ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ATOSSA GENETICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, |
| 2015 | 2014 |
| (Unaudited) |
| Assets |
| Current assets |
| Cash and cash equivalents | $ | 9,728,369 | $ | 8,500,718 |
| Accounts receivable, net | 1,280,209 | 297,958 |
| Prepaid expense | 263,763 | 247,207 |
| Inventory, net | 94,628 | 39,788 |
| Total current assets | 11,366,969 | 9,085,671 |
| Furniture and equipment, net | 381,590 | 357,532 |
| Intangible assets, net | 1,877,755 | 1,920,645 |
| Deferred financing costs | - | 351,961 |
| Other assets | 176,551 | 48,193 |
| Total assets | $ | 13,802,865 | $ | 11,764,002 |
| Liabilities and Stockholders' Equity |
| Current liabilities |
| Accounts payable | $ | 966,208 | $ | 594,357 |
| Accrued expenses | 1,117,932 | 444,861 |
| Payroll liabilities | 1,279,528 | 1,056,705 |
| Short-term lease obligations | 79,974 | 76,025 |
| Other current liabilities | 42,914 | 42,228 |
| Total current liabilities | 3,486,556 | 2,214,176 |
| Deferred rent, net of current portion | 7,227 | 2,483 |
| Long-term lease obligations | 25,230 | 49,216 |
| Total liabilities | 3,519,013 | 2,265,875 |
| Commitments and contingencies (note 13) |
| Stockholders' equity |
| Preferred stock - $.001 par value; 10,000,000 shares authorized, 0 shares issued and outstanding | - | - |
| Common stock - $.001 par value; 75,000,000 shares authorized, 27,217,257 and 24,564,058 shares issued and outstanding | 27,217 | 24,564 |
| Additional paid-in capital | 48,766,466 | 44,648,103 |
| Accumulated deficit | (38,509,831 | ) | (35,174,540 | ) |
| Total stockholders' equity | 10,283,852 | 9,498,127 |
| Total liabilities and stockholders' equity | $ | 13,802,865 | $ | 11,764,002 |

The accompanying notes are an integral part of these condensed consolidated financial statements
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ATOSSA GENETICS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| For the Three Months Ended March 31 , |
| 2015 | 2014 |
| Revenue |
| Diagnostic testing services | $ | 1,872,798 | $ | 24,124 |
| Product sales | 470 | - |
| Total revenue | 1,873,268 | 24,124 |
| Cost of revenue |
| Diagnostic testing services | 1,206,312 | - |
| Product sales | 1,642 | - |
| Total cost of revenue | 1,207,954 | - |
| Gross profit | 665,314 | 24,124 |
| Selling expenses | 546,854 | 237,838 |
| Research and development expenses | 797,225 | 422,503 |
| General and administrative expenses | 2,605,111 | 1,774,708 |
| Total operating expenses | 3,949,190 | 2,435,049 |
| Operating loss | (3,283,876 | ) | (2,410,925 | ) |
| Interest income | 279 | 143 |
| Interest expense | 1,784 | 749 |
| Other losses | 49,910 | - |
| Loss before income taxes | (3,335,291 | ) | (2,411,531 | ) |
| Income taxes | - | - |
| Net loss | $ | (3,335,291 | ) | $ | (2,411,531 | ) |
| Loss per common share - basic and diluted | $ | (0.13 | ) | $ | (0.10 | ) |
| Weighted average shares outstanding, basic and diluted | 24,916,867 | 24,419,060 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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ATOSSA GENETICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
| Common Stock |
| Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity |
| Balance at December 31, 2014 | 24,564,058 | $ | 24,564 | $ | 44,648,103 | $ | (35,174,540 | ) | $ | 9,498,127 |
| Issuance of common shares for cash | 2,653,199 | 2,653 | 4,289,696 | - | 4,292,349 |
| Amortization of deferred financing costs | - | - | (351,961 | ) | - | (351,961 | ) |
| Compensation cost for stock options granted to executives and employees | - | - | 180,628 | - | 180,628 |
| Net loss for the three months ended March 30, 2015 | - | - | - | (3,335,291 | ) | (3,335,291 | ) |
| Balance at March 31, 2015 | 27,217,257 | $ | 27,217 | $ | 48,766,466 | $ | (38,509,831 | ) | $ | 10,283,852 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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ATOSSA GENETICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended March 31, |
| 2015 | 2014 |
| CASH FLOWS FROM OPERATING ACTIVITIES |
| Net loss | $ | (3,335,291 | ) | $ | (2,411,531 | ) |
| Compensation cost for stock options granted | 180,628 | 230,181 |
| Depreciation and amortization | 84,867 | 125,097 |
| Bad debt expense | 218,482 | 27,860 |
| Changes in operating assets and liabilities: |
| Accounts receivable | (1,200,733 | ) | 19,796 |
| Inventory | (54,840 | ) | - |
| Prepaid expenses | (16,556 | ) | (245,178 | ) |
| Increase in other assets | (128,359 | ) | (24,863 | ) |
| Accounts payable | 371,851 | 42,944 |
| Payroll liabilities | 222,823 | (150,504 | ) |
| Deferred rent | 4,744 | (13,134 | ) |
| Accrued expenses | 653,034 | (75,905 | ) |
| Product recall liability | - | (115,292 | ) |
| Other current liabilities | 687 | (13,460 | ) |
| Net cash used in operating activities | (2,998,663 | ) | (2,603,989 | ) |
| CASH FLOWS FROM INVESTING ACTIVITIES |
| Purchase of furniture and equipment | (54,860 | ) | (2,966 | ) |
| Purchase of intangible assets | (11,175 | ) | (100,000 | ) |
| Net cash used in investing activities | (66,035 | ) | (102,966 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES |
| Net proceeds from issuance of common stock and warrants | 4,292,349 | 12,955,745 |
| Net cash provided by financing activities | 4,292,349 | 12,955,745 |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,227,651 | 10,248,790 |
| CASH AND CASH EQUIVALENTS, BEGINNING BALANCE | 8,500,718 | 6,342,161 |
| CASH AND CASH EQUIVALENTS, ENDING BALANCE | $ | 9,728,369 | $ | 16,590,951 |
| SUPPLEMENTAL DISCLOSURES: |
| Interest paid | $ | 1,784 | $ | 749 |
| NONCASH INVESTING AND FINANCING ACTIVITIES: |
| Noncash reclass of prepaid license fees | $ | 15,000 |
| Amortization of commitment shares | $ | 351,961 | $ | 75,000 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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ATOSSA GENETICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: NATURE OF OPERATIONS
Atossa Genetics Inc. (the “Company”) was incorporated on April 30, 2009 in the State of Delaware. The Company’s operations began in December 2008 with the negotiations for the acquisition of the Mammary Aspirate Specimen Cytology Test System, or the MASCT System, patent rights and assignments and the FDA clearance for marketing, which acquisition was completed in January 2009. The Company was formed to develop and market the MASCT System, which is a medical device that collects specimens of nipple aspirate fluid (NAF). The Company’s fiscal year ends on December 31st.
In December 2011, the Company established The National Reference Laboratory for Breast Health, Inc., or NRLBH, as a wholly-owned subsidiary which performs the Company’s NAF cytology test on NAF specimens including those collected with the MASCT System. The NRLBH is certified by College of American Pathologists (CAP) and by Clinical Laboratory Improvement Amendments (CLIA). The current version of the MASCT System is called the ForeCYTE Breast Aspirator. The NRLBH is providing other test services, including the pharmacogenomics test which provides physicians with genetic information that can be used to guide therapeutic decisions and may mitigate the incidence of costly adverse drug reactions and improve efficiencies.
Since its inception, the Company has been dependent upon the receipt of capital investment to fund its continuing activities. In addition to the normal risks associated with a new business venture, there can be no assurance that the Company’s business plan will be successfully executed. The Company’s ability to execute its business plan will depend on its ability to obtain additional financing and achieve a profitable level of operations. There can be no assurance that sufficient financing will be obtained. Further, the Company cannot give any assurance that it will generate substantial revenue or that its business operations will prove to be profitable.
NOTE 2: GOING CONCERN
The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America (“GAAP”) applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses and negative operating cash flows since inception. For the three months ended March 31, 2015, the Company recorded a net loss of approximately $3.3 million and used approximately $3.0 million of cash in operating activities. As of March 31, 2015, the Company had approximately $9.7 million in cash and cash equivalents and working capital of approximately $7.9 million. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. The Company can give no assurances that any additional capital that it is able to obtain, if any, will be sufficient to meet its needs, or that any such financing will be obtainable on acceptable terms. If the Company is unable to obtain adequate capital, it could be forced to cease operations or substantially curtail is commercial activities. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should the Company be unable to continue as a going concern.
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Management’s Plan to Continue as a Going Concern
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities during 2015, (2) sales of the ForeCYTE and FullCYTE Breast Aspirators and laboratory service revenue in 2015 , and (3) short-term borrowings from the banks, stockholders or related party(ies), if needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.
NOTE 3: SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation:
The accompanying condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), have been condensed or omitted pursuant to those rules and regulations. The Company believes disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to fairly state the financial position, results of operations and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire fiscal year. Reference is made to the Company’s audited annual financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2014, which contain information useful to understanding the Company's business and financial statement presentations. The Condensed Consolidated Balance Sheet as of December 31, 2014 was derived from the Company's most recent audited financial statements, but does not include all disclosures required by GAAP for a year-end balance sheet. The Company’s significant accounting policies and practices are presented as Note 3 to the consolidated financial statements included in the Annual Report. The accompanying condensed consolidated financial statements include the financial statements of Atossa Genetics Inc. and its wholly-owned subsidiary NRLBH. All significant intercompany account balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in accordance with GAAP.
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 Issued Accounting Pronouncements:
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers: Topic 606 (“ASU 2014-09”), to supersede nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for the Company in the first quarter of 2017 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements.
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In August, 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU requires management to determine whether substantial doubt exists regarding the entity’s going concern presumption, which generally refers to an entity’s ability to meet its obligations as they become due. If substantial doubt exists but is not alleviated by management’s plan, the footnotes must specifically state that “there is substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued.” In addition, if substantial doubt exists, regardless of whether such doubt was alleviated, entities must disclose: (a) principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans, if any); (b) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; and (c) management’s plans that are intended to mitigate the conditions or events that raise substantial doubt, or that did alleviate substantial doubt, about the entity’s ability to continue as a going concern. If substantial doubt has not been alleviated, these disclosures should become more extensive in subsequent reporting periods as additional information becomes available. In the period that substantial doubt no longer exists (before or after considering management’s plans), management should disclose how the principal conditions and events that originally gave rise to substantial doubt have been resolved. The ASU applies prospectively to all entities for annual periods ending after December 15, 2016, and to annual and interim periods thereafter. Early adoption is permitted. The Company has not yet adopted the provisions of ASU 2014-15.
NOTE 4: PREPAID EXPENSES
Prepaid expenses consisted of the following:
| March 31, 2015 | December 31, 2014 |
| Prepaid insurance | 103,649 | 87,633 |
| Prepaid hardware and software | 41,313 | 38,268 |
| Retainer and security deposits | 25,000 | 25,000 |
| Lab supplies | 6,804 | 14,976 |
| Tradeshow and other marketing events | 5,995 | 50,000 |
| Other | 81,002 | 31,330 |
| Total prepaid expenses | $ | 263,763 | $ | 247,207 |

NOTE 5: FURNITURE AND EQUIPMENT
Furniture and equipment consisted of the following:
| March 31, 2015 | December 31, 2014 |
| Machinery and equipment | $ | 574,848 | $ | 522,813 |
| Leasehold improvements | 96,491 | 93,665 |
| Furniture and equipment | 671,339 | 616,478 |
| Less: Accumulated depreciation | (289,749 | ) | (258,946 | ) |
| Total furniture and equipment | $ | 381,590 | $ | 357,532 |

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Depreciation expense for the three months ended March 31, 2015 and 2014 was $30,802 and $21,171, respectively.
NOTE 6: INTANGIBLE ASSETS
Intangible assets consisted of the following:
| March 31, | December 31, |
| 2015 | 2014 |
| Patents | $ | 1,630,000 | $ | 1,630,000 |
| Capitalized license costs | 200,000 | 200,000 |
| Software | 214,212 | 203,038 |
| Intangible assets | 2,044,212 | 2,033,038 |
| Less: Accumulated amortization | (166,457 | ) | (112,393 | ) |
| Total intangible assets, net | $ | 1,877,755 | $ | 1,920,645 |

Intangible assets amounted to $1,877,755 and $1,920,645 as of March 31, 2015 and December 31, 2014, respectively, and consisted of patents, capitalized license costs and software acquired. The amortization period for the purchased software is 3 years. Amortization expense related to software for the three months ended March 31, 2015 and 2014 was $11,811 and $8,761, respectively.
Patents amounted to $1,630,000 as of March 31, 2015 and December 31, 2014, and mainly consisted of patents acquired from Acueity on September 30, 2012 in an asset purchase transaction. Patent assets are amortized based on their determined useful life, and tested annually for impairment. The amortization period was from 7 to 12 years. Amortization expense related to patents was $37,254 and $93,497 for the three months ended March 31, 2015 and 2014, respectively.
Capitalized license costs consist of fees paid to A5 Genetics KFT, Corporation, pursuant to which the Company received the world-wide (other than the European Union) exclusive license to use the software in the NextCYTE test. Amortization expense related to license costs was $5,000 and $1,668 for the three months ended March 31, 2015 and 2014, respectively.
Future estimated amortization expenses as of March 31, 2015 for the five succeeding years is as follows:
| For the Year Ending December 31, | Amounts |
| 2015 (includes the remainder of the year) | $ | 163,126 |
| 2016 | 228,529 |
| 2017 | 197,168 |
| 2018 | 169,325 |
| 2019 | 169,015 |
| Thereafter | 950,592 |
| $ | 1,877,755 |

NOTE 7: PAYROLL LIABILITIES:
Payroll liabilities consisted of the following:
| March 31, 2015 | December 31, 2014 |
| Accrued bonus payable | $ | 896,884 | $ | 752,828 |
| Accrued payroll liabilities | 157,959 | 109,653 |
| Accrued payroll tax liabilities | 224,685 | 194,224 |
| Total payroll liabilities | $ | 1,279,528 | $ | 1,056,705 |

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NOTE 8: ACCRUED EXPENSES:
Accrued expenses consisted of the following:
| March 31, 2015 | December 31, 2014 |
| Accrued commissions | $ | 924,825 | $ | 174,398 |
| Accrued expenses | 138,144 | 254,126 |
| Accrued royalties | 54,963 | 16,337 |
| Total accrued expenses | $ | 1,117,932 | $ | 444,861 |

NOTE 9: STOCKHOLDERS’ EQUITY
The Company is authorized to issue a total of 85,000,000 shares of stock consisting of 75,000,000 shares of Common Stock, par value $0.001 per share, and 10,000,000 shares of Preferred Stock, par value $0.001 per share. The Company has designated 750,000 shares of Series A Junior Participating Preferred Stock, par value $0.001 per share through the filing of certificate of designation with the Delaware Secretary of State.
On May 19, 2014, the Company adopted a stockholder rights agreement which provides that all stockholders of record on May 26, 2014 received a non-taxable distribution of one preferred stock purchase right for each share of the Company’s common stock held by such stockholder. Each right is attached to and trades with the associated share of common stock. The rights will become exercisable only if one of the following occurs: (1) a person becomes an “Acquiring Person” by acquiring beneficial ownership of 15% or more of the Company’s common stock (or, in the case of a person who beneficially owned 15% or more of the Company’s common stock on the date the stockholder rights agreement was executed, by acquiring beneficial ownership of additional shares representing 2.0% of the Company’s common stock then outstanding (excluding compensatory arrangements) or (2) a person commences a tender offer that, if consummated, would result in such person becoming an Acquiring Person. If a person becomes an Acquiring Person, each right will entitle the holder, other than the Acquiring Person and certain related parties, to purchase a number of shares of the Company’s common stock with a market value that equals twice the exercise price of the right. The initial exercise price of each right is $15.00, so each holder (other than the Acquiring Person and certain related parties) exercising a right would be entitled to receive $30.00 worth of the Company’s common stock. If the Company is acquired in a merger or similar business combination transaction at any time after a person has become an Acquiring Person, each holder of a right (other than the Acquiring Person and certain related parties) will be entitled to purchase a similar amount of stock of the acquiring entity.
2014 Public Offering of Common Stock and Warrants
On January 29, 2014, the Company closed a public offering of 5,834,234 units at the price of $2.40 per unit for total gross proceeds of approximately $14.0 million. Each unit consists of one share of common stock and a warrant to purchase 0.20 of a share of common stock (the “2014 Investor Warrants”). The 2014 Investor Warrants are exercisable at $3.00 per share and callable by the Company at $6.00 per share if certain conditions are met.
Placement Agent Fees
In connection with the 2014 Public Offering, the Company paid Dawson James Securities, Inc. (the “Placement Agent”), a cash fee equal to 7% of the gross proceeds from sale of the units, which resulted in a payment to the Placement Agent of an aggregate of $980,151 (the “Placement Agent Fee”). In addition, the Company entered into Warrant Agreements with the Placement Agent pursuant to which the Placement Agent received 175,027 warrants, or 3% of the aggregate number of shares sold in the offering (the “2014 Placement Agent Warrants” and together with the 2014 Investor Warrants, the “2014 Warrants”). Each 2014 Placement Agent Warrant entitles the Placement Agent to purchase one share of the Company’s common stock at $3.00 per share. The cash payment of the $980,151 2014 Placement Agent Fee and the $121,707 aggregated initial fair value of the 2014 Placement Agent Warrants (see Fair Value Considerations below) were directly attributable to an actual offering and were charged through additional paid-in capital in accordance with the SEC Staff Accounting Bulletin (SAB) Topic 5A.
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Warrants
The 2014 Warrants are exercisable at any time commencing after January 29, 2014 (the “Initial Exercise Date”). Subject to the call right described above, the 2014 Warrants shall expire and no longer be exercisable on the fifth anniversary of the Initial Exercise Date on November 29, 2018 (the “Expiration Date”). The 2014 Warrants cannot be exercised on a cashless basis. There are no redemption features embodied in the 2014 Warrants and they have met the conditions provided in current GAAP accounting standards for equity classification.
Outstanding Warrants
As of March 31, 2015, warrants to purchase 6,033,426 shares of common stock are outstanding including:
| Outstanding Warrants to purchase shares | Exercise price | Expiration date |
| 2011 private placement | 4,252,050 | $ | 1.25 - 1.60 | June 23, 2016 |
| Acueity warrants | 325,000 | 5.00 | September 30, 2017 |
| 2014 public offering | 1,166,849 | 3.00 | January 29, 2019 |
| Placement agent fees for Company’s offerings | 242,027 | 2.12 – 12.43 | March - November, 2018 |
| Outside consulting | 47,500 | $ | 4.24 | January 14, 2018 |
| 6,033,426 |

From March 4, 2015 to March 31, 2015 we sold 2,653,199 shares of Common Stock to Aspire Capital under the November 8, 2013 agreement with them, with total gross proceeds to the Company of $4,292,349.
NOTE 10: NET LOSS PER SHARE
The Company accounts for and discloses net loss per common share in accordance with FASB ASC Topic 260, Earnings Per Share. Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common shares for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon the exercise of stock options and warrants. Because the inclusion of potential common shares would be anti-dilutive for all periods presented, diluted net loss per common share is the same as basic net loss per common share.
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The following table sets forth the number of potential common shares excluded from the calculation of net loss per diluted share for the three-month ended March 31, 2015 and 2014 because the effect of them would be anti-dilutive since the Company recorded net losses for both periods:
| Three Months Ended March 31, |
| 2015 | 2014 |
| Options to purchase common stock | 4,354,418 | 2,246,651 |
| Warrants to purchase common stock | 6,033,426 | 4,775,550 |
| Restricted stock units | - | - |
| 10,387,844 | 7,022,201 |

NOTE 11: INCOME TAXES
Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
As a result of the Company’s cumulative losses, management has concluded that a full valuation allowance against the Company’s net deferred tax assets is appropriate. No income tax liabilities existed as of March 31, 2015 and December 31, 2014 due to the Company’s continuing operating losses.
NOTE 12: CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At March 31, 2015 and December 31, 2014, the Company had $9,478,369 and $8,250,718 in excess of the FDIC insured limit, respectively.
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NOTE 13: COMMITMENTS AND CONTINGENCIES
Affymetrix Purchase Commitment
In connection with the development of the NextCYTE test by the NRLBH, the NRLBH entered into an “OwnerChip Program Agreement” with Affymetrix, Inc. (“Affymetrix”), a manufacturer of GeneChip Systems, where Affymetrix has agreed to loan a GeneChip System 3000Dx v.2 (“instrument”) to the Company if it purchases and takes delivery of a minimum thirty GeneChip Human Genome U133 Plus 2.0 (30-pack) arrays at $21,590 per 30-pack for the next three years for a total purchase obligation of $647,700 with a minimum purchase of ten 30-pack arrays per contract year. At the end of the three year contract, upon fulfillment of the purchase commitment, the instrument title and ownership transfer to the NRLBH at no additional cost. Because the Company takes ownership of the equipment at the completion of the three-year contract, the Company determined that the arrangement represents a capital lease for the equipment. The Company recorded $206,702 as a capital lease for the equipment and began amortizing the equipment on a straight line basis over five years. In addition to the GeneChip Human Genome, the NRLBH must purchase a two year service contract for $51,600 to cover maintenance of the instrument during the contract period. The NRLBH placed an initial order for four 30-pack arrays during 2013 for $94,723. In September 2014, the NRLBH purchased six additional 30-pack arrays for $142,005.
The future minimum payments for the Affymetrix capital lease are as follows:
| Year Ending December 31, | Amount |
| 2015 | $ | 53,045 |
| 2016 | 49,194 |
| Total minimum lease payments | $ | 102,239 |

A5 Software Development Commitment
On June 10, 2013 the Company entered into an irrevocable license and service agreement with A5 Genetics KFT, Corporation (“A5 Genetics”), pursuant to which the Company received the world-wide (other than the European Union) exclusive license to the software used in the NextCYTE test. The Company has the right to prosecute patents related to this software, two of which the Company has filed in the United States. The patent applications have been assigned to the Company. The Company paid a one-time fee of $100,000 to A5 Genetics in 2013 and in March 2014 the Company completed software validation and paid an additional $100,000 to A5 Genetics. The Company is obligated to pay up to an additional $1.2 million to A5 Genetics upon receiving the regulatory clearance for the NextCYTE test. The Company must also pay a royalty of $50 for each NextCYTE test performed and a service fee of $65 for each NextCYTE test performed. The NextCYTE test is still in validation stage and no royalty or service fees have been paid as of March 31, 2015. The agreement terminates on the later of June 10, 2023 or the expiration of the latest patents covering the software.
Luminex Reagent Rental Agreement and Assay License Agreement
On September 2, 2014, in connection with the development of a pharmacogenomics test by the NRLBH, the NRLBH entered into a three-year rental agreement with Luminex Corporation (Luminex), which provides that the NRLBH acquires the right to use Luminex instruments, including accessories, peripherals and options (the “System”) at no cost if the NRLBH purchases goods (the “Products”) at agreed upon quantities and prices for the next three years. The minimum purchases of Products under the agreement are $452,408 per year. The title to the System remains with Luminex and the NRLBH is required to return the System to Luminex at the end of the three-year rental agreement.
BioVentive Laboratory Marketing Service Agreement
On August 28, 2014, the NRLBH entered into a three year Laboratory Marketing Services Agreement with BioVentive, Inc. (“BioVentive”), which provides that BioVentive market and promote the NRLBH laboratory tests to licensed physicians practicing medicine for a fee. The agreement may be terminated prior to the end of the three year term by either party for material breach that is not cured and the NRLBH may terminate if BioVentive fails to meet certain minimums or if the NRLBH undergoes a change of control. If the agreement is terminated by the NRLBH for any reason other than for cause (which includes a material uncured breach by BioVentive or if BioVentive fails to meet certain minimums), the NRLBH is required to pay BioVentive a termination fee equal to approximately three months of fees otherwise payable to BioVentive.
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Targeted Medical Education (TME) Master Service Agreement
On September 1, 2014, the NRLBH entered into a three year agreement with TME Research LLC (TME) which requires TME to provide to the NRLBH 100 tissue specimens in connection with the development of the NextCYTE test. Fees payable to TME under the agreement includes $99,600 up front, $31,500 upon supplying the first 25 specimens and $31,500 at the time of final delivery of all specimens. The agreement is terminable with 60 days prior written notice or immediately upon a material breach. As of March 31, 2015, the Company has paid $162,600 in fees, which were recorded as R&D expenses.
Litigation and Contingencies
On October 10, 2013, a putative securities class action complaint, captioned Cook v. Atossa Genetics, Inc., et al., No. 2:13-cv-01836-RSM, was filed in the United States District Court for the Western District of Washington against us, certain of the Company’s directors and officers and the underwriters of the Company November 2012 initial public offering. The complaint alleges that all defendants violated Sections 11 and 12(a)(2), and that the Company and certain of its directors and officers violated Section 15, of the Securities Act by making material false and misleading statements and omissions in the offering’s registration statement, and that we and certain of our directors and officers violated Sections 10(b) and 20A of the Exchange Act and SEC Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions in the registration statement and in certain of our subsequent press releases and SEC filings with respect to our NAF specimen collection process, our ForeCYTE Breast Health Test and our MASCT device. This action seeks, on behalf of persons who purchased our common stock between November 8, 2012 and October 4, 2013, inclusive, damages of an unspecific amount.
On February 14, 2014, the Court appointed plaintiffs Miko Levi, Bandar Almosa and Gregory Harrison (collectively, the “Levi Group”) as lead plaintiffs, and approved their selection of co-lead counsel and liaison counsel. The Court also amended the caption of the case to read In re Atossa Genetics, Inc. Securities Litigation. No. 2:13-cv-01836-RSM. An amended complaint was filed on April 15, 2014. The Company and other defendants filed motions to dismiss the amended complaint on May 30, 2014. On October 6, 2014 the Court granted defendants’ motion dismissing all claims against Atossa and all other defendants. On October 30, 2014, the Court entered a final order of dismissal. On November 3, 2014, plaintiffs filed a notice of appeal with the Court and have appealed the Court’s dismissal order to the U.S. Court of Appeals for the Ninth Circuit. On February 11, 2015, plaintiffs filed their opening appellate brief. Defendants filed an answer on April 13, 2015. If plaintiffs choose to file a reply brief in support of their appeal, it is due May 18, 2015. A hearing for the appeal has not been set.
The Company believes this lawsuit is without merit and plans to defend itself vigorously; however, failure by the Company to obtain a favorable resolution of the claims set forth in the complaint could have a material adverse effect on the Company’s business, results of operations and financial condition. Currently, the amount of such material adverse effect cannot be reasonably estimated, and no provision or liability has been recorded for these claims as of March 31, 2015. The costs associated with defending and resolving the lawsuit and ultimate outcome cannot be predicted. These matters are subject to inherent uncertainties and the actual cost, as well as the distraction from the conduct of the Company’s business, will depend upon many unknown factors and management’s view of these may change in the future.
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NOTE 14: STOCK BASED COMPENSATION
Stock Options and Incentive Plan
On September 28, 2010, the Board of Directors approved the adoption of the 2010 Stock Option and Incentive Plan, or the 2010 Plan, to provide for the grant of equity-based awards to employees, officers, non-employee directors and other key persons providing services to the Company. Awards of incentive options may be granted under the 2010 Plan until September 2020. No other awards may be granted under the 2010 Plan after the date that is 10 years from the date of stockholder approval. An aggregate of 1,000,000 shares were initially reserved for issuance in connection with awards granted under the 2010 Plan, such number of shares to be subject to adjustment as provided in the plan and in any award agreements entered into by the Company under the plan, and upon the exercise or conversion of any awards granted under the plan. On January 1, 2012, 450,275 shares were added to the 2010 Plan and on January 1, 2013, 516,774 shares were added to the 2010 Plan, on January 1, 2014, 742,973 shares, on January 1, 2015, 983,362 shares were added to the 2010 plan as provided under the terms of the 2010 Plan.
The Company granted options to purchase 768,322 shares of common stock to employees and directors during the three months ended March 31, 2015. There are 743,966 options available for grant under the 2010 Plan as of March 31, 2015.
Compensation costs associated with the Company’s stock options are recognized, based on the grant-date fair values of these options, over the requisite service period, or vesting period. Accordingly, the Company recognized stock based compensation expense of $180,628 and $230,181 for the three months ended March 31, 2015 and 2014, respectively.
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| Three Months Ended March 31, |
| 2015 | 2014 |
| General and administrative | $ | 129,360 | $ | 209,629 |
| Research and development | 18,970 | 4,627 |
| Selling | 32,298 | 15,926 |
| Total stock compensation expense | $ | 180,628 | $ | 230,181 |

The following table presents information concerning stock option grants for the three months ended March 31, 2015:
| Employees | Executives & Officers |
| Date of Grant | January –March 2015 | January – March 2015 |
| Fair value of common stock on date of grant | $ | 1.19 – 1.59 | $ | 1.59 |
| Exercise price of the options | $ | 1.40 – 1.88 | $ | 1.88 |
| Expected life of the options (years) | 6.04-6.13 | 6.06 |
| Dividend yield | 0.00 | % | 0.00 | % |
| Expected volatility | 113.5- 115 | % | 113.5 | % |
| Risk-free interest rate | 1.64 – 1.79 | % | 1.74 | % |
| Expected forfeiture per year (%) | 10.00 | % | 10.00 | % |
| Weighted average fair value of the options per unit | $ | 1.56 | $ | 1.59 |

Options issued and outstanding as of March 31, 2015 and their activities during the three months then ended are as follows:
| Number of Underlying Shares | Weighted- Average Exercise Price Per Share | Weighted- Average Contractual Life Remaining in Years | Aggregate Intrinsic Value |
| Outstanding as of January 1, 2015 | 3,675,634 | $ | 2.86 | $ | 344,000 |
| Granted | 768,322 | 1.56 |
| Forfeited | (89,538 | ) | 0.70 | 51,750 |
| Exercised | - | - |
| Outstanding as of March 31, 2015 | 4,354,418 | 2.71 | 8.20 | $ | 884,650 |
| Exercisable as of March 31, 2015 | 1,494,728 | 4.21 | 6.23 | $ | 140,282 |
| Vested and expected to vest (1) | 3,967,136 | $ | 2.79 | 8.09 | $ | 797,960 |

(1) vested shares and unvested shares after a forfeiture rate is applied
At March 31, 2015, there were 2,859,690 unvested options outstanding and the related unrecognized total compensation cost associated with these options was $2,302,162. This expense is expected to be recognized over a weighted-average period of 3.16 years.
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NOTE 15: SUBSEQUENT EVENTS
All subsequent events requiring recognition as of March 31, 2015 have been incorporated into these consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events”.
ITEM 3
Quantitative and Qualitative Disclosures about Market Risk
25
ITEM 4. CONTROLS AND PROCEDURES
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2015. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2015, our principal executive officer and principal financial officer concluded that, as of such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
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No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 10, 2013, a putative securities class action complaint, captioned Cook v. Atossa Genetics, Inc., et al., No. 2:13-cv-01836-RSM, was filed in the United States District Court for the Western District of Washington against us, certain of our directors and officers and the underwriters of our November 2012 initial public offering. The complaint alleges that all defendants violated Sections 11 and 12(a)(2), and that we and certain of our directors and officers violated Section 15, of the Securities Act by making material false and misleading statements and omissions in the offering’s registration statement, and that we and certain of our directors and officers violated Sections 10(b) and 20A of the Exchange Act and SEC Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions in the registration statement and in certain of our subsequent press releases and SEC filings with respect to our NAF specimen collection process, our ForeCYTE Breast Health Test and our MASCT device. This action seeks, on behalf of persons who purchased our common stock between November 8, 2012 and October 4, 2013, inclusive, damages of an unspecific amount.
On February 14, 2014, the Court appointed plaintiffs Miko Levi, Bandar Almosa and Gregory Harrison (collectively, the “Levi Group”) as lead plaintiffs, and approved their selection of co-lead counsel and liaison counsel. The Court also amended the caption of the case to read In re Atossa Genetics, Inc. Securities Litigation. No. 2:13-cv-01836-RSM. An amended complaint was filed on April 15, 2014. The Company and other defendants filed motions to dismiss the amended complaint on May 30, 2014. On October 6, 2014 the Court granted defendants’ motion dismissing all claims against Atossa and all other defendants. On October 30, 2014, the Court entered a final order of dismissal. On November 3, 2014, plaintiffs filed a notice of appeal with the Court and have appealed the Court’s dismissal order to the U.S. Court of Appeals for the Ninth Circuit. On February 11, 2015, plaintiffs filed their opening appellate brief. Defendants filed an answering brief on April 13, 2015. If plaintiffs choose to file a reply brief in support of their appeal, it is due May 18, 2015. A hearing for the appeal has not been set.
The Company believes this complaint is without merit and plan to defend ourselves vigorously; however failure to obtain a favorable resolution of the claims set forth in the complaint could have a material adverse effect on the Company’s business, results of operations and financial condition. Currently, the amount of such material adverse effect cannot be reasonably estimated, and no provision or liability has been recorded for these claims as of March 31, 2015. The costs associated with defending and resolving the complaint and ultimate outcome cannot be predicted. These matters are subject to inherent uncertainties and the actual cost, as well as the distraction from the conduct of our business, will depend upon many unknown factors and management’s view of these may change in the future.
RISK FACTORS
A purchase of our shares of Common Stock is an investment in our securities and involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this report, before purchasing our securities. If any of the following risks actually occur, our business, financial condition and results of operations would likely suffer. In that case, the market price of the Common Stock could decline, and you may lose part or all of your investment in our company. Additional risks of which we are not presently aware or that we currently believe are immaterial may also harm our business and results of operations.
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There has been no material changes to the risk factors described in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 30, 2015, except for the following items which have been updated.
Anticipated liquidity issues in the next four to twelve months.
For the quarter ended March 31, 2015, we generated $1,873,268 in revenue and we incurred a net loss of $3,335,291. Through March 31, 2015, we had an accumulated deficit of approximately $38.5 million. We expect that our existing resources will be sufficient to fund our planned operations through 2015. No shares are available for sale to Aspire Capital under our November 8, 2013 agreement with them. We have not yet established an ongoing source of revenue sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable. We may not be successful in launch of ForeCYTE and FullCYTE Breast Aspirators and other sources of capital may not be available when we need them or on acceptable terms. If we are unable to raise in a timely fashion the amount of capital we anticipate needing, from Aspire or otherwise, we would be forced to curtail or cease operations.
Changes in regulations and policies, including adverse coverage decisions by Medicare Administrative Contractors, or changes in payor mix may adversely affect reimbursement for laboratory services and could have a material adverse impact on our revenue and profitability.
Most of our services are billed to a party other than the physician who ordered the test, including for example, Medicare and commercial insurance companies. The majority of our pharmacogenomics tests are billed to Medicare. Reimbursement levels for healthcare services are subject to continuous and often unexpected changes in policies. Changes in governmental and third party reimbursement rates and policies may result from statutory and regulatory changes, retroactive rate adjustments, administrative rulings, competitive bidding initiatives, and other policy changes. Uncertainty also exists as to the coverage and reimbursement status of new services, including our pharmacogenomics test and NAF test both of which are relatively new services.
Government payors and insurance companies have increased their efforts to control the cost, utilization, and delivery of healthcare services. For example, at least yearly, Congress has considered and enacted changes in the Medicare fee schedule in conjunction with budgetary legislation. Further reductions of reimbursement for Medicare services or changes in policy regarding coverage of tests may be implemented from time to time. The payment amounts under the Medicare fee schedules are often used as a reference for the payment amounts set by other third party payors. As a result, a reduction in Medicare reimbursement rates could result in a corresponding reduction in the reimbursements we may receive from such third party payors. Changes in test coverage policies of other third party payors may also occur. Such reimbursement and coverage changes in the past have resulted in reduced prices, added costs and reduced accession volume, and have imposed more complex regulatory and administrative burdens. Further changes in federal, state, and local third party payor laws, regulations, or policies may have a material adverse impact on our business.
Adverse coverage decisions by Medicare Administrative Contractors could have a material adverse impact on our revenue and operations.
The majority of the pharmacogenomics tests performed by the NRLBH have been for Medicare patients and at an average Medicare rate of approximately $1,100 per test. On May 7, 2015, the Medicare Administrative Contractor covering the region in which the NRLBH operates issued a local coverage determination, or LCD, that affects the Medicare reimbursement we expect to receive for our pharmacogenomics tests for tests performed on or after the effective date of the LCD which is June 22, 2015. The LCD provides that Medicare reimbursement will be provided for pharmacogenomics tests only for patients on a few specific drugs or for specific conditions at the reimbursement rate of $243 to $669 per test, depending on the drug and condition, which is lower than our historic average reimbursement. Most of the pharmacogenomics tests previously performed by the NRLBH have been for drugs and conditions for which Medicare reimbursement will not be available under the new LCD after it becomes effective. This new LCD could significantly reduce the rate at which the NRLBH is reimbursed and could reduce the types of pharmaceuticals and conditions for which reimbursement is available, which could have a significant adverse impact on our revenues and operations.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
| (a) | Exhibits |

| 21 | Subsidiaries of the Registrant |

| 31.1 | Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 of Steven C. Quay |

| 31.2 | Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 of Kyle Guse |

| 32.1 | Certification pursuant to 18 U.S.C. Section 1350 of Steven C. Quay |

| 32.2 | Certification pursuant to 18 U.S.C. Section 1350 of Kyle Guse |

| 101* | Interactive Data Files pursuant to Rule 405 of Regulation S-T |

| 28 |

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 13, 2015
| /s/ Steven C. Quay |
| President and Chief Executive Officer |
| (On behalf of the Registrant) |

| /s/ Kyle Guse |
| Kyle Guse |
| Chief Financial Officer, General Counsel and Secretary |
| (As Principal Financial and Accounting Officer) |

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Question: What is the difference between the total stockholders' equity at the end of 2014 and the company's net loss for the three months ended March 30, 2015, plus the company's intangible assets as of March 31, 2015 in dollars?

Python solution:
def solution():
    #Define variables name and value
    total_equity_end_2014 = 9498127
    net_loss_end_March_2015 = 3335291
    intangible_assets_end_March_2015 = 1877755

    #Do math calculation to get the answer
    difference = total_equity_end_2014 - (net_loss_end_March_2015 + intangible_assets_end_March_2015)
    return difference


Answer: 4285081