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, 20202021

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)

Delaware47-3812456

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

825 East Gate Boulevard, 900 Stewart Avenue, Suite 320301
Garden City, NY11530
(Address of principal executive offices)(Zip Code)

516-665-8200516-665-8200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:Trading SymbolName of each exchange on which registered:
Common Stock, par value $0.0001 per shareXAIRThe 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, 2020,11, 2021, there were 17,343,761 26,640,039 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, 20202021

Table of Contents

Page
PART I FINANCIAL INFORMATION3
ITEM 1. Condensed Consolidated Financial Statements.Statements (Unaudited)3
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations2622
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk3430
ITEM 4. Controls and Procedures3430
PART II OTHER INFORMATION3531
ITEM 1. Legal proceedings31
ITEM 1A. Risk Factors31
ITEM 3. Unregistered Sales of Equity Securities and Use of Proceeds31
ITEM 4. Mine Safety31
ITEM 5. Other Information31
ITEM 6. Exhibits.Exhibits3531
SIGNATURES3632

2

 

PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

INDEX

Page
Condensed Consolidated Balance Sheets4
Condensed Consolidated Statements of Operations5
Condensed Consolidated Statements of Changes in Shareholders’Stockholders’ Equity6 - 7
Condensed Consolidated Statements of Cash Flows87
Notes to Condensed Consolidated Financial Statements9 - 258 – 21

3

 

BEYOND AIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

  September 30, 2020  March 31, 2020 
   (Unaudited)     
ASSETS        
Current assets        
Cash and cash equivalents $21,716,778  $19,829,275 
Restricted cash  636,444   5,635,836 
Other current assets and prepaid expenses  438,910   1,149,806 
Total current assets  22,792,132   26,614,917 
Licensed right to use technology  393,725   412,763 
Right-of-use lease assets  378,188   195,727 
Property and equipment, net  868,868   211,337 
Other assets  38,880   - 
TOTAL ASSETS $24,471,793  $27,434,744 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities        
Accounts payable $1,825,767  $2,256,229 
Accrued expenses  1,347,505   1,097,534 
Deferred revenue  294,422   873,190 
Stock to be issued to a vendor  -   240,000 
Operating lease liability  82,003   69,342 
Loan payable  84,280   335,358 
Total current liabilities  3,633,977   4,871,653 
         
Long-term liabilities        
Operating lease liability  301,664   131,581 
Facility agreement loan, net  4,405,815   4,339,065 
Total liabilities  8,341,456   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 
Treasury stock  (25,000)  (25,000)
Additional paid-in capital  85,614,292   75,702,915 
Accumulated deficit  (69,460,670)  (57,587,076)
Total shareholders’ equity  16,130,337   18,092,445 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $24,471,793   27,434,744 

(amounts in thousands, except share and per share data)

  September 30, 2021  March 31, 2021 
   (Unaudited)     
ASSETS        
Current assets        
Cash and cash equivalents $47,699  $34,631 
Restricted cash  1,047   637 
Grant receivable  -   425 
Other current assets and prepaid expenses  1,550   1,530 
Total current assets  50,295   37,223 
Licensed right to use technology  356   375 
Right-of-use lease assets  1,769   1,861 
Property and equipment, net  1,424   929 
Other assets  211   138 
TOTAL ASSETS $54,056  $40,525 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities        
Accounts payable $2,241  $1,325 
Accrued expenses  4,352   1,805 
Operating lease liability  178   113 
Loan payable  140   557 
Total current liabilities  6,912   3,800 
         
Long-term liabilities        
Operating lease liability  1,684   1,789 
Long-term debt, net  4,539   4,472 
Total liabilities  13,134   10,061 
Commitments and contingencies  -      
 ��       
Stockholders’ 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, 25,209,749 and 21,828,244 shares issued and outstanding as of September 30, 2021 and March 31, 2021, respectively  3   2 
Treasury stock  (25)  (25)
Additional paid-in capital  136,840   110,948 
Accumulated deficit  (95,897)  (80,462)
Total stockholders’ equity  40,921   30,464 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $54,056   40,525 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

 

BEYOND AIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)(amounts in thousands, except share and per share data)

(UNAUDITED)

         
 For the Three Months Ended For the Six Month Ended  For the Three Months Ended For the Six Months Ended 
 September 30,  September 30,  September 30,  September 30, 
 2020  2019  2020  2019  2021  2020  2021  2020 
                  
License revenues $349,607  $645,602  $578,768  $1,273,071  $-  $350  $-  $579 
                                
Operating expenses:                                
                                
Research and development  3,147,276   2,849,990   7,479,090   5,173,503   2,807   3,147   5,548   7,479 
General and administrative  2,169,011   2,064,872   4,663,025   4,247,430   3,395   2,169   7,245   4,663 
Operating expenses  5,316,287   4,914,862   12,142,115   9,420,933   6,201   5,316   12,793   12,142 
                                
Operating loss  (4,966,680)  (4,269,260)  (11,563,347)  (8,147,862)  (6,201)  (4,967)  (12,793)  (11,563)
                                
Other income (loss)                                
Realized and unrealized gain (loss) from marketable securities  -   142,806   -   (2,164,513)
Dividend and interest income  878   30,691   15,863   34,067   1   1   2   16 
Interest expense  (159,034)  -   (322,274)  -   (161)  (159)  (323)  (322)
Foreign exchange loss  (6,954)  (1,977)  (5,679)  (253)  (0)  (7)  9   (6)
Other income  -   -   1,843   - 
Estimated Liability for Contingent Loss  (2,330)  -   (2,330)  2 
Total other income (loss)  (165,110)  171,520   (310,247)  (2,130,699)  (2,490)  (165)  (2,642)  (310)
                                
Net loss $(5,131,790) $(4,097,740) $(11,873,594) $(10,278,561) $(8,692) $(5,132) $(15,435) $(11,874)
                                
Net basic and diluted loss per share $(0.30) $(0.38) $(0.71) $(1.03) $(0.36) $(0.30) $(0.67) $(0.71)
                                
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   24,165,965   17,120,801   23,061,667   16,826,712 

The accompanying notes are an integral part of these condensed consolidated financial statements

5

BEYOND AIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2020

  Common Stock  Treasury  Additional Paid-in  Accumulated  

Total

Shareholders’

 
  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 
At the market stock issuance of common stock, net  113,712   11   -   899,529   -   899,540 
Issuance of common stock upon exercise of warrants  70,538   7       293,104       293,111 
Issuance of common stock upon exercise of stock options  2,340   -   -   545   -   545 
Issuance of common stock pursuant to a Purchase Agreement, net  568,605   57   -   3,641,623   -   3,641,680 
Stock-based compensation              1,813,654       1,813,654 
Issuance of common stock to investor relations firm  30,000   3   -   242,097   -   242,100 
Net loss  -   -   -   -   (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 

  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 

The accompanying notes are an integral part of these condensed consolidated financial statements.

65

 

BEYOND AIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’STOCKHOLDERS’ EQUITY FOR

(UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 20192021

(amounts in thousands, except share data)

  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 
  Number  Amount  Stock  Capital  Deficit  Equity 
        Additional     Total 
  Common Stock  Treasury  Paid-in  Accumulated  Shareholders’ 
  Number  Amount  Stock  Capital  Deficit  Equity 
Balance as of April 1, 2021  21,828,244  $2  $(25) $110,948  $(80,462) $30,464 
At the market stock issuance of common stock, net  1,239,405   0      7,481      7,482 
Issuance of common stock upon exercise of warrants                        
Issuance of common stock upon exercise of warrants, shares                        
Issuance of common stock upon exercise of stock options                        
Issuance of common stock upon exercise of stock options, shares                        
Issuance of common stock pursuant to a Purchase Agreement, net  200,000   0   -   1,031      1,031 
Stock-based compensation          -   1,216      1,216 
Issuance of common stock to investor relations firm                        
Issuance of common stock to investor relations firm, shares                        
Net loss                (6,743)  (6,743)
Balance as of June 30, 2021  23,267,649  $2  $(25) $120,677  $(87,205) $33,450 

  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 

        Additional     Total 
  Common Stock  Treasury  Paid-in  Accumulated  Shareholders’ 
  Number  Amount  Stock  Capital  Deficit  Equity 
Balance as of July 1, 2021  23,267,649  $2  $(25) $120,677  $(87,205) $33,450 
At the market stock issuance of common stock, net  1,659,664   0       14,958       14,958 
Issuance of common stock upon exercise of warrants  271,811   0   -    (0)      - 
Issuance of common stock upon exercise of stock options  10,625   0   -    50       50 
Stock-based compensation              1,155       1,155 
Net loss          -        (8,692)  (8,692)
Balance as of September 30, 2021  25,209,749  $3  $(25) $136,840  $(95,897) $40,921 

BEYOND AIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2020

(amounts in thousands, except share data)

      Additional    Total 
  Common Stock  Treasury  Paid-in  Accumulated  Shareholders’ 
  Number  Amount  Stock  Capital  Deficit  Equity 
Balance as of April 1, 2020  16,056,360  $2  $(25) $75,703  $(57,587) $18,092 
At the market stock issuance of common stock, net  113,712   0       900       900 
Issuance of common stock upon exercise of warrants  70,538   0       293       293 
Issuance of common stock upon exercise of stock options  2,340   0       1       1 
Issuance of common stock pursuant to a Purchase Agreement, net  568,605   0       3,642       3,642 
Stock-based compensation             1,814       1,814 
Issuance of common stock to investor relations firm  30,000   0       242       242 
Net loss        -       (6,742)  (6,742)
Balance as of June 30, 2020  16,841,555  $2  $(25) $82,593  $(64,329) $18,241 

           Additional     Total 
  Common Stock  Treasury  Paid-in  Accumulated  Shareholders’ 
  Number  Amount  Stock  Capital  Deficit  Equity 
Balance as of July 1, 2020  16,841,555  $2  $(25) $82,593  $(64,329) $18,241 
At the market stock issuance of common stock, net  227,527   0       1,536       1,536 
Issuance of common stock upon exercise of warrants  83,332   0       305       305 
Stock-based compensation              1,180       1,180 
Net loss        -       (5,132)  (5,132)
Balance as of September 30, 2020  17,152,414  $2  $(25) $85,614  $(69,461) $16,130 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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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 

(amounts in thousands)

       
  For the Six Months Ended 
  September 30, 
  2021  2020 
       
Cash flows from operating activities        
Net loss $(15,435) $(11,874)
Adjustments to reconcile net loss to net cash used in operating activities        
Depreciation and amortization  123   74 
Amortization of licensed right to use technology  19   19 
Stock-based compensation  2,371   2,995 
Deferred revenue  -   (579)
Amortization of debt discount and accretion of debt issuance costs  67   67 
Amortization of operating lease assets  97   36 
Gain on cancellation of operating lease  -   (2)
Foreign currency adjustments  (5)  6 
Changes in:        
Grant Receivable  425  - 
Other current assets and prepaid expenses  (20)  672 
Accounts payable  909   (436)
Accrued expenses  2,551   250 
Lease payments      (34)
Net cash used in operating activities  (8,898) $(8,806)
         
Cash flows from investing activities        
Security Deposits made on rental properties  (73)  - 
Purchase of property and equipment  (619)  (731)
Net cash used in investing activities  (692) $(731)
         
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  23,521   6,676 
Payment of loan  (453)  (251)
Net cash provided by financing activities  23,068  $6,425 
         
(Decrease) increase in cash, cash equivalents and restricted cash  13,478   (3,112)
Cash, cash equivalents and restricted cash at beginning of period  35,268   25,465 
Cash, cash equivalents and restricted cash at end of period $48,746  $22,353 
Supplemental disclosure of non-cash investing and financing activities        
Right-of-use assets $-   $237 
Operating lease liability $-   $237 
Disposition of right-of-use asset $ -   $(17)
Disposition of operating lease liability $-   $19 
Stock issued to investor relations firm $-   $242 
Supplemental disclosure of cash flow items:  -    -  
Interest paid $179  $81 
Income taxes paid $-  $- 

The accompanying notes are an integral part of these condensed consolidated financial statements.

87

 

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, 2015.28, 2015 under Delaware law. 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, 2011.2011 in Israel.

Advanced Inhalation Therapies (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 CompanyBeyond Cancer Ltd, incorporated on August 13, 2021 in Bermuda.

Beyond Air is a clinical-stage medical device and biopharmaceutical company focused on developing inhaled Nitric Oxide (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 oxide (“NO”) generator and delivery system (the “LungFit™® system”) that is capable of generating NO from ambient air. The LungFit™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™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. OurBeyond Air believes that 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, the Company believes that there is a high unmet medical need for patients suffering from certain severe lung infections that the LungFit® platform can potentially address. The Company’s current areas of focus with the LungFit™ LungFit® are persistent pulmonary hypertension of the newborn (“PPHN”)(PPHN), severe acute respiratory syndrome coronavirus 2 (“SARS CoV-2”)/acute viral pneumonia (AVP), including COVID-19, bronchiolitis (“BRO”)(BRO) and nontuberculous mycobacteria (“NTM”)(NTM) lung infection. The Company’scurrent product candidates will be subject to premarket reviews and approvals by the U.S. Food and Drug Administration or(the “FDA”), CE marking conformity assessment by a notified body in the FDA,European Union, as well as similar regulatory agenciesagency reviews or approvals in other countries or regions. The Premarketing Application (“PMA”) for the LungFit™ system addressing PPHN was filed 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 incurredused cash used in operating activities of $8.8 $5.0 million for the sixthree months ended September 30, 20202021, and has accumulated losses of $69.5 $95.9million. The Company hashad cash, cash equivalents and restricted cash of $22.4 $48.7 million as of September 30, 2020.2021. Based on management’s current business plan, the Company estimates its currentthat it will have enough cash and equivalents areliquidity sufficient to finance its operationsoperating 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 actual cost and time necessary for the development,current and anticipated preclinical studies, clinical studiestrials and other actions needed to obtain regulatory approval of our otherthe Company’s medical device, indicationsdevices in development as well as the commercial success of ourcost to launch the Company’s first product for PPHN, assuming PMA approval.approval of Beyond Air’s Pre-Market Approval Process (PMA).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 ORGANIZATION AND BUSINESS (continued)

The Company expectsmay be required to raise additional funds through sale of equity or debt securities offerings or through strategic collaboration and/or licensing agreements in order to fund operations and clinical trials until we areit is able to generate enough product or royalty revenues, if any. Such financing or collaborations may not be available on acceptable terms, or at all, whichand the Company’s failure to raise capital when needed could have a material adverse effect on our growth plans, ourits strategic objectives, results of operations and our financial condition.

8

 

However, the

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 ORGANIZATION AND BUSINESS (continued)

Liquidity Risks and Uncertainties

The Company’s future liquidity includes access to capital and liquidity currently includes the following:

a)

OnAn At-The-Market Equity Offering Sales Agreement, dated April 2, 2020 Beyond Air, Inc. entered into an At The Market Equity Offering (“ATM”(the “ATM”) for $50 $50 million, seeof which approximately $14.5 million remained as of September 30, 2021 (see Note 5.

5).
b)On March 17, 2020, the Company entered into a $25 million unsecured loan facility agreement (the “Facility Agreement”) with certain lenders. The Company has drawn down the first of five tranches of $5 million and has the ability to drawn down on an additional $5 million tranche at any time prior March 17, 2022 as well as the ability to draw down the remaining $15 million after the FDA approval of the LungFit™ PH product, see Note 11.
c)On May 14, 2020, the Company entered into a $40 A $40 million stock purchase agreement (“New Stock Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”) dated as of May 14, 2020 (the “Stock Purchase Agreement”), that replaced the former $20of which approximately $28.2 million purchase agreement.remains available as of September 30, 2021. The New Stock Purchase Agreement provides for issuances through May 2023 at the Company’s discretion see(see Note 5.5).

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 the 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 Sheetbalance sheet as of March 31, 2020September 30, 2021 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, 2020.2021 (the “2021 Annual Report”), was filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 10, 2021 and amended on July 23, 2021.  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 2021 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 of the Company’s subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying financial statements.

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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 including accruals for expenses under consulting, licensing agreements, and clinical trials, stock-based compensation, warrant fair value, assumptions associated with revenue recognition, and the determination of deferred tax attributes and the valuation allowance thereon.

Other Risks and Uncertainties

The Company is subject to risks common to medical device and development stage companies including, but not limited to, new technological innovations, regulatory approval, 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 partythird-party suppliers and, in some cases single-source suppliers.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

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.NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company’s products require approval or clearance from the U.S. Food and Drug AdministrationFDA prior to commencingcommencement of 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, itsuch denial or delay may have a material adverse impact on the Company’s results of operations, financial position and liquidity. Further, 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 development of ourthe Company’s product candidates could be further disrupted and adversely affected by COVID-19.a resurgence of the COVID-19 pandemic. The spread of SARS CoV-2 from China to other countries has resultedCompany experienced significant delays in the Director General ofsupply chain for LungFit® due to the World Health Organization declaring COVID-19 a pandemic on March 11, 2020. We have assessedredundancy in parts and suppliers with ventilator manufacturing which has since been remedied. The Company continuously assesses 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 ourglobal supply chain.chains. However, there can be no assurance that this analysisthe Company will enable usbe able to 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 will impact our operations will depend on future developments, which are still uncertain and cannot be predicted at this time.consequences if a resurgence occurs.

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 manufacturingconsiders all highly liquid investments with original maturities of three months or less at the LungFit™ generatordate of purchase and delivery systems and nitrogen dioxide filters for both clinical studies and commercial supply if regulatory approval is received.

11

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial Instruments

Financial instruments that potentially subject the Companyan investment in a U.S. government money market fund to concentrations of credit risk consist principally of cash andbe cash equivalents. The Company maintains its cash and cash equivalents in bank deposit and other interest-bearing accounts in major bankshighly rated financial institutions 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, 20202021 and March 31, 2020,2021, restricted cash includes $619,000 of cash that isincluded $1,019 thousand and $619 thousand designated for a contract manufacturer.manufacturer, respectively. This cash is expected to be used for materialmaterials and parts that require a long lead time.times. See Note 14 for additional restrictions subsequent to year end.

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:

SCHEDULE OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

 September 30, 2020  September 30, 2019         
(amounts in thousands) September 30, 2021  September 30, 2020 
Cash and cash equivalents $21,716,778  $1,895,389  $47,699  $21,717 
Restricted cash  636,444   459,234   1,047   636 
Cash and cash equivalents and restricted cash $22,353,222  $2,354,623 
Total $48,746  $22,353 

Revenue Recognition

The Company recognizes revenue when we transferit transfers 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;customer, (ii) identify the performance obligation(s) in the contract;contract, (iii) determine the transaction price;price, (iv) allocate the transaction price to the performance obligation(s) in the contract;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, assessassesses whether each promised good or service is distinct and identifyidentifies those promised goods or services that are performance obligations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company uses judgment to determine: a)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)contract (b) the transaction price under step (iii) above;above and c)(c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of the transaction price in step (iv) above. The Company also 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.

satisfied. 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, theysuch fees or other payments are recorded as contract liabilities and recognized as revenue when (or as) the underlying performance obligation is satisfied.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Grant receivable

Under a collaboration arrangement with the Cystic Fibrosis Foundation (“CFF”), grant milestones are achieved subject to certain performance steps and requirements under a development program. Grant milestones are recorded as reimbursements against the applicable portion of the Company’s research and development expenses. Such reimbursements are reflected as a reduction of research and development expenses in the Company’s consolidated statements of operations, as the performance of research and development services for reimbursement is not considered to be an ongoing component or central to the Company’s operations.

Segment reportingReporting

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 have viewed ourthe Company views its operations and managed ourmanages its business as one1 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 preclinical studies and clinical trials and preclinical studies.trials. Research and development projects that have no alternative uses have been expensed as incurred.expenses are partially offset by the benefit of tax incentive payments for qualified research and development expenditures from the Australian tax authority (“AU Tax Rebates”). The Company does not record AU Tax Rebates until payment is received due to the uncertainty of receipt. To date, the Company has not received any AU Tax Rebates.

11

 

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign Exchange Transactions

The Company’s subsidiaries have operationstransact in Israel, Ireland,U.S. dollars, Euros, New Israeli Shekels and in Australia. Beyond Air’sAustralian dollars. The Company’s main 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, 20202021 and March 31, 2021 were not material. Gains or losses from foreign currency transactions are included in other income (loss) apart of(expense) in the statement of operations.operations as foreign currency exchange gains/(losses)gain/(loss).

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 common stock on the date of grant. The grant date fair value is recognized over the requisite service period during which an employee and non-employee is required to provide service in exchange for the award - the requisite service period.award. The grant-dategrant date fair value of employee and non-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 anweighting of its historical volatility and the implied volatility based on an aggregate of guideline companies. In 2020, the Company began to incorporate and weight its historical volatility with the 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.

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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 isare calculated using the straight-line method over the estimated useful life of the assets as follows:

SCHEDULE OF PROPERTY AND EQUIPMENT USEFUL LIFE OF ASSETS

ComputersComputer equipmentThree years
Furniture and fixturesSeven years
Clinical and medical equipment

Five or Fifteen years

Leasehold improvementsShorter 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).

14

BEYOND AIR, INC. AND ITS SUBSIDIARIESThe expected amortization expense for the next five years and thereafter is as follows for the year ended March 31 (in thousands):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)SCHEDULE OF FUTURE EXPECTED AMORTIZATION EXPENSE

     
Remainder of 2022 $19 
2023  38 
2024  38 
2025  38 
2026  38 
Thereafter  184 
Total $356 

Long-Lived Assets

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 triggerthe Company considers as potential triggers of an impairment review include the following:

●significant underperformance relative to expected historical or projected future operating results,
●
●significant changes in the manner of ourthe Company’s use of the acquired assets or the strategy for ourits overall business,
●
●significant negative regulatory or economic trends, and
●
●significant technological changes, which would render the platform technology, equipment, and manufacturing processes obsolete.

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BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Long-Lived Assets

Recoverability of assets that will continue to be used in ourthe Company’s 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 estimatedestimates of 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, 2020,2021 and March 31, 2020,2021, the Company recorded a valuation allowance to the full extent of ourthe Company’s net deferred tax assets since the likelihood of realization of the benefit does not meet the more likely than notmore-likely-than-not threshold.

The Company files a U.S. Federal,federal, various state, and Internationalinternational 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 20162017 through 20202021 remain open to examination by federal and state tax jurisdictions. The Company files tax returns in Israel for which tax years 20142015 through 20202021 remain open. In addition, the Company files tax returns in Ireland and Australia for which tax years 2020 and the tax year 2020 remains2021 remain open.

Net Income (Loss) Per Share

Basic and diluted net loss per share attributable to common stockholders is computed by dividing the net loss and deemed dividend from a warrant modification to common stockholders, if any, 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 shareholdersstockholders 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 stockholders is the same as basic net loss per share attributable to common stockholders, because such shares of common sharesstock are not assumed to have been issued if their effect is anti-dilutive, see Note 9.

New Accounting Standards

There are no recently issued accounting standards that have been adopted in the current period or will be adopted in future periods that have had or are expected to have a material impact on the Company’s consolidated financial position or results of operations.

1513

 

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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 ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” as part of its initiative to reduce complexity in the accounting standards. The standard 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 standard 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, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU 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 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 standard 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 facilitya short-term 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 debt approximates 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 givesgive 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of September 30, 20202021 and March 31, 2020, respectively:2021:

SCHEDULE OF PROPERTY AND EQUIPMENT

 September 30, 2020  March 31, 2020 
(in thousands) September 30, 2021  

March 31,

2021

 
          
Clinical and medical equipment $989,716  $357,795  $1,211  $1,074 
Computer equipment  122,670   73,982   276   152 
Furniture and fixtures  87,921   53,895   251   133 
Leasehold improvements  21,840   5,336   262   22 
  1,222,147   491,008   2,000   1,381 
Accumulated depreciation and amortization  (353,279)  (279,671)  (576)  (453)
 $868,868  $211,337  $1,424  $929 

Depreciation and amortization expense related to fixed assets for the three months ended September 30, 20202021 and September 30, 20192020 was $39,958$65 thousand and $15,917,$40 thousand, respectively. Depreciation and amortization expense related to fixed assets for the six months ended September 30, 20202021 and September 30, 20192020 was $73,608$123 thousand and $33,819,$74 thousand, respectively.

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BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 STOCKHOLDERS’ EQUITY

NOTE 5 SHAREHOLDERS’ EQUITYOn April 2, 2020, the Company entered into an ATM for $50 million utilizing the Company’s shelf registration statement on Form S-3. Under the ATM, the Company may sell shares of its common stock having aggregate sales proceeds of up to $50 million from time to time and at various prices, subject to the conditions and limitations set forth in the sales agreement. If shares of the Company’s common stock are sold, there is a three percent fee paid to the sales agent. For the three months ended September 30, 2021 and September 30, 2020, the Company received net proceeds of $15.0 million and $1.5 million from the sale of 1,659,664 and 227,527 shares of the Company’s common stock, respectively. For the six months ended September 30, 2021 and September 30, 2020, the Company received net proceeds of $22.4 million and $2.4 million from the sale of 2,899,069 and 341,239 shares of the Company’s common stock, respectively. As of September 30, 2021, there was a balance of approximately $14.5 million available under the ATM.

On May 14, 2020, the Company entered into a $40 million Newthe 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 Agreementwhich provides for the issuance of up to $40$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 of the Company’s common stock is not below $0.25$0.25 per share and subject to certain other conditions and limitations set forth in 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, forFor the six months ended September 30, 2021 and September 30, 2020, the Company received net proceeds of $3,641,680$1.0 million and $3.6 million from the sale of 200,000 and 568,605 shares of common stock. As of September 30, 2020, there is a balance of $37,211,500 available.

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. 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 six months ended September 30, 2020, the Company received net proceeds of $1,536,247 and $2,435,787 from the sale of 227,527 and 341,239 shares of the Company’s stock, respectively. As of September 30, 2020,2021, there iswas a balance of $47,434,213approximately $28.2 million 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 was $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.Agreement.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 SHAREHOLDERS’ EQUITY (continued)

Restricted Stock

Stock to be Issued to a Vendor

As of March 31, 2020, the Company was obligated to issue 30,000 shares 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.

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.years.

  

Number

Of Shares

  

Weighted

Average

Grant Date

Fair Value

 
       
Unvested as of April 1, 2020  646,800  $4.99 
Granted  62,000   5.81 
Unvested as of September 30, 2020  708,800  $5.06 

Stock-based compensation expense related toA summary of the Company’s restricted stock awards was $377,315 and $219,269for the period ended September 30, 2021 is as follows:

SCHEDULE OF CHANGE IN WARRANTS OPTIONS

  Number Of Shares  Weighted Average Grant Date Fair Value 
       
Unvested as of April 1, 2021  554,200   5.07 
Forfeited  (17,000)  5.23 
Unvested as of September 30, 2021  537,200  $5.07 

Stock-based compensation related to these stock issuances for the three months ended September 30, 20202021 and September 30, 2019,2020 was $161 thousand and $377 thousand, respectively. Stock-based compensation expense related to restrictedthese stock awards was $771,176 and $348,279issuances for the six months ended September 30, 20202021 and September 30, 2019,2020 was $319 thousand and $771 thousand, respectively.

Stock Option Plan

The Company’s amendedThird 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 to four years and expire up toin ten years afterfrom the grant date. The 2013 Plan has 4,100,0005,600,000 shares authorized for issuance. As of September 30, 2020, there are 7,0592021 520,011 shares were available under the 2013 Plan.

1815

 

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 SHAREHOLDERS’STOCKHOLDERS’ EQUITY (continued)

A summary of the change inCompany’s options for the six months ended September 30, 2020,2021, is as follows:

SCHEDULE OF OPTION ACTIVITY

  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 
        Weighted    
     Weighted  Average    
     Average  Remaining  Aggregate 
     Exercise  Contractual  Intrinsic 
  Number  Price -  Life-  Value 
  Of Options  Options  Options  (thousands) 
Options outstanding as of April 1, 2021  4,195,097  $4.91   8.4  $2,609 
Granted  171,500   8.43         
Exercised  (10,625)  4.69         
Forfeited  (84,312) 5.06         
Outstanding as of September 30, 2021  4,271,660  $4.98   7.8  $26,221 
Exercisable as of September 30, 2021  2,042,035  $4.47   6.8  $13,584 

As of September 30, 2020,2021, the Company has unrecognized stock-based compensation expense of approximately $3,407,300$5.2 million related to unvested stock options andwhich is expected to be expensed over the weighted average remaining service period of 1.5 2.4 years. ForAn option to purchase 75,000 shares of common stock was granted to the six months endedChief Financial Officer as an inducement award per the new employment agreement on September 30, 2020 and September 30, 2019, the1, 2021. The weighted average fair value of options granted was $5.13 $7.92 and $3.49 $5.13 per share. share during the six months ended September 30, 2021 and September 30, 2020, respectively.

The following waswere utilized to calculate the fair value of options on the date of grant:the grants:

SCHEDULE OF ASSUMPTION OF BLACK-SCHOLES OPTION PRICING MODEL

  September 30, 2021 September 30, 2020
Risk-free interest rate  0.1%  0.5-0.7%
Expected volatility   90.3-90.5 %    87.8-92.5%
Dividend yield  0%  0%
Expected terms (in years)  6.25    5.18 -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 includesinclude stock options and restricted stock for the three and six months ended September 30, 20202021 and September 30, 2019,2020, respectively

SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE

  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 

19

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 SHAREHOLDERS’ EQUITY (continued)

Warrants

                 
  Three Months Ended  Six Months Ended 
  September 30,  September 30, 
(in thousands) 2021  2020  2021  2020 
             
Research and development $379  $452  $744  $1,289 
General and administrative  776   728   1,627   1,706 
                 
Total stock-based compensation expense $1,155  $1,180  $2,371  $2,995 

On March 4, 2021, the stockholders approved the 2021 Employee Stock Purchase Plan “the ESPP”. The purpose of the ESPP is to encourage and to enable eligible employees of the Company, through after-tax payroll deductions, to acquire proprietary interests in the Company through the purchase and ownership of shares of common stock. The ESPP is intended to benefit the Company and its stockholders by (a) incentivizing participants to contribute to the success of the Company and to operate and manage the Company’s business in a manner that will provide for the Company’s long-term growth and profitability and that will benefit its stockholders and other important stakeholders and (b) encouraging participants to remain in the employ of the Company. As of September 30, 2021 and March 31, 2021, there were 0 shares issued under the ESPP and 750,000 shares were available for future issuance under the ESPP.

Warrants

A summary of the Company’s outstanding warrants as of September 30, 2020 are2021 is 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) 
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         

SUMMARY OF COMPANY’S OUTSTANDING WARRANTS

Warrant Holders 

Number Of

Warrants

  

Exercise

Price

  

Date of

Expiration

 
January 2017 offering – investors  2,561,568  $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) 
Third-party license agreement  208,333  $4.80   January 2024 
March 2020 loan (see Note 12)  172,187  $7.26   March 2025 
Total  3,017,959        

(a)These warrants have down round protection.

For both the three and six months ended September 30, 2021, 415,664 warrants were exercised on a cashless basis in exchange for 271,811 shares. For the three and six months ended September 30, 2020, there were 83,332 and 153,870 warrants exercised for $304,995$305 thousand and $598,106,$598 thousand, respectively. There were 83,332 and 153,870 shares of common stock issued for the three and six months ended September 30, 2020, respectively. For the six months ended September 30, 2019, no warrants were exercised.

16

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6 OTHER CURRENT ASSETS AND PREPAID EXPENSES

A summary of current assets and prepaid expenses as of September 30, 20202021 and March 31, 20202021 is as follows:

  September 30, 2020  March 31, 2020 
Research and development $109,622  $266,510 
Insurance  205,832   471,182 
Professional  25,000   156,259 
Value added tax receivable  46,729   124,127 
Other  51,727   131,728 
  $438,910  $1,149,806 

SCHEDULE OF CURRENT ASSETS AND PREPAID EXPENSES

         
(in thousands) September 30, 2021  

March 31,

2021

 
Research and development $663  $272 
Insurance  378   971 
Professional  125   - 
Value added tax receivable  56   41 
Other  327   246 
Total $1,550  $1,530 

NOTE 7 ACCRUED EXPENSES

A summary of the accrued expenses as of September 30, 20202021 and March 31, 20202021 is as follows:

SUMMARY OF ACCRUED EXPENSES

 September 30, 2020  March 31, 2020         
Vendors – research and development $404,596  $484,756 
 September 30, 2021  

March 31,

2021

 
Research and development $700  $585 
Professional fees  315,879   476,638   719   709 
Employee salaries and benefits  273,864   71,066   458   270 
Interest expense  193,298   - 
Other  159,868   65,074   2,475   242 
Total $1,347,505  $1,097,534  $4,352  $1,805 

20

BEYOND AIR, INC. AND ITS SUBSIDIARIESOn September 30, 2021, the Company recorded an estimate for a contingent loss of $2.4 million related to the Empery litigation, see Note 14.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8 LEASES

On April 1, 2019, the Company early adopted Accounting Standards UpdateASU 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, 20202021 and March 31, 2020.2021 are as follows:

  September 30, 2020  March 31, 2020 
       

Right-of-use assets

 $378,188  $195,727 
         
Operating lease liability short-term $82,003  $69,342 
Operating lease liability long-term  301,664   131,581 
  $383,667  $200,923 

SCHEDULE OF OPERATING LEASE LIABILITY

(in thousands) September 30, 2021  March 31, 2021 
       
Right-of-use assets $1,769  $1,861 
         
Operating lease liability short-term $178  $113 
Operating lease liability long-term  1,684   1,789 
Total $1,862  $1,903 

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 ourthe Company’s 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, 2020, and March 31,2020, the weighted average discount rate and remaining term on lease obligation is approximately 8.3%, 8.3%, 4.5 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. 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.

SCHEDULE OF LEASE OTHER INFORMATION

Other Information for the Six Months Ended September 30, 2021   
    
Cash paid for amounts included in the measurement of lease liabilities (thousands): $118 
Right-of-use assets obtained in exchange for new operating lease liabilities:  - 
Weighted average remaining lease term — operating leases  8.8 years 
Weighted average discount rate — operating leases  8.3%

 

SCHEDULE OF MATURITY OF LEASE LIABILITIES

     
Maturity of Lease Liabilities Operating Leases 
Payments remaining for the year ended March 31 (in thousands):    
2022 $148 
2023  328 
2024  287 
2025  277 
2026  285 
Thereafter  1,329 
Total lease payments  2,654 
Less: interest  (792)
Present value of lease liabilities $1,862 

17

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 stockholders because their effect would have been anti-dilutive for the periods presented:

  September 30, 2020  September 30, 2019 
       
Common stock warrants  5,019,854   6,143,405 
Common stock options  3,193,249   2,353,115 
Restricted shares  708,800   335,000 
         
Total  8,921,903   8,831,520 

SCHEDULE OF POTENTIAL ANTI-DILUTIVE SECURITIES

  September 30, 2021  September 30, 2020 
       
Common stock warrants  3,017,959   5,019,854 
Common stock options  4,271,660   3,193,249 
Restricted stock  537,200   708,800 
         
Total  7,826,819   8,921,903 

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 License Agreement,Circassia Agreement. On May 25, 2021, the Company entered into a settlement with Circassia, 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 shares14.

As 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.

21

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO 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 License Agreement, which included significant pre-agreement negotiation, product specification, and
○the successful completion of the pre-submission meeting with the FDA. At this meeting, the FDA reinforced their assessment of the LungFit™ PH as a medical device and the requirements for approval.

●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 the approval.

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

●$7.35 million or 12,300,971 ordinary shares of Circassia upon signing (received in quarter four of fiscal year ended March 31, 2019);
●$3.15 million or 5,271,844 ordinary shares of Circassia payable within five (5) business days following the successful completion of a Food and Drug Administration (the “FDA”) pre-submission meeting (received in quarter four of fiscal year ended March 31, 2019);

During the three months ended March 31, 2019,2021, the Company met the first two milestonesits performance obligation under the license agreementCircassia 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 transferrevenue therefrom has been previously recognized. License revenue of the intellectual property to Circassia, which was recognized at a point in time$0 and was valued at $7,116,232 and the other being the ongoing support$350 thousand 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 is being recognized over a period of time from the commencement of the agreement to when management expects to submit the PMA. License revenue of $349,607 and $645,602 associated with thisCompany’s second performance obligation has been recognized for the three months ended September 30, 20202021 and September 30, 2019,2020, respectively. License revenue of $579,768$0 and $1,273,071$579 thousand associated with thisthe Company’s second performance obligation has been recognized for the six months ended September 30, 20202021 and September 30, 2019,2020, respectively. As

NOTE 11 GRANT COLLABORATON AGREEMENT

On February 10, 2021, the Company received a grant for up to $2.17 million from the CFF to advance the clinical development of high concentration NO for the treatment of Nontuberculous Mycobacteria, or NTM pulmonary disease, which disproportionally affects cystic fibrosis (“CF”) patients. Under the terms of the grant agreement, the funding will be allocated to the ongoing LungFit® GO NTM pilot study. The grant provides milestones based upon the Company’s achieving performance steps and requirements under a development program. The grant provides for royalty payments to CFF upon the commercialization of any product developed under the grant program at a rate of 10% of net sales. The royalties are capped at four times the grant actually paid to the Company. For the three and six months ended September 30, 2020,2021, the Company recognized $207 and March 31, 2020, deferred revenue was $294,422$432 thousand in reduction of research and $873,190, respectively.development expenses.

18

 

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11 FACILITY AGREEMENT12 LONG-TERM LOAN

On March 17, 2020, the Company entered into a facility agreementthe Facility Agreement with certain lenders for up to $25,000,000$25.0 million in five tranches of $5,000,000$5.0 million 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™ 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 on 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 an over a five percent shareholder,5% stockholder loaned the Company $3,160,000$3,160 thousand of the first tranche and, as such, related party interest expense for the three and six months ended September 30, 2021 and September 30, 2020 approximated $79,000was $158 thousand and $158,000$158 thousand (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 $7.26 per share. The warrants expire in five years.years. There are additional warrant issuances associated with each tranche. If the second tranche of $5 $5 million is utilized by the Company, the warrants that will be issued are up to 25% of their commitment value divided by the five-day volume-weighted average price (“VWAP”) prior to the utilization date. If any of tranches three to five are utilized by the Company, the warrants that will be issued isare up to twenty five percent10% of itstheir commitment value divided by the five day volume weighed average price “(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, theThe Company allocated the fair market value of the warrants at the date of grant of the warrants to stockholders’ equity and reflected a debt discount valued at $594,979 usingof $595 thousand. Debt discount and debt issuance costs are amortized over the Black Scholes pricing model.life of the loan.

22

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED

NOTE 11 FACILITY AGREEMENT LOAN (continued)

The Black-Scholes pricing model used the following assumptions:

Expected term in years5.0
Volatility87.5%
Dividend yield0.0%
Risk-free interest rate0.7%

A summary of the facility agreementlong-term loan balance as of September 30, 20202021 and March 31, 20202021 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 

SCHEDULE OF LONG-TERM LOAN

(in thousands) September 30, 2021  

March 31,

2021

 
Face value of loan $5,000  $5,000 
Debt discount  (595)  (595)
Accretion of debt discount  183   123 
Amortization of debt offering costs  22   15 
Debt offering costs  (71)  (71)
Total $4,539  $4,472 

SCHEDULE OF MATURITY OF LONG-TERM LOAN

Maturity of Long-Term Loan (in thousands) September 30, 2021 
    
2022 $- 
2023  500 
2024  2,250 
2025  2,250 
Total $5,000 

During October 2021, the Company amended the Facility agreement to offer the lenders the ability to accept redemption of all amounts outstanding from the first tranche of $5.0 million and to terminate the Facility Agreement without penalty. The Facility Agreement was terminated on November 10, 2021. See Note 15.

NOTE 12 13 LOAN PAYABLE

As of September 30, 2020,2021 and March 31, 2020,2021 in connection with the Company’s insurance policy, a loan was used to finance part of the premium. The following details concerning each loan is due within the year with monthly payments of $42,366 bearing interest at 4.3%. The outstanding balanceare as of September 30, 2020 and March 31, 2020 was $84,280 and $335,358, respectively.follows:

SCHEDULE OF LOAN PAYABLE

  September 30, 2021  

March 31,

2021

 
 (in thousands)        
Amount outstanding $140  $557 
Monthly payments $70  $70 
Number of monthly payments remaining  2   8 
Interest rate  3.2%  3.2%
Due date  November 2021   November 2021 

19

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 13 14 COMMITMENTS AND CONTINGENCIES

License and Other Agreements

On October 22, 2013, the Company entered into a patent license agreement (the “CareFusion Agreement”) with SensorMedics Corporation, a subsidiary of CareFusion Corp. (“CareFusion”), pursuant to which itthe Company agreed to pay to the third partyCareFusion a non-refundable upfront fee of $150,000$150 thousand that is credited against future royalty payments, and is obligated to pay 5% royalties of any licensed product net sales, but at least $50,000$50 thousand per annum throughduring the term of the agreement and the advance is credited against future royalties payments.agreement. As of September 30, 2020,2021, the Company didhas not paypaid any royalties to CareFusion since the Company didhas not havereceived 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,CareFusion Agreement, and may be terminated unilaterally by CareFusion with 30 days’ prior written notice in the event that we dothe Company does not meet certain milestones.

23

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 thousand to Pulmonox. The Company becomesis obligated to make certain one-time development and sales milestone payments to Pulmonox, commencing with the date on which we receivethe Company receives 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 $87 million across three separate and distinct indications that fall under the agreement,Option Agreement, with the majority of them,such payments, approximately $83 $83 million, being related to sales related based on cumulative sales milestones for each of the three products.

On January 31, 2018, the Company and NitricGen, Inc. (“NitricGen”) entered into an agreement (“(the “NitricGen 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™LungFit®. The Company acquired the licensing right to use the technology and agreed to pay NitricGen a total of $2,000,000$2.0 million in future payments based upon achievingthe achievement of certain milestones, as defined in the NitricGen Agreement, and royalties on sales of LungFit™LungFit®. The Company paid NitricGen $100,000$100 thousand upon the execution of the NitricGen Agreement, $100,000$100 thousand upon achieving the next milestone and issued 100,000 optionswarrants to purchase the Company’s common stock valued at $295,000$295 thousand upon executing the execution of the NitricGen Agreement. The remaining future milestone payments are $1,800,000$1.8 million of which $1,500,000$1.5 million is due after six months after the first approval of the LungFit™eNOGenerator by the Food and Drug AdministrationFDA or the European Medicine EvaluationMedicines Agency.

On May 25, 2021, the Company and Circassia Limited entered into a Settlement Agreement resolving all claims by and between both parties and mutually terminating the Circassia agreement disclosed in Note 10. Pursuant to the terms of the Settlement Agreement, the Company agreed to pay Circassia $10.5 million in three installments, the first being a payment of $2.5 million on the Initial Payment Due Date. Thereafter, the Company shall pay $3.5 million to Circassia on the first anniversary of the Initial Payment Due Date and $4.5 million on the second anniversary of the Initial Payment Due Date. Additionally, beginning in year three post-approval, Circassia will receive a quarterly royalty payment equal to 5% of LungFit® PH net sales in the US. This royalty will terminate once the aggregate payment reaches $6 million. This product candidate continues to be under FDA review and, as such, a liability has not been recognized as of September 30, 2021.

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 twelve12 months’ notice of the intent not to renew. In July 2020,renew the Company placed a non-cancellable purchase order for approximately $1,300,000 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 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 January 2021.

24

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONSENDED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 13 COMMITMENTS AND CONTINGENCIES (continued)

agreement. 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 isplaced several purchase orders under the aforementioned new operating leaseagreement. The non-cancellable portion of the purchase orders with this supplier as of September 30, 2021 is approximately $1.1 million. Additionally, long lead time materials in the amount of $2,035,601, which upon commencement,$1.0 million have been ordered on behalf of the Company, will record the operating lease liabilities and corresponding right-of-use assets on the balance sheet pursuant to ASC 842, as amended.see Note 2.

Other Information For The Six Months Ended September 30, 2020   
Cash paid for amounts included in the measurement of lease liabilities:    
Cash paid $47,625 
Right-of-use assets obtained in exchange for new operating lease liabilities:  - 
Weighted-average remaining lease term — operating leases  4.5 years 
Weighted-average discount rate — operating leases  8.3%

Maturity of Lease Liabilities Operating Leases 
Payments remaining for the year ended March 31,:    
2021(excluding the six months ended September 30, 2020) $68,408 
2022  278,214 
2023  285,868 
2024  243,596 
2025  233,632 
Thereafter  1,385,499 
Total lease payments  2,495,217 
Less: interest  (75,949)
Present value of lease liabilities $2,419,268 

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 “Trial Court”) against the Company relating to anti-dilution provisions in a 2016 warrant agreement (the “2016 Warrant Agreement”) for 166,672 warrants between the noticeCompany and Empery. The complaint alleged three claims arising out of adjustmenta 2018 transaction in which the Company issued additional warrants and common stock to second-round investors for a share price lower than that contained in the 2016 Warrant Agreement: a breach of bothcontract claim alleging that the Company did not provide a Certificate of Adjustment that is correct as to the exercise price of and share amount; a declaratory judgment claim seeking a determination as to the number of warrant shares issuable under warrants issued to Empery in January 2017. 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 theproper exercise price and share amount; and a claim for reformation of Section 3(b) of the warrantsWarrant Agreement on the grounds of mutual mistake.

On August 20, 2020, the Trial Court denied the Company’s summary judgment motion as to the first and third claims for relief, but dismissed the numbersecond claim for declaratory judgment as moot (the “August 20 Decision”). The Appellate Division First Department denied the Company’s appeal of warrant shares issuable upon such exercise.the August 20 Decision on September 30, 2021.

In an event subsequent to September 30, 2021, following a three-day bench trial, the Trial Court issued a decision on October 14, 2021, finding in favor of Empery seeks monetaryon the two remaining claims, granting reformation of the Warrant Agreement, and awarding Empery damages in the aggregate amount of approximately $5.8 million plus prejudgment interest (the “October 14 Decision”).

The Company intends to appeal the October 14 decision. Pending appeal, the Company is required to use approximately $7.4 million of cash as collateral to secure a supersedeas bond for the full amount of damages and declaratory relief under theories of breach of contract or contract reformation predicated on mutual mistake.

Whileinterest in the case that the Company believesis unsuccessful in its appeal.

The Company, in consultation with outside legal counsel, believe 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 Master, 159,869 warrant shares for Empery I and 252,672 warrant shares for Empery II and the exercise price could be reduced from $3.66 to $1.57 per share. While the Company hasthey have several meritorious defenses against the claims, and the decision of the Trial Court. However, the ultimate resolution of the matter on appeal, if unfavorable, could result in a material loss. On March 9, 2020, we filed a motion for summary judgment, which was denied by orderlosses in excess of the Court entered on August 20, 2020, except forCompany’s current estimate which may be material to the second claim for relief for declaratory judgment which was dismissed as moot. On October 1, 2020, we filed a motion seeking leavefinancial statements. See Note 7.

In addition to reargue, and upon reargument, requesting thatEmpery, there were 1,139,220 2017 Warrants held by investors who did not participate in the Court grant summary judgment dismissing claims for breach of section 3(b) and reformation.

On December 18, 2019,February 2018 financing transaction. Any further adjustments to the Company terminated the License Agreement with Circassia2017 Warrants pursuant to whichtheir antidilution provisions may result in additional dilution to the Company had granted Circassia an exclusive royalty-bearing license to distribute, market and sellinterests of the Company’s nitric oxide generatorstockholders 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, with the remaining milestone and royalty payments payable in cash or ordinary shares of Circassia at Circassia’s option. The Company terminated the Agreement pursuant to section 13.3(b) of the Agreement, 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, we may be subject to a variety of claims. Adverse outcomes in some or all of these claims, if filed, may adversely affect ourthe market price of the Company’s common stock. The antidilution provisions may also limit the Company’s ability to conduct business and our financial condition and results of operations.obtain additional financing on terms favorable to it.

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BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 14 15 SUBSEQUENT EVENTS

The PMA for the LungFit™ system addressing PPHN was filed with the FDA on November 10, 2020. If approved, our system will be marketed as a medical device initially in the United States.following transactions occurred subsequent to September 30, 2021:

-Following a three-day bench trial, the Trial Court issued a decision on October 14, 2021, finding in favor of Empery, awarding Empery damages in the aggregate amount of approximately $5.8 million plus prejudgment interest. The Company intends to appeal the October 14 Decision. The Company will use approximately $7.4 million of cash as collateral for a supersedeas bond pending the appeal, see Note 14.
-

During October 2021, the Company amended the Facility agreement to offer the lenders the ability to accept redemption of all amounts outstanding from the first tranche of $5.0 million and to terminate the Facility Agreement without penalty. The Facility Agreement was terminated on November 10, 2021, see Note 12.

-On November 4, 2021, the Company announced that Beyond Air, Inc. and Beyond Cancer, Ltd (“Beyond Cancer”) became parties to several intracompany agreement pursuant to which the Company, through its subsidiaries is licensing certain intellectual property and other assets related to, or necessary for the development, commercialization, manufacture and distribution of certain cancer treatment products and/or technologies to a wholly owned subsidiary of the Company (the Transaction). In connection with and concurrently with the closing of the Transaction, Beyond Cancer is issuing and selling common shares, par value $1.00 to certain investors pursuant to a subscription agreement (the Offering). The offering consists of up to an aggregate of 3 million common shares of Beyond Cancer, Ltd. at a purchase price of $10.00 per share. The Transaction and the Offering are expected to close in December, 2021. Funds committed to the financial statement release date approximated $23.9 million. The Company will retain at least 80% ownership of Beyond Cancer at the end of the transaction, which will have exclusive right to the intellectual property portfolio utilizing ultra-high concentrations of gaseous nitric oxide (“UNO”) for the treatment of solid tumors. Beyond Cancer will pay Beyond Air a single digit royalty on all future revenues.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 express 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 on Form 10-Q 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 COVID-19 pandemic, 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 on Form 10-Q and the documents that could causewe reference in this Quarterly Report on Form 10-Q 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 on Form 10-Q are the property of Beyond Air, Inc. This Quarterly Report on Form 10-Q 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 on Form 10-Q 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 OperationsIntroduction

Introduction

We are a clinical-stage medical device and biopharmaceutical company developing a nitric oxide (“NO”) generator and delivery system (the “LungFit™“LungFit® system”) that is capable of generating NO from ambient air. The LungFit™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™ 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™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. OurThe Company’s current areas of focus with the LungFit™ LungFit® are persistent pulmonary hypertension of the newborn (“PPHN”)(PPHN), severe acute respiratory syndrome coronavirus 2 (“SARS CoV-2”)/acute viral pneumonia (“AVP”),(AVP) including COVID-19, bronchiolitis (“BRO”)(BRO) and nontuberculous mycobacteria (“NTM”)(NTM) lung infection. OurThe Company’s current product candidates will be subject to premarket reviews and approvals by the U.S. Food and Drug Administration, or(the “FDA”), CE marking conformity assessment by a notified body in the FDA,European Union (the “E.U.”), as well as similar regulatory agenciesagencies’ reviews or approvals in other countries or regions. If approved, ourthe Company’s system will be marketed as a medical device in the United States.U.S.

 

An additional focusprogram of Beyond Air targets solid tumors, through our majority-owned affiliate Beyond Cancer, Ltd. For the Company is solid tumors. For thistumor indication the LungFit™ systemLungFit®platform is not utilized due to theneed for ultra-high concentrations of gaseous nitric oxide (“gNO”UNO”) used. We have developed a. A proprietary delivery system has been developed that can safely deliver gNO concentrationsUNO in excess of 10,000 ppm directly to a solid tumor. This program is in pre-clinicalpreclinical development and will require approval from the FDA or similar agencyregulatory agencies in another country, approvalother countries to enter human studies. We anticipate beginning the enrollment of patients into the first human trial in the first quarter of calendar year 2022.

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LungFit® is the first system with patented technology that generates NO using room air, enabling the delivery of unlimited, on-demand NO regardless of dose or flow. To generate the NO, a pump within the LungFit® flows room air through a small chamber where power, equivalent to a 60-watt lightbulb, ionizes the oxygen and nitrogen molecules. The molecules recombine as NO. We believe that the on-demand delivery, either to a ventilator circuit or directly to a patient’s lungs, is safe due to the Company’s system design and the Company’s proprietary nitrogen dioxide (“NO2”) filter. The NO2 filter removes toxic NO2 for 12 hours when used for PPHN and shorter periods for treating other conditions that require NO concentrations of 150 ppm or more.

With respect to PPHN, our novel the 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™ hasability of LungFit® PH to generate NO from ambient air provides us with many competitive advantages over the current approvedstandard of NO delivery systems in the U.S., European Union,the E.U., Japan and other markets. For example, the LungFit™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.

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Our novel LungFit™ systemLungFit® platform can also deliver a high concentration (>150 ppm) of NO directly to the lungs, which we believe has the potential to eliminate microbial infections including bacteria, fungi and viruses, among other benefits.others. We believe that current FDA-approved NO vasodilation treatments would have limited success in treating microbial infections given the low concentrations of NO being delivered.delivered (<100 ppm). 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 preclinical and 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 >80 ppm NO.

LungFit® PH for the deliverytreatment of a dosagePersistent Pulmonary Hypertension of NO at 150 ppm or higher to the lungs.Newborn

We haveIn November 2020 we submitted a premarket approval (“PMA”)PMA application to the FDA for the use of the LungFit™LungFit® PH in PPHN. There is a standard 180-day review process that starts upon the FDA’s acknowledgement of the submission, though PMA reviews oftentimes take much longer, sometimes over a year or more. Moreover, the ongoing COVID-19 pandemic and an increased volume of submissions have led to longer review times by the FDA. We anticipate an FDA typically responds todecision on the PMA submissions in 180 days, thus we anticipate a response in Maytowards the end of calendar year 2021.

We also expect to make certain regulatory filings outsidereceive the CE Mark under the Medical Device Regulation (“MDR”) in the E.U. in the first half of the U.S. over the next year.calendar year 2022. According to the 2019most recent year-end report from Mallinckrodt Pharmaceuticals, aggregate sales of low concentration NO were $574.1 million in 2020 (up from $571.4 million in 2019) for the United States, Canada, Japan, Mexico and Australia, with >90% in the U.S. were in excess of $500 million in 2019. Sales outsideUnited States. Outside of the U.S., where there are multiple market participants sales werewhich translates to considerably lower sales than in the U.S. We believe the U.S. sales potential of the LungFit™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 the fourth quarter of calendar 2021 and will continue to launch in the EU and globally throughout 2021in 2022 and beyond.

SARS CoV-2LungFit® PRO for the treatment of viral lung infections in hospitalized patients

Acute Viral Pneumonia (including COVID-19)

Viral pneumonia in adults is a global pandemic with a widespread impact across many countries. We receivedmost commonly caused by rhinovirus, respiratory syncytial virus (“RSV”) and influenza virus. However, newly emerging viruses (including SARS-CoV-1, SARS-CoV-2, avian influenza A, and H1N1 viruses) have been identified as pathogens contributing to the overall burden of adult viral pneumonia. COVID-19 is an approval from the FDA to run a study in COVID-19 (theinfectious disease caused by SARS CoV-2 infections) patientsSARS-CoV-2, that has resulted in a global pandemic. Excluding the pandemic, there are approximately 350,000 annual viral pneumonia hospitalizations in the US, and 16 million annual viral pneumonia hospitalizations globally. For the broader AVP, we believe U.S. sales potential to be greater than $1.5 billion and worldwide market potential to be greater than $3 billion.

We initiated a pilot study in late 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 (AVP), including those infected with SARS CoV-2.COVID-19. The study will beongoing trial is a multi-center, open-label, randomized clinical trial with approximately 90 adult patients, with an emphasis onin Israel, including patients infected with SARS-CoV-2. The enrolled patients will bePatients are randomized in a 1:1 ratio to receive either 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);(“NO+SST”) or standard supportive treatment alone (SST)(“SST”). Endpoints related to safety (primary endpoint), oxygen saturation fever and ICU admission, among others, will be assessed. We plan to initiate this trial in November 2020, and this will be the only active trial that Beyond Air is performing in this indication. We anticipate results to be available around mid-year 2021. We have applied for grants related 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.

23

 

We reported interim data from this ongoing trial at the American Thoracic Society or ATS International Conference 2021, which was held virtually from May 14, 2021 through May 19, 2021. At the time of the data cut off, the intent-to-treat (“ITT”) analysis population included 19 COVID-19 patients (9 NO + SST vs 10 SST). The data readout showed that 150 ppm NO treatment administered via LungFit® PRO was safe and well tolerated and demonstrated encouraging efficacy signals. From a safety perspective, there were no treatment-related, or possibly related, adverse events or severe adverse events. NO2 levels were below 4 ppm at all timepoints (trial safety threshold is 5 ppm) and methemoglobin (“MetHb”) levels were below 4% at all times (trial safety threshold is 10%). With respect to bronchiolitis, we initiatedthe requirement of oxygen support beyond hospital stay, 22.2% of subjects in the fourth calendar quarterNO + SST group compared with 40% of 2019 a double blind, controlled trial in infants hospitalized due to bronchiolitis with three arms and 89control 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 athad this requirement. There was an observable trend of shortening 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, the 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 endpointduration of hospital length of stay and statistically significant from the control armduration on oxygen support for time to achieving oxygen saturation on room air of > 92%.treated patients. The 85 ppm was no different from control on all endpoints. The pivotal study for bronchiolitis was originally set to be performed in the 2020/21 winter, but was delayed due to the SARS CoV-2 pandemic. We anticipate commencing a pivotalpilot 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 afteradult viral pneumonia, including COVID-19, remains active with 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 tosites open for enrollment. Additional detailed study results may be greater than $500 million and worldwide sales potential to be greater than $1.2 billion.submitted for presentation at an upcoming scientific meeting.

Bronchiolitis (BRO)

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%3 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 that these treatments do not successfully reduce hospital length of stay.

1 Nicolai A, Ferrara M, Schiavariello C, et al. Viral We believe the U.S. market potential for bronchiolitis 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 Hospitalizations in the United States, 2000-2009, Pediatrics 2013

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Our NTM program has produced data from four compassionate use subjectsto be greater than $500 million 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. salesworldwide market potential to be greater than $1 billion and worldwide sales potential$1.2 billion.

Our BRO program is currently on hold due to the COVID-19 pandemic. The pivotal study for bronchiolitis was originally set to be greater than $2.5 billion.performed in the winter of 2020/21 but was delayed due to the pandemic. We have completed three successful pilot studies for bronchiolitis. A further analysis of the three previously reported pilot studies was presented at the ATS International Conference 2021, which was held virtually from May 14, 2021 through May 19, 2021. Analysis across the studies (n=198 infants, mean age 3.9 months) showed that 150 ppm – 160 ppm NO administered intermittently was generally safe and well tolerated with adverse event rates similar among treatment groups with no reported treatment-related serious adverse events. The short course of treatments with intermittent high concentration inhaled NO was effective in shortening hospital length of stay and accelerating time to fit for discharge – a composite endpoint of clinical signs and symptoms to indicate readiness to be evaluated for hospital discharge. This treatment was also effective in accelerating time to stable oxygen saturation – measured as SpO2 ≥ 92% in room air. Additionally, NO at a dose of 85 ppm NO showed no difference compared to control for all efficacy endpoints, while 150 ppm NO showed statistical significance when compared to control.

We believe that the entirety of data at 150 ppm - 160 ppm NO in both adult and infant patient populations supports further development of LungFit® PRO in a pivotal study for patients hospitalized with viral pneumonia.

LungFit® GO for the treatment of Nontuberculous mycobacteria (NTM)

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 Mycobacterium abscessus(M.abscessus) representing 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 M. abscessus lung disease in North America, Europe or Japan.

There are approximately 50,000 to 90,000 people with NTM infections 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.Mycobacterium avium complex (“MAC”). Current guideline-based approaches to treat NTM lung disease involve multi-drug regimens of anti-bioticsantibiotics 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 19972007 and 2007,2016, researchers found that the prevalence of NTM in the U.S. is increasing at approximately 8%7.5% 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 year. M. abscessus treatment costs are estimated to be more than double that of NTM MAC. In total, a 2015 publication fromby co-authors from several U.S. government departments stated that prior year statistics led to a projected 181,037 national annual cases in 2014 costingcost the U.S. healthcare system approximately $1.7 billion. For this indication, we believe U.S. sales potential to be greater than $1 billion (Strollo et al., 2015).and worldwide sales potential to be greater than $2.5 billion.

24

 

In December 2020 we began 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. We received a grant of up to $2.17 million from the CFF to fund this study and advance the clinical development of inhaled NO to treat NTM pulmonary disease. The trial is enrolling both cystic fibrosis (“CF”) and non-CF patients infected with MAC or M. abscessus. The study consists of a run-in period followed by two treatment phases. The run-in period provides a baseline for the efficacy endpoints. The first treatment phase takes place over a two-week period and begins in the hospital 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 MetHb levels are monitored. Patients are also trained to use LungFit® GO and subsequently discharged to complete the remaining portion of the two-week treatment period at their home at the highest tolerated NO concentration. For ourthe 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.

We reported positive interim results in October 2021. At the time of data cutoff on September 6, 2021, eight subjects were successfully titrated up to 250 ppm NO in the hospital setting, and none required dose reductions during the subsequent at-home portion of the study. The mean age of subjects was 56.6 years (range: 22 – 73 years) with the majority female (87.5%), a distribution consistent with real-world NTM disease, and occurring at a higher rate in older adult women than men. 250 ppm NO was well-tolerated in all subjects with no study discontinuations or treatment-related serious adverse events observed. Methemoglobin and NO2 concentrations remained within acceptable ranges in all subjects during NO treatment, and below the safety thresholds of 10% and 5 ppm, respectively. The study continues to enroll patients, and we anticipate reporting the complete efficacy and safety results in calendar year 2022. If the trial is successful, we would anticipate commencing a pivotal study in the first half of calendar year 2023.

The Company’s program in chronic obstructive pulmonary disease (“COPD”) is in the preclinical stage and will remain there, subject to obtaining additional financing.

Ultra-High Concentration NO in solid tumor program,tumors through majority-owned affiliate Beyond Cancer, Ltd.

In November 2021, we secured commitments of $23.9 million in a concurrent private placement of common shares, not to exceed $30 million, providing the investors with up to 20% equity ownership in Beyond Cancer, a new and independently managed, private company. The funding is expected to be used to accelerate ongoing preclinical work including the completion of IND-enabling studies, completion of a Phase 1 study, expansion of preclinical programs for combination studies, hiring of additional Beyond Cancer team members, and optimization of the delivery system, as well as for general corporate purposes. The concurrent private placement is expected to close in the fourth fiscal quarter.

Beyond Cancer will benefit from Beyond Air’s NO expertise, IP portfolio, preclinical oncology team, and regulatory progress, and will pay Beyond Air a single digit royalty on all future revenues. Beyond Cancer will be led by a seasoned leadership team with experience in emerging healthcare companies and clinical oncology.

Selena Chaisson, MD, will be Beyond Cancer’s Chief Executive Officer. Previously, Dr. Chaisson was the Director of Healthcare Investments at Bailard, where she spent 16 years focusing on highly specialized, emerging healthcare opportunities with more than one-third of her portfolio dedicated to investing in oncology companies. Prior to Bailard, Dr. Chaisson held senior executive roles at RCM Capital Management and Tiger Management. RCM Capital Management was acquired and then merged with Allianz Global Investors U.S. in 2013. Dr. Chaisson received a BS in microbiology in 1987 from Louisiana State University in Baton Rouge, LA, where she graduated summa cum laude. She earned her MBA and MD from Stanford University in 1992 and 1993, respectively.

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The complete Beyond Cancer Board of Directors, Scientific Advisory Board and headquarters will be announced as they are finalized. The Board of Directors is expected to consist of six members, four of whom will include:

●Steve Lisi, Chairman of the Board, and CEO and Chairman of the Board of Beyond Air
●Selena Chaisson, MD, Director, and Chief Executive Officer of Beyond Cancer
●Amir Avniel, Executive Director, and COO and Co-Founder of Beyond Air
●Robert Carey, Director, and Board Member of Beyond Air

Ultra-high concentration NO has shown anticancer properties in preclinical trials by eliciting an immune response from the host. We have released pre-clinicalthis preclinical 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 a single administration of 25,000 ppm NO over five minutes were resistant to a subsequent tumor challenge and 11 of 11 mice treated with 50,000 ppm NO were resistant. Pre-clinicalresistant to a subsequent tumor challenge. Preclinical work will continue throughout the rest of 2020 and most of 2021 with a goal of initiatingbeginning the enrollment of patients in a first-in-manfirst-in-human study beforein the endfirst quarter of 2021.calendar year 2022.

 

Our program in chronic obstructive pulmonary disease (COPD) is in the pre-clinical stage and will remain there, subject to our obtaining additional financing.COVID-19

 

The development of the our product candidates could be further disrupted and adversely affected by a resurgence of the recent outbreak of COVID-19. The spread of SARS CoV-2 from China to other countries has resultedCOVID-19 pandemic. We experienced significant delays in the Director General ofsupply chain for LungFit® due to the World Health Organization declaring COVID-19 a pandemic on March 11, 2020.redundancy in parts and suppliers with ventilator manufacturing which has since been remedied. We have addressedcontinuously assess the impact that 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 analysiswe will enable usbe able 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. Asconsequences if a consequence of the global pandemic, Beyond Air experienced significant delays in the supply chain for LungFit™ due to the redundancy in parts and suppliers with ventilator manufacturingresurgence occurs.

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.)

28

Critical Accounting Estimates and Policies

A critical accounting policy is one that isand related estimates are 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, 20202021 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,

Contingent Loss judgments and estimates,
●Revenue Recognition,
●Research and development expenses,expense recognition,
●Stock-based compensation expenses,valuation and attribution, and
●Income Taxes

Off-Balance SheetOff-Balance-Sheet Arrangements

In August 2020, the Company entered into an operating lease to move its 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 Air will move into this spaceAs of September 30, 2021, we did not have any off-balance-sheet arrangements as defined in the beginningrules and regulations of January 2021, at which time the Company will record the operating lease liabilitiesSecurities and corresponding right-of-use assets on the balance sheet pursuant to ASC 842, as amended.Exchange Commission (the “SEC”).

2926

 

Results of Operations

Below are the results of operations for the three and six months ended September 30, 20202021 and September 30, 2019:2020:

  

For the Three Months Ended

September 30, 2020

 
  2020  2019 
       
License revenues $349,607  $645,602 
         
Operating expenses        
Research and development  3,147,276   2.849,990 
General and administrative  2,169,011   2,064,872 
         
Operating loss  (4,966,680)  (4,269,260)
         
Other income (loss)        
Realized and unrealized gain from marketable equity securities  -   142,806 
Dividend and interest income  878   30,691 
Interest expense  (159,034)  -
Foreign exchange loss  

(6,954)

   (1,977) 
Total other (loss) income

  (165,110)  171,520 
         
Net loss $(5,131,790) $(4,097,740)
         
Net loss per share – basic and diluted $(0.30) $(0.38)
         
Weighted average number of common shares outstanding – basic and diluted  17,120,801   10,699,370 

(in thousands)

  For the Three Months Ended  For the Six Month Ended 
  September 30,  September 30, 
  2021  2020  2021  2020 
             
License revenues $-  $350  $-  $579 
                 
Operating expenses:                
                 
Research and development  2,807   3,147   5,548   7,479 
General and administrative  3,395   2,169   7,245   4,663 
Operating expenses  6,201   5,316   12,793   12,142 
                 
Operating loss  (6,201)  (4,967)  (12,793)  (11,563)
                 
Other income (loss)                
Dividend and interest income  1   1   2   16 
Interest expense  (161)  (159)  (323)  (322)
Foreign exchange loss  0   (7)  9   (6)
Other income  (2,330)  0   (2,330)  2 
Total other income (loss)  (2,490)  (165)  (2,642)  (310)
                 
Net loss $(8,692) $(5,132) $(15,435) $(11,874)
                 
Net basic and diluted loss per share $(0.36) $(0.30) $(0.67) $(0.71)
                 
Weighted average number of shares of common stock used in computing basic and diluted net loss per share  24,165,965   17,120,801   23,061,667   16,826,712 

Comparison of Three and Six Months Ended September 30, 2021 with the Three and Six Months Ended September 30, 2020 with the Three Months Ended September 30, 2019

License revenueRevenue

License revenue for the three months ended September 30, 2020 was $349,607 as compared to $645,602 for the three months ended September 30, 2019. 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. The Company is recognizing revenue based upon the second performance obligation, which is for the ongoing support associated with the PMA submissionStates 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, 2020, and March 31, 2020, deferred revenue was $294,422 and $1,635,825, respectively.China. On December 18, 2019, the Company terminated the License Agreement with Circassia pursuantAgreement. Prior to whichthe three month period ended September 30, 2021, the Company has met its performance obligation under the Circassia Agreement and all the revenue had granted Circassia an exclusive royalty-bearing license to distribute, marketbeen previously recognized. License revenue of $0 and sell$350 thousand associated with the Company’s nitric oxide generatorsecond performance obligation has been recognized for the three months ended September 30, 2021 and delivery system inSeptember 30, 2020, respectively. License revenue of $0 and $579 thousand associated with the United Statessecond performance obligation has been recognized for the six months ended September 30, 2021 and China.September 30, 2020, respectively.

30

Research and development expensesDevelopment Expenses

Research and development expenses for the three months ended September 30, 2020 was $3,147,2762021 were $2,807 thousand as compared to $2,849,990$3,147 thousand for the three months ended September 30, 2019.2020. The increasedecrease of $297,286$340 thousand was primarily attributed to a reduction of approximately $833,000 for a toxicology studies of ratsdecrease in COVID project spend and dog with LungFit™ at 250 ppm and 400 ppm NO, which both showed no macroscopic or microscopic findingsfavorable NTM timing (including CFF grant offsetting internal costs), an increase of approximately $265,000 of COVID-19 related studies,partially offset by an increase in salariesUNO and employee benefits of approximately $512,000 and an increase in stock-based compensation expense of approximately $267,000.Lung Fit PH.

General and administrative expenses

General and administrative expense for the three months ended September 30, 2020, was $2,169,011 as compared to 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.

Other income (loss)

Other income (loss) for the three months ended September 30, 2020 was $(165,110) as compared $175,520 for the three months ended September 30, 2019. For the three months ended September 30, 2020, the Company incurred interest expense including amortization of debt discount and deferred financing expense of $159,034. Other income loss for the three months ended September 30, 2019 was primarily from the realized and unrealized gain from marketable equity securities of $142,806. 

Below are the results of operations for the six months ended September 30, 2020 and September 30 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 

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Comparison of Six Months Ended September 30, 2020 with the Six Months Ended September 30, 2019

License revenue

License revenue for the six months ended September 30, 2020 was $578,768 as compared to $1,273,071 for the six months ended September 30, 2019. On January 23, 2019, the Company entered into a License Agreement with Circassia for PPHN 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, 2020, and March 31, 2020, deferred revenue was $294,422 and $1,635,825, respectively. On December 18, 2019, the Company terminated the License 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 oxide generator and delivery system in the United States and China.

Research and development expenses

Research and development expenses for the six months ended September 30, 2020 was $7,479,0902021 were $5,548 thousand as compared to $5,173,503$7,479 thousand for the six months ended September 30, 2019.2020. The increasedecrease of $2,305,587$1,931 thousand was primarily attributed to a decrease in COVID project spend, BRO project spend and a reduction of approximately $1,450,000in stock-based compensation.

General and Administrative Expenses

General and administrative expenses for a toxicology studies of ratsthe three months ended September 30, 2021 and dog with LungFit™ at 250 ppmSeptember 30, 2020 were $3,395 thousand and 400 ppm NO, which both showed no macroscopic or microscopic findings, an$2,169 thousand, respectively. The increase of approximately $681,000 related$1,226 thousand was attributed primarily 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 $1,003,000for commercial and support staff, an increase in stock-based compensation expenseprofessional fees to assist in the preparation of approximately $955,000.a potential commercial launch, increased costs in IT and physical infrastructure and in legal fees.

General and administrative expenses

General and administrative expense for the six months ended September 30, 2020, was $4,663,025 as compared to the six months ended2021 and September 30, 2019 of $4,247,430.2020 were $7,245 thousand and $4,663 thousand, respectively. The increase of $415,595$2,582 thousand was attributed primarily attributed to an increase in salaries and employee benefits for commercial and support staff, an increase in professional fees to assist in the preparation of approximately $233,000a potential commercial launch, increased costs in IT and physical infrastructure and in legal fees, partially offset by a reduction in stock-based compensation expensecompensation.

Other Income (Loss)

Other Income (Loss) for the three months ended September 30, 2021 and September 30, 2020 was a loss of approximately $198,000.($2,490) thousand and a loss of ($165) thousand, respectively. The increase loss of ($2,325) thousand was attributed primarily to the recording of an estimate for a contingent loss related to the Empery lawsuit.

Other income (loss)

Other lossIncome (Loss) for the six months ended September 30, 2020 was $310,247 as compared $2,130,699 for the six months ended September 30, 2019. For the six months ended2021 and September 30, 2020 was a loss of ($2,642) thousand and a loss of ($310) thousand, respectively. The increase loss of ($2,332) thousand was attributed primarily to the Company incurred interest expense including amortizationrecording of debt discount and deferred financing expense of approximately $322,274. Otheran estimate for a contingent loss forrelated to the six months ended September 30, 2019 was primarily from the realized and unrealized loss from marketable equity securities of $2,164,513.Empery lawsuit.

27

 

Cash Flows

Below is a summary of the Company’s cash flows activities for the six months ended September 30, 20202021 and September 30, 2019:2020:

 Six Months Ended  Six Months Ended
 September 30,  September 30,
 2020 2019 
(in thousands) 2021 2020
         
Net cash provided by (used in):                
Operating activities $(8,805,792) $(5,633,362) $(8,897) $(8,806)
Investing activities  (731,138)  (3,125,401)  (692)  (731)
Financing activities  6,425,041   9,756,249   23,068   6,425 
Net (decrease) increase in cash, cash equivalents and restricted cash $(3,111,889) $997,506
Net increase (decrease) in cash, cash equivalents and restricted cash $13,479  $(3,112)

32

Operating Activities

For the six months ended September 30, 2021 the net cash used in operating activities was $8,897 thousand which was primarily due to the Company’s net loss of $15,435 thousand, which includes $306 thousand of amortization and depreciation, non-cash stock-based compensation expense of $2,371 thousand and an increase of $3,460 thousand of accounts payable and accrued expenses. For the six months ended September 30, 2020, cash used in operating activities was $8,805,792$8,806 thousand which was primarily due to our net loss of $11,873,594, including$11,874 thousand and a reduction of accounts payable of $436,141.$436 thousand. There was non-cash stock-based compensation expense of $2,995,368$2,995 thousand and a non-cash decrease for deferred revenue of $578,768.$579 thousand. A source of cash for the six months ended September 2020 was from other current assets and prepaid expenses of $672,014$672 thousand and accrued expenses of $249,971. $250 thousand.

Investing Activities

For the six months ended September 30, 2019, the net cash used in operating activities was $5,633,362 which was primarily due to our net loss of $10,278,561 a realized2021 and an unrealized loss on marketable equity securities of $$1,836,034, and a non-cash decrease in deferred revenue of $1,273,071. A source of cash for the six months ended was from other current assets and prepaid expenses, accounts payable and accrued expenses of $1,814,635.

Investing Activities

For the six months ended September 30, 2020, net cashedcash used in investing activities was $731,138$692 thousand and this$731 thousand, respectively, which was mainly for the purchase of property and equipment. For the six months ended September 30, 2019 net cash used in investing activities was $3,125,401. The net investment change of marketable securities was $3,107,665.

Financing Activities

Net cash provided by financing activities for the six months September 30, 2020 was $6,425,041. 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”) offering, and proceeds from the issuance of common stock related to warrant exercises and options. Net cash provided by financing activities for the six months ended September 30, 20192021 was $9,756,246. This$23,068 thousand, which was primarily from the net proceeds of a private placement and from the LPC formerissuance of common stock related to the Stock Purchase Agreement and ATM of $9,931,271.$23,521 thousand offset by a loan payment of $453 thousand. Net cash provided by financing activities for the six months ended September 30, 2020 was $6,425 thousand which was primarily from the net proceeds from the issuance of common stock related to the Stock Purchase Agreement, net proceeds from the issuance of common stock in connection with the ATM and proceeds from the issuance of common stock from warrant exercises of $6,676 thousand offset by a loan payment of $251 thousand.

Contractual Obligations

There have been no material changes to our contractual obligations since March 31, 2021. For a summary of our contractual obligations, see Item 7 of Part II of our Annual Report on Form 10-Kfor the year ended March 31, 2021 (the “2021 Annual Report”), filed with the SEC on June 10, 2021 and amended on July 23, 2021.

28

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 the sale of our products until certification or regulatory approval is received for our product candidates. Since the time the Company became public through September 30,2020, we have funded our operations principally through the issuance of equity securities and debt. As shown in the accompanying financial statements, the Company hasWe had an operating cash flow decrease of $8.8$8.9 million for the six months ended September 30, 2020,2021 and we have experienced an accumulated loss of $69.5 million since inception through September 30, 2020. The Company has cash, cash equivalent and restricted cash of $22.4$95.9 million as of September 30, 2020.2021. As of September 30, 2021, we had cash, cash equivalents and restricted cash of $48.7 million. We believe that our cash and cash equivalents as of September 30, 2021, will enable us to fund our development programs, operating expenses and capital expenditure requirements for at least one year from the date of filing these financial statements.

On March 17, 2020,Our future capital needs and the Company entered into a facility agreement (the “Facility Agreement”) with certain lenders pursuantadequacy of available funds will depend on many factors, including, but not necessarily limited to, which the lenders shall loan to up to $25,000,000 in five tranches of $5,000,000 per tranche atcost and time necessary for the option of the Company (“Tranches”), provided however that the Company may only utilize tranches three through five following FDAdevelopment, preclinical studies and clinical trials and certification or regulatory approval of our other medical devices, indications as well as the LungFit™ PH product. The loan(s) are unsecured with an interest ratecommercial success of 10% per annum which is paid quarterly andour first product candidates that receive marketing approval by the FDA. We may be prepaid with certain prepayment penalties. The effective interest rate for this loan is 13.3% per year. Each tranche shallrequired to raise additional funds through equity or debt securities offerings or strategic collaboration and/or licensing agreements in order to fund operations until we are able to generate enough product or royalty revenues, if any. Such financing may not be repaid in installments commencing June 15, 2023 withavailable on acceptable terms, or at all, remaining amounts outstanding under any tranche dueand our failure to raise capital when needed could have a material adverse effect on March 17, 2025our strategic objectives, results of operations and financial condition.

33

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 April 2, 2020, Beyond Air, Inc.we entered into anthe ATM Equity Offering for $50 millionSales Agreement with SunTrust Robinson Humphrey, Inc. and utilizedOppenheimer & Co. Under the Company’s shelf registration statement. The CompanyATM, we may sell shares of our common stock having aggregate sales proceeds of up to $50,000,000$50 million, from time to time in this offering.and at various prices. If shares of our common stock are sold, there is a three percent3% fee paid to the sales agent. There isAs of September 30, 2021, there was a balance of approximately $47.4$14.5 million available under the ATM.

On May 14, 2020, the Companywe entered into athe $40 million New Stock Purchase Agreement with LPC, thatwhich replaced the existingformer $20 million purchase agreement.agreement with LPC, dated August 10, 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 isAs of September 30, 2021, there was a balance of approximately $37.2$28.2 million available under the New Stock Purchase Agreement.

Our ability to continue to operate isbeyond 12 months from the filing of this Quarterly Report on Form 10-Q will be largely dependent upon the approval of our PMA for the PPHN medical device, the expected timing and commercial acceptance of the Company’s launch of this device, as well as our product, obtaining Partnerspartners in other parts of the world, timing of future milestones and royalties,our raising additional funds to finance our activities.activities until we are generating cash flow from operations. There are no assurances that we will be successful in obtaining an adequate level of financing for the development and commercialization of our other product candidates. The Company’s ability to continue to operate 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 and we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completingthe completion of the research and development of our product candidate.candidates.

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 certification or 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;candidates;
●
●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.candidates.

29

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in 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.

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.2021.

Changes in Internal Control Over Financial Reporting

On August 20, 2021, the Company announced the appointment of Douglas Larson as its new Chief Financial Officer, succeeding Douglas Beck effective September 1, 2021. Mr. Beck will remain a consultant to the Company and is working closely with Mr. Larson and the Beyond Air leadership team to ensure a seamless transition of CFO responsibilities, including maintaining a robust control environment.

During the three months ended September 30, 2020,2021, there waswere no change inchanges made to our internal controlcontrols over financial reporting that materially affected, or is reasonablethat are reasonably likely to materially affect our internal controlcontrols over financial reporting.

3430

 

PART II OTHER INFORMATION

Item 1. Legal Proceedings

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, relatingSee Note 14 to our unaudited condensed consolidated financial statements.

ITEM 1A. RISK FACTORS

There have been no material changes to the noticerisk factors previously disclosed in Part I, “Item 1A. Risk Factors” of adjustment of both the exercise price of and the number of warrant shares issuable under warrants issued to Empery in January 2017. 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.2021 Annual Report.

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 Master, 159,869 warrant shares for Empery I and 252,672 warrant shares for Empery II 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, we 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, we filed 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.ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. Exhibits.

Exhibit No.Description
3.1Amended and Restated Certificate of Incorporation of AIT Therapeutics, Inc., dated January 9, 2017, filed as Exhibit 3.1 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017, and incorporated herein by reference.
3.2Certificate of Amendment of the Amended and Restated Certificate of Incorporation, dated June 25, 2019, filed as Exhibit 3.3 to our Annual Report on Form 10-K, as filed with the SEC on June 28, 2019, and incorporated herein by reference.
3.3Form of Second Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Beyond Air, Inc. (included in Appendix C to our Definitive Proxy Statement, filed with the SEC on January 22, 2021 and incorporated herein by reference).
3.4Amended and Restated Bylaws of AIT Therapeutics, Inc., filed as Exhibit 3.2 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017, and incorporated herein by reference.
4.1Form of Common Stock Certificate, filed as Exhibit 4.1 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017, and incorporated herein by reference.
4.2Form of Warrant to Purchase Common Stock, by and among AIT Therapeutics, Inc. and the Holders party thereto, filed as Exhibit 10.3 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017, and incorporated herein by reference.
4.3Form of Warrant to Purchase Common Stock, by and among AIT Therapeutics, Inc. and the Holders party thereto, filed as Exhibit 4.1 to our Current Report on Form 8-K, as filed with the SEC on April 4, 2017, and incorporated herein by reference.
4.4Form of Warrant to Purchase Common Stock, by and among AIT Therapeutics, Inc. and the Holders party thereto, filed as Exhibit 4.1 to our Current Report on Form 8-K, as filed with the SEC on February 22, 2018, and incorporated herein by reference.
4.5Form of Warrant to Purchase Common Stock, filed as Exhibit 4.1 to our Current Report on Form 8-K, as filed with the SEC on March 20, 2020 and incorporated herein by reference.
   
31.110.1* Employment Agreement, dated August 20, 2021, by and between Douglas Larson and Beyond Air, Inc., filed as Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on August 25, 2021 and incorporated herein by reference.
10.2*Consulting and Severance Agreement, dated August 24, 2021, by and between Douglas Beck and Beyond Air, Inc., filed as Exhibit 10.2 to our Current Report on Form 8-K, as filed with the SEC on August 25, 2021 and incorporated herein by reference.
31.1*Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002.
31.231.2*Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002.
32.132.1**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
32.232.2**Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 20022002.
101.INSInline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Filed herewith
Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant customarily and actually treats the omitted information as private or confidential and the omitted information is not material.

 

** Filed herewith.

** Confidential treatment has been requested for portions of this exhibitFurnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BEYOND AIR, INC.
/s/ Steven Lisi
Date: November 12, 20202021Steven Lisi
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Douglas BeckLarson
Date: November 12, 20202021Douglas BeckLarson
Chief Financial Officer
(Principal Financial and Accounting Officer)

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