Note 3 - Summary of Accounting Policies	12 Months Ended
Dec. 31, 2019
Notes to Financial Statements
Basis of Presentation and Significant Accounting Policies [Text Block]	NOTE 3: SUMMARY OF ACCOUNTING POLICIES Basis of Presentation: The accompanying consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the financial statements of Atossa Therapeutics, Inc. and its wholly-owned subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation. On April 20, 2018, the Company completed a 1 -for- 12 reverse stock split of the shares of the Company’s common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every 12 shares of issued and outstanding common stock were combined into one issued and outstanding share of common stock, and the par value per share was changed to $0.18 per share. The number of authorized shares of common stock was not reduced as a result of the Reverse Stock Split. The Company’s common stock began trading on a reverse stock split-adjusted basis on April 20, 2018. All share and per share data included in this report has been retroactively restated to reflect the Reverse Stock Split. Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Recently Adopted Accounting Pronouncements: In the first quarter of 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016 - 02, Lease Accounting: Topic 842 (" Topic 842 ") and recognized on the Consolidated Balance Sheet $ 101,000 of lease liabilities with corresponding right-of-use assets for operating leases. The new lease standard requires a lessee to measure its operating lease liabilities at the present value of the remaining minimum lease payments with a discounted cash flow model using the interest rate implicit in the lease. If the implicit interest rate cannot be readily determined, the lessee must use its incremental borrowing rate (“IBR”). If the lessee does not have an IBR, the lessee must use a rate that approximates the rate of interest that the lessee would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. The implicit interest rate was readily determinable for the copier lease; however, the Company used an IBR to measure the adoption date operating lease liability related to the office space which represents the estimated borrowing rate on a secured loan collateralized by similar assets for a similar term. The adoption did not have a material impact on the Company's consolidated financial statements. As permitted under the standard, the Company elected prospective application of the new guidance and prior periods continue to be presented in accordance with Accounting Standards Codification ("ASC") Topic 840. The new standard provides a number of optional practical expedients in transition. The Company elected the practical expedients to not reassess the prior conclusions about lease identification under the new standard, to not reassess lease classification, to not separate lease and non lease components and to not reassess initial direct costs. The Company did not elect the practical expedient allowing the use-of-hindsight which would require us to reassess the lease term of the leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the current contract portfolio. See Note 13, Commitments and Contingencies, of the notes to the consolidated financial statements for additional discussion of the leases and the amounts recognized in these consolidated financial statements. On January 1, 2019, the Company adopted ASU 2018 - 08, Not -for-Profit Entities (Topic 958 ): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. This ASU affects not -for-profit entities and business entities that receive or make contributions of cash. The ASU clarifies and improves the scope and accounting guidance to assist entities in evaluating if those transactions should be accounted for as contributions under the scope of Topic 958 or as an exchange transaction subject to other guidance. The adoption did not have any impact on these consolidated financial statements. Recently Issued Accounting Pronouncements: In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018 - 13, Fair Value Measurement (Topic 820 ): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement , to improve the effectiveness of disclosures. The amendments remove, modify, and add certain disclosure requirements in Topic 820, “Fair Value Measurement.” The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. Furthermore, an entity is permitted to early adopt any removed or modified disclosures upon issuance of the update and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the effects the adoption of ASU 2018 - 13 will have on the disclosures. Research and Development All research and development costs are expensed as incurred. Research and development costs include amounts paid for clinical research organizations, drug manufacturers, consultants, travel, employee salaries, benefits and stock-based compensation. Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company elects to accrue any interest or penalties related to income taxes as part of its income tax expense. Cash and Cash Equivalents Cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less. Furniture and Equipment Furniture and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When furniture and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using the straight-line method over the estimated useful lives ranging from three to five years. Furniture and equipment amounted to $185,000 and $216,000 at December 31, 2019 and 2018, respectively. Accumulated depreciation was $151,000 and $162,000 at December 31, 2019 and 2018, respectively. Depreciation expense for the years ended December 31, 2019 and 2018 was $22,000 and $14,000, respectively. The Company periodically evaluates the carrying value of long-lived assets to be held and used and, if necessary, records impairment losses when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-loved assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. For the years ended December 31, 2019 and 2018, no impairment of furniture and equipment was recorded. Fair Value Measurements The Company records financial assets and liabilities measured on a recurring and non-recurring basis as well as all non-financial assets and liabilities subject to fair value measurement at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. These fair value principles prioritize valuation inputs across three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company's assumptions used to measure assets and liabilities at fair value. An asset or liability's classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement. Intangible Assets Intangible assets consist of intellectual property and software acquired. Intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. Impairment losses must be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the assets. Estimating future cash flows related to an intangible asset involves significant estimates and assumptions. If our assumptions are not correct, there could be an impairment loss or, in the case of a change in the estimated useful life of the asset, a change in amortization expense. No impairment charges were recorded during the year ended December 31, 2019 or December 31, 2018. Amortization of intangible assets is computed using the straight-line method over the estimated useful lives ranging from three to ten years. Intangible assets amounted to $174,000 and $192,000 at December 31, 2019 and 2018, respectively. Accumulated amortization was $105,000 and $93,000 at December 31, 2019 and 2018, respectively. Amortization expense for the years ended December 31, 2019 and 2018 was $31,000 and $30,000, respectively. Share-Based Payments The Company measures and recognizes compensation expense for all share-based payment awards made to employees, non-employee directors, and consultants, including employee stock options. Stock compensation expense is based on the estimated grant date fair value and is recognized as an expense over the requisite service period. The Company has made a policy election to recognize forfeitures when they occur. The fair value of each option grant is estimated using the Black-Scholes option-pricing model, which requires assumptions regarding the expected volatility of the stock options, the expected life of the options, an expectation regarding future dividends on the Company’s common stock, and estimation of an appropriate risk-free interest rate. The Company’s expected common stock price volatility assumption is based upon the historical volatility of our stock price. The Company has elected the simplified method for the expected life assumption for stock option grants, which averages the contractual term of the options of ten years with the vesting term, typically one to four years. The dividend yield assumption of zero is based upon the fact that the Company has never paid cash dividends and presently has no intention of paying cash dividends in the future. The risk-free interest rate used for each grant was based upon prevailing short-term interest rates over the expected life of the options.

NOTE

SUMMARY OF ACCOUNTING POLICIES

Basis of Presentation:

The accompanying consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the financial statements of Atossa Therapeutics, Inc. and its wholly-owned subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation.

April 20, 2018,

the Company completed a

-for-

reverse stock split of the shares of the Company’s common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every

shares of issued and outstanding common stock were combined into

one

issued and outstanding share of common stock, and the par value per share was changed to

$0.18

per share. The number of authorized shares of common stock was

not

reduced as a result of the Reverse Stock Split. The Company’s common stock began trading on a reverse stock split-adjusted basis on

April 20, 2018.

All share and per share data included in this report has been retroactively restated to reflect the Reverse Stock Split.

Use of Estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements:

In the

first

quarter of

2019,

the Company adopted Accounting Standards Update (“ASU”)

No.

2016

02,

Lease Accounting:

Topic

842

Topic

842

and recognized on the Consolidated Balance Sheet

101,000

of lease liabilities with corresponding right-of-use assets for operating leases. The new lease standard requires a lessee to measure its operating lease liabilities at the present value of the remaining minimum lease payments with a discounted cash flow model using the interest rate implicit in the lease. If the implicit interest rate cannot be readily determined, the lessee must use its incremental borrowing rate (“IBR”). If the lessee does

not

have an IBR, the lessee must use a rate that approximates the rate of interest that the lessee would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. The implicit interest rate was readily determinable for the copier lease; however, the Company used an IBR to measure the adoption date operating lease liability related to the office space which represents the estimated borrowing rate on a secured loan collateralized by similar assets for a similar term. The adoption did

not

have a material impact on the Company's consolidated financial statements. As permitted under the standard, the Company elected prospective application of the new guidance and prior periods continue to be presented in accordance with Accounting Standards Codification ("ASC") Topic

840.

The new standard provides a number of optional practical expedients in transition. The Company elected the practical expedients to

not

reassess the prior conclusions about lease identification under the new standard, to

not

reassess lease classification, to

not

separate lease and non lease components and to

not

reassess initial direct costs. The Company did

not

elect the practical expedient allowing the use-of-hindsight which would require us to reassess the lease term of the leases based on all facts and circumstances through the effective date and did

not

elect the practical expedient pertaining to land easements as this is

not

applicable to the current contract portfolio. See Note

13,

Commitments and Contingencies,

of the notes to the consolidated financial statements for additional discussion of the leases and the amounts recognized in these consolidated financial statements.

January 1, 2019,

the Company adopted ASU

2018

08,

Not

-for-Profit Entities (Topic

958

): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made.

This ASU affects

not

-for-profit entities and business entities that receive or make contributions of cash. The ASU clarifies and improves the scope and accounting guidance to assist entities in evaluating if those transactions should be accounted for as contributions under the scope of Topic

958

or as an exchange transaction subject to other guidance. The adoption did

not

have any impact on these consolidated financial statements.

Recently Issued Accounting Pronouncements:

August 2018,

the Financial Accounting Standards Board ("FASB") issued ASU

No.

2018

13,

Fair Value Measurement (Topic

820

): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

, to improve the effectiveness of disclosures. The amendments remove, modify, and add certain disclosure requirements in Topic

820,

“Fair Value Measurement.” The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level

fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for fiscal years beginning after

December 15, 2019.

Early adoption is permitted, including adoption in an interim period. Furthermore, an entity is permitted to early adopt any removed or modified disclosures upon issuance of the update and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the effects the adoption of ASU

2018

will have on the disclosures.

Research and Development

All research and development costs are expensed as incurred. Research and development costs include amounts paid for clinical research organizations, drug manufacturers, consultants, travel, employee salaries, benefits and stock-based compensation.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than

not

that some portion or all of a deferred tax asset will

not

be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than

not

to be sustained upon examination based solely on its technical merits. Only after a tax position passes the

first

step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than

not

to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company elects to accrue any interest or penalties related to income taxes as part of its income tax expense.

Cash and Cash Equivalents

Cash and cash equivalents include cash and all highly liquid instruments with original maturities of

three

months or less.

Furniture and Equipment

Furniture and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When furniture and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations.

Depreciation is computed using the straight-line method over the estimated useful lives ranging from

three

five

years.

Furniture and equipment amounted to

$185,000

and

$216,000

December 31, 2019

and

2018,

respectively. Accumulated depreciation was

$151,000

and

$162,000

December 31, 2019

and

2018,

respectively. Depreciation expense for the years ended

December 31, 2019

and

2018

was

$22,000

and

$14,000,

respectively.

The Company periodically evaluates the carrying value of long-lived assets to be held and used and, if necessary, records impairment losses when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-loved assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. For the years ended

December 31, 2019

and

2018,

impairment of furniture and equipment was recorded.

Fair Value Measurements

The Company records financial assets and liabilities measured on a recurring and non-recurring basis as well as all non-financial assets and liabilities subject to fair value measurement at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. These fair value principles prioritize valuation inputs across

three

broad levels. Level

inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level

inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level

inputs are unobservable inputs based on the Company's assumptions used to measure assets and liabilities at fair value. An asset or liability's classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement.

Intangible Assets

Intangible assets consist of intellectual property and software acquired. Intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets might

not

be recoverable. Impairment losses must be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the assets. Estimating future cash flows related to an intangible asset involves significant estimates and assumptions. If our assumptions are

not

correct, there could be an impairment loss or, in the case of a change in the estimated useful life of the asset, a change in amortization expense.

impairment charges were recorded during the year ended

December 31, 2019

December 31, 2018.

Amortization of intangible assets is computed using the straight-line method over the estimated useful lives ranging from

three

ten

years.

Intangible assets amounted to

$174,000

and

$192,000

December 31, 2019

and

2018,

respectively. Accumulated amortization was

$105,000

and

$93,000

December 31, 2019

and

2018,

respectively. Amortization expense for the years ended

December 31, 2019

and

2018

was

$31,000

and

$30,000,

respectively.

Share-Based Payments

The Company measures and recognizes compensation expense for all share-based payment awards made to employees, non-employee directors, and consultants, including employee stock options. Stock compensation expense is based on the estimated grant date fair value and is recognized as an expense over the requisite service period. The Company has made a policy election to recognize forfeitures when they occur.

The fair value of each option grant is estimated using the Black-Scholes option-pricing model, which requires assumptions regarding the expected volatility of the stock options, the expected life of the options, an expectation regarding future dividends on the Company’s common stock, and estimation of an appropriate risk-free interest rate. The Company’s expected common stock price volatility assumption is based upon the historical volatility of our stock price. The Company has elected the simplified method for the expected life assumption for stock option grants, which averages the contractual term of the options of

ten

years with the vesting term, typically

one

four

years. The dividend yield assumption of

zero

is based upon the fact that the Company has never paid cash dividends and presently has

intention of paying cash dividends in the future. The risk-free interest rate used for each grant was based upon prevailing short-term interest rates over the expected life of the options.