Beyond Air Inc

NOTE 1 ORGANIZATION AND BUSINESS

Beyond Air, Inc. (together with its subsidiaries, “Beyond Air” or the “Company”) was incorporated on April 28, 2015 under Delaware law. On June 25, 2019, the Company’s name was changed to Beyond Air, Inc. from AIT Therapeutics, Inc.

The Company is a commercial-stage medical device and biopharmaceutical company developing a platform of nitric oxide (“NO”) generators and delivery systems (the “LungFit® platform”) capable of generating NO from ambient air. The Company’s first device, LungFit®PH (“LungFit®PH”) received premarket approval (“PMA”) from the U.S. Food and Drug Administration (“FDA”) in June 2022. The NO generated by the LungFit® PH system is indicated to improve oxygenation and reduce the need for extracorporeal membrane oxygenation in term and near-term (>34 weeks gestation) neonates with hypoxic respiratory failure associated with clinical or echocardiographic evidence of pulmonary hypertension in conjunction with ventilatory support and other appropriate agents. This condition is commonly referred to as persistent pulmonary hypertension of the newborn (“PPHN”). The LungFit® platform can generate NO up to 400 parts per million (“ppm”) for delivery to a patient’s lungs directly or via a ventilator. LungFit®can deliver NO either continuously or for a fixed amount of time at various flow rates and has the ability to either titrate dose on demand or maintain a constant dose. In July 2022, the Company commenced marketing LungFit® PH in the United States for PPHN as a medical device.

LungFit®can be used to treat patients on ventilators that require NO, as well as patients with chronic or acute severe lung infections via delivery of NO at concentrations > 100 parts per million (ppm) through a breathing mask or similar apparatus. Furthermore, we believe that there is a high unmet medical need for patients suffering from certain severe lung infections that the LungFit®platform can potentially address. The Company’s other areas of focus with the LungFit®platform beyond PPHN are nontuberculous mycobacteria (“NTM”) lung infection and those with various severe lung infections with underlying chronic obstructive pulmonary disease (“COPD”). Our current product candidates will be subject to premarket reviews and approvals by the FDA, certification through the conduct of a conformity assessment by a notified body in the EU for the product to be CE marked, as well as comparable foreign regulatory authorities.

With Beyond Air’s focus on NO and its effect on the human condition, the Company has two additional programs that do not utilize the LungFit® system. Through the Company’s majority-owned affiliate Beyond Cancer, Ltd. (“Beyond Cancer”) NO is used to target solid tumors. The LungFit®platform is not utilized for the solid tumor indication due to the need for ultra-high concentrations of gaseous nitric oxide (“UNO”). A proprietary delivery system has been developed that is designed to safely deliver UNO in excess of 10,000 ppm directly to a solid tumor. This program has advanced to a phase 1 human clinical trial.

On November 4, 2021, Beyond Air reorganized its oncology business into a new private company called Beyond Cancer. Beyond Air’s preclinical oncology team and the exclusive right to the intellectual property portfolio utilizing UNO for the treatment of solid tumors now reside with Beyond Cancer. Beyond Air has 80% ownership in Beyond Cancer.

The second program which does not utilize the LungFit® platform partially inhibits neuronal nitric oxide synthase (nNOS) in the brain to treat neurological conditions. The first target indication is autism spectrum disorder (“ASD”). On June 15, 2023, the Company announced that it has entered into an agreement with Yissum Research Development Company of the Hebrew University of Jerusalem, LTD. (the “University”) to acquire the commercial rights for nNOS inhibitors being developed for the treatment of ASD and other neurological conditions. Currently, there are no FDA-approved therapies specifically for the treatment of ASD. Under the terms of the agreement, Beyond Air will make payments to the University over the three-year period from the date of the agreement for pre-clinical work. Also, the Company will pay a low single-digit royalty on net sales and certain one-time payments based on clinical, regulatory and sales milestones. The Company expects this program to progress from preclinical to a phase 1 first-in-human clinical trial by the end of 2026.

On March 24, 2025, Beyond Air reorganized its neurology business into a new private company called NeuroNOS. Beyond Air’s infrastructure, for example regulatory, quality, legal, etc, will continue to support the NeruoNOS team. Beyond Air has 88.2% ownership in NeuroNOS.

The Company’s current product candidates will be subject to premarket reviews and approvals by the FDA, certification through the conduct of a conformity assessment by a notified body in the European Union (the “EU”), as well as comparable foreign regulatory authorities’ reviews or approvals in other countries or regions.

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES AND OTHER RISKS AND UNCERTAINTIES

Basis of Presentation and Principles of Consolidation

These consolidated financial statements include the accounts of the Company and the accounts of all of the Company’s subsidiaries and a variable interest entity (“VIE”) for which the Company is the primary beneficiary. As the Company has both the power to direct activities of Beyond Cancer Ltd. and its affiliates (“Beyond Cancer”) that most significantly impact Beyond Cancer’s economic performance and the right to receive benefits and losses that may potentially be significant, these financial statements are fully consolidated with those of the Company. The non-controlling owners’20% interest in Beyond Cancer’s net assets and result of operations and the 11.8% interest in NeuroNOS Ltd. and its affiliates (“NeuroNos”) net assets and result of operations is reported as “non-controlling interest” on the Company’s consolidated balance sheets and as “net loss attributable to non-controlling interest” in the Company’s consolidated statements of operations and comprehensive loss. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). All intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could significantly differ from those estimates. On an ongoing basis, the Company evaluates its significant estimates and assumptions including expense recognition and accrual assumptions under consulting and clinical trial agreements, stock-based compensation, impairment assessments, accounting for licensed rights to use technologies and other long-lived assets, the valuation of warrants, the valuation of derivatives, contingency recognition and accruals and the determination of valuation allowance requirements on deferred tax attributes.

Going Concern, Liquidity and Other Uncertainties

The Company used cash in operating activities of $38.2 million for the year ended March 31, 2025, and has an accumulated deficit attributable to the stockholders of Beyond Air, Inc. of $286.3 million. The Company had cash and cash equivalents and marketable securities of $6.9 million as of March 31, 2025. In addition, $4.4 million of cash is held on deposit by the Company’s contract manufacturer to be applied against future purchases.

The Company expects to incur net losses and have significant cash outflows for at least the next year, including making significant investments in research and development. Management believes these factors raise substantial doubt about the Company’s ability to meet its obligations with cash on hand and concluded that the Company will require additional funding within one year from the date these financial statements are issued.

Management is confident that the efforts to arrange financing, while not assured, will enable the Company to meet its obligations.

The Company’s future capital needs and the adequacy of its available funds will depend on many factors, including, but not necessarily limited to, the success and costs of commercialization of the Company’s approved product and the actual cost and time necessary for current and anticipated preclinical studies, clinical trials and other actions needed to obtain certification or regulatory approval of the Company’s product candidates.

On November 1, 2024, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) for a secured loan with certain lenders, including its Chief Executive Officer Steven Lisi and director Robert Carey, for an aggregate principal balance of $11.5 million. The Loan Agreement was approved by each of the Company’s independent and disinterested directors, following the receipt of a recommendation from an independent investment bank. The Loan Agreement provides for the following terms:(i) principal amount of $11,500,000; (ii) ten-year term; (iii) interest of 15% per annum of which 3% shall be payable in cash and 12% payable in kind through June 30, 2026 and thereafter all in cash; (iv) a royalty interest of 8% of the Company’s net sales on a quarterly basis from July 2026 until the facility is repaid in full; (v) the Company’s obligations will be secured by substantially all of the Company’s assets and (vi) the Company shall issue the lenders warrants to purchase shares of the Company’s common stock at an exercise price of $0.3793 per share.

Subsequent to March 31, 2025, the Company received commitments from certain lenders under the Loan Agreement to provide additional financing of at least $2.0 million in aggregate principal. The additional loans are expected to be issued on terms and conditions that are materially consistent with those of the Loan Agreement.

Other Risks and Uncertainties

The Company is subject to risks common to development and early-stage medical device companies including, but not limited to, new technological innovations, certifications or regulatory approval, dependence on key personnel, protection of proprietary technology, compliance with government regulations, product liability, uncertainty of market acceptance of approved products and the potential need to obtain additional financing. The Company is also dependent on third-party suppliers and, in some cases, single-source suppliers.

The Company’s products require approval or clearance from the FDA prior to commencement of commercial sales in the United States. There can be no assurance that the Company’s products beyond LungFit® PH in the U.S. will receive the required approvals or clearances. Certifications, approvals or clearances are also required in foreign jurisdictions in which the Company may license or sell its products. If the Company is denied such certifications or approvals or clearances or such certifications, approvals or clearances are delayed, such denial or delay may have a material adverse impact on the Company’s results of operations, financial position and liquidity. Further, there can be no assurance that the Company’s product will be accepted in the marketplace, nor can there be any assurance that any future products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed, if at all.

Lease Revenue Recognition

The Company generates revenue from the leases of its LungFit® PH devices to its customers under fixed fee arrangements over periods of up to three years. The fixed fee is typically broken down into ratable monthly payments over the term of the arrangement. The Company’s customers include hospitals and medical facilities. The Company’s LungFit® PH leases include filters, calibration gas, bagging kits, cables, adapters, and other components and accessories required to use the LungFit® PH device (the “Consumables”). The Consumables’ quantities are varied and may be supplied upon demand of the customers and are unlimited, or the arrangement may provide for the maximum quantities available to the customer over the term of the arrangement. The Company’s LungFit® PH leases also include maintenance and training required to use the LungFit® PH device, as well as device back-up services (the “Services”), which are recorded in cost of revenue.

The Company accounts for its rental arrangements of LungFit® PH devices in accordance with Accounting Standards Codification 842,Leases(“ASC 842”). Under ASC 842, leases may be classified as either financing, sales-type, or operating, and the Company is required to disclose key information about leasing arrangements. The classification determines the pattern of revenue recognition and classification within the consolidated statements of operations and comprehensive loss. The Company typically classifies the rental arrangement of its LungFit® PH contracts as operating leases. The Company’s leases do not contain any restrictive covenants or any material residual value guarantees. The Company’s equipment leases may contain renewal options which range from one month to two years. The lease term is adjusted for renewal or termination options that the Company believe the customer is reasonably certain to exercise.

The Company elected the practical expedient applied to operating leases not to separate lease and non-lease components as long as the lease and non-lease components have the same timing and pattern of transfer. As such, the non-lease components, including the Consumables and Services, are combined with the predominant lease component. The total fixed fees that the Company is reasonably certain to collect are recognized on a straight line basis over the term of the arrangement. Additionally, the Company made an accounting policy election to present LungFit® PH revenue net of sales and other similar taxes.

Amounts billed in advance of performance obligations being satisfied are recognized as deferred revenue.

At the lease commencement date, the Company will defer initial direct costs, including commission expense and the cost is recognized over the lease term on the same basis as lease income.

The Company records the costs of shipping related to contract devices and consumables in cost of revenue in its consolidated statements of operations and comprehensive loss.

See Note 16 to the consolidated financial statements for more information regarding leasing arrangements.

Accounts Receivable

The Company extends credit to its customers on an unsecured basis. Accounts receivable are recorded at the invoiced amount, based on agreed contract terms. Receivables are written off when it is determined that amounts are uncollectible. There are currently no allowances for expected credit losses and no doubtful debts recorded in accounts receivable and the Company has not experienced any credit losses to date.

Fair Value Measurements

ASC 820,Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value standard also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:

Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.

Level 2—inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.

As of March 31, 2025 and March 31, 2024, the Company’s financial instruments included restricted cash, marketable securities, accounts payable, long-term debt and liability classified warrants. In addition, as of March 31, 2024, the Company’s financial instruments also included derivative liabilities. The carrying amounts reported in the accompanying consolidated financial statements for cash and cash equivalents, restricted cash and marketable securities approximate their respective fair values because of the short-term nature of these accounts. The carrying value of the Company’s long-term debt approximates fair value based on current interest rates for similar types of borrowings and is in Level 3 of the fair value hierarchy. The liability classified warrants and derivative liabilities are each recorded at their fair value and are Level 3 of the fair value hierarchy.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s assets and liabilities that are measured at fair value on a recurring basis:

The fair value amounts as of March 31, 2025 are:

The fair value amounts as of March 31, 2024 are:

Level 3 Valuation

The common stock warrants issued in connection with the Loan and Security Agreement (as defined below) in June 2023 (Note 10) are recorded as a warrant liability within the consolidated balance sheet as of March 31, 2025 as the warrants contain certain settlement features that are not indexed to the Company’s own stock. In addition, the conversion feature embedded within the long-term debt required bifurcation as certain adjustments to the conversion price were not indexed to the Company’s own stock and recorded as a derivative liability. The warrants and derivative liability are remeasured each reporting period with the change in fair value recorded to other income (expense) in the consolidated statements of operations and comprehensive loss until the warrants and derivative are exercised, expired, reclassified or otherwise settled. The significant assumptions used in valuing the warrants and derivative were as follows:

The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the warrants and derivatives for the years ended March 31, 2025 and March 31, 2024 (in thousands):

Warrant Liability

The Company classifies warrants as equity for any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies warrants as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). Such warrants are subject to remeasurement at each consolidated balance sheet date and any change in fair value is recognized as a component of other expense on the consolidated statements of operations and comprehensive loss. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of such warrants. At that time, the portion of the warrant liability related to warrants will be reclassified to additional paid-in capital.

***Derivative Liability ***

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815,Derivatives and Hedging. For derivative financial instruments that are accounted for as assets or liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations and comprehensive loss. The classification of derivative instruments, including whether such instruments should be recorded as assets or liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities classified in the consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Cash and Cash Equivalents, Short-Term Investments and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase and an investment in a U.S. government money market fund to be cash equivalents. The Company maintains its cash and cash equivalents in highly rated financial institutions in Australia, Israel, Ireland and the U.S., the balances of which, at times, may exceed federally insured limits. Marketable securities include investments in fixed income bonds and U.S. Treasury securities that are considered to be highly liquid and easily tradeable. The marketable securities are considered trading securities and are measured at fair value and are accounted for in accordance with ASC 320. The marketable securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the Company’s fair value hierarchy.

As of March 31, 2025 and March 31, 2024, restricted cash included approximately $0.2 million and $0.2 million, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the federal depository insurance coverage of $250,000 in the United States, A$250,000 in Australia, $25,000 in Bermuda, €100,000 in Ireland and €100,000 in Cyprus. There is currently no official federal depository insurance in Israel. The Company has not experienced losses on these accounts, and management believes the Company is not exposed to significant risks on such accounts. As of March 31, 2025, the Company had greater than $250,000 at United States financial institutions, greater than A$250,000 at Australian financial institutions, greater than €100,000 at Irish financial institutions and also has funds on deposit in Israel. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations and cash flows.

The following table is the reconciliation of the presentation and disclosure of cash, cash equivalents, marketable securities by major security type and restricted cash as shown on the Company’s consolidated statements of cash flows for:

The following table summarizes the Company’s short-term marketable securities with unrealized gains and losses as of March 31, 2025 aggregated by major security type:

The following table summarizes our short-term marketable securities with unrealized gains and losses as of March 31, 2024 aggregated by major security type:

All marketable securities are A- or higher rated. No marketable securities have maturities greater than 12 months. All investments are level 1 investments.

Fixed Assets

Property and equipment are stated at cost less accumulated depreciation and accumulated amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful life of the assets as follows:

Segment Reporting

Operating segments are defined as components of an entity for which both discrete financial information is available and regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The CODM is our Chief Executive Officer. The Company’s CODM evaluates performance and allocates resources for all of the Company’s reportable segments based on income/loss from operations. The CODM is involved in determining and reviewing projected income/loss from operations as part of the annual budget process. Throughout the year, the CODM considers forecast to actual results and variances to allocate resources. The CODM also considers this information in strategic decisions related to capital allocations, including investments in assets, research and development activities, and human capital.

The Company’s reportable segments at March 31, 2024 included Beyond Air and Beyond Cancer. Following the March 24, 2025 private placement and reorganization of the Company’s neurology business into the NeuroNos companies, the Company’s operations became further classified into three segments, Beyond Air, Beyond Cancer and NeuroNos. Each segment has its own management team, board of directors, corporate officers and legal entities. As of March 31, 2025, Beyond Air, Inc. owned 80% of the common stock of Beyond Cancer and 88.2% of the common stock of NeuroNos.

The Beyond Air segment includes unallocated corporate expenses associated with the public company fees as well as all corporate related assets and liabilities.

Inventories

Raw materials, work in progress and finished goods are stated at the lower of cost or net realizable value. Cost comprises direct materials, third-party manufacturing costs and shipping costs incurred to deliver goods to the Company’s central warehouse location.

Costs are assigned to individual items of inventory on the basis of weighted average costs. Inventory items are tracked by batch/lot number for specific identification whenever possible. The Company uses judgement to determine the proportion of inventory items held which will be provided to a hospital as part of its service delivery versus the inventory items that will be provided free of charge on hospital evaluations. Inventory items held for hospital evaluations have no realizable value.

Leases

Operating lease assets are included within operating lease right-of-use assets, and the corresponding operating lease obligation on the consolidated balance sheets as of March 31, 2025 and March 31, 2024 in accordance with ASC 842,Leases. The Company has elected not to present short-term leases as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company used an incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.

Grant Receivable

Under a collaboration arrangement with the Cystic Fibrosis Foundation (“CFF”), grant milestones are achieved subject to certain performance steps and requirements under a development program. Grant milestones are recorded as reimbursements against the applicable portion of the Company’s research and development expenses. Such reimbursements are reflected as a reduction of research and development expenses in the Company’s consolidated statements of operations and comprehensive loss, as the performance of research and development services for reimbursement is not considered to be an ongoing component or central to the Company’s operations. The grant provides for royalty payments to CFF upon the commercialization of any product developed under the grant program at a rate of 10% of net sales. The royalties are capped at four times the grant actually paid to the Company. A total of $1.9 million has been recognized as a reduction of R&D costs from this grant to date. Since the beginning of the pilot clinical trial, the Company has received milestone payments totaling $1.9 million. The trial is now successfully completed and no further payments are expected.

Research and Development

Research and development expenses are charged to the consolidated statements of operations and comprehensive loss as incurred. Research and development expenses include salaries, benefits, stock-based compensation and costs incurred by outside laboratories, manufacturers, clinical research organizations, consultants, and accredited facilities in connection with preclinical studies and clinical trials. Research and development expenses are partially offset by the benefit of tax incentive payments for qualified research and development expenditures from the Australian tax authority (“AU Tax Rebates”). The Company does not record AU Tax Rebates until payment is received due to the uncertainty of receipt. For the years ended March 31, 2025 and March 31, 2024, the Company received $0 million and $0.3 million, respectively, in AU Tax Rebates.

Foreign Exchange Transactions

The Company’s subsidiaries transact in U.S. dollars, Euros, New Israeli Shekels and Australian dollars. The Company’s main operations are in the United States and the U.S. dollar is the currency of the primary economic environment in which the Company operates and expects to continue to operate in the foreseeable future. The Company translated its non-U.S. operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Gains or losses from foreign currency transactions are included in other income (expense) in the consolidated statements of operations and comprehensive loss as foreign currency exchange gain/(loss).

In consolidating international subsidiaries, balance sheet currency effects are recorded as a component of accumulated other comprehensive income and loss. The accumulated other comprehensive income and loss account includes the cumulative results of translating certain balance sheet assets and liabilities at current exchange rates and some accounts at historical rates. For the year ended March 31, 2025, the Company recorded losses of $0.1 million in accumulated other comprehensive income. For the year ended March 31, 2024, the Company recorded losses of $0 million in accumulated other comprehensive loss.

Stock-Based Compensation

The Company measures the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. Fair value for restricted stock unit awards is valued using the closing price of the Company’s common stock on the date of grant. The grant date fair value is recognized over the requisite service period during which an employee and non-employee is required to provide service in exchange for the award, using the accelerated method with each tranche being expensed over its vesting period. The grant date fair value of employee and non-employee share options is estimated using the Black-Scholes option pricing model. The risk-free interest rate assumptions were based upon the observed interest rates appropriate for the expected term of the equity instruments. The expected dividend yield was assumed to be zero as the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable future. The Company accounts for forfeitures as they occur. Starting in 2023, Beyond Air used its own historical volatility as an input for expected volatility, but due to Beyond Cancer’s lack of marketability, the Company utilizes the implied volatility based on an aggregate of guideline companies for expected volatility. The Company uses the simplified method to estimate the expected term.

Supplier Concentration

The Company relies on third-party suppliers to provide materials for its devices and consumables.

In the year ended March 31, 2025, the Company purchased approximately 85% of its materials from a third-party vendor. In the year ended March 31, 2024, the Company purchased approximately 75% of its materials from a third-party vendor.

Customer Concentration

For the year ended March 31, 2025, the Company derived 16% and 10% of its revenues from two customers. For the year ended March 31, 2024, the Company derived 40% and 21% of its revenues from two customers.

Licensed Right to Use Technology

Licensed right to use technology that is considered platform technology with alternative future uses is recorded as an intangible asset and is amortized on a straight-line method over its estimated useful life, determined to be thirteen years.

The expected amortization expense for the next five years and thereafter is as follows for the year ended March 31 (in thousands):

Long-Lived Assets

The Company assesses the impairment of long-lived assets on an ongoing basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that the Company considers as potential triggers of an impairment review include the following:

Recoverability of assets that will continue to be used in the Company’s operations is measured by comparing the carrying value to the future net undiscounted cash flows expected to be generated by the asset or asset group. Future undiscounted cash flows include estimates of future revenues, driven by market growth rates, and estimates of future costs. There were no events during the reporting periods that were deemed to be a triggering event that would require an impairment assessment, other than an impairment of $0.5 million associated with certain R&D assets following Management’s decision to put its VCAP clinical trial on hold.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. As of March 31, 2025 and March 31, 2024, the Company recorded a valuation allowance to the full extent of the Company’s net deferred tax assets since the likelihood of realization of the benefit does not meet the more-likely-than-not threshold.

The Company’s reserves related to taxes are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. The Company would recognize both estimated accrued interest and penalties related to unrecognized benefits within income tax expense in the consolidated statements of operations and comprehensive loss. The Company’s uncertain tax positions are related to years that remain subject to examination by relevant tax authorities. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available.

Net Loss Per Share

Basic and diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to Beyond Air, Inc., by the weighted average number of shares of common stock outstanding for the period. The dilutive effect of outstanding options, warrants, restricted stock and other stock-based compensation awards is reflected in diluted net loss per share by application of the treasury stock method. The calculation of diluted net loss attributed to common stockholders per share excludes all anti-dilutive shares of common stock. For periods in which the Company has reported net losses, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because such shares of common stock are not assumed to have been issued if their effect is anti-dilutive, see Note 8.

Variable Interest Entity

As the Company has the power to direct activities of both Beyond Cancer and NeuroNos (VIE) that most significantly impact their economic performance and the right to receive benefits and losses that may potentially be significant, these financial statements are fully consolidated with those of the Company. The non-controlling owners’20% interest in Beyond Cancer’s net assets and result of operations and the non-controlling owners’11.76% interest in NeuroNos’ net assets and result of operations are reported as “non-controlling interest” on the Company’s consolidated balance sheets and as “net loss attributable to non-controlling interest” in the Company’s consolidated statements of operations and comprehensive loss. All intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements.

Recently Adopted Accounting Standards

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 (“ASU 2020-06”),Debt — Debt with Conversion and Other Options (Subtopic 470-20), to address the complexity associated with applying U.S. GAAP to certain financial instruments with characteristics of liabilities and equity, which the Company adopted on April 1, 2023. ASU 2020-06 eliminated the beneficial conversion (and cash conversion) accounting models in Subtopic 470-20 that require separate accounting for embedded conversion features, and simplified the settlement assessment to determine whether it qualifies for equity classification. In addition, the new guidance requires entities to use the if-converted method to calculate earnings per share for all convertible instruments and to include the effect of share settlement for instruments that may be settled in cash or shares. The Company adopted ASU 2020-06 using the modified retrospective approach and applied the guidance to all financial instruments that were outstanding as of the beginning of 2023. As the Company had not previously separated any financial instruments under the beneficial conversion or cash conversion accounting models, there was no cumulative effect adjustment to the opening balance of retained earnings as a result of adopting ASU 2020-06.

In November 2023, the FASB issued ASU-2023-07,Improvements to Reportable Segment Disclosures (Topic 280), to improve reportable segment disclosures about significant segment expenses. The amendments in this update requires public entities to disclose significant segment expenses that are regularly provided to the Company’s Chief Executive Officer as the Company’s Chief Operating Decision Maker (CODM). This ASU is effective for fiscal years beginning after December 15, 2023 (fiscal 2025 for the Company). We adopted this standard effective April 1, 2024 retrospectively for all periods presented. See Note 14, “Variable Interest Entities,” for further information regarding our segment reporting.

Recently Issued Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09,*Improvements to Tax Disclosures (Topic 740),*to enhance the disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 (fiscal 2026 for the Company), with early adoption permitted. The Company is assessing the impact of this ASU, and upon adoption, may be required to include certain additional disclosures in the effective income tax rate reconciliation in the footnotes to the Consolidated Financial Statements.

In November 2024, the FASB issued ASU 2024-03,Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). This standard requires disclosure of specific information about costs and expenses and becomes effective for fiscal years beginning after December 15, 2026 (fiscal 2028 for the Company), with early adoption permitted. The Company is assessing the impact of this ASU and, upon adoption, may be required to include certain additional disclosures in the footnotes to the Consolidated Financial Statements.

NOTE 3 PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Depreciation and amortization for the years ended March 31, 2025 and March 31, 2024 was $3.0 million and $1.8 million, respectively.

NOTE 4 STOCKHOLDERS’ EQUITY

On February 4, 2022, the Company entered into an At-The-Market Equity Offering Sales Agreement with Truist Securities, Inc. (the “2022 ATM”), allowing the Company to sell its common stock for aggregate sales proceeds of up to $50 million from time to time and at various prices, subject to the conditions and limitations set forth in the 2022 ATM. If shares of the Company’s common stock are sold, there is a 3% fee paid to the sales agent. Pursuant to the “baby shelf rules” promulgated by the SEC, if our public float is less than $75.0 million as of specified measurement periods, the number of shares of common stock that may be offered and sold by us under a Form S-3 registration statement, including pursuant to the 2022 ATM, in any twelve-month period is limited to an aggregate amount that does not exceed one-third of our public float. As of March 31, 2025, due to the SEC’s “baby shelf rules,” we were permitted to sell up to $6.6 million of shares of common stock pursuant to the 2022 ATM. We will remain subject to the “baby shelf rules” under the Form S-3 registration statement until such time as our public float exceeds $75.0 million.

During the year ended March 31, 2025, the Company received net proceeds of $2.1 million from the sale of 6,742,011 shares of common stock through the 2022 ATM. During the year ended March 31, 2024, the Company received net proceeds of $13.4 million from the sale of 5,131,780 shares of common stock.

On September 26, 2024, the Company entered into the Securities Purchase Agreement II with certain institutional and accredited investors, which included certain directors and officers of the Company, pursuant to which the Company sold, in a private placement offering, an aggregate of (i)24,999,999 shares of common stock (ii)15,848,712 pre-funded stock purchase warrants, (the “Pre-funded Warrants”) to purchase up to 15,848,712 shares of common stock and (iii)40,848,711 stock purchase warrants (the “Common Warrants” and together with the Pre-funded Warrants, the “Warrants”) to purchase up to 40,848,711 shares of common stock. Each common share and accompanying Common Warrant were sold together at a combined offering price of $0.5043, and each Pre-Funded Warrant and accompanying Common Warrant were sold together at a combined offering price of $0.5042 for gross proceeds of $20.6 million (which includes $2.0 million from related parties). Members of the Board of Directors and certain executives of the Company are considered related parties to this offering. The Pre-Funded Warrants have an exercise price of $0.0001 per share, and the Common Warrants have an exercise price of $0.3793 per share. The private placement offering closed on September 30, 2024. The Company received total net proceeds of $18.9 million after deductions for placement agent commissions and other offering costs of $1.4 million and $0.3 million, respectively by March 31, 2025.

The Pre-funded Warrants became exercisable on November 22, 2024 (the “Initial Exercise Date”) and shall expire when exercised in full. The Common Warrants are also exercisable on or after the Initial Exercise Date and will have a term that expires five years following the Initial Exercise Date. Both the Pre-funded Warrants and Common Warrants are exercisable on a cashless basis in the event that, at the time of exercise, there is not an effective registration statement for the resale of the shares underlying the Pre-funded Warrants or Common Warrants, as applicable. The respective Pre-funded Warrants or Common Warrants may not be exercised to the extent such exercise would cause the holder to beneficially own more than 4.99% or 9.99% of the Company’s issued and outstanding common stock. The exercise price of the Warrants is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events and also upon any distributions of assets, including cash, stock or other property to our stockholders. Subject to certain exemptions outlined in the Common Warrant, if at any time while the Common Warrants are outstanding, the Company issues or sells, or is deemed to have issued or sold, shares of common stock at an effective price per share less than the exercise price of the Common Warrants then in effect, the exercise price of the Common Warrant shall be reduced in accordance with a weighted average formula.

On March 20, 2024, the Company, entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors, including certain directors and officers of the Company pursuant to which the Company sold, in a registered direct offering, an aggregate of (i)9,638,556 shares of common stock and (ii)9,638,556 common stock purchase warrants to purchase up to 9,638,556 shares of common stock for gross proceeds of $16 million (which includes $1.2 million from related parties). Members of the Board of Directors and certain executives of the Company are considered related parties to this offering. These warrants contain a call provision which can be exercised if the Company reports $4.5 million of net sales in the quarter ending March 31, 2025. The combined offering price per share and accompanying common stock warrant is $1.66. Subject to certain ownership limitations, each common stock warrant is immediately exercisable upon issuance at an exercise price of $2.25 per share and expires three years from the date of issuance. The offering closed on March 22, 2024. The Company received net proceeds of $14.6 million after deductions for placement agent commissions and other offering costs of $1.1 million and $0.3 million, respectively.

On March 20, 2024, the Company also entered into a placement agency agreement (the “Placement Agency Agreement”) with Roth Capital Partners, LLC and Laidlaw & Company (UK) Ltd. (the “Co-Placement Agents”) as the co-placement agents in connection with the March 20, 2024 offering. Pursuant to the terms of the Placement Agency Agreement, the Co-Placement Agents agreed to use their reasonable best efforts to arrange for the sale of the securities in the offering. As compensation to the Co-Placement Agents, the Company paid the Co-Placement Agents a cash fee of 7% of the aggregate gross proceeds raised in the offering and the reimbursement of certain expenses and legal fees.

On November 22, 2024, the stockholders of the Company voted to, among other things, approve the Company’s Second Amendment to the Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock from 100,000,000 to 500,000,000 (the “Certificate of Amendment”). The additional common stock authorized by the Certificate of Amendment has rights identical to the Company’s currently outstanding common stock. The Company filed the Certificate of Amendment, which was effective upon filing, with the Secretary of State of the State of Delaware on November 25, 2024.

Stock Option Plans

The Company’s Sixth Amended and Restated 2013 Beyond Air Equity Incentive Plan (the “2013 BA Plan”) allows for awards to officers, directors, employees, and consultants of stock options, restricted stock units and restricted shares of the Company’s common stock. On January 10, 2024, the Company’s Board of Directors approved an amendment to the 2013 BA Plan to increase the number of shares in the 2013 BA Plan by 3,000,000, which was approved by the Company’s stockholders at the 2024 annual stockholder meeting on March 8, 2024. The 2013 BA Plan has 16,600,000 shares authorized for issuance. As of March 31, 2025,682,229 shares were available under the 2013 BA Plan.

Restricted Stock Units

The fair value for the restricted stock unit awards was valued at the closing price of the Company’s common stock on the date of grant. Restricted stock units vest annually over five years.

A summary of the Company’s restricted stock unit awards for the years ended March 31, 2025 and March 31, 2024 is as follows:

Stock-based compensation expense related to these grants for the years ended March 31, 2025 and March 31, 2024 was $1.0 million and $2.2 million, respectively.

As of March 31, 2025, the Company had unrecognized stock-based compensation expense for the restricted stock unit awards in the 2013 BA Plan of approximately $0.8 million which is expected to be expensed over the weighted average remaining service period of 1.6 years. For the year ended March 31, 2024, the weighted average fair value of restricted stock unit awards granted was $5.65 per share. There were no grants of restricted stock units in the year ended March 31, 2025. As of March 31, 2025, all vested shares had been issued.

Stock Options

The vesting terms of the options issued under the 2013 BA Plan are generally four years and expire ten years from the grant date.

A summary of the change in stock options for the years ended March 31, 2025 and March 31, 2024 is as follows:

As of March 31, 2025, the Company had unrecognized stock-based compensation expense for the stock options in the 2013 BA Plan of approximately $5.1 million which is expected to be expensed over the weighted average remaining service period of 1.9 years. For the years ended March 31, 2025 and March 31, 2024, the weighted average fair value of options granted was $0.47 and $1.20 per share, respectively.

On November 22, 2024, the stockholders of the Company voted to, among other things, approve the Company’s Seventh Amended and Restated 2013 Equity Incentive Plan (the “Amended 2013 Plan”) to increase the number of shares of common stock reserved for issuance by an additional 3,000,000 shares, and to give the Board authority, without stockholder approval, to (i) modify the exercise or grant price of an option or stock appreciation right after it is granted, (ii) cancel an option or stock appreciation right at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award, or (iii) take any other action that is treated as a repricing under generally accepted accounting principles.

On November 22, 2024, the Board approved a one-time stock option repricing of 10,586,473 options (“Option Repricing”), effective November 22, 2024 (“Effective Date”). The repricing was undertaken in accordance with, and as permitted by, the Company’s Amended 2013 Plan. Pursuant to the Option Repricing, all options granted pursuant to the Amended 2013 Plan that are held by Company Board members, officers, and employees expected to continue providing services to the Company were repriced, to the extent such options had an exercise price in excess of $0.54, the closing price per share of the Common Stock as reported on The Nasdaq Stock Market on November 22, 2024. As of the Effective Date, all such options were repriced such that the exercise price per share was reduced to $0.54. Stock compensation costs of $1.6 million have been recognized in relation to this share re-price.

The Company’s 2021 Beyond Cancer Ltd. Equity Incentive Plan (the “2021 BC Plan”) allows for awards to officers, directors, employees, and consultants of stock options, restricted stock units and restricted shares of Beyond Cancer Ltd.’s common stock. The vesting terms of the options issued under the 2021 BC Plan are generally four years and they expireten years from the grant date. On November 3, 2022, the Company’s Board of Directors approved an amendment to reserve for issuance an additional 2,000,000 shares of common stock. The 2021 BC Plan has 4,000,000 shares authorized for issuance. As of March 31, 2025,1,183,750 shares were available under the 2021 BC Plan.

A summary of the change in stock options for Beyond Cancer for the years ended March 31, 2025 and March 31, 2024 is as follows:

As of March 31, 2025, the Company had unrecognized stock-based compensation expense for the stock options in the 2021 BC Plan of approximately $2.2 million which is expected to be expensed over the weighted average remaining service period of 1.3 years. For the year ended March 31, 2024, the weighted average fair value of options granted was $4.60 per share. There were no grants in the year ended March 31, 2025.

On September 7, 2023, Beyond Cancer’s Board of Directors approved a modification to the exercise prices of all previously issued options to $5.50 per share. Stock compensation costs associated with the share re-price is de minimis.

The Company’s 2023 NeuroNos Ltd. Equity Incentive Plan (the “2023 NNOS Plan”) allows for awards to officers, directors, employees, and consultants of stock options, restricted stock units and restricted shares of NeuroNos Ltd.’s common stock. The vesting terms of the options issued under the 2025 NNOS Plan are generally four years and they expire ten years from the grant date. On March 31, 2025, the Company’s Board of Directors approved to reserve for issuance 1,275,000 shares of common stock. As of March 31, 2025,50,861 shares were available under the 2023 NNOS Plan.

A summary of the change in stock options for NeuroNos for the year ended March 31, 2025 is as follows:

As of March 31, 2025, the Company had unrecognized stock-based compensation expense for the stock options in the 2023 NNOS Plan of approximately $0.1 million which is expected to be expensed over the weighted average remaining service period of 1.5 years.

The following was utilized to calculate the fair value of options on the date of grant:

The Company determined the fair value per share of Beyond Cancer’s common stock to be $5.50 in fiscal years 2024 based on a third-party valuation.

The Company determined that the fair value per share of NeuroNos’ common stock to be $0.14 at the grant date in fiscal year 2025 based on a third-party valuation.

The following summarizes the components of stock-based compensation expense which included stock options and restricted stock for the years ended March 31, 2025 and March 31, 2024, in thousands:

Warrants

A summary of the Company’s outstanding warrants as of March 31, 2025 is as follows:

On September 30, 2024, warrants to purchase up to an aggregate of 40,848,711 of Company common stock were issued to certain institutional and accredited investors, including certain directors and officers of the Company at an exercise price of $0.3793 per common stock warrant. The warrant exercise price was calculated at the closing share price for September 26, 2024.961,630 warrants were exercised in the year ended March 31, 2025.

On September 30, 2024, warrants to purchase up to 15,848,712 of Company common stock were issued to with certain institutional and accredited investors, including certain directors and officers of the Company at an exercise price of $0.0001 per common stock warrant.3,721,465 warrants were exercised in the year ended March 31, 2025.

On September 30, 2024, warrants to purchase up to an aggregate of 15,159,504 of Company common stock were issued as part of a secured loan with certain lenders including its Chief Executive Officer Steven Lisi and director Robert Carey at an exercise price of $0.3793 per common stock warrant. The warrant exercise price was calculated at the closing share price for September 26, 2024. No warrants were exercised in this period.

On June 21, 2024, warrants to purchase up to an aggregate of 100,000 of Company common stock were issued to Avenue Venture Opportunities Fund, L.P., a Delaware limited partnership (“Avenue”), and Avenue Venture Opportunities Fund II, L.P., a Delaware limited partnership (“Avenue 2” and, together with Avenue, the “Lenders”) in return for extending the interest-only period for an additional 6 months on the Loan and Security Agreement with Avenue Capital. The warrant exercise price was calculated at the average closing share price for the 5 trading days prior to June 21, 2024. No warrants were exercised in this period.

Warrants to purchase up to 233,843 of Company common stock were issued to Avenue Venture Opportunities Fund, L.P., a Delaware limited partnership (“Avenue”), and Avenue Venture Opportunities Fund II, L.P, a Delaware limited partnership (“Avenue 2” and, together with Avenue, the “Lenders”) in the year ended March 31, 2024 and are liability classified. No warrants were exercised in this period. All other warrants outstanding are equity classified.

Upon completion of the Securities Purchase Agreement II and in accordance with their original terms, the 233,843 liability classified warrants issued to Avenue in connection with a convertible debt issuance had their re-priced exercise price of $1.66 per share repriced to $0.3793 per share. The previously issued warrants have been, and will continue to be, liability classified and remeasured at each reporting period until they are exercised, expire, reclassified or otherwise settled. The adjustment in the consolidated statements of operations for the exercise price has been recorded as a revaluation of warrants fair value.

ESPP

On March 4, 2021, the stockholders approved the 2021 Employee Stock Purchase Plan (“ESPP”). The purpose of the ESPP is to encourage and to enable eligible employees of the Company, through after-tax payroll deductions, to acquire proprietary interests in the Company through the purchase and ownership of shares of Stock. The ESPP is intended to benefit the Company and its stockholders by (a) incentivizing participants to contribute to the success of the Company and to operate and manage the Company’s business in a manner that will provide for the Company’s long-term growth and profitability and that will benefit its stockholders and other important stakeholders and (b) encouraging participants to remain in the employ of the Company. As of March 31, 2025 and March 31, 2024, no shares were issued under the ESPP.

NOTE 5 OTHER CURRENT ASSETS AND PREPAID EXPENSES

A summary of prepaid expenses as of March 31, 2025 and March 31, 2024 is as follows (in thousands):

NOTE 6 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

A summary of accrued expenses as of March 31, 2025 and March 31, 2024 is as follows (in thousands):

NOTE 7 LEASES

Lessees are required to recognize operating and financing lease liabilities and corresponding right-of-use assets on the consolidated balance sheets and provide disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. There were no new leases entered into during the years ended March 31, 2025 and March 31, 2024. The right-of use assets and operating lease liability are as follows (in thousands):

Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued rent. The interest rate implicit in the Company’s leases is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative and research development expenses.

The Company has other operating lease agreements with commitments of less than one year or that are not significant, of which the Company recognized $0.2 million in general and administrative expenses and less than $0.1 million in research and development expenses for the year ended March 31, 2025. For the year ended March 31, 2024, the Company recognized $0.5 million in general and administrative expenses and $0.1 million in research and development expenses for other operating lease agreements with commitments of less than one year. The Company elected the practical expedient option and as such these lease payments are expensed as incurred. For the year ended March 31, 2025, the Company recognized $0.4 million of lease expense in general and administrative costs and $0.2 million in research and development. For the year ended March 31, 2024, the Company recognized $0.4 million of lease expense in general and administrative costs and $0.2 million in research and development.

NOTE 8 BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK

In accordance with ASC 260,Earnings Per Share, warrants that are accounted for as liabilities which are potentially dilutive have not been included in diluted earnings per share as they would have been anti-dilutive during the year ended March 31, 2025.

The following potentially dilutive securities were not included in the calculation of diluted net loss per share attributable to common stockholders of Beyond Air, Inc. because their effect would have been anti-dilutive for the periods presented:

NOTE 9 CIRCASSIA AGREEMENT

On January 23, 2019, the Company entered into an agreement for commercial rights (the “Circassia Agreement”) with Circassia Limited and its affiliates (collectively, “Circassia”) for PPHN and future related indications at concentrations of < 80 ppm in the hospital setting in the United States and China. On December 18, 2019, the Company terminated the Circassia Agreement.

On May 25, 2021, the Company and Circassia entered into a settlement agreement (the “Settlement Agreement”) resolving all claims by and between both parties and mutually terminating the Circassia Agreement. Pursuant to the terms of the Settlement Agreement, the Company agreed to pay Circassia $10.5 million in three installments, which have all been paid as of March 31, 2025. As of March 31, 2025 and March 31, 2024 $0.0 million and $4.5 million is included in accrued liabilities and $4.5 million was paid to Circassia as the final settlement payment in September 2024. Additionally, beginning in year three post-approval, Circassia will receive a quarterly royalty payment equal to 5% of LungFit® PH net sales in the U.S. This royalty will terminate once the aggregate payment reaches $6.0 million. As of March 31, 2025, less than $0.1 million of royalty has been paid.

NOTE 10 LOANS

Loan and Security Agreement

On June 15, 2023, Beyond Air, Inc. and its wholly-owned subsidiary, Beyond Air Ltd., entered into a Loan and Security Agreement (the “2023 Loan and Security Agreement”) with Avenue Capital Management II, L.P., as administrative agent and collateral agent (the “Agent”) and the Lenders. Also on June 15, 2023, the Company entered into a Supplement to the Loan and Security Agreement (collectively with the Agreement, the “2023 Loan Agreement”) with the Agent and the Lenders. A total of $17.5 million was advanced under the loan. The loan principal was repayable in equal monthly installments beginning on January 1, 2025. The loans bore interest at a rate per annum equal to the greater of(i) the prime rate, as published by the Wall Street Journal from time to time, plus 3.75% and (ii) 12.00%. For the years ended March 31, 2025 and March 31 2024, the Company incurred and paid $1.1 million and $1.8 million, respectively in interest on the loan.

Also, on June 15, 2023, the Company granted the Lenders warrants to purchase an aggregate of 233,843 shares of common stock at an exercise price of the lesser of $5.88 or the price per share of the Company’s next bona fide round of equity financing before June 30, 2024 and also granted the Lenders conversion rights for up to $3.0 million in aggregate of the principal amount in common stock at a price equal to 130% of the exercise price of the warrant (1,390,176 of common stock at $2.158), for the life of the loan (the “Conversion Right”).

On June 21, 2024, the Company, in return for extending the interest-only period for an additional 6 months on the 2023 Loan and Security Agreement with Avenue Capital, entered into an agreement to issue warrants to purchase up to 100,000 shares of common stock at an exercise price of $1.28 per share and an additional end of term payment of $87,500 plus legal and amendment fees.

Upon consummation of the offering contemplated by the Securities Purchase Agreement and in accordance with their original terms, the 233,843 liability classified warrants issued the lenders had their original exercise price of $5.88 per share repriced to $1.66 per share and the original conversion price of $7.64 per share of the Conversion Right was reset to $2.16 per share.

Upon consummation of the offering contemplated by the Securities Purchase Agreement II and in accordance with their original terms, the 233,843 liability classified warrants issued the lenders had their repriced exercise price of $1.66 per share repriced to $0.38 per share.

The warrants are freestanding liability classified financial instruments to which a portion of the debt proceeds were allocated to warrants and based on the warrants estimated fair value at issuance. The remaining proceeds were allocated to the long-term debt. Costs allocated to the warrants were expensed immediately and costs allocated to the debt are recorded as a debt discount and are amortized into interest expense over the life of the debt using the effective interest method. The conversion feature was bifurcated from the debt and was accounted for as a derivative liability.

On September 30, 2024, Beyond Air and the Lenders reached an agreement to extinguish the Avenue Capital senior secured term loan for a one-time payment of $17.85 million. This agreement eliminated the debt and interest payments that would have been made to Avenue Capital from October 1, 2024 through June 30, 2026 of $12.0 million. The $17.85 million settlement was treated as an extinguishment of the loan agreement and therefore, proportionate amounts of unamortized discount and deferred financing costs were written off during the year ended March 31, 2025, resulting in the Company recording loss on extinguishment of debt of $2.5 million in the consolidated statements of operations and comprehensive loss.

Components of 2023 Loan and Security Agreement (in thousands)

NOTE 10 LOANS (continued)

On November 1, 2024, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) for a secured loan with certain lenders, including its Chief Executive Officer Steven Lisi and director Robert Carey, for an aggregate principal balance of $11.5 million. The Loan Agreement was approved by each of the Company’s independent and disinterested directors, following the receipt of a recommendation from an independent investment bank. The Loan Agreement provides for the following terms: (i) principal amount of $11,500,000; (ii) ten-year term; (iii) interest of 15% per annum of which 3% shall be payable in cash and 12% payable in kind through June 30, 2026 and thereafter all in cash; (iv) a royalty interest of 8% of the Company’s net sales on a quarterly basis from July 2026 until the facility is repaid in full; (v) the Company’s obligations will be secured by substantially all of the Company’s assets and (vi) the Company shall issue the lenders warrants to purchase shares of the Company’s common stock at an exercise price of $0.3793 per share.

As the repayments under the Loan Agreement are based on a fixed percentage of future net sales, the timing and amounts of future principal payments may vary with the Company’s performance. The outstanding debt balance has been classified in the consolidated balance sheets based on the Company’s current estimate of the repayment timing.

As part of the Loan Agreement, the Company issued 15,159,504 warrants to the lenders. The fair value of the warrants was determined using a Black-Scholes model, resulting in a fair value of $4.2 million. The warrants are classified as an equity instrument and therefore, the allocation of the loan proceeds to the instrument was based on the relative fair value of the loan and warrants. The fair value of the Loan was determined to equal the Loan’s carrying amount on the closing date. Accordingly, $3.1 million was allocated to the warrants and recorded as a debt discount. The following table summarizes the assumptions used in estimating the fair value of the warrants at issuance:

Components of Loan Agreement (in thousands)

NOTE 11 LOAN PAYABLE

As of March 31, 2025 and March 31, 2024 in connection with the Company’s insurance policy, a loan was used to finance part of the premium. The details concerning the loan are as follows:

NOTE 12 INCOME TAXES

As of March 31, 2025, the Company has approximately $159.9 million, $28.9 million, $6.3 million and $3.1 million of net operating losses (“NOL”) carryforwards for U.S. federal, Israeli, Irish and Cypriot tax purposes, respectively. The U.S. federal NOL carryforwards of approximately $1.4 million, which were generated prior to March 2018 expire starting in 2035 through 2037. The NOL of approximately $158.5 million can be carried forward indefinitely but limited to offset 80% of taxable income. The entire NOL for Israel, Ireland and Australia can be carried forward indefinitely. The Company also has state NOL carryforwards in the amount of approximately $87.7 million expiring during the years from 2036 to 2043. The Tax Cuts and Jobs Act of 2017 (“TCJA”) has modified the Internal Revenue Code (“IRC”) 174 expenses related to research and development for tax years beginning after December 31, 2021. Under the TCJA, the Company must now capitalize the expenditures related to research and development activities and amortize over five years for U.S. activities and 15 years for non-U.S. activities using a mid-year convention. Therefore, the capitalization of research and development costs in accordance with IRC 174 resulted in a gross deferred tax asset of $34.0 million.

The Company also has R&D tax credits of $2.9 million expiring during the years from 2038 to 2042. The Company has not, as yet, conducted a study of R&D credit carryforwards. This study may result in an adjustment to the Company’s R&D credit carryforwards. We assessed our uncertain tax positions and determined that a 25% reserve on our federal research and development credit is appropriate and in line with industry standards. As of March 31, 2025, the total amount of unrecognized tax benefits was $0.7 million, exclusive of interest and penalties. A full valuation allowance has been provided against the Company’s R&D credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheets and the consolidated statements of operations and comprehensive loss if an adjustment were required. No estimated interest or penalties related to unrecognized tax benefits have been recorded as of March 31, 2025.

Pursuant to Section 382 of the Internal Revenue Code, changes in the Company’s ownership may limit the amount of its NOL carryforwards that could be utilized annually to offset future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. The Company has performed a study as of March 31, 2021 and determined that on or around February 15, 2017 and February 15, 2020 ownership changes for purposes of Section 382 have occurred. The annual limitations caused by these prior ownership changes will no longer impact the utilizations of NOL’s after March 31, 2022. The Company has not updated the study since March 31, 2021 and therefore has not determined if any other NOL limitations exist.

The components of net loss before the provision for income taxes are as follows (in thousands):

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows (in thousands):

A reconciliation of income tax expense calculated at the federal enacted statutory rate of 21% is as follows:

Inflation Reduction Act

On August 16, 2022, the Inflation Reduction Act of 2022 (the “Act”) was signed into law. The Act includes a new 15% corporate minimum tax and a 1% excise tax on the value of corporate stock repurchases, net of new share issuances, after December 31, 2022. These provisions did not have a material impact on the Company’s consolidated financial position as of March 31, 2025.

**NOTE 13 COMMITMENTS AND CONTINGENCIES **

License Agreements

In August 2015, Beyond Air Ltd., a wholly-owned subsidiary of the Company (“BA Ltd.”) entered into an Option Agreement (the “Option Agreement”) with Pulmonox Technologies Corporation (“Pulmonox”) whereby BA Ltd. acquired the option (the “Option”) to purchase certain intellectual property assets and rights. On January 13, 2017, BA Ltd. exercised the Option and paid $0.5 million to Pulmonox. BA Ltd. became obligated to make certain one-time development and sales milestone payments to Pulmonox, commencing with the date on which BA Ltd. receives regulatory approval for the commercial sale of the first product candidate qualifying under the Option Agreement. These milestone payments are capped at a total of $87 million across three separate and distinct indications that fall under the agreement, with the majority of them, approximately $83 million, being sales-related based on cumulative sales milestones for each of the three products. BA Ltd. is not currently developing any qualifying products.

On January 31, 2018, the Company entered into an agreement (the “NitricGen Agreement”) with NitricGen, Inc. (“NitricGen”) to acquire a global, exclusive, transferable license and associated assets including intellectual property, know-how, trade secrets and confidential information from NitricGen related to the LungFit®. The Company acquired the licensing right to use the technology and agreed to pay NitricGen a total of $2.0 million in future payments based upon achieving certain milestones, as defined in the NitricGen Agreement, and single-digit royalties on sales of the LungFit®. The Company paid NitricGen $0.1 million upon the execution of the NitricGen Agreement, $0.1 million upon achieving the next milestone and $1.5 million in January 2023, six months after approval of the LungFit®by the FDA, and issued 100,000 warrants to purchase the Company’s common stock valued at $0.3 million upon executing the NitricGen Agreement. As of March 31, 2025 the remaining future milestone payments total $0.3 million.

Supply Agreement and Purchase Order

In August 2020, the Company entered into a supply agreement with an initial expiration date of December 31, 2024. The agreement will renew automatically for successive three-year periods unless and until the Company provides 12 months’ notice of intent not to renew. As of the date of this report, the Company has not provided such notice. The Company has opened several non-cancellable purchase orders and the outstanding amount remaining under the purchase order as of March 31, 2025 was approximately $0.4 million with this supplier. This supplier holds $4.4 million of restricted cash to partially secure materials on the Company’s behalf recorded in other current assets and prepaid expenses.

Contingencies

From time to time, we are involved in various legal matters arising in the normal course of business. We do not expect the outcome of such proceedings, either individually or in the aggregate, to have a material effect on our financial position, cash flows or results of operations.

NOTE 14 VARIABLE INTEREST ENTITIES

On November 4, 2021, the Company announced that Beyond Air and Beyond Cancer, Ltd agreed to terms to which the Company, through its subsidiaries would be licensing certain intellectual property and other assets related to, or necessary for the development, commercialization, manufacture and distribution of certain cancer treatment products and/or technologies to a subsidiary of the Company (the “2021 Transaction”). In connection and concurrently with the closing of the 2021 Transaction, Beyond Cancer issued and sold common shares, par value $1.00 to certain investors pursuant to a subscription agreement (the “2021 Offering”). The 2021 Offering consisted of an aggregate of 3 million common shares of Beyond Cancer at a purchase price of $10.00 per share. On November 18, 2021, the Company announced that the maximum amount of shares offered had been purchased for a total of $30 million (including $4.8 million from the terminated Loan Facility and $1.1 million from related parties) for 20% of the equity in Beyond Cancer. The Company retained 80% ownership of Beyond Cancer, which will have exclusive right to the intellectual property portfolio utilizing UNO for the treatment of solid tumors. Beyond Cancer will pay Beyond Air a single digit royalty on all future revenues.

Members of the Board of Directors of Beyond Air who are also members of the Board of Directors of Beyond Cancer, and their families, are considered related parties to the 2021 Offering. Related parties invested $1.1 million in the 2021 Offering.

The carrying amount of Beyond Cancer’s net assets included in the consolidated financial statements, after the elimination of intercompany balances and transactions, was $2.6 million at March 31, 2025, compared with $10.7 million at March 31, 2024. Beyond Cancer generated $9.1 million of losses (before elimination of intercompany amounts) for the year ended March 31, 2025 compared with $20.2 million of losses (before elimination of intercompany amounts) for the year ended March 31, 2024. The Company’s attributed losses as the primary beneficiary was proportional to its equity interest in Beyond Cancer (80%) for the year ended March 31, 2025.

On March 24, 2025, the Company announced that Beyond Air and NeuroNos Limited agreed to terms to which the Company, through its subsidiaries would be licensing certain intellectual property and other assets related to, or necessary for the development, commercialization, manufacture and distribution of certain neurological treatment products and/or technologies to a subsidiary of the Company (the “2025 Transaction”). In connection and concurrently with the closing of the 2025 Transaction, NeuroNos issued and sold common shares, par value $0.001 to certain investors pursuant to a subscription agreement (the “2025 Offering”). The 2025 Offering consisted of an aggregate of 666,667 common shares of NeuroNos at a purchase price of $3.00 per share. On March 31, 2025, the offered shares had been purchased for a total of $2.0 million for 11.76% of the equity in NeuroNos. The Company retained 88.24% ownership of NeuroNos, which will have exclusive right to the intellectual property portfolio for the regulation of nitric oxide as it relates to neurological therapies. NeuroNos will pay Beyond Air a single digit royalty on all future revenues.

The carrying amount of NeuroNos’ net assets included in the consolidated financial statements, after the elimination of intercompany balances and transactions, was $2.0 million at March 31, 2025. NeuroNos generated $0.8 million of losses (before elimination of intercompany amounts) for the year ended March 31, 2025. The Company’s attributed losses as the primary beneficiary was proportional to its equity interest in NeuroNos (88.24%) for the year ended March 31, 2025.

The following table summarizes segment financial information by business segment for the year ended and at March 31, 2025:

NOTE 14 VARIABLE INTEREST ENTITIES (continued)

The following table summarizes segment financial information by business segment for the year ended and at March 31, 2024:

NOTE 15 RELATED PARTY TRANSACTIONS

With the exception of the related party transactions referred to in Note 4 and Note 10, there were no additional related party transactions in the fiscal years ended March 31, 2025 and March 31, 2024.

NOTE 16 –LEASE REVENUES

The Company leases the LungFit® PH device to customers and receives a fixed rental fee over the term of the arrangement. Contract terms (generally one-to-three years) vary by customer and may include options to terminate the contract or options to extend the contract. The LungFit® PH lease agreements are accounted for as operating leases. The non-lease components, including consumables and device-related services are combined with the predominant lease component under the practical expedient. The fixed rental fee is recognized over the period of the lease agreement on a straight-line basis.

The Company recognized $3.7 million and $1.2 million in LungFit® PH lease revenues for the years ended March 31, 2025 and March 31, 2024, respectively, included revenues in the consolidated statements of operations and comprehensive loss. The Company received approximately $3.2 million and $1.0 million in cash associated with leases which the Company is the lessor for the years ended March 31, 2025 and March 31, 2024, respectively. The Company has recorded less than $0.1 million of deferred revenue in both of the years ended March 31, 2025 and March 31, 2024.

The following schedule presents the minimum future lease payments under the LungFit® PH lease arrangements that were in place as of March 31, 2025 (in thousands):

The LungFit® PH devices are included in Property and Equipment (Note 3) and have the useful life offive years. Depreciation expense related to leased LungFit® PH devices was $2.3 million and $1.0 million for the years ended March 31, 2025 and March 31, 2024, respectively.

The depreciation expense related to customer leased devices is included in the cost of revenue in the consolidated statements of operations and comprehensive loss.

Capitalized sales commissions

Sales commissions related to obtaining LungFit® PH lease agreements are accounted for as initial direct costs and are capitalized and amortized on a straight-line basis over the lease term. Total capitalized costs for the years ended March 31, 2025 and March 31, 2024 were immaterial.

NOTE 17 –SUBSEQUENT EVENTS

Subsequent to March 31, 2025, the Company received commitments from certain lenders under the Loan Agreement to provide additional financing of at least $2.0 million in aggregate principal. The additional loans are expected to be issued on terms and conditions that are materially consistent with those of the Loan Agreement.