Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements, which are based on assumptions about the future of our business. Actual results, outcomes and the timing of results or outcomes could differ materially from those contained in the forward-looking statements. Please read "Forward-Looking Statements" included below for additional information regarding forward-looking statements.

Forward-Looking Statements

All statements made in this Quarterly Report on Form 10-Q (this report) that are not statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). We have made these statements in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties, which could cause actual results, outcomes and the timing of results or outcomes to differ materially from those projected or anticipated. Although we believe that our assumptions underlying our forward-looking statements are reasonable as of the date of this Quarterly Report, we cannot assure you that the forward-looking statements set out in this Quarterly Report will prove to be accurate. We may identify these forward-looking statements by the use of forward-looking words, including, but not limited to, "expect," "potential," "continue," "may," "will," "should," "could," "would," "seek," "intend," "plan," "estimate," "anticipate," "future," "believe," "design," "predict," or the negative versions of these words or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

This Quarterly Report also contains estimates and other statistical data provided by third parties and by us relating to market size and growth, and other industry data. These and other forward-looking statements made in this Quarterly Report, unless otherwise indicated, are presented as of the date of the filing of this Quarterly Report. We have discussed certain important factors, risks and uncertainties in the cautionary statements included in this Quarterly Report, particularly in the sections titled "ITEM 1A. RISK FACTORS," "ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," and elsewhere in this Quarterly Report that we believe could cause our actual results, events or outcomes, or the timing of these results or outcomes, to differ materially from our anticipated results, events or outcomes, or the anticipated timing of these results or outcomes, including any variation between interim or preliminary and final clinical results or analysis. Our forward-looking statements do not reflect the potential impact of any new information, future events or circumstances that may affect our business after the date of this Quarterly Report. Except as required by law, we expressly disclaim any intent to update any forward-looking statements after the date on which the statement is made, whether as a result of new information, future events, future circumstances or otherwise.

Company Overview

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

We have been granted U.S. and 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.

Our business strategy is to advance our programs through clinical studies, including potentially with partners, and opportunistically add programs in areas of high unmet medical need through acquisition, minority investment, collaboration or internal development.

We are pursuing development of low dose (Z)-endoxifen for breast cancer risk reduction. On September 8, 2025, we announced that we requested a Type C meeting with the FDA to discuss a potential accelerated regulatory strategy for the development of low-dose (Z)-endoxifen for breast cancer risk reduction. This initiative followed an extensive review by external regulatory and legal experts of our clinical data and published scientific literature, which we believe supported the potential for a faster path to a New Drug Application (NDA) in the adjuvant, ductal carcinoma in situ (DCIS) and other high-risk breast cancer settings. On November 6, 2025, we received preliminary written comments from the FDA regarding the regulatory path for (Z)-endoxifen. We expect to meet with the FDA on November 17, 2025 to discuss a development plan intended to support filing an NDA, including the potential use of expedited programs where eligible. We will evaluate any implications for our plans and timelines following receipt of FDA meeting minutes, which are expected to be available in December 2025. While there can be no assurance of a favorable outcome, a successful alignment with the FDA could potentially materially shorten development timelines and reduce future clinical costs.

In parallel, 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 treatment gap. We have received positive written feedback from the FDA regarding our proposed global Phase 2 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.

Summary of Our Leading Programs

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

(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 Degrader (SERM/D). We are developing a proprietary form of (Z)-endoxifen which is administered orally for the potential treatment of breast cancer and reduction of mammographic 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.

(Z)-endoxifen for Women with Mammographic Breast Density. Mammographic breast density (MBD) is an emerging public health issue. Almost half of the women in the world over the age of 40 have dense breasts, and there are currently no approved treatments to reduce breast density. Elevated breast density can make a mammogram more difficult to interpret because dense breast tissue and some abnormal breast changes, such as calcifications and tumors, appear as white areas in a mammogram. Women with the highest density are four to six times more likely to develop breast cancer in their lifetime, and more likely to develop cancer between mammograms compared to those with low breast density. The latter are sometimes referred to as "interval cancers," which are often larger, more advanced, and more difficult to treat.

In December 2021, we commenced a Phase 2 study of our proprietary oral (Z)-endoxifen. The study, known as the Karisma-(Z)-endoxifen study, was a Phase 2, randomized, double-blind, placebo-controlled, dose-response study of our proprietary oral (Z)-endoxifen in healthy premenopausal women with measurable mammographic breast density. The primary objective of the study was to determine the dose-response relationship of daily (Z)-endoxifen on breast density reduction. Secondary endpoints assessed safety and tolerability. The study was conducted in Stockholm, Sweden and included approximately 240 participants who received daily doses of oral (Z)-endoxifen or placebo for six months after enrollment, randomized to one of three arms: placebo, 1 mg of (Z)-endoxifen, or 2 mgs of (Z)-endoxifen. The study also included an exploratory endpoint to assess twenty-four month durability of the breast density changes. Top line data for this study is expected in the first quarter of 2026.

The study fully enrolled in November 2023 and in September 2024, the study concluded. The data showed the potential of low-dose (Z)-endoxifen to significantly reduce MBD, a key risk factor for breast cancer, with a favorable safety profile.

The 1 mg dose of (Z)-endoxifen reduced MBD by 17.3% (p<0.01), while the 2 mg dose achieved a reduction of 23.5% (p<0.01), compared to a minimal change in the placebo group of 0.27%. Plasma concentrations for (Z)-endoxifen were measured at 4.8 ng/mL and 9.7 ng/mL for the 1 mg and 2 mg arms, respectively, demonstrating the effectiveness of the lower dose in achieving significant MBD reductions. Importantly, no significant differences in adverse events were observed between the 1 mg dose and the placebo. The 2 mg dose was associated with higher rates of hot flashes, night sweats and vaginal discharge.

Based on input from the FDA and Swedish Medical Products Agency, reduction in MBD may not be an approvable indication unless we can demonstrate that our (Z)-endoxifen also reduces the incidence of breast cancer. We may therefore conduct additional studies of (Z)-endoxifen to assess its correlation with the risk of breast cancer and/or reduction in the incidence of new breast cancers.

(Z)-endoxifen for Ductal Carcinoma in Situ. DCIS is the presence of abnormal cells inside a milk duct in the breast. It rarely produces symptoms, or a breast lump one can feel, typically being detected through screening mammography. In some cases, DCIS may become invasive and spread to other tissues, but there is no way of determining which lesions will remain stable without treatment and which will go on to become invasive. This uncertainty can result in aggressive and unnecessary treatment approaches that can have harmful side effects without significant benefit.

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

(Z)-endoxifen for Neoadjuvant Treatment of Breast Cancer. We are also developing (Z)-endoxifen to treat estrogen receptor positive (ER+) / human epidermal growth factor receptor 2 negative (HER2-) breast cancer in the neoadjuvant setting, which is the administration of a therapy before the main treatment, which is usually surgery. Although there are neoadjuvant treatments for breast cancers that are not ER+, there are few neoadjuvant treatments for ER+ breast cancer which comprises approximately 240,000 new cases or 78% of all breast cancers each year.

In October 2022, we received authorization from the FDA for our Investigational New Drug (IND) application for oral (Z)-endoxifen. The study, known as "EVANGELINE" is a Phase 2 randomized study assessing (Z)-endoxifen as neoadjuvant therapy in premenopausal women with primary ER+, HER2- breast cancer. The study will enroll approximately 190 patients across up to 25 U.S. sites, and consists of two parts.

In Part 1, a Pharmacokinetic (PK) Run-In Cohort evaluated two dose levels. A 40 mg per day cohort was initiated in February 2023 to assess if a plasma steady state concentration (Css) of 500 to 1000 ng/mL, which is required for optimal PKC-β inhibition, could be achieved. However, data showed that none of the patients in the 40 mg cohort reached the target Css. Subsequently, an 80 mg per day cohort was initiated and fully enrolled in July 2024. In this higher dose group, about 50% of patients receiving (Z)-endoxifen with goserelin and 38% of patients receiving (Z)-endoxifen alone attained the target plasma Css, with an average of 484 ng/mL. Importantly, tumor Css levels were found to be more than double the plasma levels, exceeding 500 ng/g in 90% of patients, and 85% of patients exhibited a 4-week Ki-67 response (≤10%), indicating substantial tumor suppression. (Z)-endoxifen was generally well tolerated, with no significant Grade 3 or 4 toxicities, although four gynecologic events (including one Grade 3 hemorrhagic ovarian cyst) were noted in the 80 mg group.

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 September 30, 2025, seven patients were enrolled in this study.

On October 6, 2025, we announced an amendment to our Phase 2 EVANGELINE study of (Z)-endoxifen in premenopausal women with newly diagnosed early-stage ER+/HER2- breast cancer. The study design has been updated to a single-arm, open-label, Phase 2 in premenopausal women with ER+/HER2- breast cancer in the pre-surgical setting. The initial EVANGELINE study design included 214 patients; and the amendment reduced the patient total to 40-65 patients. The study includes two Cohorts: Cohort A (signal-seeking), a two-stage futility design assessing the Week-4 Ki-67 ≤10% rate to allow early stop if not promising and Cohort B (estimation), assessing Week-24 objective response (RECIST 1.1, central review). The amended design will focus on objective, short-interval endpoints to inform development decisions efficiently while working to preserve patient safeguards.

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.

On May 14, 2025 we reported updated results from this study which found that (i) 95% of participants (19/20 participants) completed at least 75% of planned dosing, (ii) median Ki-67 fell from 10.5% at baseline to 5% by Week 3, (iii) 65% of patients achieved Ki-67< 10% at Week 3 with suppression maintained at surgery, (iv) median functional tumor volume measurement (performed at baseline, Week 3, Week 12 and at surgery) decreased 77.7% from baseline to surgery, and (v) the longest tumor diameter in the participants from baseline to preoperative MRI was reduced by 36.8%. (Z)-endoxifen was well tolerated in this study

with the most common side effects being mild, including hot flashes, insomnia, and fatigue. No dose reductions or discontinuations due to treatment related adverse events occurred during this study.

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. On July 31, 2025 we amended the study to include an additional 8 premenopausal women, increasing the total number of participants to 88.

Research and Development Phase

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.

Commercial Lease Agreement

On September 22, 2025, we entered into an operating lease with 1448 NW Market Street Tenant LLC for additional office space in Seattle, Washington. We agreed to pay $3 thousand per month for 13 months commencing on November 1, 2025.

Critical Accounting Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We base our estimates on our historical experience, known trends and events, and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting estimates during the nine months ended September 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.

Results of Operations

Comparison of Three and Nine Months Ended September 30, 2025 and 2024

Revenue and Cost of Revenue. For the three and nine months ended September 30, 2025 and 2024, we had no source of revenue and no associated cost of revenue.

Operating Expenses. Total operating expenses were $9.3 million and $25.7 million for the three and nine months ended September 30, 2025, respectively, which was an increase of $2.9 million and $5.2 million from total operating expenses for the three and nine months ended September 30, 2024 of $6.4 million and $20.5 million, respectively. Factors contributing to the increased operating expenses in the three and nine months ended September 30, 2025 are explained below.

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

As (Z)-endoxifen is our only product candidate for which we currently incur R&D expenses, we have not further disaggregated R&D expenses by product candidate:

General and Administrative (G&A) Expenses.The following table provides a breakdown of major categories within G&A expenses for the three and nine months ended September 30, 2025 and 2024, together with the dollar change and percentage change in those categories (dollars in thousands):

Interest Income. Interest income was $0.6 million and $1.9 million for the three and nine months ended September 30, 2025, respectively, a decrease of $0.4 million and $1.3 million from interest income of $1.0 million and $3.2 million for the three and nine months ended September 30, 2024, respectively. The decreases were due to decreases in the average balance invested in our money market account.

Impairment Charge on Investment in Equity Securities. For the nine months ended September 30, 2024, we wrote down our Investment in equity securities by $1.7 million due to the impairment of our investment in Dynamic Cell Therapies, Inc. (DCT). Refer to Note 4 "Investment in Equity Securities"to the Condensed Consolidated Financial Statements.

Income Taxes.We did not record an income tax expense or benefit for the three and nine months ended September 30, 2025 and 2024 due to uncertainty regarding utilization of our net operating loss carryforwards and our history of losses.

Liquidity and Capital Resources

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 AgreementSMwith 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 nine months ended September 30, 2025.

Cash Flows

The following table shows a summary of our cash flows for the periods indicated (in thousands):

We have incurred net losses and negative operating cash flows since inception. For the nine months ended September 30, 2025, we recorded a net loss of $23.8 million and used $19.2 million of cash and cash equivalents. As of September 30, 2025, we had $51.8 million in cash and cash equivalents and working capital of $47.5 million. We believe we have sufficient cash on hand to fund our projected operating requirements for at least the next 12 months.

Net Cash Flows from Operating Activities.During the nine months ended September 30, 2025 compared to the same period in 2024, net cash used in operating activities increased $5.2 million, primarily reflecting:

Net Cash Flows from Investing Activities.Net cash used in investing activities was $16 thousand and $19 thousand, for the nine months ended September 30, 2025 and 2024, respectively. Current and prior period cash used in investing activities was primarily related to purchases of new computers.

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

Funding Requirements

We expect to incur ongoing operating losses for the foreseeable future as we continue to develop our planned therapeutic programs, including related clinical studies and other programs in the pipeline. Our future funding requirements will depend on many factors, including:

If we are unable to raise additional capital when needed on reasonable terms, if at all, we could be forced to curtail or cease our operations. Our future capital uses and requirements will depend on the time and expenses needed to begin and continue clinical trials for our new drug developments.

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.

On February 21, 2025, we received a letter from Nasdaq informing us that we are not in compliance with Nasdaq Listing Rule 5550(a)(2) for continued listing on Nasdaq, because our common stock failed to maintain a minimum closing bid price of $1.00 per share for 30 consecutive business days. We had until August 20, 2025 to regain compliance with Nasdaq Listing Rule 5550(a)(2). On August 21, 2025, we received a letter from Nasdaq informing us that we are eligible for an additional 180 calendar day period or until February 17, 2026, to regain compliance. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days, unless Nasdaq exercises its discretion to require a minimum of up to 20 consecutive business days. Subsequent to September 30, 2025, our common stock traded above the minimum closing bid price of $1.00 for 10 consecutive business days. However, Nasdaq exercised its discretion to monitor our compliance for an additional 10 consecutive business days, during which time we did not maintain our common stock bid price above $1.00, and therefore we have not yet regained compliance.

Contractual Obligations

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 September 30, 2025, our estimated non-cancellable commitment was $7.8 million which will be paid over the term of the clinical trials.

Off-Balance Sheet Arrangements

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts.

Recently Issued Accounting Pronouncements

Please refer to Note 3 "Summary of Significant Accounting Policies"to the Condensed Consolidated Financial Statements.