary policy, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, 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

As of May 1, 2025, we have been granted six U.S. and ten international patents covering our proprietary (Z)-endoxifen, and we have numerous applications pending in the U.S. and in other major countries. We have patent protection covering our proprietary (Z)-endoxifen through at least November 17, 2038.

Current wording

We have been granted six U.S. and ten international patents covering our proprietary (Z)-endoxifen, and we have numerous applications pending in the U.S. and in other major countries. We have patent protection covering our proprietary (Z)-endoxifen through at least November 17, 2038.

Previous wording

In early 2025, we made a strategic decision to pursue a metastatic breast cancer indication for our lead program,(Z)-endoxifen. We believe that this approach may offer a more streamlined regulatory pathway to deliver(Z)-endoxifen to patients with urgent unmet medical needs as the current treatment options for metastatic breast cancer often provides limited durability of response and substantial side effects.(Z)-endoxifen, a potent and well-tolerated selective estrogen receptor modulator (SERM), has shown encouraging signs in previous clinical trials, which we believe supports its potential to fill this critical gap in treatment. The Company has initiated engagement with the U.S. Food and Drug Administration (FDA) to advance the metastatic indication and other indications, such as breast cancer prevention and neoadjuvant therapy, which typically require larger and longer clinical trials.

Current wording

In early 2025, we made a strategic decision to pursue a metastatic breast cancer indication for our lead program,(Z)-endoxifen. We believe that this approach may offer a more streamlined regulatory pathway to deliver(Z)-endoxifen to patients with urgent unmet medical needs as the current treatment options for metastatic breast cancer often provides limited durability of response and substantial side effects.(Z)-endoxifen, a potent and well-tolerated selective estrogen receptor modulator (SERM), has shown encouraging signs in previous clinical trials, which we believe supports its potential to fill this critical gap in treatment. We have received positive written feedback from the FDA regarding our proposed dose optimization trial for (Z)-endoxifen in patients with ER+/HER2- metastatic breast cancer affirming key elements of Atossa's clinical development plan and paving the way for a potential IND submission targeted for the fourth quarter of 2025.

Previous wording

The following is a summary of the status of our major clinical development programs as of the date of this report:

Current wording

The following is a summary of the status of our major clinical development programs as of the date of this Quarterly report:

Previous wording

(Z) endoxifen.(Z)-endoxifen is an active metabolite of tamoxifen, which is an FDA-approved drug to treat and prevent breast cancer in high-risk women. It is also referred to as a SERM. We are developing a proprietary form of (Z)-endoxifen which is administered orally for the potential treatment of breast cancer and the reduction of breast density. We have completed four Phase 1 clinical studies, including a study in men, and two Phase 2 clinical studies with our proprietary (Z)-endoxifen, including oral and topical formulations. We have also completed significant pre-clinical development and have developed clinical manufacturing capabilities through qualified third parties.

Current wording

(Z)-endoxifen. (Z) endoxifen is an active metabolite of tamoxifen, which is an FDA-approved drug to treat and prevent breast cancer in high-risk women. It is also referred to as a Selective Estrogen Receptor Modulator (SERM). We are developing a proprietary form of (Z)-endoxifen which is administered orally for the potential treatment of breast cancer and reduction of breast density. We have completed four Phase 1 clinical studies (including a study in men) and two Phase 2 clinical studies with our proprietary (Z)-endoxifen (including oral and topical formulations). We have also completed significant pre-clinical development and have developed clinical manufacturing capabilities through qualified third parties.

Previous wording

In January 2025, based on adverse events reported in 80 mg/day groups, as well as the findings reported on (Z)-endoxifen tissue and plasma Css, overall tolerability, and antitumor activity, the trial will proceed based on an amended protocol as a randomized trial that compares (Z)-endoxifen 40 mg/day plus OFS to exemestane plus OFS, using the 4-week Ki-67 reduction as the primary endpoint. Part 2 is expected to compare the two treatment arms based on baseline Ki-67 levels, and the aim is to evaluate the endocrine sensitive disease rate, pathologic complete response, and other key endpoints. The Treatment Cohort was initiated in April 2025.

Current wording

In January 2025, based on adverse events reported in 80 mg/day groups, as well as the findings reported on (Z)-endoxifen tissue and plasma Css, overall tolerability, and antitumor activity, the trial will proceed based on an amended protocol as a randomized trial that compares (Z)-endoxifen 40 mg/day plus OFS to exemestane plus OFS, using the 4-week Ki-67 reduction as the primary endpoint. Part 2 is expected to compare the two treatment arms based on baseline Ki-67 levels, and the aim is to evaluate the endocrine sensitive disease rate, pathologic complete response, and other key endpoints. The Treatment Cohort was initiated in April 2025. As of June 30, 2025, four patients were enrolled in this study.

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 Endocrine Optimization Pilot (I-SPY 2 EOP). The I-SPY 2 EOP is a collaborative effort among academic investigators from major cancer research centers across the U.S., QLHC, the FDA, and the Foundation for the National Institutes of Health (FNIH) Cancer Biomarkers Consortium. Twenty patients were treated with (Z)-endoxifen for up to 24 weeks prior to surgery. Enrollment was completed in January 2024.

Current wording

In March 2023, a second neoadjuvant Phase 2 trial investigating oral (Z)-endoxifen as a treatment for women diagnosed with locally advanced ER+/HER2- breast cancer was initiated. This trial is a study arm in the ongoing I‑SPY 2 Endocrine Optimization Pilot (I-SPY 2 EOP). The I-SPY 2 EOP is a collaborative effort among academic investigators from major cancer research centers across the U.S., QLHC, the FDA, and the Foundation for the National Institutes of Health (FNIH) Cancer Biomarkers Consortium. This study included twenty women who received 10 mg of (Z)-endoxifen orally once daily for six cycles (each cycle = 28 days) or up to 24 weeks prior to surgery. Enrollment was completed in January 2024 and 3 week preliminary data results were reported on October 31, 2024.

Previous wording

In April 2024, we announced our participation in a new study arm of the I-SPY 2 EOP which 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. In Iune 2024, we announced that the study had been expanded to include 80 women with newly diagnosed ER+ / HER2- invasive breast cancer. Currently enrolled and newly enrolled participants are expected to transition to or be initiated on 40 mg of (Z)-endoxifen (from 80 mg) once daily in combination with 150 mg of abemaciclib twice daily for a total of 24 weeks prior to surgery. The transition to the 40 mg dose from an 80 mg dose is the result of a protocol amendment approved in January 2025. Enrollment in this study is ongoing.

Current wording

In April 2024, we announced our participation in a new study arm of the I-SPY 2 EOP which 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. In June 2024, we announced that the study had been expanded to include 80 women with newly diagnosed ER+ / HER2- invasive breast cancer. Currently enrolled and newly enrolled participants are expected to transition to or be initiated on 40 mg of (Z)-endoxifen (from 80 mg) once daily in combination with 150 mg of abemaciclib twice daily for a total of 24 weeks prior to surgery. The transition to the 40 mg dose from an 80 mg dose is the result of a protocol amendment approved in January 2025. Enrollment in this study is ongoing.

Previous wording

We are in the research and development phase and are not currently marketing any products. We do not anticipate generating revenue unless and until we develop and launch our pharmaceutical programs.

Current wording

We are in the research and development phase and are not currently marketing any products. We do not anticipate generating revenue until we develop and launch our pharmaceutical programs.

Previous wording

There have been no material changes to our critical accounting estimates during the three months ended March 31, 2025 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, 2024, as filed with the SEC on March 25, 2025.

Current wording

There have been no material changes to our critical accounting estimates during the six months ended June 30, 2025 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, 2024, as filed with the SEC on March 25, 2025.

Previous wording

Revenue and Cost of Revenue. For the three months ended March 31, 2025 and 2024, 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, 2025 and 2024, we had no source of revenue and no associated cost of revenue.

Previous wording

Operating Expenses. Total operating expenses were $7.4 million for the three months ended March 31, 2025, which was an increase of $0.4 million, from the three months ended March 31, 2024 of $7.0 million. Factors contributing to the increased operating expenses in the three months ended March 31, 2025 are explained below.

Current wording

Operating Expenses. Total operating expenses were $9.0 million and $16.5 million for the three and six months ended June 30, 2025, respectively, which was an increase of $1.9 million and $2.4 million from total operating expenses for the three and six months ended June 30, 2024 of $7.1 million and $14.1 million, respectively. Factors contributing to the increased operating expenses in the three and six months ended June 30, 2025 are explained below.

Previous wording

Research & Development (R&D) Expenses. The following table provides a breakdown of major categories within R&D expenses for the three months ended March 31, 2025 and 2024, together with the dollar change and percentage change in those categories (dollars in thousands):

Current wording

Research & Development (R&D) Expenses. The following table provides a breakdown of major categories within R&D expenses for the three and six months ended June 30, 2025 and 2024, together with the dollar change and percentage change in those categories (dollars in thousands):

Previous wording

General and Administrative (G&A) Expenses. The following table provides a breakdown of major categories within G&A expenses for the three months ended March 31, 2025 and 2024, together with the dollar change and percentage change in those categories (dollars 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, 2025 and 2024, together with the dollar change and percentage change in those categories (dollars in thousands):

Previous wording

Interest Income. Interest income was $0.7 million for the three months ended March 31, 2025, a decrease of $0.4 million from interest income of $1.1 million for the three months ended March 31, 2024. The decrease was due to a decrease in the balance in our money market account.

Current wording

Interest Income. Interest income was $0.6 million and $1.4 million for the three and six months ended June 30, 2025, respectively, a decrease of $0.5 million and $0.8 million from interest income of $1.1 million and $2.2 million for the three and six months ended June 30, 2024, respectively. The decreases were due to decreases in the average balance invested in our money market account.

Previous wording

Income Taxes. We did not record an income tax expense or benefit for the three months ended March 31, 2025 and 2024 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, 2025 and 2024 due to uncertainty regarding utilization of our net operating loss carryforwards and our history of losses.

Previous wording

We are authorized to issue up to 350,000,000 shares of common stock, par value $0.18 per share. On November 19, 2024, we entered into an Open Market Sale Agreement SM with Jefferies LLC. We may offer, from time to time, to sell, in an "at the market offering," shares of our common stock up to an aggregate offering price of up to $100.0 million. We have not made any sales under the at the market offering facility during the three months ended March 31, 2025.

Current wording

We are authorized to issue up to 350,000,000 shares of common stock, par value $0.18 per share. On November 19, 2024, we entered into an Open Market Sale Agreement SM with Jefferies LLC. We may offer, from time to time, to sell, in an "at the market offering," shares of our common stock up to an aggregate offering price of up to $100.0 million. We did not make any sales under the at the market offering facility during the three and six months ended June 30, 2025.

Previous wording

We have incurred net losses and negative operating cash flows since inception. For the three months ended March 31, 2025, we recorded a net loss of $6.7 million and used $6.0 million of cash and cash equivalents. As of March 31, 2025, we had $65.1 million in cash and cash equivalents and working capital of $63.3 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, 2025, we recorded a net loss of $15.1 million and used $13.2 million of cash and cash equivalents. As of June 30, 2025, we had $57.9 million in cash and cash equivalents and working capital of $55.7 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. During the three months ended March 31, 2025 and 2024, net cash used in operating activities increased $1.3 million, primarily reflecting:

Current wording

Net Cash Flows from Operating Activities. During the six months ended June 30, 2025 compared to the same period in 2024, net cash used in operating activities increased $4.0 million, primarily reflecting:

Previous wording

an increase of $0.2 million in cash used for compensation due to an increase in full time employees;

Current wording

an increase of $0.5 million in cash used for compensation due to an increase in full-time employees, partially offset by;

Previous wording

a $0.4 million decrease in cash provided by interest income due to lower amounts invested our money market account.

Current wording

a decrease of $0.8 million in cash provided by interest income due to lower amounts invested in our money market account, and;

Previous wording

Net Cash Flows from Investing Activities. Net cash used in investing activities was $9 thousand for the three months ended March 31, 2025, compared to net cash used in investing activities of $6 thousand for the three months ended March 31, 2024. Current and prior period cash used in investing activities was primarily related to purchases of new computers.

Current wording

Net Cash Flows from Investing Activities. Net cash used in investing activities was $9 thousand for the six months ended June 30, 2025 and 2024. Current and prior period cash used in investing activities was primarily related to purchases of new computers.

Previous wording

Net Cash Flows from Financing Activities. No cash was provided by or used in financing activities for the three months ended March 31, 2025. Net cash provided by financing activities was $0.2 million for the three months ended March 31, 2024 and consisted of the receipt of proceeds from the exercise of warrants.

Current wording

Net Cash Flows from Financing Activities. No cash was provided by or used in financing activities for the six months ended June 30, 2025. Net cash provided by financing activities was $0.3 million for the six months ended June 30, 2024 and consisted of proceeds from the exercise of warrants.

Previous wording

Additional funding may not be available to us on acceptable terms or at all. Continued uncertain market and macroeconomic conditions, including the impact of inflation, tariffs, high interest rates, general economic slowdown or a recession, foreign exchange rate volatility, financial institution instability, changes in monetary policy, changes in trade policies and other trade restrictions or the threat of such actions, 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 the impact of inflation, tariffs, high interest rates, general economic slowdown or a recession, foreign exchange rate volatility, financial institution instability, changes in monetary policy, changes in trade policies and other trade restrictions or the threat of such actions, 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. If adequate funds are not available, we may be required to terminate, significantly modify or delay our development programs, reduce our planned commercialization efforts, or obtain funds through collaborators that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. Further, we may elect to raise additional funds even before we need them if we believe the conditions for raising capital are favorable.

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, 2025, our estimated non-cancellable commitment was $9.4 million which will be paid over the term of the clinical trials.

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, 2025, our estimated non-cancellable commitment was $7.9 million which will be paid over the term of the clinical trials.