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EX-32.2 - EXHIBIT 32.2 - Rezolute, Inc.v451690_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - Rezolute, Inc.v451690_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - Rezolute, Inc.v451690_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Rezolute, Inc.v451690_ex31-1.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
OR
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

 

 

Commission file number: 000-54495

 

ANTRIABIO, INC

(Exact Name of Registrant as Specified in its Charter)

Delaware   27-3440894
(State of other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
     

1450 Infinite Drive, Louisville, Colorado

  80027
(Address of Principal Executive Offices)   (Zip Code)

 

(303) 222-2128

(Registrant’s Telephone Number, including Area Code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

 

Indicate by check mark whether the Registrant is ¨ a large accelerated filer, ¨ an accelerated file, ¨ a non-accelerated filer, or x a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act)

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨ Yes x No

 

Number of shares of issuer’s common stock outstanding as of November 14, 2016: 40,952,450

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
PART I - FINANCIAL INFORMATION 2
 
ITEM 1.  FINANCIAL STATEMENTS (unaudited) 2
   
Consolidated Balance Sheets – September 30, 2016 and June 30, 2016 2
   
Consolidated Statements of Operations - Three months ended September 30, 2016 and 2015 3
   
Consolidated Statements of Stockholders’ Equity - From June 30, 2015 to September 30, 2016 4
   
Consolidated Statements of Cash Flows - Three months ended September 30, 2016 and 2015 5
   
Notes to Consolidated Financial Statements 6
   
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15
   
ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCUSSION ABOUT MARKET RISK 18
   
ITEM 4.  CONTROLS AND PROCEDURES 19
   
PART II – OTHER INFORMATION 19
   
ITEM 1.  LEGAL PROCEEDINGS 19
   
ITEM 1A.  RISK FACTORS 19
   
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 20
   
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES 20
   
ITEM 4.  MINE SAFETY DISCLOSURE 21
   
ITEM 5.  OTHER INFORMATION 21
   
ITEM 6.  EXHIBITS 21

 

i 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements included or incorporated by reference in this report, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements appear in a number of places, including, but not limited to “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements represent our reasonable judgment of the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “may,” “should,” “plan,” “project” and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:

 

    projected operating or financial results, including anticipated cash flows used in operations;

 

    expectations regarding capital expenditures, research and development expense and other payments;

 

    our beliefs and assumptions relating to our liquidity position, including our ability to obtain additional financing;

 

    our ability to obtain regulatory approvals for our pharmaceutical drugs and diagnostics; and

 

    our future dependence on third party manufacturers or strategic partners to manufacture any of our pharmaceutical drugs and diagnostics that receive regulatory approval, and our ability to identify strategic partners and enter into license, co-development, collaboration or similar arrangements.

 

Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:

 

    the loss of key management personnel or sponsored research partners on whom we depend;

 

    the progress and results of clinical trials for our product candidates;

 

    our ability to navigate the regulatory approval process in the U.S. and other countries, and our success in obtaining required regulatory approvals for our product candidates;

 

    commercial developments for products that compete with our product candidates;

 

    the actual and perceived effectiveness of our product candidates, and how those product candidates compare to competitive products;

 

    the strength of our intellectual property protection, and our success in avoiding infringing the intellectual property rights of others;

 

    adverse developments in our research and development activities;

 

    potential liability if our product candidates cause illness, injury or death, or adverse publicity from any such events;

 

    our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing when required;

 

    our expectations with respect to our acquisition activity.

 

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included elsewhere in this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this Quarterly Report of Form 10-Q are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as otherwise required by applicable law.

 

 1

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

AntriaBio, Inc.

Consolidated Balance Sheets

          

   September 30, 2016   June 30, 2016 
   (Unaudited) 
Assets        
         
Current assets          
Cash  $3,365,740   $4,062,013 
Other current assets   363,799    430,094 
Total current assets   3,729,539    4,492,107 
           
Non-current assets          
Fixed assets, net   5,902,299    5,984,670 
Intangibile assets, net   49,791    51,614 
Deposit   375,000    375,000 
Total non-current assets   6,327,090    6,411,284 
           
Total Assets  $10,056,629   $10,903,391 
           
Liabilities and Stockholders' Equity          
           
Current liabilities:          
Accounts payable and accrued expenses  $1,286,041   $1,500,650 
Convertible notes payable   60,000    60,000 
Deferred lease liability, current portion   122,451    119,688 
Lease payable   -    23,128 
Interest payable   15,579    15,079 
Warrant derivative liability   2,543    11,955 
Total current liabilities   1,486,614    1,730,500 
           
Non-current liabilities:          
Deferred lease liability, less current portion   367,813    400,038 
Total non-current liabilities   367,813    400,038 
           
Total Liabilities   1,854,427    2,130,538 
           
Commitments and Contingencies  (Note 11)          
           
Stockholders' equity:          
Preferred stock, $0.001 par value; 20,000,000 shares authorized;          
  none issued and outstanding   -    - 
Common stock, $0.001 par value, 200,000,000 shares authorized;          
  37,558,552 and 35,110,916  shares issued and outstanding,          
  September 30, 2016 and June 30, 2016   37,561    35,114 
Additional paid-in capital   56,025,338    52,782,569 
Accumulated deficit   (47,860,697)   (44,044,830)
Total stockholders' equity   8,202,202    8,772,853 
           
Total Liabilities and Stockholders' Equity  $10,056,629   $10,903,391 

 

See accompanying notes to consolidated financial statements

 

 2

 

 

AntriaBio, Inc.

Consolidated Statements of Operations

  

   Three Months 
   Ended September 30, 
   2016   2015 
   (Unaudited) 
Operating expenses          
 Research and development          
 Compensation and benefits  $1,303,840   $865,203 
 Consultants and outside costs   271,475    263,991 
 Material manufacturing costs   511,707    620,143 
 Facilities and other costs   398,907    219,025 
    2,485,929    1,968,362 
           
 General and administrative          
 Compensation and benefits   866,901    947,171 
 Professional fees   146,151    122,061 
 Investor relations   68,107    56,918 
 General and administrative   256,596    205,183 
    1,337,755    1,331,333 
           
Total operating expenses   3,823,684    3,299,695 
           
Loss from operations   (3,823,684)   (3,299,695)
           
Other income (expense)          
 Interest income   -    771 
 Interest expense   (1,595)   (1,613)
 Derivative gains   9,412    12,587 
Total other income (expense)   7,817    11,745 
           
Net loss  $(3,815,867)  $(3,287,950)
           
Net loss per common share - basic and diluted  $(0.11)  $(0.14)
           
Weighted average number          
of common shares outstanding - basic and diluted   35,400,427    24,338,219 

 

See accompanying notes to consolidated financial statements

  

 3

 

 

AntriaBio, Inc.

Consolidated Statements of Stockholders' Equity

From June 30, 2015 to September 30, 2016 (Unaudited)

            

           Additional       Total 
   Common Stock, $0.001 Par Value   Paid-in   Accumulated   Stockholders' 
   Shares   Amount   Capital   Deficit   Equity 
                     
Balance at June 30, 2015   24,338,219   $24,341   $38,138,754   $(29,109,288)  $9,053,807 
                          
Stock-based compensation   -    -    3,761,837    -    3,761,837 
                          
Fair value of warrants issued   -    -    5,523,706    -    5,523,706 
                          
Dividends on Series A Preferred Stock   -    -    (5,974,385)   -    (5,974,385)
                          
Conversion of Series A Preferred Stock into common stock   5,897,677    5,897    5,302,012    -    5,307,909 
                          
Exchange on Series A Preferred Stock   -    -    2,929,084    -    2,929,084 
                          
Issuance of common stock, net of issuance costs of $1,053,748   4,875,020    4,876    3,101,561    -    3,106,437 
                          
Net loss for the year ended June 30, 2016   -    -    -    (14,935,542)   (14,935,542)
                          
Balance at June 30, 2016   35,110,916   $35,114   $52,782,569   $(44,044,830)  $8,772,853 
                          
Stock-based compensation  (Unaudited)   -    -    889,028    -    889,028 
                          
Fair value of warrants issued (Unaudited)   -    -    742,860    -    742,860 
                          
Issuance of common stock, net of issuance costs of $561,722 (Unaudited)   2,447,636    2,447    1,610,881    -    1,613,328 
                          
Net loss for the three months ended September 30, 2016 (Unaudited)   -    -    -    (3,815,867)   (3,815,867)
                          
Balance at September 30, 2016 (Unaudited)   37,558,552   $37,561   $56,025,338   $(47,860,697)  $8,202,202 

 

See accompanying notes to consolidated financial statements

 

 4

 

 

AntriaBio, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

         

   Three Months 
   Ended September 30, 
   2016   2015 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(3,815,867)  $(3,287,950)
Amortization of intangible asset   1,823    1,823 
Depreciation expense   268,355    70,313 
Stock-based compensation expense   889,028    980,350 
Derivative gains   (9,412)   (12,587)
Warrant expense   -    11,407 
Changes in operating assets and liabilities:          
Decrease (increase) in other assets   362    (50,918)
Decrease in accounts payable and accrued expenses   (273,637)   (202,398)
Increase in interest payable   500    500 
Decrease in deferred lease liability   (29,462)   (24,221)
Net Cash Used In Operating Activities   (2,968,310)   (2,513,681)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of fixed assets   (126,956)   (576,271)
Return of security deposit   65,933    187,500 
Increase in restricted cash   -    (113)
Net Cash Used In Investing Activities   (61,023)   (388,884)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Payments on lease payable   (23,128)   (23,109)
Proceeds from issuance of equity financing   2,692,399    - 
Payment of placement agent compensation and issuance costs   (336,211)   - 
Net Cash Provided by (Used in) Financing Activities   2,333,060    (23,109)
           
Net decrease in cash   (696,273)   (2,925,674)
           
Cash - Beginning of Period   4,062,013    5,278,706 
           
Cash - End of Period  $3,365,740   $2,353,032 
           
SUPPLEMENTARY CASH FLOW INFORMATION:          
Cash Paid During the Period for:          
Taxes  $-   $- 
Interest  $-   $- 
           
Non-Cash Transactions:          
Fixed assets acquired through accounts payable and accrued expenses  $59,028   $465,252 

 

See accompanying notes to consolidated financial statements

 

 5

 

 

AntriaBio, Inc.

Notes to Consolidated Financial Statements
September 30, 2016
(Unaudited)

 

Note 1 Nature of Operations

 

These financial statements represent the consolidated financial statements of AntriaBio, Inc. (“AntriaBio”), and its wholly owned operating subsidiary, AntriaBio Delaware, Inc. (“Antria Delaware”). AntriaBio and Antria Delaware are collectively referred to herein as the “Company”.

 

Note 2 Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

 

The unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K filed on September 28, 2016, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the year ended June 30, 2016.

 

Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the period ended September 30, 2016 are not necessarily indicative of results for the full fiscal year.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and the accompanying notes. Such estimates and assumptions impact, among others, the following: estimated useful lives and impairment of depreciable assets, the fair value of share-based payments and warrants, fair value of derivative instruments, estimates of the probability and potential magnitude of contingent liabilities and the valuation allowance for deferred tax assets due to continuing and expected future operating losses. Actual results could differ from those estimates.

 

Risks and Uncertainties

 

The Company's operations may be subject to significant risk and uncertainties including financial, operational, regulatory and other risks associated with a preclinical stage company, including the potential risk of business failure. See Note 3 regarding going concern matters.

 

 6

 

 

Fixed Assets

 

Fixed assets are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives.

 

Research and Development Costs

 

Research and development costs are expensed as incurred and include salaries, benefits and other staff-related costs; consultants and outside costs; material manufacturing costs; and facilities and other costs. These costs relate to research and development costs without an allocation of general and administrative expenses.

 

Fair Value of Financial Instruments

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

·Level 1: Quoted prices for identical assets and liabilities in active markets;
·Level 2: Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
·Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

The carrying amounts of financial instruments including cash, accounts payable and accrued expenses, and convertible notes payable approximated fair value as of September 30, 2016 and June 30, 2016 due to the relatively short maturity of the respective instruments.

 

The warrant derivative liability recorded as of September 30, 2016 and June 30, 2016 is recorded at an estimated fair value based on a Black-Scholes pricing model. The warrant derivative liability is a level 3 fair value measurement with the entire change in the balance recorded through earnings. See significant assumptions in Note 9. The following table sets forth a reconciliation of changes in the fair value of financial instruments classified as level 3 in the fair value hierarchy:

 

Balance as of June 30, 2016  $(11,955)
Total unrealized gains (losses):     
Included in earnings   9,412 
Balance as of September 30, 2016  $(2,543)

 

Recent Accounting Pronouncements

 

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"), which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. We will be required to perform the going concern assessment under ASU 2014-15 beginning with the year ending June 30, 2017. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.

 

 7

 

 

In January 2015, the FASB issued ASU 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20), which eliminates the concept of extraordinary items. The new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. The new guidance is to be applied prospectively but may also be applied retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We adopted the provisions of this new guidance on July 1, 2016. The new provisions did not have a material impact on our financial condition or results of operations.

 

In November 2015, the FASB issued ASU 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes, which is intended to improve how deferred taxes are classified on organizations’ balance sheets by eliminating the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. The changes are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. We adopted the provisions of this new guidance on July 1, 2016. The adoption of the new provisions did not have a material impact on our financial condition or results of operations.

 

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 will be effective for us starting on July 1, 2018, and early adoption is not permitted. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and also disclose key information about leasing arrangements. This ASU is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual period. We will be required to adopt ASU 2016-02 starting on July 1, 2019. We are currently evaluating the impact the adoption of this ASU will have on our consolidated financial statements.

 

In March 2016, the FASB issued ASU 2016-09. Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The update will affect all entities that issue share-based payment awards to their employees and is effective for annual periods beginning after December 15, 2016 for public entities. The areas for simplification in ASU 2016-09 involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We will be required to adopt this ASU starting on July 1, 2017. We are currently evaluating the impact the adoption of this ASU will have on our consolidated financial statements.

 

Note 3 Going Concern

 

As reflected in the accompanying financial statements, the Company has a net loss of $3,815,867 and net cash used in operations of $2,968,310 for the three months ended September 30, 2016, and working capital equity of $2,242,925 and stockholders’ equity of $8,202,202 and an accumulated deficit of $47,860,697 at September 30, 2016.  In addition, the Company is in the preclinical stage and has not yet generated any revenues. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company expects that its current cash resources as well as expected lack of operating cash flows will not be sufficient to sustain operations for a period greater than one year. The ability of the Company to continue its operations is dependent on Management's plans, which include continuing to raise capital through equity based financings. There can be no assurances that such capital will be available to us on acceptable terms or at all.

 

 8

 

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 4 Fixed Assets

 

The following is a summary of fixed assets and accumulated depreciation:

 

   Useful        
   Life  September 30, 2016   June 30, 2016 
Furniture and fixtures  5 - 7 years  $74,494   $62,730 
Lab equipment  3 - 15 years   3,618,325    3,585,590 
Lab equipment (not yet placed in service)  3 - 15 years   110,047    4,025 
Leasehold Improvements  3 - 7 years   3,247,038    3,211,575 
       7,049,904    6,863,920 
Less: accumulated depreciation and amortization      (1,147,605)   (879,250)
      $5,902,299   $5,984,670 

 

Depreciation expense was $268,355 and $70,313 for the three months ended September 30, 2016 and 2015, respectively.

 

Note 5 Related Party Transactions

 

During the three months ended September 30, 2016, the Company incurred investor relations expenses of $36,225 for services performed by a related party of the Company and included in the statement of operations. During the three months ended September 30, 2015, there were no related party transactions.

 

Note 6 Convertible Notes Payable

 

From 2010 to 2014, the Company issued several series of convertible promissory notes for which principal and interest were due between six months and two years after issuance. The convertible notes allowed investors to convert their shares into common stock at the time of certain qualifying events with some of the notes also issuing warrants at the time of conversion. 

 

On March 31, 2014, the Company closed on an equity transaction which qualified as a “qualified financing” as such the $2,703,000 in 2013 Notes and the accrued interest was converted into 2,186,838 shares of our common stock. The Company also converted $4,275,172 of the 2010, 2011 and 2012 Notes and accrued interest into 3,111,126 shares of our common stock. The remaining balance of any debt discounts on the notes converted was recorded into interest expense at the time of the conversion.

 

As of September 30, 2016 and June 30, 2016, the convertible notes outstanding balance was $60,000 and $60,000, respectively. As of September 30, 2016, all of the outstanding convertible notes have matured and payments were due. The convertible notes which have not been repaid or converted continue to accrue interest at a rate of 8%.

 

On October 7, 2016, one convertible note with a balance of $50,000 and accrued interest converted into 58,350 shares of common stock.

 

 9

 

 

Note 7 Series A Convertible Preferred Stock

 

On December 7, 2015, the Board of Directors authorized fifteen million shares of Series A Convertible Preferred Stock (“Series A Stock”). The Series A Stock had a conversion feature at the option of the holder that could be converted at any time at a conversion rate of $1.95, subject to adjustment, into common stock. The shares also had a mandatory conversion feature at the same conversion rate if one of the following events occurs: 1) Upon vote or consent of 2/3 of the then outstanding Series A Stock; 2) Upon the Company’s listing to NASDAQ Stockmarket or the NYSE MKT and the Company’s common stock trades for 30 days for at least 155% of the Series A Stock conversion price; or 3) the Company closes an underwritten public offering of at least $15 million in gross proceeds with an offering price of at least 155% of the Series A Stock conversion price. The Series A Stock’s conversion price was subject to weighted average anti-dilution protection, as defined, and was subject to adjustments for stock splits, dividends, and similar events. The Series A Stock was mandatorily redeemable ten years after the issuance date or upon a liquidation event, as defined, which included a change in control and therefore recorded before stockholders’ equity on the consolidated balance sheet. The Series A Stock was entitled to an annual dividend of 6% based on the original issuance price, compounded quarterly. The dividend was cumulative and was to be paid in shares of Series A Stock. The accrued dividends were payable upon redemption or conversion. The Series A Stock had voting rights equal to common stockholders as if the Series A Stock converted into common stock on the record date of the vote. The Series A Stock also had liquidation preferences over other stockholders.

 

On December 10, 2015, the Company closed an initial offering of its Series A Stock with an offering price of $1.95 per share. The Company issued 1,025,699 shares and received net proceeds of $1,803,548 after the placement agent compensation and issuance costs paid of $105,715 and a warrant with a fair value of $90,852 recorded as issuance costs. On March 2, 2016, the Company closed a second offering of its Series A Stock with an offering price of $1.95 per share. The Company issued 1,716,487 shares and received net proceeds of $2,956,975 after the placement agent compensation and issuance costs paid of $231,214 and a warrant with a fair value of $159,311 recorded as issuance costs. On April 12, 2016, the Company closed a final offering of its Series A Stock with an offering price of $1.95 per share. The Company issued 512,820 shares and received net proceeds of $1,000,000 as there were no placement agent compensation or issuance costs. The issuance costs were being accreted over the ten-year life of the Series A Stock of which $22,846 was accreted during the year ended June 30, 2016.

 

Through June 24, 2016, the Company declared and issued 71,708 shares of Series A Stock as dividends on the current outstanding shares of Series A Stock.

 

On June 24, 2016, the Company and the stockholders of the Series A Preferred Stock consented to convert all of the shares of Series A Preferred Stock into common stock. The conversion occurred at a conversion price of $1.95 per share. The Company then entered into an Exchange Agreement with each former Series A stockholder to exchange the Conversion Shares into shares of common stock and related warrants equal to the Series A Preferred Stock purchase price plus accrued dividends at an exchange rate of $1.10 per Exchange Share and related Exchange Warrant. The Company converted and cancelled 3,326,714 shares of Series A Preferred Stock and issued 5,897,677 Exchange Shares and Exchange Warrants. As the Series A stockholders received additional securities over what would have been received in the original conversion terms the transaction was considered an induced conversion. The Exchange Shares and Exchange Warrants received are recorded at the fair value on the date they were received. The excess of the fair value of the securities received over the fair value of the securities the stockholders would have received under the original terms on the date of conversion was $5,811,700 and was recorded as a deemed dividend as additional paid in capital at the time of conversion. The Company then recorded a gain on the exchange of $2,929,084, which was also recorded into additional paid in capital. As a result of the conversion and exchange of the Series A Preferred Stock, the Series A Preferred Stock is no longer deemed outstanding, and all rights with respect to such stock ceased and terminated.

 

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Note 8 Shareholders’ Equity

 

During 2016, the Company entered into a private placement transaction in which the Company issued 4,875,020 units to accredited investors. Each investor was issued either Class A Units or Class B units of the Company. Each Class A Unit received one share of common stock and one-half of one common share purchase warrant. If the investor had previously invested in the Company they were eligible for a Class B Unit which received one share of common stock and one common share purchase warrant. Each common share purchase warrant is exercisable at $1.65 per share and will expire 60 months following the issuance. As of June 30, 2016, the Company received net proceeds of $4.8 million after the placement agent compensation and issuance costs paid of $553,428 and $500,321 of warrant expense recorded as issuance costs.

 

During the three months ended September 30, 2016, the Company closed two additional private placement transactions in which the Company issued 2,447,636 units to accredited investors. Each investor was issued either Class A Units or Class B units of the Company. Each Class A Unit received one share of common stock and one-half of one common share purchase warrant. If the investor had previously invested in the Company they were eligible for a Class B Unit which received one share of common stock and one common share purchase warrant. Each common share purchase warrant is exercisable at $1.65 per share and will expire 60 months following the issuance. As of September 30, 2016, the Company received net proceeds of $2.4 million after the placement agent compensation and issuance costs paid of $336,212 and $225,510 of warrant expense recorded as issuance costs.

 

On October 6, 2016, October 7, 2016 and October 13, 2016 we completed additional and final closes on the private placement transaction in which the Company issued 3,335,546 units and received gross proceeds of $3.7 million.

 

The Company has not declared or paid any dividends or returned any capital to common stockholders as of September 30, 2016.

 

Note 9 Stock-Based Compensation

 

Options - AntriaBio adopted individual stock option plans in January 2013 for four officers and/or directors of the Company. The stock option plans granted 1,500,000 option shares with an exercise price of $4.50 per share and had fully vested as of June 30, 2016. In June 2013, AntriaBio adopted individual stock option plans for two consultants of the Company. The stock option plans granted 8,334 shares with an exercise price of $4.50 per share and had fully vested as of June 30, 2015.

 

On March 26, 2014, the Company adopted the AntriaBio, Inc. 2014 Stock and Incentive Plan which allows the Company to issue up to 3,750,000 of common stock in the form of stock options, incentive options or common stock. The Company had granted 3,295,000 of these shares to current employees and directors of the Company as of September 30, 2016. The options have an exercise price from $1.29 to $3.44 per share. The options vest monthly over four years, with some options subject to a one year cliff before options begin to vest monthly.

  

On February 23, 2015, the Company adopted the AntriaBio, Inc. 2015 Non Qualified Stock Option Plan which allows the Company to issue up to 6,850,000 of common stock in the form of stock options. The Company had granted 4,397,000 of these shares to current employees and directors of the Company as of June 30, 2016 and granted an additional 90,000 of these shares to current employees as of September 30, 2016. The options have an exercise price of from $1.00 to $2.06 per share. The options vest monthly over 4 years with some options subject to a one year cliff before options begin to vest monthly.

 

On October 31, 2016, the Company adopted the AntriaBio, Inc. 2016 Non Qualified Stock option plan which allows the Company to issue upto 35 million of common stock in the form of stock options. In November 2016, company granted 28,210,000 of these shares to current employees and directors of the Company.

 

AntriaBio has computed the fair value of all options granted using the Black-Scholes option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding components of the model, including the estimated fair value of the underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to valuation. AntriaBio estimated a volatility factor utilizing a comparable published volatility of several peer companies. Due to the small number of option holders and all options being to officers and/or directors, AntriaBio has estimated a forfeiture rate of zero as the value of each option holder is calculated individually. AntriaBio estimates the expected term based on the average of the vesting term and the contractual term of the options. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for treasury securities of similar maturity.

 

 11

 

 

AntriaBio has computed the fair value of all options granted during the three months ended September 30, 2016 using the following assumptions:

 

Expected volatility   74%
Risk free interest rate   1.46%
Expected term (years)   7 
Dividend yield   0%

 

AntriaBio has computed the fair value of all options granted during the year ended June 30, 2016 using the following assumptions:

 

Expected volatility   97 - 100% 
Risk free interest rate   1.69%  -1.91% 
Expected term (years)   7 
Dividend yield   0%

 

Stock option activity is as follows:

 

       Weighted   Weighted Average 
   Number of   Average   Remaining 
   Options   Exercise Price   Contractual Life 
Outstanding, June 30, 2015   8,702,418   $2.78    7.1 
Granted   285,000   $1.07      
Forfeited   (40,000)  $1.66      
Outstanding, June 30, 2016   8,947,418   $2.73    6.2 
Granted   90,000   $1.19      
Outstanding, September 30, 2016   9,037,418   $2.71    6.0 
                
Exercisable at September 30, 2016   4,965,584   $3.11    4.9 

 

Stock-based compensation expense related to the fair value of stock options was included in the statement of operations as research and development – compensation and benefits expense of $304,969 and $307,337 and as general and administrative – compensation and benefits expense of $584,059 and $673,013 for the three months ended September 30, 2016 and 2015, respectively. The unrecognized stock-based compensation expense at September 30, 2016 is $7,086,690. AntriaBio determined the fair value as of the date of grant using the Black-Scholes option pricing method and expenses the fair value ratably over the vesting period.

 

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Warrants- AntriaBio issued warrants to agents in conjunction with the closing of various financings and issued warrants in private placements as follows:

 

       Weighted   Weighted Average 
   Number of   Average   Remaining 
   Warrants   Exercise Price   Contractual Life 
Outstanding, June 30, 2015   19,016,391   $2.33    3.0 
Warrants issued in stock conversion   5,897,677   $1.65      
Warrants issued in private placements   3,043,669   $1.65      
Warrants issued to placement agents   933,639   $1.61      
Warrants issued for investor relations   103,000   $1.60      
Warrants cancelled   (30,000)  $3.44      
Outstanding, June 30, 2016   28,964,376   $2.11    3.1 
Warrants issued in private placements   1,420,591   $1.65      
Warrants issued to placement agents   269,240   $1.65      
Outstanding, September 30, 2016   30,654,207   $2.08    3.0 

 

Year ended June 30, 2016: The Company issued warrants to purchase 5,897,677 shares of common stock at a price of $1.65 per share, exercisable through March 2021 in connection with the issuance of units in a preferred stock conversion. The Company issued warrants to purchase 3,043,669 shares of common stock at a price of $1.65 per share, exercisable through June 2021 in connection with the issuance of units in private placements. The Company issued warrants to the placement agent to purchase 184,490 shares of common stock at a price of $2.34 per share. On June 24, 2016, the Company modified the warrant to purchase 184,490 shares of common stock, by replacing the warrant with warrants to purchase 327,046 shares of common stock at a price of $1.32 per share, exercisable through December 2023 in connection with the Series A Preferred Stock Offering. The Company issued warrants to the placement agent to purchase 87,500 shares of common stock at a price of $2.50 per share, exercisable through December 2022 in connection with the Series A Preferred Stock Offering. The Company issued warrants to the placement agents to purchase 519,093 shares of common stock at a price of $1.65 per share, exercisable through December 2023 in connection with the private placement. The Company issued warrants to purchase 9,000 shares of common stock at a price of $1.38 per share in connection with investor relations services. The Company issued warrants to purchase 24,000 shares of common stock at a price of $1.34 per share in connection with investor relations services. The Company issued warrants to purchase 60,000 shares of common stock at a price of $1.85 per share in connection with investor relations services. The Company issued warrants to purchase 10,000 shares of common stock at a price of $0.96 per share in connection with investor relations services.

 

For the Three Months Ended September 30, 2016: The Company issued warrants to purchase 1,420,591 shares of common stock at a price of $1.65 per share, exercisable through September 2021 in connection with the issuance of units in private placements. The Company issued warrants to the placement agent to purchase 269,240 shares of common stock at a price of $1.65 per share.

 

The warrants exercisable for the 66,667 shares of common stock are accounted for under liability accounting for the shares that have vested and were recorded at their fair value on the date of issuance of $50,365 as a liability and as professional fees and investor relation expense. Warrants for 30,000 shares of common stock were cancelled as of December 31, 2015 as the vesting events had not occurred. The fair value as of September 30, 2016 and June 30, 2016 were $2,543 and $11,955, respectively which is reflected as a liability with the fair value adjustment recorded as derivative gains or losses on the consolidated statements of operations.

 

The warrants exercisable for the 5,897,677 shares of common stock were accounted for under equity treatment and fair valued as of the date of issuance. The fair value of the warrants was valued at $3,497,914 and was recorded into additional paid-in capital. The warrants exercisable for the 3,043,558 shares of common stock were accounted for under equity treatment and were recorded at the allocated fair value as of the date of issuance. The estimated fair value of the warrants was $1,667,630 and the allocated fair value of $1,202,336 was recorded into additional paid-in capital.

 

 13

 

 

The warrants exercisable for 184,490 shares of common stock were accounted for under equity treatment and were fair valued as of the date of issuance. The fair value of the warrants was valued at $184,673 and recorded as additional paid-in-capital and Series A Convertible Preferred Stock as issuance costs. On June 24, 2016, the warrants were modified and in place of the warrants to purchase 184,490 shares were replaced by warrants to purchase 327,046 shares of common stock. The change in the fair value between the old warrants and the new warrants on the date of modification was calculated as $113,521 and was recorded as additional paid-in-capital and as issuance costs. The warrants exercisable for 87,500 shares of common stock were accounted for under equity treatment and were fair valued as of the date of issuance. The fair value of the warrants was valued as $65,490 as additional paid-in-capital and Series A Convertible Preferred Stock as issuance costs. The warrants exercisable for 519,093 shares of common stock were accounted for under equity treatment and were fair valued as of the date of issuance. The fair value of the warrants was valued at $386,800 and recorded as additional paid-in-capital and as issuance costs.

 

The warrants exercisable for the 9,000 shares of common stock were accounted for under the equity treatment and were fair valued as of the date of issuance. The fair value of the warrants was valued at $11,407 and recorded as additional paid-in-capital and investor relations. The additional warrants exercisable for the 24,000 shares of common stock were accounted for under the equity treatment and were fair valued as of the date of issuance. The fair value of the warrants was valued at $20,943 and recorded as additional paid-in-capital and investor relations. The warrants exercisable for the 60,000 shares of common stock were accounted for under the equity treatment and were fair valued as of the date of issuance. The fair value of the warrants was valued at $34,122 and recorded as additional paid-in-capital and investor relations. The warrants exercisable for the 10,000 shares of common stock were accounted for under the equity treatment and fair valued as of the date of issuance. The fair value of the warrants was valued as $6,500 and recorded as additional paid-in-capital and investor relations.

 

The warrants exercisable for the 1,420,591 shares of common stock were accounted for under equity treatment and were recorded at the allocated fair value as of the date of issuance. The estimated fair value of the warrants was $1,011,085 and the allocated fair value of $517,350 was recorded into additional paid-in capital. The warrants exercisable for 269,240 shares of common stock were accounted for under equity treatment and were fair valued as of the date of issuance. The fair value of the warrants was valued at $225,510 and recorded as additional paid-in-capital and as issuance costs.

 

These warrants were valued using the Black-Scholes option pricing model on the date of issuance. In order to calculate the fair value of the warrants, certain assumptions were made regarding components of the model, including the closing price of the underlying common stock, risk-free interest rate, volatility, expected dividend yield, and warrant term. Changes to the assumptions could cause significant adjustments to valuation. AntriaBio estimated a volatility factor utilizing comparable published volatilities of several peer companies. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for treasury securities of similar maturity.

 

The Black-Scholes valuation methodology was used because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions for the warrants issued for the three months ended September 30, 2016 were as follows:

 

Expected volatility   54% - 74%
Risk free interest rate   0.45% - 1.42%
Warrant term (years)    1 - 7  
Dividend yield   0%

 

Significant assumptions for the warrants issued for the year ended June 30, 2016 were as follows:

 

Expected volatility   87 - 151%
Risk free interest rate   0.45% - 2.03%
Warrant term (years)    1 - 7.5  
Dividend yield   0%

 

 14

 

 

Note 10 Income Taxes

 

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes.

 

In the three months ended September 30, 2016, the Company did not record any income tax provision due to expected future losses and full valuation allowance on its deferred tax assets.

 

Note 11 Commitments and Contingencies

 

Lease Commitments – In May 2014, the Company entered into a lease of approximately 27,000 square feet of office, laboratory and clean room space to be leased for seventy two months. The lease requires monthly payments of $28,939 adjusted annually by approximately 3% plus triple net expenses monthly of $34,381 adjusted annually. The Company also made a security deposit of $750,000 which is held by the landlord, of which $253,433 has been returned to the Company and the remaining balance will be returned gradually over the next several years.

 

As of September 30, 2016, the minimum rental commitment under the lease is as follows:

 

Year Ending June 30,    
2017   278,150 
2018   381,360 
2019   392,855 
2020   335,747 
   $1,388,112 

 

Legal Matters - From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of September 30, 2016, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse to our interest.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

General

 

This discussion and analysis should be read in conjunction with the accompanying financial statements and related notes. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors.

 

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Summary

 

Since inception, we have raised over $40 million, which has enabled us to advance our microsphere platform, including completing preclinical studies for our lead product candidate, AB101, a potential once-weekly injectable basal insulin for patients with type 1 and type 2 diabetes. We continue to believe that AB101’s unique human insulin based formulation has the potential to significantly disrupt the annual $11 billion basal insulin market that is dominated by daily injections of insulin analogs. Our primary objective is to manufacture clinical material in our Louisville, Colorado facility and to commence a clinical study at a contract research organization in Southern California. In order to achieve this objective, we will need to demonstrate that the formulation meets the intended specification at clinical scale, certify the sterility of our manufacturing process and raise additional capital.

 

Capital Requirements

 

Given our ongoing financial needs as well as our desired strategy to advance AB101 while scaling the business to include additional product candidates, we have reached a point in our evolution where we believe we need to raise capital in a different manner by conducting a relatively large institutionally focused round before the end of calendar year 2016. Fortunately, we have received a great deal of interest from the Korean investment community including large, sophisticated healthcare funds. We are currently in the process of meeting with various groups to determine the level of interest by Korean investors and funds. There can be no assurance that such capital will be available to us on acceptable terms or at all. If Korean investments do not formalize then the Company will need to explore alternative financing options.

 

Concurrent with our planned capital raise in the 4th quarter of calendar year 2016, we are in the process of establishing a subsidiary in Seoul which will be led by our Founder and Chairman of the Scientific Advisory Board, Dr. Hoyoung Huh. We plan to expand our core capabilities by tapping into the scientific prowess and know how that exists in Korea. In addition, we may also seek to in-license or acquire technologies and/or product candidates that complement our existing pipeline.

 

AB101 Update

 

In accordance with the initial feedback that we received from the FDA in 2015, as a precursor to filing an IND and starting a clinical study, we conducted a six-month stability study of the drug substance (PEGylated insulin) used in AB101, which was satisfactorily completed in June 2016. We also met face-to-face with the FDA in the 2nd quarter of calendar year 2016 in a pre-IND meeting to discuss our Phase 1 clinical study design. Notably, given the complexity of microsphere products, the agency advised us to ensure that our manufacturing process was robust before filing our IND and commencing a clinical study.

 

We have constructed a $3.2 million GMP sterile manufacturing suite in our Louisville, Colorado facility to produce AB101 material suitable for injection into patients. Based on the guidance received from the FDA and introduction of a senior manufacturing leader to the Louisville site, in calendar year 2016 we have been methodically engineering, testing and certifying the processes to be used in clinical manufacturing, to include the sterility assurance of the process and product as mandated by the FDA. In the 3rd quarter of calendar year 2016 we have successfully demonstrated our process by manufacturing sample batches of AB101 material at clinical scale. This has been a significant and complex scientific and engineering undertaking, as prior to this calendar year we had only manufactured AB101 in small non-sterile batches in our laboratories for use in animal studies and for analytical purposes. Furthermore, as part of our testing process we made adjustments to certain equipment, including further customization in specific instances. This combined endeavor, coupled with delays that we have experienced in receiving specialized parts and equipment from third party suppliers, contributed to extending the timeline that we established in calendar year 2015 to commence clinical studies.

 

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We have made significant progress in demonstrating that we can manufacture AB101 at clinical scale, and we are finalizing our sterility assurance campaign, which will demonstrate that our manufacturing process can be conducted in a sterile fashion prior to making AB101 material for the clinical study, a fundamental and mandated exercise to ensure patient safety in the clinic. Qualifying the sterility of a manufacturing process and environment is generally complex and particularly so when manufacturing microsphere products as AB101 cannot be sterile filtered as is common with most injectable products. Prior to the end of 1st quarter of calendar year 2017, we are planning to have completed a capital raise and have our facility fully qualified to enable the manufacture of clinical material. Following the financing and manufacturing campaign, we will plan to file an IND with the FDA and commence the clinical study in the first half of calendar year 2017.

 

Significant Accounting Policies and Estimates

 

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to the estimated useful lives and impairment of depreciable assets, the fair value of share-based payments and warrants, fair value of derivative instruments, income tax valuation allowances and contingencies. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstance, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The methods, estimates, and judgments used by us in applying these most critical accounting policies have a significant impact on the results we report in our consolidated financial statements.

 

Results of Operations

 

For Three Months Ended September 30, 2016 and 2015

 

Results of operations for the three months ended September 30, 2016 (the “2017 quarter”) and the three months ended September 30, 2015 (the “2016 quarter”) reflected losses of $3,815,867 and $3,287,950, respectively.

 

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Revenues

 

We are a preclinical stage company and have not generated any revenues since inception.

 

Expenses

 

Research and development costs include salaries, benefits and other staff-related costs; consultants and outside costs; material manufacturing costs; and facilities and other costs. Research and development costs were approximately $2,486,000 in the 2017 quarter compared to $1,968,000 in the 2016 quarter. The main increase is due to the Company continuing to hire significant staff to manufacture clinical material during the 2017 quarter.

 

General and administrative costs were approximately $1,338,000 in the 2017 quarter compared to $1,331,000 in the 2016 quarter. The general and administrative costs have remained fairly consistent as most of these costs are fixed and remain fairly consistent from quarter to quarter.

 

Liquidity and Capital Resources

 

As of September 30, 2016, we have approximately $3.4 million in cash on hand and working capital of approximately $2.2 million. During the year ended June 30, 2016, we closed on a Series A Preferred Stock Offering in which we issued Series A Preferred Stock. On June 24, 2016, with the consent of the Series A Stockholders all of the Series A Preferred Stock was converted to common stock and warrants. During the year ended June 30, 2016, we also closed on an equity transaction in which we issued units consisting of one share of common stock and a warrant to purchase either one-half or one share of common stock. During the three months ended September 30, 2016, we performed additional closes on the equity transaction from June 30, 2016.

 

The Company received net proceeds of approximately $14.7 million from the transactions above. While we do have cash on hand, we anticipate that we will need an additional $10 million to cover operating expenses, clinical trials of AB101 and continuing research and development of our product pipeline through the calendar year end 2017. We are currently evaluating raising additional capital to fund our current and future operations. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us.

 

Going Concern

 

The continuation of our business is dependent upon obtaining further financing and achieving a break even or profitable level of operations in our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. There are no assurances that we will be able to obtain additional financing through either private placements, and/or bank financing or other loans necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. These conditions raise substantial doubt about our ability to continue as a going concern.

 

Recent Accounting Pronouncements

 

See Note 2 to the consolidated financial statements included in this Form 10-Q regarding the impact of certain accounting pronouncements on our consolidated financial statements.

 

Off-Balance Sheet Arrangements

 

We had no off-balance sheet transactions.

 

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCUSSION ABOUT MARKET RISK.

 

Not required for smaller reporting companies.

 

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ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and our Chief Accounting Officer (our principal accounting officer), of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Based on that evaluation and the material weakness described below, our management concluded that we did not maintain effective disclosure controls and procedures as of September 30, 2016 in ensuring that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that it is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our management has identified control deficiencies regarding a lack of segregation of duties, a need for a stronger internal control environment, and minimal review of complex accounting issues. Our management believes that these deficiencies, which in the aggregate constitute a material weakness, are due to the small size of our staff, which makes it challenging to maintain adequate disclosure controls.

 

Changes in internal controls over financial reporting

 

During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) or 15(d)-15(f)) that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

None.

 

ITEM 1A. RISK FACTORS.

 

Certain factors exist which may affect the Company’s business and could cause actual results to differ materially from those expressed in any forward-looking statements. The Company has not experienced any material changes from those risk factors as previously disclosed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 28, 2016 (the “Form 10-K”) except as added below.

 

Operations outside the United States may be affected by different local politics, business and cultural factors, different regulatory requirements and prohibitions between jurisdictions.

 

Operations outside the United States may be affected by different local business and cultural factors, different regulatory requirements and prohibitions between jurisdictions, including the Foreign Corrupt Practices Act and local laws prohibiting corrupt payments; and changes in regulatory requirements for financing activities.

 

We are currently in the process of establishing a wholly-owned subsidiary in the Republic of Korea (South Korea).  Our operations, once established, will be subject to various political, economic, and other risks and uncertainties inherent to the country.  Among other risks, the registrant’s operations are subject to the risks of political conditions and governmental regulations.  If there are any changes to government regulations that affect our ability to operate, we may face significant losses.

 

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The persistently weak global economic and financial environment in many countries and increasing political and social instability may have a material adverse effect on our results.

 

Many of the world’s largest economies and financial institutions continue to be impacted by a weak ongoing global economic and financial environment, with some continuing to face financial difficulty, liquidity problems and limited availability of credit. It is uncertain how long these effects will last, or whether economic and financial trends will worsen or improve. Such uncertain times may have a material adverse effect on our results of operations, financial condition and, if circumstances worsen, our ability to raise capital at reasonable rates.

 

In addition, the varying effects of difficult economic times on the economies, currencies and financial markets of different countries could unpredictably impact, the conversion of our operating results into our reporting currency, the US dollar. Alternately, inflation could accelerate, which could lead to higher interest rates, which would increase our costs of raising capital.

 

In addition, increasing political and social instability around the world may lead to significant business disruptions or other adverse business conditions. Similarly, increased scrutiny of corporate taxes and executive pay may lead to significant business disruptions or other adverse business conditions, and may interfere with our ability to attract and retain qualified personnel in South Korea.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

On October 7, 2016 and October 13, 2016, the Company completed an additional close and a final close of a private placement transaction (the “PIPE Financing”) with investors (each an “Investor” and collectively, the “Investors”) pursuant to Section 4(a)(2) of the United States Securities Act of 1933, as amended and Rule 506 of Regulation D promulgated thereunder.  In connection with the Close, we entered into Purchase Agreements by and between us and each Investor in which we issued to the Investors Class A Units.  Each Class A Unit was priced at $1.10 and consisted of one share of our common stock (an “Offered Share”) and one-half of one common share purchase warrant (a “Warrant”) exercisable at $1.65 per share of our common stock (the “Warrant Shares”) at any time until 5:00 p.m. (Pacific Time) on the date that is sixty (60) months following the Close of the PIPE Financing.   We issued an aggregate of 959,091 Units and received gross cash proceeds of $1.1 million, excluding placement agent compensation, transaction costs, fees and expenses.

 

Financing Warrants

 

As part of the close, we issued to the Placement Agent a warrant (the “Financing Warrant”) pursuant to Section 4(a)(2) of the Act and Rule 506 promulgated thereunder.  The Financing Warrant is exercisable for a period of seven (7) years from the date of issuance with an exercise price of $1.65 per share.  The Financing Warrant contains cashless exercise rights and shall be adjusted both as to the number of shares and price to which they are exercisable, based on any splits, conversions, or reorganizations that affect the Company’s common stock.

 

Note Conversion

 

On October 7, 2016, one convertible note holder elected to convert their note and accrued interest to common stock based on the original terms of the note. The note holder converted their note into 58,350 shares of common stock.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

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ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

Exhibit Number Description of Exhibits
   
31.1 Certification of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
   
31.2 Certification of Chief Accounting Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
   
32.1 Certification of Chief Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
   
32.2 Certification of Chief Accounting Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
   
101 The following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheet, (ii) Statement of Operations, (iii) Statements of Cash Flows, (iv) Statements of Stockholders Equity and (v) related notes to these financial statements*

 

*Filed herewith

 

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SIGNATURES

 

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    ANTRIABIO, INC.
     
     

 Date: November 14, 2016

By:  

/s/ Nevan Elam

    Nevan Elam
    Chief Executive Officer
    (Principal Executive Officer)
     
     

 Date: November 14, 2016

By: 

 /s/ Morgan Fields

    Morgan Fields
    Chief Accounting Officer
    (Principal Accounting Officer)

 

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