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 December 31, ~~2020~~2021

~~[ ]~~☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to _________

Commission File Number: 001-38892

BEYOND AIR, INC.

(Exact name of registrant as specified in its charter)

Delaware

47-3812456

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~825 East Gate Boulevard, Suite 320~~
~~Garden City, NY~~		~~11530~~
900 Stewart Avenue, Suite 301
Garden City, NY		11530
(Address of principal executive offices)		(Zip Code)

~~516-665-8200~~516-665-8200

(Registrant’s telephone number, including area code)

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

Title of each class:		Trading Symbol		Name of each exchange on which registered:
Common Stock, par value $0.0001 per share		XAIR		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X]~~ ☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ~~[X]~~ ☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ~~[ ]~~☐		Accelerated Filer ~~[ ]~~☐
Non-accelerated filer ~~[X]~~ ☒		Smaller reporting company ~~[X]~~☒
		Emerging growth company ~~[X]~~☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ~~[ ]~~☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ~~[ ]~~ ☐ No ~~[X]~~ ☒

As of February ~~5, 2021,~~8, 2022, there were ~~20,486,527~~ 29,831,400 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 DECEMBER 31, ~~2020~~2021

Table of Contents

	Page

PART I FINANCIAL INFORMATION	3

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)	3

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2623

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	3431

ITEM 4. Controls and Procedures	31

PART II OTHER INFORMATION	32

ITEM 1. Legal Proceedings	32

ITEM 1A. Risk Factors	32

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	32

~~ITEM 4. Controls and Procedures~~	34

~~PART II OTHER INFORMATION~~	35

~~ITEM 1. Legal Proceedings~~	35

~~ITEM 1A. Risk Factors~~	35

~~ITEM 2. Unregistered Shares of Equity Securities and use of Proceeds~~	35

ITEM 3. ~~Default~~Defaults Upon Senior Securities	3532

ITEM 4. Mine ~~Safely Disclosers~~Safety	3532

ITEM 5. Other Information	32

ITEM 6. Exhibits	32

SIGNATURES	34


~~ITEM.5. Other Information~~	35
2
~~ITEM 6. Exhibits.~~	36

~~SIGNATURES~~	37

PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

INDEX

	Page

Condensed Consolidated Balance Sheets	4

Condensed Consolidated Statements of Operations	5

Condensed Consolidated Statements of Changes in ~~Shareholders’~~Stockholders’ Equity	6 ~~- 7~~

Condensed Consolidated Statements of Cash Flows	8

Notes to Condensed Consolidated Financial Statements	9 ~~- 25~~– 22

BEYOND AIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2020 March 31, 2020
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 22,016,310 $ 19,829,275
Restricted cash 637,699 5,635,836
Other current assets and prepaid expenses 425,362 1,149,806
Total current assets 23,079,371 26,614,917
Licensed right to use technology 384,206 412,763
Right-of-use lease assets 357,871 195,727
Property and equipment, net 956,759 211,337
Other assets 38,880 -
TOTAL ASSETS $ 24,817,087 $ 27,434,744

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 1,223,839 $ 2,256,229
Accrued expenses 1,434,087 1,097,534
Deferred revenue 145,628 873,190
Stock to be issued to a vendor - 240,000
Operating lease liability 84,388 69,342
Loan payable - 335,358
Total current liabilities 2,887,942 4,871,653

Long-term liabilities
Operating lease liability 279,594 131,581
Facility agreement loan, net 4,439,373 4,339,065
Total liabilities 7,606,909 9,342,299
Commitments and contingencies

Shareholders’ equity
Preferred stock, $0.0001 par value per share: 10,000,000 shares authorized, 0 shares issued and outstanding - -
Common stock, $0.0001 par value per share: 100,000,000 shares authorized, 18,381,227 and 16,056,360 shares issued and outstanding as of December 31, 2020 and March 31, 2020, respectively 1,838 1,606
Treasury stock (25,000 ) (25,000 )
Additional paid-in capital 92,463,661 75,702,915
Accumulated deficit (75,230,321 ) (57,587,076 )
Total shareholders’ equity 17,210,178 18,092,445
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 24,817,087 27,434,744

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

	December 31, 2021			March 31, 2021
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	83,468		$	34,631
Restricted cash		9,239			637
Grant receivable		661			425
Other current assets and prepaid expenses		1,317			1,530
Total current assets		94,684			37,223
Licensed right to use technology		346			375
Right-of-use lease assets		2,299			1,861
Property and equipment, net		1,772			929
Other assets		209			138
TOTAL ASSETS	$	99,311		$	40,525

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,611		$	1,325
Accrued expenses		4,328			1,805
Operating lease liability		239			113
Loan payable		-			557
Total current liabilities		6,178			3,800

Long-term liabilities
Operating lease liability		2,162			1,789
Long-term debt, net		200			4,472
Total liabilities		8,540			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, 28,161,446 and 21,828,244 shares issued and outstanding as of December 31, 2021 and March 31, 2021, respectively		3			2
Treasury stock		(25	)		(25	)
Additional paid-in capital		188,652			110,948
Accumulated deficit		(103,636	)		(80,462	)
Total stockholders’ equity attributable to Beyond Air, Inc		84,994			30,464
Non-controlling interests		5,777			-
Total Equity		90,771			30,464
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	99,311			40,525

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

BEYOND AIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the Three Months Ended For the Nine Months Ended
December 31, December 31,
2020 2019 2020 2019

License revenues $ 148,794 $ 314,379 $ 727,562 $ 1,587,450

Operating expenses:

Research and development 3,294,102 2,580,622 10,773,192 7,754,125
General and administrative 2,471,065 2,471,714 7,134,090 6,719,144
Operating expenses 5,765,167 5,052,336 17,907,282 14,473,269

Operating loss (5,616,373 ) (4,737,957 ) (17,179,720 ) (12,885,819 )

Other income (loss)
Realized and unrealized gain (loss) from marketable securities - 314,889 - (1,849,624 )
Dividend and interest income 378 25,692 16,241 59,759
Interest expense (157,960 ) - (480,234 ) -
Foreign exchange gain (loss) 6,147 1,765 468 1,512
Other loss (1,843 ) - -
Total other income (loss) (153,278 ) 342,346 (463,525 ) (1,788,353 )

Net loss $ (5,769,651 ) $ (4,395,611 ) $ (17,643,245 ) $ (14,674,172 )

Deemed dividend from warrant modification - (522,478 ) - (522,478 )

Net loss attributed to common shareholders $ (5,769,651 ) $ (4,918,089 ) $ (17,643,245 ) $ (15,196,650 )

Net basic and diluted loss per share $ (0.33 ) $ (0.43 ) $ (1.03 ) $ (1.46 )

Weighted average number of shares of common stock used in computing basic and diluted net loss per share 17,609,328 11,398,413 17,086,871 10,437,690

(UNAUDITED)

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

	2021			2020			2021			2020
	For the Three Months Ended						For the Nine Months Ended
	December 31,						December 31,
	2021			2020			2021			2020

License revenues	$	-		$	149		$	-		$	728

Operating expenses:

Research and development		2,543			3,294			8,091			10,773
General and administrative		4,943			2,471			12,188			7,134
Operating expenses		7,486			5,765			20,279			17,907

Operating loss		(7,486	)		(5,616	)		(20,279	)		(17,180	)

Other income (loss)
Interest expense		(57	)		(158	)		(377	)		(464	)
Foreign exchange gain / (loss)		(8	)		7			2			0
Other income / (expense)		(412	)		(2	)					0
Estimated Liability for Contingent Loss		-			-			(2,742	)		-
Total other income (loss)		(476	)		(153	)		(3,118	)		(464	)

Provision for income taxes		-			-			-			-

Net Loss	$	(7,962	)	$	(5,770	)	$	(23,397	)	$	(17,643	)

Less : net loss attributable to non-controlling interests		(223	)		-			(223	)		-

Net loss attributable to Beyond Air, Inc.	$	(7,739	)		(5,770	)		(23,174	)		(17,643	)

Net basic and diluted loss per share attributable to Beyond Air, Inc.	$	(0.29	)	$	(0.33	)	$	(0.95	)	$	(1.03	)

Weighted average number of shares, outstanding basic and diluted		26,822,302			17,609,328			24,319,771			17,086,871

~~BEYOND AIR, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY~~

~~(UNAUDITED)~~

~~FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 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

Common Stock Treasury Additional Paid-in Accumulated
Total
Shareholders’

Number Amount Stock Capital Deficit Equity
Balance as of October 1, 2020 17,152,414 $ 1,715 $ (25,000 ) $ 85,614,292 $ (69,460,670 ) $ 16,130,337
At the market stock issuance of common stock, net 575,448 57 - 3,131,290 - 3,131,347
Issuance of common stock pursuant to a Purchase Agreement, net 463,162 46 - 2,433,501 - 2,433,547
Issuance of vested restricted stock
135,000

14

-
(14 )
-

Issuance of common stock upon exercise of warrants 55,203 6 - 223,829 - 223,835
Stock-based compensation 1,060,763 1,060,763
Net loss - - - - (5,769,651 ) (5,769,651 )
Balance as of December 31, 2020 18,381,227 $ 1,838 $ (25,000 ) $ 92,463,661 $ (75,230,321 ) $ 17,210,178

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

BEYOND AIR, INC. AND SUBSIDIARIES

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

(UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, ~~2019~~2021

(amounts in thousands, except share data)

	Number		Amount		Stock			Capital		Deficit				Equity
								Additional
	Common Stock				Treasury			Paid-in		Accumulated				Total
	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
Issuance of vested restricted stock
Issuance of vested restricted stock, shares
Stock-based compensation									1,216						1,216
Beyond Cancer issuance of stock
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

	Number		Amount		Stock			Capital			Deficit				Equity
								Additional
	Common Stock				Treasury			Paid-in			Accumulated				Total
	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

	Number		Amount		Stock			Capital		Deficit			Interests			Equity
	Common Stock				Treasury			Additional Paid-in		Accumulated			Non-Controlling			Total
	Number		Amount		Stock			Capital		Deficit			Interests			Equity
Balance as of October 1, 2021		25,209,749	$	3	$	(25	)	$	136,840	$	(95,897	)	$	-			40,921
At the market stock issuance of common stock, net		1,154,355		0					14,049								14,049
Issuance of common stock pursuant to a Purchase Agreement, net		900,000		0		-			10,107								10,107
Issuance of common stock upon exercise of warrants		748,110		0					1,391								1,391
Issuance of common stock upon exercise of stock options		149,232		0					149								149
Stock-based compensation									2,116								2,116
Beyond Cancer issuance of stock (including $1.1 million from related parties)									24,000					6,000			30,000
Net Loss				-		-			-		(7,739	)		(223	)		(7,962	)
Balance as of December 31, 2021		28,161,446	$	3	$	(25	)	$	188,652	$	(103,636	)	$	5,777			90,771

Common Stock Treasury
Additional
Paid-in
Accumulated
Total
Shareholders’

Number Amount Stock Capital Deficit Equity
Balance as of April 1, 2019 8,714,815 $ 871 $ (25,000 ) $ 41,693,578 $ (37,644,572 ) $ 4,024,877
At the market stock issuance of common stock, net 250,000 25 - 1,173,785 - 1,173,810
Issuance of common stock upon exercise of options 32,122 3 - 83,854 - 83,857
Issuance of common stock pursuant to a private placement, net of offering cost 1,583,743 159 - 7,839,336 - 7,839,495
Stock-based compensation 919,037 919,037
Net loss - - - - (6,180,821 ) (6,180,821 )
Balance as of June 30, 2019 10,580,680 $ 1,058 $ (25,000 ) $ 51,709,590 $ (43,825,393 ) $ 7,860,255

Common Stock Treasury Additional Paid-in Accumulated
Total
Shareholders’

Number Amount Stock Capital Deficit Equity
Balance as of July 1, 2019 10,580,680 $ 1,058 $ (25,000 ) $ 51,709,590 $ (43,825,393 ) $ 7,860,255
Issuance of common stock pursuant to a Purchase Agreement, net 160,000 16 - 808,168 - 808,184
Issuance of common stock upon exercise of options 6,100 1 - 25,924 - 25,925
Stock-based compensation 922,997 922,997
Net loss - - - - (4,097,740 ) (4,097,740 )
Balance as of September 30, 2019 10,746,780 $ 1,075 $ (25,000 ) $ 53,466,679 $ (47,923,133 ) $ 5,519,621

Common Stock Treasury
Additional
Paid-in
Accumulated
Total
Shareholders’

Number Amount Stock Capital Deficit Equity
Balance as of October 1, 2019 10,746,780 $ 1,075 $ (25,000 ) $ 53,466,679 $ (47,923,133 ) $ 5,519,621
Issuance of common stock, pursuant to an underwriter offering and a private placement, net 3,152,985 315 - 10,169,028 - 10,169,343
Incremental value of warrants due to a warrant modification 552,478 522,478
Deemed dividend due to a warrant modification (522,478 ) (522,478 )
Issuance of common stock upon exercise of options 1,980 - - 8,168 - 8,168
Stock-based compensation 714,574 714,574
Net loss - - - - (4,395,611 ) (4,395,611 )
Balance as of December 31, 2019 13,901,745 $ 1,390 $ (25,000 ) $ 64,358,449 $ (52,318,744 ) $ 12,016,095

BEYOND AIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020

(amounts in thousands, except share data)

	Number		Amount		Stock			Capital		Deficit				Equity
								Additional
	Common Stock				Treasury			Paid-in		Accumulated				Total
	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

	Number		Amount		Stock			Capital		Deficit				Equity
								Additional
	Common Stock				Treasury			Paid-in		Accumulated				Total
	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

	Number		Amount		Stock			Capital			Deficit				Equity
								Additional
	Common Stock				Treasury			Paid-in			Accumulated				Total
	Number		Amount		Stock			Capital			Deficit				Equity
Balance as of October 1, 2020		17,152,414	$	2	$	(25	)	$	85,614		$	(69,461	)	-	$	16,130
At the market stock issuance of common stock, net		575,448		0					3,131							3,131
Issuance of common stock pursuant to a Purchase Agreement, net		463,162		0					2,434							2,434
Issuance of vested restricted stock		135,000		0		-			(0	)						(0	)
Issuance of common stock upon exercise of warrants		55,203		0					224							224
Stock-based compensation									1,061							1,061
Net loss				-		-			-			(5,770	)	-		(5,770	)
Balance as of December 31, 2020		18,381,227	$	2	$	(25	)	$	92,464		$	(75,230	)	-	$	17,210

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

BEYOND AIR, INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the Nine Months Ended
December 31,
2020 2019

Cash flows from operating activities
Net loss $ (17,643,245 ) $ (14,674,172 )
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization
125,036
57,009
Amortization of licensed right to use technology 30,409 72,718
Stock-based compensation 4,056,131 2,569,508
Deferred revenue (727,562 ) (1,587,450 )
Amortization of debt discount and accretion of debt issuance costs 100,308 -
Operating leases 906 6,824
Gain on cancellation of operating lease (1,843 ) -
Realized and unrealized loss on marketable equity securities - 1,849,624
Foreign currency adjustments (468 ) -
Changes in:
Other current assets and prepaid expenses 685,563 358,629
Accounts payable (1,031,922 ) 849,259
Accrued expenses 336,552 107,431
Net cash used in operating activities (14,070,135 ) (10,390,620 )

Cash flows from investing activities
Investment in marketable equity securities - (32,970,684 )
Proceeds from redemption of marketable securities - 24,963,763
Purchase of property and equipment (870,457 ) (28,248 )
Net cash used in investing activities (870,457 ) (8,035,169 )

Cash flows from financing activities
Issuance of common stock in connection with a Purchase Agreement with Lincoln Park, At the Market Offerings, private placement, net, exercise of warrants and stock options 12,464,848 20,020,200
Payment of loan (335,358 ) (175,022 )
Net cash provided by financing activities 12,129,490 19,845,178

(Decrease) increase in cash, cash equivalents and restricted cash (2,811,102 ) 1,419,389
Cash, cash equivalents and restricted cash at beginning of period 25,465,111 1,357,137
Cash, cash equivalents and restricted cash at end of period $ 22,654,009 $ 2,776,526
Supplemental disclosure of non-cash investing and financing activities
Right-of-use assets $ 236,700 $ 258,605
Operating lease liability $ 236,700 $ 266,570
Disposition of right-of-use asset $ (17,486 ) $ -
Disposition of operating lease liability $ 19,329 $ -
Stock issued to investor relations firm $ 242,100 -
Deemed dividend as a result of a warrant modification $ - $ 522,478
Supplemental disclosure of cash flow items:
Interest paid $ 340,779 $ 3,832

(amounts in thousands)

	2021			2020
	For the Nine Months Ended
	December 31,
	2021			2020

Cash flows from operating activities
Net loss	$	(23,397	)	$	(17,643	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		193			125
Amortization of licensed right to use technology		29			30
Stock-based compensation		4,487			4,056
Deferred revenue		-			(728	)
Amortization of debt discount and accretion of debt issuance costs		528			100
Amortization of operating lease assets		166			1
Gain on cancellation of operating lease		-			(2	)
Foreign currency adjustments		(7	)		(0	)
Changes in:
Grant Receivable		233			-
Other current assets and prepaid expenses		(254	)		686
Accounts payable		286			(1,032	)
Accrued expenses		2,501			337
Net cash used in operating activities		(15,234	)	$	(14,070	)

Cash flows from investing activities
Security Deposits made on rental properties		(73	)		-
Purchase of property and equipment		(1,038	)		(870	)
Net cash used in investing activities		(1,111	)	$	(870	)

Cash flows from financing activities
Proceeds from issuance of common stock in connection with a Purchase agreement		11,138			6,076
Proceeds from issuance of common stock through at the Market offerings		36,489			5,567
Proceeds from issuance of common stock through exercise of warrants		1,391			822
Proceeds from issuance of common stock through exercise of stock options		199			1
Proceeds from the sale of common stock - Beyond Cancer ($30.0 million, including $1.1 million from related parties, less $4.8 million from lenders in retired Loan Facility)		25,200			-
Payment of loan		(635	)		(335	)
Net cash provided by financing activities		73,783		$	12,129

Increase (decrease) in cash, cash equivalents and restricted cash		57,439			(2,811	)
Cash, cash equivalents and restricted cash at beginning of period		35,268			25,465
Cash, cash equivalents and restricted cash at end of period	$	92,707		$	22,654
Supplemental disclosure of non-cash investing and financing activities
Right-of-use assets	$	602		$	237
Operating lease liability	$	602		$	237
Accelerated amortization of debt discount costs on retirement of debt	$	390		$	-
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	$	334		$	341
Income taxes paid	$	68		$	-

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

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 ORGANIZATION AND BUSINESS

Beyond Air, Inc. (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.~~

~~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 Company~~ is a clinical-stage medical device and biopharmaceutical company ~~focused on~~ developing ~~inhaled Nitric Oxide~~a nitric oxide (“NO”) for the treatment of patients with respiratory conditions, including serious lung infections and pulmonary hypertension, and gaseous NO 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 an NO~~ generator and delivery system (the “LungFit™^® system”) ~~that is~~ capable of generating NO from ambient air. The ~~LungFit™ system~~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™ system~~ 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. The Company 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™ system~~ LungFit^®are persistent pulmonary hypertension of the newborn ~~(“PPHN”)~~(PPHN), ~~severe acute respiratory syndrome coronavirus 2 (“SARS CoV-2”)/~~-community-acquired viral pneumonia (CAVP) including COVID-19 (previously acute viral pneumonia, ~~(“AVP”)~~or AVP), bronchiolitis ~~(“BRO”)~~(BRO) and nontuberculous mycobacteria ~~(“NTM”)~~(NTM) lung infection. The Company’s current product candidates will be subject to premarket reviews and approvals by the U.S. Food and Drug Administration, (the “FDA”), CE marking conformity assessment by a notified body in the European Union (the “E.U.”), as well as similar regulatory ~~agencies~~agencies’ reviews or approvals in other countries or regions. ~~The Premarketing Application (“PMA”) for the~~ LungFit™ ~~system addressing PPHN was submitted~~^®is currently undergoing PMA review with the FDA ~~on November 10, 2020. If~~for the treatment of PPHN and, if approved, the Company’s system will be marketed as a medical device ~~initially~~ in the ~~United States.~~U.S.

On November 4, 2021, Beyond Air reorganized the oncology business into a new and independently managed, private company called Beyond Cancer, Ltd (“Beyond Cancer”). Beyond Air’s preclinical oncology team and the exclusive right to the intellectual property portfolio utilizing ultra-high concentrated nitric oxide (“UNO”) for the treatment of solid tumors now reside with Beyond Cancer. The new subsidiary secured $30 million in private placement of common shares, providing investors with 20% equity ownership. Beyond Air retained 80% ownership in Beyond Cancer (see Note 15).

Liquidity Risks and Uncertainties

The Company ~~has incurred operating losses in almost each year since inception, $14.1 million net~~used cash ~~used~~ in operating activities ~~during~~of $6.3 million for the ~~nine~~three months ended December 31, ~~2020~~2021, and has accumulated losses attributable to the stockholders of ~~$75.2~~Beyond Air of $103.6 million. ~~However, the~~The Company ~~has~~had cash, cash equivalents and ~~equivalents~~restricted cash of ~~approximately $22.7~~$92.7 million atas of December 31, ~~2020 and, based~~2021. Based on ~~the~~management’s current business plan, the Company estimates ~~such~~that it will have enough cash and ~~equivalents will be~~liquidity sufficient to finance its ~~operations~~operating 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 ~~studies~~trials and other actions needed to obtain regulatory approval of the Company’s ~~other~~ medical ~~device, indications~~devices in development as well as the ~~commercial success of~~cost to launch the Company’s first product for PPHN, assuming ~~PMA approval.~~ approval of Beyond Air’s Pre-Market Approval Process (PMA).

The Company’s access to capital and liquidity currently includes a $40 million stock purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”) dated as of May 14, 2020 (the “Stock Purchase Agreement”), of which approximately $18.1 million remains available as of December 31, 2021. The Stock Purchase Agreement provides for issuances through May 2023 at the Company’s discretion (see Note 5).

The Company entered into an At-The-Market Offering Sales Agreement, dated February 4, 2022 for $50 million (see Note 5).

The Company may 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 until ~~we are~~it is able to generate enough product or royalty revenues, if any. ~~Financing~~Such financing may not be available on acceptable terms, or at all, and ~~our~~the Company’s failure to raise capital when needed could have a material adverse effect on ~~our~~its strategic objectives, results of operations and financial condition.

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~NOTE 1 ORGANIZATION AND BUSINESS (continued)~~

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

	a)	~~On April 2, 2020, an At The Market Offering (“ATM”) agreement for $50 million, see Note 5.~~

	b)	On March 2, 2020, 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 draw down 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 LungFit™ PH, see Note 11.

	c)	On May 14, 2020, a $40 million stock purchase agreement (“New Stock Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), that replaced the former $20 million purchase agreement with LPC, dated August 10, 2018. The New Stock Purchase Agreement provides for issuances through May 2023 at the Company’s discretion, see Note 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 (“U.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 Sheet~~balance sheet as of ~~March~~December 31, ~~2020~~2021 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2020~~2021 (the ~~“2020~~“2021 Annual Report”), was filed with the U.S. Securities and Exchange Commission ~~(“SEC”~~(the “SEC”) on June 10, 2021 and amended on July 23, ~~2020.~~2021. The unaudited condensed consolidated financial statements and related disclosures should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the ~~2020~~2021 Annual Report.

Principles of Consolidation

These unaudited condensed consolidated financial statements include the accounts of the Company and the accounts of all ~~subsidiaries.~~of the Company’s subsidiaries and a variable interest entity (“VIE”) for which the Company is the primary beneficiary. As the Company has both the power to direct activities of Beyond Cancer that most significantly impact such entities economic performance and the right to receive benefits and losses that potentially be significant, financial statements are fully consolidated with those of the Company. The non-controlling owners’ 20% interest in Beyond Cancer’s net assets and result of operations is reported as “non-controlling interest” on the consolidated balance sheets and as “net income (loss) attributable to non-controlling interest” in the Company’s consolidated statement of operations. All intercompany balances and transactions have been eliminated in the accompanying financial statements.

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)~~

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its significant estimates ~~and assumptions~~ including ~~expense recognition assumption~~accruals for expenses under consulting, licensing agreements, and clinical ~~trial agreements,~~trials, stock-based compensation, ~~warrant fair value,~~ and the determination of deferred tax attributes and the valuation allowance ~~requirements on deferred tax attributes.~~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 party~~third-party suppliers and, in some cases single-source suppliers.

There can be no assurance that the Company’s product will be accepted in the marketplace, nor can there be any assurance that any future products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed, if at all.

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company’s products require approval or clearance from the FDA prior to ~~commencing~~commencement 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 ~~our~~the Company’s product candidates could be further disrupted and adversely affected by a resurgence of the ~~ongoing~~ COVID-19 pandemic. The ~~spread of SARS CoV-2 resulted~~Company experienced significant delays in the ~~Director General of~~supply 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. The Company ~~has assessed~~continuously assesses the impact COVID-19 may have on the Company’s business plans and its ability to conduct the preclinical studies and clinical trials as well as on the Company’s reliance on third-party manufacturing and ~~our~~global supply ~~chain. The Company experienced significant delays in the supply chain for LungFit™ due to the redundancy in parts and suppliers with ventilator manufacturing which has since been remedied~~. chains. However, there can be no assurance that the Company will be able to ~~further~~ avoid part or all of any impact from COVID-19 or its ~~consequences. The extent to which the COVID-19 pandemic and global efforts to contain its spread may impact the Company’s operations will depend on future developments.~~consequences if a resurgence occurs.

~~Concentrations~~

The Company ~~is reliant on two vendors for commercial manufacturing~~considers all highly liquid investments with original maturities of three months or less at the ~~LungFit™ generator~~date of purchase and ~~delivery systems and nitrogen dioxide filters for both clinical studies and future commercial supply if regulatory approval is received.~~

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)~~

~~Cash and Cash Equivalents~~

~~The Company’s~~ ~~concentrations of credit risk consist principally of cash and~~an investment in a U.S. government money market fund to be cash equivalents. The Company maintains its cash and cash equivalents in ~~bank deposit and other interest-bearing accounts in major banks~~highly 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 December 31, ~~2020,~~2021 and March 31, ~~2020,~~2021, restricted cash ~~consisted of $619,000 of cash~~included approximately $1.8 millionand $0.6 million designated for a contract ~~manufacturer.~~manufacturer, respectively. This cash is expected to be used for ~~material~~materials and parts that require a long lead ~~time.~~times. As of December 31, 2021, restricted cash also included $7.4 million held as collateral to secure a supersedeas bond for an appeal of a lawsuit (see Note 14).

~~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

	December 31, 2020		December 31, 2019
(amounts in thousands)					December 31, 2021		December 31, 2020
Cash and cash equivalents	$	22,016,310	$	2,140,162	$	83,468	$	22,016
Restricted cash		637,699		636,364		9,239		638
Cash and cash equivalents and restricted cash	$	22,654,009	$	2,776,526
Total					$	92,707	$	22,654

Revenue Recognition

The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers, the 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) the Company satisfies the performance obligation(s). At contract inception, the Company assesses the goods or services promised within each contract, ~~assess~~assesses whether each promised good or service is distinct and ~~identify~~identifies those promised goods or services that are performance obligations.

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)~~

The Company uses judgment to ~~determine: a)~~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, ~~they~~such fees or other payments are recorded as contract liabilities and recognized as revenue when (or as) the underlying performance obligation is satisfied.

BEYOND AIR, INC. AND ITS SUBSIDIARIES

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 ~~reporting~~Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, the Company ~~has viewed~~views its operations and ~~managed~~manages its business as ~~one~~1 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.

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 operations~~transact in ~~Israel, Ireland,~~U.S. dollars, Euros, New Israeli Shekels and ~~in Australia. Beyond Air’s~~Australian 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 December 31, ~~2020~~2021 and March 31, 2021 were not material. Gains or losses from foreign currency transactions are included in other income ~~(loss)~~(expense) in the statement of 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 date fair value of the award. Fair value for restricted stock unit 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 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 its peer group in order to obtain expected volatility. The peer companies selected have similar characteristics, including industry and market capitalization. The Company routinely reviews its calculation of volatility based on, the Company’s life cycle, its peer group, and other factors. The Company uses the simplified method to estimate the expected term.

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)~~

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and accumulated amortization. Depreciation and amortization 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

~~Computers~~Computer equipment	Three years
Furniture and fixtures	Seven years
Clinical and medical equipment	Five or Fifteen years
Leasehold improvements	Shorter of term of lease or estimated useful life of the asset

Licensed Right to Use Technology

Licensed right to use technology that is considered platform technology with alternative future uses is recorded as an intangible asset and is ~~being~~ amortized on a straight-line method over its estimated useful life, determined to be thirteen years ~~see~~ (see Note ~~13.~~14).

The expected amortization expense for the next five years and thereafter is as follows for the year ended March 31 (in thousands):

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~SCHEDULE OF FUTURE EXPECTED AMORTIZATION EXPENSE


Remainder of 2022	$	10
2023		38
2024		38
2025		38
2026		38
Thereafter		184
Total	$	346

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~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 trigger~~the 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 ~~our~~the Company’s use of the acquired assets or the strategy for ~~our~~its overall business,
●
●	significant negative regulatory or economic trends, and
●
●	significant technological changes, which would render the platform technology, equipment, and manufacturing processes obsolete.

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 ~~our~~the 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 ~~estimated~~estimates 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 December 31, ~~2020,~~2021 and March 31, ~~2020,~~2021, the Company recorded a valuation allowance to the full extent of ~~our~~the Company’s net deferred tax assets since the likelihood of realization of the benefit does not meet the ~~more likely than not~~more-likely-than-not threshold.

The Company files U.S. ~~Federal,~~federal, various state, and ~~International~~international income tax returns. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances. Such adjustment is reflected in the tax provision when appropriate. The Company will recognize interest and penalties, if any, related to unrecognized tax benefits in income taxes in the statements of operations. Tax years 2016 through 2020 remain open to examination by federal and state tax jurisdictions. The Company files tax returns in Israel for which tax years 2014 through 2020 remain open. In addition, the Company files tax returns in Ireland and Australia and the tax year 2020 remains open.

Net Income (Loss) Per Share

Basic and diluted net loss per share attributable to common ~~shareholders~~stockholders is computed by dividing the net loss ~~and deemed dividend from a warrant modification~~attributable to ~~common shareholders~~Beyond Air, Inc., by the weighted average number of shares of common stock outstanding for the period. The dilutive effect of outstanding options, warrants, restricted stock and other stock-based compensation awards is reflected in diluted net income (loss) per share by application of the treasury stock method. The calculation of diluted net income (loss) attributed to common ~~shareholders~~stockholders per share excludes all anti-dilutive shares of common stock. For periods in which the Company has reported net losses, diluted net loss per share attributable to common ~~shareholders~~stockholders is the same as basic net loss per share attributable to common ~~shareholders,~~stockholders, because such shares of common stock 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.

1514

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)~~

~~Recently Issued Accounting Standards Not Yet Adopted~~

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”) as part of its initiative to reduce complexity in the accounting standards. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company does not anticipate the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for the Company on December 1, 2022, Early adoption is permitted, but no earlier than December 1, 2021. The Company is currently evaluating the impact of ASU 2020-06 on its condensed consolidated financial statements and related disclosures.

NOTE 3 FAIR VALUE MEASUREMENT

The Company’s financial instruments primarily include cash, cash equivalents, restricted cash, accounts payable, and a ~~Facility Agreement Loan.~~short-term loan. Due to the short-term nature of these financial instruments, the carrying amounts of these assets and liabilities approximate their fair value. The long-term ~~Facility Agreement loan approximate~~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 ~~gives~~give 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.

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

NOTE 4 PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of December 31, ~~2020~~2021 and March 31, ~~2020, respectively:~~2021:

SCHEDULE OF PROPERTY AND EQUIPMENT

	December 31, 2020			March 31, 2020
(in thousands)							December 31, 2021			March 31, 2021

Clinical and medical equipment	$	1,114,760		$	357,795		$	1,474		$	1,074
Computer equipment		131,621			73,982			318			152
Furniture and fixtures		93,245			53,895			284			133
Leasehold improvements		21,840			5,336			343			22
		1,361,466			491,008			2,419			1,381
Accumulated depreciation and amortization		(404,707	)		(279,671	)		(646	)		(453	)
	$	956,759		$	211,337		$	1,772		$	929

Depreciation and amortization expense for the three months ended December 31, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$51,428~~ $0.1 millionand ~~$23,190,~~ $0.1 million, respectively. Depreciation and amortization expense for the nine months ended December 31, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$125,036~~ $0.2 million and ~~$57,009,~~$0.1 million, respectively.

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 ~~SHAREHOLDERS’~~STOCKHOLDERS’ EQUITY

On April 2, 2020, the Company entered into an At-The-Market Equity Offering Sales Agreement (the “ATM”), allowing the Company to sell its common stock for 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. When shares of the Company’s common stock were sold, there was a three percent fee paid to the sales agent. For the three months ended December 31, 2021 and December 31, 2020, the Company received net proceeds of $14.0 million and $3.1 million from the sale of 1,154,355 and 575,448 shares of the Company’s common stock, respectively. For the nine months ended December 31, 2021 and December 31, 2020, the Company received net proceeds of $36.5 million and $5.6 million from the sale of 4,053,424 and 916,688 shares of the Company’s common stock, respectively. As of December 31, 2021, there were 0remaining funds available under the ATM.

On May 14, 2020, the Company entered into ~~a $40 million New~~the Stock Purchase Agreement with LPC, ~~that replaced the former $20 million purchase agreement. The New Stock Purchase Agreement~~which provides for the issuance of up to ~~$40~~ $40 million of ~~the Company’s~~its 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. Under both~~limitations set forth in the ~~new and former agreement, for~~Stock Purchase Agreement. For the three ~~and nine~~ months ended December 31, 2021 and December 31, 2020, the Company received net proceeds of ~~$2,433,547~~$10.1 million and ~~$6,075,228~~$2.4 million from the sale of 900,000 and 463,162 shares of common ~~stock.~~stock, respectively. For the nine months ended December 31, 2021 and December 31, 2020, the Company received net proceeds of $11.1 million and $6.1 million from the sale of 1,100,000 and 1,031,767 shares of common stock, respectively. As of December 31, ~~2020,~~2021, there iswas a balance of ~~$34,777,953~~approximately $18.1 million available under the ~~LPC new agreement.~~

Stock Purchase Agreement.

On January 24, 2022, the Company filed a shelf registration statement on Form S-3 (the “Registration”) registering an indeterminate number of shares of common stock and preferred stock, such indeterminate principal amount of debt securities, such indeterminate number of warrants to purchase common stock, preferred stock and/or debt securities, and such indeterminate number of units as may be sold by the Company from time to time, which together shall have an aggregate initial offering price not to exceed $200,000,000. The Registration was declared effective by the SEC on February 1, 2022;

On ~~April 2, 2020,~~February 4, 2022, the Company entered into ~~an ATM for $50 million utilizing~~a new At-The-Market Equity Offering Sales Agreement (the “ATM”), allowing the ~~Company’s shelf registration statement. The~~ Company ~~may~~to sell ~~shares of our~~its common stock ~~having~~for aggregate sales proceeds of up to ~~$50,000,000~~$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 and nine months ended December 31, 2020, the Company received net proceeds of $3,131,347 and $5,567,134 from the sale of the Company’s stock. As of December 31, 2020, there is a balance of $44,292,866 available under the ATM.

Equity Incentive Plan

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 of $7,839,495. The Company’s CEO participated in this offering and invested $300,000 and received 58,253 shares of common stock, or $5.15 per share. In addition, certain directors and employees invested $610,000 for an aggregate of 118,254 shares of common stock, at a purchase price of $5.15 per share.

On December 12, 2019, the Company closed on an underwritten offering and concurrent private placement of 3,152,985 shares of common stock at $3.66 per share for net proceeds of $10,169,343. The underwritten offering shares were registered under the Company’s shelf registration statement. There were 532,786 common stock that were sold in a private placement and subsequently registered under an effective Form S-1 on January 23, 2020. In addition, the Company’s CEO invested $699,999 and receiving 190,437 shares of common stock at $3.66 per share. In addition, certain employees participated in this offering by investing $475,000 and receiving 129,781 shares of common stock at $3.66 per share.

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 5 SHAREHOLDERS’ EQUITY (continued)~~

~~Stock to be Issued to a Vendor~~

As of March 31, 2020, the Company was obligated to issue 30,000 shares of common stock to a vendor for services related to investor relations. The fair value of the liability as of March 31, 2020 was $240,000. In May 2020, 30,000 shares were issued at the fair value of $242,100. Such amount was transferred to shareholders’ equity. As of December 31, 2020, there is no obligation to the vendor, nor any stock compensation expense.

~~Issuance of Restricted Shares~~

Restricted stock was issued to officers, employees and consultants. The fair value for the restricted stock awards was valued at the closing price of the Company’s common stock on the date of grant. Restricted stock vests annually over five years.

Number
Of Shares

Weighted
Average
Grant Date
Fair Value

Unvested as of April 1, 2020 646,800 $ 4.99
Granted 62,000 5.81
Vested (135,000 ) 4.99
Unvested as of December 31, 2020 573,800 $ 5.08

Stock-based compensation expense related to restricted stock awards was $291,452 and $84,477 for the three months ended December 31, 2020 and December 31, 2019, respectively. Stock-based compensation expense related to restricted stock awards was $1,062,628 and $432,756 for the nine months ended December 31, 2020 and December 31, 2019, respectively.

~~Stock Option Plan~~

The Company’s ~~Second~~Third Amended and Restated 2013 Equity Incentive Plan (the “2013 Plan”) allows for awards to officers, directors, employees, and consultants 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 and~~ four years and expire ~~up to~~ in ten years ~~after~~ from the grant date. The 2013 Plan has ~~4,100,000~~5,600,000 shares authorized for issuance. As of December 31, ~~2020, 7,047~~2021 233,761 shares ~~are~~were available for issuance under the 2013 Plan.

Restricted Stock Units

The fair value for the restricted stock unit awards was valued at the closing price of the Company’s common stock on the date of grant. Restricted stock units vest annually over five years.

A summary of the Company’s restricted stock unit awards for the period ended December 31, 2021 is as follows:

SCHEDULE OF RESTRICTED STOCK AWARDS

	Number Of Shares			Weighted Average Grant Date Fair Value

Unvested as of April 1, 2021		554,200			5.04
Forfeited		(17,000	)		5.23
Granted		250,000			10.55
Vested		(183,000	)		6.46
Unvested as of December 31, 2021		604,200		$	6.88

Stock-based compensation related to these stock issuances for the three months ended December 31, 2021 and December 31, 2020 was $930 thousand and $291 thousand, respectively. Stock-based compensation related to these stock issuances for the nine months ended December 31, 2021 and December 31, 2020 was $1,249 thousand and $1,063 thousand, respectively.

As of December 31, 2021, the 183,000 shares that vested in the three months ended December 31, 2021 had not been issued.

1816

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 ~~SHAREHOLDERS’~~STOCKHOLDERS’ EQUITY (continued)

A summary of the ~~change in~~Company’s options for the nine months ended December 31, ~~2020~~2021, is as follows:

SCHEDULE OF OPTION ACTIVITY

						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		211,500			8.98
Exercised		(215,904	)		4.92
Forfeited		(88,062	)		5.08
Outstanding as of December 31, 2021		4,102,631		$	5.15		7.6	$	17,620
Exercisable as of December 31, 2021		2,489,256		$	4.69		7.0	$	11,816

Number Of Options Weighted
Average
Exercise Price -
Options Weighted
Average
Remaining
Contractual
Life-
Options Aggregate
Intrinsic
Value

Options outstanding as of April 1, 2020 3,053,589 $ 4.77 8.4 $ 9,878,264
Granted 122,000 5.11 9.3
Exercised (2,340 ) 0.1 -
Outstanding as of December 31, 2020 3,173,249 $ 4.8 8.0 $ 1,770,400
Exercisable as of December 31, 2020 1,715,849 $ 4.55 7.5 $ 1,251,025

On January 9, 2021, the Company’s board approved an amendment to the 2013 Plan to increase the number of shares in the plan by 1,500,000, with such amendment being subject to shareholder vote at the 2021 annual stockholder meeting, scheduled for March 4, 2021. As of December 31, ~~2020, the Company agreed to issue 60,000 options, which are subject to shareholder approval of the increase in shares allocated to the 2013 Plan.~~

~~As of December 31, 2020,~~2021, the Company has unrecognized stock-based compensation expense of approximately ~~$2,538,200~~$4.6 million related to unvested stock options which is expected to be expensed over the weighted average remaining service period of ~~1.7~~ 2.8 years. ~~For the nine months ended December 31, 2020 and December 31, 2019, the~~

The weighted average fair value of options granted was ~~$5.20~~ $8.98 and ~~$3.49~~ $5.20 per share, during the nine months ended December 31, 2021 and December 31, 2020, respectively.

The following ~~was~~inputs were utilized in the Company’s Black-Scholes Model to calculate ~~the~~ fair value ~~of options~~ on the date of grant:

SCHEDULE OF BLACK-SCHOLES MODEL

	December 31, 2021			December 31, 2020
Risk-free interest rate		1.3-1.5	%		0.5-0.7	%
Expected volatility		89.4-91.1	%		87.8-92.5	%
Dividend yield		0	%		0	%
Expected terms (in years)		6.25			5.18 -6.25

December 31, 2020 December 31, 2019
Risk -free interest rate 0.5 - 0.7 % 1.4 - 2.3 %
Expected volatility 87.8 - 92.54 % 82.3 - 83.4 %
Dividend yield 0 % 0 %
Expected terms (in years) 5.18 - 6.25 6.25

The following summarizes the components of stock-based compensation expense, which ~~includes~~include stock options and restricted stock, for the three and nine months ended December 31, ~~2020~~2021 and December 31, ~~2019, respectively:~~2020, respectively

SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE

	Three Months Ended				Nine Months Ended
	December 31,				December 31,				Three Months Ended				Nine Months Ended
	2020		2019		2020		2019		December 31,				December 31,
(in thousands)									2021		2020		2021		2020

Research and development	$	376,424	$	97,765	$	1,665,372	$	431,453	$	416	$	376	$	1,160	$	1,665
General and administrative		684,339		616,809		2,390,659		2,125,155		1,700		684		3,327		2,391

Total stock-based compensation expense	$	1,060,763	$	714,574	$	4,056,131	$	2,556,608	$	2,116	$	1,061	$	4,487	$	4,056

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Employee Stock Purchase Plan

~~NOTE 5 SHAREHOLDERS’ EQUITY (continued)~~

~~Warrants~~

~~A modification~~On March 4, 2021, the stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”). The purpose of the ~~exercise price~~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 ~~January 2017~~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 December 31, 2021 and March ~~2017 investor warrants from $4.25 per share to $3.66 per share was triggered by~~31, 2021, there were 0shares issued under the ~~2019 Offering described above. As a result,~~ESPP and 750,000 shares were available for future issuance under the ~~Company recognized the incremental value of $522,478 as a deemed dividend using the Black-Scholes pricing model with the following assumptions:~~ESPP.

~~Expected term in years~~	~~2.2~~
~~Volatility~~	87	%
~~Dividend yield~~	~~0.0~~	%
~~Risk-free interest rate~~	~~1.7~~	%

Warrants

A summary of the Company’s outstanding warrants as of December 31, ~~2020 are~~2021 is as follows:

SUMMARY OF COMPANY’S OUTSTANDING WARRANTS

Warrant Holders	Number Of Warrants		Exercise Price		Date of Expiration		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)
January 2017 offering – investors								1,683,240	$	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)		7,541	$	3.66	March 2022 (a)
February 2018 offering - investors		1,525,232	$	4.25		February 2021
Third-party license agreement		208,333	$	4.80		January 2024		208,333	$	4.80	January 2024
March 2020 loan (see Note 11)		172,187	$	7.26		March 2025
March 2020 loan (see Note 12)								172,187	$	7.26	March 2025
NitricGen								80,000	$	6.90	January 2028
Total		4,958,855						2,219,631

(a)

These warrants have down round ~~protection.~~protection (See Notes 7 and 14).

For the ~~three and~~ nine months ended December 31, ~~2020, 52,667 and 206,537 warrants were exercised for $223,835 and $821,940, respectively. For the three and nine months ended December 31, 2020, 8,332~~ 2021, 925,660 warrants were exercised on a cashless basis in exchange for 639,921 shares and ~~2,536 shares of common stock~~an additional 380,000 warrants were ~~issued.~~exercised for $1,391 thousand. For the nine months ended December 31, ~~2019, no~~ 2020, 8,332 warrants were ~~exercised.~~exercised on a cashless basis in exchange for 2,536 shares and an additional 206,537 warrants were exercised for $822 thousand.

For the three months ended December 31, 2021, 509,996 warrants were exercised on a cashless basis in exchange for 368,110 shares and an additional 380,000 warrants were exercised for $1,391 thousand. For the three months ended December 31, 2020, 8,332 warrants were exercised on a cashless basis in exchange for 2,536 shares and an additional 52,667 warrants were exercised for $224 thousand.

Subsequent to December 31, 2021, 433,236 warrants that were issued in January 2017 were exercised on a cashless basis in exchange for 254,902 shares and an additional 1,250,002 warrants were exercised for $4.6 million.

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 December 31, ~~2020~~2021 and March 31, ~~2020~~2021 is as follows:

SCHEDULE OF CURRENT ASSETS AND PREPAID EXPENSES

	December 31, 2020		March 31, 2020
(in thousands)					December 31, 2021		March 31, 2021
Research and development	$	94,607	$	266,510	$	633	$	272
Insurance		110,742		471,182		142		971
Professional		25,000		156,259
Value added tax receivable		46,568		124,127		162		41
Other		148,445		131,728		380		246
Total	$	425,362	$	1,149,806	$	1,317	$	1,530

NOTE 7 ACCRUED EXPENSES

A summary of the accrued expenses as of December 31, ~~2020~~2021 and March 31, ~~2020~~2021 is as follows:

December 31, 2020
March 31,
2020

Research and development $ 623,653 $ 484,756
Professional fees 406,062 476,638
Employee salaries and benefits 275,671 71,066
Interest expense 9,218 -
Other 119,483 65,074
Total $ 1,434,087 $ 1,097,534

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~SUMMARY OF ACCRUED EXPENSES

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

	December 31, 2021		March 31, 2021
Research and development	$	695	$	585
Professional fees		450		709
Employee salaries and benefits		461		270
Other		365		242
Accrual for contingent liability		2,356		-
Total	$	4,328	$	1,805

On September 30, 2021, the Company recorded an estimate for a contingent loss of $2.4 million related to the Empery litigation, see Note 14. The estimate is unchanged as of December 31, 2021.

NOTE 8 LEASES

~~On April 1, 2019, the Company early adopted Accounting Standards Update~~ASU No. 2016-02, Leases (Topic 842), 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~~On October 1, 2021, a new 5-year lease was signed at one location with an initial right-of-use asset valuation and ~~cancelled a~~offsetting lease ~~which resulted in the recognition~~liability 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. $602 thousand.

The right-of use assets and operating lease liability as of December 31, ~~2020~~2021 and March 31, ~~2020 is~~2021 are as follows:

SCHEDULE OF OPERATING LEASE LIABILITY

	December 31, 2020		March 31, 2020
(in thousands)					December 31, 2021		March 31, 2021

Right-of-use assets	$	357,871	$	195,727	$	2,299	$	1,861

Operating lease liability short-term	$	84,388	$	69,342	$	239	$	113
Operating lease liability long-term		279,594		131,581		2,162		1,789
Total	$	363,982	$	200,923	$	2,401	$	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 ~~our~~the 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 December 31, 2020, and March 31, 2020, the weighted average discount rate and remaining term on lease obligation was approximately 8.3%, 8.3%, 4.3 and 3.0 years, respectively.~~ Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative and research development expenses. 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 Nine Months Ended December 31, 2021

Cash paid for amounts included in the measurement of lease liabilities (thousands):	$	232
Right-of-use assets obtained in exchange for new operating lease liabilities:		-
Weighted average remaining lease term — operating leases		7.7 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	$	79
2023		464
2024		446
2025		437
2026		444
Thereafter		1,408
Total lease payments		3,278
Less: interest		(877	)
Present value of lease liabilities	$	2,401

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

December 31, 2020 December 31, 2019

Common stock warrants 4,958,855 6,143,405
Common stock options 3,173,249 2,287,049
Restricted shares 573,800 654,000

Total 8,705,904 9,084,454

SCHEDULE OF POTENTIAL ANTI-DILUTIVE SECURITIES

	December 31, 2021		December 31, 2020

Common stock warrants		2,219,631		4,958,855
Common stock options		4,102,631		3,173,249
Restricted stock		604,200		573,800

Total		6,926,462		8,705,904

NOTE 10 LICENSE AGREEMENT

On January 23, 2019, the Company entered into an agreement for commercial rights (the “Circassia Agreement”) with Circassia Limited and its affiliates (collectively, “Circassia”) for 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 Circassia ~~Agreement,~~Agreement. On May 25, 2021, the Company entered into a settlement with Circassia, see Note ~~13.~~14.

~~This contract consisted~~As of ~~five performance obligations with only the following two obligations required prior to the termination of the License Agreement:~~

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 10 LICENSE AGREEMENT (continued)~~

●	~~Performance Obligation 1: non-exclusive transfer of functional intellectual property rights to Circassia, which includes:~~

	○	~~the consummation of the Circassia Agreement, which included significant pre-agreement negotiation and product specification, and~~

	○	~~the successful completion of the pre-submission meeting with the FDA. At this meeting, the FDA reinforced its 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 such approval.

~~During the three months ended~~ March 31, ~~2019,~~2021, the Company met ~~the first two milestones~~its performance obligation under the ~~license agreement~~Circassia Agreement and ~~received 17,572,815 ordinary shares valued at $9,987,295. This consideration was allocated to the first two performance obligations; one being the transfer~~revenue 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~~$149 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.~~

~~The second performance obligation~~ ~~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 this~~Company’s second performance obligation has been recognized for the three months ended December 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. License revenue of ~~$727,562~~$0 and ~~$1,273,071~~$728 thousand associated with ~~this~~the Company’s second performance obligation has been recognized for the nine months ended December 31, ~~2020~~2021 and December 31, ~~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 nine months ended December 31, ~~2020,~~2021, the Company recognized $229 thousand and ~~March~~$661 thousand in reduction of research and development expenses, respectively. The Company has received $425 thousand from the CFF through December 31, ~~2020, deferred revenue was $145,628 and $873,190, respectively.~~2021.

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE ~~11 FACILITY AGREEMENT~~12 LONG-TERM LOAN

On March 17, 2020, the Company entered into the 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 the LungFit™ PH product. The loan(s) are unsecured with interest at 10% per year which is to be paid quarterly. The loans may be prepaid with certain prepayment penalties. The effective interest rate for this loan is 13.3% per year. Each tranche shall be repaid in installments commencing June 15, 2023 with all amounts outstanding under any tranche due on March 17, 2025. The Company received proceeds from the first tranche in fiscal year 2020. ~~A lender who is over a five percent shareholder loaned~~During October 2021, the Company ~~$3,160,000~~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 ~~as such, related party interest expense for~~to terminate the ~~three and nine months ended December 31, 2020 approximated $79,000 and $158,000 (not including amortization of debt discount and deferred offering costs), respectively.~~Facility Agreement without penalty. The Facility Agreement was terminated on November 10, 2021.

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. There are additional warrant issuances associated with each tranche. If the second tranche of $5 million is utilized by the Company, the warrants that will be issued is up to twenty five percent of its commitment value ~~divided by the five-day volume-weighted 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-day VWAP.~~ ~~As a result, the~~The Company allocated the fair market value of the warrants at the date of grant ~~of the warrants~~ to ~~shareholders’~~stockholders’ equity and reflected a debt discount ~~valued~~of $595 thousand. Debt discount and debt issuance costs are amortized over the life of the loan. Upon termination of the Facility Agreement, the Company accelerated amortization of debt discount and debt issuance costs and have recognized the full amount as at ~~$594,979 using the Black Scholes pricing model.~~December 31, 2021.

~~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 years~~	~~5.0~~
~~Volatility~~	~~87.5~~	%
~~Dividend yield~~	~~0.0~~	%
~~Risk-free interest rate~~	~~0.7~~	%

A summary of the balance of the Facility Agreement ~~loan balance~~ as of December 31, ~~2020~~2021 and March 31, ~~2020~~2021 is as follows:

SCHEDULE OF FACILITY AGREEMENT

	December 31, 2020			March 31, 2020
(in thousands)							December 31, 2021			March 31, 2021
Face value of loan	$	5,000,000		$	5,000,000		$	5,000		$	5,000
Loan redemption								(5,000	)
Debt discount		(594,979	)		(594,979	)		(595	)		(595	)
Accretion of interest expense		105,415			5,107
Accretion of debt discount								595			123
Debt offering costs		(71,063	)		(71,063	)		(71	)		(71	)
Facility agreement loan balance	$	4,439,373		$	4,339,065
Amortization of debt offering costs								71			15
Total							$	0		$	4,472

Maturity of Facility Agreement Loan December 31, 2020

2021 $ -
2022 -
2023 1,500,000
2024 2,750,000
2025 750,000
Total $ 5,000,000

~~NOTE 12 LOAN PAYABLE~~

AsA lender who is an over 5% stockholder loaned the Company $3,160 thousand of the first tranche and, as such, related party interest expense for the three months ended December 31, 2021 and December 31, 2020 was $36 thousand and $79 thousand (not including amortization of debt discount and deferred offering costs), respectively.

In connection with the termination of the Facility Agreement, on November 8, 2021, the Company entered into a modification of the Facility Agreement for one lender to allow for repayment of $200 thousand on unchanged payment terms. The loan is unsecured with interest at 10% per year which is to be paid quarterly. The loan shall be repaid in installments commencing on June 15, 2023 with all outstanding amounts due on March ~~31, 2020, in~~17, 2025.

SCHEDULE OF MATURITY OF LONG-TERM LOAN

Maturity of Long-Term Loan (in thousands)	December 31, 2021

2022	$	-
2023		60
2024		110
2025		30
Total	$	200

NOTE 13SHORT-TERMLOAN PAYABLE

In connection with the Company’s insurance policy, a loan was used to finance part of the premium. ~~The loan was due in November 2020 with monthly payments of $42,366 bearing interest at 4.3%. The outstanding balance as~~As of December 31, ~~2020 and March 31, 2020~~2021, this loan was ~~$0 and $335,358, respectively.~~fully reimbursed. The following details concerning the loan is as follows:

SCHEDULE OF LOAN PAYABLE

	December 31, 2021		March 31, 2021
(in thousands)
Amount outstanding	$	-	$	557
Monthly payments	$	n/a	$	70
Number of monthly payments remaining		-		8
Interest rate		n/a		3.2	%
Due date		n/a		November 2021

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 ~~with CareFusion~~ (the “CareFusion Agreement”) with SensorMedics Corporation, a subsidiary of CareFusion Corp. (“CareFusion”), pursuant to which the Company agreed to pay to CareFusion a non-refundable upfront fee of ~~$150,000~~$150 thousand that is credited against future ~~royalties~~royalty payments, and is obligated to pay 5%5% royalties of any licensed product net sales, but at least ~~$50,000~~$50 thousand per annum during the term of the agreement. As of December 31, ~~2020,~~2021, the Company ~~did~~has not ~~pay~~paid any royalties to CareFusion since the Company ~~did~~has not ~~have~~received any revenues from the technology associated with the license under the CareFusion Agreement. The term of the CareFusion 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 do~~the Company does not meet certain milestones.

~~BEYOND AIR, INC. AND ITS SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 13 COMMITMENTS AND CONTINGENCIES (continued)~~

In August 2015, BA Ltd. entered into an Option Agreement (the “Option Agreement”) with Pulmonox whereby BA Ltd. acquired the option to purchase certain intellectual property assets and rights (the “Option”) ~~on September 7, 2016 for $25,000.~~. On January 13, 2017, the Company exercised the Option and paid ~~$500,000~~$500 thousand to Pulmonox. The Company ~~becomes~~is obligated to make certain one-time development and sales milestone payments to Pulmonox, commencing with the date on which the Company ~~receive~~receives regulatory approval for the commercial sale of the first product candidate qualifying under the 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 ~~“NitriGen~~“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 ~~achieving~~the achievement of certain milestones, as defined in the ~~NitriGen~~NitricGen Agreement, and royalties on sales of ~~the LungFit™~~LungFit^®. The Company paid NitricGen ~~$100,000~~$100 thousand upon the execution of the ~~NitriGen~~NitricGen Agreement, ~~$100,000~~$100 thousand upon achieving the next milestone and issued 100,000 ~~options~~ warrants to purchase the Company’s common stock valued at ~~$295,000~~$295 thousand upon ~~executing~~ the ~~NitriGen~~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 FDA or the European ~~Medicine Evaluation~~Medicines Agency. On November 18, 2021, NitricGen, Inc. exercised 20,000 warrants in a cashless exercise and received 10,547 shares of common stock.

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 upon FDA approval (the “Initial Payment Due Date”). Thereafter, the Company will 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 December 31, 2021.

Employment Agreements

Certain agreements between the Company and its officers contain a change of control provision for payment of severance arrangements.

Supply Agreement and Purchase Order

In August 2020, the Company entered into a supply agreement expiring on December 31, 2024. The agreement will renew automatically for successive three-year periods unless and until the Company provides ~~twelve~~12 months’ notice of the intent not to ~~renew. In July 2020,~~renew the agreement. The Company has placed aseveral purchase orders under the aforementioned agreement. The non-cancellable portion of the purchase ~~order and the outstanding amount~~orders with this supplier as of December 31, ~~2020~~2021 is approximately ~~$1,054,000 with this supplier.~~

~~Operating Leases~~

~~The Company cancelled a lease~~$2.0 million. Additionally, long lead time materials in ~~May 2020 for its location in Madison, Wisconsin. In June 2020,~~the amount of $1.8 million have been ordered on behalf of the Company ~~entered into a lease for office space~~ and ~~research facility in Madison, Wisconsin. The lease agreement expires in May 2026.~~are secured with restricted cash, see Note 2.

In May 2018, the Company entered into an operating lease for its corporate office in Garden City, New York. In August 2020, the Company entered into an operating lease (the “2020 Operating Lease”) to move its corporate office to another location in Garden City, New York. It is expected that Beyond Air will move into this space in April 2021.

BEYOND AIR, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~NOTE 13 COMMITMENTS AND CONTINGENCIES (continued)~~Contingencies

The Company has other operating lease agreements with commitments of less than one year or that are not significant. The Company elected the practical expedient option and as such these lease payments are expensed as incurred. Included in the maturity of lease liabilities below is the aforementioned 2020 Operating Lease in the amount of $2,035,601, which upon commencement, the Company will record the operating lease liabilities and corresponding right-of-use assets on the balance sheet pursuant to ASU 2016-02.

Other Information For The Nine Months Ended December 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid $ 73,743
Right-of-use assets obtained in exchange for new operating lease liabilities: -
Weighted-average remaining lease term — operating leases 4.3 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 nine months ended December 31, 2020) $ 27,359
2022 207,296
2023 283,330
2024 240,981
2025 230,940
Thereafter 1,349,266
Total lease payments 2,339,172
Less: interest (68,276 )
Present value of lease liabilities $ 2,270,896

~~Contingencies~~

On March 16, 2018, Empery Asset Master, Ltd., Empery Tax Efficient, LP and Empery Tax Efficient II, LP, (collectively, “Empery”), filed a complaint in the Supreme Court of the State of New York (the ~~“Court”~~“Trial Court”), against the Company relating to the notice of adjustment of both the exercise price of and the number of warrant shares issuable under warrants issued to Empery in January ~~2017 (the “Empery Suit”). The~~2017. Empery ~~Suit~~ alleges that, as a result of certain circumstances in connection with ~~our~~a February 2018 ~~offering,~~financing transaction, the 166,672 warrants issued to Empery in January 2017 provide for adjustments to both the exercise price of the warrants and the number of warrant shares issuable upon such exercise. ~~Empery seeks monetary damages and declaratory relief under theories of breach of contract or contract reformation predicated on mutual mistake.~~

While the Company believes that it has complied with the applicable protective features of the 2017 Warrants and properly adjusted the exercise price, if Empery were to prevail on all claims, the new adjusted total number of warrant shares could be as follows: 319,967 warrant shares for Empery Asset Master, Ltd., 159,869 warrant shares for Empery Tax Efficient, LP and 252,672 warrant shares for Empery Tax Efficient II, LP, and the exercise price could be reduced from $3.66 to $1.57 per share. On ~~March 9, 2020, the Company filed a motion for summary judgment, which was denied by order of the Court entered on~~ August 20, 2020, ~~except~~the Trial Court denied the Company’s summary judgment motion as to the first and third claims for relief, but dismissed the second claim for ~~relief for~~ declaratory judgment ~~which was dismissed~~ as ~~moot.~~ moot (the “August 20 Decision”). The Appellate Division First Department denied the Company’s appeal of the August 20 Decision on September 30, 2021. Following a three-day bench trial, the Trial Court issued a decision on October 14, 2021, finding in favor of Empery on the two remaining claims, granting reformation of the Warrant Agreement, and awarding Empery damages in the aggregate amount of approximately $5.8 million (the “October 14 Decision”). On ~~October 1, 2020, the Company~~November 12, 2021, we filed a ~~Notice~~notice of ~~Appeal~~appeal. Pending appeal, we are required to use approximately $7.4 million of cash as collateral to secure a supersedeas bond for the full amount of damages and interest in the case that we are unsuccessful in our appeal. On September 30, 2021, we recorded an estimate for a ~~motion seeking leave~~contingent loss of $2.4 million related to ~~reargue, and upon reargument, requesting that~~ the Court grant summary judgment dismissing claims for breach of section 3(b) and reformation. The Court denied reargument on January 15, 2021. Appeal of the order denying the motion for summary judgment is pending. Trial is presently scheduled for April 19, 2021.Empery litigation. The Company, ~~has~~in consultation with outside legal counsel, believes that we have several meritorious defenses against the claims, and ~~intends~~the decision of the Trial Court.

On December 28, 2021 Hudson Bay Master Fund (“Hudson”) filed a lawsuit against us related to the notice of adjustment of the exercise price of and the number of warrant shares issuable under warrants issued to Hudson in January 2017. Hudson received 83,334 warrants in connection with the January 2017 offering.

Hudson’s complaint alleges breach of contract and that it is entitled to damages estimated at approximately $2.6 million as a result of certain adjustments to the exercise price and number of warrant shares issuable following the February 2018 financing transaction. The Company, in consultation with outside legal counsel, believes that we have several meritorious defenses against Hudson’s claims. The Company believes that Hudson’s claims have no merit and the Company will vigorously defend ~~itself. However,~~such lawsuit.

In addition to Empery, there were 1,055,886 2017 Warrants held by investors who did not participate in the ~~ultimate resolution~~February 2018 financing transaction. Any further adjustments to the 2017 Warrants pursuant to their antidilution provisions may result in additional dilution to the interests of the ~~matter, if unfavorable, could result in a material loss.~~Company’s stockholders and may adversely affect the market price of the Company’s common stock. The antidilution provisions may also limit the Company’s ability to obtain additional financing on terms favorable to it.

NOTE 15 CREATION OF BEYOND CANCER

On ~~December 18, 2019,~~November 4, 2021, the Company ~~terminated the Circassia Agreement pursuant~~announced that Beyond Air and Beyond Cancer, Ltd agreed to terms 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 subsidiary of the Company (the “Transaction”). In connection and concurrently with the closing of the Transaction, Beyond Cancer issued and sold common shares, par value $1.00 to certain investors pursuant to a subscription agreement (the “Offering”). The Offering consisted of an aggregate of 3 million common shares of Beyond Cancer at a purchase price of $10.00 per share. On November 18, 2021, the Company announced that the maximum amount of shares offered had ~~granted Circassia an~~been purchased for a total of $30 million (including $4.8 million from the terminated Loan Facility and $1.1 million from related parties) for 20% of the equity in Beyond Cancer. The Company retained 80% ownership of Beyond Cancer, which will have exclusive ~~royalty-bearing license~~right to ~~distribute, market~~the intellectual property portfolio utilizing UNO for the treatment of solid tumors. Beyond Cancer will pay Beyond Air a single digit royalty on all future revenues.

Members of the Board of Directors of Beyond Air who are also member of the Board of Directors of Beyond Cancer, and ~~sell the Company’s NO generator and delivery system~~their families, are considered related parties to this transaction. Related parties invested $1.1 million in the ~~United States~~Offering.

Beyond Cancer is consolidated into Beyond Air as a variable interest entity as Beyond Air is deemed to be the primary beneficiary. Since Beyond Cancer had no operations prior to the Transaction, the $30.0 million received represents the adjusted net assets. The carrying value of the NCI is calculated to be $6.0 million ($30.0 million x 20%). Beyond Cancer generated $1.1 million of losses (before elimination of intercompany amounts) in the three months ended December 31, 2021. The carrying amounts of the remaining assets, and ~~China. As previously described~~liabilities of the VIE and included in ~~Note 9, Circassia had agreed~~the consolidated financial statements, after the elimination of intercompany balances and transactions, were not material at December 31, 2021. The Company attributed losses to ~~pay~~ the ~~Company certain milestone and royalty payments~~primary beneficiary proportionally to its equity interest in Beyond Cancer (80%) for the ~~marketing rights~~ ~~of the Company’s PPHN indication, if approved and future related indications at concentrations of < 80 ppm in the hospital setting in the United States and China~~. The Company terminated the Circassia Agreement pursuant to section 13.3(b) thereof, which provides for termination by either party upon the other party’s material breach or default. In connection with the termination of the Circassia Agreement, we may be subject to a variety of claims. Adverse outcomes in some or all of these claims, if filed, may adversely affect our ability to conduct business and our financial condition and results of operations.period from inception until December 31, 2021.

~~NOTE 14 SUBSEQUENT EVENTS~~

~~In January 2021, the Company received approximately $9.7 million net proceeds from the sale of shares through its ATM facility, and the LPC new agreement and through the exercise of warrants.~~NOTE 16 SUBSEQUENT EVENTS

The following transactions occurred subsequent to December 31, 2021:

	-	433,236 warrants that were issued in January 2017 were exercised on a cashless basis in exchange for 254,902 shares and an additional 1,250,002 warrants were exercised for $4.6 million;
	-	Beyond Cancer’s Board of Directors approved the Beyond Cancer 2022 Equity Incentive Plan (the “BC 2022 Plan”), which allows for awards to officers, directors, employees, and consultants of stock options, stock appreciation rights, restricted stock units, restricted stock and other equity incentives. The vesting terms of the options issued under the BC 2022 Plan are generally four years, unless otherwise specified by the Board or the Award agreement and expire in ten years from the grant date. The BC 2022 Plan has 2,000,000 shares authorized for issuance. On January 3, 2022, Beyond Cancer granted 1,762,000 options to employees and consultants of Beyond Cancer and Beyond Air to purchase its common stock at $2.76 with a 4-year vesting schedule at 25% per year;
	-	On January 24, 2022, the Company filed a shelf registration statement on Form S-3 (the “Registration”) registering an indeterminate number of shares of common stock and preferred stock, such indeterminate principal amount of debt securities, such indeterminate number of warrants to purchase common stock, preferred stock and/or debt securities, and such indeterminate number of units as may be sold by the Company from time to time, which together shall have an aggregate initial offering price not to exceed $200,000,000. The Registration was declared effective by the SEC on February 1, 2022;
	-	On February 4, 2022, the Company entered into an At-The-Market-Offering Sales Agreement for $50 million utilizing the Company’s January 24, 2022 Registration.

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

~~References in this Quarterly Report on Form 10-Q to the “Company,” “we,” “our,” or “us” mean Beyond Air, Inc. and its subsidiaries except where the context otherwise requires.~~

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements.” We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained 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 candidates and products, product approvals, timing of our clinical development activities, research and development costs, timing and likelihood of success and the plans and objectives of management for future operations and future results of anticipated products are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements ~~expressed~~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~~.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. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements,, including the factors described under the sections in this Quarterly Report on Form 10-Q titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”,~~Operations,” 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™~~LungFit^® system;
	●
	-	our ability to build a pipeline of product candidates and develop and commercialize products;
	●
	-	our ability to enroll patients in clinical trials, timely and successfully complete those trials and receive necessary regulatory approvals;
	●
	-	our ability to maintain our existing or future collaborations or licenses;
	●
	-	our ability to protect and enforce our intellectual property rights;
	●
	-	federal, state and foreign regulatory requirements, including the FDA regulation of our product candidates;
	●
	-	our ability to obtain and retain key executives and attract and retain qualified personnel;
	●
	-	our ability to successfully manage our growth; and
	●
	-	our ability to address business disruption and related risks resulting from the ~~recent~~COVID-19 pandemic, ~~of COVID-19,~~ which could have a material adverse effect on our business plan.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report on Form 10-Q and the documents that we 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 publicly 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 fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.

Introduction

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Introduction~~

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

An additional ~~focus~~program of ~~ours is~~Beyond Air targets solid ~~tumors.~~tumors, through our majority-owned affiliate Beyond Cancer, Ltd. (“Beyond Cancer”) For ~~this~~the solid tumor indication the ~~LungFit™~~LungFit^® platform is not utilized due to the need 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 concentrations~~UNO in excess of 10,000 ppm directly to a solid tumor. This program is in ~~pre-clinical~~preclinical development and will require approval from the FDA or similar regulatory agencies in other countries to enter human studies. We anticipate that Beyond Cancer will begin enrolling patients into the first human trial in the first half of calendar year 2022.

We believe LungFit^®will be the first approved 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 NO₂filter removes toxic NO₂for 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 ~~LungFit™~~LungFit^® PH is designed to deliver a dosage of NO to the lungs that is consistent with current guidelines for delivery of 20 ppm NO with a range of 0.5 ppm – 80 ppm (low-concentration NO) for ventilated patients. We believe ~~LungFit™ PH’s~~the ability of LungFit^® PH to generate NO from ambient air provides ~~Beyond Air~~us with many competitive advantages over the current ~~approved~~standard of NO delivery systems in the U.S., ~~European Union,~~the E.U., Japan and other markets. For example, ~~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.

On November 10, 2020 we submitted a premarket approval (“PMA”) application to the FDA for the use of LungFit PH in PPHN. There is a standard 180 day review process, and we anticipate an FDA response by mid-May 2021, though the FDA may have delays due to the ongoing COVID-19 pandemic. We also expect to make certain regulatory filings outside of the U.S. this year. According to the 2019 year-end report from Mallinckrodt Pharmaceuticals, aggregate sales of low concentration NO in the U.S. were in excess of $500 million in 2019. Sales outside of the U.S., where there are multiple market participants, sales were considerably lower than in the U.S. We believe the U.S. sales potential of the LungFit™ PH in PPHN to be greater than $300 million and worldwide sales potential to be greater than $600 million. If regulatory approval is obtained, we anticipate a product launch in both the U.S. and Israel in 2021 and will continue to launch globally throughout 2021 and beyond.

Our novel ~~LungFit™~~ LungFit^®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 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 ~~150~~>80 ppm NONO.

LungFit^®PH for the treatment of Persistent Pulmonary Hypertension of the Newborn

In November 2020 we submitted a PMA application to the FDA for the use of 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 ~~higher.~~more. Moreover, the ongoing COVID-19 pandemic continues to lead to longer review times by the FDA. We anticipate an FDA decision on the PMA in the first half of calendar year 2022.

~~SARS CoV-2~~We also expect to receive the CE Mark under the Medical Device Regulation (“MDR”) in the E.U. in the first half of calendar year 2022. According to the most recent year-end report from Mallinckrodt plc (“Mallinckrodt”), sales of 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 United States. However, Mallinckrodt reported that due to increased competition following the launch of competing NO delivery systems in the United States, Mallinckrodt’s sales of NO faced a downward trajectory, reporting $134.0 million in the first quarter of 2021, $106.0 million in the second quarter of 2021 and $98.0 million in the third quarter of 2021. Outside of the U.S. there are multiple market participants which translates to considerably lower sales than in the U.S. We believe the U.S. sales potential of 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 the U.S. in the first half of calendar year 2022 and will continue commercialization in the E.U. and globally in 2022 and beyond.

LungFit^®PRO for the treatment of viral lung infections in hospitalized patients

Community-Acquired Viral Pneumonia (including COVID-19)

Viral pneumonia in adults is most 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 infectious disease caused by SARS-CoV-2, that has ~~caused~~resulted in a global pandemic. Excluding the pandemic, ~~with widespread impact across many countries.~~ there are approximately 350,000 annual viral pneumonia hospitalizations in the US, and up to 16 million annual viral pneumonia hospitalizations globally. For the broader annual viral pneumonia hospitalizations, 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 novel LungFit^™® PRO system at 150 ppm to treat patients with ~~acute viral pneumonia, including SARS-CoV-2.~~CAVP. The ongoing trial is a multi-center, open-label, randomized clinical trial in Israel, ~~with planned enrollment up to 90 adult patients, with an emphasis on~~including patients infected with ~~SARS-CoV-2.~~COVID-19. Patients 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 ~~expect~~reported interim data ~~in Spring~~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. ~~There approximately 350,000 annual viral pneumonia hospitalizations in~~At the ~~US,~~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 ~~16 million annual viral pneumonia hospitalizations globally. For the broader acute viral pneumonia indication, we believe U.S. sales potential to be greater than $1.5 billion~~well tolerated and ~~worldwide sales potential to be greater than $3 billion.~~

demonstrated encouraging efficacy signals. From a safety perspective, there were no treatment-related, or possibly related, adverse events or severe adverse events. NO₂levels 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 NTM, 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. The trial is enrolling both cystic fibrosis (“CF”) and non-CF patients infected with Mycobacterium avium complex (“MAC”) or Mycobacterium abscessus complex (MABSC). The study consiststhe requirement of a run-in period followed by two treatment phases. The run-in period provides a baseline for the efficacy endpoints, such as patient physical function and bacterial load. The first treatment phase takes place over a two week period and beginsoxygen support beyond hospital stay, 22.2% of subjects in the NO + SST group compared with 40% of control subjects had this requirement. There was an observable trend of shortening the duration of hospital ~~setting where patients~~stay and duration on oxygen support for treated patients. The pilot study in adult viral pneumonia, including COVID-19, remains active with trial sites open for enrollment. Additional detailed study results will be titrated from 150 ppm NO up to 250 ppm NO over several days. During this phase patients receive NO for 40 minutes, four times per day while methemoglobin and nitrogen dioxide (NO2) levels are monitored. Patients are then trained to use LungFit™ GO and subsequently discharged to complete the remaining portion of the two week treatment period at their home at the highest tolerated NO concentration. For the second treatment phase, a 10-week maintenance phase, the administration is twice daily. The study is evaluating safety, quality of life, physical function, and bacterial load among other parameters, as compared to baseline measurements.

We anticipate reporting interim data in mid-2021, and release top-line results for the full data set approximately six months later. If the trial is successful, we would anticipate commencing a pivotal study towards the end of 2022. For this indication, we believe U.S. sales potential to be greater than $1 billion and worldwide sales potential to be greater than $2.5 billion.

NTM lung infection is a rare and serious pulmonary disease associated with increased morbidity and mortality. Patients with NTM lung disease may experience a multitude of symptoms such as fever, weight loss, cough, lack of appetite, night sweats, blood in the sputum and fatigue. Patients with NTM lung disease, specifically ~~abscessus~~ ~~(represents 20-25% of all NTM) and other forms of NTM that are refractory to antibiotic therapy~~, ~~frequently require lengthy and repeated hospital stays to manage their condition. There are no treatments specifically indicated for the treatment of NTM~~ ~~abscessus~~ lung disease in North America, Europe or Japan. There are approximately 50,000 patients diagnosed with NTM in the U.S. In Asia, the number of patients suffering from NTM surpasses what is seen in the U.S. There is one inhaled antibiotic approved in the U.S. for the treatment of refractory NTM MAC. Current guideline-based approaches to treat NTM lung disease involve multi-drug regimens of antibiotics that may cause severe, long lasting side effects, and treatment can be as long as 18 months or more. Median survival for NTM MAC patients is approximately 13 years while median survival for patients with other variations of NTM is typically 4.6 years⁴. The prevalence of human disease attributable to NTM has increased over the past two decades. In a study conducted between 2007 and 2016, researchers found that the prevalence of NTM in the U.S. is increasing at approximately 7.5% per year. NTM ~~abscessus~~ treatment costs are estimated to be more than double that of NTM MAC. In total, a 2015 publication from co-authors from several U.S. government departments stated annual cases in 2014 cost the U.S. healthcare system approximately $1.7 billion.

Our bronchiolitis program is currently on hold due to the COVID-19 pandemic. The pivotal study for bronchiolitis was originally set to be performed in the winter of 2020/21 but was delayed due to the pandemic. We have completed three successful pilot studies in infants for bronchiolitis. Data from the most recent study was presented at ~~the 2020 annual~~an upcoming scientific meeting ~~of The American College of Chest Physicians (CHEST). The trial was a double blind, controlled trial~~ in infants hospitalized due to bronchiolitis with three arms and 89 subjects randomized 1:1:1 to standard supportive therapy (SST), SST plus 85 ppm NO and SST plus 150 ppm NO. There were no serious adverse events (SAE’s) related to NO therapy. 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 endpoint of hospital length of stay, and statistically significant from the control arm for time to achieving oxygen saturation on room air of > ~~92%. The 85 ppm was no different from control on all endpoints. We believe the U.S. sales potential to be greater than $500 million and worldwide sales potential to be greater than $1.2 billion.~~April 2022.

Bronchiolitis (BRO)

Bronchiolitis is the leading cause of hospital admission in children less than 1 year of age. The incidence is estimated to be 150 million 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. In the U.S., there are ~~more than~~approximately 120,000 annual bronchiolitis hospitalizations and approximately 3.2 million annual child hospitalizations 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. We believe the U.S. market potential for bronchiolitis to be greater than $500 million and worldwide market potential to be greater than $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 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 study for CAVP, and plan to initiate this study in the United States in the fourth quarter of calendar year 2022, FDA and pandemic permitting.

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

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 for the treatment of refractory Mycobacterium avium complex (“MAC”). Current guideline-based approaches to treat NTM lung disease involve multi-drug regimens of antibiotics that may cause severe, long lasting side effects, and treatment can be as long as 18 months or more. Median survival for NTM MAC patients is approximately 13 years while median survival for patients with other variations of NTM is typically 4.6 years. The prevalence of human disease attributable to NTM has increased over the past two decades. In a study conducted between 2007 and 2016, researchers found that the prevalence of NTM in the U.S. is increasing at approximately 7.5% per year. M. abscessus treatment costs are estimated to be more than double that of MAC. In total, a 2015 publication by co-authors from several U.S. government departments stated that annual cases in 2014 cost the U.S. healthcare system approximately $1.7 billion. For this indication, we believe U.S. sales potential to be greater than $1 billion and worldwide sales potential to be greater than $2.5 billion.

~~Our~~

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 the second treatment phase, a 10-week maintenance phase, the administration is twice daily. The study is evaluating safety, quality of life, physical function, and bacterial load among other parameters.

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 efficacy and safety results in the first half of calendar year 2022. If the trial is successful, we would anticipate commencing a pivotal study in the second half of calendar year 2023 or the first half of calendar year 2024.

The Company’s program in chronic obstructive pulmonary disease ~~(COPD)~~(“COPD”) is in the ~~pre-clinical~~preclinical stage and we anticipate beginning a pilot study in calendar year 2022 or 2023.

UNO in solid tumors through majority-owned affiliate Beyond Cancer

In November 2021, Beyond Cancer, a new and independently managed private company, secured commitments of $30 million in a concurrent private placement of common shares, providing the investors with 20% equity ownership in Beyond Cancer. 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 closed in December, 2021.

Beyond Cancer will ~~remain there, subject~~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 an experienced leadership team with experience in emerging healthcare companies and clinical oncology.

Selena Chaisson, MD, joined Beyond Cancer as 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 ~~our obtaining additional financing.~~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.

~~For our solid tumor program, we~~The Beyond Cancer Board of Directors will consist of six members:

	●	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
	●	David Dvorak, Director
	●	Gregory Berk, M.D., Director

UNO has shown anticancer properties in preclinical trials by eliciting an immune response from the host. We have released ~~pre-clinical~~this 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-clinical~~resistant to a subsequent tumor challenge. Preclinical work will continue ~~throughout most of 2021~~ with a goal of ~~initiating~~beginning the enrollment of patients in a first-in-human ~~trial before~~study in the ~~end~~first half of ~~2021.~~calendar year 2022.

COVID-19

The development of our product candidates could be further disrupted and adversely affected by a resurgence of the ~~ongoing~~ COVID-19 pandemic. We ~~have addressed~~experienced significant delays in the supply chain for LungFit^® due to the redundancy in parts and suppliers with ventilator manufacturing which has since been remedied. We continuously 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 analysis~~we will ~~enable us~~be 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, we experienced significant delays in the supply chain for LungFit™ due to the redundancy in parts and suppliers with ventilator manufacturing.~~resurgence occurs.

Critical Accounting Estimates and Policies

A critical accounting policy ~~is one that is~~and 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 December 31, ~~2020~~2021 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:

	●	Contingent Loss judgments and estimates,

	●	Research and development expense recognition,

	●	Stock-based compensation valuation and attribution, and

	●	Income Taxes

Off-Balance-Sheet Arrangements

As of December 31, 2021, we did not have any off-balance-sheet arrangements as defined in the rules and regulations of the Securities and Exchange Commission (the “SEC”).

	●	~~Use of Estimates,~~
	27
	●	~~Revenue Recognition,~~

	●	~~Research and development expenses,~~

	●	~~Stock-based compensation expenses, and~~

	●	~~Income Taxes~~

~~Off-Balance Sheet Arrangements~~

In August 2020, we entered into an operating lease to move our 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 we will move into this space in April 2021, at which time we will record the operating lease liabilities and corresponding right-of-use assets on the balance sheet pursuant to ASU 2016-02.

Results of Operations

Below are the results of operations for the three and nine months ended December 31, ~~2020~~2021 and December 31, ~~2019:~~2020:

For the Three Months Ended
December 31,
2020 2019

License revenues $ 148,794 $ 314,379

Operating expenses:

Research and development 3,294,102 2,580,622
General and administrative 2,471,065 2,471,714
Operating expenses 5,765,167 5,052,336

Operating loss (5,616,373 ) (4,737,957 )

Other income (loss)
Realized and unrealized gain from marketable securities - 314,889
Dividend and interest income 378 25,692
Interest expense (157,960 ) -
Foreign exchange gain (loss) 6,147 1,765
Other loss (1,843 ) -
Total other (loss) income (153,278 ) 342,346

Net loss $ (5,769,651 ) $ (4,395,611 )

Deemed dividend from warrant modification - (522,478 )

Net loss attributed to common shareholders $ (5,769,651 ) $ (4,919,089 )

Net basic and diluted loss per share $ (0.33 ) $ (0.43 )

Weighted average number of shares of common stock used in computing basic and diluted net loss per share 17,609,328 11,398,413

(in thousands)

	For the Three Months Ended						For the Nine Months Ended
	December 31,						December 31,
	2021			2020			2021			2020

License revenues	$	-		$	149		$	-		$	728

Operating expenses:

Research and development		2,543			3,294			8,091			10,773
General and administrative		4,943			2,471			12,188			7,143
Operating expenses		7,486			5,765			20,279			17,907

Operating loss		(7,486	)		(5,616	)		(20,279	)		(17,180	)

Other income (loss)
Dividend and interest income		1			0			3			16
Interest expense		(58	)		(158	)		(381	)		(480	)
Foreign exchange loss		(8	)		6			2			0
Other income		(412	)		(2	)		(2,742	)		-
Total other income (loss)		(476	)		(153	)		(3,118	)		(464	)

Net loss	$	(7,962	)	$	(5,770	)	$	(23,397	)	$	(17,643	)

Net loss attributable to non-controlling interests		(223	)		-			(223	)		-

Net loss Attributable to Beyond Air, Inc.	$	(7,739	)	$	(5,770	)	$	(23,174	)	$	(17,643	)

Net basic and diluted loss per share	$	(0.29	)	$	(0.33	)	$	(0.95	)	$	(1.03	)

Weighted average number of shares of common stock used in computing basic and diluted net loss per share		26,822,302			17,609,328			24,319,771			17,086,871

Comparison of Three and Nine Months Ended December 31, 2021 with the Three and Nine Months Ended December 31, 2020 ~~with the Three Months Ended December 31, 2019~~

License ~~revenue~~Revenue

License revenue for the three months ended December 31, 2020 was $148,749 as compared to $314,379 for the three months ended December 31, 2019. The primary decrease of $165,360 was due to the increase in time to amortize the revenue. On January 23, 2019, wethe Company entered into an agreement for commercial rights (the “Circassia Agreement”) with Circassia Limited and its affiliates ~~(collectively, “Circassia”)~~ for PPHN and future related indications at concentrations of <80 ppm in the hospital setting in the United ~~States. We are recognizing~~States and China. On December 18, 2019, the Company terminated the Circassia Agreement. Prior to the three months ended December 31, 2021, the Company has met its performance obligation under the Circassia Agreement and all the revenue ~~based upon~~had been previously recognized. License revenue of $0 and $0.1 million associated with the second performance obligation ~~which is~~has been recognized for the ~~ongoing support~~three months ended December 31, 2021 and December 31, 2020, respectively. License revenue of $0 and $0.7 million associated with the ~~PMA submission~~second performance obligation has been recognized for the nine months ended December 31, 2021 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 December 31, 2020, ~~and March 31, 2020, deferred revenue was $145,628 and $873,190,~~ respectively. On December 18, 2019, we terminated the Circassia Agreement pursuant to which we had granted Circassia an exclusive royalty-bearing license to distribute, market and sell our NO generator and delivery system in the United States and China.

Research and ~~development expenses~~Development Expenses

Research and development expenses for the three months ended December 31, ~~2020 was $3,294,102~~2021 were $2.5 million as compared to ~~$2,580,622~~$3.3 million for the three months ended December 31, ~~2019.~~2020. The ~~increase~~decrease of ~~$713,480~~$0.8 million was primarily attributed to a net decrease of $0.5 million in NTM studies (due mainly to the ~~initiation~~CFF grant offsetting internal costs), a reduction in the timing of ~~the NTM open-label clinical trial and the viral pneumonia clinical trial, along with associated increases in salaries and employee benefits,~~spend on LungFit® PH for $0.5 million, which was partially offset by ~~the completion~~an increase of ~~animal toxicology studies with LungFit™, which both showed no macroscopic or microscopic findings and the Bronchiolitis program being put on hold due to the pandemic.~~$0.4 million in UNO.

~~General and administrative expenses~~

~~General and administrative expense for the three months ended December 31, 2020 was $2,471,065 as compared to $2,471,714 for the three months ended December 31, 2019.~~

~~Other income (loss)~~

Other income (loss) for the three months ended December 31, 2020 was $(153,293) as compared $342,346 for the three months ended December 31, 2019. For the three months ended December 31, 2020, we incurred interest expense including amortization of debt discount and deferred financing expense of $157,960. Other income loss for the three months ended December 31, 2019 was primarily from the realized and unrealized gain from marketable equity securities of $314,889.

~~Below are the results of operations for the nine months ended December 31, 2020 and December 31, 2019:~~

~~Comparison of Nine Months Ended December 31, 2020 with the Nine Months Ended December 31, 2019~~

For the Nine Month Ended
December 31,
2020 2019

License revenues $ 727,562 $ 1,587,450

Operating expenses:

Research and development 10,773,192 7,754,125
General and administrative 7,134,090 6,719,144
Operating expenses 17,907,282 14,473,269

Operating loss (17,179,720 ) (12,885,819 )

Other income (loss)
Realized and unrealized loss from marketable securities - (1,849,624 )
Dividend and interest income 16,241 59,759
Interest expense (480,234 ) -
Foreign exchange gain 468 1,512
Total other loss (463,525 ) (1,788,353 )

Net loss $ (17,643,245 ) $ (14,674,172 )

Deemed dividend from warrant modification - (522,478 )

Net loss attributed to common shareholders $ (17,643,245 ) $ (15,196,650 )

Net basic and diluted loss per share $ (1.03 ) $ (1.46 )

Weighted average number of shares of common stock used in computing basic and diluted net loss per share 17,086,871 10,437,690

~~License revenue~~

License revenue for the nine months ended December 31, 2020 was $772,562 as compared to $1,587,450 for the nine months ended December 31, 2019. The primary decrease of $814,818 was due to the increase in time to amortize the revenue. On January 23, 2019, we entered into the Circassia Agreement for PPHN and future related indications at concentrations of < 80 ppm in the hospital setting in the United States. As of December 31, 2020 and March 31, 2020, deferred revenue was $145,628 and $873,190, respectively. On December 18, 2019, we terminated the Circassia Agreement pursuant to which we had granted Circassia an exclusive royalty-bearing license to distribute, market and sell our NO generator and delivery system in the United States and China.

~~Research and development expenses~~

Research and development expenses for the nine months ended December 31, ~~2020 was $10,773,192~~2021 were $8.1 million as compared to ~~$7,754,125~~$10.8 million for the nine months ended December 31, ~~2019.~~2020. The ~~increase~~decrease of ~~$3,019,067~~$2.7 million was primarily attributed to ~~the initiation~~a decrease of ~~our acute viral pneumonia program that includes COVID-19, the start~~$1.2 million in COVID project spend, a $0.7 million reduction in CAVP project spend, a $0.5 million reduction in PH purchases, a net reduction of ~~our at-home~~$0.5 million in NTM ~~lung infections study, pandemic related expense increase that led~~(due in part to the ~~successful submission~~offset of ~~our LungFit PH PMA, as well as associated increases~~the CFF grant) and a $0.7 million reduction in ~~employee~~stock-based compensation, partially offset ~~mainly~~ by ~~the completion of animal toxicology studies.~~an increased investment in UNO for $0.9 million.

General and Administrative Expenses

General and administrative expenses for the three months ended December 31, 2021 and December 31, 2020 were $4.9 million and $2.5 million, respectively. The increase of $2.4 million was attributed primarily to an increase of $1.4 million in salaries and benefits for commercial and support staff, an increase of $0.7 million in professional fees to assist in the preparation of a potential commercial launch, including branding, IT infrastructure, insurance and legal fees.

General and administrative ~~expense~~expenses for the nine months ended December 31, 2021 and December 31, 2020 were $12.2 million and $7.1 million, respectively. The increase of $5.1 million was ~~$7,134,090 as compared~~attributed primarily to a $2.3 million increase in salaries and benefits for commercial and support staff, a $2.2 million increase in professional fees to assist in the ~~nine~~preparation of a potential commercial launch, including travel, branding, IT infrastructure, insurance and legal fees plus a $0.2 million in occupancy costs.

Other Income (Loss)

Other Income (Loss) for the three months ended December 31, ~~2019~~2021 and December 31, 2020 was a loss of ~~$6,719,144.~~($0.5) million and a loss of ($0.2) million, respectively. The increase loss of ~~$414,946~~($0.3) million was attributed primarily ~~attributed~~ to ~~an increase~~the recognition of accelerated costs related to the early termination of the loan facility in ~~insurance costs and employee compensation, offset by a decrease in professional fees.~~Ireland for $0.4 million.

Other ~~income (loss)~~

~~Other loss~~Income (Loss) for the nine months ended December 31, ~~2020 was $463,525 as compared $1,788,353 for the nine months ended December 31, 2019. For the nine months ended~~2021 and December 31, 2020 ~~we incurred interest expense including amortization~~was a loss of ~~debt discount~~($3.1) million and ~~deferred financing expense~~a loss of ~~approximately $480,234. Other~~($0.5) million, respectively. The increase loss of ($2.6) million was attributed primarily to the recording of an estimate for a contingent loss related to the ~~nine months ended December 31, 2019 was primarily from the realized and unrealized loss from marketable equity securities of $1,849,624.~~Empery lawsuit for $2.4 million.

Cash Flows

Below is a summary of ~~our~~the Company’s cash flows activities for the nine months ended December 31, ~~2020~~2021 and December 31, ~~2019:~~2020:

	Nine Months Ended						Nine Months Ended
	December 31,						December 31,
	2020			2019
(in thousands)							2021			2020

Net cash provided by (used in):
Operating activities	$	(14,070,135	)	$	(10,390,620	)	$	(15,234	)	$	(14,070	)
Investing activities		(870,457	)		(8,035,169	)		(1,111	)		(870	)
Financing activities		12,129,490			19,845,178			73,783			12,129
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(2,811,102	)	$	1,419,389
Net increase (decrease) in cash, cash equivalents and restricted cash							$	57,439		$	(2,811	)

Operating Activities

For the nine months ended December 31, 2021 the net cash used in operating activities was $15.2 million which was primarily due to the Company’s net loss of $23.4 million, which includes $4.5 million of stock-based compensation, $2.6 million of accrued liabilities and $0.5 million for the non-cash accretion of debt issuance costs on the retired debt facility. For the nine months ended December 31, 2020, cash used in operating activities was ~~$14,070,135~~$14.1 million which was primarily due to ~~our~~the Company’s net loss of ~~$17,643,245, along with a reduction in accounts payable of $1,031,922, offset by~~$17.6 million which included non-cash stock-based compensation expense of ~~$4,056,131.~~ $4.1 million.

Investing Activities

For the nine months ended December 31, ~~2019, the net cash used in operating activities was $10,390,620 which was due primarily to our net loss of $14,674,172~~2021 and a non-cash decrease of $1,587,450 in deferred revenue offset by non-cash stock-based compensation expense of $2,569,508, an unrealized and realized loss on marketable securities of $1,849,624, and an increase in accounts payable of $849,624.

~~Investing Activities~~

~~For the nine months ended~~ December 31, 2020, net cash used in investing activities was ~~$870,457, primarily from~~$1.1 million and $0.9 million, respectively, which was mainly for the purchase of property and equipment. ~~For the nine months ended December 31, 2019 net cash used in investing activities was $8,035,169, primarily from the net purchases of marketable securities of $8,006,921.~~

Financing Activities

Net cash provided by financing activities for the nine months December 31, 2020 was $12,129,490. This was primarily from the net proceeds for the issuance of common stock related to the New Stock Purchase Agreement with LPC, the issuance of common stock in connection with an at-the-market equity offering (the “ATM”), and proceeds from the issuance of common stock related to warrant exercises and options. Net cash provided by financing activities for the nine months ended December 31, ~~2019~~2021 was ~~$19,845,178,~~$73.7 million, including $30.0 million from the proceeds of the investment in Beyond Cancer, $47.7 million from the issuance of common stock related to a $40 million stock purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”) dated as of May 14, 2020 (the “Stock Purchase Agreement”) and an At-The-Market Equity Offering Sales Agreement (the “ATM”) and $1.4 million from the issuance of common stock for cash upon the exercise of warrants, partially offset by the net reimbursement of the loan facility for $4.8m. Net cash provided by financing activities for the nine months ended December 31, 2020 was $12.1 million which was primarily from the net proceeds ~~an underwritten offering, a private placement, and~~from the issuance ~~and sales~~ of common stock related to ~~LPC.~~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.

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.

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 we became public through December 31, 2020, we have funded our operations principally through the issuance of equity securities and debt. As shown in the accompanying financial statements, we haveWe had an operating cash flow decrease of ~~$14.1~~$6.3 million for the ~~nine~~three months ended ~~was~~ December 31, ~~2020~~2021 and we ~~had~~have experienced an accumulated loss of ~~$75.2~~$103.6 million ~~since inception through~~attributable to the stockholders of Beyond Air, Inc. as of December 31, ~~2020. The Company has~~2021. As of December 31, 2021, we had cash, cash ~~equivalent~~equivalents and restricted cash of ~~$22.7 million as of December 31, 2020.~~$92.7 million. We believe that our cash and cash equivalents as of December 31, ~~2020,~~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.

~~The Company’s~~Our future capital needs and the adequacy of ~~its~~ available funds ~~beyond one year~~ will depend on many factors, including, but not necessarily limited to, the cost and time necessary for the development, ~~clinical~~preclinical studies and clinical trials and certification or regulatory approval of ~~the Company’s~~our other medical ~~device,~~devices, indications as well as the commercial success of ~~the Company’s~~our first product ~~for PPHN, assuming PMA approval. The Company~~candidates that receive marketing approval by the FDA. We may 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 until we are able to generate enough product or royalty revenues, if any. ~~Financing~~Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could have a material adverse effect on our strategic objectives, results of operations and financial condition.

However, we will need to raise substantial additional financing in the future to fund our operations. In order to meet these additional cash requirements, we may seek to sell additional equity or convertible debt securities that may result in dilution to our shareholders. If we raise additional funds through the issuance of convertible debt securities, these securities could have rights senior to those of our common stock and could contain covenants that restrict our operations. There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all.

On March 17, 2020, we entered into a facility agreement with certain lenders pursuant to which the lenders shall loan to up to $25,000,000 in five tranches of $5,000,000 per tranche at our option, provided however that we may only utilize tranches three through five following FDA approval of LungFit™ PH. The loan(s) are unsecured with an interest rate of 10% per annum which is paid quarterly and may be prepaid with certain prepayment penalties. The effective interest rate for this loan is 13.3% per year. Each tranche shall be repaid in installments commencing June 15, 2023 with all remaining amounts outstanding under any tranche due on March 17, 2025.

On April 2, 2020, we entered into the ATM ~~for $50 million~~Offering Sales Agreement with SunTrust Robinson Humphrey, Inc. and ~~utilized our shelf registration statement. We~~Oppenheimer & Co. Under the ATM, 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. If shares are sold,~~and at various prices. As of December 31, 2021, there ~~is a three percent fee paid to the sales agent. There is a balance of approximately $44.3 million~~were no remaining funds available under the ~~ATM as of December 31,2020.~~ATM.

On May 14, 2020, we entered into athe $40 million ~~New~~ Stock Purchase Agreement ~~with~~ LPC, ~~that~~which replaced the ~~existing~~former $20 million purchase agreement ~~from~~with LPC, dated August 10, 2018. The ~~New~~ Stock Purchase Agreement provides for the issuance of up to $40 million of our common stock, which we may sell from time to time in our sole discretion, to LPC over ~~the next~~ 36 months, subject to the conditions and limitations in the ~~New~~ Stock Purchase Agreement. ~~There is~~As of December 31, 2021, there was a balance of approximately ~~$34.8~~$18.1 million available under the ~~New~~ Stock Purchase Agreement.

On February 4, 2022, we entered into a new ATM Offering Sales Agreement aswith Truist Securities, Inc. and Oppenheimer & Co. Inc. Under the ATM, we may sell shares of ~~December 31,2020.~~

our common stock having aggregate sales proceeds of up to $50 million, from time to time and at various prices.

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 launch of this device, as well as our ~~product,~~ obtaining partners 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. Further, the continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. Our failure to obtain sufficient funds on acceptable terms when needed could have a negative impact on our business, results of operations, and financial condition. Our ability to continue to operate beyond one year from the issuance of these financial statements is dependent upon raising additional funds to finance its activities.

There are numerous risks and uncertainties associated with the development of our NO delivery system and we are unable to estimate the amounts of increased capital outlays and operating expenses associated with ~~completing~~the 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™~~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.

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 ~~smaller reporting company as defined by Rule 12b-2~~result of ~~the Securities Exchange Act of 1934, as amended (“Exchange Act”) and are not required to provide the information under this item.~~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 officer) and Chief Financial Officer (our principal financial 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 Exchange 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~~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 were effective at the reasonable assurance level as of December 31, ~~2020.~~2021.

Changes in Internal Control Over Financial Reporting

During the three months ended December 31, ~~2020,~~2021, there ~~was~~were no ~~change in~~changes made to our internal ~~control~~controls over financial reporting that materially affected, or isthat are reasonably likely to materially affect our internal ~~control~~controls over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

See Note 14 to our unaudited condensed consolidated financial statements.

ITEM 1A. Risk Factors

There have been no material changes to the ~~notice of adjustment of both the exercise price of and the number of warrant shares issuable under warrants issued to Empery~~risk factors previously disclosed in January 2017 (the “Empery Suit”). The Empery Suit alleges that, as a result of certain circumstances in connection with our February 2018 offering, the 166,672 warrants issued to Empery in January 2017 provide for adjustments to both the exercise price of the warrants and the number of warrant shares issuable upon such exercise. Empery seeks monetary damages and declaratory relief under theories of breach of contract or contract reformation predicated on mutual mistake.

~~Item~~Part I, “Item 1A. Risk ~~Factors~~

~~For a discussion~~Factors” of ~~the Company’s risk factors, see the information under the heading “Risk Factors” in the Company’s~~our 2021 Annual ~~Report on Form 10-K for the fiscal year ended March 31, 2020.~~Report.

~~Item~~ITEM 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds

~~N/A.~~None.

~~Item~~ITEM 3. Defaults ~~Upon~~upon Senior ~~Securities.~~Securities

~~N/A~~None.

~~Item~~ITEM 4. Mine Safety ~~Disclosures.~~Disclosure

~~N/A.~~Not Applicable.

~~Item~~ITEM 5. Other ~~Information.~~Information

~~N/A.~~None.

ITEM 6. Exhibits.

Exhibit No.		Description

3.1		Amended 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.

3.2		Certificate 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.

3.3		Form 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).

~~3.2~~3.4		Amended 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.

~~3.3~~4.1		Certificate of Amendment of Amended and Restated Certificate of Incorporation, dated June 25, 2019, filed as Exhibit 3.3 to our Annual Report on Form 10-K filed with the SEC on June 28, 2019 and incorporated herein by reference.

~~4.1~~		Form of Common Stock ~~certificate,~~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.

4.2		Form 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.

4.3		Form 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 ~~amended and~~ filed with the SEC on April 4, 2017, and incorporated herein by reference.

4.4		Form 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 ~~amended and~~ filed with the SEC on February 22, 2018, and incorporated herein by reference.

4.5		~~Beyond Air, Inc. Second Amended and Restated 2013 Equity Incentive Plan (included in Appendix A to our Definitive Proxy Statement filed on January 17, 2020 and incorporated herein by reference).~~

~~4.6~~		Form of Warrant to Purchase Common Stock, filed as ~~exhibit~~Exhibit 4.1 to our Current Report on Form 8-K, as filed with the SEC on March ~~17,~~20, 2020 and incorporated herein by reference.

10.131.1		Supply Agreement, dated July 30, 2020, by and between Beyond Air, Inc. and Spartronics Watertown, LLC, filed as Exhibit 10.1 to our Current Report on Form 8-K filed on August 12, 2020 and incorporated herein by reference.

10.2*		Manufacture and Supply Agreement, dated August 6, 2020, by and between Beyond Air, Inc. and Medisize Ireland Limited, filed as Exhibit 10.1 to our Current Report on Form 8-K filed on August 18, 2020 and incorporated herein by reference.

~~31.1~~		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.

~~31.2~~31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.

~~32.1~~32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~32.2~~32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the ~~Sarbanes-Oxley~~Sarbanes Oxley Act of ~~2002~~2002.

101.INS		Inline 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.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover 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.

** Furnished herewith.

* Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has determined that the omitted information (i) is not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed.SIGNATURES

~~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: February ~~9, 2021~~10, 2022	Steven Lisi
	President and Chief Executive Officer
	(Principal Executive Officer)

	/s/ Douglas ~~Beck~~Larson
Date: February ~~9, 2021~~10, 2022	Douglas ~~Beck~~Larson
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

3734

	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

	For the Nine Months Ended December 31,
	2020			2019

Cash flows from operating activities
Net loss	$	(17,643,245	)	$	(14,674,172	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		125,036			57,009
Amortization of licensed right to use technology		30,409			72,718
Stock-based compensation		4,056,131			2,569,508
Deferred revenue		(727,562	)		(1,587,450	)
Amortization of debt discount and accretion of debt issuance costs		100,308			-
Operating leases		906			6,824
Gain on cancellation of operating lease		(1,843	)		-
Realized and unrealized loss on marketable equity securities		-			1,849,624
Foreign currency adjustments		(468	)		-
Changes in:
Other current assets and prepaid expenses		685,563			358,629
Accounts payable		(1,031,922	)		849,259
Accrued expenses		336,552			107,431
Net cash used in operating activities		(14,070,135	)		(10,390,620	)

Cash flows from investing activities
Investment in marketable equity securities		-			(32,970,684	)
Proceeds from redemption of marketable securities		-			24,963,763
Purchase of property and equipment		(870,457	)		(28,248	)
Net cash used in investing activities		(870,457	)		(8,035,169	)

Cash flows from financing activities
Issuance of common stock in connection with a Purchase Agreement with Lincoln Park, At the Market Offerings, private placement, net, exercise of warrants and stock options		12,464,848			20,020,200
Payment of loan		(335,358	)		(175,022	)
Net cash provided by financing activities		12,129,490			19,845,178

(Decrease) increase in cash, cash equivalents and restricted cash		(2,811,102	)		1,419,389
Cash, cash equivalents and restricted cash at beginning of period		25,465,111			1,357,137
Cash, cash equivalents and restricted cash at end of period	$	22,654,009		$	2,776,526
Supplemental disclosure of non-cash investing and financing activities
Right-of-use assets	$	236,700		$	258,605
Operating lease liability	$	236,700		$	266,570
Disposition of right-of-use asset	$	(17,486	)	$	-
Disposition of operating lease liability	$	19,329		$	-
Stock issued to investor relations firm	$	242,100			-
Deemed dividend as a result of a warrant modification	$	-		$	522,478
Supplemental disclosure of cash flow items:
Interest paid	$	340,779		$	3,832

	Number Of Shares			Weighted Average Grant Date Fair Value

Unvested as of April 1, 2020		646,800		$	4.99
Granted		62,000			5.81
Vested		(135,000	)		4.99
Unvested as of December 31, 2020		573,800		$	5.08

	Number Of Options			Weighted Average Exercise Price - Options		Weighted Average Remaining Contractual Life- Options		Aggregate Intrinsic Value

Options outstanding as of April 1, 2020		3,053,589		$	4.77		8.4	$	9,878,264
Granted		122,000			5.11		9.3
Exercised		(2,340	)		0.1		-
Outstanding as of December 31, 2020		3,173,249		$	4.8		8.0	$	1,770,400
Exercisable as of December 31, 2020		1,715,849		$	4.55		7.5	$	1,251,025

	December 31, 2020			December 31, 2019
Risk -free interest rate		0.5 - 0.7	%		1.4 - 2.3	%
Expected volatility		87.8 - 92.54	%		82.3 - 83.4	%
Dividend yield		0	%		0	%
Expected terms (in years)		5.18 - 6.25			6.25

Maturity of Facility Agreement Loan	December 31, 2020

2021	$	-
2022		-
2023		1,500,000
2024		2,750,000
2025		750,000
Total	$	5,000,000

Other Information For The Nine Months Ended December 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid	$	73,743
Right-of-use assets obtained in exchange for new operating lease liabilities:		-
Weighted-average remaining lease term — operating leases		4.3 years
Weighted-average discount rate — operating leases		8.3	%

	For the Nine Month Ended
	December 31,
	2020			2019

License revenues	$	727,562		$	1,587,450

Operating expenses:

Research and development		10,773,192			7,754,125
General and administrative		7,134,090			6,719,144
Operating expenses		17,907,282			14,473,269

Operating loss		(17,179,720	)		(12,885,819	)

Other income (loss)
Realized and unrealized loss from marketable securities		-			(1,849,624	)
Dividend and interest income		16,241			59,759
Interest expense		(480,234	)		-
Foreign exchange gain		468			1,512
Total other loss		(463,525	)		(1,788,353	)

Net loss	$	(17,643,245	)	$	(14,674,172	)

Deemed dividend from warrant modification		-			(522,478	)

Net loss attributed to common shareholders	$	(17,643,245	)	$	(15,196,650	)

Net basic and diluted loss per share	$	(1.03	)	$	(1.46	)

Weighted average number of shares of common stock used in computing basic and diluted net loss per share		17,086,871			10,437,690