NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
1 ORGANIZATION AND BUSINESS
Beyond
Air, Inc. (“Beyond Air” or the “Company”) was incorporated on April 24, 2015. On June 25, 2019, the Company’s
name was changed to Beyond Air, Inc. from AIT Therapeutics, Inc. The Company has the following wholly-owned subsidiaries:
Beyond
Air, Ltd. (“BA Ltd.), incorporated in Israel on May 1, 2011.
Advanced
Inhalation Therapies (AIT), a wholly owned subsidiary of Beyond Air, Ltd., incorporated on August 29, 2014, in Delaware.
Beyond
Air Australia Pty Ltd., incorporated on December 17, 2019 in Australia.
Beyond
Air Ireland Limited, incorporated on March 5, 2020 in Ireland.
The
Company is a clinical-stage medical device and biopharmaceutical company focused on developing inhaled Nitric Oxide (NO) for the
treatment of patients with respiratory conditions, including serious lung infections and pulmonary hypertension, and gaseous NO
(gNO) for the treatment of solid tumors. Since its inception, the Company has devoted substantially all of its efforts to research
and development.
The Company is developing a nitric oxide generator
and delivery system (the “LungFit™ system”) that is capable of generating NO from ambient air. The LungFit™
can generate NO up to 400 parts per million (“ppm”) for delivery to a patient’s lungs directly or via a ventilator.
The 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. Our current areas of focus with the LungFit™ are persistent
pulmonary hypertension of the newborn (“PPHN”), severe acute respiratory syndrome coronavirus 2 (“SARS CoV-2”)/acute
viral pneumonia (AVP), bronchiolitis (“BRO”) and nontuberculous mycobacteria (“NTM”) lung infection.
The Company’s product candidates will be subject to premarket reviews and approvals by the U.S. Food and Drug Administration,
or the FDA, as well as similar regulatory agencies in other countries or regions. The Premarketing Application (“PMA”)
for the LungFit™ system addressing PPHN was filed with the FDA on November 10, 2020. If approved, our
system will be marketed as a medical device initially in the United States.
Liquidity
Risks and Uncertainties
The Company has incurred cash used in operating
activities of $8.8 million for the six months ended September 30, 2020 and has accumulated losses of $69.5 million. The
Company has cash, cash equivalents and restricted cash of $22.4 million as of September 30, 2020. Based on management’s
current business plan, the Company estimates its current cash and equivalents are sufficient to finance its
operations for at least one year from the date of filing these financial statements.
The
Company’s future capital needs and the adequacy of its available funds beyond one year will depend on many factors, including,
but not necessarily limited to, the cost and time necessary for the development, clinical studies and regulatory approval
of our other medical device, indications as well as the commercial success of our first product for PPHN,
assuming PMA approval.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
1 ORGANIZATION AND BUSINESS (continued)
The
Company expects to raise additional funds through sale of equity or debt securities or through strategic collaboration
and/or licensing agreements, in order to fund operations and clinical trials until we are able to generate enough product
or royalty revenues, if any. Such financing or collaborations may not be available on acceptable terms, or at all, which
could have a material adverse effect on our growth plans, our results of operations and our financial condition.
However, the
Company’s future liquidity includes access to the following:
|
a)
|
On
April 2, 2020, Beyond Air, Inc. entered into an At The Market Equity Offering (“ATM”)
for $50 million, see
Note 5.
|
|
|
|
|
b)
|
On
March 17, 2020, the Company entered into a $25 million unsecured loan facility agreement (the “Facility Agreement”)
with certain lenders. The Company has drawn down the first of five tranches of $5 million and has the ability to drawn down
on an additional $5 million tranche at any time prior March 17, 2022 as well as the ability to draw down the remaining $15
million after the FDA approval of the LungFit™ PH product, see Note 11.
|
|
|
|
|
c)
|
On
May 14, 2020, the Company entered into a $40 million stock purchase agreement (“New Stock Purchase Agreement”)
with Lincoln Park Capital Fund, LLC (“LPC”), that replaced the former $20 million purchase agreement.
The New Stock Purchase Agreement provides for issuances through May 2023 at the Company’s discretion, see Note 5.
|
NOTE
2 SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”)
for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information
and footnotes required to be presented for complete financial statements. The accompanying unaudited condensed consolidated financial
statements reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary
for a fair presentation of the results for the interim periods presented. The accompanying unaudited condensed consolidated Balance
Sheet as of March 31, 2020 has been derived from the audited consolidated financial statements included in our Annual Report on
Form 10-K for the year ended March 31, 2020. The unaudited condensed consolidated financial statements and related disclosures
have been prepared with the assumption that users of the interim financial information have read or have access to the audited
consolidated financial statements and the related notes thereto included in the Annual Report on Form 10-K for the year ended March
31,2020 which was filed with the United States Securities and Exchange Commission, (“SEC”), on June 23, 2020.
Principles
of Consolidation
These
unaudited condensed consolidated financial statements include the accounts of the Company and the accounts of all subsidiaries.
All intercompany balances and transactions have been eliminated in the accompanying financial statements.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Use
of Estimates
The
preparation of financial statements in conformity with 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 differ from those
estimates. On an ongoing basis, the Company evaluates its significant estimates including accruals for expenses under consulting,
licensing agreements, and clinical trials, stock-based compensation, warrant fair value, assumptions associated with revenue recognition,
and the determination of deferred tax attributes and the valuation allowance thereon.
Other
Risks and Uncertainties
The
Company is subject to risks common to medical device companies including, but not limited to, new technological innovations, dependence
on key personnel, protection of proprietary technology, compliance with government regulations, product liability, uncertainty
of market acceptance of products and the potential need to obtain additional financing. The Company is dependent on third party
suppliers, in some cases single-source suppliers.
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.
The
Company’s products require approval or clearance from the U.S. Food and Drug Administration prior to commencing commercial
sales in the United States. There can be no assurance that the Company’s products will receive all of the required approvals
or clearances. 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 approvals or clearances or such approvals or clearances are delayed, it may have a material
adverse impact on the Company’s results of operations, financial position and liquidity.
The
development of our product candidates could be further disrupted and adversely affected by COVID-19. The spread of SARS CoV-2
from China to other countries has resulted in the Director General of the World Health Organization declaring COVID-19 a
pandemic on March 11, 2020. We have assessed the impact COVID-19 may have on our business plans and our ability to conduct
the preclinical studies and clinical trials as well as on our reliance on third-party manufacturing and our supply chain.
However, there can be no assurance that this analysis will enable us to avoid part or all of any impact from COVID-19 or its consequences. The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact
our operations will depend on future developments, which are still uncertain and cannot be predicted at this time.
Concentrations
The
Company’s license revenue was from milestone payments from a terminated license, see Note 10. The Company is reliant
on two vendors for commercial manufacturing of the LungFit™ generator and delivery systems and nitrogen dioxide filters
for both clinical studies and commercial supply if regulatory approval is received.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial
Instruments
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and
cash equivalents in bank deposit and other interest-bearing accounts in major banks in Israel, Ireland and the U.S., the balances
of which, at times, may exceed federally insured limits.
The
Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign
hedging arrangements.
As of September 30, 2020 and March 31,
2020, restricted cash includes $619,000 of cash that is designated for a contract manufacturer. This cash is expected
be used for material and parts that require a long lead time.
Cash
equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months
or less at acquisition.
The
following table is the reconciliation of the presentation and disclosure of financial instruments as shown on the Company’s
consolidated statements of cash flows:
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
Cash and cash equivalents
|
|
$
|
21,716,778
|
|
|
$
|
1,895,389
|
|
Restricted cash
|
|
|
636,444
|
|
|
|
459,234
|
|
Cash and cash equivalents and restricted cash
|
|
$
|
22,353,222
|
|
|
$
|
2,354,623
|
|
Revenue
Recognition
The
Company recognizes revenue when we transfer promised goods or services to customers in an amount that reflects the consideration
to which we expect to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with
customers we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s)
in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in
the contract; and (v) recognize revenue when (or as) we satisfy the performance obligation(s). At contract inception, we assess
the goods or services promised within each contract, assess whether each promised good or service is distinct and identify those
that are performance obligations.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
The
Company uses judgment to determine: a) the number of performance obligations based on the determination under step (ii)
above and whether those performance obligations are distinct from other performance obligations in the contract; b) the transaction
price under step (iii) above; and c) the stand-alone selling price for each performance obligation identified in the contract
for the allocation of transaction price in step (iv) above. The Company uses judgment to determine whether milestones or other
variable consideration, except for royalties, should be included in the transaction price. The transaction price is allocated
to each performance obligation on an estimated stand-alone selling price basis, for which the Company recognizes revenue as or
when the performance obligations under the contract are satisfied, see, Note 10.
Where
a portion of non-refundable up-front fees or other payments received are allocated to continuing performance obligations under
the terms of a license arrangement, they are recorded as contract liabilities and recognized as revenue when (or as) the underlying
performance obligation is satisfied.
Segment
reporting
Operating
segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation
by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, we
have viewed our operations and managed our business as one segment.
Research
and Development
Research and development expenses are charged
to the statement of operations as incurred. Research and development expenses include salaries, benefits, stock-based compensation
and costs incurred by outside laboratories, manufacturers, consultants, accredited facilities in connection with clinical
trials and preclinical studies. Research and development projects that have no alternative uses have
been expensed as incurred.
Foreign
Exchange Transactions
The Company’s subsidiaries have operations in Israel,
Ireland, and in Australia. Beyond Air’s 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. Thus, the functional and reporting currency of the Company is the U.S. dollar.
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. Translation adjustments resulting from exchange rate fluctuations as of September 30, 2020 were not material. Gains or
losses from foreign currency transactions are included in other income (loss) apart of the statement of operations. foreign currency
exchange gains/(losses).
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 awards is valued using the closing price of the Company’s stock on the date of grant. The
grant date fair value is recognized over the period during which an employee and non-employee is required to provide
service in exchange for the award - the requisite service period. The grant-date fair value of 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. Due to the
Company’s limited trading history, the Company utilizes an implied volatility based on an aggregate of guideline companies.
In 2020, the Company began to incorporate and weight its historical volatility with the peer group in order to obtain expected
volatility. The peer companies selected have similar characteristics, including industry and market capitalization.
The Company routinely reviews its calculation of volatility based on, the Company’s life cycle, its peer group, and
other factors. The Company uses the simplified method to estimate the expected term.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Property
and Equipment
Property
and equipment are stated at cost less accumulated depreciation and accumulated amortization. Depreciation and amortization is
calculated using the straight-line method over the estimated useful life of the assets as follows:
Computers
equipment
|
Three
years
|
Furniture
and fixtures
|
Seven
years
|
Clinical
and medical equipment
|
Five or
Fifteen years
|
Leasehold
improvements
|
Shorter
of term of lease or estimated useful life of the asset
|
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 being amortized on a straight-line method over its estimated useful life, determined to be thirteen
years. See Note 13.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Long Lived Assets
The
Company assess 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 we consider that could trigger an impairment review include the following:
●
|
significant
underperformance relative to expected historical or projected future operating results,
|
|
|
●
|
significant
changes in the manner of our use of the acquired assets or the strategy for our overall business,
|
|
|
●
|
significant
negative regulatory or economic trends, and
|
|
|
●
|
significant
technological changes, which would render equipment and manufacturing processes obsolete.
|
Recoverability
of assets that will continue to be used in our 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 estimated future costs. There were no events during the reporting periods that were deemed
to be a triggering event that would require an impairment assessment.
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 September 30, 2020, and March 31, 2020, the Company recorded
a valuation allowance to the full extent of our net deferred tax assets since the likelihood of realization of the benefit does
not meet the more likely than not threshold.
The
Company files a U.S. Federal, various state, and International income tax returns. Uncertain tax positions are reviewed on an
ongoing basis and are adjusted in light of changing facts and circumstances. Such adjustment is reflected in the tax provision
when appropriate. The Company will recognize interest and penalties, if any, related to unrecognized tax benefits in income
taxes in the statements of operations. Tax years 2016 through 2020 remain open to examination by federal and state tax jurisdictions.
The Company files tax returns in Israel for which tax years 2014 through 2020 remain open. In addition, the Company files tax
returns in Ireland and Australia and the tax year 2020 remains open.
Net
Income (Loss) Per Share
Basic
and diluted net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted
average number of common shares outstanding for the period. The dilutive effect of outstanding options, warrants, restricted
stock and other stock-based compensation awards is reflected in diluted net income (loss) per share by application of the
treasury stock method. The calculation of diluted net income (loss) attributed to common shareholders per share excludes all
anti-dilutive common shares. 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
common shares are not assumed to have been issued if their effect is anti-dilutive, see Note 9.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently
Issued Accounting Standards Not Yet Adopted
In
December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, “Income Taxes (Topic
740): Simplifying the Accounting for Income Taxes.” as part of its initiative to reduce complexity in the accounting standards.
The standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating
income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard
also clarifies and simplifies other aspects of the accounting for income taxes. The standard is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company does not
anticipate the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
In
August 2020, the FASB issued Accounting Standard Updates “ASU” ASU No. 2020-06, Debt—Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments
by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required
for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation
in certain areas. The ASU is effective for the Company on December 1, 2022, Early adoption is permitted, but no earlier than December
1, 2021. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and
related disclosures.
NOTE
3 FAIR VALUE MEASUREMENT
The Company’s financial instruments primarily
include cash, cash equivalents, restricted cash, accounts payable, loan payable and credit facility loan. Due to the short-term
nature of cash and accounts payable, the carrying amounts of these assets and liabilities approximate their fair value. Fair value
is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction
between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes
the inputs used in the valuation methodologies in measuring fair value. A fair value hierarchy has been established for valuation
inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. The fair value hierarchy is as follows:
|
Level
1 -
|
quoted
prices in active markets for identical assets or liabilities;
|
|
|
|
|
Level
2 -
|
inputs
other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar
assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other
inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities; or
|
|
|
|
|
Level
3 -
|
unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
4 PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of September 30, 2020 and March 31, 2020, respectively:
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
Clinical and medical equipment
|
|
$
|
989,716
|
|
|
$
|
357,795
|
|
Computer equipment
|
|
|
122,670
|
|
|
|
73,982
|
|
Furniture and fixtures
|
|
|
87,921
|
|
|
|
53,895
|
|
Leasehold improvements
|
|
|
21,840
|
|
|
|
5,336
|
|
|
|
|
1,222,147
|
|
|
|
491,008
|
|
Accumulated depreciation and amortization
|
|
|
(353,279
|
)
|
|
|
(279,671
|
)
|
|
|
$
|
868,868
|
|
|
$
|
211,337
|
|
Depreciation and amortization expense related
to fixed assets for the three months ended September 30, 2020 and September 30, 2019 was $39,958 and $15,917, respectively.
Depreciation and amortization expense related to fixed assets for the six months ended September 30, 2020 and September 30,
2019 was $73,608 and $33,819, respectively.
NOTE
5 SHAREHOLDERS’ EQUITY
On May 14, 2020, the Company entered into
a $40 million New Stock Purchase Agreement with LPC, that replaced the former $20 million purchase agreement. Under
the former purchase agreement, for the three months ended June 30, 2020, the Company received net proceeds of $1,958,845 from
the sale of 243,605 shares of common stock. The New Stock Purchase Agreement provides for the issuance of up to $40
million of the Company’s common stock which the Company may sell from time to time in its sole discretion
to LPC over 36 months, provided that the closing price is not below $0.25 per share and subject to conditions and limitations
in the New Stock Purchase Agreement. Pursuant to the New Stock Purchase Agreement, the Company received net
proceeds of $1,682,835 from the sale of 325,000 shares of common stock. Under these agreements, for the six months ended
September 30, 2020, the Company received net proceeds of $3,641,680 from the sale of 568,605 shares of common stock. As
of September 30, 2020, there is a balance of $37,211,500 available.
On April 2, 2020, the Company entered
into an ATM for $50 million utilizing the Company’s shelf registration statement and filed on Form S-3. The
Company may sell shares of our common stock having aggregate sales proceeds of up to $50,000,000 from time to time, subject
to the conditions and limitations in the agreement. If shares are sold, there is a three percent fee paid to the sales agent.
For the three and six months ended September 30, 2020, the Company received net proceeds of $1,536,247 and
$2,435,787 from the sale of 227,527 and 341,239 shares of the Company’s stock, respectively. As of September
30, 2020, there is a balance of $47,434,213 available under the ATM.
On
June 3, 2019, the Company entered into a Stock Purchase Agreement with investors for the issuance of
1,583,743 shares of common stock. The Company raised net proceeds was $7,839,495. The Company’s CEO participated in this
offering and invested $300,000 and received 58,253 shares of common stock, or $5.15 per share. In addition, certain directors
and employees invested $610,000 for an aggregate of 118,254 shares of common stock, at a purchase price of $5.15 per share.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
5 SHAREHOLDERS’ EQUITY (continued)
Stock
to be Issued to a Vendor
As of March 31, 2020, the Company was obligated
to issue 30,000 shares to a vendor for services related to investor relations. The fair value of the liability as of March 31,
2020 was $240,000. In May 2020, 30,000 shares were issued at the fair value of $242,100. Such amount was transferred
to shareholders’ equity.
Issuance
of Restricted Shares
Restricted
stock was issued to officers, employees and consultants. The fair value for the restricted stock awards was valued at the closing
price of the Company’s stock on the date of grant. Restricted stock vests annually over five years.
|
|
Number
Of Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
|
|
|
|
|
|
|
Unvested as of April 1, 2020
|
|
|
646,800
|
|
|
$
|
4.99
|
|
Granted
|
|
|
62,000
|
|
|
|
5.81
|
|
Unvested as of September 30, 2020
|
|
|
708,800
|
|
|
$
|
5.06
|
|
Stock-based compensation expense related to
restricted stock awards was $377,315 and $219,269 for the three months ended September 30, 2020 and September 30, 2019,
respectively. Stock-based compensation expense related to restricted stock awards was $771,176 and $348,279 for the six months
ended September 30, 2020 and September 30, 2019, respectively.
Stock
Option Plan
The
Company’s amended and restated Equity Incentive Option Plan (the “2013 Plan”), allows for awards to officers,
directors, employees, and non-employees of stock options, restricted stock units and restricted shares of the Company’s
common stock. The vesting terms of the options issued under the 2013 Plan are generally between two to four years and expire up
to ten years after the grant date. The 2013 Plan has 4,100,000 shares authorized for issuance. As of September 30, 2020,
there are 7,059 shares available under the 2013 Plan.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
5 SHAREHOLDERS’ EQUITY (continued)
A
summary of the change in options for the six months ended September 30, 2020, is as follows:
|
|
Number
Of Options
|
|
|
Weighted
Average
Exercise Price -
Options
|
|
|
Weighted
Average
Remaining
Contractual
Life-
Options
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding as of April 1, 2020
|
|
|
3,053,589
|
|
|
$
|
4.77
|
|
|
|
8.4
|
|
|
$
|
9,878,264
|
|
Granted
|
|
|
142,000
|
|
|
|
5.55
|
|
|
|
9.6
|
|
|
|
13,000
|
|
Exercised
|
|
|
(2,340
|
)
|
|
|
0.1
|
|
|
|
-
|
|
|
|
(18,386
|
)
|
Outstanding
as of September 30, 2020
|
|
|
3,193,249
|
|
|
$
|
4.80
|
|
|
|
8.3
|
|
|
$
|
1,585,844
|
|
Exercisable
as of September 30, 2020
|
|
|
1,311,874
|
|
|
$
|
4.44
|
|
|
|
7.5
|
|
|
$
|
1,004,432
|
|
As
of September 30, 2020, the Company has unrecognized stock-based compensation expense of approximately $3,407,300 related to unvested
stock options and is expected to be expensed over the weighted average remaining service period of 1.5 years. For the six
months ended September 30, 2020 and September 30, 2019, the weighted average fair value of options granted was $5.13 and
$3.49 per share. The following was utilized to calculate the fair value of options on the date of grant:
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
Risk -free interest rate
|
|
|
0.5-.07
|
%
|
|
|
1.4 -2.3
|
%
|
Expected volatility
|
|
|
87.8-92.54
|
%
|
|
|
82.3 -83.4
|
%
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected terms (in years)
|
|
|
5.18
-6.25
|
|
|
|
6.25
|
|
The
following summarizes the components of stock-based compensation expense which includes stock options and restricted stock for
the three and six months ended September 30, 2020 and September 30, 2019, respectively
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
451,500
|
|
|
$
|
183,766
|
|
|
$
|
1,288,949
|
|
|
$
|
333,688
|
|
General and administrative
|
|
|
728,114
|
|
|
|
739,231
|
|
|
|
1,706,319
|
|
|
|
1,508,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
$
|
1,179,614
|
|
|
$
|
922,997
|
|
|
$
|
2,995,268
|
|
|
$
|
1,842,034
|
|
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
5 SHAREHOLDERS’ EQUITY (continued)
Warrants
A
summary of the Company’s outstanding warrants as of September 30, 2020 are as follows:
Warrant Holders
|
|
Number Of Warrants
|
|
|
Exercise Price
|
|
|
Date of Expiration
|
|
January 2017 offering - investors
|
|
|
2,977,232
|
|
|
$
|
3.66
|
|
|
|
January
2022 (a)
|
|
March 2017 offering - investors
|
|
|
68,330
|
|
|
$
|
3.66
|
|
|
|
March
2022 (a)
|
|
March 2017 offering - placement agent
|
|
|
7,541
|
|
|
$
|
3.66
|
|
|
|
March 2022 (a)
|
|
March 2018 offering - investors
|
|
|
1,586,231
|
|
|
$
|
4.25
|
|
|
|
March 2021
|
|
Third-party license agreement
|
|
|
208,333
|
|
|
$
|
4.80
|
|
|
|
January 2024
|
|
March 2020 loan (see Note 11)
|
|
|
172,187
|
|
|
$
|
7.26
|
|
|
|
March
2025
|
|
Total
|
|
|
5,019,854
|
|
|
|
|
|
|
|
|
|
|
(a)
|
These
warrants have down round protection.
|
For the three and six months ended
September 30, 2020, there were 83,332 and 153,870 warrants exercised for $304,995 and $598,106, respectively. There were 83,332
and 153,870 shares of common stock issued for the three and six months ended September 30, 2020, respectively. For the
six months ended September 30, 2019, no warrants were exercised.
NOTE
6 OTHER CURRENT ASSETS PREPAID EXPENSES
A
summary of current assets and prepaid expenses as of September 30, 2020 and March 31, 2020 is as follows:
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
Research and development
|
|
$
|
109,622
|
|
|
$
|
266,510
|
|
Insurance
|
|
|
205,832
|
|
|
|
471,182
|
|
Professional
|
|
|
25,000
|
|
|
|
156,259
|
|
Value added tax receivable
|
|
|
46,729
|
|
|
|
124,127
|
|
Other
|
|
|
51,727
|
|
|
|
131,728
|
|
|
|
$
|
438,910
|
|
|
$
|
1,149,806
|
|
NOTE
7 ACCRUED EXPENSES
A
summary of the accrued expenses as of September 30, 2020 and March 31, 2020 is as follows:
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
Vendors – research and development
|
|
$
|
404,596
|
|
|
$
|
484,756
|
|
Professional fees
|
|
|
315,879
|
|
|
|
476,638
|
|
Employee salaries and benefits
|
|
|
273,864
|
|
|
|
71,066
|
|
Interest expense
|
|
|
193,298
|
|
|
|
-
|
|
Other
|
|
|
159,868
|
|
|
|
65,074
|
|
Total
|
|
$
|
1,347,505
|
|
|
$
|
1,097,534
|
|
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
8 LEASES
On April 1, 2019, the Company early
adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which generally requires lessees
to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide
enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. In June 2020, the Company entered into a new
lease and cancelled a lease, which resulted in the recognition of operating lease liabilities and right-of-use assets of
approximately of $236,700 and $236,900, respectively. The cancellation of the lease resulted in a derecognition of operating lease
liabilities and right-of-use assets of $19,329 and $17,486, respectively. As a result of the cancellation, the Company
recorded a gain of $1,843. The right-of use assets and operating lease liability is as follows as of September 30, 2020
and March 31, 2020.
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
Right-of-use assets
|
|
$
|
378,188
|
|
|
$
|
195,727
|
|
|
|
|
|
|
|
|
|
|
Operating lease liability short-term
|
|
$
|
82,003
|
|
|
$
|
69,342
|
|
Operating lease liability long-term
|
|
|
301,664
|
|
|
|
131,581
|
|
|
|
$
|
383,667
|
|
|
$
|
200,923
|
|
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
our 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. As of September 30, 2020, and March 31,2020, the weighted average discount
rate and remaining term on lease obligation is approximately 8.3%, 8.3%, 4.5 and 3.0 years, respectively. Operating lease expense
is recognized on a straight-line basis over the lease term and is included in general and administrative expenses.
NOTE 9 BASIC AND DILUTED NET INCOME
(LOSS) PER COMMON SHARE
The
following potentially dilutive securities were not included in the calculation of diluted net income (loss) per share attributable
to common stockholders because their effect would have been anti-dilutive for the periods presented:
|
|
September
30, 2020
|
|
|
September
30, 2019
|
|
|
|
|
|
|
|
|
Common stock warrants
|
|
|
5,019,854
|
|
|
|
6,143,405
|
|
Common stock options
|
|
|
3,193,249
|
|
|
|
2,353,115
|
|
Restricted shares
|
|
|
708,800
|
|
|
|
335,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,921,903
|
|
|
|
8,831,520
|
|
NOTE
10 LICENSE AGREEMENT
On January 23, 2019, the Company entered into
an agreement for commercial rights (the “License Agreement”) with Circassia Limited and its affiliates (collectively,
“Circassia”) for persistent pulmonary hypertension of the newborn (“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 License Agreement, see Note 13. The Company would have received payments up to $32.55 million in up front and regulatory
milestones, payable in cash or ordinary shares
of Circassia, at the discretion of Circassia, with payments in cash discounted by approximately 5%.
This contract was evaluated under Accounting
Standards Codification (“ASC”) 606 and it was determined that the contract consisted of five
performance obligations with only the following two obligations required prior to the termination of the License
Agreement.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10 LICENSE AGREEMENT (continued)
●
|
Performance
Obligation 1: non-exclusive transfer of functional intellectual property rights to Circassia, which includes:
|
|
○
|
the
consummation of the License Agreement, which included significant pre-agreement negotiation, product specification, and
|
|
|
|
|
○
|
the
successful completion of the pre-submission meeting with the FDA. At this meeting, the FDA reinforced their assessment
of the LungFit™ PH as a medical device and the requirements for approval.
|
●
|
Performance
Obligation 2: ongoing support associated with the PMA submission and regulatory approval by the FDA. This also includes development
activities including manufacturing readiness process ahead of the approval.
|
In
consideration of the rights and licenses granted to Circassia by the Company, five milestones were included. The Company received
the first two milestone payments in ordinary shares of Circassia
●
|
$7.35
million or 12,300,971 ordinary shares of Circassia upon signing (received in quarter four of fiscal year ended March 31, 2019);
|
|
|
●
|
$3.15
million or 5,271,844 ordinary shares of Circassia payable within five (5) business days following the successful completion
of a Food and Drug Administration (the “FDA”) pre-submission meeting (received in quarter four of fiscal year
ended March 31, 2019);
|
During the three months ended March 31, 2019,
the Company met the first two milestones under the license agreement and received 17,572,815 ordinary shares valued at $9,987,295.
This consideration was allocated to the first two performance obligations; one being the transfer of the intellectual property
to Circassia, which was recognized at a point in time and was valued at $7,116,232 and the other being the ongoing support associated
with the PMA submission and regulatory approval by the FDA, which was valued at $2,871,063 and was recorded as deferred
revenue. This is being recognized over a period of time from the commencement of the agreement to when management expects
to submit the PMA. License revenue of $349,607 and $645,602 associated with this second performance obligation has been
recognized for the three months ended September 30, 2020 and September 30, 2019, respectively. License revenue of $579,768 and
$1,273,071 associated with this second performance obligation has been recognized for the six months ended September 30, 2020
and September 30, 2019, respectively. As of September 30, 2020, and March 31, 2020, deferred revenue was $294,422 and $873,190,
respectively.
NOTE
11 FACILITY AGREEMENT LOAN
On March 17, 2020, the Company entered into
a facility agreement with certain lenders for up to $25,000,000 in five tranches of $5,000,000 per tranche. Such tranches
are at the option of the Company, provided however that the Company may only utilize tranches three through five following
FDA approval of our the LungFit™ PH product. The loan(s) are unsecured with interest at 10% per year which is to be paid
quarterly. The loans may be prepaid with certain prepayment penalties. The effective interest rate for this loan is 13.3% per
year. Each tranche shall be repaid in installments commencing June 15, 2023 with all amounts outstanding under any tranche due
on March 17, 2025. The Company received proceeds from the first tranche in fiscal year 2020. A lender who is over a five
percent shareholder, loaned the Company $3,160,000 of the first tranche and, as such, related party interest expense for
the three and six months ended September 30, 2020 approximated $79,000 and $158,000 (not including amortization of debt
discount and deferred offering costs), respectively.
In connection with the first tranche, the Company issued, in March 2020,
warrants to the lenders for the purchase of 172,826 shares of the Company’s common stock at $7.26 per share. The warrants
expire in five years. There are additional warrant issuances associated with each tranche. If the second tranche of $5 million
is utilized by the Company, the warrants that will be issued is up to twenty five percent of its commitment value divided
by the five day volume weighed average price “(VWAP”) prior to utilization date. For tranches three to five, if any
of these tranches are utilized by the Company, the warrants that will be issued is up to ten percent of its commitment
value divided by the five day VWAP. As a result, the Company allocated the fair market
value at the date of grant of the warrants to stockholders’ equity and reflected a debt discount valued at $594,979
using the Black Scholes pricing model.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED
NOTE
11 FACILITY AGREEMENT LOAN (continued)
The Black-Scholes pricing model used the following assumptions:
Expected term in years
|
|
|
5.0
|
|
Volatility
|
|
|
87.5
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
Risk-free interest rate
|
|
|
0.7
|
%
|
A
summary of the facility agreement loan balance as of September 30, 2020 and March 31, 2020 is as follows:
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
Face value of loan
|
|
$
|
5,000,000
|
|
|
$
|
5,000,000
|
|
Debt discount
|
|
|
(594,979
|
)
|
|
|
(594,979
|
)
|
Accretion of interest expense
|
|
|
71,312
|
|
|
|
4,562
|
|
Debt offering costs
|
|
|
(70,518
|
)
|
|
|
(70,518
|
)
|
Facility agreement loan balance
|
|
$
|
4,405,815
|
|
|
$
|
4,339,065
|
|
Maturity of Facility Agreement Loan
|
|
September 30, 2020
|
|
|
|
|
|
2021
|
|
$
|
-
|
|
2022
|
|
|
-
|
|
2023
|
|
|
1,500,000
|
|
2024
|
|
|
2,750,000
|
|
2025
|
|
|
750,000
|
|
Total
|
|
$
|
5,000,000
|
|
NOTE
12 LOAN PAYABLE
As
of September 30, 2020, and March 31, 2020, in connection with the Company’s insurance policy, a loan was used to finance
part of the premium. The loan is due within the year with monthly payments of $42,366 bearing interest at 4.3%. The outstanding
balance as of September 30, 2020 and March 31, 2020 was $84,280 and $335,358, respectively.
NOTE
13 COMMITMENTS AND CONTINGENCIES
License
Agreements
On
October 22, 2013, the Company entered into a patent license agreement with CareFusion, pursuant to which it agreed to pay to the
third party a non-refundable upfront fee of $150,000 and is obligated to pay 5% royalties of any licensed product net sales, but
at least $50,000 per annum through the term of the agreement and the advance is credited against future royalties payments. As
of September 30, 2020, the Company did not pay any royalties since the Company did not have any revenues from the technology
associated with this license. The term of the agreement extends through the life of applicable patents and may be terminated
by either party with 60 days’ prior written notice in the event of a breach of the agreement, and may be terminated unilaterally
by CareFusion with 30 days’ prior written notice in the event that we do not meet certain milestones.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
13 COMMITMENTS AND CONTINGENCIES (continued)
In
August 2015, BA Ltd. entered into an Option Agreement (the “Option Agreement”) with Pulmonox whereby BA Ltd. acquired
the option to purchase certain intellectual property assets and rights (the “Option”) on September 7, 2016 for $25,000.
On January 13, 2017, the Company exercised the Option and paid $500,000. The Company becomes obligated to make certain one-time
development and sales milestone payments to Pulmonox, commencing with the date on which we receive regulatory approval for the
commercial sale of the first product candidate qualifying under the 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.
On January 31, 2018 the Company entered into
an agreement (“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 $2,000,000 in future payments based upon achieving certain milestones, as defined in the Agreement, and royalties on
sales of LungFit™. The Company paid NitricGen $100,000 upon the execution of the Agreement, $100,000 upon achieving
the next milestone and issued 100,000 options to purchase the Company’s stock valued at $295,000 upon executing the Agreement.
The remaining future milestone payments are $1,800,000 of which $1,500,000 is due after six months after the first
approval of the LungFit™ by the Food and Drug Administration or the European Medicine Evaluation Agency.
Employment
Agreements
Certain
officer agreements contain a change of control provision for payment of severance arrangements.
Supply
Agreement and Purchase Order
In
August 2020, the Company entered into a supply agreement
expiring on December 31, 2024. The agreement will renew automatically for successive three-year periods unless and until the Company
provides twelve months’ notice of intent not to renew. In July 2020, the Company placed a non-cancellable purchase order
for approximately $1,300,000 with this supplier.
Operating
Leases
The
Company cancelled a lease in May 2020 for its location in Madison, Wisconsin. In June 2020, the Company entered into a lease for
office space and research facility in Madison, Wisconsin. The lease agreement expires in May 2026.
In May 2018,
the Company entered into an operating lease for its corporate office in Garden City, New York. In August 2020, the Company
entered into an operating lease to move its corporate office to another location in Garden City, New York. It is expected
that Beyond Air will move into this space in the beginning of January 2021.
BEYOND
AIR, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSENDED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
13 COMMITMENTS AND CONTINGENCIES (continued)
The
Company has other operating lease agreements with commitments of less than one year or that are not significant. The Company
elected the practical expedient option and as such these lease payments are expensed as incurred. Included in the maturity
of lease liabilities below is the aforementioned new operating lease in the amount of $2,035,601, which upon commencement, the Company will record the
operating lease liabilities and corresponding right-of-use assets on the balance sheet pursuant to ASC 842, as
amended.
Other Information For The Six Months Ended September 30, 2020
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Cash paid
|
|
$
|
47,625
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities:
|
|
|
-
|
|
Weighted-average remaining lease term — operating leases
|
|
|
4.5 years
|
|
Weighted-average discount rate — operating leases
|
|
|
8.3
|
%
|
Maturity of Lease Liabilities
|
|
Operating Leases
|
|
Payments remaining for the year ended March 31,:
|
|
|
|
|
2021(excluding the six months ended September 30, 2020)
|
|
$
|
68,408
|
|
2022
|
|
|
278,214
|
|
2023
|
|
|
285,868
|
|
2024
|
|
|
243,596
|
|
2025
|
|
|
233,632
|
|
Thereafter
|
|
|
1,385,499
|
|
Total lease payments
|
|
|
2,495,217
|
|
Less: interest
|
|
|
(75,949
|
)
|
Present value of lease liabilities
|
|
$
|
2,419,268
|
|
Contingencies
On
March 16, 2018, Empery Asset Master, Ltd., Empery Tax Efficient, LP and Empery Tax Efficient II, LP, (collectively, “Empery”),
filed a complaint in the Supreme Court of the State of New York, relating to the notice of adjustment of both the exercise price
of and the number of warrant shares issuable under warrants issued to Empery in January 2017. The Empery Suit alleges that, as
a result of certain circumstances in connection with our February 2018 offering, the 166,672 warrants issued to Empery in January
2017 provide for adjustments to both the exercise price of the warrants and the number of warrant shares issuable upon such exercise.
Empery seeks monetary damages and declaratory relief under theories of breach of contract or contract reformation predicated on
mutual mistake.
While the Company believes that it has complied with the applicable protective features of the 2017 Warrants and
properly adjusted the exercise price, if Empery were to prevail on all claims, the new adjusted total number of warrant shares
could be as follows: 319,967 warrant shares for Empery Master, 159,869 warrant shares for Empery I and 252,672 warrant shares
for Empery II and the exercise price could be reduced from $3.66 to $1.57 per share. While the Company has several meritorious
defenses against the claims, the ultimate resolution of the matter, if unfavorable, could result in a material loss. On March
9, 2020, we filed a motion for summary judgment, which was denied by order of the Court entered on August 20, 2020, except
for the second claim for relief for declaratory judgment which was dismissed as moot. On October 1, 2020, we filed a motion seeking
leave to reargue, and upon reargument, requesting that the Court grant summary judgment dismissing claims for breach of section
3(b) and reformation.
On
December 18, 2019, the Company terminated the License Agreement with Circassia pursuant to which the Company had granted Circassia
an exclusive royalty-bearing license to distribute, market and sell the Company’s nitric oxide generator and delivery system
in the United States and China. As previously described in Note 9, Circassia had agreed to pay the Company certain milestone and
royalty payments, with the remaining milestone and royalty payments payable in cash or ordinary shares of Circassia at Circassia’s
option. The Company terminated the Agreement pursuant to section 13.3(b) of the Agreement, which provides for termination by either
party upon the other party’s material breach or default. In connection with the termination of the license with Circassia, we may be subject to a
variety of claims. Adverse outcomes in some or all of these claims, if filed, may adversely affect our ability to conduct business
and our financial condition and results of operations.
NOTE
14 SUBSEQUENT EVENTS
The
PMA for the LungFit™ system addressing PPHN was filed with the FDA on November 10, 2020. If approved, our system
will be marketed as a medical device initially in the United States.