Business context and reporting period
The supplied filing is AIT Therapeutics, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2017—not a Beyond Air, Inc. filing. AIT was a clinical-stage company developing a 160 ppm nitric oxide formulation and delivery system for respiratory infections. It reported no product revenue. The January 2017 merger was accounted for as a reverse recapitalization, with AIT as the accounting acquirer.
Key financial metrics
Amounts are U.S. dollars in thousands, except per-share data.
| Metric | Three months ended June 30, 2017 | Six months ended June 30, 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $591 | $2,030 | $271 / $495 |
| General and administrative expense | $2,476 | $4,597 | $160 / $434 |
| Operating loss | $3,067 | $6,627 | $626 / $1,550 |
| Net loss | $2,880 | $9,163 | $970 / $2,243 |
| Net loss per share, basic and diluted | $0.46 | $1.54 | $0.44 / $1.02 |
| Net cash used in operating activities | Not separately highlighted in MD&A | $3,913 | $303 used |
At June 30, 2017, cash and cash equivalents were $5,189, total assets $5,492, current liabilities $945, and total liabilities $5,680. Current assets were $5,376, implying working capital of approximately $4,431. The balance sheet showed no bank loan or convertible notes outstanding; it included a $4,735 non-current warrant liability. Stockholders’ deficiency was $188, and accumulated deficit was $22,736. No operating margin is meaningful because the company had no revenue.
Six-month investing cash use was $366, while financing provided $9,461, primarily from unit-issuance proceeds of $9,889 net of issuance costs and repayments. Cash increased by $5,182 from year-end 2016 to $5,189.
Material changes versus prior comparable periods
- Six-month net loss rose to $9,163 from $2,243; quarterly net loss increased to $2,880 from $970.
- Six-month R&D expense increased to $2,030 from $495, reflecting $500 of acquired intellectual property, $480 of third-party warrant expense, and higher clinical-trial, consultant, and subcontractor costs.
- Six-month G&A expense increased to $4,597 from $434, mainly due to increased stock-based compensation, merger-related legal and accounting costs, and payroll.
- Six-month net financial expense increased to $2,530 from $671. Items included convertible-note discount amortization, warrant issuance and revaluation, and related issuance costs. The second quarter recorded $187 of net financial income, primarily from warrant revaluation.
- Cash rose from $7 at December 31, 2016, following private-placement financing and the merger-related recapitalization. Convertible notes totaling $3,955, including accrued interest, converted into common stock in January 2017.
Outlook, risks and unusual items
- Management expected existing cash to fund operating expenses and capital requirements through the first quarter of 2018, while cautioning that assumptions could prove wrong. It said additional financing would be required and that no future funding commitments existed.
- The company reported substantial doubt about its ability to continue as a going concern, citing losses, operating cash outflows, accumulated deficit, and dependence on raising funds.
- Management expected R&D expense to increase with a Phase II study for Nontuberculous Mycobacterium abscessus and a Phase III study for infant bronchiolitis. It expected higher public-company and staffing costs in G&A.
- The product candidate had no marketing approval; development, clinical-trial completion, regulatory review, manufacturing and financing were material uncertainties. The filing also cites dependence on third parties, intellectual-property risks and unhedged foreign-exchange exposure.
- Investor warrants with down-round provisions were recorded as a liability and remeasured at fair value. The filing also disclosed contingent development and sales milestone payments under an intellectual-property option agreement, payable beginning after regulatory approval of the first product candidate.
Most important facts to verify
- Confirm the requested issuer: this filing names AIT Therapeutics, Inc., not Beyond Air, Inc.
- Check subsequent financing and cash use against the stated first-quarter 2018 runway and going-concern disclosure.
- Review clinical-trial progress, timelines, costs and regulatory status for the 160 ppm nitric oxide candidate.
- Assess potential dilution and volatility from warrants, options, restricted shares and the warrant liability.
- Review the intellectual-property license and option terms, including royalties and contingent milestone obligations.