Beyond Air(XAIR) - 2023 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION ITEM 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows, along with their accompanying notes, providing a snapshot of the company's financial position, performance, and cash movements for the periods ended December 31, 2022 Condensed Consolidated Balance Sheets | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2022 (in thousands) | Change (in thousands) | | :----- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | $73,959 | $99,199 | $(25,240) | | Total Liabilities | $18,519 | $20,990 | $(2,471) | | Total Equity | $55,440 | $78,209 | $(22,769) | | Cash and cash equivalents | $25,478 | $80,242 | $(54,764) | | Marketable securities | $27,641 | $- | $27,641 | Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric (in thousands) | 3 Months Ended Dec 31, 2022 | 3 Months Ended Dec 31, 2021 | 9 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Revenue | $- | $- | $- | $- | | Net loss | $(13,798) | $(7,962) | $(38,250) | $(23,397) | | Net loss attributable to Beyond Air, Inc. | $(12,747) | $(7,739) | $(35,649) | $(23,174) | | Net basic and diluted loss per share | $(0.43) | $(0.29) | $(1.19) | $(0.95) | | Research and development expenses | $5,000 | $2,543 | $12,679 | $8,091 | | General and administrative expenses | $8,941 | $4,943 | $25,144 | $12,188 | Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric (in thousands) | As of April 1, 2022 | As of Dec 31, 2022 | Change | | :-------------------- | :------------------ | :----------------- | :----- | | Total Equity | $78,209 | $55,440 | $(22,769) | | Accumulated Deficit | $(123,639) | $(159,288) | $(35,649) | | Additional Paid-in Capital | $196,269 | $210,097 | $13,828 | Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | 9 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2021 | Change | | :-------------------- | :---------------------------- | :---------------------------- | :----- | | Net cash used in operating activities | $(24,569) | $(15,234) | $(9,335) | | Net cash used in investing activities | $(29,447) | $(1,111) | $(28,336) | | Net cash (used in) / provided by financing activities | $(713) | $73,783 | $(74,496) | | Cash, cash equivalents and restricted cash at end of period | $35,563 | $92,707 | $(57,144) | Notes to Condensed Consolidated Financial Statements NOTE 1 ORGANIZATION AND BUSINESS - Beyond Air, Inc. is a commercial-stage medical device and biopharmaceutical company developing the LungFit platform for nitric oxide (NO) generation and delivery[17] - LungFitPH received FDA premarket approval in June 2022 for the treatment of term and near-term neonates with hypoxic respiratory failure (PPHN) and commenced U.S. marketing in July 2022[17] - The company reorganized its oncology business into Beyond Cancer, Ltd. in November 2021, retaining 80% ownership, to develop ultra-high concentration NO (UNO) for solid tumors[19] NOTE 2 SIGNIFICANT ACCOUNTING POLICIES AND OTHER RISKS AND UNCERTAINTIES - The company consolidates its subsidiaries, including Beyond Cancer, Ltd., as a variable interest entity (VIE) where Beyond Air is the primary beneficiary, holding an 80% ownership[22] - As of December 31, 2022, the company had $55.7 million in cash, cash equivalents, marketable securities, and restricted cash, estimated to be sufficient for operating requirements for at least one year[25] - Future capital needs depend on commercialization success, clinical trial costs, and regulatory approvals, with potential additional funding through equity/debt offerings or collaborations[26][29] - The company faces risks related to new technological innovations, regulatory approvals, market acceptance, dependence on key personnel and third-party suppliers, and potential disruptions from the COVID-19 pandemic[30][31][33] NOTE 3 FAIR VALUE MEASUREMENT Marketable Securities (in thousands) | Marketable Securities (in thousands) | Level 1 | Level 2 | Level 3 | | :--------------------------------- | :------ | :------ | :------ | | Corporate debt securities | $4,558 | $- | $- | | Government securities | $5,961 | $- | $- | | Mutual funds | $17,122 | $- | $- | | Total Marketable Securities | $27,641 | $- | $- | NOTE 4 PROPERTY AND EQUIPMENT Property and Equipment Metrics (in thousands) | Metric (in thousands) | Dec 31, 2022 | Mar 31, 2022 | Change | | :-------------------- | :----------- | :----------- | :----- | | Property and equipment, net | $3,624 | $1,995 | $1,629 | | Depreciation and amortization expense (3 months) | $204 | $70 | $134 | | Depreciation and amortization expense (9 months) | $439 | $193 | $246 | NOTE 5 STOCKHOLDERS' EQUITY - As of December 31, 2022, approximately $18.1 million remains available under the $40 million stock purchase agreement with Lincoln Park Capital Fund, LLC[60] - As of December 31, 2022, $49.8 million in funds are available under the $50 million At-The-Market Offering Sales Agreement (2022 ATM)[62] Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | 3 Months Ended Dec 31, 2022 | 3 Months Ended Dec 31, 2021 | 9 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2021 | | :-------------------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Research and development | $1,290 | $416 | $3,247 | $1,160 | | General and administrative | $4,576 | $1,700 | $11,957 | $3,327 | | Total stock-based compensation expense | $5,866 | $2,116 | $15,204 | $4,487 | NOTE 6 OTHER CURRENT ASSETS AND PREPAID EXPENSES Other Current Assets and Prepaid Expenses (in thousands) | Category (in thousands) | Dec 31, 2022 | Mar 31, 2022 | Change | | :---------------------- | :----------- | :----------- | :----- | | Research and development | $112 | $216 | $(104) | | Insurance | $210 | $1,037 | $(827) | | Total | $1,500 | $2,044 | $(544) | NOTE 7 ACCRUED EXPENSES Accrued Expenses (in thousands) | Category (in thousands) | Dec 31, 2022 | Mar 31, 2022 | Change | | :---------------------- | :----------- | :----------- | :----- | | Accrued Circassia Settlement | $3,500 | $2,500 | $1,000 | | Employee salaries and benefits | $1,058 | $409 | $649 | | Research and development | $522 | $1,006 | $(484) | | Total current accrued expenses | $9,777 | $8,374 | $1,403 | NOTE 8 BASIC AND DILUTED NET INCOME (LOSS) PER SHARE OF COMMON STOCK Potentially Dilutive Securities | Potentially Dilutive Securities | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------ | :----------- | :----------- | | Common stock warrants | 460,520 | 2,219,631 | | Common stock options | 5,645,131 | 4,102,631 | | Restricted shares | 769,500 | 604,200 | | Total | 6,875,151 | 6,926,462 | NOTE 9 LICENSE AGREEMENT - Beyond Air settled claims with Circassia Limited, agreeing to a total payment of $10.5 million in three installments[80] - The first payment of $2.5 million was made on July 28, 2022, following FDA approval of LungFit PH[80] - Circassia will receive a 5% quarterly royalty on LungFit PH net sales in the US, commencing in year three post-approval, capped at $6 million[80] NOTE 10 GRANT COLLABORATON AGREEMENT - Beyond Air received a grant of up to $2.17 million from the Cystic Fibrosis Foundation (CFF) for clinical development of high concentration NO to treat NTM pulmonary disease[82] - As of December 31, 2022, $1.63 million has been recognized as a reduction of R&D costs from this grant[82] NOTE 11 COMMITMENTS AND CONTINGENCIES - The company has license agreements with CareFusion (5% royalties, $50k/annum minimum) and Pulmonox (up to $87 million in milestone payments across three indications)[83][84] - A $1.5 million milestone payment to NitricGen related to LungFit technology was made on January 6, 2023[86] - Beyond Air is appealing a lawsuit with Empery, with an estimated contingent loss of $2.6 million as of December 31, 2022, secured by $7.4 million in restricted cash[91] - A lawsuit with Hudson Bay Master Fund regarding warrant adjustments has an estimated contingent loss of $0.2 million as of December 31, 2022[93] NOTE 12 BEYOND CANCER AND RELATED PARTY TRANSACTIONS - Beyond Cancer, Ltd., a majority-owned affiliate (80% by Beyond Air), raised $30 million in a private placement in November 2021, selling 20% equity to investors[95] - The funds are intended to accelerate preclinical work, complete IND-enabling studies, conduct a Phase 1 study, and expand preclinical programs for combination studies[129] - Beyond Cancer will pay Beyond Air a single-digit royalty on all future revenues[95] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three and nine months ended December 31, 2022, discussing forward-looking statements, business overview, product development progress, critical accounting estimates, and a detailed analysis of financial performance and liquidity Note Regarding Forward-Looking Statements - The report contains forward-looking statements about future results, business strategy, product candidates, approvals, and costs, which are subject to known and unknown risks[99] - Key risks include commercialization success of LungFit PH, EU CE mark approval, future capital needs, ability to build product pipeline, clinical trial success, regulatory approvals, and intellectual property protection[105] Introduction - Beyond Air is a commercial-stage medical device and biopharmaceutical company focused on the LungFit platform for nitric oxide (NO) generation and delivery[104] - LungFitPH received FDA approval in June 2022 for Persistent Pulmonary Hypertension of the Newborn (PPHN)[104] - The LungFit platform is being developed for high-concentration NO to treat viral lung infections (VCAP, bronchiolitis, NTM) and ultra-high concentration NO (UNO) for solid tumors via Beyond Cancer, Ltd[106][107] LungFitPH for the treatment of Persistent Pulmonary Hypertension of the Newborn (PPHN) - LungFitPH is the first FDA-approved system using patented ionizer technology to generate on-demand nitric oxide from ambient air for PPHN, offering competitive advantages over cylinder-based systems[109][110][112] - The company expects to receive the CE Mark under the Medical Device Regulation (MDR) in the EU during the first half of fiscal year 2024[113] - Estimated U.S. sales potential for LungFitPH in PPHN is greater than $400 million, with worldwide potential exceeding $700 million[113] LungFitPRO for the treatment of viral lung infections in hospitalized patients Viral Community-Acquired Pneumonia (including COVID-19) - The U.S. market potential for VCAP is estimated to be greater than $1.5 billion, with worldwide potential exceeding $3 billion[114] - A pilot study for LungFit PRO (150 ppm NO) in VCAP patients (including COVID-19) demonstrated that inhaled NO was well-tolerated, significantly shortened the duration of oxygen support (p=0.0339), and showed a trend towards shorter hospital length of stay[116][117] - The company anticipates commencing a pivotal study for VCAP in calendar year 2023[117] Bronchiolitis - Bronchiolitis is a leading cause of infant hospitalization with no approved treatment, with estimated U.S. market potential over $500 million and worldwide over $1.2 billion[118] - Three pilot studies (n=198 infants) for 150-160 ppm NO in bronchiolitis showed the treatment was safe, well-tolerated, and effective in shortening hospital length of stay and accelerating time to stable oxygen saturation[119] - Long-term safety data for high concentration inhaled NO in bronchiolitis showed a favorable re-hospitalization rate for the inhaled NO group compared to control[120] LungFitGO for the treatment of Nontuberculous mycobacteria (NTM) - NTM lung infection, particularly M. abscessus, has no specific approved treatments, with an estimated U.S. market potential over $1 billion and worldwide over $2.5 billion[122][123] - A 12-week pilot study for LungFit GO (150-250 ppm NO) in NTM patients demonstrated safety and tolerability in both hospital and home settings, high treatment compliance (>90%), and improvements in quality of life[126][127] - The study observed trends in the reduction of microbial load, with one subject achieving culture conversion, and a pivotal study is anticipated in the second half of fiscal year 2025[127] Ultra-High Concentration NO (UNO) in solid tumors through majority-owned affiliate Beyond Cancer, Ltd. - Beyond Cancer is developing Ultra-High Concentration NO (UNO) for solid tumors, with preclinical data showing anticancer properties by eliciting an immune response and causing dose-dependent cytotoxic responses[131] - Preclinical studies demonstrated UNO (20,000-200,000 ppm) increased recruitment of T cells, B cells, macrophages, and dendrocytes to tumors, and significantly higher tumor regression rates in combination with anti-PD-1 treatment[131][132] - The first patient in a Phase 1 study for UNO therapy was treated in August 2022, with top-line results expected in calendar year 2023[107][132][134] COVID-19 - The COVID-19 pandemic caused significant supply chain delays for the LungFit system, which have been remedied[33][135] - The company continuously assesses the potential impact of COVID-19 resurgences on its business plans, preclinical/clinical trials, and reliance on third-party manufacturing and supply chains[135] Critical Accounting Estimates and Policies - The preparation of consolidated financial statements involves subjective and complex estimates[137] - Critical accounting policies include contingent loss judgments, R&D expense recognition, licensed right-to-use technology, stock-based compensation valuation, and income taxes[137][138] Results of Operations and Comprehensive Loss Comparison of Three and Nine Months Ended December 31, 2022 with the Three and Nine Months Ended December 31, 2021 Revenue - No revenue was recognized for the three or nine months ended December 31, 2022, or the comparable periods in 2021[141] - Revenue generation is expected to begin in fiscal year 2023 following FDA approval of LungFit PH in June 2022[141] Cost of Revenue Cost of Revenue (in thousands) | Metric (in thousands) | 3 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2022 | | :-------------------- | :---------------------------- | :---------------------------- | | Cost of revenue | $68 | $247 | - Cost of revenue in 2022 was primarily related to establishing warehouse locations to optimize future deliveries[142] Research and Development Expenses Research and Development Expenses (in thousands) | Metric (in thousands) | 3 Months Ended Dec 31, 2022 | 3 Months Ended Dec 31, 2021 | 9 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Research and development | $5,000 | $2,543 | $12,679 | $8,091 | | Increase (YoY) | $2,457 | - | $4,588 | - | - The increase in R&D expenses was primarily due to scaling up spending on UNO ($1.3 million for 3 months), increased R&D infrastructure and preclinical work in UNO ($1.7 million for 9 months), and a $2.1 million increase in stock-based compensation for the nine months[143][144] General and Administrative Expenses General and Administrative Expenses (in thousands) | Metric (in thousands) | 3 Months Ended Dec 31, 2022 | 3 Months Ended Dec 31, 2021 | 9 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | General and administrative | $8,941 | $4,943 | $25,144 | $12,188 | | Increase (YoY) | $3,998 | - | $12,956 | - | - The increase in G&A expenses was primarily attributed to the creation of the Beyond Cancer entity ($3.0 million for 3 months, $8.2 million for 9 months, including $2.9 million and $6.6 million in stock-based compensation, respectively)[145][146] - Beyond Air also saw increases in salaries, benefits, travel, and legal fees[145][146] Other Income (Loss) Total Other Expense (in thousands) | Metric (in thousands) | 3 Months Ended Dec 31, 2022 | 3 Months Ended Dec 31, 2021 | 9 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Total other expense | $211 (gain) | $(476) (loss) | $(180) (loss) | $(3,118) (loss) | - The reduction in other loss was mainly due to gains from investments in marketable securities ($0.4 million for 9 months) and foreign exchange gains ($0.4 million for 3 months), and a lower contingent liability recording compared to 2021[148][149] Net Loss Attributable to Non-controlling Interests Net Loss Attributable to Non-controlling Interests (in thousands) | Metric (in thousands) | 3 Months Ended Dec 31, 2022 | 3 Months Ended Dec 31, 2021 | 9 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Net loss attributable to non-controlling interests | $(1,051) | $(223) | $(2,601) | $(223) | - The increase is due to the 20% share of net loss from the Beyond Cancer subsidiary, established in November 2021[150] Net Loss Attributed to Common Stockholders Net Loss Attributable to Beyond Air, Inc. (in thousands) | Metric | 3 Months Ended Dec 31, 2022 | 3 Months Ended Dec 31, 2021 | 9 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2021 | | :------------------------------------------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Net loss attributable to Beyond Air, Inc. (in thousands) | $(12,747) | $(7,739) | $(35,649) | $(23,174) | | Net basic and diluted loss per share | $(0.43) | $(0.29) | $(1.19) | $(0.95) | Liquidity and Capital Resources Cash Flows Cash Flow Summary (in thousands) | Metric (in thousands) | 9 Months Ended Dec 31, 2022 | 9 Months Ended Dec 31, 2021 | Change | | :-------------------- | :---------------------------- | :---------------------------- | :----- | | Net cash used in operating activities | $(24,569) | $(15,234) | $(9,335) | | Net cash used in investing activities | $(29,447) | $(1,111) | $(28,336) | | Net cash (used in) / provided by financing activities | $(713) | $73,783 | $(74,496) | Operating Activities - Net cash used in operating activities was $24.6 million for the nine months ended December 31, 2022[154] - This was primarily due to a net loss of $38.3 million, partially offset by $15.2 million in stock-based compensation and $1.0 million in depreciation and amortization[154] Investing Activities - Net cash used in investing activities was ($29.4) million for the nine months ended December 31, 2022[156] - This included a net investment of $27.6 million in marketable securities and $1.9 million for property and equipment, including LungFit PH devices[156] Financing Activities - Net cash used in financing activities was $0.7 million for the nine months ended December 31, 2022, mainly from loan payments, partially offset by ATM offerings[157] - In contrast, the prior year (2021) saw $73.7 million provided by financing activities, including $11.1 million from LPC, $36.5 million from ATM offerings, and $30.0 million from the sale of Beyond Cancer common stock[157] Contractual Obligations - No material changes to contractual obligations since March 31, 2022[158] Overview - The company expects to begin generating revenue in fiscal year 2023 following LungFit PH regulatory approval[160] - As of December 31, 2022, the company had an accumulated loss of $159.3 million and $63.2 million in total cash, cash equivalents, marketable securities, and restricted cash[160] - The company has $49.8 million available under the 2022 ATM and $18.1 million under the New Stock Purchase Agreement with LPC for future financing[162][163] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, primarily focusing on foreign currency exchange rates - The company's primary market risk exposure is foreign currency exchange rates[167] ITEM 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of December 31, 2022[168] Changes in Internal Control Over Financial Reporting - No material changes to internal controls over financial reporting occurred during the three months ended December 31, 2022[169] PART II OTHER INFORMATION ITEM 1. Legal Proceedings This section refers to the detailed discussion of legal proceedings in Note 11 of the unaudited condensed consolidated financial statements - Legal proceedings are detailed in Note 11 of the unaudited condensed consolidated financial statements[171] ITEM 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's most recent Annual Report on Form 10-K - No material changes to risk factors since the 2022 Annual Report on Form 10-K[172] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no unregistered sales of equity securities or use of proceeds during the reporting period - No unregistered sales of equity securities or use of proceeds to report[173] ITEM 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities to report[174] ITEM 4. Mine Safety Disclosures This section states that the disclosure requirements for mine safety are not applicable to the company - Mine Safety Disclosures are not applicable[175] ITEM 5. Other Information This section reports that there is no other information to disclose under this item - No other information to report[176] ITEM 6. Exhibits This section provides a comprehensive list of all exhibits filed as part of this Form 10-Q, including corporate governance documents, warrant forms, and certifications - The section lists all exhibits filed with the Form 10-Q, including organizational documents, warrant forms, and certifications[178] SIGNATURES This section contains the required signatures of the company's principal executive and financial officers, certifying the accuracy of the report - The report was signed by Steven Lisi (President and CEO) and Douglas Larson (CFO) on February 9, 2023[183]