Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "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 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 expressed 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," "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 Form 10-Q 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 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 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 ability to successfully commercialize our LungFit® PH system in the U.S.;
	●	our expectation to incur losses for the next year;
	●	our ability to predict accurately the demand for our products, and products under development and to develop strategies to address markets successfully;
	●	the possibility that products may contain undetected errors or defects or otherwise not perform as anticipated;
	●	the anticipated development of markets we sell our products into and the success of our products in these markets;
	●	our future capital needs and our need to raise additional funds;
	●	our ability to build a pipeline of product candidates and develop and commercialize our approved products;
	●	our ability to enroll patients in clinical trials, timely and successfully complete those trials and receive necessary certifications or 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 U.S. Food and Drug Administration ("FDA") regulation of our approved product and product candidates;
	●	our ability to obtain and retain key executives and attract and retain qualified personnel; and
	●	our ability to successfully manage our growth, including as a commercial-stage company.

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 Form 10-Q and the documents that we reference in this 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 Form 10-Q are the property of Beyond Air, Inc. This 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 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 commercial-stage medical device and biopharmaceutical company developing a platform of nitric oxide ("NO") generators and delivery systems (the "LungFit^® platform") capable of generating NO from ambient air. The Company's first device, LungFit^® PH received premarket approval ("PMA") from the FDA in June 2022. The NO generated by the LungFit^® PH system is indicated to improve oxygenation and reduce the need for extracorporeal membrane oxygenation in term and near-term (>34 weeks gestation) neonates with hypoxic respiratory failure associated with clinical or echocardiographic evidence of pulmonary hypertension in conjunction with ventilatory support and other appropriate agents. This condition is commonly referred to as persistent pulmonary hypertension of the newborn ("PPHN"). The LungFit^® platform can generate NO up to 400 parts per million ("ppm") for delivery to a patient's lungs directly or via a ventilator. LungFit^® can deliver NO either continuously or for a fixed amount of time at various flow rates and has the ability to either titrate dose on demand or maintain a constant dose. In July 2022, we commenced marketing LungFit^® PH in the United States for PPHN as a medical device.

In November 2024, the Company received European CE mark approval of the LungFit^® PH system for the following:

	●	The treatment of infants >34 weeks gestation with hypoxic respiratory failure associated with clinical or echocardiographic evidence of pulmonary hypertension, in order to improve oxygenation and to reduce the need for extracorporeal membrane oxygenation; and
	●	The treatment of peri- and post-operative pulmonary hypertension in adults and newborn infants, infants and toddlers, children and adolescents, ages 0-17 years in conjunction to heart surgery, in order to selectively decrease pulmonary arterial pressure and improve right ventricular function and oxygenation

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

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

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

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

On March 24, 2025, Beyond Air reorganized its neurology business into a new private company, NeuroNOS Ltd. (together with its affiliates, "NeuroNOS"). Beyond Air's infrastructure, for example regulatory, quality, legal, etc., is currently supporting the NeuroNOS team. As of September 30, 2026, Beyond Air has 68.4% ownership in NeuroNOS.

LungFit^® PH is the first FDA-approved and CE Mark system using our patented plasma pulse technology to generate on-demand NO from ambient air and, regardless of dose or flow, deliver it to a ventilator circuit. The device uses a medical air compressor to drive room air through a plasma chamber in the center of the unit where pulses of electrical discharge are created between two electrodes. The system uses the power equivalent to a 60-watt lightbulb to ionize the nitrogen and oxygen molecules, which then combine as NO with low levels of nitrogen dioxide ("NO₂") created as a byproduct. The products are then passed through a Smart Filter, which removes the toxic NO₂ from the internal circuit. With respect to PPHN, the 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 us with many competitive advantages over the current standard of NO delivery systems in the U.S., the EU, 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.

Our 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 that 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 our preclinical studies and clinical trials, 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 comparable foreign 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 (PPHN)

In June 2022, the FDA approved LungFit^® PH to improve oxygenation and reduce the need for extracorporeal membrane oxygenation in term and near-term (>34 weeks gestation) neonates with hypoxic respiratory failure associated with clinical or echocardiographic evidence of pulmonary hypertension in conjunction with ventilatory support and other appropriate agents.

In November 2024, the company received European CE mark approval of the LungFit^® PH system for the following:

●	The treatment of infants >34 weeks gestation with hypoxic respiratory failure associated with clinical or echocardiographic evidence of pulmonary hypertension, in order to improve oxygenation and to reduce the need for extracorporeal membrane oxygenation; and
●	The treatment of peri- and post-operative pulmonary hypertension in adults and newborn infants, infants and toddlers, children and adolescents, ages 0-17 years in conjunction to heart surgery, in order to selectively decrease pulmonary arterial pressure and improve right ventricular function and oxygenation

LungFit^® PH is the inaugural device from the LungFit^® platform of NO generators that use patented ionizer technology and is the first FDA-approved and CE Marked product for Beyond Air.

We initiated the first phase of our commercial launch in July 2022 (the limited launch phase to introduce Lungfit^® PH and Beyond Air to hospitals), and entered into phase 2 (target initial market share gains in certain geographies) with an expanded commercial presence during the spring of 2023 in the U.S. Since receiving CE Mark in late November 2024, we have received regulatory approvals in more than 27 other countries outside of the United States and EU. Additionally, we have signed distribution agreements covering over 40 countries outside of the United States. We anticipate significant contribution to revenues in fiscal 2027 and beyond from these and future partnerships.

A PMA supplement to the US FDA for the expansion of the label to include certain cardiac surgeries was withdrawn in favor of our submission of our second generation LungFit^® PH II. The LungFit^® PH II PMA supplement was submitted to the FDA in June 2025. LungFit^® PH II is smaller, lighter, and fully transport-ready. The ability of the device to be used in air and ground transportation significantly increases our addressable market compared to our first generation product. We believe the estimated total addressable market for inhaled NO in the U.S. is approximately $350 million and worldwide to be approximately $700 million or greater. We believe the approval and subsequent launch of the LungFit^® PH II will equip our commercial organization to become the market leader in the U.S. in the near-term.

LungFit^® PRO for the treatment of viral lung infections in hospitalized patients

Viral Community-Acquired 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 resulted in a global pandemic, causing millions of hospitalizations and over 7.1 million deaths worldwide reported as of March 2026, according to the World Health Organization. Excluding the pandemic, there are approximately 350,000 annual viral pneumonia hospitalizations in the U.S., and up to 16 million annual viral pneumonia hospitalizations globally. For the broader annual viral pneumonia hospitalizations, we believe U.S. market potential to be greater than $1.5 billion and worldwide market potential to be greater than $3 billion.

We initiated a pilot clinical trial in late 2020 using our novel LungFit® PRO system at 150 ppm to treat patients with VCAP. The trial was a multi-center, open-label, randomized clinical trial in Israel, including patients infected with COVID-19. Patients were 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, were assessed.

We presented results from the pilot clinical trial at the 32^nd European Congress of Clinical Microbiology & Infectious Diseases (ECCMID 2022), which took place from April 23, 2022 through April 26, 2022 as a hybrid event both onsite in Lisbon, Portugal and online. At the time of the data cut off, the trial enrolled a total of 40 patients hospitalized for VCAP (SARS-CoV-2, n=39; other viruses n=1). The intent-to-treat population included 35 patients with 16 patients in the inhaled NO group and 19 patients in the control group. The primary COVID-19 treatments used during the clinical trial were Remdesivir (>30%) and Dexamethasone (>65%). Safety data from the clinical trial show that inhaled NO treatment was well tolerated overall with no treatment related adverse events as assessed by the investigators. There were two serious adverse events ("SAEs") reported in the group receiving inhaled NO along with SST, which were determined to be related to underlying conditions and unrelated to clinical trial drug/device. From an efficacy perspective, results show a trend of shortening length of stay ("LOS") by a factor 1.8 in favor of inhaled NO treatment. Duration of oxygen support, measured in-hospital and at home, was significantly shorter (p=0.0339) for inhaled NO treated patients. Patients with unstable oxygen saturation during hospitalization, 66.7% of the inhaled NO treatment group, reached stable saturation of ≥93% during hospital stay as compared to 26.7% in the SST group.

Following completion of the clinical trial and the 180-day follow-up period, incremental data were provided in a poster presentation at IDWeek 2022. In addition to the positive clinical results provided at ECCMID 2022, the poster showed a larger decline in c-reactive protein ("CRP") from baseline for patients treated with NO + SST compared to the control group. Analysis of the data provides compelling evidence that high concentration NO delivery with the LungFit® PRO generator and delivery system can be a powerful tool against any type of pneumonia. The Company commenced a clinical trial in the second half of calendar 2023 in the United States and made the decision to terminate this study.

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% of all cases occur in developing countries. In the U.S., there are approximately 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 LOS. 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 pivotal clinical trial for bronchiolitis was originally set to be performed in the winter of 2020/21 but was delayed due to the COVID-19 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. Analysis across the studies (n=198 infants, mean age 3.9 months) showed that 150 ppm - 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 LOS 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.

Additionally, long-term safety data for high concentration inhaled NO in bronchiolitis was presented at the Pediatric Academic Societies Meeting 2022 (PAS 22). A total of 101 infants from the three prior pilot studies for bronchiolitis (n=198) participated in the long-term follow-up clinical trial. Clinical trial endpoints for the long-term safety clinical trial included percentage of patients re-hospitalized for bronchiolitis related reasons, such reasons included wheezing episodes, pneumonia, and asthma and the percentage of patients re-hospitalized for any reason. Data from the clinical trial showed the re-hospitalization rate per 100 Patient Exposure Years (PEY) due to bronchiolitis related reasons trended favorably for the inhaled NO group. In addition, the long-term patient re-hospitalization rate for any reason was similar between inhaled NO and control groups. As such, the clinical trial concluded that the treatment of hospitalized infants with acute bronchiolitis by intermittent high dose inhaled NO shows a favorable long-term safety profile.

We believe that the entirety of data at 150 ppm - 160 ppm NO in both adult and infant patient populations supports further development of LungFit^® PRO in a pivotal clinical trial for patients hospitalized with VCAP or bronchiolitis.

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% to 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 longer than 18 months. 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 clinical trial 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. A 2015 publication by co-authors from several U.S. government departments stated that cases in 2014 alone 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.

In December 2020 we began a 12-week, multi-center, open-label clinical trial in Australia intended 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 ("CFF") to fund this clinical trial and advance the clinical development of inhaled NO to treat NTM pulmonary disease. The trial enrolled both cystic fibrosis ("CF") and non-CF patients infected with MAC, M. abscessus or any strain of NTM. The clinical trial consisted of a run-in period followed by two treatment phases. The run-in period provided a baseline for the efficacy endpoints. The first treatment phase took place over a two-week period and began in the hospital setting where patients were titrated from 150 ppm NO up to 250 ppm NO over several days. During this phase patients received NO for 40 minutes, four times per day while Methemoglobin ("MetHb") levels were monitored. Patients were 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 was twice daily at 250 ppm NO. The clinical trial evaluated safety, quality of life, physical function, and bacterial load among other parameters.

At the American Thoracic Society International Conference 2022 (ATS 2022), we presented positive interim data from the aforementioned clinical trial. At the time of data cutoff on April 4, 2022, a total of 15 patients were enrolled in the pilot clinical trial. The mean age of patients was 62.1 years (range: 22 - 82 years) with the majority female (80%), a distribution consistent with real-world NTM disease. All 15 patients were successfully titrated to 250 ppm NO in the hospital setting, and no patients required dose reductions during the subsequent at-home portion of the clinical trial. Patients were followed up for 12 weeks after the 12-week treatment period was completed.

After completion of the clinical trial, we presented positive results at the 2022 American College of Chest Physicians ("CHEST") annual meeting, further supporting development of intermittent high dose NO for the treatment of NTM. The clinical trial demonstrated that high dose NO treatment was well-tolerated in both the home and hospital settings. During the 10-week at-home treatment period of the clinical trial, a total of 2,492 inhalations were self-administered with overall high treatment compliance (>90%). There were no SAEs related to treatment discontinuations reported over the 12-week treatment or 12-week follow up periods. Key efficacy endpoints showed strong results with improvement seen in the majority of quality-of-life domains. Respiratory function and physical function were maintained during treatment and follow-up. Trends in the reduction of microbial load were observed and one patient achieved culture conversion with three consecutive negative sputum samples.

On August 31, 2026, we announced that the FDA granted Breakthrough Device Designation to LungFit® GO for the treatment of NTM-Pulmonary Disease (NTM-PD). FDA grants Breakthrough Device Designation when a device provides for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions. The Breakthrough Device Designation is designed to provide timely access to medical devices to speed up development, assessment, and review for FDA approval. The Breakthrough Device Designation underscores the significant unmet need in NTM-PD and builds upon clinical data generated with LungFit® GO within this patient population. Our program in NTM-PD will move forward subject to obtaining additional financing.

Our program in COPD is in the preclinical stage and will move forward subject to obtaining additional financing.

Ultra-High Concentration NO (UNO) in solid tumors through majority-owned affiliate Beyond Cancer, Ltd.

In the fourth calendar quarter of 2021, Beyond Cancer, our majority-owned subsidiary, raised $30.0 million in a private placement of common shares. The investors purchased a 20% equity ownership in Beyond Cancer, while Beyond Air maintained 80% equity ownership. The funding is being used to accelerate ongoing preclinical work, including the completion of IND-enabling studies, completion of a Phase 1 human clinical trial, expansion of preclinical programs for combination studies, hiring of additional Beyond Cancer team members, and optimization of the delivery system, as well as for general corporate purposes.

Beyond Cancer will benefit from Beyond Air's NO expertise, IP portfolio, and regulatory progress, and will pay Beyond Air a single-digit royalty on all future revenues.

UNO has shown anticancer properties in preclinical trials by eliciting an immune response from the host. We have released preclinical data at several medical/scientific conferences showing the promise of delivering NO directly to tumors at concentrations of 20,000 ppm - 200,000 ppm. Results showed that local tumor ablation with NO conveyed anti-tumor immunity to the host. In April 2022, we presented in vivo and in vitro preclinical data at the American Association for Cancer Research ("AACR") 2022 annual meeting. The in vivo study assessed the mode of action following a single 5-minute gaseous NO ("gNO") treatment which provided data showing an effect on the primary tumor 14 days post-treatment. These data showed that intratumoral injections of concentrations of gNO at 20,000 and 50,000 ppm led to increased recruitment of T cells, B cells, macrophages, and dendrocytes to the primary tumor. An elevated number of T cells and B cells were also detected in the spleen and blood 21 days following gNO treatment. In addition, at the same time point, a marked reduction in the number of myeloid-derived suppressor cells was observed in the spleen. Results from the in vitro study showed that exposure of six different cancer cell lines - including human ovarian and pancreatic and mouse lung, melanoma, colon, and breast - to UNO ranging from 10,000 ppm to 100,000 ppm for up to 10 minutes resulted in a dose-dependent cytotoxic response. The higher concentration doses of gNO led to near-instant cell death, while the lower concentration doses required a longer exposure period to elicit cell death. Cell viability was assessed using two assays: XTT and clonogenic assay. After one minute of exposure to 25,000 ppm gNO, less than 10% viability was observed in all cell lines.

The second half of calendar year 2022 was a time of significant progress for Beyond Cancer. On August 23, 2022, we announced that the first patient was treated in a first-in-human Phase 1 clinical trial to assess the safety and immune biomarkers of UNO therapy. In November, at the annual meeting of the Society for Immunotherapy of Cancer ("SITC"), we presented new in vivo combination data that support the potential of our novel UNO therapy to treat various types of solid tumors in combination with immune checkpoint inhibitor ("ICI") therapies, including anti-PD-1. The data presented at SITC appears to indicate that UNO in combination with anti-PD-1 treatment may lead to higher tumor regression rates and prolonged survival. On December 13, 2022, we announced the publication of preclinical data in the peer-reviewed journal Cancer Cell International (CCI), which showed that our proprietary tumor ablation technology utilizing UNO induced a potent innate and adaptive immune response that prevented metastases and resulted in a statistically significant survival benefit.

In April 2023, Beyond Cancer presented additional preclinical data for UNO therapy in solid tumors during the AACR 2023 annual meeting. Data showed a statistically significant survival benefit for repeat dosing of UNO compared to anti-mCTLA-4 as monotherapy and repeat doses of UNO prolonged survival in combination with anti-PD-1 compared to gNO alone. With regard to tumor volume, statistically significant reductions were observed with repeat dosing of UNO versus anti-mPD-1 as a monotherapy and in combination with anti-CTLA-4 versus anti-CTLA-4 alone. Additionally, the data shows that short exposures between 10 seconds to one minute of tumor cells to UNO at increasing concentrations of 25,000 ppm to 100,000 ppm NO significantly upregulate mPD-L1 expression in a dose and time-dependent manner. Also, in vivo experiments exhibited a statistically significant day 1 increase in M1 macrophages, decrease in Tregs, and reduction in tumor cell viability was directionally maintained through day 5. We believe that together with the known ability of NO to activate and recruit the immune system, the data presented at this year's AACR annual meeting appears to indicate that repeat dosing of UNO is feasible and may be effective even in difficult-to-treat, non-immunogenic tumor types.

In October 2023, Beyond Cancer presented positive pre-clinical data at the EORTC International Conference on Molecular Targets and Cancer Therapeutics, demonstrating a statistically significant survival benefit in mice treated with UNO plus anti-PD1 versus anti-PD1 alone. This was a pooled analysis of multiple studies done with 50,000 or 100,000 ppm NO for a single administration of 5 or 10 minutes. Additionally, Beyond Cancer's second manuscript was published in the Cells Journal in an article titled "Intratumoral Administration of High-Concentration Nitric Oxide and Anti-mPD-1 Treatment Improves Tumor Regression Rates and Survival in CT26 Tumor-Bearing Mice."

In late December 2023, the Company's safety review committee completed its review of the first 6 human subjects treated with UNO and reported that there were no dose limiting toxicities at the 25,000 ppm NO concentration and the study may progress to the next concentration of 50,000 ppm NO.

In June 2024 at the American Society of Clinical Oncology (ASCO), the Company presented single agent treatment in relapsed or refractory unresectable, primary or metastatic cutaneous and subcutaneous malignancies at UNO doses of 25,000 and 50,000 parts per million. The immune biomarker data at Day 21, following a single 5-minute dose of UNO 50,000 ppm, demonstrated increases in dendritic cells, cytotoxic T-cells, central memory T-cells and a favorable increase in the M1/M2 ratio. Myeloid Derived Suppressor Cells (MDSCs) also showed a 54% decrease. In the 25,000 ppm cohort, the same stimulatory immune biomarkers were upregulated. UNO was generally well tolerated with primarily Grade 1 related toxicities. One Grade 3 adverse event was deemed a dose limiting toxicity in the 50,000 ppm cohort resulting in the expansion of the cohort to six total subjects.

The Company also reported a case of relapsed/refractory Triple Negative Breast Cancer (TNBC) in which the subject showed no evidence of malignancy in a satellite lesion 21 days following UNO treatment and a corollary, rapid and durable clinical resolution of radiation-induced dermatitis.

The phase 1a study, between August 2022 and November 2024, enrolled a total of 10 patients treated with either 25,000 ppm or 50,000 ppm NO for a single intra-tumoral administration over 5 minutes. All subjects had significant advanced stage metastatic disease. The mean number of treatments prior to entering the study was 10.3 (min 4, max 18), with 5.5 being medication treatments (min 2, max 14). Tumors were a mix of squamous cell carcinoma, melanoma, breast and triple negative breast. At the time of treatment, life expectancy for all patients was less than 12 months, with some as low as 3 months. The majority of patients are still alive as of February 2, 2026.

A Phase 1b trial protocol was approved by the Israeli Ministry of Health (IMOH) in December 2024. The initiation of the study is pending future funding.

Selective neuronal nitric oxide synthase (nNOS) inhibitor for the treatment of neurological conditions in collaboration with Hebrew University of Jerusalem

As described above, on June 15, 2023, we announced that we had entered into an agreement with the University to acquire the commercial rights for nNOS inhibitors being developed for the treatment of ASD and other neurological conditions. Currently, there are no FDA-approved therapies utilizing nNOS inhibitors specifically for the treatment of ASD. Under the terms of the agreement, Beyond Air shall pay to the University compensation for pre-clinical work over the three-year period from the date of the agreement. Also, we will pay a low single-digit royalty on net sales and certain one-time payments based on clinical, regulatory and sales milestones.

In the first calendar quarter of 2025, NeuroNOS, our majority-owned affiliate, raised $2.0 million in a private placement of common shares. Additional amounts have since been raised in the private placement offering, and as of September 30, 2026, investors held a 31.6% equity ownership in NeuroNOS, while Beyond Air held 68.4% equity ownership. The funding is being used to accelerate ongoing preclinical work, including IND-enabling studies as well as for general corporate purposes. In August 2026, we announced agreements for the proposed disposition of our interest in NeuroNOS Israel Ltd., as described in Note 1.

In April 2025, the FDA granted Orphan Drug Designation ("ODD") to NeuroNOS' investigational therapy, BA-102, for the treatment of Phelan-McDermid Syndrome ("PMS"), a syndrome associated with ASD. PMS is a rare genetic disorder most commonly caused by deletions or mutations affecting the SHANK3 gene leading to a range of symptoms, including global developmental delay, intellectual disability, severe speech impairments, and in many cases features of ASD.

In September 2025, the FDA granted ODD to NeuroNOS' investigational therapy, BA-101, for the treatment of Glioblastoma ("GBM"). GBM is an aggressive primary brain tumor with limited treatment options and poor prognosis under current standard-of-care approaches.

Other Recent Developments

On April 7, 2026, the Company received notice from Nasdaq that it was not in compliance with the $1.00 minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule") and that, because the Company had effected a reverse stock split during the preceding one-year period, it was not eligible for the customary compliance period. The Company timely requested a hearing before the Nasdaq Hearings Panel (the "Panel"), which stayed any suspension or delisting action pending the Panel's decision.

Following a hearing on May 14, 2026, the Panel issued a decision on May 28, 2026 granting the Company a brief exception for continued listing, subject to the Company demonstrating compliance with the minimum bid price requirement by July 31, 2026. The Panel also determined that the Company would be subject to a one-year Discretionary Panel Monitor beginning on the date it regains compliance.

The Company's compliance plan contemplated a reverse stock split. On June 18, 2026, the Company's stockholders authorized the Company to effect a reverse stock split at a ratio ranging from 1-for-2 to 1-for-20, and the Board approved a 1-for-20 ratio. The Company filed the related certificate of amendment on July 9, 2026, and the reverse stock split became effective at 12:01 a.m. Eastern Time on July 13, 2026. The common stock began trading on Nasdaq on a split-adjusted basis that same day.

On August 6, 2026, the Company received a letter from Nasdaq confirming that the Company had regained compliance with the Bid Price Rule and had satisfied the terms of the Panel's decision (the "Compliance Letter"). Nasdaq's determination was based on the closing bid price of the Company's common stock having been at or above $1.00 per share for 17 consecutive trading days from July 13, 2026 through August 4, 2026.

The Compliance Letter also advised that, pursuant to Nasdaq Listing Rule 5815(d)(4)(A), the Panel had determined to impose a Discretionary Panel Monitor for a period of one year from the date of the Compliance Letter (the "Monitor Period"). Should the Company fail to maintain compliance with any continued listing requirement during the Monitor Period, the Nasdaq's Listing Qualifications staff (the "Staff") will issue a delisting determination and the Company will promptly schedule a new hearing before the initial Panel or a newly convened Hearings Panel. The hearing may be oral or written, at the Company's election. Notwithstanding Nasdaq Listing Rule 5810(c)(2), during the Monitor Period, the Company will not be permitted to submit a plan of compliance to the Staff with respect to any deficiency that arises, and the Staff will not be permitted to grant the Company additional time to regain compliance with respect to any such deficiency. The Panel will consider the Company's compliance history when rendering its decision.

In July 2026, we raised approximately $10.2 million in gross proceeds, before placement agent fees and other offering expenses, through a private placement with institutional investors and certain directors and executive officers. We issued 167,011 shares of common stock and pre-funded warrants to purchase 1,638,835 shares of common stock, together with Series A and Series B warrants each for up to 1,805,846 shares of common stock. The combined purchase price was $5.66 per common share and accompanying warrants ($5.76 for participating directors and executive officers), or $5.6599 per pre-funded warrant and accompanying warrants.

The pre-funded warrants have an exercise price of $0.0001 per share and remain outstanding until fully exercised. The Series A and Series B warrants have an exercise price of $5.51 per share. The Series A warrants expire on the earlier of one year after issuance or 45 days following FDA approval of the pending LungFit^® PH II premarket approval supplement, subject to the registration-statement and prospectus conditions in those warrants. The Series B warrants expire five years after issuance. All warrants were immediately exercisable, subject to beneficial ownership limitations.

The related resale registration statement became effective on August 24, 2026. The purchase agreement restricts certain subsequent issuances and variable-rate transactions, subject to specified exceptions. See Note 4 to the Condensed Consolidated Financial Statements.

Critical Accounting Estimates

A summary of our critical accounting estimates is discussed in the section entitled "Critical Accounting Estimates" in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K. There were no material changes to our critical accounting estimates for the six months ended September 30, 2026.

Results of Operations and Comprehensive Loss

Below are the results of operations for the three and six months ended September 30, 2026 and September 30, 2025:

(in thousands, except share data)

		For the Three Months Ended								For the Six Months Ended
		September 30,								September 30,
		2026				2025				2026				2025
Revenues		$	2,324			$	1,818			$	4,092			$	3,578
Cost of revenues			2,127				2,116				3,670				3,720
Gross profit (loss)			197				(298	)			422				(142	)
Research and development			1,581				2,450				3,540				5,536
Selling, general and administrative			4,591				4,913				9,469				9,600
Total operating expenses			6,172				7,363				13,009				15,136
Loss from operations			(5,975	)			(7,661	)			(12,587	)			(15,278	)
Other income (expense):
Dividend/investment income			93				59				196				87
Interest and finance expense			(1,504	)			(639	)			(2,996	)			(1,187	)
Change in fair value of warrant liability			1				(1	)			2				16
Foreign exchange gain/(loss)			29				(18	)			69				(59	)
Loss on disposal of fixed assets			-				(46	)			(52	)			(57	)
Loss on extinguishment of debt			(252	)			-				(405	)			-
Loss on contract manufacturer's inventory obsolescence			(567	)			-				(567	)			-
Other income/(expense)			-				48				11				142
Total other expense			(2,200	)			(597	)			(3,742	)			(1,058	)
Provision for income taxes			-				-				-				-
Net loss		$	(8,175	)		$	(8,258	)		$	(16,329	)		$	(16,336	)
Less: net loss attributable to non-controlling interests			(357	)			(318	)			(576	)			(705	)
Net loss attributable to Beyond Air, Inc.			(7,818	)			(7,940	)			(15,753	)			(15,631	)
Foreign currency translation adjustment			(41	)			18				(62	)			145
Comprehensive loss attributable to Beyond Air, Inc.		$	(7,859	)		$	(7,922	)		$	(15,815	)		$	(15,486	)
Net basic and diluted loss per share of common stock attributable to Beyond Air, Inc.		$	(3.76	)		$	(24.98	)		$	(11.22	)		$	(54.95	)
Weighted average number of shares, outstanding, basic and diluted			2,078,853				317,829				1,403,780				284,471

Comparison of Three and Six Months Ended September 30, 2026 with the Three and Six Months Ended September 30, 2025

Revenues and Cost of Revenues

Revenue was $2.3 million and $1.8 million for the three months ended September 30, 2026 and September 30, 2025, respectively. Cost of revenue of $2.1 million and gross profit of $0.2 million were recognized for the three months ended September 30, 2026, compared to a cost of revenue of $2.1 million and gross losses of $0.3 million for the three months ended September 30, 2025.

Revenue was $4.1 million and $3.6 million for the six months ended September 30, 2026 and September 30, 2025, respectively. Cost of revenue of $3.7 million and gross profit of $0.4 million were recognized for the six months ended September 30, 2026, compared to a cost of revenue of $3.7 million and gross losses of $0.1 million for the six months ended September 30, 2025.

Research and Development Expenses

Research and development expenses for the three months ended September 30, 2026 were $1.6 million as compared to $2.5 million for the three months ended September 30, 2025. The decrease of $0.9 million was primarily attributed to decreases in salaries of $0.3 million ($0.2 million in Beyond Air and $0.1 million in Beyond Cancer), stock-based compensation costs $0.2 million ($0.1 million in Beyond Air and $0.1 million in Beyond Cancer), and pre-clinical studies $0.2 million in NeuroNOS.

Research and development expenses for the six months ended September 30, 2026 were $3.5 million as compared to $5.5 million for the six months ended September 30, 2025. The decrease of $2.0 million was attributed primarily to decreases in salaries of $0.7 million ($0.5 million in Beyond Air and $0.2 million in Beyond Cancer, offset by increase of $0.1 million in NeuroNOS), stock-based compensation costs $0.4 million ($0.3 million in Beyond Air and $0.1 million in Beyond Cancer), pre-clinical studies $0.3 million in NeuroNOS, and clinical studies $0.2 million in Beyond Air.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses for the three months ended September 30, 2026 were $4.6 million as compared to $4.9 million for the three months ended September 30, 2025. The decrease of $0.3 million was attributed primarily to decreases in stock-based compensation costs $1.2 million ($0.7 million in Beyond Air, $0.4 million in Beyond Cancer and $0.1 million in NeuroNOS), partially offset by increased salaries $0.3 million ($0.2 million in Beyond Air and $0.2 million in NeuroNOS, partially offset by decrease of $0.1 million in Beyond Cancer), and professional fees $0.5 million in NeuroNOS.

Selling, general and administrative expenses for the six months ended September 30, 2026 were $9.5 million as compared to $9.6 million for the six months ended September 30, 2025. The decrease of $0.1 million was attributed primarily to decreases in stock-based compensation costs of $1.5 million ($1.2 million in Beyond Air and $0.8 million in Beyond Cancer, offset by increase of $0.5 million in NeuroNOS), partially offset by increased salaries $0.3 million in NeuroNOS and $1.0 million professional fees ($0.4 million in Beyond Air, $0.1 million in Beyond Cancer, and $0.5 million in NeuroNOS).

Other Income/Expense

Other expense for the three months ended September 30, 2026 was $2.2 million as compared to other expense of $0.6 million for the three months ended September 30, 2025. The increase in expense of $1.6 million was attributed primarily to an increase in the Company's outstanding debt and related interest expense, in addition to a $0.6 million charge from the Company's contract manufacturer for scrapped materials on deposit.

Other expense for the six months ended September 30, 2026 was $3.7 million as compared to other expense of $1.1 million for the six months ended September 30, 2025. The increase in expense of $2.6 million was attributed primarily to an increase in the Company's outstanding debt and related interest expense, in addition to a $0.6 million charge from the Company's contract manufacturer for scrapped materials on deposit.

Net Loss Attributable to Non-controlling Interests

Net loss attributed to non-controlling interests for the three months ended September 30, 2026, was $0.4 million, compared to $0.3 million for the three months ended September 30, 2025. Net loss attributed to non-controlling interests for the six months ended September 30, 2026, was $0.6 million, compared to $0.7 million for the six months ended September 30, 2025. Non-controlling interests represent the minority interest percentage of our Beyond Cancer and NeuroNOS subsidiaries at the applicable ownership structure during the quarterly reporting period.

Net Loss Attributed to Common Stockholders

Net loss attributed to common stockholders of Beyond Air, Inc. for the three months ended September 30, 2026, was $7.8 million or a loss of $3.76 per share, basic and diluted. Our net loss attributed to common stockholders of Beyond Air, Inc for the three months ended September 30, 2025 was $7.9 million or a loss of $24.98 per share, basic and diluted.

Net loss attributed to common stockholders of Beyond Air, Inc. for the six months ended September 30, 2026, was $15.8 million or a loss of $11.22 per share, basic and diluted. Our net loss attributed to common stockholders of Beyond Air, Inc for the six months ended September 30, 2025 was $15.6 million or a loss of $54.95 per share, basic and diluted.

Liquidity and Capital Resources

Cash Flows

Below is a summary of our cash flows activities for the six months ended September 30, 2026 and September 30, 2025:

		Six Months Ended
		September 30,
(in thousands)		2026				2025
Net cash provided by (used in):
Operating activities		$	(10,514	)		$	(8,979	)
Investing activities			(1,648	)			816
Financing activities			12,747				12,984
Effect of exchange rate changes on cash and cash equivalents			(62	)			145
Net increase in cash, cash equivalents and restricted cash		$	523			$	4,966

Operating Activities

For the six months ended September 30, 2026, the net cash used in operating activities was $10.5 million which was primarily due to our net loss of $16.3 million, which includes $1.6 million of stock-based compensation, $1.5 million of depreciation and amortization, and $1.7 million of paid in kind interest and amortization of debt discount associated with the Loan Agreement.

For the six months ended September 30, 2025 the net cash used in operating activities was $9.0 million which was primarily due to our net loss of $16.3 million, which includes $3.4 million of stock-based compensation, $1.6 million of depreciation and amortization, and $1.0 million of paid in kind interest and amortization of debt discount associated with the Loan Agreement, in addition to $0.9 million in prepayments and other assets.

Investing Activities

For the six months ended September 30, 2026, net cash used in investing activities was $1.6 million. In the six months ended September 30, 2026, the Company used a net $0.7 million of excess cash for the purchase of high quality, short term, U.S. dollar denominated marketable equities with high liquidity and invested $1.0 million for the purchase of property and equipment, mainly LungFit^® PH devices.

For the six months ended September 30, 2025, net cash provided by investing activities was $0.8 million which was mainly attributable to a net redemption of investments in marketable securities of $1.3 million and invested $0.4 million for the purchase of property and equipment, mainly LungFit^® PH devices.

Financing Activities

Net cash provided by financing activities for the six months ended September 30, 2026 was $12.7 million, mainly from the sale of common stock and warrants (net of transaction costs) of $9.1 million and the issuance of NeuroNOS common stock.

Net cash provided by financing activities for the six months ended September 30, 2025 was $13.0 million, mainly from the issuance of common stock in connection with the At-The-Market Offering Sales Agreement with BTIG, Inc (the "2025 ATM") of $8.1 million in addition to $3.0 million from the issuance of common stock in connection with the warrant inducement and issuance of additional warrants. Additionally, the Company received $2.0 million of advanced financing from a related party, a director of the Company who is also an existing lender under its Loan Agreement.

Future Funding Requirements

We had an operating cash flow decrease of $10.5 million for the six months ended September 30, 2026 and we have experienced an accumulated loss of $335.3 million since inception through September 30, 2026. As of September 30, 2026, we had cash, cash equivalents and marketable securities of $13.7 million and $4.8 million in restricted cash.

We expect to incur net losses and have net cash outflows for at least the next twelve months. Management believes these factors raise substantial doubt about the Company's ability to meet its obligations with cash on hand and concluded that the Company will require additional funding within one year from the date these financial statements are issued.

Management is confident that the efforts to arrange financing, while not assured, will enable them to meet the Company's obligations. There can be no assurance that additional financing will be available when needed or on acceptable terms.

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

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue operating as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of liabilities in the normal course of business.

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

Our ability to continue to operate beyond the second fiscal quarter of 2028 will be largely dependent upon the successful commercialization of LungFit^® PH, obtaining partners in other parts of the world, the timing of the FDA approval for LungFit^® PH II and possibly 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.

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 the completion of the research and development of our product candidates.

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

●	the progress and costs of our preclinical studies, clinical trials and other research and development activities;
●	the costs of commercializing the LungFit® system;
●	the scope, prioritization and number of our clinical trials and other research and development programs;
●	the costs and timing of obtaining certification or regulatory approval for our product candidates;
●	the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
●	the costs of, and timing for, strengthening our manufacturing agreements for production of sufficient clinical quantities of our product candidates;
●	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.