Business context and reporting period
The supplied filing is AIT Therapeutics, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2018—not a Beyond Air, Inc. filing. It covers the three and six months ended September 30, 2018; dollar amounts below are in thousands unless stated otherwise. AIT was developing a nitric-oxide delivery system and had no product revenue.
Financial results and liquidity
| Metric | Three months ended Sep. 30, 2018 | Three months ended Sep. 30, 2017 | Six months ended Sep. 30, 2018 | Six months ended Sep. 30, 2017 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $648 | $1,193 | $1,711 | $1,784 |
| General and administrative expense | $1,765 | $864 | $2,458 | $3,340 |
| Operating loss | $2,413 | $2,057 | $4,169 | $5,124 |
| Net loss | $4,463 | $7,149 | $7,464 | $10,029 |
| Basic and diluted loss per share | $0.53 | $1.18 | $0.89 | $1.63 |
At September 30, 2018, cash and cash equivalents were $316, restricted cash $17, and marketable securities $4,549, for combined cash and marketable securities of $4,865. Current assets were $5,006 against current liabilities of $1,243. Total liabilities were $10,272, including a $9,029 warrant liability measured at fair value; the filing does not show material conventional borrowings. Shareholders’ deficit was $5,007.
For the six months, operating cash use was $4,108, investing activities provided $3,721 (principally securities redemptions), and financing activities used $19. Cash, cash equivalents and restricted cash declined by $406 to $333. The filing does not report a meaningful gross margin or operating margin because there was no revenue.
Changes versus prior comparable periods
- Six-month net loss narrowed by $2,565, while quarterly net loss narrowed by $2,686. Lower six-month operating expenses and smaller warrant fair-value charges contributed to the improvement.
- Six-month R&D expense declined $73; quarterly R&D expense declined $545. Management attributed the reductions mainly to lower clinical-trial, contractor, manufacturing and related costs.
- Six-month G&A expense fell $882, largely due to lower noncash stock compensation. In contrast, quarterly G&A expense increased $901, primarily reflecting a $426 increase in stock-based compensation.
- The six-month noncash warrant fair-value expense was $3,351, versus $4,933 in the financial statements for the prior-year period. The warrant liability increased from $5,678 at March 31, 2018 to $9,029 at September 30, 2018.
- Operating cash use increased to $4,108 from $3,101. Cash balances and marketable securities also decreased from $9,037 at March 31, 2018 to $4,865 at September 30, 2018.
Outlook, risks and notable items
- Management estimated available cash would fund operations through June 30, 2019 and stated additional financing would be needed to continue clinical trials. The filing explicitly says substantial doubt exists about the company’s ability to continue as a going concern.
- Management anticipated submitting a premarket approval application to the FDA in the first quarter of 2020. Approval, commercialization, timing and clinical success are uncertain; the company expected no product revenue in the next several years.
- In August 2018, AIT entered a discretionary, three-year equity purchase agreement with Lincoln Park Capital for up to $20 million, subject to conditions and trading limitations. AIT sold 117,000 shares for gross proceeds of $527 and incurred $546 in offering costs; the registration statement was accepted in October. A subsequent October sale of 10,000 shares generated $46 gross proceeds.
- The Empery parties’ lawsuit concerns warrant adjustments and seeks monetary damages and declaratory relief. AIT said it would defend the claims; the filing says the outcome could not then be assessed.
- Other material risks include FDA and clinical-development uncertainty, the need for further financing and potential dilution, dependence on third parties, and foreign-exchange exposure; approximately 12% of expenses were denominated in Israeli shekels, and the company did not hedge that exposure.
- A license agreement includes 5% royalties on licensed-product revenue and at least $50 annually during the royalty period; no revenue or royalties had been recorded. A separate NitricGen license provides for up to $2 million in milestone payments plus royalties; no milestones had been achieved by September 30, 2018.
Important facts for investors to verify
- Confirm the issuer identity and reporting period: this source is AIT Therapeutics, Inc., not Beyond Air, Inc.
- Review the going-concern disclosure, cash runway estimate, and assumptions about financing needs and clinical-trial spending.
- Check subsequent ATM sales, remaining availability and share dilution, as well as the substantial offering costs recorded on the initial sale.
- Assess warrant accounting and sensitivity: the $9,029 liability is a Level 3 fair-value estimate, and its remeasurement materially affects reported losses.
- Follow clinical and regulatory progress, including the stated FDA submission target, and the status and potential exposure of the Empery litigation and license commitments.