Filing summary
Issuer and period: The supplied filing is AIT Therapeutics, Inc.’s Form 10-Q for the three months ended June 30, 2018, filed August 14, 2018. It does not identify Beyond Air, Inc. as the registrant; verify the issuer mapping. AIT changed its fiscal year-end to March 31, making this the first quarter of fiscal 2019. Financial amounts below are in U.S. dollars, thousands, unless noted.
Business context
AIT was developing a nitric oxide generator and delivery system for lung treatment. It had no product sales and stated that it did not expect product revenue until regulatory approval and commercialization. Its initial proposed U.S. indication was persistent pulmonary hypertension of the newborn (PPHN); management anticipated a 510(k) submission in fiscal Q4 2019. No marketing approval had been obtained for its proposed high-concentration antimicrobial use.
Financial performance and liquidity
| Metric | Three months ended June 30, 2018 | Comparable 2017 period |
|---|---|---|
| Revenue | None | None reported |
| Research and development expense | $1,063 | $591 |
| General and administrative expense | $693 | $2,476 |
| Operating loss | $1,756 | $3,067 |
| Net loss | $3,001 | $2,880 |
| Basic and diluted loss per share | $0.36 | $0.46 |
| Cash used in operating activities | $2,304 | $1,701 |
Gross margin was not applicable because the company reported no revenue. At June 30, 2018, cash and cash equivalents were $386, restricted cash $16, and marketable securities $6,342, totaling $6,744 in cash, restricted cash, and short-term securities. Total current liabilities were $1,515; related-party and other loans were $34. The balance sheet showed a $6,955 warrant liability, not conventional borrowing, and a shareholders’ deficit of $1,371.
Investing activities provided $1,967, primarily from $2,000 of marketable-security redemptions; financing activities provided no cash. Management and the board believed available resources would meet expected liquidity needs through June 2019, but the company disclosed substantial doubt about its ability to continue as a going concern without additional financing.
Changes, outlook, and risks
- R&D expense increased $472, mainly from higher clinical-trial, subcontractor, manufacturing, and related costs. G&A expense fell $1,783, primarily because prior-year expenses included substantial stock-based compensation and legal costs. Despite a lower operating loss, net loss increased $121 as warrant revaluation produced a $1,277 financial expense, versus $151 of warrant-revaluation income in 2017.
- Management expected R&D spending to fluctuate with clinical activity and potentially decline ahead of regulatory filing, partly offset by product-development and manufacturing costs. It expected G&A costs to increase as public-company operations and staffing expanded.
- The February 2018 offering generated $9,820 in gross proceeds from warrant sales and exercise. Subsequent to quarter-end, AIT entered a three-year agreement allowing Lincoln Park Capital to purchase up to $20 million of common stock, subject to conditions; AIT paid a $500 fee. This is a potential funding source, not cash already received.
- Warrants were remeasured at fair value, with the $1,277 quarter expense increasing the warrant liability. The filing also reports a New York lawsuit by warrant holders seeking damages and declaratory relief over adjustments to warrant exercise terms. The outcome was too uncertain to assess; AIT intended to defend the case.
- Other commitments include up to $2,000 in future milestone payments and sales royalties under the NitricGen license, plus royalties and minimum annual payments under a separate patent license if applicable. New office leases carried disclosed future minimum payments totaling $369.
- Key risks include continued operating losses, dependence on future financing, clinical and regulatory uncertainty, commercialization and manufacturing execution, litigation, and exposure to foreign-exchange movements. About 12% of expenses were denominated in Israeli shekels; the company did not hedge this exposure.
Important facts for investors to verify
- Confirm whether this AIT Therapeutics filing is the intended filing for Beyond Air, Inc.; the registrant named throughout the filing is AIT Therapeutics, Inc.
- Check current cash, securities, cash burn, and whether the company obtained financing after the filing date; the stated runway estimate extended only through June 2019.
- Verify the status and terms of the Lincoln Park Capital purchase agreement, including registration and other conditions and actual proceeds raised.
- Track regulatory submission and clinical-development progress, since the filing’s 510(k) timing was forward-looking and no relevant approval had yet been obtained.
- Monitor the warrant-holder litigation, warrant-liability remeasurement, and potential dilution from outstanding warrants and subsequent option grants.