Use of Estimates

The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could significantly differ from those estimates. On an ongoing basis, the Company evaluates its significant estimates and assumptions including expense recognition and accrual assumptions under consulting and clinical trial agreements, stock-based compensation, allowance for credit losses, excess and obsolete inventory reserves, impairment assessments, accounting for licensed rights to use technologies and other long-lived assets, the valuation of warrants, the valuation of derivatives, contingency recognition and accruals and the determination of valuation allowance requirements on deferred tax attributes.

Other Risks and Uncertainties

Other Risks and Uncertainties

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

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

BEYOND AIR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES AND OTHER RISKS AND UNCERTAINTIES (continued)

Accounts Receivable

Accounts Receivable

The Company extends credit to its customers on an unsecured basis. Accounts receivable are recorded at the invoiced amount, based on agreed contract terms, less an allowance for credit losses.

The Company establishes an allowance for accounts receivable that are considered to be at increased risk of becoming uncollectible. When evaluating the adequacy of this allowance for credit losses, the Company considers factors such as, historical collection experience and creditworthiness, the composition of outstanding receivables by customer class, and expected economic conditions and other trends. The Company’s estimates are reflected in the period they are made. The charges recorded for credit losses are reported within Selling, general and administrative expenses on the consolidated statements of operations and comprehensive loss. Receivables are written off against the allowance for credit losses when it is definitively determined that amounts are uncollectible. As of March 31, 2026 and 2025, the allowance for credit losses were $0.1 million and $0, respectively.

BEYOND AIR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES AND OTHER RISKS AND UNCERTAINTIES (continued)

Warrant Liability

Warrant Liability

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

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

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

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

As of March 31, 2026 and March 31, 2025, restricted cash included approximately $5.6 million and $0.2 million, respectively. Restricted cash as of March 31, 2026 includes $5.4 million of proceeds from the Company’s secured promissory note issued on November 4, 2025 that is required to be held in a restricted account pursuant to the Note Purchase Agreement. Amounts held in the restricted account become available to the Company as the outstanding principal of the Note is repaid (see Note 9).

Fixed Assets

Fixed Assets

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

Computer equipment	Three years
Furniture and fixtures	Five years
Clinical and medical equipment	Three3/Five years
Equipment deployable as part of a service offering	Five years
Leasehold improvements	Shorter of term of lease or estimated useful life of the asset

Inventories

Inventories

Inventories consist primarily of purchased filters, bagging kits, cables, adapters, and other components and accessories required to use the LungFit® PH device held for sale to customers. Inventories are recorded at the lower of cost or net realizable value. Cost comprises direct materials, third-party manufacturing costs and shipping costs incurred to deliver goods to the Company’s central warehouse location. Costs are assigned to individual items of inventory on the basis of weighted average costs. Inventory items are tracked by batch/lot number for specific identification whenever possible.

Inventory reserves are established for estimated excess and obsolete inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory based on historical usage, known trends, and market conditions and judgment about the anticipated future consumption and the Company’s ability to sell the inventory. At March 31, 2026 and March 31, 2025, excess and obsolescence reserves were $0.4 million and $0.2 million, respectively.

Research and Development

Research and Development

Research and development expenses are charged to the consolidated statements of operations and comprehensive loss as incurred. Research and development expenses include salaries, benefits, stock-based compensation and costs incurred by outside laboratories, manufacturers, clinical research organizations, consultants, and accredited facilities in connection with preclinical studies and clinical trials. Research and development expenses are partially offset by the benefit of tax incentive payments for qualified research and development expenditures from the Australian tax authority (“AU Tax Rebates”). The Company does not record AU Tax Rebates until payment is received due to the uncertainty of receipt. For the years ended March 31, 2026 and March 31, 2025, the Company received $0.1 million and $0.0 million, respectively, in AU Tax Rebates.

Stock-Based Compensation

Stock-Based Compensation

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

Customer Concentration

Customer Concentration

For the year ended March 31, 2026, the Company derived 11% and 10% of its revenues from two customers. For the year ended March 31, 2025, the Company derived 16% and 10% of its revenues from two customers.

Long-Lived Assets

Long-Lived Assets

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

●	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.

Recoverability of assets that will continue to be used in the Company’s operations is measured by comparing the carrying value to the future net undiscounted cash flows expected to be generated by the asset or asset group. Future undiscounted cash flows include estimates of future revenues, driven by market growth rates, and estimates of future costs. There were no events during the reporting periods that were deemed to be a triggering event that would require an impairment assessment, other than the impairment of $0.5 million recorded during the year ended March 31, 2025 associated with certain R&D assets following Management’s decision to put its VCAP clinical trial on hold.

BEYOND AIR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES AND OTHER RISKS AND UNCERTAINTIES (continued)

Net Loss Per Share

Net Loss Per Share

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

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Improvements to Tax Disclosures (Topic 740), to enhance the disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 (fiscal 2026 for the Company), with early adoption permitted. The Company adopted this standard effective April 1, 2025 prospectively. See Note 11, “Income Taxes,” for further information regarding the Company’s effective income tax.