Beyond Air, Inc. — filing identity and period
Important identity note: The supplied filing is for AIT Therapeutics, Inc., not Beyond Air, Inc. It is a Form 10-Q for the quarter ended December 31, 2018, covering the three and nine months ended that date. The financial statements are unaudited.
Business context and financial performance
AIT described itself as a pre-revenue medical-device company developing a system that generates and delivers nitric oxide from ambient air. It reported no product revenue and said it did not expect product revenue until regulatory approval and commercialization.
- Quarter: Operating expenses were $2.40 million, including R&D of $0.59 million and G&A of $1.82 million. Operating loss was $2.40 million. Net income was $0.96 million, or $0.11 per share, primarily reflecting a $3.35 million noncash gain from changes in warrant fair value.
- Nine months: Operating expenses were $6.57 million and operating loss was $6.57 million. Net loss was $6.50 million, or $0.77 per share, versus a $11.76 million net loss in the prior-year period.
- Revenue and margins: No product revenue was reported; therefore, revenue growth and gross margins are not applicable.
- Cash flow: Net cash used in operations was $5.75 million for the nine months, compared with $4.91 million a year earlier. Investing activities provided $5.48 million, mainly from $5.73 million of marketable-security redemptions; financing activities provided $27,000.
- Liquidity: At December 31, cash and cash equivalents were $0.48 million and marketable securities were $2.57 million; together with restricted cash, reported cash and securities totaled $3.07 million. Management estimated funding for operations through March 31, 2020, but said additional funding would be needed to continue clinical trials.
- Balance sheet: Total assets were $3.91 million and shareholders’ equity was $2.46 million. The filing reports no conventional borrowings; current liabilities were $1.45 million, including $0.83 million of accounts payable and a $0.30 million NitricGen options liability.
Changes versus prior comparable periods
- Quarterly R&D fell 52% to $0.59 million, primarily because a compassionate-use trial had ended in the prior-year period; the current quarter also included a $0.20 million reduction from correcting the accounting for a technology license.
- Quarterly G&A rose 56% to $1.82 million, mainly due to noncash stock compensation, additional hires, and higher professional fees. For the nine months, G&A declined 7% to $4.27 million, partly because the prior-year period included substantial restricted-share compensation.
- Quarterly net income contrasted with the prior-year quarterly loss, but largely reflected a noncash warrant valuation gain rather than operating profitability. Nine-month losses narrowed, while operating cash use increased.
- Cash, cash equivalents, and marketable securities declined from $9.04 million at March 31, 2018 to $3.07 million at December 31, 2018. The company also reported 8.53 million shares outstanding at December 31, versus 6.10 million weighted-average shares in the year-earlier quarter.
Outlook, risks, and unusual items
- Management anticipated submitting a premarket approval application to the FDA in the second quarter of 2019. The product and proposed indications remained subject to clinical development and regulatory approval; the company cautioned that approval and commercial viability were uncertain.
- After quarter-end, on January 23, 2019, AIT entered a Circassia agreement granting commercial rights for PPHN and related hospital indications at nitric-oxide concentrations below 80 ppm in the United States and China. The agreement provides for up to $32.5 million in upfront and regulatory milestone payments and future royalties of 15%–20% based on gross profit. AIT reported meeting two milestones for $10.5 million, paid in Circassia shares. These are post-period developments, not December 31 cash or revenue.
- An LPC stock purchase agreement permits AIT to sell up to $20 million of stock over three years. AIT had sold 127,000 shares for net proceeds of $27,170 through December 31; the filing reported $19.15 million remaining. It reported additional sales after quarter-end.
- AIT adopted ASU 2017-11, reclassifying $5.68 million of warrant liabilities to equity. The quarter’s $3.35 million warrant-related gain was noncash. A separate accounting correction capitalized the NitricGen technology license, increasing assets by $495,000, recording a $295,000 options liability, and reducing R&D expense by $200,000.
- AIT disclosed an Empery investor lawsuit over warrant adjustment provisions, seeking monetary damages and declaratory relief. The company said it would defend the claims; the outcome could not be assessed at that stage.
- Liquidity depends on future financing and successful development; available financing may be unavailable or dilutive. The company also identified regulatory, clinical, intellectual-property, execution, and foreign-exchange risks, including currency and share-price exposure related to Circassia shares.
Investor verification checklist
- Confirm the issuer: this filing names AIT Therapeutics, Inc., not Beyond Air, Inc.
- Verify the Circassia agreement’s milestone conditions, share valuation and receipt, royalty calculation, and subsequent accounting treatment.
- Assess the assumptions behind management’s March 31, 2020 cash runway, clinical-trial funding needs, and potential use of the LPC facility.
- Track FDA submission timing and clinical and regulatory progress for the nitric-oxide system.
- Review developments in the Empery litigation and the potential financial or dilution effects of outstanding warrants and options.
- Reconcile the reported cash-flow and liquidity figures and the effects of the NitricGen accounting correction and warrant reclassification.