The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with "our consolidated financial
statements and related notes appearing elsewhere in this Annual Report on Form
10-K. This discussion and other parts of this Annual Report contain
forward-looking statements that involve risks and uncertainties, such as
statements regarding our plans, objectives, expectations, intentions and
projections. Our actual results could differ materially from those discussed in
these forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in Item 1A "Risk
Factors."



Introduction



We are 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. Our first
device, LungFit® PH received approval for PPHN in June 2022. 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. We believe that 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 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. Our current areas of focus with LungFit® is PPHN, AVP
including COVID-19, BRO NTM lung infection and those with various severe lung
infections with underlying COPD. Our current product candidates will be subject
to premarket reviews and certifications or regulatory approvals by the FDA, as
well as comparable foreign regulatory authorities in other countries or regions.



We also expect to be certified under the EU MDR in the second half of calendar
year 2022. We also expect to make certain regulatory filings outside of the U.S.
this year. If certifications or regulatory approvals are obtained, we anticipate
a product launch in 2023 outside of the U.S.



COVID-19




The development of our product candidates and the commercialization of our
approved product could be further disrupted and adversely affected by a
resurgence of the COVID-19 pandemic. We experienced significant delays in the
supply chain for the LungFit® system due to the redundancy in parts and
suppliers for ventilator manufacturing, which have since been remedied. We
continually assess the impact that 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 we will be able to avoid part or all of any impact from
COVID-19 or its consequences if a resurgence occurs.



Financial Operations Overview

Critical Accounting Policies and Use of Estimates





Use of Estimates



The preparation of consolidated financial statements in conformity with
generally accepted accounting principles in the United States 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, we evaluate our 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, contingency recognition and accruals and the determination of
valuation allowance requirements on deferred tax attributes.



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, clinical research organizations, consultants, and accredited
facilities in connection with clinical trials and preclinical studies. 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"). We do not record AU Tax Rebates until payment
is received due to the uncertainty of receipt. As of March 31, 2022, we have not
received any AU Tax Rebates.



74






Stock-Based Compensation



We measure 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 our common 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 we
have not paid any dividends since our inception and do not anticipate paying
dividends in the foreseeable future. Due to our limited trading history, we
utilize an implied volatility based on an aggregate of guideline companies. In
2020, we began to incorporate and weight our historical volatility with our peer
group in order to obtain expected volatility. The peer companies selected have
similar characteristics, including industry and market capitalization. We
routinely review our calculation of volatility based on our life cycle, our peer
group, and other factors. We use the simplified method to estimate the expected
term.

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.



Income Taxes



We account 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 we are able to realize the benefit,
or that future deductibility is uncertain. As of March 31, 2022 and March 31,
2021, we 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.



We file 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. We will recognize interest and penalties, if
any, related to unrecognized tax benefits in income taxes in the statements of
operations. Tax years 2018 through 2022 remain open to examination by federal
and state tax jurisdictions. We file tax returns in Israel for which tax years
2016 through 2022 remain open. In addition, we file tax returns in Ireland and
Australia and the tax years 2021 and 2022 remain open.



COMMITMENTS AND CONTINGENCIES



License Agreements



On October 22, 2013, the Company entered into a patent license agreement (the
"CareFusion Agreement") with SensorMedics Corporation, a subsidiary of
CareFusion Corp. ("CareFusion"), pursuant to which the Company agreed to pay to
CareFusion a non-refundable upfront fee of $150 thousand that is credited
against future royalty payments, and is obligated to pay 5% royalties of any
licensed product net sales, but at least $50 thousand per annum during the term
of the agreement. As of March 31, 2021, the Company has not paid any royalties
to CareFusion since the Company has not received any revenues from the
technology associated with the license under the CareFusion Agreement. The term
of the CareFusion 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 CareFusion Agreement, and may be terminated
unilaterally by CareFusion with 30 days' prior written notice in the event that
the Company does not meet certain milestones.





75






In August 2015, BA Ltd. entered into the Option Agreement with Pulmonox whereby
BA Ltd. acquired the option to purchase certain intellectual property assets and
rights on September 7, 2016 for $25 thousand. On January 13, 2017, we exercised
the Option and paid $500 thousand to Pulmonox. We become 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 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.



On January 31, 2018, we entered into the NitricGen Agreement 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® We acquired the licensing right to use the
technology and agreed to pay NitricGen a total of $2 million in future payments
based upon achieving certain milestones, as defined in the NitricGen Agreement,
and royalties on sales of the LungFit® We paid NitricGen $100 thousand upon the
execution of the NitricGen Agreement, $100 thousand upon achieving the next
milestone and issued to NitricGen 100,000 warrants to purchase our common stock
valued at $295 thousand upon executing the NitricGen Agreement. The remaining
future milestone payments are $1.8 million, of which $1.5 million are due within
six months.



Contingencies



On March 16, 2018, Empery filed a complaint in the Trial Court against us
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. Empery alleges that, as a result of certain circumstances in connection
with a February 2018 financing transaction, 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.



On August 20, 2020, the Trial Court denied our summary judgment motion as to the
first and third claims for relief, but dismissed the second claim for
declaratory judgment as moot. The Appellate Division First Department denied our
appeal of the August 20 Decision on September 30, 2021. Following a three-day
bench trial, the Trial Court issued a decision on October 14, 2021, finding in
favor of Empery on the two remaining claims, granting reformation of the Warrant
Agreement, and awarding Empery damages in the aggregate amount of approximately
$5.8 million. On November 12, 2021, we filed a notice of appeal. Pending appeal,
we are required to use approximately $7.4 million of cash as collateral to
secure a supersedeas bond for the full amount of damages and interest in case we
are unsuccessful in our appeal. On September 30, 2021, we recorded an estimate
for a contingent loss of $2.4 million related to the Empery litigation. In
consultation with outside legal counsel, we believe that we have several
meritorious defenses against the claims, and the decision of the Trial Court
including, but not limited to, the quantification of damages.



On December 28, 2021 Hudson filed a lawsuit against us related to the notice of
adjustment of the exercise price of and the number of warrant shares issuable
under warrants issued to Hudson in January 2017. Hudson received 83,334 warrants
in connection with the January 2017 offering.



Hudson's complaint alleges breach of contract and that Hudson is entitled to
damages estimated at approximately $2.6 million as a result of certain
adjustments to the exercise price and number of warrant shares issuable
following the February 2018 financing transaction. The fact pattern of these
claims differs from the claims associated with the initial Empery judgment and
in consultation with outside legal counsel, we believe that we have several
meritorious defenses against Hudson's claims. We believe that Hudson's claims
have no merit and we will vigorously defend such lawsuit.



76






On May 25, 2021, we and Circassia Limited entered into a Settlement Agreement
resolving all claims by and between both parties and mutually terminating the
Circassia agreement disclosed in Note 10 of the consolidated financial
statements included in this Annual Report. Pursuant to the terms of the
Settlement Agreement, we agreed to pay Circassia $10.5 million in three
installments, the first being a payment of $2.5 million on the Initial Payment
Due Date. Thereafter, we shall pay $3.5 million to Circassia on the first
anniversary of the Initial Payment Due Date and $4.5 million on the second
anniversary of the Initial Payment Due Date. 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 million.

Results of Operations and Other Comprehensive Income (Loss)

(in thousands, except number of shares and loss per Year Ended 


  Year Ended
                      share)                           March 31, 2022       March 31, 2021

License revenue                                       $              -     $            873

Operating expenses
Research and development                                       (11,802 )            (12,618 )
General and administrative                                     (18,408 )            (10,468 )
Liability from settlements contingent on FDA
approval                                                       (10,500 )                  -

Loss from operations                                           (40,710 )            (22,214 )

Other income (expense)

Estimated liability for contingent loss                         (2,435 )                  -
Dividend and interest income                                         4                   17
Interest expense and financing expense                            (775 )               (642 )
Foreign exchange loss (gain)                                      (144 )                (37 )
Total other loss                                                (3,350 )               (661 )

Net loss before income taxes                                   (44,060 )   

        (22,875 )

Benefit for income taxes                                             -                    -

Net loss                                              $        (44,060 )   $        (22,875 )

Less : Net loss attributable to non-controlling
interests                                                         (882 )                  -

Net loss attributed to Beyond Air, Inc.               $        (43,177 )

$ (22,875 )



Other Comprehensive Income:
Foreign currency translation gain                                   96                    -

Comprehensive loss attributable to Beyond Air, Inc.            (43,081 )

(22,875 )


Net loss per share - basic and diluted                $          (1.68 )

$ (1.27 )



Weighted average number of shares of common stock
outstanding - basic and diluted                             25,668,230     

     18,005,226



77

Comparison of the year ended March 31, 2022 to the year ended March 31, 2021





License Revenue



On January 23, 2019, we entered into the Circassia Agreement 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, we terminated the Circassia
Agreement. On May 25, 2021, we entered into a settlement with Circassia whereby
we retain all rights to LungFit®.



As of March 31, 2022, we met our performance obligation under the Circassia
Agreement and revenue therefrom has been previously recognized. License revenue
of $0 and $873 thousand associated with the Company's second performance
obligation has been recognized for the year ended March 31, 2022 and March 31,
2021, respectively. No further revenue will be recognized from the former
performance obligations due to the settlement entered into in May 2021. See

Note
10.

Revenue from the commercialization of LungFit® PH is expected to commence in the second half of fiscal 2023.





Research and Development



Research and development expenses for the year ended March 31, 2022 were $11.8
million, as compared to $12.6 million for the year ended March 31, 2021. The
decrease of $0.8 million was attributed primarily to a decrease in investment in
Covid studies ($1.2 million), a reduction in stock-based compensation and
salaries ($0.6 million) and a reduction in the development costs for PH (for
$0.5 million) partially offset by an increased pre-clinical expense in Oncology
(including Beyond Cancer) of $1.5 million.

General and Administrative Expenses





General and administrative expense for the year ended March 31, 2022 and March
31, 2021 were $18.4 million and $10.5 million, respectively. The increase of
$7.9 million was attributed primarily to an increase in stock-based compensation
($3.1 million) and salaries ($2.2 million) mainly driven by an increase of 16
positions globally, legal and professional fees ($1.0 million), leases and
related office costs ($0.5 million), IT costs ($0.5 million) and increased
insurance costs ($0.4 million).



Other Operating Expenses

Other operating expenses for the year ended March 31, 2022 were ($10.5) million, attributed to the recognition of liabilities that were contingent on FDA approval of LungFit PH with Circassia ($10.5 million).





Other Income and Expense




Net other expense for the year ended March 31, 2022 and March 31, 2021 were
($3.4) million and ($0.7) million, respectively. The increase of $2.7 million
was attributed primarily to an estimated liability for a contingent loss on a
lawsuit ($2.4 million) and accretion of debt discount costs ($0.4 million).

Net Loss Attributable to Non-controlling Interests





Net loss attributed to non-controlling interests for the year ended March 31,
2022, was $0.9 million, compared to $0 for the year ended March 31, 2021.
Non-controlling interests represent 20% of the net loss of our Beyond Cancer
subsidiary which was established in November 2021.

Net Loss Attributed to Common Stockholders





Net loss attributed to common stockholders for the year ended March 31, 2022,
was ($43.2) million or a loss of ($1.68) per share, basic and diluted. As a
result of the foregoing, our net loss attributed to common stockholders for the
year ended March 31, 2021, was ($22.9) million or a loss of ($1.27) per share,
basic and diluted.



78

Liquidity and Capital Resources





We have not generated any revenue from the sale of products, but now that we
have obtained regulatory approval LungFit® PH, we expect to begin generating
revenue in fiscal 2023. We had an operating cash flow decrease of $23.1 million
for the year ended March 31, 2022 and we have experienced an accumulated loss of
$123.6 million since inception through March 31, 2022. As of March 31, 2022, we
had cash and cash equivalents of $80.2 million and $10.0 million restricted
cash. We believe that our cash and cash equivalents as of March 31, 2022 will
enable us to fund our operating expenses and capital expenditure requirements
into the fourth fiscal quarter of 2024.



Our future capital needs and the adequacy of its available funds beyond one year
from the date of filing these financial statements will depend on many factors,
including, but not necessarily limited to, the cost and time necessary for the
development, clinical studies and certification or regulatory approval of our
other medical devices, indications as well as the commercial success of our
approved product and any product candidates that receive marketing approval by
the FDA. We may be required to raise additional funds through sale of equity or
debt securities or through strategic collaborations and/or licensing agreements
in order to fund operations until we are able to generate enough product or
royalty revenues, if any. Financing may not be available on acceptable terms, or
at all, and our failure to raise capital when needed could have a material
adverse effect on our strategic objectives, results of operations and financial
condition.



On March 17, 2020, we entered into a facility agreement with certain lenders for
up to $25.0 million in five tranches of $5.0 million per tranche (the "Facility
Agreement"). We received proceeds from the first tranche in fiscal year 2020.
During October 2021, we amended the Facility agreement to offer the lenders the
ability to accept redemption of all amounts outstanding from the first tranche
of $5.0 million and to terminate the Facility Agreement without penalty. The
Facility Agreement was terminated on November 10, 2021.



In connection with the termination of the Facility Agreement, on November 8,
2021, the Company entered into a modification of the Facility Agreement for one
lender to allow for repayment of $0.2 million on unchanged payment terms. The
loan is unsecured with interest at 10% per year which is to be paid quarterly.
The loan shall be repaid in installments commencing on June 15, 2023 with all
outstanding amounts due on March 17, 2025.



On April 2, 2020, we entered an At-The-Market Equity Offering Sales Agreement
with SunTrust Robinson Humphrey, Inc. and Oppenheimer & Co. (the "2020 ATM").
Under the 2020 ATM, we may sell shares of our common stock having aggregate
sales proceeds of up to $50 million, from time to time and at various prices. If
shares of our common stock are sold, there is a 3% fee paid to the sales agent.
As of March 31, 2022, there were no remaining funds available under the 2020
ATM.



On February 4, 2022, we entered into a new At-The-Market Equity Offering Sales
Agreement with Truist Securities, Inc. and Oppenheimer & Co, Inc. (the "2022
ATM"). Under the 2022 ATM, we may sell shares of our common stock having
aggregate sales proceeds of up to $50 million, from time to time and at various
prices. If shares of our common stock are sold, there is a 3% fee paid to the
sales agent. As of March 31, 2022, there was a balance of $50 million available
under the 2022 ATM.



On May 14, 2020, we entered into a $40 million stock purchase agreement (the
"New Stock Purchase Agreement") with Lincoln Park Capital Fund, LLC ("LPC"),
which replaced the former $20 million purchase agreement with LPC, dated August
10, 2018. The New Stock Purchase Agreement provides for the issuance of up to
$40 million of our common stock, which we may sell from time to time in our sole
discretion, to LPC over a period of 36 months, subject to the conditions and
limitations in the New Stock Purchase Agreement. As of March 31, 2022, there was
a balance of approximately $18.1 million available under the New Stock Purchase
Agreement.




Our ability to continue to operate beyond the fourth fiscal quarter of 2024 will
be largely dependent upon the successful commercial launch of LungFit® PH, as
well as obtaining partners in other parts of the world, and raising additional
funds to finance our activities until we are generating cash flow from
operations. Further, there are no assurances that we will be successful in
obtaining an adequate level of financing for the development and
commercialization of our other product candidates.



79







There are numerous risks and uncertainties associated with the development of
our NO delivery system and we are unable to estimate the amounts of increased
capital outlays and operating expenses associated with completing the research
and development of our product candidates.

Our future capital requirements will depend on many factors, including:

? the effects of the COVID-19 pandemic on our business, the medical community

and the global economy;

? the progress and costs of our preclinical studies, clinical trials and other

research and development activities;

? the costs of commercializing the LungFit® system;

? the scope, prioritization and number of our clinical trials and other research

and development programs;

? the costs and timing of obtaining certification or regulatory approval for our

product candidates;

? the costs of filing, prosecuting, enforcing and defending patent claims and

other intellectual property rights;

? the costs of, and timing for, strengthening our manufacturing agreements for

production of sufficient clinical quantities of our product candidate;

? the potential costs of contracting with third parties to provide marketing and

distribution services for us or for building such capacities internally;

? the costs of acquiring or undertaking the development and commercialization

efforts for additional, future therapeutic applications of our product

candidate;

? the magnitude of our general and administrative expenses; and

? any cost that we may incur under current and future in-and out-licensing


    arrangements relating to our product candidate.




Cash Flows



Below is a summary of the statements of cash flows for the years ended March 31,
2022 and March 31, 2021.



                                                    For The Year Ended       For The Year Ended
                 (in thousands)                       March 31, 2022

March 31, 2021



Net cash provided by (used in):
Operating activities                               $            (23,134 )   $            (19,639 )
Investing activities                               $             (1,450 )   $               (890 )
Financing activities                               $             79,450     $             30,332

Effect of exchange rate changes                    $                 96     $                  -
Net increase in cash, cash equivalents and
restricted cash                                    $             54,962     $              9,803

Comparison between March 31, 2022 and March 31, 2021





For the year ended March 31, 2022, net cash used by operating activities was
$23.1 million which was primarily due to our net loss of $44.1 million, which
included non-cash stock based compensation of $7.8 million and an increase in
liabilities for the recognition of contingent liabilities of $10.5 million and a
contingent liability for a lawsuit of $2.5 million. For the year ended March 31,
2021, net cash used by operating activities was $19.6 million which was
primarily due to our net loss of $22.9 million, an increase in grant receivable
of $0.4 million, a net decrease in deferred revenue of $0.9 million, partially
offset by non-cash stock based compensation of $4.9 million.



80






Investing Activities



For the year ended March 31, 2022, cash used in investing activities was $1.4
million which was from purchase of property and equipment. For the year ended
March 31, 2021, cash used in investing activities was $0.9 million which was
from the purchase of property and equipment.



Financing Activities



For the year ended March 31, 2022, net cash provided by financing activities was
$79.5 million which was primarily from the issuance of common stock in
connection with our New Stock Purchase Agreement and 2020 ATM ($11.1 million and
$36.5 million, respectively), issuance of common stock in connection with the
exercise of warrants and stock options ($6.0 million and $0.3 million,
respectively), and proceeds from the sale of common stock of Beyond Cancer for
$30.0 million less ($4.8) million from lenders in our retired loan facility. For
the year ended March 31, 2021, net cash provided by financing activities of
$30.3 million which was primarily from the net proceeds from New Stock Purchase
Agreement ($11.6 million), net proceeds from the 2020 ATM ($11.9 million) and
from the exercise from the issuance of common stock for warrants ($6.7 million).

The effect of exchange rates changes on entities using a functional currency other than US dollars was $96 thousand for the year ended March 31, 2022.





Contractual Obligations

The following tables sets forth our contractual obligations for the next five fiscal years and thereafter for the year ended March 31, 2022:

(in thousands) 2023 2024 2025 2026 2027 

     Thereafter       Total
Circassia settlement   $ 2,500     $ 3,500     $ 4,500     $   -     $   - 

   $          -     $ 10,500
NitricGen payments       1,500           -           -         -         -                -        1,500
Rent                       462         443         434       441       325            1,081        3,186
Long-term loan               -           -          80       120         -                -          200
Loan                       927           -           -         -         -                -          927
Total                  $ 5,389     $ 3,943     $ 5,014     $ 561     $ 325     $      1,081     $ 16,313

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