UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,December 31, 2020
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission File Number: 001-38892
BEYOND AIR, INC.
(Exact name of registrant as specified in its charter)
Delaware | 47-3812456 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
825 East Gate Boulevard, Suite 320 | ||
Garden City, NY | 11530 | |
(Address of principal executive offices) | (Zip Code) |
516-665-8200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: | Trading Symbol | Name of each exchange on which registered: | ||
Common Stock, par value $0.0001 per share | XAIR | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer [ ] | Accelerated Filer [ ] | |
Non-accelerated filer [X] | Smaller reporting company [X] | |
Emerging growth company [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 6, 2020,February 5, 2021, there were 17,343,76120,486,527 shares of common stock, par value $0.0001 per share, outstanding.
BEYOND AIR, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q FILING
FOR THE PERIOD ENDED SEPTEMBER 30,DECEMBER 31, 2020
Table of Contents
SIGNATURES | 37 |
ITEM 1. Financial Statements.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
INDEX
BEYOND AIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2020 | March 31, 2020 | December 31, 2020 | March 31, 2020 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 21,716,778 | $ | 19,829,275 | $ | 22,016,310 | $ | 19,829,275 | ||||||||
Restricted cash | 636,444 | 5,635,836 | 637,699 | 5,635,836 | ||||||||||||
Other current assets and prepaid expenses | 438,910 | 1,149,806 | 425,362 | 1,149,806 | ||||||||||||
Total current assets | 22,792,132 | 26,614,917 | 23,079,371 | 26,614,917 | ||||||||||||
Licensed right to use technology | 393,725 | 412,763 | 384,206 | 412,763 | ||||||||||||
Right-of-use lease assets | 378,188 | 195,727 | 357,871 | 195,727 | ||||||||||||
Property and equipment, net | 868,868 | 211,337 | 956,759 | 211,337 | ||||||||||||
Other assets | 38,880 | - | 38,880 | - | ||||||||||||
TOTAL ASSETS | $ | 24,471,793 | $ | 27,434,744 | $ | 24,817,087 | $ | 27,434,744 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable | $ | 1,825,767 | $ | 2,256,229 | $ | 1,223,839 | $ | 2,256,229 | ||||||||
Accrued expenses | 1,347,505 | 1,097,534 | 1,434,087 | 1,097,534 | ||||||||||||
Deferred revenue | 294,422 | 873,190 | 145,628 | 873,190 | ||||||||||||
Stock to be issued to a vendor | - | 240,000 | - | 240,000 | ||||||||||||
Operating lease liability | 82,003 | 69,342 | 84,388 | 69,342 | ||||||||||||
Loan payable | 84,280 | 335,358 | - | 335,358 | ||||||||||||
Total current liabilities | 3,633,977 | 4,871,653 | 2,887,942 | 4,871,653 | ||||||||||||
Long-term liabilities | ||||||||||||||||
Operating lease liability | 301,664 | 131,581 | 279,594 | 131,581 | ||||||||||||
Facility agreement loan, net | 4,405,815 | 4,339,065 | 4,439,373 | 4,339,065 | ||||||||||||
Total liabilities | 8,341,456 | 9,342,299 | 7,606,909 | 9,342,299 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Shareholders’ equity | ||||||||||||||||
Preferred stock, $0.0001 par value per share: 10,000,000 shares authorized, 0 shares issued and outstanding | - | - | - | - | ||||||||||||
Common stock, $0.0001 par value per share: 100,000,000 shares authorized, 17,152,414 and 16,056,360 shares issued and outstanding as of September 30, 2020 and March 31, 2020, respectively | 1,715 | 1,606 | ||||||||||||||
Common stock, $0.0001 par value per share: 100,000,000 shares authorized, 18,381,227 and 16,056,360 shares issued and outstanding as of December 31, 2020 and March 31, 2020, respectively | 1,838 | 1,606 | ||||||||||||||
Treasury stock | (25,000 | ) | (25,000 | ) | (25,000 | ) | (25,000 | ) | ||||||||
Additional paid-in capital | 85,614,292 | 75,702,915 | 92,463,661 | 75,702,915 | ||||||||||||
Accumulated deficit | (69,460,670 | ) | (57,587,076 | ) | (75,230,321 | ) | (57,587,076 | ) | ||||||||
Total shareholders’ equity | 16,130,337 | 18,092,445 | 17,210,178 | 18,092,445 | ||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 24,471,793 | 27,434,744 | $ | 24,817,087 | 27,434,744 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BEYOND AIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended | For the Six Month Ended | For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | December 31, | December 31, | |||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
License revenues | $ | 349,607 | $ | 645,602 | $ | 578,768 | $ | 1,273,071 | $ | 148,794 | $ | 314,379 | $ | 727,562 | $ | 1,587,450 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Research and development | 3,147,276 | 2,849,990 | 7,479,090 | 5,173,503 | 3,294,102 | 2,580,622 | 10,773,192 | 7,754,125 | ||||||||||||||||||||||||
General and administrative | 2,169,011 | 2,064,872 | 4,663,025 | 4,247,430 | 2,471,065 | 2,471,714 | 7,134,090 | 6,719,144 | ||||||||||||||||||||||||
Operating expenses | 5,316,287 | 4,914,862 | 12,142,115 | 9,420,933 | 5,765,167 | 5,052,336 | 17,907,282 | 14,473,269 | ||||||||||||||||||||||||
Operating loss | (4,966,680 | ) | (4,269,260 | ) | (11,563,347 | ) | (8,147,862 | ) | (5,616,373 | ) | (4,737,957 | ) | (17,179,720 | ) | (12,885,819 | ) | ||||||||||||||||
Other income (loss) | ||||||||||||||||||||||||||||||||
Realized and unrealized gain (loss) from marketable securities | - | 142,806 | - | (2,164,513 | ) | - | 314,889 | - | (1,849,624 | ) | ||||||||||||||||||||||
Dividend and interest income | 878 | 30,691 | 15,863 | 34,067 | 378 | 25,692 | 16,241 | 59,759 | ||||||||||||||||||||||||
Interest expense | (159,034 | ) | - | (322,274 | ) | - | (157,960 | ) | - | (480,234 | ) | - | ||||||||||||||||||||
Foreign exchange loss | (6,954 | ) | (1,977 | ) | (5,679 | ) | (253 | ) | ||||||||||||||||||||||||
Other income | - | - | 1,843 | - | ||||||||||||||||||||||||||||
Foreign exchange gain (loss) | 6,147 | 1,765 | 468 | 1,512 | ||||||||||||||||||||||||||||
Other loss | (1,843 | ) | - | - | ||||||||||||||||||||||||||||
Total other income (loss) | (165,110 | ) | 171,520 | (310,247 | ) | (2,130,699 | ) | (153,278 | ) | 342,346 | (463,525 | ) | (1,788,353 | ) | ||||||||||||||||||
Net loss | $ | (5,131,790 | ) | $ | (4,097,740 | ) | $ | (11,873,594 | ) | $ | (10,278,561 | ) | $ | (5,769,651 | ) | $ | (4,395,611 | ) | $ | (17,643,245 | ) | $ | (14,674,172 | ) | ||||||||
Deemed dividend from warrant modification | - | (522,478 | ) | - | (522,478 | ) | ||||||||||||||||||||||||||
Net loss attributed to common shareholders | $ | (5,769,651 | ) | $ | (4,918,089 | ) | $ | (17,643,245 | ) | $ | (15,196,650 | ) | ||||||||||||||||||||
Net basic and diluted loss per share | $ | (0.30 | ) | $ | (0.38 | ) | $ | (0.71 | ) | $ | (1.03 | ) | $ | (0.33 | ) | $ | (0.43 | ) | $ | (1.03 | ) | $ | (1.46 | ) | ||||||||
Weighted average number of shares of common stock used in computing basic and diluted net loss per share | 17,120,801 | 10,699,370 | 16,826,712 | 9,935,444 | 17,609,328 | 11,398,413 | 17,086,871 | 10,437,690 |
The accompanying notes are an integral part of these condensed consolidated financial statements
BEYOND AIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
FOR THE THREE AND SIXNINE MONTHS ENDED SEPTEMBER 30,DECEMBER 31, 2020
Common Stock | Treasury | Additional Paid-in | Accumulated | Total Shareholders’ | Common Stock | Treasury | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||||||||||||||
Number | Amount | Stock | Capital | Deficit | Equity | Number | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||||||||||||||||||||
Balance as of April 1, 2020 | 16,056,360 | $ | 1,606 | $ | (25,000 | ) | $ | 75,702,915 | $ | (57,587,076 | ) | $ | 18,092,445 | 16,056,360 | $ | 1,606 | $ | (25,000 | ) | $ | 75,702,915 | $ | (57,587,076 | ) | $ | 18,092,445 | ||||||||||||||||||||||
At the market stock issuance of common stock, net | 113,712 | 11 | - | 899,529 | - | 899,540 | 113,712 | 11 | - | 899,529 | - | 899,540 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of warrants | 70,538 | 7 | 293,104 | 293,111 | 70,538 | 7 | 293,104 | 293,111 | ||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 2,340 | - | - | 545 | - | 545 | 2,340 | - | - | 545 | - | 545 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock pursuant to a Purchase Agreement, net | 568,605 | 57 | - | 3,641,623 | - | 3,641,680 | 568,605 | 57 | - | 3,641,623 | - | 3,641,680 | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | 1,813,654 | 1,813,654 | 1,813,654 | 1,813,654 | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock to investor relations firm | 30,000 | 3 | - | 242,097 | - | 242,100 | 30,000 | 3 | - | 242,097 | - | 242,100 | ||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | (6,741,804 | ) | (6,741,804 | ) | - | - | - | - | (6,741,804 | ) | (6,741,804 | ) | ||||||||||||||||||||||||||||||||
Balance as of June 30, 2020 | 16,841,555 | $ | 1,684 | $ | (25,000 | ) | $ | 82,593,467 | $ | (64,328,880 | ) | $ | 18,241,271 | 16,841,555 | $ | 1,684 | $ | (25,000 | ) | $ | 82,593,467 | $ | (64,328,880 | ) | $ | 18,241,271 |
Common Stock | Treasury | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||
Number | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||
Balance as of July 1, 2020 | 16,841,555 | $ | 1,684 | $ | (25,000 | ) | $ | 82,593,467 | $ | (64,328,880 | ) | $ | 18,241,271 | |||||||||||
At the market stock issuance of common stock, net | 227,527 | 23 | - | 1,536,224 | - | 1,536,247 | ||||||||||||||||||
Issuance of common stock upon exercise of warrants | 83,332 | 8 | - | 304,987 | - | 304,995 | ||||||||||||||||||
Stock-based compensation | 1,179,614 | 1,179,614 | ||||||||||||||||||||||
Net loss | - | - | - | - | (5,131,790 | ) | (5,131,790 | ) | ||||||||||||||||
Balance as of September 30, 2020 | 17,152,414 | $ | 1,715 | $ | (25,000 | ) | $ | 85,614,292 | $ | (69,460,670 | ) | $ | 16,130,337 |
Common Stock | Treasury | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||
Number | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||
Balance as of October 1, 2020 | 17,152,414 | $ | 1,715 | $ | (25,000 | ) | $ | 85,614,292 | $ | (69,460,670 | ) | $ | 16,130,337 | |||||||||||
At the market stock issuance of common stock, net | 575,448 | 57 | - | 3,131,290 | - | 3,131,347 | ||||||||||||||||||
Issuance of common stock pursuant to a Purchase Agreement, net | 463,162 | 46 | - | 2,433,501 | - | 2,433,547 | ||||||||||||||||||
Issuance of vested restricted stock | 135,000 | 14 | - | (14 | ) | - | ||||||||||||||||||
Issuance of common stock upon exercise of warrants | 55,203 | 6 | - | 223,829 | - | 223,835 | ||||||||||||||||||
Stock-based compensation | 1,060,763 | 1,060,763 | ||||||||||||||||||||||
Net loss | - | - | - | - | (5,769,651 | ) | (5,769,651 | ) | ||||||||||||||||
Balance as of December 31, 2020 | 18,381,227 | $ | 1,838 | $ | (25,000 | ) | $ | 92,463,661 | $ | (75,230,321 | ) | $ | 17,210,178 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BEYOND AIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR
(UNAUDITED)
FOR THE THREE AND SIXNINE MONTHS ENDED SEPTEMBER 30,DECEMBER 31, 2019
Common Stock | Treasury | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||
Number | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||
Balance as of April 1, 2019 | 8,714,815 | $ | 871 | $ | (25,000 | ) | $ | 41,693,578 | $ | (37,644,572 | ) | $ | 4,024,877 | |||||||||||
At the market stock issuance of common stock, net | 250,000 | 25 | - | 1,173,785 | - | 1,173,810 | ||||||||||||||||||
Issuance of common stock upon exercise of options | 32,122 | 3 | - | 83,854 | - | 83,857 | ||||||||||||||||||
Issuance of common stock pursuant to a private placement, net of offering cost | 1,583,743 | 159 | - | 7,839,336 | - | 7,839,495 | ||||||||||||||||||
Stock-based compensation | 919,037 | 919,037 | ||||||||||||||||||||||
Net loss | - | - | - | - | (6,180,821 | ) | (6,180,821 | ) | ||||||||||||||||
Balance as of June 30, 2019 | 10,580,680 | $ | 1,058 | $ | (25,000 | ) | $ | 51,709,590 | $ | (43,825,393 | ) | $ | 7,860,255 |
Common Stock | Treasury | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||
Number | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||
Balance as of July 1, 2019 | 10,580,680 | $ | 1,058 | $ | (25,000 | ) | $ | 51,709,590 | $ | (43,825,393 | ) | $ | 7,860,255 | |||||||||||
Issuance of common stock pursuant to a Purchase Agreement, net | 160,000 | 16 | - | 808,168 | - | 808,184 | ||||||||||||||||||
Issuance of common stock upon exercise of options | 6,100 | 1 | - | 25,924 | - | 25,925 | ||||||||||||||||||
Stock-based compensation | 922,997 | 922,997 | ||||||||||||||||||||||
Net loss | - | - | - | - | (4,097,740 | ) | (4,097,740 | ) | ||||||||||||||||
Balance as of September 30, 2019 | 10,746,780 | $ | 1,075 | $ | (25,000 | ) | $ | 53,466,679 | $ | (47,923,133 | ) | $ | 5,519,621 |
Common Stock | Treasury | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||
Number | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||
Balance as of October 1, 2019 | 10,746,780 | $ | 1,075 | $ | (25,000 | ) | $ | 53,466,679 | $ | (47,923,133 | ) | $ | 5,519,621 | |||||||||||
Issuance of common stock, pursuant to an underwriter offering and a private placement, net | 3,152,985 | 315 | - | 10,169,028 | - | 10,169,343 | ||||||||||||||||||
Incremental value of warrants due to a warrant modification | 552,478 | 522,478 | ||||||||||||||||||||||
Deemed dividend due to a warrant modification | (522,478 | ) | (522,478 | ) | ||||||||||||||||||||
Issuance of common stock upon exercise of options | 1,980 | - | - | 8,168 | - | 8,168 | ||||||||||||||||||
Stock-based compensation | 714,574 | 714,574 | ||||||||||||||||||||||
Net loss | - | - | - | - | (4,395,611 | ) | (4,395,611 | ) | ||||||||||||||||
Balance as of December 31, 2019 | 13,901,745 | $ | 1,390 | $ | (25,000 | ) | $ | 64,358,449 | $ | (52,318,744 | ) | $ | 12,016,095 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BEYOND AIR, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended December 31, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (17,643,245 | ) | $ | (14,674,172 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Depreciation and amortization | 125,036 | 57,009 | ||||||
Amortization of licensed right to use technology | 30,409 | 72,718 | ||||||
Stock-based compensation | 4,056,131 | 2,569,508 | ||||||
Deferred revenue | (727,562 | ) | (1,587,450 | ) | ||||
Amortization of debt discount and accretion of debt issuance costs | 100,308 | - | ||||||
Operating leases | 906 | 6,824 | ||||||
Gain on cancellation of operating lease | (1,843 | ) | - | |||||
Realized and unrealized loss on marketable equity securities | - | 1,849,624 | ||||||
Foreign currency adjustments | (468 | ) | - | |||||
Changes in: | ||||||||
Other current assets and prepaid expenses | 685,563 | 358,629 | ||||||
Accounts payable | (1,031,922 | ) | 849,259 | |||||
Accrued expenses | 336,552 | 107,431 | ||||||
Net cash used in operating activities | (14,070,135 | ) | (10,390,620 | ) | ||||
Cash flows from investing activities | ||||||||
Investment in marketable equity securities | - | (32,970,684 | ) | |||||
Proceeds from redemption of marketable securities | - | 24,963,763 | ||||||
Purchase of property and equipment | (870,457 | ) | (28,248 | ) | ||||
Net cash used in investing activities | (870,457 | ) | (8,035,169 | ) | ||||
Cash flows from financing activities | ||||||||
Issuance of common stock in connection with a Purchase Agreement with Lincoln Park, At the Market Offerings, private placement, net, exercise of warrants and stock options | 12,464,848 | 20,020,200 | ||||||
Payment of loan | (335,358 | ) | (175,022 | ) | ||||
Net cash provided by financing activities | 12,129,490 | 19,845,178 | ||||||
(Decrease) increase in cash, cash equivalents and restricted cash | (2,811,102 | ) | 1,419,389 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 25,465,111 | 1,357,137 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 22,654,009 | $ | 2,776,526 | ||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||
Right-of-use assets | $ | 236,700 | $ | 258,605 | ||||
Operating lease liability | $ | 236,700 | $ | 266,570 | ||||
Disposition of right-of-use asset | $ | (17,486 | ) | $ | - | |||
Disposition of operating lease liability | $ | 19,329 | $ | - | ||||
Stock issued to investor relations firm | $ | 242,100 | - | |||||
Deemed dividend as a result of a warrant modification | $ | - | $ | 522,478 | ||||
Supplemental disclosure of cash flow items: | ||||||||
Interest paid | $ | 340,779 | $ | 3,832 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (11,873,594 | ) | $ | (10,278,561 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Depreciation and amortization | 73,608 | 33,819 | ||||||
Amortization of licensed right to use technology | 19,038 | 63,199 | ||||||
Stock-based compensation | 2,995,368 | 1,836,034 | ||||||
Deferred revenue | (578,768 | ) | (1,273,071 | ) | ||||
Amortization of debt discount and accretion of debt issuance costs | 66,750 | - | ||||||
Amortization of operating lease assets | 36,427 | 30,578 | ||||||
Gain on cancellation of operating lease | (1,843 | ) | - | |||||
Realized and unrealized loss on marketable equity securities | - | 2,164,513 | ||||||
Foreign currency adjustments | 5,679 | - | ||||||
Changes in: | ||||||||
Other current assets and prepaid expenses | 672,014 | 374,374 | ||||||
Accounts payable | (436,141 | ) | 939,651 | |||||
Accrued expenses | 249,971 | 500,610 | ||||||
Lease payments | (34,301 | ) | (24,508 | ) | ||||
Net cash used in operating activities | (8,805,792 | ) | (5,633,362 | ) | ||||
Cash flows from investing activities | ||||||||
Investment in marketable equity securities | - | (11,856,706 | ) | |||||
Proceeds from redemption of marketable securities | - | 8,749,041 | ||||||
Purchase of property and equipment | (731,138 | ) | (17,736 | ) | ||||
Net cash used in investing activities | (731,138 | ) | (3,125,401 | ) | ||||
Cash flows from financing activities | ||||||||
Issuance of common stock in connection with a Purchase Agreement with Lincoln Park, At the Market Offerings, private placement, net, exercise of warrants and stock options | 6,676,119 | 9,931,271 | ||||||
Payment of loan | (251,078 | ) | (175,022 | ) | ||||
Net cash provided by financing activities | 6,425,041 | 9,756,249 | ||||||
(Decrease) increase in cash, cash equivalents and restricted cash | (3,111,889 | ) | 997,486 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 25,465,111 | 1,357,137 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 22,353,222 | $ | 2,354,623 | ||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||
Right-of-use assets | $ | 236,700 | $ | 258,605 | ||||
Operating lease liability | $ | 236,700 | $ | 266,570 | ||||
Disposition of right-of-use asset | $ | (17,486 | ) | $ | - | |||
Disposition of operating lease liability | $ | 19,329 | $ | - | ||||
Stock issued to investor relations firm | $ | 242,100 | - | |||||
Supplemental disclosure of cash flow items: | ||||||||
Interest paid | $ | 80,853 | $ | 3,082 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 ORGANIZATION AND BUSINESS
Beyond Air, Inc. (“Beyond(together with its subsidiaries, “Beyond Air” or the “Company”) was incorporated on April 24, 2015. On June 25, 2019, the Company’s name was changed to Beyond Air, Inc. from AIT Therapeutics, Inc. The Company has the following wholly-owned subsidiaries:
Beyond Air, Ltd. (“BA Ltd.”), incorporated in Israel on May 1, 2011.
Advanced Inhalation Therapies (AIT)(“AIT”), a wholly owned subsidiary of Beyond Air, Ltd., incorporated on August 29, 2014, in Delaware.
Beyond Air Australia Pty Ltd., incorporated on December 17, 2019 in Australia.
Beyond Air Ireland Limited, incorporated on March 5, 2020 in Ireland.
The Company is a clinical-stage medical device and biopharmaceutical company focused on developing inhaled Nitric Oxide (NO)(“NO”) for the treatment of patients with respiratory conditions, including serious lung infections and pulmonary hypertension, and gaseous NO (gNO) for the treatment of solid tumors. Since its inception, the Company has devoted substantially all of its efforts to research and development.
The Company is developing a nitric oxidean NO generator and delivery system (the “LungFit™ system”) that is capable of generating NO from ambient air. The LungFit™ system can generate NO up to 400 parts per million (“ppm”) for delivery to a patient’s lungs directly or via a ventilator. The LungFit™ system can deliver NO either continuously or for a fixed amount of time at various flow rates and has the ability to either titrate dose on demand or maintain a constant dose. OurThe Company’s current areas of focus with the LungFit™ system are persistent pulmonary hypertension of the newborn (“PPHN”), severe acute respiratory syndrome coronavirus 2 (“SARS CoV-2”)/acute viral pneumonia (AVP)(“AVP”), bronchiolitis (“BRO”) and nontuberculous mycobacteria (“NTM”) lung infection. The Company’s product candidates will be subject to premarket reviews and approvals by the U.S. Food and Drug Administration or the FDA,(the “FDA”) as well as similar regulatory agencies in other countries or regions. The Premarketing Application (“PMA”) for the LungFit™system addressing PPHN was filedsubmitted with the FDA on November 10, 2020. If approved, ourthe Company’s system will be marketed as a medical device initially in the United States.
Liquidity Risks and Uncertainties
The Company has incurred operating losses in almost each year since inception, $14.1 million net cash used in operating activities of $8.8 million forduring the sixnine months ended September 30,December 31, 2020 and has accumulated losses of $69.5$75.2 million. TheHowever, the Company has cash cashand equivalents of approximately $22.7 million at December 31, 2020 and, restricted cash of $22.4 million as of September 30, 2020. Basedbased on management’sthe current business plan, the Company estimates its currentsuch cash and equivalents arewill be sufficient to finance its operations for at least one year from the date of filing these financial statements.
The Company’s future capital needs and the adequacy of its available funds beyond one year will depend on many factors, including, but not necessarily limited to, the cost and time necessary for the development, clinical studies and regulatory approval of ourthe Company’s other medical device, indications as well as the commercial success of ourthe Company’s first product for PPHN, assuming PMA approval. The Company may be required to raise additional funds through sale of equity or debt securities or through strategic collaboration and/or licensing agreements in order to fund operations until we are able to generate enough product or royalty revenues, if any. Financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could have a material adverse effect on our strategic objectives, results of operations and financial condition.
9 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 ORGANIZATION AND BUSINESS (continued)
The Company expects to raise additional funds through sale of equity or debt securities or through strategic collaboration and/or licensing agreements, in order to fund operations and clinical trials until we are able to generate enough product or royalty revenues, if any. Such financing or collaborations may not be available on acceptable terms, or at all, which could have a material adverse effect on our growth plans, our results of operations and our financial condition.
However, the Company’s future liquidity includes access to capital and liquidity currently includes the following:
a) | On April 2, 2020, | |
b) | On March | |
c) | On May 14, 2020, |
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“USU.S. GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required to be presented for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The accompanying unaudited condensed consolidated Balance Sheet as of March 31, 2020 has been derived from the audited consolidated financial statements included in ourthe Company’s Annual Report on Form 10-K for the year ended March 31, 2020 (the “2020 Annual Report”), filed with the U.S. Securities and Exchange Commission (“SEC”) on June 23, 2020. The unaudited condensed consolidated financial statements and related disclosures have been preparedshould be read in conjunction with the assumption that users of the interim financial information have read or have access to theCompany’s audited consolidated financial statements and the related notes thereto included in the 2020 Annual Report on Form 10-K for the year ended March 31,2020 which was filed with the United States Securities and Exchange Commission, (“SEC”), on June 23, 2020.Report.
Principles of Consolidation
These unaudited condensed consolidated financial statements include the accounts of the Company and the accounts of all subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying financial statements.
10 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of financial statements in conformity with U.S. 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 revenues and expenses for the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its significant estimates and assumptions including accruals for expensesexpense recognition assumption under consulting licensing agreements, and clinical trials,trial agreements, stock-based compensation, warrant fair value, assumptions associated with revenue recognition, and the determination of valuation allowance requirements on deferred tax attributes and the valuation allowance thereon.attributes.
Other Risks and Uncertainties
The Company is subject to risks common to medical device companies including, but not limited to, new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, product liability, uncertainty of market acceptance of products and the potential need to obtain additional financing. The Company is dependent on third party suppliers, in some cases single-source suppliers.
There can be no assurance that the Company’s product will be accepted in the marketplace, nor can there be any assurance that any future products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed, if at all.
The Company’s products require approval or clearance from the U.S. Food and Drug AdministrationFDA prior to commencing commercial sales in the United States. There can be no assurance that the Company’s products will receive all of the required approvals or clearances. Approvals or clearances are also required in foreign jurisdictions in which the Company may license or sell its products. If the Company is denied such approvals or clearances or such approvals or clearances are delayed, it may have a material adverse impact on the Company’s results of operations, financial position and liquidity.
The development of our product candidates could be further disrupted and adversely affected by COVID-19.the ongoing COVID-19 pandemic. The spread of SARS CoV-2 from China to other countries has resulted in the Director General of the World Health Organization declaring COVID-19 a pandemic on March 11, 2020. We haveThe Company has assessed the impact COVID-19 may have on ourthe Company’s business plans and ourits ability to conduct the preclinical studies and clinical trials as well as on ourthe Company’s reliance on third-party manufacturing and our supply chain. The Company experienced significant delays in the supply chain for LungFit™ due to the redundancy in parts and suppliers with ventilator manufacturing which has since been remedied. However, there can be no assurance that this analysisthe Company will enable usbe able to further avoid part or all of any impact from COVID-19 or its consequences. The extent to which the COVID-19 pandemic and global efforts to contain its spread willmay impact ourthe Company’s operations will depend on future developments, which are still uncertain and cannot be predicted at this time.developments.
Concentrations
The Company’s license revenue was from milestone payments from a terminated license, see Note 10. The Company is reliant on two vendors for commercial manufacturing of the LungFit™ generator and delivery systems and nitrogen dioxide filters for both clinical studies and future commercial supply if regulatory approval is received.
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial InstrumentsCash and Cash Equivalents
Financial instruments that potentially subject the Company toThe Company’s concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents in bank deposit and other interest-bearing accounts in major banks in Israel, Ireland and the U.S., the balances of which, at times, may exceed federally insured limits.
The Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
As of September 30,December 31, 2020, and March 31, 2020, restricted cash includesconsisted of $619,000 of cash that is designated for a contract manufacturer. This cash is expected to be used for material and parts that require a long lead time.
Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at acquisition.
The following table is the reconciliation of the presentation and disclosure of financial instruments as shown on the Company’s consolidated statements of cash flows:
September 30, 2020 | September 30, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||
Cash and cash equivalents | $ | 21,716,778 | $ | 1,895,389 | $ | 22,016,310 | $ | 2,140,162 | ||||||||
Restricted cash | 636,444 | 459,234 | 637,699 | 636,364 | ||||||||||||
Cash and cash equivalents and restricted cash | $ | 22,353,222 | $ | 2,354,623 | $ | 22,654,009 | $ | 2,776,526 |
Revenue Recognition
The Company recognizes revenue when we transfertransfers promised goods or services to customers in an amount that reflects the consideration to which we expectthe Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers we performthe Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) we satisfythe Company satisfies the performance obligation(s). At contract inception, we assessthe Company assesses the goods or services promised within each contract, assess whether each promised good or service is distinct and identify those that are performance obligations.
12 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company uses judgment to determine: a) the number of performance obligations based on the determination under step (ii) above and whether those performance obligations are distinct from other performance obligations in the contract; b) the transaction price under step (iii) above; and c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above. The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price. The transaction price is allocated to each performance obligation on an estimated stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied, see Note 10.
Where a portion of non-refundable up-front fees or other payments received are allocated to continuing performance obligations under the terms of a license arrangement, they are recorded as contract liabilities and recognized as revenue when (or as) the underlying performance obligation is satisfied.
Segment reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, we havethe Company has viewed ourits operations and managed ourits business as one segment.
Research and Development
Research and development expenses are charged to the statement of operations as incurred. Research and development expenses include salaries, benefits, stock-based compensation and costs incurred by outside laboratories, manufacturers, clinical research organizations, consultants, and accredited facilities in connection with clinical trials and preclinical studies. Research and development projects that have no alternative uses have been expensed as incurred.
Foreign Exchange Transactions
The Company’s subsidiaries have operations in Israel, Ireland, and in Australia. Beyond Air’s operations are in the United States and the U.S. dollar is the currency of the primary economic environment in which the Company operates and expects to continue to operate in the foreseeable future. Thus, the functional and reporting currency of the Company is the U.S. dollar. The Company translated its non-U.S. operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations as of September 30,December 31, 2020 were not material. Gains or losses from foreign currency transactions are included in other income (loss) apart ofin the statement of operations.operations as foreign currency exchange gains/(losses).
Stock-Based Compensation
The Company measures the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-dategrant date fair value of the award. Fair value for restricted stock awards is valued using the closing price of the Company’s stock on the date of grant. The grant date fair value is recognized over the period during which an employee and non-employee is required to provide service in exchange for the award -– the requisite service period. The grant-dategrant date fair value of employee share options is estimated using the Black-Scholes option pricing model. The risk-free interest rate assumptions were based upon the observed interest rates appropriate for the expected term of the equity instruments. The expected dividend yield was assumed to be zero as the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable future. Due to the Company’s limited trading history, the Company utilizes an implied volatility based on an aggregate of guideline companies. In 2020, the Company began to incorporate and weight its historical volatility with theits peer group in order to obtain expected volatility. The peer companies selected have similar characteristics, including industry and market capitalization. The Company routinely reviews its calculation of volatility based on, the Company’s life cycle, its peer group, and other factors. The Company uses the simplified method to estimate the expected term.
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and accumulated amortization. Depreciation and amortization is calculated using the straight-line method over the estimated useful life of the assets as follows:
Computers equipment | Three years |
Furniture and fixtures | Seven years |
Clinical and medical equipment | Five or Fifteen years |
Leasehold improvements | Shorter of term of lease or estimated useful life of the asset |
Licensed Right to Use Technology
Licensed right to use technology that is considered platform technology with alternative future uses is recorded as an intangible asset and is being amortized on a straight-line method over its estimated useful life, determined to be thirteen years. Seeyears, see Note 13.
14 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Long Lived Assets
The Company assess the impairment of long-lived assets on an ongoing basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider that could trigger an impairment review include the following:
● | significant underperformance relative to expected historical or projected future operating results, |
● | significant changes in the manner of our use of the acquired assets or the strategy for our overall business, |
● | significant negative regulatory or economic trends, and |
● | significant technological changes, which would render the platform technology, equipment, and manufacturing processes obsolete. |
Recoverability of assets that will continue to be used in our operations is measured by comparing the carrying value to the future net undiscounted cash flows expected to be generated by the asset or asset group. Future undiscounted cash flows include estimates of future revenues, driven by market growth rates, and estimated future costs. There were no events during the reporting periods that were deemed to be a triggering event that would require an impairment assessment.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. As of September 30,December 31, 2020, and March 31, 2020, the Company recorded a valuation allowance to the full extent of our net deferred tax assets since the likelihood of realization of the benefit does not meet the more likely than not threshold.
The Company files a U.S. Federal, various state, and International income tax returns. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances. Such adjustment is reflected in the tax provision when appropriate. The Company will recognize interest and penalties, if any, related to unrecognized tax benefits in income taxes in the statements of operations. Tax years 2016 through 2020 remain open to examination by federal and state tax jurisdictions. The Company files tax returns in Israel for which tax years 2014 through 2020 remain open. In addition, the Company files tax returns in Ireland and Australia and the tax year 2020 remains open.
Net Income (Loss) Per Share
Basic and diluted net loss per share attributable to common stockholdersshareholders is computed by dividing the net loss and deemed dividend from a warrant modification to common shareholders by the weighted average number of shares of common sharesstock outstanding for the period. The dilutive effect of outstanding options, warrants, restricted stock and other stock-based compensation awards is reflected in diluted net income (loss) per share by application of the treasury stock method. The calculation of diluted net income (loss) attributed to common shareholders per share excludes all anti-dilutive shares of common shares.stock. For periods in which the Company has reported net losses, diluted net loss per share attributable to common stockholdersshareholders is the same as basic net loss per share attributable to common stockholders,shareholders, because such shares of common sharesstock are not assumed to have been issued if their effect is anti-dilutive, see Note 9.
15 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Issued Accounting Standards Not Yet Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.”Taxes” (“ASU 2019-12”) as part of its initiative to reduce complexity in the accounting standards. The standardASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. The standardASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company does not anticipate the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
In August 2020, the FASB issued Accounting Standard Updates “ASU” ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. The ASU 2020-06 is effective for the Company on December 1, 2022, Early adoption is permitted, but no earlier than December 1, 2021. The Company is currently evaluating the impact of this standardASU 2020-06 on its condensed consolidated financial statements and related disclosures.
NOTE 3 FAIR VALUE MEASUREMENT
The Company’s financial instruments primarily include cash, cash equivalents, restricted cash, accounts payable loan payable and credit facility loan.a Facility Agreement Loan. Due to the short-term nature of cash and accounts payable,these financial instruments, the carrying amounts of these assets and liabilities approximate their fair value. The long-term Facility Agreement loan approximate fair value due to the prevailing market conditions for similar debt with remaining maturity and terms.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 - | quoted prices in active markets for identical assets or liabilities; | |
Level 2 - | inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or | |
Level 3 - | unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
16 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of September 30,December 31, 2020 and March 31, 2020, respectively:
September 30, 2020 | March 31, 2020 | December 31, 2020 | March 31, 2020 | |||||||||||||
Clinical and medical equipment | $ | 989,716 | $ | 357,795 | $ | 1,114,760 | $ | 357,795 | ||||||||
Computer equipment | 122,670 | 73,982 | 131,621 | 73,982 | ||||||||||||
Furniture and fixtures | 87,921 | 53,895 | 93,245 | 53,895 | ||||||||||||
Leasehold improvements | 21,840 | 5,336 | 21,840 | 5,336 | ||||||||||||
1,222,147 | 491,008 | 1,361,466 | 491,008 | |||||||||||||
Accumulated depreciation and amortization | (353,279 | ) | (279,671 | ) | (404,707 | ) | (279,671 | ) | ||||||||
$ | 868,868 | $ | 211,337 | $ | 956,759 | $ | 211,337 |
Depreciation and amortization expense related to fixed assets for the three months ended September 30,December 31, 2020 and September 30,December 31, 2019 was $39,958$51,428 and $15,917,$23,190, respectively. Depreciation and amortization expense related to fixed assets for the sixnine months ended September 30,December 31, 2020 and September 30,December 31, 2019 was $73,608$125,036 and $33,819,$57,009, respectively.
NOTE 5 SHAREHOLDERS’ EQUITY
On May 14, 2020, the Company entered into a $40 million New Stock Purchase Agreement with LPC, that replaced the former $20 million purchase agreement. Under the former purchase agreement, for the three months ended June 30, 2020, the Company received net proceeds of $1,958,845 from the sale of 243,605 shares of common stock. The New Stock Purchase Agreement provides for the issuance of up to $40 million of the Company’s common stock which the Company may sell from time to time in its sole discretion to LPC over 36 months, provided that the closing price is not below $0.25 per share and subject to certain other conditions and limitations inlimitations. Under both the New Stock Purchase Agreement. Pursuant to the New Stock Purchase Agreement, the Company received net proceeds of $1,682,835 from the sale of 325,000 shares of common stock. Under these agreements,new and former agreement, for the sixthree and nine months ended September 30,December 31, 2020, the Company received net proceeds of $3,641,680$2,433,547 and $6,075,228 from the sale of 568,605 shares of common stock. As of September 30,December 31, 2020, there is a balance of $37,211,500 available.$34,777,953 available under the LPC new agreement.
On April 2, 2020, the Company entered into an ATM for $50 million utilizing the Company’s shelf registration statement and filed on Form S-3.statement. The Company may sell shares of our common stock having aggregate sales proceeds of up to $50,000,000 from time to time, subject to the conditions and limitations in the agreement. If shares are sold, there is a three percent fee paid to the sales agent. For the three and sixnine months ended September 30,December 31, 2020, the Company received net proceeds of $1,536,247$3,131,347 and $2,435,787$5,567,134 from the sale of 227,527 and 341,239 shares of the Company’s stock, respectively.stock. As of September 30,December 31, 2020, there is a balance of $47,434,213$44,292,866 available under the ATM.
On June 3, 2019, the Company entered into a Stock Purchase Agreement with investors for the issuance of 1,583,743 shares of common stock. The Company raised net proceeds wasof $7,839,495. The Company’s CEO participated in this offering and invested $300,000 and received 58,253 shares of common stock, or $5.15 per share. In addition, certain directors and employees invested $610,000 for an aggregate of 118,254 shares of common stock, at a purchase price of $5.15 per share.
On December 12, 2019, the Company closed on an underwritten offering and concurrent private placement of 3,152,985 shares of common stock at $3.66 per share for net proceeds of $10,169,343. The underwritten offering shares were registered under the Company’s shelf registration statement. There were 532,786 common stock that were sold in a private placement and subsequently registered under an effective Form S-1 on January 23, 2020. In addition, the Company’s CEO invested $699,999 and receiving 190,437 shares of common stock at $3.66 per share. In addition, certain employees participated in this offering by investing $475,000 and receiving 129,781 shares of common stock at $3.66 per share.
17 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 SHAREHOLDERS’ EQUITY (continued)
Stock to be Issued to a Vendor
As of March 31, 2020, the Company was obligated to issue 30,000 shares of common stock to a vendor for services related to investor relations. The fair value of the liability as of March 31, 2020 was $240,000. In May 2020, 30,000 shares were issued at the fair value of $242,100. Such amount was transferred to shareholders’ equity. As of December 31, 2020, there is no obligation to the vendor, nor any stock compensation expense.
Issuance of Restricted Shares
Restricted stock was issued to officers, employees and consultants. The fair value for the restricted stock awards was valued at the closing price of the Company’s common stock on the date of grant. Restricted stock vests annually over five years.
Number Of Shares | Weighted Average Grant Date Fair Value | Number Of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
Unvested as of April 1, 2020 | 646,800 | $ | 4.99 | 646,800 | $ | 4.99 | ||||||||||
Granted | 62,000 | 5.81 | 62,000 | 5.81 | ||||||||||||
Unvested as of September 30, 2020 | 708,800 | $ | 5.06 | |||||||||||||
Vested | (135,000 | ) | 4.99 | |||||||||||||
Unvested as of December 31, 2020 | 573,800 | $ | 5.08 |
Stock-based compensation expense related to restricted stock awards was $377,315$291,452 and $219,269$84,477 for the three months ended September 30,December 31, 2020 and September 30,December 31, 2019, respectively. Stock-based compensation expense related to restricted stock awards was $771,176$1,062,628 and $348,279$432,756 for the sixnine months ended September 30,December 31, 2020 and September 30,December 31, 2019, respectively.
Stock Option Plan
The Company’s amendedSecond Amended and restatedRestated 2013 Equity Incentive Option Plan (the “2013 Plan”), allows for awards to officers, directors, employees, and non-employeesconsultants of stock options, restricted stock units and restricted shares of the Company’s common stock. The vesting terms of the options issued under the 2013 Plan are generally between two toand four years and expire up to ten years after the grant date. The 2013 Plan has 4,100,000 shares authorized for issuance. As of September 30,December 31, 2020, there7,047 shares are 7,059 shares available under the 2013 Plan.
18 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 SHAREHOLDERS’ EQUITY (continued)
A summary of the change in options for the sixnine months ended September 30,December 31, 2020 is as follows:
Number Of Options | Weighted Average Exercise Price - Options | Weighted Average Remaining Contractual Life- Options | Aggregate Intrinsic Value | |||||||||||||
Options outstanding as of April 1, 2020 | 3,053,589 | $ | 4.77 | 8.4 | $ | 9,878,264 | ||||||||||
Granted | 142,000 | 5.55 | 9.6 | 13,000 | ||||||||||||
Exercised | (2,340 | ) | 0.1 | - | (18,386 | ) | ||||||||||
Outstanding as of September 30, 2020 | 3,193,249 | $ | 4.80 | 8.3 | $ | 1,585,844 | ||||||||||
Exercisable as of September 30, 2020 | 1,311,874 | $ | 4.44 | 7.5 | $ | 1,004,432 |
Number Of Options | Weighted Average Exercise Price - Options | Weighted Average Remaining Contractual Life- Options | Aggregate Intrinsic Value | |||||||||||||
Options outstanding as of April 1, 2020 | 3,053,589 | $ | 4.77 | 8.4 | $ | 9,878,264 | ||||||||||
Granted | 122,000 | 5.11 | 9.3 | |||||||||||||
Exercised | (2,340 | ) | 0.1 | - | ||||||||||||
Outstanding as of December 31, 2020 | 3,173,249 | $ | 4.8 | 8.0 | $ | 1,770,400 | ||||||||||
Exercisable as of December 31, 2020 | 1,715,849 | $ | 4.55 | 7.5 | $ | 1,251,025 |
On January 9, 2021, the Company’s board approved an amendment to the 2013 Plan to increase the number of shares in the plan by 1,500,000, with such amendment being subject to shareholder vote at the 2021 annual stockholder meeting, scheduled for March 4, 2021. As of December 31, 2020, the Company agreed to issue 60,000 options, which are subject to shareholder approval of the increase in shares allocated to the 2013 Plan.
As of September 30,December 31, 2020, the Company has unrecognized stock-based compensation expense of approximately $3,407,300$2,538,200 related to unvested stock options andwhich is expected to be expensed over the weighted average remaining service period of 1.51.7 years. For the sixnine months ended September 30,December 31, 2020 and September 30,December 31, 2019, the weighted average fair value of options granted was $5.13$5.20 and $3.49 per share.share, respectively. The following was utilized to calculate the fair value of options on the date of grant:
December 31, 2020 | December 31, 2019 | |||||||
Risk -free interest rate | 0.5 - 0.7 | % | 1.4 - 2.3 | % | ||||
Expected volatility | 87.8 - 92.54 | % | 82.3 - 83.4 | % | ||||
Dividend yield | 0 | % | 0 | % | ||||
Expected terms (in years) | 5.18 - 6.25 | 6.25 |
September 30, 2020 | September 30, 2019 | |||||||
Risk -free interest rate | 0.5-.07 | % | 1.4 -2.3 | % | ||||
Expected volatility | 87.8-92.54 | % | 82.3 -83.4 | % | ||||
Dividend yield | 0 | % | 0 | % | ||||
Expected terms (in years) | 5.18 -6.25 | 6.25 |
The following summarizes the components of stock-based compensation expense which includes stock options and restricted stock for the three and sixnine months ended September 30,December 31, 2020 and September 30,December 31, 2019, respectivelyrespectively:
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Research and development | $ | 451,500 | $ | 183,766 | $ | 1,288,949 | $ | 333,688 | ||||||||
General and administrative | 728,114 | 739,231 | 1,706,319 | 1,508,346 | ||||||||||||
Total stock-based compensation expense | $ | 1,179,614 | $ | 922,997 | $ | 2,995,268 | $ | 1,842,034 |
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Research and development | $ | 376,424 | $ | 97,765 | $ | 1,665,372 | $ | 431,453 | ||||||||
General and administrative | 684,339 | 616,809 | 2,390,659 | 2,125,155 | ||||||||||||
Total stock-based compensation expense | $ | 1,060,763 | $ | 714,574 | $ | 4,056,131 | $ | 2,556,608 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 SHAREHOLDERS’ EQUITY (continued)
Warrants
A modification of the exercise price to the January 2017 and March 2017 investor warrants from $4.25 per share to $3.66 per share was triggered by the 2019 Offering described above. As a result, the Company recognized the incremental value of $522,478 as a deemed dividend using the Black-Scholes pricing model with the following assumptions:
Expected term in years | 2.2 | |||
Volatility | 87 | % | ||
Dividend yield | 0.0 | % | ||
Risk-free interest rate | 1.7 | % |
A summary of the Company’s outstanding warrants as of September 30,December 31, 2020 are as follows:
Warrant Holders | Number Of Warrants | Exercise Price | Date of Expiration | |||||||||
January 2017 offering - investors | 2,977,232 | $ | 3.66 | January 2022 (a) | ||||||||
March 2017 offering - investors | 68,330 | $ | 3.66 | March 2022 (a) | ||||||||
March 2017 offering - placement agent | 7,541 | $ | 3.66 | March 2022 (a) | ||||||||
February 2018 offering - investors | 1,525,232 | $ | 4.25 | February 2021 | ||||||||
Third-party license agreement | 208,333 | $ | 4.80 | January 2024 | ||||||||
March 2020 loan (see Note 11) | 172,187 | $ | 7.26 | March 2025 | ||||||||
Total | 4,958,855 |
Warrant Holders | Number Of Warrants | Exercise Price | Date of Expiration | |||||||||
January 2017 offering - investors | 2,977,232 | $ | 3.66 | January 2022 (a) | ||||||||
March 2017 offering - investors | 68,330 | $ | 3.66 | March 2022 (a) | ||||||||
March 2017 offering - placement agent | 7,541 | $ | 3.66 | March 2022 (a) | ||||||||
March 2018 offering - investors | 1,586,231 | $ | 4.25 | March 2021 | ||||||||
Third-party license agreement | 208,333 | $ | 4.80 | January 2024 | ||||||||
March 2020 loan (see Note 11) | 172,187 | $ | 7.26 | March 2025 | ||||||||
Total | 5,019,854 |
(a) | These warrants have down round protection. |
For the three and sixnine months ended September 30,December 31, 2020, there52,667 and 206,537 warrants were 83,332 and 153,870 warrants exercised for $304,995$223,835 and $598,106,$821,940, respectively. ThereFor the three and nine months ended December 31, 2020, 8,332 warrants were 83,332exercised on a cashless basis and 153,8702,536 shares of common stock issued forwere issued. For the three and sixnine months ended September 30, 2020, respectively. For the six months ended September 30,December 31, 2019, no warrants were exercised.
NOTE 6 OTHER CURRENT ASSETS PREPAID EXPENSES
A summary of current assets and prepaid expenses as of September 30,December 31, 2020 and March 31, 2020 is as follows:
September 30, 2020 | March 31, 2020 | December 31, 2020 | March 31, 2020 | |||||||||||||
Research and development | $ | 109,622 | $ | 266,510 | $ | 94,607 | $ | 266,510 | ||||||||
Insurance | 205,832 | 471,182 | 110,742 | 471,182 | ||||||||||||
Professional | 25,000 | 156,259 | 25,000 | 156,259 | ||||||||||||
Value added tax receivable | 46,729 | 124,127 | 46,568 | 124,127 | ||||||||||||
Other | 51,727 | 131,728 | 148,445 | 131,728 | ||||||||||||
$ | 438,910 | $ | 1,149,806 | |||||||||||||
Total | $ | 425,362 | $ | 1,149,806 |
NOTE 7 ACCRUED EXPENSES
A summary of the accrued expenses as of September 30,December 31, 2020 and March 31, 2020 is as follows:
September 30, 2020 | March 31, 2020 | |||||||
Vendors – research and development | $ | 404,596 | $ | 484,756 | ||||
Professional fees | 315,879 | 476,638 | ||||||
Employee salaries and benefits | 273,864 | 71,066 | ||||||
Interest expense | 193,298 | - | ||||||
Other | 159,868 | 65,074 | ||||||
Total | $ | 1,347,505 | $ | 1,097,534 |
December 31, 2020 | March 31, 2020 | |||||||
Research and development | $ | 623,653 | $ | 484,756 | ||||
Professional fees | 406,062 | 476,638 | ||||||
Employee salaries and benefits | 275,671 | 71,066 | ||||||
Interest expense | 9,218 | - | ||||||
Other | 119,483 | 65,074 | ||||||
Total | $ | 1,434,087 | $ | 1,097,534 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 8 LEASES
On April 1, 2019, the Company early adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended (“ASU 2016-02”), which generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. In June 2020, the Company entered into a new lease and cancelled a lease, which resulted in the recognition of operating lease liabilities and right-of-use assets of approximately of $236,700 and $236,900, respectively. The cancellation of the lease resulted in a derecognition of operating lease liabilities and right-of-use assets of $19,329 and $17,486, respectively. As a result of the cancellation, the Company recorded a gain of $1,843. The right-of use assets and operating lease liability is as follows as of September 30,December 31, 2020 and March 31, 2020.2020 is as follows:
September 30, 2020 | March 31, 2020 | December 31, 2020 | March 31, 2020 | |||||||||||||
Right-of-use assets | $ | 378,188 | $ | 195,727 | $ | 357,871 | $ | 195,727 | ||||||||
Operating lease liability short-term | $ | 82,003 | $ | 69,342 | $ | 84,388 | $ | 69,342 | ||||||||
Operating lease liability long-term | 301,664 | 131,581 | 279,594 | 131,581 | ||||||||||||
$ | 383,667 | $ | 200,923 | |||||||||||||
Total | $ | 363,982 | $ | 200,923 |
Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued rent. The interest rate implicit in our leases is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. As of September 30,December 31, 2020, and March 31,2020,31, 2020, the weighted average discount rate and remaining term on lease obligation iswas approximately 8.3%, 8.3%, 4.54.3 and 3.0 years, respectively. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative and research development expenses.
NOTE 9 BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE
The following potentially dilutive securities were not included in the calculation of diluted net income (loss) per share attributable to common stockholdersshareholders because their effect would have been anti-dilutive for the periods presented:
September 30, 2020 | September 30, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||
Common stock warrants | 5,019,854 | 6,143,405 | 4,958,855 | 6,143,405 | ||||||||||||
Common stock options | 3,193,249 | 2,353,115 | 3,173,249 | 2,287,049 | ||||||||||||
Restricted shares | 708,800 | 335,000 | 573,800 | 654,000 | ||||||||||||
Total | 8,921,903 | 8,831,520 | 8,705,904 | 9,084,454 |
NOTE 10 LICENSE AGREEMENT
On January 23, 2019, the Company entered into an agreement for commercial rights (the “License“Circassia Agreement”) with Circassia Limited and its affiliates (collectively, “Circassia”) for persistent pulmonary hypertension of the newborn (“PPHN”)PPHN and future related indications at concentrations of < 80 ppm in the hospital setting in the United States and China. On December 18, 2019, the Company terminated the LicenseCircassia Agreement, see Note 13. The Company would have received payments up to $32.55 million in up front and regulatory milestones, payable in cash or ordinary shares of Circassia, at the discretion of Circassia, with payments in cash discounted by approximately 5%.
This contract was evaluated under Accounting Standards Codification (“ASC”) 606 and it was determined that the contract consisted of five performance obligations with only the following two obligations required prior to the termination of the License Agreement.Agreement:
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10 LICENSE AGREEMENT (continued)
● | Performance Obligation 1: non-exclusive transfer of functional intellectual property rights to Circassia, which includes: |
○ | the consummation of the | |
○ | the successful completion of the pre-submission meeting with the FDA. At this meeting, the FDA reinforced |
● | Performance Obligation 2: ongoing support associated with the PMA submission and regulatory approval by the FDA. This also includes development activities including manufacturing readiness process ahead of |
In consideration of the rights and licenses granted to Circassia by the Company, five milestones were included. The Company received the first two milestone payments in ordinary shares of Circassia
During the three months ended March 31, 2019, the Company met the first two milestones under the license agreement and received 17,572,815 ordinary shares valued at $9,987,295. This consideration was allocated to the first two performance obligations; one being the transfer of the intellectual property to Circassia, which was recognized at a point in time and was valued at $7,116,232 and the other being the ongoing support associated with the PMA submission and regulatory approval by the FDA, which was valued at $2,871,063 and was recorded as deferred revenue. This
The second performance obligation is being recognized over a period of timetime; from the commencement of the agreement to when management expects to submit the PMA. License revenue of $349,607 and $645,602 associated with this second performance obligation has been recognized for the three months ended September 30,December 31, 2020 and September 30,December 31, 2019, respectively. License revenue of $579,768$727,562 and $1,273,071 associated with this second performance obligation has been recognized for the sixnine months ended September 30,December 31, 2020 and September 30,December 31, 2019, respectively. As of September 30,December 31, 2020, and March 31, 2020, deferred revenue was $294,422$145,628 and $873,190, respectively.
NOTE 11 FACILITY AGREEMENT LOAN
On March 17, 2020, the Company entered into a facility agreementthe Facility Agreement with certain lenders for up to $25,000,000 in five tranches of $5,000,000 per tranche. Such tranches are at the option of the Company, provided however that the Company may only utilize tranches three through five following FDA approval of our the LungFit™ PH product. The loan(s) are unsecured with interest at 10% per year which is to be paid quarterly. The loans may be prepaid with certain prepayment penalties. The effective interest rate for this loan is 13.3% per year. Each tranche shall be repaid in installments commencing June 15, 2023 with all amounts outstanding under any tranche due on March 17, 2025. The Company received proceeds from the first tranche in fiscal year 2020. A lender who is over a five percent shareholder loaned the Company $3,160,000 of the first tranche and, as such, related party interest expense for the three and sixnine months ended September 30,December 31, 2020 approximated $79,000 and $158,000 (not including amortization of debt discount and deferred offering costs), respectively.
In connection with the first tranche, the Company issued, in March 2020, warrants to the lenders for the purchase of 172,826 shares of the Company’s common stock at $7.26 per share. The warrants expire in five years. There are additional warrant issuances associated with each tranche. If the second tranche of $5 million is utilized by the Company, the warrants that will be issued is up to twenty five percent of its commitment value divided by the five day volume weighedfive-day volume-weighted average price “(VWAP”(“VWAP”) prior to utilization date. For tranches three to five, if any of these tranches are utilized by the Company, the warrants that will be issued is up to ten percent of its commitment value divided by the five dayfive-day VWAP. As a result, the Company allocated the fair market value at the date of grant of the warrants to stockholders’shareholders’ equity and reflected a debt discount valued at $594,979 using the Black Scholes pricing model.
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED(UNAUDITED)
NOTE 11 FACILITY AGREEMENT LOAN (continued)
The Black-Scholes pricing model used the following assumptions:
Expected term in years | 5.0 | |||
Volatility | 87.5 | % | ||
Dividend yield | 0.0 | % | ||
Risk-free interest rate | 0.7 | % |
A summary of the facility agreementFacility Agreement loan balance as of September 30,December 31, 2020 and March 31, 2020 is as follows:
September 30, 2020 | March 31, 2020 | |||||||
Face value of loan | $ | 5,000,000 | $ | 5,000,000 | ||||
Debt discount | (594,979 | ) | (594,979 | ) | ||||
Accretion of interest expense | 71,312 | 4,562 | ||||||
Debt offering costs | (70,518 | ) | (70,518 | ) | ||||
Facility agreement loan balance | $ | 4,405,815 | $ | 4,339,065 |
Maturity of Facility Agreement Loan | September 30, 2020 | |||
2021 | $ | - | ||
2022 | - | |||
2023 | 1,500,000 | |||
2024 | 2,750,000 | |||
2025 | 750,000 | |||
Total | $ | 5,000,000 |
December 31, 2020 | March 31, 2020 | |||||||
Face value of loan | $ | 5,000,000 | $ | 5,000,000 | ||||
Debt discount | (594,979 | ) | (594,979 | ) | ||||
Accretion of interest expense | 105,415 | 5,107 | ||||||
Debt offering costs | (71,063 | ) | (71,063 | ) | ||||
Facility agreement loan balance | $ | 4,439,373 | $ | 4,339,065 |
Maturity of Facility Agreement Loan | December 31, 2020 | |||
2021 | $ | - | ||
2022 | - | |||
2023 | 1,500,000 | |||
2024 | 2,750,000 | |||
2025 | 750,000 | |||
Total | $ | 5,000,000 |
NOTE 12 LOAN PAYABLE
As of September 30,December 31, 2020, and March 31, 2020, in connection with the Company’s insurance policy, a loan was used to finance part of the premium. The loan iswas due within the yearin November 2020 with monthly payments of $42,366 bearing interest at 4.3%. The outstanding balance as of September 30,December 31, 2020 and March 31, 2020 was $84,280$0 and $335,358, respectively.
NOTE 13 COMMITMENTS AND CONTINGENCIES
License Agreements
On October 22, 2013, the Company entered into a patent license agreement with CareFusion (the “CareFusion Agreement”), pursuant to which itthe Company agreed to pay to the third partyCareFusion a non-refundable upfront fee of $150,000 that is credited against future royalties payments, and is obligated to pay 5% royalties of any licensed product net sales, but at least $50,000 per annum throughduring the term of the agreement and the advance is credited against future royalties payments.agreement. As of September 30,December 31, 2020, the Company did not pay any royalties since the Company did not have any revenues from the technology associated with this license.the license under the CareFusion Agreement. The term of the agreementCareFusion Agreement extends through the life of applicable patents and may be terminated by either party with 60 days’ prior written notice in the event of a breach of the agreement, and may be terminated unilaterally by CareFusion with 30 days’ prior written notice in the event that we do not meet certain milestones.
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 13 COMMITMENTS AND CONTINGENCIES (continued)
In August 2015, BA Ltd. entered into an Option Agreement (the “Option Agreement”) with Pulmonox whereby BA Ltd. acquired the option to purchase certain intellectual property assets and rights (the “Option”) on September 7, 2016 for $25,000. On January 13, 2017, the Company exercised the Option and paid $500,000.$500,000 to Pulmonox. The Company becomes obligated to make certain one-time development and sales milestone payments to Pulmonox, commencing with the date on which wethe Company receive regulatory approval for the commercial sale of the first product candidate qualifying under the agreement.Option Agreement. These milestone payments are capped at a total of $87 million across three separate and distinct indications that fall under the agreement, with the majority of them, approximately $83 million, being sales related based on cumulative sales milestones for each of the three products.
On January 31, 2018 the Company entered into an agreement (“(the “NitriGen Agreement”) with NitricGen, Inc. (“NitricGen”) to acquire a global, exclusive, transferable license and associated assets including intellectual property, know-how, trade secrets and confidential information from NitricGen related to the LungFit™. The Company acquired the licensing right to use the technology and agreed to pay NitricGen a total of $2,000,000 in future payments based upon achieving certain milestones, as defined in the NitriGen Agreement, and royalties on sales of the LungFit™. The Company paid NitricGen $100,000 upon the execution of the NitriGen Agreement, $100,000 upon achieving the next milestone and issued 100,000 options to purchase the Company’s common stock valued at $295,000 upon executing the NitriGen Agreement. The remaining future milestone payments are $1,800,000 of which $1,500,000 is due after six months after the first approval of the LungFit™ by the Food and Drug AdministrationFDA or the European Medicine Evaluation Agency.
Employment Agreements
Certain officer agreements between the Company and its officers contain a change of control provision for payment of severance arrangements.
Supply Agreement and Purchase Order
In August 2020, the Company entered into a supply agreement expiring on December 31, 2024. The agreement will renew automatically for successive three-year periods unless and until the Company provides twelve months’ notice of intent not to renew. In July 2020, the Company placed a non-cancellable purchase order forand the outstanding amount as of December 31, 2020 is approximately $1,300,000$1,054,000 with this supplier.
Operating Leases
The Company cancelled a lease in May 2020 for its location in Madison, Wisconsin. In June 2020, the Company entered into a lease for office space and research facility in Madison, Wisconsin. The lease agreement expires in May 2026.
In May 2018, the Company entered into an operating lease for its corporate office in Garden City, New York. In August 2020, the Company entered into an operating lease (the “2020 Operating Lease”) to move its corporate office to another location in Garden City, New York. It is expected that Beyond Air will move into this space in the beginning of JanuaryApril 2021.
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONSENDEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 13 COMMITMENTS AND CONTINGENCIES (continued)
The Company has other operating lease agreements with commitments of less than one year or that are not significant. The Company elected the practical expedient option and as such these lease payments are expensed as incurred. Included in the maturity of lease liabilities below is the aforementioned new operating lease2020 Operating Lease in the amount of $2,035,601, which upon commencement, the Company will record the operating lease liabilities and corresponding right-of-use assets on the balance sheet pursuant to ASC 842, as amended.ASU 2016-02.
Other Information For The Six Months Ended September 30, 2020 | ||||||||
Other Information For The Nine Months Ended December 31, 2020 | ||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Cash paid | $ | 47,625 | $ | 73,743 | ||||
Right-of-use assets obtained in exchange for new operating lease liabilities: | - | - | ||||||
Weighted-average remaining lease term — operating leases | 4.5 years | 4.3 years | ||||||
Weighted-average discount rate — operating leases | 8.3 | % | 8.3 | % |
Maturity of Lease Liabilities | Operating Leases | Operating Leases | ||||||
Payments remaining for the year ended March 31,: | ||||||||
2021(excluding the six months ended September 30, 2020) | $ | 68,408 | ||||||
2021(excluding the nine months ended December 31, 2020) | $ | 27,359 | ||||||
2022 | 278,214 | 207,296 | ||||||
2023 | 285,868 | 283,330 | ||||||
2024 | 243,596 | 240,981 | ||||||
2025 | 233,632 | 230,940 | ||||||
Thereafter | 1,385,499 | 1,349,266 | ||||||
Total lease payments | 2,495,217 | 2,339,172 | ||||||
Less: interest | (75,949 | ) | (68,276 | ) | ||||
Present value of lease liabilities | $ | 2,419,268 | $ | 2,270,896 |
Contingencies
On March 16, 2018, Empery Asset Master, Ltd., Empery Tax Efficient, LP and Empery Tax Efficient II, LP, (collectively, “Empery”), filed a complaint in the Supreme Court of the State of New York (the “Court”), relating to the notice of adjustment of both the exercise price of and the number of warrant shares issuable under warrants issued to Empery in January 2017.2017 (the “Empery Suit”). The Empery Suit alleges that, as a result of certain circumstances in connection with our February 2018 offering, the 166,672 warrants issued to Empery in January 2017 provide for adjustments to both the exercise price of the warrants and the number of warrant shares issuable upon such exercise. Empery seeks monetary damages and declaratory relief under theories of breach of contract or contract reformation predicated on mutual mistake.
While the Company believes that it has complied with the applicable protective features of the 2017 Warrants and properly adjusted the exercise price, if Empery were to prevail on all claims, the new adjusted total number of warrant shares could be as follows: 319,967 warrant shares for Empery Asset Master, Ltd., 159,869 warrant shares for Empery ITax Efficient, LP and 252,672 warrant shares for Empery Tax Efficient II, LP, and the exercise price could be reduced from $3.66 to $1.57 per share. While the Company has several meritorious defenses against the claims, the ultimate resolution of the matter, if unfavorable, could result in a material loss. On March 9, 2020, wethe Company filed a motion for summary judgment, which was denied by order of the Court entered on August 20, 2020, except for the second claim for relief for declaratory judgment which was dismissed as moot. On October 1, 2020, wethe Company filed a Notice of Appeal and a motion seeking leave to reargue, and upon reargument, requesting that the Court grant summary judgment dismissing claims for breach of section 3(b) and reformation. The Court denied reargument on January 15, 2021. Appeal of the order denying the motion for summary judgment is pending. Trial is presently scheduled for April 19, 2021. The Company has several meritorious defenses against the claims and intends to vigorously defend itself. However, the ultimate resolution of the matter, if unfavorable, could result in a material loss.
On December 18, 2019, the Company terminated the LicenseCircassia Agreement with Circassia pursuant to which the Company had granted Circassia an exclusive royalty-bearing license to distribute, market and sell the Company’s nitric oxideNO generator and delivery system in the United States and China. As previously described in Note 9, Circassia had agreed to pay the Company certain milestone and royalty payments withfor the remaining milestonemarketing rights of the Company’s PPHN indication, if approved and royalty payments payablefuture related indications at concentrations of < 80 ppm in cash or ordinary shares of Circassia at Circassia’s option.the hospital setting in the United States and China. The Company terminated the Circassia Agreement pursuant to section 13.3(b) of the Agreement,thereof, which provides for termination by either party upon the other party’s material breach or default. In connection with the termination of the license with Circassia Agreement, we may be subject to a variety of claims. Adverse outcomes in some or all of these claims, if filed, may adversely affect our ability to conduct business and our financial condition and results of operations.
NOTE 14 SUBSEQUENT EVENTS
The PMA forIn January 2021, the LungFit™ system addressing PPHN was filed withCompany received approximately $9.7 million net proceeds from the FDA on November 10, 2020. If approved, our system will be marketed as a medical device initially insale of shares through its ATM facility, and the United States.LPC new agreement and through the exercise of warrants.
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this Quarterly Report on Form 10-Q to the “Company,” “we,” “our,” or “us” mean Beyond Air, Inc. and its subsidiaries except where the context otherwise requires.
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-lookingWe intend such forward-looking statements includeto be covered by the safe harbor provisions for forward-looking statements about our expectations, beliefs or intentionscontained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, prospective product offerings,candidates and products, product approvals, timing of our clinical development activities, research and development costs, timing and likelihood of success, and the plans and objectives of management for future operations and future results of anticipated products are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “expect,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar conditional expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations, strategies or prospects. You can identify suchoperations. These forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “goal,” “assumes,” “targets” and similar expressions and/or the use of future tense or conditional constructions (such as “will,” “may,” “could,” “should” and the like) and by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or resultsspeak only as of the date such statementsof this Quarterly Report on Form 10-Q and are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertaintiesa number of important factors that could cause our actual results to differ materially from any future results expressed or implied bythose in the forward-looking statements. Manystatements, including the factors could cause our actual activities or results to differ materiallydescribed under the sections in this Quarterly Report on Form 10-Q titled “Risk Factors” and results anticipated in forward-looking statements. These forward-looking statements are only predictions“Management’s Discussion and reflect our views asAnalysis of the date they are made with respect to future eventsFinancial Condition and financial performance. We undertake no obligation to update, and we do not have a policyResults of updating or revising, these forward-looking statements, except as required by applicable law. Please seeOperations”, Item 1A “Risk Factors” contained in our most recently filed Annual Report on Form 10-K, as well as the following:
- | our status as a development-stage company and our expectation to incur losses in the future; | |
- | our future capital needs and our need to raise additional funds; | |
- | our ability to obtain FDA approval of the PMA for the LungFit™ system; | |
- | our ability to build a pipeline of product candidates and develop and commercialize products; | |
- | our ability to enroll patients in clinical trials, timely and successfully complete those trials and receive necessary regulatory approvals; | |
- | our ability to maintain our existing or future collaborations or licenses; | |
- | our ability to protect and enforce our intellectual property rights; | |
- | federal, state, and foreign regulatory requirements, including the FDA regulation of our product candidates; | |
- | our ability to obtain and retain key executives and attract and retain qualified personnel; | |
- | our ability to successfully manage our growth; and | |
- | our ability to address business disruption and related risks resulting from the recent pandemic of COVID-19, which could have a material adverse effect on our business plan. |
Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for importantmanagement to predict all risk factors and uncertainties.
You should read this Quarterly Report and the documents that could causewe reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to differ materially frompublicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Beyond Air, Inc. the Beyond Air logo, and other trademarks or service marks of Beyond Air, Inc. appearing in this Quarter Report are the property of Beyond Air, Inc. This Quarterly Report also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this Quarterly Report appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the forward-looking statements.fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
We are a clinical-stage medical device and biopharmaceutical company developing a nitric oxide (“NO”) generator and delivery system (the “LungFit™ system”) that is capable of generating NO from ambient air. The LungFit™ platform can generate NO up to 400 parts per million (“ppm”) for delivery to a patient’s lungs directly or via a ventilator. The LungFit™ can deliver NO either continuously or for a fixed amount of time at various flow rates and has the ability to either titrate dose on demand or maintain a constant dose. We believe that The LungFit™ can be used to treat patients on ventilators that require NO, as well as patients with chronic or acute severe lung infections via delivery through a breathing mask or similar apparatus. Furthermore, we believe that there is a high unmet medical need for patients suffering from certain severe lung infections that the LungFit®LungFit™ platform can potentially address. Our current areas of focus with the LungFit™ are persistent pulmonary hypertension of the newborn (“PPHN”), severe acute respiratory syndrome coronavirus 2 (“SARS CoV-2”)/, acute viral pneumonia (“AVP”), bronchiolitis (“BRO”) and nontuberculous mycobacteria (“NTM”) lung infection.infection Our current product candidates will be subject to premarket reviews and approvals by the U.S. Food and Drug Administration, or the FDA,(the “FDA”), as well as similar regulatory agencies in other countries or regions. If approved, our system will be marketed as a medical device in the United States.
An additional focus of the Companyours is solid tumors. For this indication the LungFit™ systemplatform is not utilized due to the ultra-high concentrations of gaseous nitric oxide (“gNO”) used. We have developed a delivery system that can safely deliver gNO concentrations in excess of 10,000 ppm directly to a solid tumor. This program is in pre-clinical development and will require approval from the FDA or similar agencyagencies in another country, approvalother countries to enter human studies.
With respect to PPHN, our novel the LungFit™ LungFit™ PH is designed to deliver a dosage of NO to the lungs that is consistent with current guidelines for delivery of 20 ppm NO with a range of 0.5 ppm – 80 ppm (low-concentration NO). for ventilated patients. We believe the LungFit™ hasPH’s ability to generate NO from ambient air provides Beyond Air many competitive advantages over the current approved NO delivery systems in the U.S., European Union, Japan and other markets. For example, the LungFit™ PH does not require the use of a high-pressure cylinder, does not require cumbersome purging procedures and places less burden on hospital staff in carrying out safety procedures.
On November 10, 2020 we submitted a premarket approval (“PMA”) application to the FDA for the use of LungFit PH in PPHN. There is a standard 180 day review process, and we anticipate an FDA response by mid-May 2021, though the FDA may have delays due to the ongoing COVID-19 pandemic. We also expect to make certain regulatory filings outside of the U.S. this year. According to the 2019 year-end report from Mallinckrodt Pharmaceuticals, aggregate sales of low concentration NO in the U.S. were in excess of $500 million in 2019. Sales outside of the U.S., where there are multiple market participants, sales were considerably lower than in the U.S. We believe the U.S. sales potential of the LungFit™ PH in PPHN to be greater than $300 million and worldwide sales potential to be greater than $600 million. If regulatory approval is obtained, we anticipate a product launch in both the U.S. and Israel in 2021 and will continue to launch globally throughout 2021 and beyond.
Our novel LungFit™ systemplatform can also deliver a high concentration of NO to the lungs, which we believe has the potential to eliminate microbial infections including bacteria, fungi, and viruses, among other benefits.others. We believe current FDA-approved NO vasodilation treatments would have limited success in treating microbial infections given the low concentrations of NO being delivered. Given that NO is produced naturally by the body as an innate immunity mechanism at a concentration of 200 ppm, supplemental high dose NO should aid in the body’s fight against infection. Based on our clinical studies, we believe that 150 ppm is the minimum therapeutic dose to achieve the desired pulmonary antimicrobial effect of NO. To date, neither the FDA nor equivalent regulatory agencies in other countries or regions have approved any NO formulation and/or delivery system for the delivery of a dosage of NO at 150 ppm NO or higher to the lungs.higher.
We have submitted a premarket approval (“PMA”) application to the FDA for the use of the LungFit™ in PPHN. FDA typically responds to PMA submissions in 180 days, thus we anticipate a response in May of 2021. We also expect to make certain regulatory filings outside of the U.S. over the next year. According to the 2019 year-end report from Mallinckrodt Pharmaceuticals, aggregate sales of low concentration NO in the U.S. were in excess of $500 million in 2019. Sales outside of the U.S., where there are multiple market participants, sales were considerably lower than in the U.S. We believe the U.S. sales potential of the LungFit™ in PPHN to be greater than $300 million and worldwide sales potential to be greater than $600 million. If regulatory approval is obtained, we anticipate a product launch in both the U.S. and Israel in 2021 and will continue to launch globally throughout 2021 and beyond.
SARS CoV-2 ishas caused a global pandemic with a widespread impact across many countries. We received an approval from the FDA to runinitiated a pilot study in COVID-19 (the disease caused by SARS CoV-2 infections) patientslate 2020 using our the LungFit™ system. We also received approval from Health Canada to run a similar study to the one approved by the FDA. The results from these studies, along with other data – such as our in vitro data showing the killing effect of NO on human coronavirus – has enabled Beyond Air to receive approval from the Israeli Ministry of Health (IMOH) to perform a clinical studynovel LungFit™ PRO system at 150 ppm for the treatmentto treat patients with acute viral pneumonia, including those infected with SARS CoV-2.SARS-CoV-2. The study will beongoing trial is a multi-center, open-label, randomized clinical trial in Israel with approximatelyplanned enrollment up to 90 adult patients, with an emphasis on patients infected with SARS-CoV-2. The enrolled patients will bePatients are randomized in a 1:1 ratio to receive inhalations of 150 ppm NO given intermittently for 40 minutes four times per day for up to seven days in addition to standard supportive treatment (NO+SST); or standard supportive treatment alone (SST). Endpoints related to safety, oxygen saturation, fever and ICU admission, among others, will be assessed. We plan to initiate this trialexpect interim data in November 2020,Spring 2021. There approximately 350,000 annual viral pneumonia hospitalizations in the US, and this will be16 million annual viral pneumonia hospitalizations globally. For the only active trial that Beyond Air is performing in this indication. We anticipate resultsbroader acute viral pneumonia indication, we believe U.S. sales potential to be available around mid-year 2021. We have applied for grants relatedgreater than $1.5 billion and worldwide sales potential to COVID-19 in the United States and other countries. However, no external funding is required to perform the clinical study recently approved by the IMOH.be greater than $3 billion.
With respect to bronchiolitis,NTM, in December 2020 we initiatedbegan a 12-week, multi-center, open-label clinical trial in Australia and we plan to enroll approximately 20 adult patients with chronic refractory NTM lung disease. The trial is enrolling both cystic fibrosis (“CF”) and non-CF patients infected with Mycobacterium avium complex (“MAC”) or Mycobacterium abscessus complex (MABSC). The study consists of a run-in period followed by two treatment phases. The run-in period provides a baseline for the efficacy endpoints, such as patient physical function and bacterial load. The first treatment phase takes place over a two week period and begins in the fourth calendar quarterhospital setting where patients will be titrated from 150 ppm NO up to 250 ppm NO over several days. During this phase patients receive NO for 40 minutes, four times per day while methemoglobin and nitrogen dioxide (NO2) levels are monitored. Patients are then trained to use LungFit™ GO and subsequently discharged to complete the remaining portion of 2019the two week treatment period at their home at the highest tolerated NO concentration. For the second treatment phase, a 10-week maintenance phase, the administration is twice daily. The study is evaluating safety, quality of life, physical function, and bacterial load among other parameters, as compared to baseline measurements.
We anticipate reporting interim data in mid-2021, and release top-line results for the full data set approximately six months later. If the trial is successful, we would anticipate commencing a pivotal study towards the end of 2022. For this indication, we believe U.S. sales potential to be greater than $1 billion and worldwide sales potential to be greater than $2.5 billion.
NTM lung infection is a rare and serious pulmonary disease associated with increased morbidity and mortality. Patients with NTM lung disease may experience a multitude of symptoms such as fever, weight loss, cough, lack of appetite, night sweats, blood in the sputum and fatigue. Patients with NTM lung disease, specifically abscessus (represents 20-25% of all NTM) and other forms of NTM that are refractory to antibiotic therapy, frequently require lengthy and repeated hospital stays to manage their condition. There are no treatments specifically indicated for the treatment of NTM abscessus lung disease in North America, Europe or Japan. There are approximately 50,000 patients diagnosed with NTM in the U.S. In Asia, the number of patients suffering from NTM surpasses what is seen in the U.S. There is one inhaled antibiotic approved in the U.S. for the treatment of refractory NTM MAC. Current guideline-based approaches to treat NTM lung disease involve multi-drug regimens of antibiotics that may cause severe, long lasting side effects, and treatment can be as long as 18 months or more. Median survival for NTM MAC patients is approximately 13 years while median survival for patients with other variations of NTM is typically 4.6 years4. The prevalence of human disease attributable to NTM has increased over the past two decades. In a study conducted between 2007 and 2016, researchers found that the prevalence of NTM in the U.S. is increasing at approximately 7.5% per year. NTM abscessus treatment costs are estimated to be more than double that of NTM MAC. In total, a 2015 publication from co-authors from several U.S. government departments stated annual cases in 2014 cost the U.S. healthcare system approximately $1.7 billion.
Our bronchiolitis program is currently on hold due to the COVID-19 pandemic. The pivotal study for bronchiolitis was originally set to be performed in the winter of 2020/21 but was delayed due to the pandemic. We have completed three successful pilot studies in infants for bronchiolitis. Data from the most recent study was presented at the 2020 annual meeting of The American College of Chest Physicians (CHEST). The trial was a double blind, controlled trial in infants hospitalized due to bronchiolitis with three arms and 89 subjects randomized 1:1:1 to standard supportive therapy (SST), SST plus 85 ppm NO and SST plus 150 ppm NO. The trial is complete and we presented our data at the 2020 annual meeting of The American College of Chest Physicians (CHEST). There were no serious adverse events (SAE’s) related to NO therapy. With respect to efficacy, theThe 150 ppm arm was statistically significant when compared to both the control arm and the 85 ppm arm on the primary endpoint of fit for discharge from the hospital and the key secondary endpoint of hospital length of stay, and statistically significant from the control arm for time to achieving oxygen saturation on room air of > 92%. The 85 ppm was no different from control on all endpoints. The pivotal study for bronchiolitis was originally set to be performed inWe believe the 2020/21 winter, but was delayed due to the SARS CoV-2 pandemic. We anticipate commencing a pivotal study in the United States in the fourth quarter of 2021 and completing it late in the second quarter of 2022, depending on the pandemic situation. We would expect to submit a PMA to the FDA about 6 months after trial completion. Regulatory filings outside of the U.S. would begin after our review process is completed in the U.S. as long as no additional trials are required. For this indication, we believe U.S. sales potential to be greater than $500 million and worldwide sales potential to be greater than $1.2 billion.
Bronchiolitis is one of the leading causescause of hospital admission in children less than 1 year of age. The incidence is estimated to be 150 million1 new cases a year worldwide, with 2-3% (over 3 million) of them severe enough to require hospitalization. Worldwide, 95% of all cases occur in developing countries.2 In the U.S., there are approximately 130,0003more than 120,000 annual bronchiolitis hospitalizations among children two years of age or younger and approximately 177,0004 3.2 million annual child hospitalizations among the elderly population related to RSV infection only with the number rising higher due to other viruses similar to those that cause bronchiolitis in very young children.
globally. Currently, there is no approved treatment for bronchiolitis. The treatment for acute viral lung infections that cause bronchiolitis in infants is largely supportive care and is based primarily on prolonged hospitalization during which the infant receives a constant flow of oxygen to treat hypoxemia, a reduced concentration of oxygen in the blood. In addition, systemic steroids and inhalation with bronchodilators are sometimes utilized until recovery, but we believe these treatments do not successfully reduce hospital length of stay.
1 Nicolai A, Ferrara M, Schiavariello C, et al. Viral bronchiolitisOur program in children: a common condition with few therapeutic options. Early Hum Dev. 2013;89 Suppl 3:S7-S11. doi:10.1016/j.earlhumdev.2013.07.016
2 Rudan I, Tomaskovic L, Boschi-Pinto C, Campbell H. Global estimate of the incidence of clinical pneumonia among children under five years of age. Bull World Health Organ. 2004 Dec. 82(12):895-903.
3 Scand J Trauma Resusc Emerg Med. 2014; 22: 23.; WHO
4 Hasegawa et al. Trends in Bronchiolitis Hospitalizationschronic obstructive pulmonary disease (COPD) is in the United States, 2000-2009, Pediatrics 2013
pre-clinical stage and will remain there, subject to our obtaining additional financing.
Our NTM program has produced data from four compassionate use subjects and nine patients from a multi-center pilot study completed in 2018. All patients suffered from NTM abscessus infection and had underlying cystic fibrosis. One compassion patient was treated with our nitric oxide generator at the National Heart, Lung and Blood Institute (“NHLBI”). All others were treated with our NO cylinder-based delivery system. All patients were treated with 160 ppm NO at intermittent 30-minute dosing over 21 days, except one patient who was treated over 26 days and another patient who was treated with 250 ppm NO over 28 days. We expected to begin a study by the end of 2020 (delayed about 6 months by the COVID-19 pandemic) where patients would self-administer high concentration NO at home over a period of 12 weeks with the LungFit™. We now anticipate preliminary data for this study will be available towards the end of the first half of 2021 and that a full dataset will be available late in the second half of 2021. If the trial is successful, we would anticipate commencing a pivotal study towards the end of 2022. For this indication, we believe U.S. sales potential to be greater than $1 billion and worldwide sales potential to be greater than $2.5 billion.
NTM lung infection is a rare and serious pulmonary disease associated with increased morbidity and mortality. There is an increasing rate of lung disease caused by NTM, which is an emerging public health concern worldwide. There are approximately 50,0005patients diagnosed with NTM in the U.S., and there are an estimated additional 100,000 patients in the U.S. that have not yet been diagnosed. In Asia, the number of patients suffering from NTM surpasses what is seen in the U.S. To date we have treated only the abscessus form of NTM which comprises approximately 20-25% of all NTM. We will be treating both the abscessus and mycobacterium avium complex (MAC) forms of NTM in the planned upcoming study.
Patients with NTM lung disease may experience a multitude of symptoms such as fever, weight loss, cough, lack of appetite, night sweats, blood in the sputum and fatigue. Patients with NTM lung disease, specifically abscessus and other forms of NTM that are refractory to antibiotic therapy, frequently require lengthy and repeated hospital stays to manage their condition. There are no treatments specifically indicated for the treatment of NTM abscessus lung disease in North America, Europe or Japan. There is one inhaled antibiotic approved in the U.S. for the treatment of refractory NTM MAC. Current guideline-based approaches to treat NTM lung disease involve multi-drug regimens of anti-biotics that may cause severe, long lasting side effects, and treatment can be as long as 18 months or more. Median survival for NTM MAC patients is approximately 13 years while median survival for patients with other variations of NTM is typically 4.6 years. The prevalence of human disease attributable to NTM has increased over the past two decades. In a study conducted between 1997 and 2007, researchers found that the prevalence of NTM in the U.S. is increasing at approximately 8% per year and that NTM patients on Medicare over the age of 65 are 40% more likely to die over the period of the study than those who did not have the disease (Adjemian et al., 2012). NTM abscessus treatment costs are estimated to be more than double that of NTM MAC. In total, a 2015 publication from co-authors from several U.S. government departments stated that prior year statistics led to a projected 181,037 national annual cases in 2014 costing the U.S. healthcare system approximately $1.7 billion (Strollo et al., 2015).
For our solid tumor program, we have released pre-clinical data at several medical/scientific conferences showing the promise of delivering NO at concentrations of 20,000 ppm – 200,000 ppm directly to tumors. Results showed that local tumor ablation with NO conveyed anti-tumor immunity to the host. In our most recent release of data, 8 of 11 mice treated with 25,000 ppm NO were resistant to a subsequent tumor challenge and 11 of 11 mice treated with 50,000 ppm NO were resistant. Pre-clinical work will continue throughout the rest of 2020 and most of 2021 with a goal of initiating a first-in-man studyfirst-in-human trial before the end of 2021.
Our program in chronic obstructive pulmonary disease (COPD) is in the pre-clinical stage and will remain there, subject to our obtaining additional financing.
The development of our product candidates could be further disrupted and adversely affected by the recent outbreak of COVID-19. The spread of SARS CoV-2 from China to other countries has resulted in the Director General of the World Health Organization declaringongoing COVID-19 a pandemic on March 11, 2020.pandemic. We have addressed the impact COVID-19 may have on our business plans and our ability to conduct the preclinical studies and clinical trials as well as on our reliance on third-party manufacturing and our supply chain. However, there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences. The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact our operations will depend on future developments, which are still uncertain and cannot be predicted at this time. As a consequence of the global pandemic, Beyond Airwe experienced significant delays in the supply chain for LungFit™ due to the redundancy in parts and suppliers with ventilator manufacturingmanufacturing.
5 CHEST Foundation estimates 50,000 – 90,000 patients with NTM infections in the United States have NTM lung disease (updated 9/24/2020, authors Daley C., Estrada-Y-Martin R.)
Critical Accounting Policies
A critical accounting policy is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Our unaudited consolidated financial statements are presented in accordance with U.S. GAAP, and all applicable U.S. GAAP accounting standards effective as of September 30,December 31, 2020 have been taken into consideration in preparing the unaudited consolidated financial statements. The preparation of unaudited consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. Some of those estimates are subjective and complex, and, consequently, actual results could differ from those estimates. The following accounting policies and estimates have been highlighted as significant because changes to certain judgments and assumptions inherent in these policies could affect our consolidated financial statements:
● | Use of Estimates, | |
● | Revenue Recognition, | |
● | Research and development expenses, | |
● | Stock-based compensation expenses, and | |
● | Income Taxes |
Off-Balance Sheet Arrangements
In August 2020, the Companywe entered into an operating lease to move itsour corporate office to another location in Garden City, New York. The lease term is for 10.5 years with lease payments aggregating approximately $2,036,000. It is expected that Beyond Airwe will move into this space in the beginning of JanuaryApril 2021, at which time the Companywe will record the operating lease liabilities and corresponding right-of-use assets on the balance sheet pursuant to ASC 842, as amended.ASU 2016-02.
Results of Operations
Below are the results of operations for the three months ended September 30,December 31, 2020 and September 30December 31 2019:
For the Three Months Ended | ||||||||||||||||
For the Three Months Ended September 30, 2020 | December 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
License revenues | $ | 349,607 | $ | 645,602 | $ | 148,794 | $ | 314,379 | ||||||||
Operating expenses | ||||||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 3,147,276 | 2.849,990 | 3,294,102 | 2,580,622 | ||||||||||||
General and administrative | 2,169,011 | 2,064,872 | 2,471,065 | 2,471,714 | ||||||||||||
Operating expenses | 5,765,167 | 5,052,336 | ||||||||||||||
Operating loss | (4,966,680 | ) | (4,269,260 | ) | (5,616,373 | ) | (4,737,957 | ) | ||||||||
Other income (loss) | ||||||||||||||||
Realized and unrealized gain from marketable equity securities | - | 142,806 | ||||||||||||||
Realized and unrealized gain from marketable securities | - | 314,889 | ||||||||||||||
Dividend and interest income | 878 | 30,691 | 378 | 25,692 | ||||||||||||
Interest expense | (159,034 | ) | - | (157,960 | ) | - | ||||||||||
Foreign exchange loss | (6,954) | (1,977) | ||||||||||||||
Foreign exchange gain (loss) | 6,147 | 1,765 | ||||||||||||||
Other loss | (1,843 | ) | - | |||||||||||||
Total other (loss) income | (165,110 | ) | 171,520 | (153,278 | ) | 342,346 | ||||||||||
Net loss | $ | (5,131,790 | ) | $ | (4,097,740 | ) | $ | (5,769,651 | ) | $ | (4,395,611 | ) | ||||
Net loss per share – basic and diluted | $ | (0.30 | ) | $ | (0.38 | ) | ||||||||||
Deemed dividend from warrant modification | - | (522,478 | ) | |||||||||||||
Weighted average number of common shares outstanding – basic and diluted | 17,120,801 | 10,699,370 | ||||||||||||||
Net loss attributed to common shareholders | $ | (5,769,651 | ) | $ | (4,919,089 | ) | ||||||||||
Net basic and diluted loss per share | $ | (0.33 | ) | $ | (0.43 | ) | ||||||||||
Weighted average number of shares of common stock used in computing basic and diluted net loss per share | 17,609,328 | 11,398,413 |
Comparison of Three Months Ended September 30,December 31, 2020 with the Three Months Ended September 30,December 31, 2019
License revenue
License revenue for the three months ended September 30,December 31, 2020 was $349,607$148,749 as compared to $645,602$314,379 for the three months ended September 30,December 31, 2019. The primary decrease of $165,360 was due to the increase in time to amortize the revenue. On January 23, 2019, the Companywe entered into an agreement for commercial rights (the “License“Circassia Agreement”) with Circassia Limited and its affiliates (collectively, “Circassia”) for persistent pulmonary hypertension of the newborn (“PPHN”)PPHN and future related indications at concentrations of < 80 ppm in the hospital setting in the United States. The Company isWe are recognizing revenue based upon the second performance obligation, which is for the ongoing support associated with the PMA submission and regulatory approval by the FDA, valued at $2,871,063. Such amount was recorded as deferred revenue to be recognized over a period of time from the commencement of the agreement to when management expects to submit the PMA. As of September 30,December 31, 2020, and March 31, 2020, deferred revenue was $294,422$145,628 and $1,635,825,$873,190, respectively. On December 18, 2019, the Companywe terminated the LicenseCircassia Agreement with Circassia pursuant to which the Companywe had granted Circassia an exclusive royalty-bearing license to distribute, market and sell the Company’s nitric oxideour NO generator and delivery system in the United States and China.
Research and development expenses
Research and development expenses for the three months ended September 30,December 31, 2020 was $3,147,276$3,294,102 as compared to $2,849,990$2,580,622 for the three months ended September 30,December 31, 2019. The increase of $297,286$713,480 was primarily attributed to a reductionthe initiation of approximately $833,000 for athe NTM open-label clinical trial and the viral pneumonia clinical trial, along with associated increases in salaries and employee benefits, offset by the completion of animal toxicology studies of rats and dog with LungFit™ at 250 ppm and 400 ppm NO,, which both showed no macroscopic or microscopic findings, an increase of approximately $265,000 of COVID-19 related studies, an increase in salaries and employee benefits of approximately $512,000 and an increase in stock-based compensation expense of approximately $267,000.the Bronchiolitis program being put on hold due to the pandemic.
General and administrative expenses
General and administrative expense for the three months ended September 30,December 31, 2020 was $2,169,011$2,471,065 as compared to $2,471,714 for the three months ended September 30, 2019 of $2,064,872. The increase of $104,139 was primarily attributed to an increase in salaries and employee benefits of approximately $146,000.December 31, 2019.
Other income (loss)
Other income (loss) for the three months ended September 30,December 31, 2020 was $(165,110)$(153,293) as compared $175,520$342,346 for the three months ended September 30,December 31, 2019. For the three months ended September 30,December 31, 2020, the Companywe incurred interest expense including amortization of debt discount and deferred financing expense of $159,034.$157,960. Other income loss for the three months ended September 30,December 31, 2019 was primarily from the realized and unrealized gain from marketable equity securities of $142,806. $314,889.
Below are the results of operations for the sixnine months ended September 30,December 31, 2020 and September 30December 31, 2019:
For the Six Months Ended September 30, 2020 | ||||||||
2020 | 2019 | |||||||
License revenues | $ | 578,768 | $ | 1,273,071 | ||||
Operating expenses | ||||||||
Research and development | 7,479,090 | 5,173,503 | ||||||
General and administrative | 4,663,025 | 4,247,430 | ||||||
Operating loss | (11,563,347 | ) | (8,147,862 | ) | ||||
Other income (loss) | ||||||||
Realized and unrealized loss on marketable equity securities | - | (2,164,513 | ) | |||||
Dividend income | 15,863 | 34,067 | ||||||
Interest expense | (322,274 | ) | - | |||||
Foreign exchange gain | (5,679 | ) | (253 | ) | ||||
Other income | 1,843 | - | ||||||
Total other loss | (310,247 | ) | (2,130,699 | ) | ||||
Net loss | $ | (11,873,594 | ) | $ | (10,278,561 | ) | ||
Net loss per share – basic and diluted | $ | (0.71 | ) | $ | (1.03 | ) | ||
Weighted average number of common shares outstanding – basic and diluted | 16,826,712 | 9,935,444 |
Comparison of SixNine Months Ended September 30,December 31, 2020 with the SixNine Months Ended September 30,December 31, 2019
For the Nine Month Ended | ||||||||
December 31, | ||||||||
2020 | 2019 | |||||||
License revenues | $ | 727,562 | $ | 1,587,450 | ||||
Operating expenses: | ||||||||
Research and development | 10,773,192 | 7,754,125 | ||||||
General and administrative | 7,134,090 | 6,719,144 | ||||||
Operating expenses | 17,907,282 | 14,473,269 | ||||||
Operating loss | (17,179,720 | ) | (12,885,819 | ) | ||||
Other income (loss) | ||||||||
Realized and unrealized loss from marketable securities | - | (1,849,624 | ) | |||||
Dividend and interest income | 16,241 | 59,759 | ||||||
Interest expense | (480,234 | ) | - | |||||
Foreign exchange gain | 468 | 1,512 | ||||||
Total other loss | (463,525 | ) | (1,788,353 | ) | ||||
Net loss | $ | (17,643,245 | ) | $ | (14,674,172 | ) | ||
Deemed dividend from warrant modification | - | (522,478 | ) | |||||
Net loss attributed to common shareholders | $ | (17,643,245 | ) | $ | (15,196,650 | ) | ||
Net basic and diluted loss per share | $ | (1.03 | ) | $ | (1.46 | ) | ||
Weighted average number of shares of common stock used in computing basic and diluted net loss per share | 17,086,871 | 10,437,690 |
License revenue
License revenue for the sixnine months ended September 30,December 31, 2020 was $578,768$772,562 as compared to $1,273,071$1,587,450 for the sixnine months ended September 30,December 31, 2019. The primary decrease of $814,818 was due to the increase in time to amortize the revenue. On January 23, 2019, the Companywe entered into a Licensethe Circassia Agreement with Circassia for PPHN and future related indications at concentrations of <80 ppm in the hospital setting in the United States. The Company is recognizing revenue based upon the second performance obligation, which is for the ongoing support associated with the PMA submission and regulatory approval by the FDA, valued at $2,871,063. Such amount was recorded as deferred revenue to be recognized over a period of time from the commencement of the agreement to when management expects to submit the PMA. As of September 30,December 31, 2020 and March 31, 2020, deferred revenue was $294,422$145,628 and $1,635,825,$873,190, respectively. On December 18, 2019, the Companywe terminated the LicenseCircassia Agreement with Circassia pursuant to which the Companywe had granted Circassia an exclusive royalty-bearing license to distribute, market and sell the Company’s nitric oxideour NO generator and delivery system in the United States and China.
Research and development expenses
Research and development expenses for the sixnine months ended September 30,December 31, 2020 was $7,479,090$10,773,192 as compared to $5,173,503$7,754,125 for the sixnine months ended September 30,December 31, 2019. The increase of $2,305,587$3,019,067 was primarily attributed to a reductionthe initiation of approximately $1,450,000 for aour acute viral pneumonia program that includes COVID-19, the start of our at-home NTM lung infections study, pandemic related expense increase that led to the successful submission of our LungFit PH PMA, as well as associated increases in employee compensation, offset mainly by the completion of animal toxicology studies of rats and dog with LungFit™ at 250 ppm and 400 ppm NO, which both showed no macroscopic or microscopic findings, an increase of approximately $681,000 related to development of the LungFit™ system for PPHN, an increase of approximately $849,000 of COVID-19 related studies, an increase of approximately $417,000 for preclinical studies, an increase in salaries and employee benefits of approximately $1,003,000 and an increase in stock-based compensation expense of approximately $955,000.studies.
General and administrative expenses
General and administrative expense for the sixnine months ended September 30,December 31, 2020 was $4,663,025$7,134,090 as compared to the sixnine months ended September 30,December 31, 2019 of $4,247,430.$6,719,144. The increase of $415,595$414,946 was primarily attributed to an increase in salariesinsurance costs and employee benefits of approximately $233,000 and stock-based compensation, expense of approximately $198,000.offset by a decrease in professional fees.
Other income (loss)
Other loss for the sixnine months ended September 30,December 31, 2020 was $310,247$463,525 as compared $2,130,699$1,788,353 for the sixnine months ended September 30,December 31, 2019. For the sixnine months ended September 30,December 31, 2020, the Companywe incurred interest expense including amortization of debt discount and deferred financing expense of approximately $322,274.$480,234. Other loss for the sixnine months ended September 30,December 31, 2019 was primarily from the realized and unrealized loss from marketable equity securities of $2,164,513.$1,849,624.
Cash Flows
Below is a summary of the Company’sour cash flows activities for the sixnine months ended September 30,December 31, 2020 and September 30,December 31, 2019:
Six Months Ended | ||||||||
September 30, | ||||||||
2020 | 2019 | |||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | (8,805,792 | ) | $ | (5,633,362 | ) | ||
Investing activities | (731,138 | ) | (3,125,401 | ) | ||||
Financing activities | 6,425,041 | 9,756,249 | ||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (3,111,889 | ) | $ | 997,506 |
Nine Months Ended | ||||||||
December 31, | ||||||||
2020 | 2019 | |||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | (14,070,135 | ) | $ | (10,390,620 | ) | ||
Investing activities | (870,457 | ) | (8,035,169 | ) | ||||
Financing activities | 12,129,490 | 19,845,178 | ||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (2,811,102 | ) | $ | 1,419,389 |
Operating Activities
For the sixnine months ended September 30,December 31, 2020, cash used in operating activities was $8,805,792$14,070,135 which was primarily due to our net loss of $11,873,594, including$17,643,245, along with a reduction in accounts payable of $436,141. There was$1,031,922, offset by non-cash stock-based compensation expense of $2,995,368 and a non-cash decrease for deferred revenue of $578,768. A source of cash for$4,056,131. For the sixnine months ended was from other current assets and prepaid expenses of $672,014 and accrued expenses of $249,971. For the six months ended September 30,December 31, 2019, the net cash used in operating activities was $5,633,362$10,390,620 which was due primarily due to our net loss of $10,278,561 a realized and an unrealized loss on marketable equity securities of $$1,836,034,$14,674,172 and a non-cash decrease of $1,587,450 in deferred revenue offset by non-cash stock-based compensation expense of $1,273,071. A source$2,569,508, an unrealized and realized loss on marketable securities of cash for the six months ended was from other current assets$1,849,624, and prepaid expenses,an increase in accounts payable and accrued expenses of $1,814,635.$849,624.
Investing Activities
For the sixnine months ended September 30,December 31, 2020, net cashedcash used in investing activities was $731,138 and this was for$870,457, primarily from the purchase of property and equipment. For the sixnine months ended September 30,December 31, 2019 net cash used in investing activities was $3,125,401. The$8,035,169, primarily from the net investment changepurchases of marketable securities was $3,107,665.of $8,006,921.
Financing Activities
Net cash provided by financing activities for the sixnine months September 30,December 31, 2020 was $6,425,041.$12,129,490. This was primarily from the net proceeds for the issuance of common stock related to the New Stock Purchase Agreement with LPC, the issuance of common stock in connection with the At the Market (“ATM”an at-the-market equity offering (the “ATM”) offering,, and proceeds from the issuance of common stock related to warrant exercises and options. Net cash provided by financing activities for the sixnine months ended September 30,December 31, 2019 was $9,756,246. This was$19,845,178, primarily from the net proceeds ofan underwritten offering, a private placement, and from the LPC former Purchase Agreementissuance and sales of $9,931,271.common stock to LPC.
Liquidity and Capital Resources
Overview
We have incurred losses and generated negative cash flows from operations since inception. To date, we have not generated any revenue from the sale of products, and we do not expect to generate revenue from sale of our products until regulatory approval is received for our product candidates. Since the time the Companywe became public through September 30,2020,December 31, 2020, we have funded our operations principally through the issuance of equity securities and debt. As shown in the accompanying financial statements, the Company haswe have an operating cash flow decrease of $8.8$14.1 million September 30,for the nine months ended was December 31, 2020 and we havehad an accumulated loss of $69.5$75.2 million since inception through September 30,December 31, 2020. The Company has cash, cash equivalent and restricted cash of $22.4$22.7 million as of September 30,December 31, 2020. We believe that our cash, cash equivalents as of December 31, 2020, will enable us to fund our operating expenses and capital expenditure requirements for at least one year from the date of filing these financial statements.
The Company’s future capital needs and the adequacy of its available funds beyond one year will depend on many factors, including, but not necessarily limited to, the cost and time necessary for the development, clinical studies and regulatory approval of the Company’s other medical device, indications as well as the commercial success of the Company’s first product for PPHN, assuming PMA approval. The Company may be required to raise additional funds through sale of equity or debt securities or through strategic collaboration and/or licensing agreements in order to fund operations until we are able to generate enough product or royalty revenues, if any. Financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could have a material adverse effect on our strategic objectives, results of operations and financial condition.
However, we will need to raise substantial additional financing in the future to fund our operations. In order to meet these additional cash requirements, we may seek to sell additional equity or convertible debt securities that may result in dilution to our shareholders. If we raise additional funds through the issuance of convertible debt securities, these securities could have rights senior to those of our common stock and could contain covenants that restrict our operations. There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all.
On March 17, 2020, the Companywe entered into a facility agreement (the “Facility Agreement”) with certain lenders pursuant to which the lenders shall loan to up to $25,000,000 in five tranches of $5,000,000 per tranche at theour option, of the Company (“Tranches”), provided however that the Companywe may only utilize tranches three through five following FDA approval of the LungFit™ PH product.PH. The loan(s) are unsecured with an interest rate of 10% per annum which is paid quarterly and may be prepaid with certain prepayment penalties. The effective interest rate for this loan is 13.3% per year. Each tranche shall be repaid in installments commencing June 15, 2023 with all remaining amounts outstanding under any tranche due on March 17, 20252025.
On April 2, 2020, Beyond Air, Inc.we entered into anthe ATM Equity Offering for $50 million and utilized the Company’sour shelf registration statement. The CompanyWe may sell shares of our common stock having aggregate sales proceeds of up to $50,000,000 from time to time in this offering. If shares are sold, there is a three percent fee paid to the sales agent. There is a balance of approximately $47.4$44.3 million available under the ATM.ATM as of December 31,2020.
On May 14, 2020, the Companywe entered into a $40 million New Stock Purchase Agreement with LPC, that replaced the existing $20 million purchase agreement.agreement from August 2018. The New Stock Purchase Agreement provides for the issuance of up to $40 million of the Company’sour common stock which we may sell from time to time in our sole discretion to Lincoln ParkLPC over the next 36 months, subject to the conditions and limitations in the New Stock Purchase Agreement. There is a balance of approximately $37.2$34.8 million available under the New Stock Purchase Agreement.Agreement as of December 31,2020.
Our ability to continue to operate is dependent upon the approval of our PMA for PPHN, expected timing of the Company’s launch of our product, obtaining Partnerspartners in other parts of the world, timing of future milestones and royalties, raising additional funds to finance our activities. There are no assurances that we will be successful in obtaining an adequate level of financing for the development and commercialization of our product candidates. The Company’sFurther, the continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. Our failure to obtain sufficient funds on acceptable terms when needed could have a negative impact on our business, results of operations, and financial condition. Our ability to continue to operate beyond one year from the issuance of these financial statements is dependent upon raising additional funds to finance its activities.
There are numerous risks and uncertainties associated with the development of our NO delivery system, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidate.
Our future capital requirements will depend on many factors, including:
● | the effects of the COVID-19 pandemic on our business, the medical community and the global economy; | |
● | the progress and costs of our preclinical studies, clinical trials and other research and development activities; | |
● | the costs of commercializing the LungFit™ system, if approved; | |
● | the scope, prioritization and number of our clinical trials and other research and development programs; | |
● | the costs and timing of obtaining regulatory approval for our product candidates; | |
● | the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; | |
● | the costs of, and timing for, strengthening our manufacturing agreements for production of sufficient clinical quantities of our product candidate; | |
● | the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; | |
● | the costs of acquiring or undertaking the development and commercialization efforts for additional, future therapeutic applications of our product candidate; | |
● | the magnitude of our general and administrative expenses; and | |
● | any cost that we may incur under current and future in-and out-licensing arrangements relating to our product candidate. |
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposeda smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and are not required to market risks inprovide the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of foreign currency exchange rates.information under this item.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officerofficer) and Chief Financial Officer (our principal financial officer,officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act).Act. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. 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 upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures arewere effective at the reasonable assurance level as of September 30, 2020, in ensuring that material information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.December 31, 2020.
Changes in Internal Control Over Financial Reporting
During the three months ended September 30,December 31, 2020, there was no change in our internal control over financial reporting that materially affected, or is reasonablereasonably likely to materially affect, our internal control over financial reporting.
On March 16, 2018, Empery Asset Master, Ltd., Empery Tax Efficient, LP and Empery Tax Efficient II, LP, (collectively, “Empery”), filed a complaint in the Supreme Court of the State of New York (the “Court”), relating to the notice of adjustment of both the exercise price of and the number of warrant shares issuable under warrants issued to Empery in January 2017.2017 (the “Empery Suit”). The Empery Suit alleges that, as a result of certain circumstances in connection with our February 2018 offering, the 166,672 warrants issued to Empery in January 2017 provide for adjustments to both the exercise price of the warrants and the number of warrant shares issuable upon such exercise. Empery seeks monetary damages and declaratory relief under theories of breach of contract or contract reformation predicated on mutual mistake.
While the Company believes that it has complied with the applicable protective features of the 2017 Warrants and properly adjusted the exercise price, if Empery were to prevail on all claims, the new adjusted total number of warrant shares could be as follows: 319,967 warrant shares for Empery Asset Master, Ltd., 159,869 warrant shares for Empery ITax Efficient, LP and 252,672 warrant shares for Empery Tax Efficient II, LP, and the exercise price could be reduced from $3.66 to $1.57 per share. While the Company has several meritorious defenses against the claims, the ultimate resolution of the matter, if unfavorable, could result in a material loss. On March 9, 2020, wethe Company filed a motion for summary judgment, which was denied by order of the Court entered on August 20, 2020, except for the second claim for relief for declaratory judgment which was dismissed as moot. On October 1, 2020, wethe Company filed a Notice of Appeal and a motion seeking leave to reargue, and upon reargument, requesting that the Court grant summary judgment dismissing claims for breach of section 3(b) and reformation. Appeal of the order denying the motion for summary judgment is pending. The Court denied reargument on January 15, 2021. Trial is presently scheduled for April 19, 2021. While the Company has several meritorious defenses against the claims, the ultimate resolution of the matter, if unfavorable, could result in a material loss.
For a discussion of the Company’s risk factors, see the information under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
N/A.
Item 3. Defaults Upon Senior Securities.
N/A
Item 4. Mine Safety Disclosures.
N/A.
N/A.
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
3.3 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
4.5 | ||
4.6 | ||
10.1* | ||
10.2* | ||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
**** Confidential treatment has been requested for Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has determined that the omitted information (i) is not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed.
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.
BEYOND AIR, INC. | |
/s/ Steven Lisi | |
Date: | Steven Lisi |
President and Chief Executive Officer | |
(Principal Executive Officer) | |
/s/ Douglas Beck | |
Date: | Douglas Beck |
Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
37 |