UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission File Number: 001-38892
BEYOND AIR, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 47-3812456 | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
| 825 East Gate Boulevard, Suite 320 | ||
| Garden City, NY | 11530 | |
| (Address of principal executive offices) | (Zip Code) |
516-665-8200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol | Name of each exchange on which registered: | ||
| Common Stock, par value $0.0001 per share | XAIR | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | Accelerated Filer ☐ | |
| Non-accelerated filer ☒ | Smaller reporting company ☒ | |
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 6, 2021, there were 23,947,879 shares of common stock, par value $0.0001 per share, outstanding.
BEYOND AIR, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q FILING
FOR THE PERIOD ENDED JUNE 30, 2021
Table of Contents
| 2 |
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
INDEX
| 3 |
BEYOND AIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2021 | March 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 38,581,386 | $ | 34,630,682 | ||||
| Restricted cash | 1,046,606 | 637,025 | ||||||
| Grant receivable | - | 425,000 | ||||||
| Other current assets and prepaid expenses | 1,325,064 | 1,530,096 | ||||||
| Total current assets | 40,953,056 | 37,222,803 | ||||||
| Licensed right to use technology | 365,158 | 374,686 | ||||||
| Right-of-use lease assets | 1,815,351 | 1,860,885 | ||||||
| Property and equipment, net | 897,550 | 928,842 | ||||||
| Other assets | 137,880 | 137,880 | ||||||
| TOTAL ASSETS | $ | 44,168,995 | $ | 40,525,096 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 2,261,777 | $ | 1,324,988 | ||||
| Accrued expenses | 1,695,235 | 1,804,938 | ||||||
| Operating lease liability | 187,288 | 113,141 | ||||||
| Loan payable | 349,165 | 556,514 | ||||||
| Total current liabilities | 4,493,465 | 3,799,581 | ||||||
| Long-term liabilities | ||||||||
| Operating lease liability | 1,720,389 | 1,789,461 | ||||||
| Long-term debt, net | 4,505,393 | 4,472,201 | ||||||
| Total liabilities | 10,719,247 | 10,061,243 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred Stock, $0.0001 par value per share: 10,000,000 shares authorized, 0 shares issued and outstanding | - | - | ||||||
| Common Stock, $0.0001 par value per share: 100,000,000 shares authorized, 23,267,649 and 21,828,244 shares issued and outstanding as of June 30, 2021 and March 31, 2021, respectively | 2,327 | 2,183 | ||||||
| Treasury stock | (25,000 | ) | (25,000 | ) | ||||
| Additional paid-in capital | 120,677,112 | 110,948,477 | ||||||
| Accumulated deficit | (87,204,691 | ) | (80,461,807 | ) | ||||
| Total stockholders’ equity | 33,449,748 | 30,463,853 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 44,168,995 | 40,525,096 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
BEYOND AIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| 2021 | 2020 | |||||||
|
For the Three Months Ended June 30, |
||||||||
| 2021 | 2020 | |||||||
| License revenue | $ | - | $ | 229,161 | ||||
| Operating expenses | ||||||||
| Research and development | 2,741,041 | 4,331,814 | ||||||
| General and administrative | 3,850,265 | 2,494,014 | ||||||
| Operating loss | (6,591,306 | ) | (6,596,667 | ) | ||||
| Other income (loss) | ||||||||
| Dividend income | 706 | 14,985 | ||||||
| Foreign exchange gain | 9,859 | 1,275 | ||||||
| Interest expense | (162,143 | ) | (163,240 | ) | ||||
| Other | - | 1,843 | ||||||
| Total other loss | (151,578 | ) | (145,137 | ) | ||||
| Net loss | $ | (6,742,884 | ) | $ | (6,741,804 | ) | ||
| Net loss per share – basic and diluted | $ | (0.31 | ) | $ | (0.41 | ) | ||
| Weighted average number of common shares outstanding – basic and diluted | 21,945,235 | 16,529,392 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
BEYOND AIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2021
| Number | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||
| Common Stock | Treasury | Additional Paid-in | Accumulated |
Total Stockholders’ |
||||||||||||||||||||
| Number | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||
| Balance as of April 1, 2021 | 21,828,244 | $ | 2,183 | $ | (25,000 | ) | $ | 110,948,477 | $ | (80,461,807 | ) | $ | 30,463,853 | |||||||||||
| At-The-Market issuance of common stock, net | 1,239,405 | 124 | - | 7,481,444 | - | 7,481,568 | ||||||||||||||||||
| Issuance of common stock pursuant to a Purchase Agreement, net | 200,000 | 20 | - | 1,031,280 | - | 1,031,300 | ||||||||||||||||||
| Stock-based compensation | 1,215,911 | 1,215,911 | ||||||||||||||||||||||
| Net loss | - | - | - | - | (6,742,884 | ) | (6,742,884 | ) | ||||||||||||||||
| Balance as of June 30, 2021 | 23,267,649 | $ | 2,327 | $ | (25,000 | ) | $ | 120,677,112 | $ | (87,204,691 | ) | $ | 33,449,748 | |||||||||||
BEYOND AIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2020
| Common Stock | Treasury | Additional Paid-in | Accumulated |
Total Stockholders’ |
||||||||||||||||||||
| Number | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||
| Balance as of April 1, 2020 | 16,056,360 | $ | 1,606 | $ | (25,000 | ) | $ | 75,702,915 | $ | (57,587,076 | ) | $ | 18,092,445 | |||||||||||
| At-The-Market issuance of common stock, net | 113,712 | 11 | - | 899,529 | - | 899,540 | ||||||||||||||||||
| Issuance of common stock upon exercise of warrants | 70,538 | 7 | 293,104 | 293,111 | ||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | 2,340 | - | - | 545 | - | 545 | ||||||||||||||||||
| Issuance of common stock pursuant to a Purchase Agreement, net | 568,605 | 57 | - | 3,641,623 | - | 3,641,680 | ||||||||||||||||||
| Issuance of common stock to investor relations firm | 30,000 | 3 | 242,097 | 242,100 | ||||||||||||||||||||
| Stock-based compensation | 1,813,654 | 1,813,654 | ||||||||||||||||||||||
| Net loss | - | - | - | - | (6,741,804 | ) | (6,741,804 | ) | ||||||||||||||||
| Balance as of June 30, 2020 | 16,841,555 | $ | 1,684 | $ | (25,000 | ) | $ | 82,593,467 | $ | (64,328,880 | ) | $ | 18,241,271 | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| 2021 | 2020 | |||||||
| For the Three Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (6,742,884 | ) | $ | (6,741,804 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | 58,347 | 33,650 | ||||||
| Amortization of licensed right to use technology | 9,528 | 9,519 | ||||||
| Stock-based compensation | 1,215,911 | 1,815,654 | ||||||
| Amortization of debt discount | 33,192 | 33,192 | ||||||
| Operating lease expense | 50,608 | 1,483 | ||||||
| Gain on cancellation of operating lease | - | (1,843 | ) | |||||
| Foreign currency adjustment | (9,859 | ) | - | |||||
| Deferred revenue | - |
(229,161 |
) | |||||
| Changes in: | ||||||||
| Grant receivable | 425,000 | - | ||||||
| Other current assets and prepaid expenses | 205,032 | (57,432 | ) | |||||
| Accounts payable | 946,648 | (335,893 | ) | |||||
| Accrued expenses |
(109,701 |
) | (12,830 | ) | ||||
| Net cash used in operating activities | (3,918,178 | ) | (5,485,465 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (27,055 | ) | (243,527 | ) | ||||
| Net cash used in investing activities | (27,055 | ) | (243,527 | ) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of common stock in connection with a Purchase Agreement with Lincoln Park, At- The Market Equity Offering, private placement, net, exercise of warrants and stock options | 8,512,867 | 4,834,877 | ||||||
| Payment of loan | (207,349 | ) | (125,779 | ) | ||||
| Net cash provided by financing activities | 8,305,518 | 4,709,098 | ||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 4,360,285 | (1,019,894 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 35,267,707 | 25,465,111 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 39,627,992 | $ | 24,445,217 | ||||
| Supplemental disclosure of non-investing activities | ||||||||
| Right-of-use assets | $ | - | $ | 236,700 | ||||
| Operating lease liability | $ | - | $ | 236,700 | ||||
| Disposition of right-of-use asset | $ | - | $ | (17,426 | ) | |||
| Disposition of operating lease liability | $ | - | $ | 19,329 | ||||
| Stock issued to investor relations firm | $ | - | $ | 242,100 | ||||
| Supplemental disclosure of cash flow items: | ||||||||
| Interest paid | $ | 136,032 | $ | 22,298 | ||||
| Income taxes paid | $ | - | $ | - | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 7 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 ORGANIZATION AND BUSINESS
Beyond Air, Inc. (together with its subsidiaries, “Beyond Air” or the “Company”) was incorporated on April 28, 2015. On June 25, 2019, our name was changed to Beyond Air, Inc. from AIT Therapeutics, Inc. We have the following wholly-owned subsidiaries:
Beyond Air Ltd. (“BA Ltd.”) incorporated on May 1, 2011 in Israel.
Beyond Air Australia Pty Ltd., incorporated on December 17, 2019 in Australia.
Beyond Air Ireland Limited, incorporated on March 5, 2020 in Ireland.
Beyond Air is a clinical-stage medical device and biopharmaceutical company developing a nitric oxide (“NO”) generator and delivery system (the “LungFit® system”) that is capable of generating NO from ambient air. 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. Beyond Air believes 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, the Company believes 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 current areas of focus with LungFit® are persistent pulmonary hypertension of the newborn (PPHN), acute viral pneumonia (AVP) including COVID-19, bronchiolitis (BRO) and nontuberculous mycobacteria (NTM) lung infection. The current product candidates will be subject to premarket reviews and approvals by the U.S. Food and Drug Administration (the “FDA”), CE marking conformity assessment by a notified body in the European Union, as well as similar regulatory agencies’ reviews or approvals, as well as similar regulatory agencies in other countries or regions. If approved, the Company’s system will be marketed as a medical device in the United States.
Liquidity Risks and Uncertainties
The Company used cash in operating activities of $3.9 million for the three months ended June 30, 2021, and has accumulated losses of $87.2 million. The Company had cash, equivalents and restricted cash of $39.6 million as of June 30, 2021. Based on management’s current business plan, the Company estimates it will have enough cash and liquidity sufficient to finance its operating requirements 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 will depend on many factors, including, but not necessarily limited to, the actual cost and time necessary for current and anticipated preclinical studies, clinical trials and other actions needed to obtain regulatory approval of the Company’s medical devices in development as well as the cost to launch the Company’s first product for PPHN, assuming approval of Beyond Air’s PMA. The Company may be required to raise additional funds through equity or debt securities offerings or strategic collaboration and/or licensing agreements in order to fund operations until it is able to generate enough product or royalty revenues, if any. Such financing may not be available on acceptable terms, or at all, and the Company’s failure to raise capital when needed could have a material adverse effect its strategic objectives, results of operations and financial condition.
| 8 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 ORGANIZATION AND BUSINESS (continued)
Liquidity Risks and Uncertainties
The Company’s access to capital and liquidity currently includes the following:
| a) | At-The-Market Equity Offering Sales Agreement (the “ATM”) for $50 million which approximately $29.9 million remained as of June 30, 2021, see Note 5. | |
| b) | A $25 million unsecured loan with certain lenders to a facility agreement dated April 2, 2020 “the Facility Agreement”). The Company has drawn down the first of five tranches of $5 million and has the ability to draw down an additional $5 million tranche at any time prior March 17, 2022 as well as the ability to draw down the remaining $15 million in three subsequent tranches after FDA approval of LungFit® PH, see Note 12. | |
| c) | A $40 million Stock Purchase Agreement with Lincoln Park Capital Fund, LLC (“LPC”) dated as of May 14, 2020 of which approximately $28.2 million remains available as of June 30, 2021 with Lincoln Park Capital Fund, LLC (“LPC”), which 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 (“U.S. GAAP”) for interim financial information and with the instructions to the 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, 2021 (the “2021 Annual Report”), filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 10, 2021 and amended on July 23, 2021. The unaudited condensed consolidated financial statements and related disclosures should be read in conjunction with the Company’s audited consolidated financial statements and the related notes thereto included in the 2021 Annual Report on Form 10-K.
Principles of Consolidation
These unaudited condensed consolidated financial statements include the accounts of the Company and the accounts of all of the Company’s subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying financial statements.
| 9 |
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, 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 and development stage companies including, but not limited to, new technological innovations, regulatory approval, 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 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 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. 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.
The development of the Company’s product candidates could be further disrupted and adversely affected by a resurgence of the COVID-19 pandemic. The Company experienced significant delays in the supply chain for LungFit® due to the redundancy in parts and suppliers with ventilator manufacturing which has since been remedied. The Company continuously assesses the impact COVID-19 may have on the Company’s business plans and its ability to conduct the preclinical studies and clinical trials as well as on the Company’s reliance on third-party manufacturing and our supply chain. However, there can be no assurance that the Company will be able to avoid part or all of any impact from COVID-19 or its consequences if a resurgence occurs.
| 10 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
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 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 June 30, 2021 and March 31, 2021, restricted cash consisted of $1,019,000 and $619,000 designated for a contract manufacturer, respectively. This cash is expected to be used for material and parts that require a long lead time.
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:
SCHEDULE OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
| June 30, 2021 | June 30, 2020 | |||||||
| Cash and cash equivalents | $ | 38,581,386 | $ | 23,808,900 | ||||
| Restricted cash | 1,046,606 | 636,317 | ||||||
| Total | $ | 39,627,992 | $ | 24,445,217 | ||||
Revenue Recognition
The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers the Company performs 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) the Company satisfies the performance obligation(s). At contract inception, the Company assesses the goods or services promised within each contract, assesses whether each promised good or service is distinct, and identifies those that are performance obligations.
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 also 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 contract are satisfied. 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.
| 11 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Grant receivable
Under a collaboration arrangement with the Cystic Fibrosis Foundation, 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, 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.
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, the Company views its operations and manages its 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, 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”). The Company does not record AU Tax Rebates until payment is received due to the uncertainty of receipt. To date, the Company has not received any AU Tax Rebates.
| 12 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Exchange Transactions
The Company’s subsidiaries have operations in Israel, Ireland, and in Australia. The Company’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. 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 June 30, 2021 and March 31, 2021 were not material. Gains or losses from foreign currency transactions are included in other income (expense) in the statement of operations as foreign currency exchange gain/(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 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. 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. Due to the Company’s limited trading history, the Company utilizes weighting of its historical volatility and the implied volatility based on an aggregate of guideline companies. The Company uses the simplified method to estimate the expected term.
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:
SCHEDULE OF PROPERTY AND EQUIPMENT USEFUL LIFE OF ASSETS
| Computer 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 |
| 13 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
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, see Note 14.
The expected amortization expense for the next five years and thereafter is as follows for the year ended March 31,:
SCHEDULE OF FUTURE EXPECTED AMORTIZATION EXPENSE
| March 31, 2021 | ||||
| Remainder of 2022 | $ | 28,558 | ||
| 2023 | 38,077 | |||
| 2024 | 38,077 | |||
| 2025 | 38,077 | |||
| 2026 | 38,077 | |||
| Thereafter | 184,292 | |||
| Total | $ | 365,158 |
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 that the Company considers as potential triggers of an impairment review include the following:
| ● | significant underperformance relative to expected historical or projected future operating results, |
| ● | significant changes in the manner of the Company’s use of the acquired assets or the strategy for its overall business, |
| ● | significant negative regulatory or economic trends, and |
| ● | significant technological changes, which would render the platform technology, equipment, and manufacturing processes obsolete. |
| 14 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Long-Lived Assets
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.
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 June 30, 2021 and March 31, 2021, 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 files 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 2017 through 2021 remain open to examination by federal and state tax jurisdictions. The Company files tax returns in Israel for which tax years 2015 through 2021 remain open. In addition, the Company files tax returns in Ireland and Australia and the tax years 2020 and 2021 remain open.
Net Income (Loss) Per Share
Basic and diluted net loss per share attributable to common stockholders is computed by dividing the net loss and deemed dividend from a warrant modification to common stockholders, if any, 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 income (loss) per share by application of the treasury stock method. The calculation of diluted net income (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 9.
| 15 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (continued)
New Accounting Standards
There are no recently issued accounting standards that have been adopted in the current period or will be adopted in future periods that have had or are expected to have a material impact on the Company’s consolidated financial position or results of operations.
NOTE 3 FAIR VALUE MEASUREMENT
The Company’s financial instruments primarily include cash, cash equivalents, restricted cash, accounts payable, and the short-term loan. Due to the short-term nature of these financial instruments, the carrying amounts of these assets and liabilities approximate their fair value. The long-term debt approximates fair value due to the prevailing market conditions for similar debt with remaining maturity and terms.
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. |
| 16 |
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:
SCHEDULE OF PROPERTY AND EQUIPMENT
| June 30, 2021 | March 31, 2021 | |||||||
| Clinical and medical equipment | $ | 1,097,397 | $ | 1,074,353 | ||||
| Computer equipment | 153,123 | 152,052 | ||||||
| Furniture and fixtures | 136,110 | 133,170 | ||||||
| Leasehold improvements | 21,840 | 21,840 | ||||||
| 1,408,470 | 1,381,415 | |||||||
| Accumulated depreciation and amortization | (510,920 | ) | (452,573 | ) | ||||
| $ | 897,550 | $ | 928,842 | |||||
Depreciation and amortization expense for the three months ended June 30, 2021 and June 30, 2020 was $58,347 and $33,650, respectively.
| 17 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 STOCKHOKDERS’ EQUITY
On May 14, 2020, the Company entered into a Stock Purchase Agreement, which replaced the former $20 million purchase agreement with LPC from August 2018. The 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 of the Company’s common stock is not below $0.25 per share and subject to certain other conditions and limitations set forth in the Stock Purchase Agreement. For the three months ended June 30, 2021 and June 30 2020, the Company received net proceeds of $1,031,300 and $3,641,800 from the sale of 200,000 and 568,605 shares of common stock, respectively. As of June 30, 2021, there was $28.2 million available under the Stock Purchase Agreement.
On April 2, 2020, the Company entered into an ATM for $50 million utilizing the Company’s shelf registration statement on Form S-3. Under the ATM, the Company may sell shares of its common stock having 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 sales agreement. If shares of the Company’s common stock are sold, there is a three percent fee paid to the sales agent. For the three months ended June 30, 2021 and June 30, 2020, the Company received net proceeds of $7,481,567 and $899,540 from the sale of 1,239,405 and 113,712 shares of the Company’s common stock, respectively. As of June 30, 2021, there was $29.9 million available under the ATM.
Restricted Stock
The fair value for the restricted stock awards was valued at the closing price of the Company’s common stock on the date of grant. Restricted stock vests annually over five years. Stock-based compensation related to these stock issuances for the three months ended June 30, 2021 and June 30, 2020 was $158,504 and $393,861, respectively. A summary of the change of the Company’s restricted stock awards for the period ended June 30, 2021 is as follows:
SCHEDULE OF CHANGE IN WARRANTS OPTIONS
| Number Of Shares | Weighted Average Grant Date Fair Value | |||||||
| Unvested as of April 1, 2021 | 554,200 | 5.07 | ||||||
| Forfeited |
(8,000 |
) |
5.23 |
|||||
| Unvested as of June 30, 2021 |
546,200 |
$ |
5.07 |
|||||
Stock Option Plan
The Company’s Third Amended and Restated 2013 Equity Incentive Plan (the “2013 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. The vesting terms of the options issued under the 2013 Plan are generally four years and expires in ten years from the grant date. The 2013 Plan has 5,600,000 shares authorized for issuance. As of June 30, 2021 484,074 shares were available under the 2013 Plan.
| 18 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 STOCKHOLDERS’ EQUITY (continued)
A summary of the Company’s options for the three months ended June 30, 2021, is as follows:
SCHEDULE OF OPTION ACTIVITY
|
Number Of Options |
Weighted Average Exercise Price - Options |
Weighted Average Remaining Contractual Life- Options |
Aggregate Intrinsic Value |
|||||||||||||
| Options outstanding as of April 1, 2021 | 4,185,097 | $ | 4.91 | 8.4 | $ | 2,609,100 | ||||||||||
| Granted | 65,000 | 5.26 | ||||||||||||||
| Forfeited | (25,875 | ) | 5.11 | |||||||||||||
| Outstanding as of June 30, 2021 | 4,224,222 | $ | 4.93 | 8.0 | $ | 6,516,900 | ||||||||||
| Exercisable as of June 30, 2021 | 1,901,479 | $ | 4.57 | 7.0 | $ | 3,597,100 | ||||||||||
As of June 30, 2021, the Company has unrecognized stock-based compensation expense of approximately $5,554,700 related to unvested stock options and which is expected to be expensed over the weighted average remaining service period of 2.4 years. The weighted average fair value of options granted was $4.05 and $5.09 per share during the three months ended June 30, 2021 and June 30, 2020, respectively. The following were utilized on the date of grant:
SCHEDULE OF ASSUMPTION OF BLACK-SCHOLES OPTION PRICING MODEL
| June 30, 2021 | June 30, 2020 | |||||||
| Risk free interest rate | 1.1 | % | 0.5-.07 | % | ||||
| Expected volatility | 91.1-91.8 | % | 87.8-92.5 | % | ||||
| Dividend yield | 0 | % | 0 | % | ||||
| Expected terms (in years) | 6.25 | 5.28 -6.25 | ||||||
The following summarizes the components of stock-based compensation expense which include stock options and restricted stock for the three months ended June 30, 2021 and June 30, 2020, respectively
SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE
|
Three Months Ended June 30, 2021 |
Three Months Ended June 30, 2020 |
|||||||
| Research and development | $ | 364,551 | $ | 837,449 | ||||
| General and administrative | 851,360 | 978,205 | ||||||
| Total | $ | 1,215,911 | $ | 1,815,654 | ||||
On March 4, 2021, the stockholders approved the 2021 Employee Stock Purchase Plan “the 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 common 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 June 30, 2021 and March 31, 2021, there were no shares issued under the ESPP and 750,000 shares were available for future issuance under the ESPP.
Warrants
A summary of the Company’s outstanding warrants as of June 30, 2021 is as follows:
SUMMARY OF COMPANY’S OUTSTANDING WARRANTS
| 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) | ||||||
| Third-party license agreement | 208,333 | $ | 4.80 | January 2024 | ||||||
| March 2020 loan (see Note 12) | 172,187 | $ | 7.26 | March 2025 | ||||||
| Total | 3,433,623 | |||||||||
| (a) | These warrants have down round protection. |
For the three months ended June 30, 2021, no warrants were exercised. For the three months ended June 30, 2020, 70,538 warrants exercised for $293,111.
| 19 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 OTHER CURRENT ASSETS PREPAID EXPENSES
A summary of current assets and prepaid expenses is as follows:
SCHEDULE OF CURRENT ASSETS AND PREPAID EXPENSES
| June 30, 2021 | March 31, 2021 | |||||||
| Research and development | $ | 284,276 | $ | 271,727 | ||||
| Insurance | 573,928 | 971,140 | ||||||
| Professional | 113,056 | - | ||||||
| Value added tax receivable | 106,210 | 41,272 | ||||||
| Other | 247,594 | 245,957 | ||||||
| Total | $ | 1,325,064 | $ | 1,530,096 | ||||
NOTE 7 ACCRUED EXPENSES
A summary of the accrued expenses is as follows:
SUMMARY OF ACCRUED EXPENSES
| June 30, 2021 | March 31, 2021 | |||||||
| Research and development | $ | 446,877 | $ | 584,802 | ||||
| Professional fees | 710,549 | 708,800 | ||||||
| Employee salaries and benefits | 398,653 | 269,787 | ||||||
| Other | 139,156 | 241,549 | ||||||
| Total | $ | 1,695,235 | $ | 1,804,938 | ||||
NOTE 8 LEASES
On April 1, 2019, the Company early adopted ASU No. 2016-02, Leases (Topic 842), as amended (“ASU 2016-02”), 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. The right-of use assets and operating lease liability are as follows:
SCHEDULE OF OPERATING LEASE LIABILITY
| June 30, 2021 | March 31, 2021 | |||||||
| Right-of-use assets | $ | 1,815,351 | $ | 1,860,885 | ||||
| Operating lease liability short-term | $ | 187,288 | $ | 113,141 | ||||
| Operating lease liability long-term | 1,720,389 | 1,789,461 | ||||||
| Total | $ | 1,907,677 | $ | 1,902,602 | ||||
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. The Company elected the practical expedient option and as such these lease payments are expensed as incurred.
SCHEDULE OF LEASE OTHER INFORMATION
| Other Information For The Three Months Ended June 30, 2021 | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Cash paid | $ | 31,861 | ||
| Right-of-use assets obtained in exchange for new operating lease liabilities: | - | |||
| Weighted average remaining lease term — operating leases | 9.0 years | |||
| Weighted average discount rate — operating leases | 8.3 | % | ||
SCHEDULE OF MATURITY OF LEASE LIABILITIES
| Maturity of Lease Liabilities | Operating Leases | |||
| Payments remaining for the year ended March 31: | ||||
| 2022 | $ | 234,332 | ||
| 2023 | 328,475 | |||
| 2024 | 286,786 | |||
| 2025 | 277,451 | |||
| 2026 | 284,590 | |||
| Thereafter | 1,328,640 | |||
| Total lease payments | 2,740,274 | |||
| Less: interest | (832,597 | ) | ||
| Present value of lease liabilities | $ | 1,907,677 | ||
| 20 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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:
SCHEDULE OF POTENTIAL ANTI-DILUTIVE SECURITIES
| June 30, 2021 | June 30, 2020 | |||||||
| Common stock warrants | 3,433,623 | 5,103,186 | ||||||
| Common stock options | 4,224,222 | 3,173,249 | ||||||
| Restricted stock | 546,200 | 646,800 | ||||||
| Total | 8,204,045 | 8,923,235 | ||||||
NOTE 10 LICENSE AGREEMENT
On January 23, 2019, the Company entered into an agreement for commercial rights (the “Circassia Agreement”) with 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 made a settlement with Circassia, see Note 14.
As of March 31, 2021, the Company has met its performance obligation under the Circassia Agreement and revenue therefrom has been previously recognized. License revenue of $0 and $229,161 associated with the Company’s second performance obligation has been recognized for the three months ended June 30, 2021 and June 30, 2020, respectively.
| 21 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11 GRANT COLLABORATON AGREEMENT
On February 10, 2021, the Company received a grant for up to $2.17 million from the Cystic Fibrosis Foundation (“CFF”) to advance the clinical development of high concentration NO for the treatment of Nontuberculous Mycobacteria, or NTM pulmonary disease, which disproportionally affects cystic fibrosis (“CF”) patients. Under the terms of the grant agreement, the funding will be allocated to the ongoing LungFit® GO NTM pilot study. The grant provides milestones based upon the Company’s achieving performance steps and requirements under a development program. 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. For the three months ended June 30, 2021, the Company recognized $225,150 in reduction of research and development expenses and incurred $392,000 of related research and development costs.
NOTE 12 LONG-TERM LOAN
On March 17, 2020, the Company entered into the Facility Agreement for up to $25,000,000 with certain lenders 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 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 stockholder loaned the Company $3,160,000 of the first tranche and, as such, related party interest expense for the three months ended June 30, 2021 and June 30, 2020 was $79,000 and $79,000 (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 are up to twenty five percent of their commitment value divided by the five-day volume-weighted 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 are up to ten percent of its commitment value divided by the five-day VWAP. The Company allocated the fair market value of the warrants at the date of grant to stockholders’ equity and reflected a debt discount of $594,979. Debt discount and debt issuance costs are amortized over the life of the loan.
| 22 |
BEYOND AIR, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 12 LONG-TERM LOAN (continued)
A summary of the long-term loan balance is as follows:
SCHEDULE OF LONG-TERM LOAN
| June 30, 2021 | March 31, 2021 | |||||||
| Face value of loan | $ | 5,000,000 | $ | 5,000,000 | ||||
| Debt discount | (594,979 | ) | (594,979 | ) | ||||
| Accretion of debt discount | 156,685 | 123,493 | ||||||
| Amortization of debt offering costs | 14,750 | 14,750 | ||||||
| Debt offering costs | (71,063 | ) | (71,063 | ) | ||||
| Total | $ | 4,505,393 | $ | 4,472,201 | ||||
SCHEDULE OF MATURITY OF LONG-TERM LOAN
| Maturity of Long-Term Loan | June 30, 2021 | |||
| 2022 | $ | - | ||
| 2023 | 500,000 | |||
| 2024 | 2,250,000 | |||
| 2025 | 2,250,000 | |||
| Total | $ | 5,000,000 | ||
NOTE 13 LOAN PAYABLE
As of June 30, 2021 and March 31, 2021 in connection with the Company’s insurance policy, a loan was used to finance part of the premium. The following details concerning each loan are as follows:
SCHEDULE OF LOAN PAYABLE
| June 30, 2021 | March 31, 2021 | |||||||
| Amount outstanding | $ | 349,165 | $ | 556,514 | ||||
| Monthly payments | $ | 70,396 | $ | 70,396 | ||||
| Number of monthly payments | 9 | 9 | ||||||
| Interest rate | 3.2 | % | 3.2 | % | ||||
| Due date | November 2021 | November 2021 | ||||||
NOTE 14 COMMITMENTS AND CONTINGENCIES
License and Other 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 $150,000 that is credited against future royalty payments, and is obligated to pay 5% royalties of any licensed product net sales, but at least $50,000 per annum during the term of the agreement. As of June 30, 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.
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. On January 13, 2017, the Company exercised the Option and paid $500,000 to Pulmonox. The Company becomes obligated to make certain one-time development and sales milestone payments to Pulmonox, commencing with the date on which the Company 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 Option Agreement, with the majority of them, approximately $83 million, being related to sales based on cumulative sales milestones for each of the three products.
On January 31, 2018, the Company and NitricGen, Inc. (“NitricGen”) entered into an agreement (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 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 the achievement of certain milestones, as defined in the NitricGen Agreement, and royalties on sales of LungFit®. The Company paid NitricGen $100,000 upon the execution of the NitricGen Agreement, $100,000 upon achieving the next milestone and issued 100,000 warrants to purchase the Company’s common stock valued at $295,000 upon executing the NitricGen Agreement. The remaining future milestone payments are $1,800,000 of which $1,500,000 is due six months after the first approval.
Employment Agreements
Certain agreements between the Company and its officers 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 and the outstanding amount remaining under the purchase order as of June 30, 2021 is approximately $1,054,000 with this supplier.
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 NY Supreme Court (the “NY Supreme Court”), 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”). The Empery Suit alleges that, as a result of certain circumstances in connection with the Company’s 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.
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 Asset Master, Ltd., 159,869 warrant shares for Empery Tax Efficient, LP and 252,672 warrant shares for Empery Tax Efficient II, LP, and the exercise price could be reduced from $3.66 to $1.57 per share. On March 9, 2020, the Company filed a motion for summary judgment, which was denied by order of the NY Supreme 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, the Company filed a Notice of Appeal and appeal of the NY Supreme Court’s denial of summary judgment remains pending. Trial of this matter was conducted from April 19, 2021 to April 21, 2021, and a decision was reserved pending post-trial briefing of various issues, which was fully submitted by June 30, 2021.
While the Company asserted at trial and continues to asset several meritorious defenses against the claims, the ultimate resolution of the matter, if unfavorable, could result in a material loss.
In addition to Empery, there are 1,139,220 2017 Warrants outstanding held by investors who did not participate in the February 2018 financing transaction. Any further adjustments to the 2017 Warrants pursuant to their antidilution provisions may result in additional dilution to the interests of the Company’s stockholders and may adversely affect the market price of the Company’s common stock. The antidilution provisions may also limit the Company’s ability to obtain additional financing on terms favorable to it.
| 23 |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements.” We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, prospective product candidates and products, product approvals, timing of our clinical development activities, research and development costs, timing and likelihood of success, and the plans and objectives of management for future operations and future results of anticipated products are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements express or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “expect,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar conditional expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under the sections in this Quarterly Report on Form 10-Q titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 1A “Risk Factors” contained in our most recently filed Annual Report on Form 10-K, as well as the following:
| ● | our status as a development-stage company and our expectation to incur losses in the future; | |
| ● | our future capital needs and our need to raise additional funds; | |
| ● | our ability to obtain FDA approval of the PMA for the LungFit® system; | |
| ● | our ability to build a pipeline of product candidates and develop and commercialize products; | |
| ● | our ability to enroll patients in clinical trials, timely and successfully complete those trials and receive necessary regulatory approvals; | |
| ● | our ability to maintain our existing or future collaborations or licenses; | |
| ● | our ability to protect and enforce our intellectual property rights; | |
| ● | federal, state, and foreign regulatory requirements, including the FDA regulation of our product candidates; | |
| ● | our ability to obtain and retain key executives and attract and retain qualified personnel; | |
| ● | our ability to successfully manage our growth; and | |
| ● | our ability to address business disruption and related risks resulting from the COVID-19 pandemic, which could have a material adverse effect on our business plan. |
Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Beyond Air, Inc. the Beyond Air logo, and other trademarks or service marks of Beyond Air, Inc. appearing in this Quarter Report on Form 10-Q are the property of Beyond Air, Inc. This Quarterly Report on Form 10-Q also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this Quarterly Report on Form 10-Q appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.
Introduction
We are a clinical-stage medical device and biopharmaceutical company developing a nitric oxide (“NO”) generator and delivery system (the “LungFit® system”) that is capable of generating NO from ambient air. 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. 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. The Company’s current areas of focus with LungFit® are PPHN, AVP including COVID-19, BRO and NTM lung infection. The Company’s current product candidates will be subject to premarket reviews and certifications or approvals by the U.S. Food and Drug Administration, (the “FDA”), as well as similar regulatory agencies in other countries or regions. If approved, the Company’s system will be marketed as a medical device in the United States.
An additional program of Beyond Air is solid tumors. For this indication the LungFit® platform is not utilized due to need for ultra-high concentrations of gaseous nitric oxide (“gNO”). We have developed a delivery system that can safely deliver gNO in excess of 10,000 ppm directly to a solid tumor. This program is in pre-clinical development and will require approval from the FDA or similar agencies in other countries to enter human studies. We expect to receive regulatory approval to enter a first in human trial by the end of calendar year 2021.
| 24 |
The LungFit® system generates NO from ambient air by simulating the electric discharge caused from a lightning strike. Beyond Air proprietary technology allows for this reaction to occur in a plasma chamber. We believe the on-demand delivery, either to a ventilator circuit or directly to a patient’s lungs, is safe due to the Company’s system design and the Company’s proprietary nitrogen dioxide (“NO2”) filter. The NO2 filter removes toxic NO2 for 12 hours when used for PPHN and shorter periods for treating other conditions that require NO concentrations of 150 ppm or more.
With respect to PPHN, Beyond Air’s novel LungFit® PH is designed to deliver a dosage of NO to the lungs that is consistent with current guidelines for delivery of 20 ppm NO with a range of 0.5 ppm – 80 ppm (low-concentration NO) for ventilated patients. We believe the ability of LungFit® PH to generate NO from ambient air provides Beyond Air many competitive advantages over the current standard of NO delivery systems in the U.S., European Union, Japan and other markets. For example, LungFit® PH does not require the use of a high-pressure cylinder, does not require cumbersome purging procedures and places less burden on hospital staff in carrying out safety procedures.
The Company’s novel LungFit® platform can also deliver a high concentration (>150 ppm) of NO directly to the lungs, which we believe has the potential to eliminate microbial infections including bacteria, fungi, and viruses, among others. We believe current FDA-approved NO vasodilation treatments would have limited success in treating microbial infections given the low concentrations of NO being delivered (<100 ppm). Given that NO is produced naturally by the body as an innate immunity mechanism at a concentration of 200 ppm, supplemental high dose NO should aid in the body’s fight against infection. Based on the Company’s pre-clinical and clinical studies, we believe that 150 ppm is the minimum therapeutic dose to achieve the desired pulmonary antimicrobial effect of NO. To date, neither the FDA nor equivalent regulatory agencies in other countries or regions have approved any NO formulation and/or delivery system for >80 ppm NO.
LungFit® PH for the treatment of Persistent Pulmonary Hypertension of the Newborn
In November 2020 we submitted a premarket approval (“PMA”) application to the FDA for the use of LungFit® PH in PPHN. There is a standard 180-day review process that starts upon FDA acknowledgement of submission, though PMA reviews oftentimes take much longer, sometimes over a year or more. Moreover, the ongoing COVID-19 pandemic and an increased volume of submissions have led to longer review times by the FDA. We anticipate an FDA response towards the end of calendar third quarter of 2021. We also expect to receive CE Mark under the MDR in the European Union around the end of calendar year 2021. According to the most recent year-end report from Mallinckrodt Pharmaceuticals, sales of NO were $574.1 million in 2020 (up from $571.4 million in 2019) for the United States, Canada, Japan, Mexico and Australia, with >90% in the United States. Outside of the U.S. there are multiple market participants which translates to considerably lower sales than in the U.S. We believe the U.S. sales potential of LungFit® PH in PPHN to be greater than $300 million and worldwide sales potential to be greater than $600 million. If regulatory approval is obtained, we anticipate a product launch in the U.S. in the fourth quarter of calendar 2021 and will continue to launch in the EU and globally in 2022 and beyond.
LungFit® PRO for the treatment of viral lung infections in hospitalized patients
Acute Viral Pneumonia (including COVID-19)
Viral pneumonia in adults is most commonly caused by rhinovirus, respiratory syncytial virus (“RSV”) and influenza virus. However, newly emerging viruses (including SARS-CoV-1, SARS-CoV-2, avian influenza A, and H1N1 viruses) have been identified as pathogens contributing to the overall burden of adult viral pneumonia. COVID-19 is an infectious disease caused by SARS-CoV-2, that has resulted in a global pandemic. Excluding the pandemic, there are approximately 350,000 annual viral pneumonia hospitalizations in the US, and 16 million annual viral pneumonia hospitalizations globally. For the broader AVP, we believe U.S. sales potential to be greater than $1.5 billion and worldwide market potential to be greater than $3 billion.
We initiated a pilot study in late 2020 using Beyond Air’s novel LungFit® PRO system at 150 ppm to treat patients with acute viral pneumonia (AVP), including COVID-19. The ongoing trial is a multi-center, open-label, randomized clinical trial in Israel, including patients infected with SARS-CoV-2. Patients are randomized in a 1:1 ratio to receive either inhalations of 150 ppm NO given intermittently for 40 minutes four times per day for up to seven days in addition to standard supportive treatment (“NO+SST”) or standard supportive treatment alone (“SST”). Endpoints related to safety (primary endpoint), oxygen saturation, and ICU admission, among others, will be assessed.
| 25 |
Beyond Air reported interim data from this ongoing trial at the American Thoracic Society or ATS International Conference 2021, which was held virtually from May 14 through May 19. At the time of the data cut off, the intent-to-treat (“ITT”) analysis population included 19 COVID-19 patients (9 NO + SST vs 10 SST). The data readout showed that 150 ppm NO treatment administered via LungFit® PRO was safe and well tolerated and demonstrated encouraging efficacy signals. From a safety perspective, there were no treatment-related, or possibly related, adverse events or severe adverse events. NO2 levels were below 4 ppm at all timepoints (trial safety threshold is 5 ppm) and methemoglobin (“MetHb”) levels were below 4% at all times (trial safety threshold is 10%). With respect to the requirement of oxygen support beyond hospital stay, 22.2% of subjects in the NO + SST group compared with 40% of control subjects had this requirement. There was an observable trend of shortening the duration of hospital stay and duration on oxygen support for treated patients. Additional detailed study results may be submitted for presentation at an upcoming scientific meeting.
Bronchiolitis (BRO)
Bronchiolitis is the leading cause of hospital admission in children less than 1 year of age. The incidence is estimated to be 150 million new cases a year worldwide, with 2-3% (over 3 million) of them severe enough to require hospitalization. Worldwide, 95%3 of all cases occur in developing countries. In the U.S., there are more than 120,000 annual bronchiolitis hospitalizations and approximately 3.2 million annual child hospitalizations globally. Currently, there is no approved treatment for bronchiolitis. The treatment for acute viral lung infections that cause bronchiolitis in infants is largely supportive care and is based primarily on prolonged hospitalization during which the infant receives a constant flow of oxygen to treat hypoxemia, a reduced concentration of oxygen in the blood. In addition, systemic steroids and inhalation with bronchodilators are sometimes utilized until recovery, but we believe that these treatments do not successfully reduce hospital length of stay. We believe the U.S. market potential for bronchiolitis to be greater than $500 million and worldwide market potential to be greater than $1.2 billion.
The Company’s BRO program is currently on hold due to the COVID-19 pandemic. The pivotal study for bronchiolitis was originally set to be performed in the winter of 2020/21 but was delayed due to the pandemic. We have completed three successful pilot studies for bronchiolitis. A further analysis of the three previously reported pilot studies was presented at the ATS International Conference 2021, which was held virtually from May 14 – May 19. Analysis across the studies (n=198 infants, mean age 3.9 months) showed that 150 – 160 ppm NO administered intermittently was generally safe and well tolerated with adverse event rates similar among treatment groups with no reported treatment-related serious adverse events. The short course of treatments with intermittent high concentration inhaled NO was effective in shortening hospital length of stay and accelerating time to fit for discharge – a composite endpoint of clinical signs and symptoms to indicate readiness to be evaluated for hospital discharge. This treatment was also effective in accelerating time to stable oxygen saturation – measured as SpO2 ≥ 92% in room air. Additionally, NO at a dose of 85 ppm NO showed no difference compared to control for all efficacy endpoints, while 150 ppm NO showed statistical significance when compared to control.
We believe that the entirety of data at 150-160 ppm NO in both adult and infant patient populations supports further development of LungFit® PRO in a pivotal study for patients hospitalized with viral pneumonia.
LungFit® GO for the treatment of Nontuberculous mycobacteria (NTM)
NTM lung infection is a rare and serious pulmonary disease associated with increased morbidity and mortality. Patients with NTM lung disease may experience a multitude of symptoms such as fever, weight loss, cough, lack of appetite, night sweats, blood in the sputum and fatigue. Patients with NTM lung disease, specifically Mycobacterium abscessus (M.abscessus) representing 20-25% of all NTM and other forms of NTM that are refractory to antibiotic therapy, frequently require lengthy and repeated hospital stays to manage their condition. There are no treatments specifically indicated for the treatment of M. abscessus lung disease in North America, Europe or Japan.
There are approximately 50,000 to 90,000 people with NTM infections in the U.S. In Asia, the number of patients suffering from NTM surpasses what is seen in the U.S. There is one inhaled antibiotic approved for the treatment of refractory Mycobacterium avium complex (“MAC”). Current guideline-based approaches to treat NTM lung disease involve multi-drug regimens of antibiotics that may cause severe, long lasting side effects, and treatment can be as long as 18 months or more. Median survival for NTM MAC patients is approximately 13 years while median survival for patients with other variations of NTM is typically 4.6 years. The prevalence of human disease attributable to NTM has increased over the past two decades. In a study conducted between 2007 and 2016, researchers found that the prevalence of NTM in the U.S. is increasing at approximately 7.5% per year. M. abscessus treatment costs are estimated to be more than double that of MAC. In total, a 2015 publication from co-authors from several U.S. government departments stated that annual cases in 2014 cost the U.S. healthcare system approximately $1.7 billion. For this indication, we believe U.S. sales potential to be greater than $1 billion and worldwide sales potential to be greater than $2.5 billion.
| 26 |
In December 2020 we began a 12-week, multi-center, open-label clinical trial in Australia and we plan to enroll approximately 20 adult patients with chronic refractory NTM lung disease. We received a grant of up to $2.17 million from the Cystic Fibrosis Foundation to fund this study and advance the clinical development of inhaled NO to treat NTM pulmonary disease. The trial is enrolling both cystic fibrosis (“CF”) and non-CF patients infected with MAC or M. abscessus. The study consists of a run-in period followed by two treatment phases. The run-in period provides a baseline for the efficacy endpoints. The first treatment phase takes place over a two-week period and begins in the hospital setting where patients will be titrated from 150 ppm NO up to 250 ppm NO over several days. During this phase patients receive NO for 40 minutes, four times per day while MetHb levels are monitored. Patients are also trained to use LungFit® GO and subsequently discharged to complete the remaining portion of the two-week treatment period at their home at the highest tolerated NO concentration. For the second treatment phase, a 10-week maintenance phase, the administration is twice daily. The study is evaluating safety, quality of life, physical function, and bacterial load among other parameters.
We anticipate reporting interim data in the fall of calendar year 2021, likely at a scientific conference. We will release top-line results for the full data set approximately six months later. If the trial is successful, we would anticipate commencing a pivotal study in the first half of calendar year 2023.
The Company’s program in chronic obstructive pulmonary disease (“COPD”) is in the pre-clinical stage and will remain there, subject to obtaining additional financing.
Ultra-High Concentration NO in solid tumors
For the Company’s solid tumor program, we have released pre-clinical data at several medical/scientific conferences showing the promise of delivering NO at concentrations of 20,000 ppm – 200,000 ppm directly to tumors. Results showed that local tumor ablation with NO conveyed anti-tumor immunity to the host. In the Company’s most recent release of data, 8 of 11 mice treated with a single administration of 25,000 ppm NO over 5 minutes were resistant to a subsequent tumor challenge and 11 of 11 mice treated with 50,000 ppm NO were resistant to a subsequent tumor challenge. Pre-clinical work will continue throughout most of 2021 with a goal of receiving regulatory approval to initiate a first-in-human trial by the end of calendar year 2021.
COVID-19
The development of the Company’s product candidates could be further disrupted and adversely affected by a resurgence of the COVID-19 pandemic. The Company experienced significant delays in the supply chain for LungFit® due to the redundancy in parts and suppliers with ventilator manufacturing which has since been remedied. The Company continuously assesses the impact COVID-19 may have on the Company’s business plans and its ability to conduct the preclinical studies and clinical trials as well as on the Company’s reliance on third-party manufacturing and Beyond Air’s supply chain. However, there can be no assurance that the Company will be able to avoid part or all of any impact from COVID-19 or its consequences if a resurgence occurs.
Critical Accounting Estimates and Policies
A critical accounting policy is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
The Company’s unaudited consolidated financial statements are presented in accordance with U.S. GAAP, and all applicable U.S. GAAP accounting standards effective as of June 30, 2021 have been taken into consideration in preparing the unaudited consolidated financial statements. The preparation of unaudited consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. Some of those estimates are subjective and complex, and, consequently, actual results could differ from those estimates. The following accounting policies and estimates have been highlighted as significant because changes to certain judgments and assumptions inherent in these policies could affect the Company’s consolidated financial statements:
| ● | Use of Estimates, | |
| ● | Research and development expenses, | |
| ● | Stock-based compensation expenses, and | |
| ● | Income Taxes |
| 27 |
Off-Balance-Sheet Arrangements
As of June 30, 2021, we did not have any off-balance-sheet arrangements as defined in the rules and regulations of the Securities and Exchange Commission the (“SEC”).
Results of Operations
Below are the results of operations for the three months ended June 30, 2021 and June 30, 2020:
|
For the Three
June 30, |
||||||||
| 2021 | 2020 | |||||||
| License revenue | $ | - | $ | 229,161 | ||||
| Operating expenses | ||||||||
| Research and development | 2,741,041 | 4,331,814 | ||||||
| General and administrative | 3,850,265 | 2,494,014 | ||||||
| Operating loss | (6,591,306 | ) | (6,596,667 | ) | ||||
| Other income (loss) | ||||||||
| Dividend income | 706 | 14,985 | ||||||
| Foreign exchange gain | 9,859 | 1,275 | ||||||
| Interest expense | (162,143 | ) | (163,240 | ) | ||||
| Other | - | 1,843 | ||||||
| Total other loss | (151,578 | ) | (145,137 | ) | ||||
| Net loss | $ | (6,742,884 | ) | $ | (6,741,804 | ) | ||
| Net loss per share – basic and diluted | $ | (0.31 | ) | $ | (0.41 | ) | ||
| Weighted average number of common shares outstanding – basic and diluted | 21,945,235 | 16,529,392 | ||||||
Comparison of Three Months Ended June 30, 2021 with the Three Months Ended June 30, 2020
| 28 |
License Revenue
On January 23, 2019, the Company entered into an agreement for commercial rights (the “Circassia Agreement”) with 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. Prior to the three month period ending June 30, 2021, the Company has met its performance obligation under the Circassia Agreement and all the revenue had been previously recognized. License revenue of $0 and $229,161 associated with the second performance obligation has been recognized for the three months ended June 30, 2021 and June 30, 2020, respectively.
Research and Development Expenses
Research and development expenses for the three months ended June 30, 2021 were $2,741,041 as compared to $4,331,814 for the three months ended June 30, 2020. The decrease of $1,590,773 was primarily attributed to less expenses for PPHN due to the submission of the PMA in November 2020 and a decrease in non-cash compensation expense of $472,898.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2021 and June 30, 2020 were $3,850,265 and $2,494,014, respectively. The increase of $1,356,251 was attributed primarily to changing legal counsel, increase in professional fees, preparation for the commercial launch, increase in salaries and benefits and insurance.
Cash Flows
Below is a summary of the Company’s cash flows activities for the three months ended June 30, 2021 and June 30, 2020:
| Three Months Ended | ||||||||
| June 30, | ||||||||
| 2021 | 2020 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (3,918,178 | ) | $ | (5,485,465 | ) | ||
| Investing activities | (27,055 | ) | (243,527 | ) | ||||
| Financing activities | 8,305,518 | 4,709,098 | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 4,360,285 | $ | (1,019,894 | ) | |||
Operating Activities
For the three months ended June 30, 2021 the net cash used in operating activities was $3,918,178 which was primarily due to the Company’s net loss of $6,742,884, offset by non-cash stock-based compensation expense of $1,215,911, cash provided from a grant receivable of $425,000, a decrease in prepaid expenses of $205,032 and an increase of $946,648 of accounts payable. For the three months ended June 30, 2020 the net cash used in operating activities was $5,484,465 which was primarily due to the Company’s net loss of $6,741,804 and a decrease of $335,893 from accounts payable. In addition, there was non-cash stock-based compensation expense of $1,815,654 and amortization of deferred revenue of $229,161.
Investing Activities
For the three months ended June 30, 2021 and June 30, 2020, net cashed used in investing activities was $27,055 and $243,527, respectively, which was for the purchase of property and equipment.
Financing Activities
Net cash provided by financing activities for the three months ended June 30, 2021 was $8,305,518 and which was primarily from the net proceeds for the issuance of common stock related to the Stock Purchase Agreement and ATM of $8,512,867 offset by a loan payment of $207,349. Net cash provided by financing activities for the three months ended June 30, 2020 was $4,709,098 which was primarily from the net proceeds from the issuance of common stock issued related to the Stock Purchase Agreement with LPC, net proceeds the issuance of common stock in connection with ATM and proceeds from the issuance of common stock from warrant exercises of $4,834,877 offset by a loan payment of $125,779.
Contractual Obligations
There have been no material changes to our contractual obligations since March 31, 2021. For a summary of our contractual obligations, see Item 7 of Part II of our Annual Report on Form 10-K for the year ended March 31, 2021 (the “2021 Annual Report”), filed with the SEC on June 10, 2021 and amended on July 23, 2021.
| 29 |
Liquidity and Capital Resources
Overview
We have not generated any revenue from the sale of products, and we do not expect to generate revenue from sale of our products until certification or regulatory approval is received for our product candidates. We had an operating cash flow decrease of $3.9 million for the three months ended June 30, 2021 and we have experienced an accumulated loss of $87.2 million as of June 30, 2021. As of June 30, 2021, we had cash, cash equivalents and restricted cash of $39.6 million. We believe that our cash, cash equivalents of June 30, 2021, will enable us to fund our operating expenses and capital expenditure for at least one year from the date of filing these financial statements.
Our future capital needs and the adequacy of its available funds 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 first product candidates that receive marketing approval by the FDA. The Company may be required to raise additional funds through equity or debt securities offerings or strategic collaboration and/or licensing agreements in order to fund operations until it is able to generate enough product or royalty revenues, if any. Such financing may not be available on acceptable terms, or at all, and the Company’s failure to raise capital when needed could have a material adverse effect its strategic objectives, results of operations and financial condition.
There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all.
On March 17, 2020, we entered into a facility agreement with certain lenders (“Facility Agreement”) pursuant to which the lenders agreed to loan up to $25,000,000 in five tranches of $5,000,000 per tranche at our option, provided however that we may only utilize tranches three through five following FDA approval of LungFit® PH. The loan(s) are unsecured with an interest rate of 10% per annum which is paid quarterly and may be prepaid with certain prepayment penalties. The effective interest rate for this loan is 13.3% per year. Each tranche must be repaid in installments commencing June 15, 2023 with all remaining amounts outstanding under any tranche due on March 17, 2025. We drew down on the first tranche of $5,000,000.
On April 2, 2020, we entered an At-The-Market Equity Offering Sales Agreement with SunTrust Robinson Humphrey, Inc. and Oppenheimer & Co. (the “ATM”). Under the 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 three percent fee paid to the sales agent. As of June 30, 2021, there was a balance of approximately $29.9 million available under the ATM.
On May 14, 2020, we entered into the $40 million 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 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 the next 36 months, subject to the conditions and limitations in the New Stock Purchase Agreement. As of June 30, 2021, there was a balance of approximately $28.2 million available under the New Stock Purchase Agreement.
Our ability to continue to operate beyond twelve months from the filing of this Form 10-K will be largely dependent upon the approval of our PMA for the PPHN medical device, the expected timing and commercial acceptance of the launch this device, 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.
| 30 |
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, if approved; | |
| ● | 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 candidates; | |
| ● | 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 candidates. |
| 31 |
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of foreign currency exchange rates.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2021.
Changes in Internal Control Over Financial Reporting
During the three months ended June 30, 2021, there was no change in our internal controls over financial reporting that materially affected, or is reasonably likely to materially affect our, internal controls over financial reporting.
| 32 |
PART II OTHER INFORMATION
Item 1. Legal Proceedings
See Note 14 to our unaudited consolidated financial statements.
ITEM 1A. RISK FACTORS
There have been no material changes with respect to risk factors previously disclosed in the Company’s Form 10-K for the year ended March 31, 2021, filed with the Securities and Exchange Commission on June 10, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. Exhibits.
**** Confidential treatment has been requested for portions of this exhibit
| 33 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BEYOND AIR, INC. | |
| /s/ Steven Lisi | |
| Date: August 10, 2021 | Steven Lisi |
| President and Chief Executive Officer | |
| (Principal Executive Officer) | |
| /s/ Douglas Beck | |
| Date: August 10, 2021 | Douglas Beck |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
| 34 |
Exhibit 10.1
CERTAIN INFORMATION IN THIS DOCUMENT, MARKED BY [***], HAS BEEN EXCLUDED PURSUANT TO REGULATION S-K, ITEM 601(b)(10)(iv). SUCH EXCLUDED INFORMATION IS NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (this “Settlement Agreement”), is entered into by and between BEYOND AIR, INC., formerly AIT Therapeutics, Inc. (“Beyond Air”) on behalf of itself and its Affiliates (collectively, “Beyond Air”) and CIRCASSIA LIMITED on behalf of itself and its Affiliates (collectively, “Circassia”) on the date it is fully executed by the Parties (the “Effective Date”). Beyond Air and Circassia may be referred to collectively as the “Parties” and each individually as a “Party”. “Affiliate” means any entity that directly or indirectly controls, is controlled by or is under common control of a Party.
RECITALS
| A. | Circassia and Beyond Air are parties to a License, Development and Commercialization Agreement dated January 23, 2019 (the “License Agreement”) with respect to the Product (defined herein). |
| B. | In December 2019, Beyond Air purported to terminate the License Agreement based on an alleged material breach by Circassia. Circassia asserts that it did not breach the License Agreement, that the termination was wrongful and that, instead, Beyond Air ceased cooperating with Circassia and effectively abandoned its obligations under the License Agreement prior to attempting to terminate it. The effectiveness of the purported termination and each Party’s allegations regarding the other Party’s failure to fulfill its obligations under the License Agreement are referred to herein as the “Dispute”. |
| C. | [***], Beyond Air submitted a pre-market approval application to the FDA for the Product (the “PMA”). |
| D. | The Parties desire to resolve all disagreements and disputes between them, and the Parties agree that this Settlement Agreement constitutes a settlement of disputed claims, that nothing contained herein shall be construed as an admission of liability by the Parties and that all such liability is expressly denied. |
NOW, THEREFORE, in consideration of the promises and releases contained herein, and the compromise of disputed claims, the receipt and sufficiency of all such consideration being expressly acknowledged by all Parties, the Parties agree as follows:
AGREED TERMS
1. Defined Terms. Capitalized terms used in this Settlement Agreement and not otherwise defined shall have the meanings given to them in Exhibit A attached hereto.
2. Termination of License Agreement. Subject to the terms and conditions of this Settlement Agreement, the term of the License Agreement is hereby terminated as of the Effective Date. From and after the Effective Date, the License Agreement will be of no further force or effect, and the rights and obligations of each of the Parties thereunder shall terminate, except for any rights and obligations of the Parties set forth in Sections 12.1 through 12.5 of the License Agreement regarding confidentiality, which shall survive in accordance with their terms.
3. Initial Settlement Payment.
(a) Beyond Air will pay Circassia the sum of Ten Million Five Hundred Thousand Dollars ($10,500,000.00) (the “Initial Settlement Payment”) in three installments as follows:
(i) $2,500,000 to Circassia within fifteen (15) days following FDA approval of the Product (“Initial Payment Due Date”);
(ii) $3,500,000 to Circassia on the first anniversary of the Initial Payment Due Date; and
(iii) the remainder of the Initial Settlement Payment on the second anniversary of the Initial Payment Due Date.
(b) Each installment of the Initial Settlement Payment shall be paid by wire transfer of immediately available funds in accordance with the following wire instructions or such other instructions as Circassia may designate by notice to Beyond Air hereunder:
| ABA Number: | [***] | |
| Account Number: | [***] | |
| Bank Address: | [***] | |
| Attn: | [***] |
4. FDA Approval. If Beyond Air withdraws the PMA or any other application submitted to the FDA with respect to the Product in lieu of the PMA or fails to pursue FDA approval of the Product primarily for the purpose of depriving Circassia of the right to receive the benefits of this Settlement Agreement or otherwise in bad faith, the Initial Settlement Payment will become due and payable immediately without further action or notice on the part of Circassia.
5. Royalty Payments.
(a) In addition to the Initial Settlement Payment, Beyond Air shall pay to Circassia a royalty payment equal 5% of Net Sales (“Royalties”) made in the Territories commencing in the first full fiscal quarter following the second anniversary of the Initial Payment Due Date and continuing until such time as the aggregate Royalties paid to Circassia equal to Six Million Dollars ($6,000,000.00) (“Total Royalty Payment”). Beyond Air shall pay the Royalties earned in any fiscal quarter within [***] of the close of such fiscal quarter.
| Page 2 of 8 |
(b) Beyond Air shall furnish or cause to be furnished to Circassia within [***] after the end of each fiscal quarter of Beyond Air (each a “Reporting Period”) a written report or reports (the “Sales Report”) covering the applicable Reporting Period and containing the following information:
(i) The Net Sales from the sale of Products and/or Filters (and all associated calculations) in the Territories during the Reporting Period; and
(ii) the Royalties which shall have accrued hereunder in respect to such Net Sales during the Reporting Period.
The obligation to provide such Sales Reports shall commence following the first full quarter following the second anniversary of the Initial Payment Due Date and continue until the Total Royalty Payment has been made. If the net sales amount set forth in any Beyond Air publicly filed Form 10-Q report is calculated consistent with Net Sales as defined in this Agreement, then such publicly filed Form 10-Q report shall constitute a “Sales Report” within the meaning of this Agreement. Beyond Air and its Affiliates shall keep legible, verifiable and accurate records in sufficient detail to enable the Royalties payable hereunder to be determined and substantiated.
(c) Circassia shall have the right to have an independent public accounting firm of its own selection but reasonably acceptable to Beyond Air, and at [***] own expense (except if the result of such audit reveals an underpayment exceeding [***] ([***]) of the amounts actually due to Circassia for the audit period in question, in which case such audit shall be at [***] expense), examine the relevant books and records of account of Beyond Air and any of its Affiliates during reasonable business hours upon reasonable prior written notice to Beyond Air and not more often than [***] each fiscal year of Beyond Air, for not more than [***] ([***]) previous years, to determine whether appropriate payment have been made to Circassia hereunder. Beyond Air shall promptly pay to Circassia the full amount of any undisputed underpayment. If the amount of the underpayment is greater than [***] ([***]) on an annualized basis, Beyond Air shall pay interest on that amount that is in excess of [***] ([***]) at the rate of [***] ([***]) per year, or the maximum rate permitted by applicable Law, whichever is less, in either case compounding annually from the date payment was due. Any overpayment by Beyond Air shall be credited against future Beyond Air Royalties payment obligations hereunder. Such public accounting firm shall treat as confidential, and shall not disclose to Circassia, any information other than information which could otherwise be given to Circassia pursuant to any provision of this Settlement Agreement, all of which shall be treated as Confidential Information of Beyond Air under the surviving confidentiality provisions under the License Agreement.
(d) All payments to Circassia shall be in U.S. Dollars.
6. [***]. In the event of [***], the Initial Settlement Payment and the Total Royalty Payment will become due and payable to Circassia [***] without further action or notice. Notwithstanding the foregoing, if [***], then payment is not due and payable to Circassia [***] as set forth in the immediately preceding sentence and shall be made as follows:
| Page 3 of 8 |
|
Circassia
Balance Due
|
Payment Schedule | |
| [***] | [***] | |
| [***] | [***] | |
| [***] | [***] |
Alternatively, Beyond Air may make a proposal to Circassia regarding a preferred payment schedule with respect to the remaining amounts due under this Settlement Agreement and Circassia will consider such proposal in good faith.
7. Taxes. Circassia shall be solely responsible for, and is legally bound to make payment of, any taxes determined to be due and owing (including penalties and interest related thereto) by it to any federal, state, local, or regional taxing authority as a result of the Initial Settlement Payment or the Royalties.
8. Mutual Release. The Parties, on behalf of themselves, their predecessors, successors, direct and indirect parent companies, direct and indirect subsidiary companies, companies under common control with any of the foregoing, Affiliates, and assigns, and their past, present, and future officers, directors, shareholders, interest holders, members, partners, attorneys, agents, employees, managers, representatives, assigns, and successors in interest, and all persons acting by, through, under, or in concert with them, and each of them, hereby absolutely, fully and forever, release, relieve, waive, relinquish and discharge the Parties, and each of their current and former parents, subsidiaries, Affiliates, insurers, and each of their respective present and past officers, directors, equity holders, managers, members, agents, servants, employees, representatives, predecessors, successors, assigns and attorneys, of and from any and all claims, demands, causes of action, contracts (other than the provisions of the License Agreement that survive termination of the License Agreement in accordance with the terms of the License Agreement), suits, judgments and liabilities of any kind or nature whatsoever, whether known or unknown, liquidated or unliquidated, contingent or determined, direct or indirect, in law or in equity, arising from any matter or thing whatsoever, including but not limited to the License Agreement, and the Dispute (collectively, the “Released Claims”). The Parties may hereafter discover facts in addition to or different from those which they now know or belief to be true with respect to the subject matter of the Released Claims, but the Parties expressly, fully, finally and forever settle and release, any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, which now exist, or heretofore have existed, upon any theory of law or equity now existing or coming into existence in the future, including without limitation conduct that is negligent, intentional, with or without malice, and a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts. The Parties acknowledges that the foregoing waiver and release was separately bargained for and a key element of the settlement of which this release is a part.
| Page 4 of 8 |
9. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail (in each case, return receipt requested, postage pre-paid). Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section):
| If to Circassia: |
Circassia Limited Northbrook House Robert Robinson Avenue, Science Park Oxford OX4 4GA, UK E-mail: [***] Telephone: [***] Attention: [***] |
| with a copy to: |
Womble Bond Dickinson (US) LLP 555 Fayetteville Street Suite 1100 Raleigh, NC 27601 E-mail: J[***] Telephone: [***] Attention: [***]
|
| If to Beyond Air: |
Beyond Air, Inc. 825 East Gate Blvd., Suite 320 Garden City, New York 11530 E-mail: [***] Telephone: [***] Attention: [***] |
| Page 5 of 8 |
10. Authority. The Parties and signatories to this Settlement Agreement represent and warrant that they have the full legal authority to sign this Settlement Agreement. The Parties represent and warrant that they have full power and authority to compromise and release the Released Claims, and have not previously assigned, encumbered or otherwise transferred any portion of the Released Claims.
11. No Outstanding or Known Future Claims/Causes of Action. The Parties affirm that they have not filed with any governmental agency or court any type of action or report against the other Party, and currently know of no existing act or omission by the other Party that could give rise to liability.
12. No Admission of Liability. The Parties acknowledge that the Initial Settlement Payment and the Total Royalty Payment were agreed upon as a compromise and final settlement of disputed claims and that payment of the Initial Settlement Payment and the Total Royalty Payment is not, and may not be construed as, an admission of liability by either Party and is not to be construed as an admission that either Party engaged in any wrongful, tortious, or unlawful activity. The Parties specifically disclaim and deny (a) any liability to the other Party and (b) engaging in any wrongful, tortious, or unlawful activity.
13. Non-Disparagement. The Parties agree that, unless required to do so by legal process, the Parties, including all Affiliates, officers, and directors, will not make any disparaging statements or representations, either directly or indirectly, whether orally or in writing, by word or gesture, in any medium to any person whatsoever, about the other Party, the other Party’s Affiliates, or any of the other Party’s directors, officers, employees, attorneys, agents, or representatives. For purposes of this Section, a disparaging statement or representation is any communication which, if publicized to another, would cause or tend to cause the recipient of the communication to question the business condition, integrity, competence, good character, or product quality of the person or entity to whom the communication relates.
14. Entire Agreement. Other than the provisions of the License Agreement that survive termination of the License Agreement in accordance with the terms of the License Agreement, this Settlement Agreement constitutes the final, integrated and entire agreement and understanding of the Parties with respect to the subject matter of this Settlement Agreement, and supersedes any and all prior agreements, representations and negotiations between the Parties as to such subject matter, whether oral or written. The Parties further agree that they are not relying on any inducements, promises, or representations made by the other Party, with the exception of the representations and the consideration cited herein.
| Page 6 of 8 |
15. Interpretation. Should any provision of this Settlement Agreement be declared or be determined by any court to be illegal or invalid, the validity of the remaining parts, terms, or provisions shall not be affected thereby and said illegal or invalid part, term, or provision shall be deemed not to be a part of this Settlement Agreement. The headings within this Settlement Agreement are purely for convenience and are not to be used as an aid in interpretation. Moreover, this Settlement Agreement shall not be construed against either Party as the author or drafter of the Settlement Agreement.
16. Choice of Law; Venue. This Settlement Agreement and all related documents and all matters arising out of or relating to this Settlement Agreement, whether sounding in contract, tort, or statute are governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof to the extent such principles or rules would require or permit the application of the laws of any jurisdiction other than those of the State of Delaware. All claims, controversies or disputes arising out of or in connection with this Settlement Agreement, including its validity or termination, or the performance or breach hereof, shall be heard exclusively by courts located in Delaware.
17. Reliance on Own Counsel. In entering into this Settlement Agreement, the Parties acknowledge that they have relied upon the legal advice of their respective attorneys, who are the attorneys of their own choosing, that such terms are fully understood and voluntarily accepted by them, and that, other than the consideration set forth herein, no promises or representations of any kind have been made to them by the other Party. The Parties represent and acknowledge that in executing this Settlement Agreement they did not rely, and have not relied, upon any representation or statement, whether oral or written, made by the other Party or by that other Party’s agents, representatives, or attorneys with regard to the subject matter, basis, or effect of this Settlement Agreement or otherwise.
18. Counterparts. This Settlement Agreement may be executed by the Parties in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. An executed facsimile or electronically scanned copy of this Settlement Agreement shall have the same force and effect as an original.
19. Covenant Not to Sue. Each Party hereby irrevocably covenants that neither such Party nor any of its related parties granting the release in Section 8 will, directly or indirectly, alone or by, with, or through others, cause, induce or authorize, or voluntarily assist, participate, or cooperate in, the commencement, maintenance or prosecution of any action or proceeding of any kind or nature whatsoever including, but not limited to, any suit, complaint, grievance, demand, claim, cause of action in, of, or before any government authority against the other Party or any of the other persons or entities released pursuant to Section 8 hereof, seeking or having the tendency to establish any liability on the part of, or to exact any sanction or penalty, or any injunctive, equitable, legal, declaratory, administrative or other relief from or against the other Party, or any of such other released persons or entities, arising from, by reason of, or in connection with any claim or other matter released pursuant to Section 8.
| Page 7 of 8 |
20. Agreement is Legally Binding. The Parties intend this Settlement Agreement to be legally binding upon and shall inure to the benefit of each of them and their respective successors and assigns. Moreover, the persons and entities referred to in Section 8 above (other than the Parties) are third-party beneficiaries of this Settlement Agreement.
21. Attorneys’ Fees.
(a) The Parties acknowledge and agree that they are solely responsible for paying any attorneys’ fees and costs they incurred in connection with the Dispute or the negotiation and execution of this Settlement Agreement and that neither Party nor its attorney(s) will seek any award of attorneys’ fees or costs from the other Party, except as provided herein.
(b) In the event that any Party institutes any legal suit, action or proceeding, including arbitration, against the other Party to enforce the covenants contained in this Settlement Agreement (or obtain any other remedy in respect of any breach of this Settlement Agreement) or otherwise arising out of or relating to this Settlement Agreement, the prevailing party in the suit, action or proceeding shall be entitled to receive in addition to all other damages to which it may be entitled, the costs incurred by such party in conducting the suit, action or proceeding, including reasonable attorneys’ fees and expenses and court costs.
READ THE FOREGOING DOCUMENT CAREFULLY. IT INCLUDES A RELEASE OF KNOWN AND UNKNOWN CLAIMS.
[signature page follows]
| Page 8 of 8 |
CERTAIN INFORMATION IN THIS DOCUMENT, MARKED BY [***], HAS BEEN EXCLUDED PURSUANT TO REGULATION S-K, ITEM 601(b)(10)(iv). SUCH EXCLUDED INFORMATION IS NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
IN WITNESS WHEREOF, the parties hereto have executed this Settlement Agreement as of the date first above written.
| BEYOND AIR, INC. | CIRCASSIA LIMITED | ||
| by: | /s/ Steve Lisi | by: | /s/ Michael Roller |
| Authorized signature | Authorized signature | ||
| Signatory Name: | Steve Lisi | Signatory Name: | Michael Roller |
| (type or print) | (type or print) | ||
| Signatory Title: | CEO | Signatory Title: | Director |
| Signature Date: | May 25, 2021 | Signature Date: | 25 May 2021 |
[Signature Page]
Exhibit A
Defined Terms
[***]
“Circassia Balance Due” means, as of a given date, an amount equal to [***].
[***]
“FDA” means the United States Food and Drug Administration and any successors thereof.
“Filter” means [***].
[***]
[***]
“Laws” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign, including any regulatory agency policy or informal regulatory agency guidance, including, but not limited to, those related to medical device marketing, labeling and sales, foreign corrupt practices, import and export controls.
[***]
[***]
“Net Sales” has the same meaning as set forth in the License Agreement.
“Person” means any individual, corporation, limited liability company, trust, joint venture, association, company, limited or general partnership, unincorporated organization, governmental authority, or other entity.
“Product” has the same meaning as set forth in the License Agreement.
“Territories” means the United States of America and its territories and possessions.
[***]
[***]
[***]
Exhibit 10.2
AIT THERAPEUTICS INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (“Agreement”) is made and entered into as of June 30, 2018, by and between AIT THERAPEUTICS INC., a Delaware corporation (“Employer”), and Steven Lisi (“Executive”).
1. Employment. Employer employs Executive, and Executive accepts employment with Employer, on the terms and conditions set forth in this Agreement commencing on June 30, 2018 (“Effective Date”).
2. Position; Scope of Employment The Company agrees to employ and the Executive agrees to serve as the Company’s Chief Executive Officer and Chairman of the Board. The duties and responsibilities of the Executive shall include the duties and responsibilities as the Company’s Board of Directors (“Board”) may from time to time assign to the Executive.
For so long as Executive is Chief Executive Officer, the Company shall use commercially reasonable efforts, subject to applicable law and regulations of any applicable stock exchange, to cause Executive to be nominated for election as a director and to be recommended to the stockholders for election as a director.
The Executive shall devote his full-time efforts and services to the business and affairs of the Company and its subsidiaries. Nothing in this Section 1 shall prohibit the Executive from: (A) serving as a director or member of any other board, committee thereof of any other entity or organization (except as such position may be with a directly competing company); (B) delivering lectures, fulfilling speaking engagements, and any writing or publication relating to his area of expertise; (C) serving as a director or trustee of any governmental, charitable or educational organization; (D) engaging in additional activities in connection with personal investments and community affairs, including, without limitation, professional or charitable or similar organization committees, boards, memberships or similar associations or affiliations (E) performing advisory activities, provided, however, such activities are not in competition with the business and affairs of the Company or would tend to cast executive of Company in a negative light in the reasonable judgment of the Board.
2.1. Rules and Regulations. During his employment with Employer, Executive agrees to observe and comply with Employer’s rules and regulations (including Employer’s code of ethics and insider trading policy) as provided by Employer and as may be amended from time to time by Employer and will carry out and perform faithfully such orders, directions and policies of Employer. To the extent any provision of this Agreement is contrary to an Employer rule or regulation, as such may be amended from time to time, the terms of this Agreement shall control.
3. Employment Term. Executive’s term of employment (the “Employment Term”) shall commence upon the Effective Date of this Agreement and shall terminate as provided in Section 5.
4. Compensation. During the Employment Term, Employer shall pay to or provide compensation to Executive as set forth in this Section 4. All compensation of every description shall be subject to the customary withholding tax and other employment taxes as required with respect to compensation paid to an employee.
4.1. Base Salary. Employer shall pay Executive an annual base salary as established by the Board of Directors from time-to-time (“Base Salary”). Executive’s Base Salary shall be payable in accordance with Employer’s regular payroll schedule, but not less frequently than twice per month. The initial Base Salary shall be $450,000 per annum.
4.2. Review. Executive’s Base Salary and duties shall be reviewed by the Compensation Committee of the Board of Directors at least annually. During the review, duties will be outlined and compensation may be adjusted up at the discretion of the Compensation Committee. The Base Salary may not be decreased during the Employment Term without the consent of the Executive. If Employer has no Compensation Committee, then all references to the Compensation Committee shall refer to the Board of Directors.
| Page 1 |
4.3. Short-Term Incentive Compensation. In addition to the Base Salary provided for in sections 4.1 and 4.2, Executive is eligible to receive a short-term incentive bonus (“STI”) equal to a percentage of his Base Salary in effect at the end of the fiscal year, based partially on performance weighted bonus objectives established for Executive by the Board of Directors (which will include both corporate objectives and individual objectives) for the fiscal year, such objectives to be discussed with Executive prior to being established, and partially based on the discretion of the Board of Directors. The target STI each fiscal year shall be an amount equal to 60% of the Base Salary in effect at the end of that fiscal year. However, the actual STI as determined by the Board of Directors may range from 0% to higher than 100% of the Base Salary. STI shall for any year be payable on or before April 15 of the following year and may include cash, stock options and restricted stock awards. If paid in stock options or restricted stock awards, STI shall be paid separately from, and independently of, any long term equity incentive award as described in section 4.4 below. Any and all bonuses provided to Executive pursuant to this paragraph shall be governed by the terms of a separate management bonus plan as adopted by the Board of Directors in its sole discretion from time to time.
4.4. Long Term Incentive Compensation. Executive shall be eligible to receive awards of stock options or restricted stock grants as may be determined from time to time by the Board of the Directors or the Compensation Committee of the Board of Directors. On a date to be determined by the Compensation Committee of the Board of Directors (but no later than March 31, 2018), Executive will be granted options to purchase up to 400,000 shares of Employer’s Common Stock (“Options”), if appropriate, under Employer’s Stock Option Plan (the “Plan”) pursuant to an option agreement in the form determined by the Board of Directors (the “Option Agreement”). Subject to the terms and conditions of the Option Agreement, the Options will vest as to 25% of the shares subject to the Option (the “Option Shares”) on the Effective Date, and thereafter 25% on December 31, 2018 and December 31st of each of the two ensuing years thereafter until vested in full (provided that the last vesting date shall occur on a date before the Option expires). The exercise price of the Options will be equal to 100% of the fair market value of share of Employer Common Stock on the date of grant, not to be less than $4.25 and the Options will expire on the tenth anniversary of the date of grant. In the event of a conflict between the terms hereof and the terms of the Option Agreement and/or the Plan, the terms of the Option Agreement and/or the Plan will control. The Board may, in its absolute discretion, choose to grant Executive additional options in the future.
4.5 Tax Matters Relating to Awards. The Compensation Committee shall be permitted to elect to have Employer cover any tax withholding obligation by net share settlement of shares equal to the amount of Executive’s tax withholding liability unless a Rule 10b5-1 Plan is a viable option. Otherwise, such net settlement on vested shares for tax purposes shall be permitted upon finding that a Rule 10b5-1 Plan is not an alternative for Executive.
4.6. Vacation and Sick Leave Benefits. Executive shall be entitled to accrue six (6) weeks of paid vacation annually. While Employer encourages Executive to take vacation, if he does not use all vacation accrued in each calendar year, Executive may carry it over from year to year; provided, however, that the maximum accrual of Executive’s vacation shall be capped at two times the annual accrual rate. Once the cap is reached, Executive shall no longer accrue vacation until such time as he uses accrued vacation and his accrued and unused vacation days fall below the cap, at which time he will again begin to accrue vacation at the appropriate accrual rate. The value of any amount of vacation that would otherwise accrue but for the cap would be paid in cash to Executive. Any vacation benefit granted or paid to Executive is based solely on his Base Salary. Executive shall be entitled to sick leave in accordance with Employer’s sick leave policy, as amended from time to time.
4.7 Other Fringe Benefits. Executive shall participate in all of Employer’s fringe benefit programs in substantially the same manner and to substantially the same extent as other similar employees of Employer, excluding only those benefits expressly modified by the terms hereof.
4.8 Expenses. Executive shall be reimbursed for his reasonable business expenses, subject to the presentation of evidence that such expenses are made in accordance with established policies adopted by Employer from time to time.
| Page 2 |
4.9 Compensation From Other Sources. Any proceeds that Executive shall receive by virtue of qualifying for disability insurance, disability benefits, or health or accident insurance shall belong to Executive. Executive shall not be paid Base Salary in any period in which he receives benefits as determined and paid under Employer’s long-term disability policy. Benefits paid to Executive under Employer’s short-term disability policy shall reduce, by the same amount, Base Salary payable to Executive for such period.
4.10 Medical Insurance. Executive shall be eligible to receive all benefits available to the Employer’s executives, including Health, Dental and Vision Insurance to which other Employer executives or officers participate. The terms and conditions of the Executive’s participation in Employer’s benefit plans, policies, programs, or perquisites shall be governed by the terms of each such plan, policy, or program.
5. Termination of Employment. Executive’s employment with Employer shall terminate on the earliest to occur of the following (the date of termination of Executive’s employment being the “Termination Date”):
5.1 upon the mutual agreement of Employer and Executive in writing;
5.2 upon the Executive’s death;
5.3 upon delivery to Executive of a written notice of termination by Employer if Executive should suffer a disability or physical or mental condition, which for the purposes of this Agreement, means Executive’s inability, for a period of ninety (90) consecutive days, to substantially perform the essential functions of Executive’s duties as Chief Executive Officer, with or without a reasonable accommodation. For purposes of determining whether Executive has a disability or physical or mental condition under this Section 5.3, upon request Executive agrees to submit to Employer a medical certification regarding his health condition from his health care provider, or submit to a medical exam by a health care provider selected by Employer and Executive for the sole purpose of evaluating Executive’s ability to perform the essential functions of his position. Employer’s written notice of termination under this Section 5.3 shall coincide with the date Executive qualifies for total disability payments under Employer’s long-term disability plan.
5.4 upon the date set forth in a written notice of termination for Cause delivered to Executive by Employer.
For purposes of this Agreement, “Cause” is defined as follows: (a) willful or habitual breach of Executive’s duties, provided that Employer shall give Executive notice of such breach and Executive shall not have cured such breach within thirty (30) days of such notice; (b) fraud, dishonesty, deliberate injury or intentional material misrepresentation by Executive to Employer or any others; (c) embezzlement, theft or conversion by Executive; (d) negligent unauthorized disclosure or other use of Employer’s trade secrets, customer lists or confidential information; (e) habitual misuse of alcohol or any non-prescribed drug or intoxicant; (f) willful misconduct that causes material harm to Employer; (g) willful violation of any other standards of conduct as set forth in Employer’s employee manual and policies; (h) Executive’s conviction of or plea of guilty or nolo contendere to a felony or to a misdemeanor involving moral turpitude; (i) continuing failure to communicate and fully disclose material information to the Board of Directors, the failure of which would adversely impact the Employer or may result in a violation of state or federal law, including securities laws; or (j) debarment by any federal agency that would limit or prohibit Executive from serving in his capacity for Employer under this Agreement.
5.5 upon the date set forth in a written notice of resignation delivered to Employer by Executive for Good Reason.
For purposes of this Agreement, “Good Reason” is defined as one or more of the following: (a) without the consent of Executive, Executive is assigned material duties that are materially inconsistent with Executive’s position, duties, responsibilities or status as Chief Executive Officer of Employer, including any Change of Control, provided that Executive must advise the Board of Directors in writing within fifteen (15) days of such assignment of duties that he believes the duties would give him the right to terminate his employment for Good Reason and the Board of Directors does not withdraw or change such assignment within a reasonable period of time; or (b) without the consent of Executive, Employer relocates Executive’s principal place of employment to a location further than 35 miles from the Employer’s current principal offices.
| Page 3 |
5.6 upon the date set forth in (a) a written notice of termination without Cause delivered to Executive by Employer; or (b) a written notice of resignation for Good Reason delivered to Employer by Executive, if such written notice is provided within three (3) months prior to a Change of Control or one (1) year following a Change in Control.
For purposes of this Agreement, “Change in Control” means an event involving one transaction or a related series of transactions in which one of the following occurs: (a) Employer issues securities equal to fifty percent 50% or more of Employer’s issued and outstanding voting securities, determined as a single class, to any individual, firm, partnership or other entity, including a “group” within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934; (b) Employer issues securities equal to fifty percent 50% or more of the issued and outstanding common stock of Employer in connection with a merger, consolidation or other business combination; (c) Employer is acquired in a merger or other business combination transaction in which Employer is not the surviving company; or (d) all or substantially all of Employer’s assets are sold or transferred to a third party that is not an affiliate of Employer.
5.7 upon the date set forth in a written notice of resignation delivered to Employer by Executive, other than a notice under Section 5.5 (Good Reason) or Section 5.6 (Change in Control);
5.8 upon the date set forth in a written notice of termination without Cause delivered to Executive by Employer, other than a notice under Section 5.3 (Disability) or Section 5.4 (termination for Cause).
6. Compensation Upon Termination.
6.1 Minimum Payments. Upon termination of Executive’s employment for any reason Executive shall be entitled to: (a) Base Salary accrued through the Termination Date; (b) reimbursement of expenses incurred prior to termination of employment that are payable in accordance with Section 4.8; (c) any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of Employer, including but not limited to accrued and unused vacation; and (d) any earned but unpaid STI bonus or other incentive compensation if, and to the extent, the applicable management bonus plan expressly provides for payment following termination of employment.
6.2 Severance Payments for Termination Without Cause or for Resignation for Good Reason. If Executive’s employment is terminated pursuant to Section 5.5 (Good Reason) or Section 5.8 (without Cause), in addition to the payments made under Section 6.1, Executive shall be entitled to:
(a) Base Salary: a sum equal to twenty-four (24) months of Base Salary in effect as of the Termination Date, payable in a lump sum cash payment on the Termination Date.
(b) STI: a lump sum cash payment equal to one and a half (1.5) times the Executive’s most recently established and earned annual STI award, and
(c) Equity Awards: all of the Executive’s outstanding options to acquire Employer’s common stock and restricted common stock awards which have not vested as of the Termination Date shall become immediately vested as of the Termination Date.
(d) Health and Welfare Benefits: Provided that the Executive timely elects continuation coverage (as defined under COBRA) under the Employer’s medical and dental plans as in effect at the time of the Executive’s termination, the Employer shall pay the COBRA premiums for Executive and his dependents under such plans (or any successor plans) until the earliest of i) the end of the eighteenth (18th) month following the Executive’s termination, or ii) the date Executive secures subsequent employment with medical and dental coverage. Executive shall provide at least five (5) business days advance written notice informing the Employer when Executive becomes eligible for other comparable medical and dental coverage in connection with subsequent employment. In addition, if periodically requested by the Employer, Executive will provide the Employer with written confirmation that Executive has not become eligible for comparable medical and dental coverage.
| Page 4 |
6.3 Severance Payments Related to Change of Control. If Executive’s employment is terminated pursuant to Section 5.6 because Executive has resigned for Good Reason, or because Employer terminated Executive without Cause, in either case within three (3) months prior to a Change of Control or within eighteen (18) months following of a Change of Control, in addition to the benefits under Sections 6.1, Executive shall be entitled to:
(a) A one-time grant of 650,000 shares of common stock,validly issued, fully paid and nonassessable
(b) all the Executive’s outstanding options to acquire the Employer’s common stock or restricted stock awards which have not vested as of the Termination Date shall become immediately vested as of the Termination Date,
(c) Health and Welfare Benefits: Provided that the Executive timely elects continuation coverage (as defined under COBRA) under the Employer’s medical and dental plans as in effect at the time of the Executive’s termination, the Employer shall pay the COBRA premiums for Executive and his dependents under such plans (or any successor plans) until the earliest of i) the end of the twenty-fourth (24th) month following the Executive’s termination, or ii) the date Executive secures subsequent employment with medical and dental coverage. Executive shall provide at least five (5) business days advance written notice informing the Employer when Executive becomes eligible for other comparable medical and dental coverage in connection with subsequent employment. In addition, if periodically requested by the Employer, Executive will provide the Employer with written confirmation that Executive has not become eligible for comparable medical and dental coverage.
6.4 Timing of Payments. Subject to the conditions set forth in Sections 6.5 (Release) and Section 13 (409A), all compensation under sections 6.2 and 6.3 earned by and owing to Executive at the time of his termination of employment shall be paid to him on the Termination Date. Subject to the conditions set forth in Sections 6.5 (Release) and Section 13 (409A), all other payments made to Executive under this Agreement shall be due and payable as stated and, if not specified, in installments at least twice monthly at Employer’s sole discretion and election.
6.5 Release. Executive acknowledges and agrees that payments under Section 6.2 or 6.3 shall fully and completely discharge any and all obligations of Employer to Executive arising out of or related to: (a) Executive’s employment with, and/or separation from employment with Employer; and/or (b) this Agreement. The payment(s) made hereunder shall constitute liquidated damages in lieu of any and all claims which Executive may have against Employer or any of its officers, directors, employees, or other agents, except for any obligations under the workers’ compensation laws including Employer’s liability provisions. Therefore, notwithstanding any provision of this Agreement to the contrary, no payments or benefits shall be owed to Executive under Section 6.2 or Section 6.3 unless Executive executes and delivers to Employer a release in the form attached hereto as Exhibit A (“Release”) within forty five (45) days following the Termination Date, and any applicable revocation period has expired prior to the sixtieth (60th) day following the Termination Date.
6.6 No Obligation to Seek Employment. Executive shall have no obligation to seek other employment following termination of his employment with Employer nor shall any payment he receives from any subsequent employer reduce the payments to which he is entitled to under this Agreement.
6.7 Section 280G. If a payment (including this tax reimbursement payment) by the Company is determined to be an “excess parachute payment” within the meaning of Internal Revenue Code (“Code”) §280 and/or §4999, and Treasury Regs. §1.280G-1, and an excise tax is imposed thereon under Code §4999, the Company shall immediately reimburse Executive for the amount of such excise tax together with any additional income tax or excise tax attributable to the reimbursement of any excise taxes, as well as any income taxes on the income tax on the excise tax reimbursement, etc., so that Executive is not out of pocket any excise tax expense nor any income tax expense on such excise tax reimbursement.
| Page 5 |
7. Proprietary Information; Confidentiality.
7.1. Confidential Information. Executive during the course of his duties will be handling financial, accounting, statistical, marketing and personnel information of Employer and/or its customers or other third-parties. All such information is confidential and shall not be disclosed, directly or indirectly, or used by Executive in any way, either during the term of this Agreement or at any time thereafter except as required in the course of Executive’s employment with Employer. Executive agrees not to disclose to any others, or take or use for Executive’s own purposes or purposes of any others, during the term of this Agreement, any of Employer’s Confidential Information (as defined below). Executive agrees that these restrictions shall also apply to (a) Confidential Information belonging to third parties in Employer’s possession; and (b) Confidential Information conceived, originated, discovered or developed by Executive during the term of this Agreement. “Confidential Information” means any Employer proprietary information, trade secrets or know-how, and any other information relating to Employer, its subsidiaries, or affiliates of any kind, type or nature (whether written, stored on magnetic or other media, or oral), including, but not limited to, research, plans, services, customer lists, Employer’s computer programs or computer software, marketing, finances or other business information that has been compiled, prepared, devised, developed, designed, discovered, or otherwise learned by Executive during the course of his employment and/or disclosed to Executive by Employer, either directly or indirectly, in writing, orally, or by observation of any business conduct. Confidential Information does not include any of the foregoing items that has become publicly known and made generally available through no wrongful act of Executive. Executive further agrees not to use improperly or disclose or bring onto the premises of Employer any trade secrets of another person or entity during the term of this Agreement.
7.2. Return of Property. Executive agrees that upon termination of employment with Employer, Executive will deliver to Employer all devices, records, data, disks, computer files, notes, reports, proposals, lists, correspondence, materials, equipment, other documents or property, or reproductions of any aforementioned items developed by Executive pursuant to employment with Employer or otherwise belonging to Employer, its successors or assigns.
7.3. Employment Information. Executive represents and warrants to Employer that information provided by Executive in connection with his employment and any supplemental information provided to Employer is complete, true and materially correct in all respects. Executive has not omitted any information that is or may reasonably be considered necessary or useful to evaluate the information provided by Executive to Employer. Executive shall immediately notify Employer in writing of any change in the accuracy or completeness of all such information.
7.4. Other Agreements. Executive represents that the performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by Executive in confidence or in trust prior to employment with Employer. Executive has not and shall not: (a) disclose or use in the course of his employment with Employer, any proprietary or trade-secret information belonging to another; or (b) enter into any oral or written agreement in conflict with this Agreement.
7.5 Communications with Government Authorities. Nothing in this in this Agreement is intended to discourage or restrict Executive from communicating with, or making a report with, any governmental authority regarding a good faith belief of any violations of law or regulations based on information that Executive acquired through lawful means in the course of his employment, including such disclosures protected or required by any whistleblower law or regulation of the Securities and Exchange Commission, the Department of Labor, or any other appropriate governmental authority. Furthermore, nothing in this Agreement is intended to discourage or restrict Executive from reporting any theft of trade secrets pursuant to the Defend Trade Secrets Act of 2016 (the “DTSA”) or other applicable state or federal law. The DTSA prohibits retaliation against an employee, contractor or consultant because of whistleblower activity in connection with the disclosure of trade secrets, so long as any such disclosure is made either (A) in confidence to an attorney or a federal, state, or local government official and solely to report or investigate a suspected violation of the law, or (B) under seal in a complaint or other document filed in a lawsuit or other proceeding. Executive agrees that if Executive believes that any Employer employee, consultant, contractor or any third party has misappropriated or improperly used or disclosed trade secrets or Confidential Information, Executive will report such activity to Employer’s Board of Directors or otherwise in accordance with any communication protocols or policies established by the Employer.
| Page 6 |
8. Duty of Loyalty; Fiduciary Duty; Covenant Not to Unfairly Compete.
8.1 Obligations During Employment. During the term of this Agreement, Executive has a duty of loyalty and a fiduciary duty to Employer. Executive shall not, directly or indirectly, whether as a partner, employee, creditor, stockholder, or otherwise, promote, participate, or engage in any activity or other business which is directly competitive to the current operations of Employer or the currently contemplated future operations of Employer. The obligation of Executive not to compete with Employer shall not prohibit Executive from owning or purchasing less than 5% of the outstanding voting securities of any company whose securities are regularly traded on a recognized stock exchange or on over-the-counter market.
8.2 Obligations Post-Employment. To the fullest extent permitted by law, upon the termination of Executive’s employment with Employer for any reason, Executive shall not use any of Employer’s confidential proprietary or trade secrets information to directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or any other individual or representative capacity, engage or participate in any business, wherever located, that is in direct competition with the business of Employer.
9. Inventions; Ownership Rights. To the fullest extent permitted by law, Executive agrees that all ideas, techniques, inventions, systems, formulas, discoveries, technical information, programs, know-how, prototypes and similar developments (“Developments”) developed, created, discovered, made, written or obtained by Executive in the course of or as a result, directly or indirectly, of performance of his duties hereunder, and all related industrial property, copyrights, patent rights, trade secrets, moral rights and other forms of protection with respect thereto, shall be and remain the property of Employer. Executive agrees to execute or cause to be executed such assignments and applications, registrations and other documents and to take such other action as may be requested by Employer to enable Employer to protect its rights to any such Developments. If Employer requires Executive’s assistance under this Section 9 after termination of this Agreement, Executive shall be compensated for his time actually spent in providing such assistance at an hourly rate equivalent to the prevailing rate for such services and as agreed upon by the parties.
10. Non-Solicitation; Post-Termination Cooperation.
10.1 Customers. During the term of this Agreement, Executive has a duty of loyalty and a fiduciary duty to Employer. While employed by Employer, Executive shall not divert or attempt to divert (by solicitation or other means), whether directly or indirectly, Employer’s customers for the purpose of inducing or encouraging them to sever their relationship with Employer or to solicit them in connection with any product or service competing with those products and services offered and sold by Employer. Also, to the fullest extent permissible under applicable law, following termination of Executive’s employment with Employer for any reason, Executive agrees not use any Confidential Information to directly or indirectly divert or attempt to divert (by solicitation or other means) Employer’s customers for the purpose of inducing or encouraging them to sever their relationship with Employer or to solicit them in connection with any product or service competing with those products and services offered and sold by Employer.
10.2 Employees. To the fullest extent permissible under applicable law, Executive agrees that both during the term of this Agreement, and for a period of one (1) year after the Termination Date, Executive shall not take any action to induce employees or independent contractors of Employer to sever their relationship with Employer and accept an employment or an independent contractor relationship with any other business. However, this obligation will not affect any responsibility Executive may have as an employee of Employer with respect to the bona fide hiring and firing of Employer personnel.
10.3 Post-Termination Cooperation. For a period of one (1) month following any termination of this Agreement, Executive will make himself available and assist Employer, as reasonably requested, with respect to prior services, transition of duties, and intellectual property filings and protection.
| Page 7 |
11. Arbitration; Remedies. Executive and Employer agree that any dispute between the parties (including any affiliate, successor, predecessor, contractors, employees, and agents of Employer) that may arise from Executive’s employment with Employer or termination of Executive’s employment with Employer, and/or regarding the rights or obligations of the parties under this Agreement, will be submitted to binding arbitration. The arbitration requirement applies to all statutory, contractual, and/or common law claims arising from the employment relationship including, but not limited to, claims arising under Title VII of the Civil Rights Act of 1964; the Age Discrimination in Employment Act; the Equal Pay act of 1963; New York Labor Law; the Fair Labor Standards Act, the American With Disabilities Act, and other applicable federal and state employment laws. Both Employer and Executive shall be precluded from bringing or raising in court or another forum any dispute that was or could have been submitted to binding arbitration. This arbitration requirement does not apply to claims for workers’ compensation benefits, claims arising under ERISA, or claims for any provisional or injunctive relief remedies as set forth in the New York Code of Civil Procedure (or any statute or law of similar effect concerning provisional or injunctive relief remedies in any other applicable jurisdiction). The parties agree that, in the event of a breach or threatened breach of Sections 7 through 10 of this Agreement by Executive, monetary damages alone would not be an adequate remedy to Employer for the injury that would result from such breach, and that Employer shall be entitled to apply to any court of competent jurisdiction for specific performance and/or injunctive relief (without posting bond or other security) in order to enforce or prevent any violation of such provisions of this Agreement. Executive further agrees that any such injunctive relief obtained by Employer shall be in addition to monetary damages.
Binding arbitration under this Agreement shall be conducted in New York County, New York and shall be conducted before a neutral arbitrator selected by both parties and shall otherwise be conducted in accordance with the American Arbitration Association’s “National Rules for the Resolution of Employment Disputes”. Where required by law, Employer shall pay all additional costs peculiar to the arbitration to the extent such costs would not otherwise be incurred in a court proceeding. Each party shall pay their own attorney’s fees and costs. The parties will be permitted to conduct discovery as provided by the New York Code of Civil Procedure. The arbitrator shall, within thirty (30) days after the conclusion of the arbitration, issue a written award setting forth the factual and legal bases for his or her decision and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
NOTE: THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP.
12. Actions Contrary to Law; Blue Pencil. Nothing contained in this Agreement shall be construed to require the commission of any act contrary to law, and whenever there is any conflict between any provision of this Agreement and any statute, law, ordinance, or regulation, contrary to which the parties have no legal right to contract, then the latter shall prevail; but in such event, the provisions of this Agreement so affected shall be curtailed and limited only to the extent necessary to bring it within legal requirements. The parties hereby acknowledge that the restrictions set forth in Sections 7 through 10 have been specifically negotiated and agreed to by the parties hereto and if the scope or enforceability of any such section is in any way disputed at any time, and should a court find that such restrictions are overly broad, the court may modify and enforce the covenant to the extent that it believes to be reasonable under the circumstances.
13. Section 409A Compliance.
13.1 Conditions to Payment. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement that constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”) shall not commence in connection with your termination of employment unless and until you have also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to you without causing you to incur the additional 20% tax under Section 409A. It is intended that each installment of severance pay provided for in this Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). For the avoidance of doubt, it is intended that severance payments set forth in this Agreement satisfy, to the greatest extent possible, the exceptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4) and 1.409A-1(b)(9). If the Company (or, if applicable, the successor entity thereto) determines that any payments or benefits constitute “deferred compensation” under Section 409A and you are, on the termination of service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the payments and benefits shall be delayed until the earlier to occur of: (a) the date that is six months and one day after your Separation From Service, or (b) the date of your death (such applicable date, the “Specified Employee Initial Payment Date”). On the Specified Employee Initial Payment Date, the Company (or the successor entity thereto, as applicable) shall (i) pay to you a lump sum amount equal to the sum of the payments and benefits that you would otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of such amounts had not been so delayed pursuant to this Section and (ii) commence paying the balance of the payments and benefits in accordance with the applicable payment schedules set forth in this Agreement. All reimbursements provided under this Agreement shall be subject to the following requirements: (i) the amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year, (ii) all reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred, and (iii) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for any other benefit. It is intended that all payments and benefits under this Agreement shall either comply with or be exempt from the requirements of Section 409A, and any ambiguity contained herein shall be interpreted in such manner so as to avoid adverse personal tax consequences under Section 409A.
| Page 8 |
14. Miscellaneous.
14.1. Notices. All notices and demands of every kind shall be personally delivered or sent by first class mail to the parties at the addresses appearing below or at such other addresses as either party may designate in writing, delivered or mailed in accordance with the terms of this Agreement. Any such notice or demand shall be effective immediately upon personal delivery or three (3) days after deposit in the United States mail, as the case may be.
| EMPLOYER: | AIT THERAPEUTICS INC. |
|
500 Mamaroneck Road Harrison, New York |
|
| EXECUTIVE: | Steven Lisi |
|
9 McGann Drive Rockville Centre, New York |
14.2. Attorneys’ Fees; Prejudgment Interest. If the services of an attorney are required by any party to secure the performance hereof or otherwise upon the breach or default of another party to this Agreement, or if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation thereto, to the extent permitted by law, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and other expenses, in addition to any other relief to which such party may be entitled. Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law.
14.3. Choice of Law, Jurisdiction, Venue. This Agreement is drafted to be effective in the State of New York, and shall be construed in accordance with New York law. The exclusive jurisdiction and venue of any legal action by either party under this Agreement shall be the County of New York, New York.
14.4. Amendment, Waiver. No amendment or variation of the terms of this Agreement shall be valid unless made in writing and signed by Executive and Employer. A waiver of any term or condition of this Agreement shall not be construed as a general waiver by Employer. Failure of either Employer or Executive to enforce any provision or provisions of this Agreement shall not waive any enforcement of any continuing breach of the same provision or provisions or any breach of any provision or provisions of this Agreement.
| Page 9 |
14.5 Change in the Time and Form of Payment. Any amendment that proposes to delay the time or form of the payment of any deferred compensation payable pursuant to the terms of this Agreement shall be subject to the following restrictions:
(a) Any election to amend the terms of this Agreement to defer the time or form of payment of deferred compensation hereunder shall not take effect for twelve (12) months after the date on which the election to amend the time of form of payment is made: and
(b) Any election to amend the terms of this Agreement to defer the payment of deferred compensation payable hereunder shall require that the first payment of any deferred compensation payable hereunder be deferred for a period of not less than five (5) years from the date such payment would have been made but for the amendment of the Agreement to defer the payment date.
14.6. Assignment; Succession. It is hereby agreed that Executive’s rights and obligations under this Agreement are personal and not assignable. Further, neither Executive, nor beneficiary, nor any other person entitled to payments hereunder shall have the power to transfer, assign, anticipate, mortgage or otherwise encumber in advance any of such payments, nor shall such payments be subject to seizure for the payment of public or private debts, judgment, alimony or separate maintenance or be transferable by operation of law in event of bankruptcy, insolvency or otherwise. This Agreement contains the entire agreement and understanding between the parties to it and shall be binding on and inure to the benefit of the heirs, personal representatives, successors and assigns of the parties hereto.
14.7. Independent Covenants. All provisions herein concerning unfair competition and confidentiality shall be deemed independent covenants and shall be enforceable without regard to any breach by Employer unless such breach by Employer is willful and egregious.
14.8. Entire Agreement. This document constitutes the entire agreement between the parties, all oral agreements being merged herein, and supersedes all prior representations. There are no representations, agreements, arrangements, or understandings, oral or written, between or among the parties relating to the subject matter of this Agreement that are not fully expressed herein. This Agreement supersedes and replaces its entirety the employment letter, dated December 14, 2016, between Executive and Employer, which employment letter shall be terminated effective as of the date hereof.
14.9. Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement which can be given effect without the invalid provision shall continue in full force and effect and shall in no way be impaired or invalidated.
14.10. Captions. All captions of sections and paragraphs in this Agreement are for reference only and shall not be considered in construing this Agreement.
14.11 Certain Definitions. As used in this Agreement, the term “affiliate” means, with respect to a specified person or entity, any other person or entity that directly or indirectly controls, is controlled by, or is under common control with the specified person or entity. For purposes of the preceding sentence, “control” when used with respect to an entity means the power to direct the management and policies of the entity, directly or indirectly, whether through ownership of voting securities, by contract or otherwise. The terms “affiliated”, “unaffiliated”, and “non-affiliated” shall have meanings correlative to the foregoing.
[SIGNATURE PAGE TO FOLLOW]
| Page 10 |
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH AFFECTS YOUR LEGAL RIGHTS AND MAY BE ENFORCED BY THE PARTIES.
|
EMPLOYER:
AIT THERAPEUTICS. |
|
|
/s/
|
|
| By: | |
| EXECUTIVE: | |
|
Steven Lisi, Individually |
| Page 11 |
Exhibit 10.3
AIT THERAPEUTICS INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (“Agreement”) is made and entered into as of June 30, 2018, by and between AIT THERAPEUTICS INC., a Delaware corporation (“Employer”), and Amir Avniel (“Executive”).
1. Employment. Employer employs Executive, and Executive accepts employment with Employer, on the terms and conditions set forth in this Agreement commencing on June 30, 2018 (“Effective Date”).
2. Position; Scope of Employment The Company agrees to employ and the Executive agrees to serve as the Company’s President and Chief Operating Officer and Member of the Board. The duties and responsibilities of the Executive shall include the duties and responsibilities as the Company’s Board of Directors (“Board”) may from time to time assign to the Executive.
For so long as Executive is President and Chief Operating Officer, the Company shall use commercially reasonable efforts, subject to applicable law and regulations of any applicable stock exchange, to cause Executive to be nominated for election as a director and to be recommended to the stockholders for election as a director.
The Executive shall devote his full-time efforts and services to the business and affairs of the Company and its subsidiaries. Nothing in this Section 1 shall prohibit the Executive from: (A) serving as a director or member of any other board, committee thereof of any other entity or organization (except as such position may be with a directly competing company); (B) delivering lectures, fulfilling speaking engagements, and any writing or publication relating to his area of expertise; (C) serving as a director or trustee of any governmental, charitable or educational organization; (D) engaging in additional activities in connection with personal investments and community affairs, including, without limitation, professional or charitable or similar organization committees, boards, memberships or similar associations or affiliations (E) performing advisory activities, provided, however, such activities are not in competition with the business and affairs of the Company or would tend to cast executive of Company in a negative light in the reasonable judgment of the Board.
2.1. Rules and Regulations. During his employment with Employer, Executive agrees to observe and comply with Employer’s rules and regulations (including Employer’s code of ethics and insider trading policy) as provided by Employer and as may be amended from time to time by Employer and will carry out and perform faithfully such orders, directions and policies of Employer. To the extent any provision of this Agreement is contrary to an Employer rule or regulation, as such may be amended from time to time, the terms of this Agreement shall control.
3. Employment Term. Executive’s term of employment (the “Employment Term”) shall commence upon the Effective Date of this Agreement and shall terminate as provided in Section 5.
4. Compensation. During the Employment Term, Employer shall pay to or provide compensation to Executive as set forth in this Section 4. All compensation of every description shall be subject to the customary withholding tax and other employment taxes as required with respect to compensation paid to an employee.
4.1. Base Salary. Employer shall pay Executive an annual base salary as established by the Board of Directors from time-to-time (“Base Salary”). Executive’s Base Salary shall be payable in accordance with Employer’s regular payroll schedule, but not less frequently than twice per month. The initial Base Salary shall be $400,000.00 per annum.
4.2. Review. Executive’s Base Salary and duties shall be reviewed by the Compensation Committee of the Board of Directors at least annually. During the review, duties will be outlined and compensation may be adjusted up at the discretion of the Compensation Committee. The Base Salary may not be decreased during the Employment Term without the consent of the Executive. If Employer has no Compensation Committee, then all references to the Compensation Committee shall refer to the Board of Directors.
| Page 1 |
4.3. Short-Term Incentive Compensation. In addition to the Base Salary provided for in sections 4.1 and 4.2, Executive is eligible to receive a short-term incentive bonus (“STI”) equal to a percentage of his Base Salary in effect at the end of the fiscal year, based partially on performance weighted bonus objectives established for Executive by the Board of Directors (which will include both corporate objectives and individual objectives) for the fiscal year, such objectives to be discussed with Executive prior to being established, and partially based on the discretion of the Board of Directors. The target STI each fiscal year shall be an amount equal to 60% of the Base Salary in effect at the end of that fiscal year. However, the actual STI as determined by the Board of Directors may range from 0% to higher than 100% of the Base Salary. STI shall for any year be payable on or before April 15 of the following year and may include cash, stock options and restricted stock awards. If paid in stock options or restricted stock awards, STI shall be paid separately from, and independently of, any long term equity incentive award as described in section 4.4 below. Any and all bonuses provided to Executive pursuant to this paragraph shall be governed by the terms of a separate management bonus plan as adopted by the Board of Directors in its sole discretion from time to time.
4.4. Long Term Incentive Compensation. Executive shall be eligible to receive awards of stock options or restricted stock grants as may be determined from time to time by the Board of the Directors or the Compensation Committee of the Board of Directors. On a date to be determined by the Compensation Committee of the Board of Directors (but no later than March 31, 2018), Executive will be granted options to purchase up to 250,000 shares of Employer’s Common Stock (“Options”), if appropriate, under Employer’s Stock Option Plan (the “Plan”) pursuant to an option agreement in the form determined by the Board of Directors (the “Option Agreement”). Subject to the terms and conditions of the Option Agreement, the Options will vest as to 25% of the shares subject to the Option (the “Option Shares”) on the Effective Date, and thereafter 25% on December 31, 2018 and December 31st of each of the two ensuing years thereafter until vested in full (provided that the last vesting date shall occur on a date before the Option expires). The exercise price of the Options will be equal to 100% of the fair market value of share of Employer Common Stock on the date of grant, not to be less than $4.25 and the Options will expire on the tenth anniversary of the date of grant. In the event of a conflict between the terms hereof and the terms of the Option Agreement and/or the Plan, the terms of the Option Agreement and/or the Plan will control. The Board may, in its absolute discretion, choose to grant Executive additional options in the future.
4.5 Tax Matters Relating to Awards. The Compensation Committee shall be permitted to elect to have Employer cover any tax withholding obligation by net share settlement of shares equal to the amount of Executive’s tax withholding liability unless a Rule 10b5-1 Plan is a viable option. Otherwise, such net settlement on vested shares for tax purposes shall be permitted upon finding that a Rule 10b5-1 Plan is not an alternative for Executive.
4.6. Vacation and Sick Leave Benefits. Executive shall be entitled to accrue six (6) weeks of paid vacation annually. While Employer encourages Executive to take vacation, if he does not use all vacation accrued in each calendar year, Executive may carry it over from year to year; provided, however, that the maximum accrual of Executive’s vacation shall be capped at two times the annual accrual rate. Once the cap is reached, Executive shall no longer accrue vacation until such time as he uses accrued vacation and his accrued and unused vacation days fall below the cap, at which time he will again begin to accrue vacation at the appropriate accrual rate. The value of any amount of vacation that would otherwise accrue but for the cap would be paid in cash to Executive. Any vacation benefit granted or paid to Executive is based solely on his Base Salary. Executive shall be entitled to sick leave in accordance with Employer’s sick leave policy, as amended from time to time.
4.7 Other Fringe Benefits. Executive shall participate in all of Employer’s fringe benefit programs in substantially the same manner and to substantially the same extent as other similar employees of Employer, excluding only those benefits expressly modified by the terms hereof.
4.8 Expenses. Executive shall be reimbursed for his reasonable business expenses, subject to the presentation of evidence that such expenses are made in accordance with established policies adopted by Employer from time to time.
| Page 2 |
4.9 Compensation From Other Sources. Any proceeds that Executive shall receive by virtue of qualifying for disability insurance, disability benefits, or health or accident insurance shall belong to Executive. Executive shall not be paid Base Salary in any period in which he receives benefits as determined and paid under Employer’s long-term disability policy. Benefits paid to Executive under Employer’s short-term disability policy shall reduce, by the same amount, Base Salary payable to Executive for such period.
5. Termination of Employment. Executive’s employment with Employer shall terminate on the earliest to occur of the following (the date of termination of Executive’s employment being the “Termination Date”):
5.1 upon the mutual agreement of Employer and Executive in writing;
5.2 upon the Executive’s death;
5.3 upon delivery to Executive of a written notice of termination by Employer if Executive should suffer a disability or physical or mental condition, which for the purposes of this Agreement, means Executive’s inability, for a period of ninety (90) consecutive days, to substantially perform the essential functions of Executive’s duties as Chief Executive Officer, with or without a reasonable accommodation. For purposes of determining whether Executive has a disability or physical or mental condition under this Section 5.3, upon request Executive agrees to submit to Employer a medical certification regarding his health condition from his health care provider, or submit to a medical exam by a health care provider selected by Employer and Executive for the sole purpose of evaluating Executive’s ability to perform the essential functions of his position. Employer’s written notice of termination under this Section 5.3 shall coincide with the date Executive qualifies for total disability payments under Employer’s long-term disability plan.
5.4 upon the date set forth in a written notice of termination for Cause delivered to Executive by Employer.
For purposes of this Agreement, “Cause” is defined as follows: (a) willful or habitual breach of Executive’s duties, provided that Employer shall give Executive notice of such breach and Executive shall not have cured such breach within thirty (30) days of such notice; (b) fraud, dishonesty, deliberate injury or intentional material misrepresentation by Executive to Employer or any others; (c) embezzlement, theft or conversion by Executive; (d) negligent unauthorized disclosure or other use of Employer’s trade secrets, customer lists or confidential information; (e) habitual misuse of alcohol or any non-prescribed drug or intoxicant; (f) willful misconduct that causes material harm to Employer; (g) willful violation of any other standards of conduct as set forth in Employer’s employee manual and policies; (h) Executive’s conviction of or plea of guilty or nolo contendere to a felony or to a misdemeanor involving moral turpitude; (i) continuing failure to communicate and fully disclose material information to the Board of Directors, the failure of which would adversely impact the Employer or may result in a violation of state or federal law, including securities laws; or (j) debarment by any federal agency that would limit or prohibit Executive from serving in his capacity for Employer under this Agreement.
5.5 upon the date set forth in a written notice of resignation delivered to Employer by Executive for Good Reason.
For purposes of this Agreement, “Good Reason” is defined as one or more of the following: (a) without the consent of Executive, Executive is assigned material duties that are materially inconsistent with Executive’s position, duties, responsibilities or status as Chief Operating Officer of Employer, including any Change of Control, provided that Executive must advise the Board of Directors in writing within fifteen (15) days of such assignment of duties that he believes the duties would give him the right to terminate his employment for Good Reason and the Board of Directors does not withdraw or change such assignment within a reasonable period of time; or (b) without the consent of Executive, Employer relocates Executive’s principal place of employment to a location further than 35 miles from the Employer’s current principal offices.
5.6 upon the date set forth in (a) a written notice of termination without Cause delivered to Executive by Employer; or (b) a written notice of resignation for Good Reason delivered to Employer by Executive, if such written notice is provided within three (3) months prior to a Change of Control or one (1) year following a Change in Control.
| Page 3 |
For purposes of this Agreement, “Change in Control” means an event involving one transaction or a related series of transactions in which one of the following occurs: (a) Employer issues securities equal to fifty percent 50% or more of Employer’s issued and outstanding voting securities, determined as a single class, to any individual, firm, partnership or other entity, including a “group” within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934; (b) Employer issues securities equal to fifty percent 50% or more of the issued and outstanding common stock of Employer in connection with a merger, consolidation or other business combination; (c) Employer is acquired in a merger or other business combination transaction in which Employer is not the surviving company; or (d) all or substantially all of Employer’s assets are sold or transferred to a third party that is not an affiliate of Employer.
5.7 upon the date set forth in a written notice of resignation delivered to Employer by Executive, other than a notice under Section 5.5 (Good Reason) or Section 5.6 (Change in Control);
5.8 upon the date set forth in a written notice of termination without Cause delivered to Executive by Employer, other than a notice under Section 5.3 (Disability) or Section 5.4 (termination for Cause).
6. Compensation Upon Termination.
6.1 Minimum Payments. Upon termination of Executive’s employment for any reason Executive shall be entitled to: (a) Base Salary accrued through the Termination Date; (b) reimbursement of expenses incurred prior to termination of employment that are payable in accordance with Section 4.8; (c) any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of Employer, including but not limited to accrued and unused vacation; and (d) any earned but unpaid STI bonus or other incentive compensation if, and to the extent, the applicable management bonus plan expressly provides for payment following termination of employment.
6.2 Severance Payments for Termination Without Cause or for Resignation for Good Reason. If Executive’s employment is terminated pursuant to Section 5.5 (Good Reason) or Section 5.8 (without Cause), in addition to the payments made under Section 6.1, Executive shall be entitled to:
(a) Base Salary: a sum equal to twenty-four (24) months of Base Salary in effect as of the Termination Date, payable in a lump sum cash payment on the Termination Date.
(b) STI: a lump sum cash payment equal to one and a half (1.5) times the Executive’s most recently established and earned annual STI award, and
(c) Equity Awards: all of the Executive’s outstanding options to acquire Employer’s common stock and restricted common stock awards which have not vested as of the Termination Date shall become immediately vested as of the Termination Date.
(d) Health and Welfare Benefits: Provided that the Executive timely elects continuation coverage (as defined under COBRA) under the Employer’s medical and dental plans as in effect at the time of the Executive’s termination, the Employer shall pay the COBRA premiums for Executive and his dependents under such plans (or any successor plans) until the earliest of i) the end of the eighteenth (18th) month following the Executive’s termination, or ii) the date Executive secures subsequent employment with medical and dental coverage. Executive shall provide at least five (5) business days advance written notice informing the Employer when Executive becomes eligible for other comparable medical and dental coverage in connection with subsequent employment. In addition, if periodically requested by the Employer, Executive will provide the Employer with written confirmation that Executive has not become eligible for comparable medical and dental coverage.
6.3 Severance Payments Related to Change of Control. If Executive’s employment is terminated pursuant to Section 5.6 because Executive has resigned for Good Reason, or because Employer terminated Executive without Cause, in either case within three (3) months prior to a Change of Control or within eighteen (18) months following of a Change of Control, in addition to the benefits under Sections 6.1, Executive shall be entitled to:
| Page 4 |
(a) A one-time grant of 350,000 shares of common stock,validly issued, fully paid and nonassessable
(b) all the Executive’s outstanding options to acquire the Employer’s common stock or restricted stock awards which have not vested as of the Termination Date shall become immediately vested as of the Termination Date,
(c) Health and Welfare Benefits: Provided that the Executive timely elects continuation coverage (as defined under COBRA) under the Employer’s medical and dental plans as in effect at the time of the Executive’s termination, the Employer shall pay the COBRA premiums for Executive and his dependents under such plans (or any successor plans) until the earliest of i) the end of the twenty-fourth (24th) month following the Executive’s termination, or ii) the date Executive secures subsequent employment with medical and dental coverage. Executive shall provide at least five (5) business days advance written notice informing the Employer when Executive becomes eligible for other comparable medical and dental coverage in connection with subsequent employment. In addition, if periodically requested by the Employer, Executive will provide the Employer with written confirmation that Executive has not become eligible for comparable medical and dental coverage.
6.4 Timing of Payments. Subject to the conditions set forth in Sections 6.5 (Release) and Section 13 (409A), all compensation under sections 6.2 and 6.3 earned by and owing to Executive at the time of his termination of employment shall be paid to him on the Termination Date. Subject to the conditions set forth in Sections 6.5 (Release) and Section 13 (409A), all other payments made to Executive under this Agreement shall be due and payable as stated and, if not specified, in installments at least twice monthly at Employer’s sole discretion and election.
6.5 Release. Executive acknowledges and agrees that payments under Section 6.2 or 6.3 shall fully and completely discharge any and all obligations of Employer to Executive arising out of or related to: (a) Executive’s employment with, and/or separation from employment with Employer; and/or (b) this Agreement. The payment(s) made hereunder shall constitute liquidated damages in lieu of any and all claims which Executive may have against Employer or any of its officers, directors, employees, or other agents, except for any obligations under the workers’ compensation laws including Employer’s liability provisions. Therefore, notwithstanding any provision of this Agreement to the contrary, no payments or benefits shall be owed to Executive under Section 6.2 or Section 6.3 unless Executive executes and delivers to Employer a release in the form attached hereto as Exhibit A (“Release”) within forty five (45) days following the Termination Date, and any applicable revocation period has expired prior to the sixtieth (60th) day following the Termination Date.
6.6 No Obligation to Seek Employment. Executive shall have no obligation to seek other employment following termination of his employment with Employer nor shall any payment he receives from any subsequent employer reduce the payments to which he is entitled to under this Agreement.
6.7 Section 280G. If a payment (including this tax reimbursement payment) by the Company is determined to be an “excess parachute payment” within the meaning of Internal Revenue Code (“Code”) §280 and/or §4999, and Treasury Regs. §1.280G-1, and an excise tax is imposed thereon under Code §4999, the Company shall immediately reimburse Executive for the amount of such excise tax together with any additional income tax or excise tax attributable to the reimbursement of any excise taxes, as well as any income taxes on the income tax on the excise tax reimbursement, etc., so that Executive is not out of pocket any excise tax expense nor any income tax expense on such excise tax reimbursement.
7. Proprietary Information; Confidentiality.
7.1. Confidential Information. Executive during the course of his duties will be handling financial, accounting, statistical, marketing and personnel information of Employer and/or its customers or other third-parties. All such information is confidential and shall not be disclosed, directly or indirectly, or used by Executive in any way, either during the term of this Agreement or at any time thereafter except as required in the course of Executive’s employment with Employer. Executive agrees not to disclose to any others, or take or use for Executive’s own purposes or purposes of any others, during the term of this Agreement, any of Employer’s Confidential Information (as defined below). Executive agrees that these restrictions shall also apply to (a) Confidential Information belonging to third parties in Employer’s possession; and (b) Confidential Information conceived, originated, discovered or developed by Executive during the term of this Agreement. “Confidential Information” means any Employer proprietary information, trade secrets or know-how, and any other information relating to Employer, its subsidiaries, or affiliates of any kind, type or nature (whether written, stored on magnetic or other media, or oral), including, but not limited to, research, plans, services, customer lists, Employer’s computer programs or computer software, marketing, finances or other business information that has been compiled, prepared, devised, developed, designed, discovered, or otherwise learned by Executive during the course of his employment and/or disclosed to Executive by Employer, either directly or indirectly, in writing, orally, or by observation of any business conduct. Confidential Information does not include any of the foregoing items that has become publicly known and made generally available through no wrongful act of Executive. Executive further agrees not to use improperly or disclose or bring onto the premises of Employer any trade secrets of another person or entity during the term of this Agreement.
| Page 5 |
7.2. Return of Property. Executive agrees that upon termination of employment with Employer, Executive will deliver to Employer all devices, records, data, disks, computer files, notes, reports, proposals, lists, correspondence, materials, equipment, other documents or property, or reproductions of any aforementioned items developed by Executive pursuant to employment with Employer or otherwise belonging to Employer, its successors or assigns.
7.3. Employment Information. Executive represents and warrants to Employer that information provided by Executive in connection with his employment and any supplemental information provided to Employer is complete, true and materially correct in all respects. Executive has not omitted any information that is or may reasonably be considered necessary or useful to evaluate the information provided by Executive to Employer. Executive shall immediately notify Employer in writing of any change in the accuracy or completeness of all such information.
7.4. Other Agreements. Executive represents that the performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by Executive in confidence or in trust prior to employment with Employer. Executive has not and shall not: (a) disclose or use in the course of his employment with Employer, any proprietary or trade-secret information belonging to another; or (b) enter into any oral or written agreement in conflict with this Agreement.
7.5 Communications with Government Authorities. Nothing in this in this Agreement is intended to discourage or restrict Executive from communicating with, or making a report with, any governmental authority regarding a good faith belief of any violations of law or regulations based on information that Executive acquired through lawful means in the course of his employment, including such disclosures protected or required by any whistleblower law or regulation of the Securities and Exchange Commission, the Department of Labor, or any other appropriate governmental authority. Furthermore, nothing in this Agreement is intended to discourage or restrict Executive from reporting any theft of trade secrets pursuant to the Defend Trade Secrets Act of 2016 (the “DTSA”) or other applicable state or federal law. The DTSA prohibits retaliation against an employee, contractor or consultant because of whistleblower activity in connection with the disclosure of trade secrets, so long as any such disclosure is made either (A) in confidence to an attorney or a federal, state, or local government official and solely to report or investigate a suspected violation of the law, or (B) under seal in a complaint or other document filed in a lawsuit or other proceeding. Executive agrees that if Executive believes that any Employer employee, consultant, contractor or any third party has misappropriated or improperly used or disclosed trade secrets or Confidential Information, Executive will report such activity to Employer’s Board of Directors or otherwise in accordance with any communication protocols or policies established by the Employer.
8. Duty of Loyalty; Fiduciary Duty; Covenant Not to Unfairly Compete.
8.1 Obligations During Employment. During the term of this Agreement, Executive has a duty of loyalty and a fiduciary duty to Employer. Executive shall not, directly or indirectly, whether as a partner, employee, creditor, stockholder, or otherwise, promote, participate, or engage in any activity or other business which is directly competitive to the current operations of Employer or the currently contemplated future operations of Employer. The obligation of Executive not to compete with Employer shall not prohibit Executive from owning or purchasing less than 5% of the outstanding voting securities of any company whose securities are regularly traded on a recognized stock exchange or on over-the-counter market.
| Page 6 |
8.2 Obligations Post-Employment. To the fullest extent permitted by law, upon the termination of Executive’s employment with Employer for any reason, Executive shall not use any of Employer’s confidential proprietary or trade secrets information to directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or any other individual or representative capacity, engage or participate in any business, wherever located, that is in direct competition with the business of Employer.
9. Inventions; Ownership Rights. To the fullest extent permitted by law, Executive agrees that all ideas, techniques, inventions, systems, formulas, discoveries, technical information, programs, know-how, prototypes and similar developments (“Developments”) developed, created, discovered, made, written or obtained by Executive in the course of or as a result, directly or indirectly, of performance of his duties hereunder, and all related industrial property, copyrights, patent rights, trade secrets, moral rights and other forms of protection with respect thereto, shall be and remain the property of Employer. Executive agrees to execute or cause to be executed such assignments and applications, registrations and other documents and to take such other action as may be requested by Employer to enable Employer to protect its rights to any such Developments. If Employer requires Executive’s assistance under this Section 9 after termination of this Agreement, Executive shall be compensated for his time actually spent in providing such assistance at an hourly rate equivalent to the prevailing rate for such services and as agreed upon by the parties.
10. Non-Solicitation; Post-Termination Cooperation.
10.1 Customers. During the term of this Agreement, Executive has a duty of loyalty and a fiduciary duty to Employer. While employed by Employer, Executive shall not divert or attempt to divert (by solicitation or other means), whether directly or indirectly, Employer’s customers for the purpose of inducing or encouraging them to sever their relationship with Employer or to solicit them in connection with any product or service competing with those products and services offered and sold by Employer. Also, to the fullest extent permissible under applicable law, following termination of Executive’s employment with Employer for any reason, Executive agrees not use any Confidential Information to directly or indirectly divert or attempt to divert (by solicitation or other means) Employer’s customers for the purpose of inducing or encouraging them to sever their relationship with Employer or to solicit them in connection with any product or service competing with those products and services offered and sold by Employer.
10.2 Employees. To the fullest extent permissible under applicable law, Executive agrees that both during the term of this Agreement, and for a period of one (1) year after the Termination Date, Executive shall not take any action to induce employees or independent contractors of Employer to sever their relationship with Employer and accept an employment or an independent contractor relationship with any other business. However, this obligation will not affect any responsibility Executive may have as an employee of Employer with respect to the bona fide hiring and firing of Employer personnel.
10.3 Post-Termination Cooperation. For a period of one (1) month following any termination of this Agreement, Executive will make himself available and assist Employer, as reasonably requested, with respect to prior services, transition of duties, and intellectual property filings and protection.
11. Arbitration; Remedies. Executive and Employer agree that any dispute between the parties (including any affiliate, successor, predecessor, contractors, employees, and agents of Employer) that may arise from Executive’s employment with Employer or termination of Executive’s employment with Employer, and/or regarding the rights or obligations of the parties under this Agreement, will be submitted to binding arbitration. The arbitration requirement applies to all statutory, contractual, and/or common law claims arising from the employment relationship including, but not limited to, claims arising under Title VII of the Civil Rights Act of 1964; the Age Discrimination in Employment Act; the Equal Pay act of 1963; New York Labor Law; the Fair Labor Standards Act, the American With Disabilities Act, and other applicable federal and state employment laws. Both Employer and Executive shall be precluded from bringing or raising in court or another forum any dispute that was or could have been submitted to binding arbitration. This arbitration requirement does not apply to claims for workers’ compensation benefits, claims arising under ERISA, or claims for any provisional or injunctive relief remedies as set forth in the New York Code of Civil Procedure (or any statute or law of similar effect concerning provisional or injunctive relief remedies in any other applicable jurisdiction). The parties agree that, in the event of a breach or threatened breach of Sections 7 through 10 of this Agreement by Executive, monetary damages alone would not be an adequate remedy to Employer for the injury that would result from such breach, and that Employer shall be entitled to apply to any court of competent jurisdiction for specific performance and/or injunctive relief (without posting bond or other security) in order to enforce or prevent any violation of such provisions of this Agreement. Executive further agrees that any such injunctive relief obtained by Employer shall be in addition to monetary damages.
| Page 7 |
Binding arbitration under this Agreement shall be conducted in New York County, New York and shall be conducted before a neutral arbitrator selected by both parties and shall otherwise be conducted in accordance with the American Arbitration Association’s “National Rules for the Resolution of Employment Disputes”. Where required by law, Employer shall pay all additional costs peculiar to the arbitration to the extent such costs would not otherwise be incurred in a court proceeding. Each party shall pay their own attorney’s fees and costs. The parties will be permitted to conduct discovery as provided by the New York Code of Civil Procedure. The arbitrator shall, within thirty (30) days after the conclusion of the arbitration, issue a written award setting forth the factual and legal bases for his or her decision and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
NOTE: THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP.
12. Actions Contrary to Law; Blue Pencil. Nothing contained in this Agreement shall be construed to require the commission of any act contrary to law, and whenever there is any conflict between any provision of this Agreement and any statute, law, ordinance, or regulation, contrary to which the parties have no legal right to contract, then the latter shall prevail; but in such event, the provisions of this Agreement so affected shall be curtailed and limited only to the extent necessary to bring it within legal requirements. The parties hereby acknowledge that the restrictions set forth in Sections 7 through 10 have been specifically negotiated and agreed to by the parties hereto and if the scope or enforceability of any such section is in any way disputed at any time, and should a court find that such restrictions are overly broad, the court may modify and enforce the covenant to the extent that it believes to be reasonable under the circumstances.
13. Section 409A Compliance.
13.1 Conditions to Payment. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement that constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”) shall not commence in connection with your termination of employment unless and until you have also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to you without causing you to incur the additional 20% tax under Section 409A. It is intended that each installment of severance pay provided for in this Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). For the avoidance of doubt, it is intended that severance payments set forth in this Agreement satisfy, to the greatest extent possible, the exceptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4) and 1.409A-1(b)(9). If the Company (or, if applicable, the successor entity thereto) determines that any payments or benefits constitute “deferred compensation” under Section 409A and you are, on the termination of service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the payments and benefits shall be delayed until the earlier to occur of: (a) the date that is six months and one day after your Separation From Service, or (b) the date of your death (such applicable date, the “Specified Employee Initial Payment Date”). On the Specified Employee Initial Payment Date, the Company (or the successor entity thereto, as applicable) shall (i) pay to you a lump sum amount equal to the sum of the payments and benefits that you would otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of such amounts had not been so delayed pursuant to this Section and (ii) commence paying the balance of the payments and benefits in accordance with the applicable payment schedules set forth in this Agreement. All reimbursements provided under this Agreement shall be subject to the following requirements: (i) the amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year, (ii) all reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred, and (iii) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for any other benefit. It is intended that all payments and benefits under this Agreement shall either comply with or be exempt from the requirements of Section 409A, and any ambiguity contained herein shall be interpreted in such manner so as to avoid adverse personal tax consequences under Section 409A.
| Page 8 |
14. Miscellaneous.
14.1. Notices. All notices and demands of every kind shall be personally delivered or sent by first class mail to the parties at the addresses appearing below or at such other addresses as either party may designate in writing, delivered or mailed in accordance with the terms of this Agreement. Any such notice or demand shall be effective immediately upon personal delivery or three (3) days after deposit in the United States mail, as the case may be.
| EMPLOYER: | AIT THERAPEUTICS INC. |
|
500 Mamaroneck Road Harrison, New York |
|
| EXECUTIVE: | Amir Avniel |
| Enter address |
14.2. Attorneys’ Fees; Prejudgment Interest. If the services of an attorney are required by any party to secure the performance hereof or otherwise upon the breach or default of another party to this Agreement, or if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation thereto, to the extent permitted by law, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and other expenses, in addition to any other relief to which such party may be entitled. Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law.
14.3. Choice of Law, Jurisdiction, Venue. This Agreement is drafted to be effective in the State of New York, and shall be construed in accordance with New York law. The exclusive jurisdiction and venue of any legal action by either party under this Agreement shall be the County of New York, New York.
14.4. Amendment, Waiver. No amendment or variation of the terms of this Agreement shall be valid unless made in writing and signed by Executive and Employer. A waiver of any term or condition of this Agreement shall not be construed as a general waiver by Employer. Failure of either Employer or Executive to enforce any provision or provisions of this Agreement shall not waive any enforcement of any continuing breach of the same provision or provisions or any breach of any provision or provisions of this Agreement.
14.5 Change in the Time and Form of Payment. Any amendment that proposes to delay the time or form of the payment of any deferred compensation payable pursuant to the terms of this Agreement shall be subject to the following restrictions:
(a) Any election to amend the terms of this Agreement to defer the time or form of payment of deferred compensation hereunder shall not take effect for twelve (12) months after the date on which the election to amend the time of form of payment is made: and
| Page 9 |
(b) Any election to amend the terms of this Agreement to defer the payment of deferred compensation payable hereunder shall require that the first payment of any deferred compensation payable hereunder be deferred for a period of not less than five (5) years from the date such payment would have been made but for the amendment of the Agreement to defer the payment date.
14.6. Assignment; Succession. It is hereby agreed that Executive’s rights and obligations under this Agreement are personal and not assignable. Further, neither Executive, nor beneficiary, nor any other person entitled to payments hereunder shall have the power to transfer, assign, anticipate, mortgage or otherwise encumber in advance any of such payments, nor shall such payments be subject to seizure for the payment of public or private debts, judgment, alimony or separate maintenance or be transferable by operation of law in event of bankruptcy, insolvency or otherwise. This Agreement contains the entire agreement and understanding between the parties to it and shall be binding on and inure to the benefit of the heirs, personal representatives, successors and assigns of the parties hereto.
14.7. Independent Covenants. All provisions herein concerning unfair competition and confidentiality shall be deemed independent covenants and shall be enforceable without regard to any breach by Employer unless such breach by Employer is willful and egregious.
14.8. Entire Agreement. This document constitutes the entire agreement between the parties, all oral agreements being merged herein, and supersedes all prior representations. There are no representations, agreements, arrangements, or understandings, oral or written, between or among the parties relating to the subject matter of this Agreement that are not fully expressed herein. This Agreement supersedes and replaces its entirety the employment letter, dated December 14, 2016, between Executive and Employer, which employment letter shall be terminated effective as of the date hereof.
14.9. Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement which can be given effect without the invalid provision shall continue in full force and effect and shall in no way be impaired or invalidated.
14.10. Captions. All captions of sections and paragraphs in this Agreement are for reference only and shall not be considered in construing this Agreement.
14.11 Certain Definitions. As used in this Agreement, the term “affiliate” means, with respect to a specified person or entity, any other person or entity that directly or indirectly controls, is controlled by, or is under common control with the specified person or entity. For purposes of the preceding sentence, “control” when used with respect to an entity means the power to direct the management and policies of the entity, directly or indirectly, whether through ownership of voting securities, by contract or otherwise. The terms “affiliated”, “unaffiliated”, and “non-affiliated” shall have meanings correlative to the foregoing.
[SIGNATURE PAGE TO FOLLOW]
| Page 10 |
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH AFFECTS YOUR LEGAL RIGHTS AND MAY BE ENFORCED BY THE PARTIES.
|
EMPLOYER:
AIT THERAPEUTICS. |
|
|
/s/
|
|
| By: | |
| EXECUTIVE: | |
|
Amir Avniel, Individually |
| Page 11 |
Exhibit 31.1
CERTIFICATION
I, Steven Lisi, certify that:
| 1. | I have reviewed this Report on Form 10-Q of Beyond Air, Inc. and its subsidiaries | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its condensed consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of any transitional report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 10, 2021
| /s/ Steven Lisi | |
| Steven Lisi | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Douglas Beck, CPA certify that:
| 1. |
I have reviewed this Report on Form 10-Q of Beyond Air, Inc. and its subsidiaries; |
|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant including its condensed consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 10, 2021
| /s/ Douglas Beck, CPA | |
| Douglas Beck Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION
In connection with the accompanying Quarterly Report on Form 10-Q of Beyond Air, Inc. Inc. for the period ended June 30, 2021 (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Beyond Air. |
| /s/ Steven Lisi | |
| Steven Lisi | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) |
August 10, 2021
The certification set forth above is being furnished as an Exhibit solely pursuant to Section 906 of the Sarbanes—Oxley Act of 2002 and is not being filed as part of the Report or as a separate disclosure document of Beyond Air, Inc. or the certifying officers.
Exhibit 32.2
CERTIFICATION
In connection with the accompanying Quarterly Report on Form 10-Q of Beyond Air, Inc. and its subsidiaries for the period ended June 30, 2021 (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Beyond Air, Inc. |
| /s/ Douglas Beck | |
| Douglas Beck Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
August 10, 2021
The certification set forth above is being furnished as an Exhibit solely pursuant to Section 906 of the Sarbanes—Oxley Act of 2002 and is not being filed as part of the Report or as a separate disclosure document of Beyond Air, Inc. or the certifying officers.