UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For the quarterly period ended September 30, 2020
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 001-35023
iBio, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
|
26-2797813 |
(State
or other jurisdiction of incorporation or organization) |
|
(I.R.S.
Employer Identification No.) |
|
|
|
8800
HSC Parkway, Bryan, TX |
|
77807-1107 |
(Address
of principal executive offices) |
|
(Zip
Code) |
(979) 446-0027
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Ticker
symbol(s) |
|
Name
of each exchange on which registered |
Common
Stock |
|
IBIO |
|
NYSE
American |
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
x 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
x No
¨
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting 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. (Check one):
|
|
Accelerated
filer ¨ |
Large
accelerated filer ¨ |
|
Smaller
reporting company x
|
Non-accelerated filer
x |
|
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 x
Shares of Common Stock outstanding as of November 16, 2020:
182,108,086
iBio, Inc.
TABLE OF CONTENTS
PART I - FINANCIAL
INFORMATION
Item 1. Financial
Statements.
iBio, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands, except share and per share amounts)
|
|
September
30,
2020 |
|
|
June
30,
2020 |
|
|
|
(Unaudited) |
|
|
(See
Note 2) |
|
Assets |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
77,543 |
|
|
$ |
55,112 |
|
Accounts
receivable - trade |
|
|
300 |
|
|
|
75 |
|
Subscription
receivable |
|
|
- |
|
|
|
5,549 |
|
Investments
in debt securities |
|
|
6,010 |
|
|
|
- |
|
Work
in process |
|
|
843 |
|
|
|
798 |
|
Prepaid
expenses and other current assets |
|
|
263 |
|
|
|
214 |
|
Total
Current Assets |
|
|
84,959 |
|
|
|
61,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
lease right-of-use assets, net of accumulated
amortization |
|
|
27,201 |
|
|
|
27,616 |
|
Fixed
assets, net of accumulated depreciation |
|
|
3,834 |
|
|
|
3,657 |
|
Intangible
assets, net of accumulated amortization |
|
|
1,236 |
|
|
|
1,144 |
|
Security
deposit |
|
|
24 |
|
|
|
24 |
|
Total
Assets |
|
$ |
117,254 |
|
|
$ |
94,189 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable (related parties of $124 and $6 as of September 30, 2020
and June 30, 2020, respectively) |
|
$ |
1,602 |
|
|
$ |
1,759 |
|
Accrued
expenses (related party of $847 and $705 as of September 30, 2020
and June 30, 2020, respectively) |
|
|
1,406 |
|
|
|
1,105 |
|
Note
payable – PPP Loan – current portion |
|
|
362 |
|
|
|
261 |
|
Finance
lease obligation – current portion |
|
|
306 |
|
|
|
301 |
|
Contract
liabilities |
|
|
1,370 |
|
|
|
1,810 |
|
Total
Current Liabilities |
|
|
5,046 |
|
|
|
5,236 |
|
|
|
|
|
|
|
|
|
|
Note
payable – PPP Loan – net of current portion |
|
|
238 |
|
|
|
339 |
|
Finance
lease obligation – net of current portion |
|
|
31,928 |
|
|
|
32,007 |
|
Total
Liabilities |
|
|
37,212 |
|
|
|
37,582 |
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
iBio,
Inc. Stockholders’ Equity: |
|
|
|
|
|
|
|
|
Preferred
stock – no par value; 1,000,000 shares authorized; iBio CMO
Preferred Tracking Stock; 1 share authorized, issued and
outstanding as of both September 30, 2020 and June 30,
2020 |
|
|
- |
|
|
|
- |
|
Series
B Convertible Preferred Stock - $1,000 stated value; 5,785 shares
authorized; 0 and 5,785 shares issued and outstanding as of
September 30, 2020 and June 30, 2020 |
|
|
- |
|
|
|
- |
|
Common
stock - $0.001 par value; 275,000,000 shares authorized;
180,317,751 and 140,071,110 shares issued and outstanding as of
September 30, 2020 and June 30, 2020, respectively |
|
|
180 |
|
|
|
140 |
|
Additional
paid-in capital |
|
|
237,867 |
|
|
|
206,931 |
|
Accumulated
other comprehensive loss |
|
|
(40 |
) |
|
|
(33 |
) |
Accumulated
deficit |
|
|
(157,953 |
) |
|
|
(150,420 |
) |
Total
iBio, Inc. Stockholders’ Equity |
|
|
80,054 |
|
|
|
56,618 |
|
Noncontrolling
interest |
|
|
(12 |
) |
|
|
(11 |
) |
Total
Equity |
|
|
80,042 |
|
|
|
56,607 |
|
Total
Liabilities and Equity |
|
$ |
117,254 |
|
|
$ |
94,189 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
iBio, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and
Comprehensive Loss
(Unaudited; in Thousands, except per share amounts)
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
|
2020 |
|
|
2019 |
|
Revenues |
|
$ |
410 |
|
|
$ |
108 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development (related party of $0 and $97) |
|
|
1,762 |
|
|
|
977 |
|
General and administrative (related parties of $393 and $321) |
|
|
5,572 |
|
|
|
2,986 |
|
Total operating expenses |
|
|
7,334 |
|
|
|
3,963 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(6,924 |
) |
|
|
(3,855 |
) |
|
|
|
|
|
|
|
|
|
Other
income (expense): |
|
|
|
|
|
|
|
|
Interest expense – related party |
|
|
(614 |
) |
|
|
(620 |
) |
Interest income |
|
|
4 |
|
|
|
4 |
|
Royalty income |
|
|
- |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
(610 |
) |
|
|
(609 |
) |
|
|
|
|
|
|
|
|
|
Consolidated net loss |
|
|
(7,534 |
) |
|
|
(4,464 |
) |
Net loss attributable to noncontrolling interest |
|
|
1 |
|
|
|
1 |
|
Net
loss attributable to iBio, Inc. |
|
|
(7,533 |
) |
|
|
(4,463 |
) |
Preferred stock dividends |
|
|
(66 |
) |
|
|
(66 |
) |
Net loss available to iBio, Inc. |
|
$ |
(7,599 |
) |
|
$ |
(4,529 |
) |
|
|
|
|
|
|
|
|
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
Consolidated net loss |
|
$ |
(7,534 |
) |
|
$ |
(4,464 |
) |
Other comprehensive loss – unrealized loss on securities |
|
|
(7 |
) |
|
|
- |
|
Other comprehensive loss - foreign currency translation
adjustments |
|
|
- |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(7,541 |
) |
|
$ |
(4,465 |
) |
|
|
|
|
|
|
|
|
|
Loss per common share attributable to iBio, Inc. stockholders –
basic and diluted |
|
$ |
(0.05 |
) |
|
$ |
(0.21 |
) |
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding – basic and diluted |
|
|
162,442 |
|
|
|
21,923 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
iBio, Inc. and Subsidiaries
Condensed Consolidated Statements of Equity (Deficiency)
Three Months Ended September 30, 2020 and 2019
(Unaudited; In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Noncontrolling |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
Interest |
|
|
Total |
|
Balance as of July 1, 2020 |
|
|
6 |
|
|
$ |
- |
|
|
|
140,071 |
|
|
$ |
140 |
|
|
$ |
206,931 |
|
|
$ |
(33 |
) |
|
$ |
(150,420 |
) |
|
$ |
(11 |
) |
|
$ |
56,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital raises |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
11,292 |
|
|
|
11 |
|
|
|
32,111 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
32,122 |
|
Costs to raise capital |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,525 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,525 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
- |
|
|
|
- |
|
|
|
30 |
|
|
|
- |
|
|
|
28 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of preferred stock to
common stock |
|
|
(6 |
) |
|
|
- |
|
|
|
28,925 |
|
|
|
29 |
|
|
|
(29 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
351 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on debt
securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7 |
) |
|
|
- |
|
|
|
- |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,533 |
) |
|
|
(1 |
) |
|
|
(7,534 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30,
2020 |
|
|
- |
|
|
$ |
- |
|
|
|
180,318 |
|
|
$ |
180 |
|
|
$ |
237,867 |
|
|
$ |
(40 |
) |
|
$ |
(157,953 |
) |
|
$ |
(12 |
) |
|
$ |
80,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Noncontrolling |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
Interest |
|
|
Total |
|
Balance as of July 1, 2019 |
|
|
10 |
|
|
$ |
- |
|
|
|
20,152 |
|
|
$ |
20 |
|
|
$ |
108,295 |
|
|
$ |
(31 |
) |
|
$ |
(105,821 |
) |
|
$ |
(6 |
) |
|
$ |
2,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of preferred stock to
common stock |
|
|
(4 |
) |
|
|
- |
|
|
|
4,000 |
|
|
|
4 |
|
|
|
(4 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
68 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,463 |
) |
|
|
(1 |
) |
|
|
(4,464 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30,
2019 |
|
|
6 |
|
|
$ |
- |
|
|
|
24,152 |
|
|
$ |
24 |
|
|
$ |
108,359 |
|
|
$ |
(32 |
) |
|
$ |
(110,284 |
) |
|
$ |
(7 |
) |
|
$ |
(1,940 |
) |
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
iBio, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited; In Thousands)
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
|
2020 |
|
|
2019 |
|
Cash
flows from operating activities: |
|
|
|
|
|
|
|
|
Consolidated net loss |
|
$ |
(7,534 |
) |
|
$ |
(4,464 |
) |
Adjustments to reconcile consolidated net loss to net cash used in
operating activities: |
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
351 |
|
|
|
68 |
|
Amortization of intangible assets |
|
|
72 |
|
|
|
77 |
|
Amortization of finance lease right-of-use assets |
|
|
415 |
|
|
|
415 |
|
Depreciation of fixed assets |
|
|
97 |
|
|
|
66 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable - trade |
|
|
(225 |
) |
|
|
22 |
|
Work in process |
|
|
(45 |
) |
|
|
- |
|
|
|
|
|
|
|
|
- |
|
Prepaid expenses and other current assets |
|
|
(51 |
) |
|
|
107 |
|
Accounts payable |
|
|
(12 |
) |
|
|
(403 |
) |
Accrued expenses |
|
|
302 |
|
|
|
210 |
|
Contract liabilities |
|
|
(440 |
) |
|
|
1,615 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(7,070 |
) |
|
|
(2,287 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of debt securities |
|
|
(6,017 |
) |
|
|
- |
|
Additions to intangible assets |
|
|
(164 |
) |
|
|
(30 |
) |
Purchases of fixed assets |
|
|
(419 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(6,600 |
) |
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from sales of common stock |
|
|
32,122 |
|
|
|
- |
|
Proceeds from subscription receivable |
|
|
5,549 |
|
|
|
- |
|
Proceeds from exercise of stock option |
|
|
28 |
|
|
|
- |
|
Costs to raise capital |
|
|
(1,525 |
) |
|
|
- |
|
Payment of finance lease obligation |
|
|
(73 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
36,101 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes |
|
|
- |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash |
|
|
22,431 |
|
|
|
(2,318 |
) |
Cash - beginning of period |
|
|
55,112 |
|
|
|
4,421 |
|
Cash - end of period |
|
$ |
77,543 |
|
|
$ |
2,103 |
|
|
|
|
|
|
|
|
|
|
Schedule of non-cash activities: |
|
|
|
|
|
|
|
|
Unpaid fixed assets included in accounts payable |
|
$ |
123 |
|
|
$ |
67 |
|
Fixed assets included in accounts payable in prior period, paid in
current period |
|
$ |
268 |
|
|
$ |
- |
|
Conversion of preferred stock into common stock |
|
$ |
29 |
|
|
$ |
4 |
|
Increase in ROU assets under ASC 842 |
|
$ |
- |
|
|
$ |
7,489 |
|
Unpaid intangible assets included in accounts payable |
|
$ |
- |
|
|
$ |
4 |
|
Intangible assets included in accounts payable in prior period,
paid in current period |
|
$ |
- |
|
|
$ |
8 |
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information: |
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
614 |
|
|
$ |
525 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
iBio, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
iBio, Inc. (“we”, “us”, “our”, “iBio”, “Ibio, Inc” or the
“Company”) is a biotechnology company and biologics contract
development and manufacturing organization (“CDMO”). We apply our
licensed and owned technologies to develop novel products to fight
fibrotic diseases, cancers, and infectious diseases. We use our
FastPharming® Development and Manufacturing
System (the “FastPharming System”) to increase “speed-to-clinic”
for new candidates. We are also using the FastPharming
System to create proteins and bioinks for research and further
manufacturing uses in a variety of research and development
(“R&D”) applications, including 3D-bioprinting. In addition, we
make the FastPharming System available to clients on a
fee-for-service basis for the production of proteins.
During the year ended June 30, 2020, we operated in two segments:
(i) our CDMO segment, operated via our subsidiary iBio CDMO LLC
(“iBio CDMO”), and (ii) our biologics development and licensing
activities, conducted within iBio, Inc. In the past, our primary
focus was the CDMO business, pursuant to which iBio CDMO provided
manufacturing services to collaborators and third-party customers
as well as to us, for our own product development purposes.
However, during the second half of 2020 and subsequent to year end,
we shifted our primary focus to our biologics development programs,
including new vaccines and therapeutics.
Our current platforms and programs include: (i) CDMO services using
our licensed and owned FastPharming System and
GlycaneeringTM Services; (ii) the development of
therapeutics, for which we intend to conduct preclinical and
clinical trials; (iii) the development of vaccines, for which we
intend to conduct preclinical and clinical trials, and (iv) the
production of proteins for research and further manufacturing for
use in 3D-bioprinting and other applications. We are developing a
portfolio of technologies, products, and services driven by the
following platforms and programs, which we intend to use
individually, and in combination:
|
o |
Process
development and manufacturing of protein products in
hydroponically-grown, transiently-transfected plants, (typically
Nicotiana benthamiana, a relative of the tobacco plant)
using our proprietary expression technologies,
GlycaneeringTM Services, and production know-how
(the FastPharming System), deployed in our 130,000
square-foot manufacturing facility in Bryan, Texas. |
|
o |
“Factory
Solutions” for the clients who seek to insource biologics
manufacturing using the FastPharming System and instead of
outsourcing production to iBio CDMO. |
|
o |
Treatments
for fibrotic diseases, including a fusion of the endostatin-derived
E4 antifibrotic peptide to the hinge and heavy chain of human IgG1
(“IBIO-100”, formerly described as “CFB-03”) for systemic
scleroderma (for which we have received orphan drug designation),
idiopathic pulmonary fibrosis, and related conditions. |
|
o |
An
ACE2-Fc fusion protein as a treatment for COVID-19 and,
prospectively, other diseases emanating from the
Coronaviridae family, in-licensed from Planet Biotechnology,
Inc. |
|
o |
A
novel virus-like particle antigen being designed for use in a
vaccine candidate targeting the SARS-CoV-2 virus
(“IBIO-200”). |
|
o |
The
lichenase (“LicKMTM”)-subunit vaccine for
COVID-19 (“IBIO-201”). |
|
o |
An E2
antigen, in combination with a selected adjuvant, for vaccination
of pigs against classical swine fever (“IBIO-400”). |
|
¨ |
Research
& Bioprocess Products |
|
o |
Protein
scaffolds for use as bioinks in the development of 3D-bioprinted
tissues and organs. |
|
o |
Cytokines
and growth factors for cell culture applications. |
|
o |
Biomaterials
for a range of life science research, development, and
bioprocessing applications. |
Our Platforms and Programs
CDMO Services
Our contract development and manufacturing services include:
|
Process
Development |
Feasibility
assessment and development of manufacturing processes using the
FastPharming System for optimized gene expression and
purification parameters to meet client specifications for their
active pharmaceutical ingredients (“APIs”). Product optimization
via our GlycaneeringTM Services that may be used
to enhance the quality and performance of therapeutic proteins via
plant-based glycosylation controls. |
|
|
|
|
Manufacturing |
Biologics
production using the FastPharming System to
deliver custom biologics for clinical trials. |
|
|
|
|
Fill
/ Finish |
Aseptic
vial and bottle filling and finishing services with in-line
labelling that provides serialization capability for greater
quality assurance. |
|
|
|
|
BioAnalytics |
Method
development and validation with expertise in protein
characterization using mass spectrometry. |
iBio was established as a public company in August 2008 as the
result of a spinoff from Integrated BioPharma, Inc., iBio’s
wholly-owned and majority-owned subsidiaries are as follows:
iBio CDMO – iBio CDMO is a Delaware limited liability
company formed on December 16, 2015 as iBio CMO, LLC to develop and
manufacture plant-made pharmaceuticals and provide related services
to clients. Effective July 1, 2017, iBio CMO changed its name to
iBio CDMO. As of December 31, 2015, the Company owned 100% of iBio
CDMO. On January 13, 2016, the Company entered into a contract
manufacturing joint venture with an affiliate of Eastern Capital
Limited (“Eastern”), a stockholder of the Company (the “Eastern
Affiliate”). The Eastern Affiliate contributed $15 million in cash
for a 30% interest in iBio CDMO. The Company retained a 70%
interest in iBio CDMO and contributed a royalty-bearing license
which grants iBio CDMO a non-exclusive license to use the Company’s
proprietary technologies for research purposes and an exclusive
U.S. license for manufacturing purposes. The Company retained the
exclusive right to grant product licenses to those who wish to sell
or distribute products made using the Company’s technologies.
On February 23, 2017, the Company entered into an exchange
agreement with the Eastern Affiliate, pursuant to which the Company
acquired substantially all of the interest in iBio CDMO held by the
Eastern Affiliate in exchange for one share of the Company’s iBio
CMO Preferred Tracking Stock, par value $0.001 per share. After
giving effect to the transaction, the Company owns 99.99% of iBio
CDMO. See Note 11 - Stockholders' Equity for a further discussion.
At any time, at our election or the election of the Eastern
Affiliate, the outstanding share of iBio CMO Preferred Tracking
Stock may be exchanged for 29,990,000 units of limited liability
company interests of iBio CDMO. Following such exchange, we would
own a 70% interest in iBio CDMO and the Eastern Affiliate would own
a 30% interest.
iBio CDMO’s operations take place in Bryan, Texas in a facility
controlled by another affiliate of Eastern (the “Second Eastern
Affiliate”) as sublandlord. The facility is a 130,000-square foot
Class A life sciences building located on land owned by the Texas
Agricultural and Mechanical College of Texas (“Texas
A&M”) system, designed and equipped for plant-made
manufacture of biopharmaceuticals. The Second Eastern Affiliate
granted iBio CDMO a 34-year lease (the “Sublease”) for the facility
as well as certain equipment (see Note 10 – Finance Lease
Obligations). iBio CDMO commenced commercial operations in January
2016. iBio CDMO expects to operate on the basis of three parallel
lines of business: (1) development and manufacturing of third-party
products; (2) development and production of iBio’s proprietary
products; and (3) commercial technology transfer services including
facility design, as needed.
iBIO DO BRASIL BIOFARMACÊUTICA LTDA (“iBio Brazil”) – iBio
Brazil is a subsidiary organized in Brazil in which the Company has
a 99% interest. iBio Brazil was formed to manage and expand the
Company’s business activities in Brazil. The activities of iBio
Brazil are intended to include coordination and expansion of the
Company’s existing relationship with Fundacao Oswaldo Cruz/Fiocruz
(“Fiocruz”), with whom we have previously partnered with on a
Yellow Fever Vaccine program and development of additional products
with private sector participants for the Brazilian market. iBio
Brazil commenced operations during the first quarter of the fiscal
year ended June 30, 2015.
iBio Manufacturing LLC (“iBio Manufacturing”) – iBio
Manufacturing, a wholly-owned subsidiary, is a Delaware limited
liability company formed in November 2015. iBio Manufacturing has
not commenced any activities to date.
Interim Financial Statements
The accompanying unaudited condensed consolidated financial
statements have been prepared from the books and records of the
Company and include all normal and recurring adjustments which, in
the opinion of management, are necessary for a fair presentation in
accordance with accounting principles generally accepted in the
United States (“U.S. GAAP”) for interim financial information and
Rule 8-03 of Regulation S-X promulgated by the U.S. Securities and
Exchange Commission (the “SEC”). Accordingly, these interim
financial statements do not include all of the information and
footnotes required for complete annual financial statements.
Interim results are not necessarily indicative of the results that
may be expected for the full year. Interim unaudited condensed
consolidated financial statements should be read in conjunction
with the audited financial statements and the notes thereto
included in the Company’s Annual Report on Form 10-K for the year
ended June 30, 2020 filed with the SEC on October 13, 2020, as
amended by a Form 10-K/A filed with the SEC on October 27, 2020
(the “Annual Report”), from which the accompanying condensed
consolidated balance sheet dated June 30, 2020 was derived.
Principles of Consolidation
The condensed consolidated financial statements include the
accounts of the Company and its wholly-owned and majority-owned
subsidiaries. All intercompany balances and transactions have been
eliminated as part of the consolidation.
Liquidity
The following equity transactions occurred during the year ended
June 30, 2020 and subsequent thereto :
|
1. |
On
October 29, 2019, the Company closed on an underwritten public
offering with total net proceeds of $4.5 million after deducting
underwriting discounts, commissions and other offering expenses
payable by the Company. |
|
2. |
On
March 19, 2020, the Company entered into a common stock purchase
agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), an
Illinois limited liability company, pursuant to which Lincoln Park
agreed to purchase from the Company up to an aggregate of
$50,000,000 of the Company’s common stock, par value $0.001 per
share (the “common stock”) (subject to certain limitations) from
time to time over the 36-month term of the agreement (the “Lincoln
Park March 2020 Purchase Agreement”). We terminated the Lincoln
Park March 2020 Purchase Agreement effective July 27,
2020. For the period from March 19, 2020 through July
27, 2020, Lincoln Park acquired 19.47 million shares of the
Company’s common stock for gross proceeds of approximately $25.23
million. |
|
3. |
In
Fiscal 2020, the Company received proceeds of $6.3 million from the
exercise of various warrants. |
|
4. |
On
May 13, 2020, the Company entered into a purchase agreement (the
“Lincoln Park May 2020 Purchase Agreement”), pursuant to which the
Company agreed to sell to Lincoln Park and Lincoln Park agreed to
purchase 1,000,000 shares of the Company’s common stock at a price
of $1.09 per share for an aggregate purchase price of $1.1
million. |
|
5. |
On June 17, 2020 as amended on July 29, 2020, the Company entered
into an equity distribution agreement with UBS Securities, LLC
(“UBS”) as sales agent pursuant to which the Company may sell from
time to time shares of its common stock through UBS, for the sale
of up to $72,000,000 of shares of the Company's common stock. This
“At-The-Market” facility included the remaining portion of the
Lincoln Park facility. As of the date of the filing of this
Quarterly Report on Form 10-Q (this “Report”), the Company has
issued 30.2 million shares of the Company’s common stock for net
proceeds of approximately $68.97 million.
|
See Note 11 – Stockholders’ Equity for additional information.
In the past, the history of significant losses, the negative cash
flow from operations, the limited cash resources and the dependence
by the Company on its ability to obtain additional financing to
fund its operations after the current cash resources are exhausted
raised substantial doubt about the Company's ability to continue as
a going concern. Based on the total cash and cash equivalents plus
debt securities of approximately $83.6 million as of September 30,
2020, combined with subsequent sales of the Company’s common stock
through the date of the filing of this report totaling
approximately $3.0 million, management believes the Company has
adequate cash to support the Company’s activities through fiscal
year 2022.
3. |
Summary
of Significant Accounting Policies |
The Company’s significant accounting policies are described in Note
3 of the Notes to Financial Statements in the Annual Report.
Use of Estimates
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. These estimates include liquidity
assertions, the valuation of debt securities and intellectual
property, legal and contractual contingencies and share-based
compensation. Although management bases its estimates on historical
experience and various other assumptions that are believed to be
reasonable under the circumstances, actual results could differ
from these estimates.
Accounts Receivable
Accounts receivable are reported at their outstanding unpaid
principal balances net of allowances for uncollectible accounts.
The Company provides for allowances for uncollectible receivables
based on management's estimate of uncollectible amounts considering
age, collection history, and any other factors considered
appropriate. The Company’s policy is to write off accounts
receivable against the allowance for doubtful accounts when a
balance is determined to be uncollectible. At September 30, 2020
and June 30, 2020, the Company determined that an allowance for
doubtful accounts was not needed.
Revenue Recognition
The Company accounts for its revenue recognition under Accounting
Standards Update (“ASU”) 2014-09, “Revenue from Contracts with
Customers (Topic 606)” (“ASU 2014-09”) and other associated
standards. Under this standard, the Company recognizes revenue when
a customer obtains control of promised services or goods in an
amount that reflects the consideration to which the Company expects
to receive in exchange for those goods or services. In addition,
the standard requires disclosure of the nature, amount, timing, and
uncertainty of revenue and cash flows arising from customer
contracts.
The Company’s contract revenue consists primarily of amounts earned
under contracts with third-party customers and reimbursed expenses
under such contracts. The Company analyzes its agreements to
determine whether the elements can be separated and accounted for
individually or as a single unit of accounting. Allocation of
revenue to individual elements that qualify for separate accounting
is based on the separate selling prices determined for each
component, and total contract consideration is then allocated pro
rata across the components of the arrangement. If separate selling
prices are not available, the Company will use its best estimate of
such selling prices, consistent with the overall pricing strategy
and after consideration of relevant market factors.
In general, the Company applies the following steps when
recognizing revenue from contracts with customers:
(i) identify the contract, (ii) identify the performance
obligations, (iii) determine the transaction price,
(iv) allocate the transaction price to the performance
obligations and (v) recognize revenue when a performance
obligation is satisfied. The nature of the Company’s contracts with
customers generally fall within the three key elements of the
Company’s business plan: CDMO Facility Activities; Product
Candidate Pipeline, and Facility Design and Build-out / Technology
Transfer services.
Recognition of revenue is driven by satisfaction of the performance
obligations using one of two methods: revenue is either recognized
over time or at a point in time. Contracts containing multiple
performance obligations classify those performance obligations into
separate units of accounting either as standalone or combined units
of accounting. For those performance obligations treated as a
standalone unit of accounting, revenue is generally recognized
based on the method appropriate for each standalone unit. For those
performance obligations treated as a combined unit of accounting,
revenue is generally recognized as the performance obligations are
satisfied, which generally occurs when control of the goods or
services have been transferred to the customer or client or once
the client or customer is able to direct the use of those goods
and/or services as well as obtaining substantially all of its
benefits. As such, revenue for a combined unit of accounting is
generally recognized based on the method appropriate for the last
delivered item but due to the specific nature of certain project
and contract items, management may determine an alternative revenue
recognition method as appropriate, such as a contract whereby one
deliverable in the arrangement clearly comprises the overwhelming
majority of the value of the overall combined unit of accounting.
Under this circumstance, management may determine revenue
recognition for the combined unit of accounting based on the
revenue recognition guidance otherwise applicable to the
predominant deliverable.
The Company generates (or may generate in the future) contract
revenue under the following types of contracts:
Fixed-Fee
Under a fixed-fee contract, the Company charges a fixed agreed upon
amount for a deliverable. Fixed-fee contracts have fixed
deliverables upon completion of the project. Typically, the Company
recognizes revenue for fixed-fee contracts after projects are
completed, delivery is made and title transfers to the customer,
and collection is reasonably assured.
Revenue can be recognized either 1) over time or 2) at a point in
time. For the three months ended September 30, 2020, $0 was
recognized over time and $410,000 was recognized at a point in
time. The comparative amounts for the three months ended September
30, 2019 were $47,000 recognized over time and $61,000 recognized
at a point in time.
Time and Materials
Under a time and materials contract, the Company charges customers
an hourly rate plus reimbursement for other project specific costs.
The Company recognizes revenue for time and material contracts
based on the number of hours devoted to the project multiplied by
the customer’s billing rate plus other project specific costs
incurred.
Grant Income
Grants are recognized as income when all conditions of such grants
are fulfilled or there is a reasonable assurance that they will be
fulfilled. Grant income is classified as a reduction of research
and development expenses. There was no grant income for each of the
three months ended September 30, 2020 and 2019.
Contract Assets
A contract asset is an entity’s right to payment for goods and
services already transferred to a customer if that right to payment
is conditional on something other than the passage of time.
Generally, an entity will recognize a contract asset when it has
fulfilled a contract obligation but must perform other obligations
before being entitled to payment.
Contract assets consist primarily of the cost of project contract
work performed by third parties for which the Company expects to
recognize any related revenue at a later date, upon satisfaction of
the contract obligations. At both September 30, 2020 and June 30,
2020, contract assets were $0.
Contract Liabilities
A contract liability is an entity’s obligation to transfer goods or
services to a customer at the earlier of (1) when the customer
prepays consideration or (2) the time that the customer’s
consideration is due for goods and services the entity will yet
provide. Generally, an entity will recognize a contract liability
when it receives a prepayment.
Contract liabilities consist primarily of consideration received,
usually in the form of payment, on project work to be performed
whereby the Company expects to recognize any related revenue at a
later date, upon satisfaction of the contract obligations. At
September 30, 2020 and June 30, 2020, contract liabilities were
$1,370,000 and $1,810,000, respectively. The Company recognized
revenue of $311,800 during the three months ended September 30,
2020 that was included in the contract liabilities balance as of
June 30, 2020. The Company recognized revenue of $93,000 during the
three months ended September 30, 2019 that was included in the
contract liabilities balance as of June 30, 2019.
Leases
Effective July 1, 2019, the Company adopted ASU 2016-02, “Leases
(Topic 842)” (“ASC 842”) and other associated standards using
the modified retrospective approach for all leases entered into
before the effective date. The new standard establishes a
right-of-use (“ROU”) model requiring a lessee to record a ROU asset
and a lease liability on the balance sheet for all leases with
terms longer than 12 months and classified as either an operating
or finance lease. The adoption of ASC 842 had a significant
effect on the Company’s balance sheet, resulting in an increase in
non-current assets and both current and non-current liabilities.
The adoption of ASC 842 had no impact on retained earnings as the
assets recognized under the Sublease and the associated lease
obligation were accounted for as a capital lease under Leases
(Topic 840) (“Topic 840”). The Company did not have any operating
leases, therefore there was no change in accounting treatment
required. For comparability purposes, the Company will
continue to comply with prior disclosure requirements in accordance
with the then existing lease guidance under Topic 840 as prior
periods have not been restated.
As the Company elected to adopt ASC 842 at the beginning of the
period of adoption, the Company recorded the ROU and finance lease
obligation as follows:
|
1. |
ROU
measured at the carrying amount of the leased assets under Topic
840. |
|
2. |
Finance
lease liability measured at the carrying amount of the capital
lease obligation under Topic 840 at the beginning of the period of
adoption. |
The Company elected the package of practical expedients as
permitted under the transition guidance, which allowed it: (1) to
carry forward the historical lease classification; (2) not to
reassess whether expired or existing contracts are or contain
leases; and, (3) not to reassess the treatment of initial direct
costs for existing leases.
In accordance with ASC 842, at the inception of an arrangement, the
Company determines whether the arrangement is or contains a
lease based on the unique facts and circumstances present and the
classification of the lease including whether the contract involves
the use of a distinct identified asset, whether we obtain the right
to substantially all the economic benefit from the use of the
asset, and whether we have the right to direct the use of the
asset. Leases with a term greater than one year are recognized on
the balance sheet as ROU assets, lease liabilities and, if
applicable, long-term lease liabilities. The
Company has elected not to recognize on the balance sheet
leases with terms of one year or less under practical expedient in
paragraph ASC 842-20-25-2. For contracts with lease and non-lease
components, the Company has elected not to allocate the
contract consideration and to account for the lease and non-lease
components as a single lease component.
The lease liability and the corresponding ROU assets were recorded
based on the present value of lease payments over the expected
remaining lease term. The implicit rate within our capital lease
was determinable and, therefore, used at the adoption date of
ASC 824 to determine the present value of lease payments under the
finance lease.
An option to extend the lease is considered in connection with
determining the ROU asset and lease liability when it is reasonably
certain we will exercise that option. An option to terminate is
considered unless it is reasonably certain we will not exercise the
option.
For periods prior to the adoption of ASC 842, the
Company recorded interest expense based on the amortization of
the capital lease obligation. The expense recognition for finance
leases under Topic 842 is substantially consistent with prior
guidance for capital leases. As a result, there are no significant
differences in our results of operations presented.
Cash Equivalents
The Company considers all highly liquid instruments purchased with
an original maturity of three months or less to be cash
equivalents. Cash equivalents at September 30, 2020 consisted of
money fund accounts. The Company did not have any cash equivalents
at June 30, 2020.
Investments in Debt Securities
Debt investments are classified as available-for-sale. Changes in
fair value are recorded in other comprehensive income (loss). Fair
value is calculated based on publicly available market
information.
Work in Process
Work in process consists primarily of the cost of labor and other
overhead incurred on contracts that have not been completed. Work
in process amounted to $843,000 and $798,000 as of September 30,
2020 and June 30, 2020, respectively.
Research and Development
The Company accounts for research and development costs in
accordance with the Financial Accounting Standards Board (“FASB”)
ASC 730-10, “Research and Development” (“ASC 730-10”). Under
ASC 730-10, all research and development costs must be charged to
expense as incurred. Accordingly, internal research and development
costs are expensed as incurred. Third-party research and
development costs are expensed when the contracted work has been
performed or as milestone results have been achieved.
Right-of-Use Assets
Assets held under the terms of finance (capital) leases are
amortized on a straight-line basis over the terms of the leases or
the economic lives of the assets. Obligations for future lease
payments under finance (capital) leases are shown within
liabilities and are analyzed between amounts falling due within and
after one year. See Note 10 - Finance Lease Obligation for
additional information.
Fixed Assets
Fixed assets are stated at cost net of accumulated depreciation.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets ranging from three to fifteen
years.
Intangible Assets
The Company accounts for intangible assets at their historical cost
and records amortization utilizing the straight-line method based
upon their estimated useful lives. Patents are amortized over a
period of ten years and other intellectual property is amortized
over a period from 16 to 23 years. The Company reviews the carrying
value of its intangible assets for impairment whenever events or
changes in business circumstances indicate the carrying amount of
such assets may not be fully recoverable. Evaluating for impairment
requires judgment, and recoverability is assessed by comparing the
projected undiscounted net cash flows of the assets over the
remaining useful life to the carrying amount. Impairments, if any,
are based on the excess of the carrying amount over the fair value
of the assets. There were no impairment charges for the three
months ended September 30, 2020 and 2019.
Foreign Currency
The Company accounts for foreign currency translation pursuant to
FASB ASC 830, "Foreign Currency Matters." The functional
currency of iBio Brazil is the Brazilian Real. Under FASB ASC 830,
all assets and liabilities are translated into United States
dollars using the current exchange rate at the end of each fiscal
period. Revenues and expenses are translated using the average
exchange rates prevailing throughout the respective periods. All
transaction gains and losses from the measurement of monetary
balance sheet items denominated in Reals are reflected in the
statement of operations as appropriate. Translation adjustments are
included in accumulated other comprehensive loss. For the three
months ended September 30, 2020 and 2019, any translation
adjustments were considered immaterial and did not have a
significant impact on the Company's consolidated financial
statements.
Share-based Compensation
The Company recognizes the cost of all share-based payment
transactions at fair value. Compensation cost, measured by the fair
value of the equity instruments issued, adjusted for estimated
forfeitures, is recognized in the financial statements as the
respective awards are earned over the performance period. The
Company uses historical data to estimate forfeiture rates.
The impact that share-based payment awards will have on the
Company’s results of operations is a function of the number of
shares awarded, the trading price of the Company’s stock at the
date of grant or modification, the vesting schedule and
forfeitures. Furthermore, the application of the Black-Scholes
option pricing model employs weighted-average assumptions for
expected volatility of the Company’s stock, expected term until
exercise of the options, the risk-free interest rate, and
dividends, if any, to determine fair value.
Expected volatility is based on historical volatility of the
Company’s common stock; the expected term until exercise represents
the weighted-average period of time that options granted are
expected to be outstanding giving consideration to vesting
schedules and the Company’s historical exercise patterns; and the
risk-free interest rate is based on the U.S. Treasury yield curve
in effect at the time of grant for periods corresponding with the
expected life of the option. The Company has not paid any dividends
since its inception and does not anticipate paying any dividends
for the foreseeable future, so the dividend yield is assumed to be
zero. In addition, the Company estimates forfeitures at each
reporting period, rather than electing to record the impact of such
forfeitures as they occur. See Note 13 - Share-Based Compensation
for additional information.
Down Round Features
The Company accounts for certain equity-linked financial
instruments in accordance with ASU 2017-11, “Earnings Per Share
(Topic 260), Distinguishing Liabilities from Equity (Topic 480),
Derivatives and Hedging (Topic 815)" (“ASU 2017-11”). The
amendments in Part I of ASU 2017-11 change the classification
analysis of certain equity-linked financial instruments (or
embedded features) with down round features. When determining
whether certain financial instruments should be classified as
liabilities or equity instruments, a down round feature no longer
precludes equity classification when assessing whether the
instrument is indexed to an entity’s own stock. The amendments also
clarify existing disclosure requirements for equity-classified
instruments. As a result, a freestanding equity-linked financial
instrument (or embedded conversion option) no longer would be
accounted for as a derivative liability at fair value as a result
of the existence of a down round feature. For freestanding equity
classified financial instruments, the amendments require entities
that present earnings per share (“EPS”) in accordance with ASC 260
to recognize the effect of the down round feature when it is
triggered. That effect is treated as a dividend and as a reduction
of income available to common shareholders in basic EPS.
Convertible instruments with embedded conversion options that have
down round features are now subject to the specialized guidance for
contingent beneficial conversion features (in ASC 470-20,
“Debt—Debt with Conversion and Other Options”), including
related EPS guidance (in ASC 260). The amendments in Part II of
this Update recharacterize the indefinite deferral of certain
provisions of ASC 480 that now are presented as pending content in
the codification, to a scope exception. Those amendments do not
have an accounting effect.
Concentrations of Credit Risk
Cash
The Company maintains principally all cash balances in one
financial institution which, at times, may exceed the amount
insured by the Federal Deposit Insurance Corporation. The exposure
to the Company is solely dependent upon daily bank balances and the
strength of the financial institution. The Company has not incurred
any losses on these accounts. At September 30, 2020 and June 30,
2020, amounts in excess of insured limits were approximately
$57,162,000 and $54,680,000, respectively.
Revenue
During the three months ended
September 30, 2020, the Company generated 100% of its revenue from
two customers, Corteva Agriscience accounted for 50.5% of revenue
and AzarGen Biotechnologies accounted for 49.5% of revenue. During
the three months ended September 30, 2019, the Company generated
100% of its revenue from three customers, CC-Pharming accounted for
43.7% of revenue, Lung Biotechnology accounted for 42.2% of revenue
and Corteva Agriscience accounted for 14.1% of revenue.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial
Instruments - Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments” (“ASU 2016-13”), which
requires an entity to assess impairment of its financial
instruments based on its estimate of expected credit losses. Since
the issuance of ASU 2016-13, the FASB released several amendments
to improve and clarify the implementation guidance. In November
2019, the FASB issued ASU 2019-10, “Financial Instruments -
Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and
Leases (Topic 842): Effective Dates”, which amended the
effective date of the various topics. As the Company is a smaller
reporting company, the provisions of ASU 2016-13 and the related
amendments are effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2022
(quarter ending September 30, 2023 for the Company). Entities are
required to apply these changes through a cumulative-effect
adjustment to retained earnings as of the beginning of the first
reporting period in which the guidance is effective. The Company
will evaluate the impact of ASU 2016-13 on the Company’s
consolidated financial statements in a future period closer to the
date of adoption.
Effective July 1, 2019, the Company adopted ASU No. 2018-07,
“Compensation - Stock Compensation (Topic 718): Improvements to
Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”).
ASU No 2018-07 expands the scope of Topic 718 to include
share-based payment transactions for acquiring goods and services
from nonemployees. The guidance also specifies that Topic 718
applies to all share-based payment transactions in which a grantor
acquires goods or services to be used or consumed in a grantor’s
own operations by issuing share-based payment awards. The adoption
of ASU 2018-07 did not have a significant impact on the Company’s
consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, “Simplifying
the Accounting for Income Taxes” (“ASU 2019-12”) to reduce the
cost and complexity in accounting for income taxes. ASU 2019-12
removes certain exceptions related to the approach for intra-period
tax allocation, the methodology for calculating income taxes in an
interim period, and the recognition of deferred tax liabilities for
outside basis differences. ASU 2019-12 also amends other aspects of
the guidance to help simplify and promote consistent application of
U.S. GAAP. The guidance is effective for fiscal years and for
interim periods within those fiscal years, beginning after December
15, 2020 (quarter ending September 30, 2021 for the Company), with
early adoption permitted. An entity that elects early adoption must
adopt all the amendments in the same period. Most amendments within
ASU 2019-12 are required to be applied on a prospective basis,
while certain amendments must be applied on a retrospective or
modified retrospective basis. The Company is currently evaluating
the impact of ASU 2019-12 on the Company’s consolidated financial
statements.
Management does not believe that any other recently issued, but not
yet effective, accounting standard if currently adopted would have
a material effect on the accompanying condensed consolidated
financial statements. Most of the newer standards issued represent
technical corrections to the accounting literature or application
to specific industries which have no effect on the Company’s
condensed consolidated financial statements.
4. |
Financial
Instruments and Fair Value Measurement |
The carrying values of cash, accounts receivable and accounts
payable in the Company’s condensed consolidated balance sheets
approximated their fair values as of September 30, 2020 and June
30, 2020 due to their short-term nature. The carrying value of the
finance (capital) lease obligation approximated its fair value as
of September 30, 2020 and June 30, 2020 as the interest rate used
to discount the lease payments approximated market.
The Company accounts for its investments in debt securities at fair
value. The following provides a description of the three levels of
inputs that may be used to measure fair value under the standard,
the types of plan investments that fall under each category, and
the valuation methodologies used to measure these investments at
fair value.
• Level 1 – Inputs are based upon unadjusted quoted prices
for identical instruments in active markets.
• Level 2 – Inputs to the valuation include quoted prices
for similar assets and liabilities in active markets, quoted prices
for identical or similar assets or liabilities in inactive markets,
inputs other than quoted prices that are observable for the asset
or liability, and inputs that are derived principally from or
corroborated by observable market data by correlation or other
means. If the asset or liability has a specified (contractual)
term, the level 2 input must be observable for substantially the
full term of the asset or liability. All debt securities were
valued using level 2 inputs.
• Level 3 – Inputs to the valuation methodology are
unobservable and significant to the fair value measurement.
5. |
Investments
in Debt Securities |
Investments in debt
securities consist of AA and A rated corporate bonds bearing
interest at rates from 0.45% to 3.4% with maturities from April
2021 to August 2022. The components of investments in debt
securities are as follows (in thousands):
|
|
September 30,
2020 |
|
Adjusted cost |
|
$ |
6,017 |
|
Gross unrealized losses |
|
|
(7 |
) |
Fair value |
|
$ |
6,010 |
|
The fair value of available-for-sale debt securities, by
contractual maturity, as of September 30, 2020, was as follows (in
thousands):
Fiscal period ending on September 30: |
|
|
Fair Value |
|
2021 |
|
|
$ |
2,544 |
|
2022 |
|
|
|
3,466 |
|
|
|
|
$ |
6,010 |
|
As discussed above, the Company adopted ASC 842 effective July 1,
2019 using the modified retrospective approach for all leases
entered into before the effective date.
iBio CDMO is leasing its facility in Bryan, Texas as well as
certain equipment from the Second Eastern Affiliate under the
Sublease. See Note 10 – Finance Lease Obligation for more details
of the terms of the Sublease.
The economic substance of the Sublease is that the Company is
financing the acquisition of the facility and equipment. As the
Sublease involves real estate and equipment, the Company separated
the equipment component and accounted for the facility and
equipment as if each were leased separately.
The following table summarizes by category the gross carrying value
and accumulated amortization of finance lease ROU (in
thousands):
|
|
September 30,
2020 |
|
|
June 30,
2020 |
|
ROU - Facility |
|
$ |
25,761 |
|
|
$ |
25,761 |
|
ROU - Equipment |
|
|
7,728 |
|
|
|
7,728 |
|
|
|
|
33,489 |
|
|
|
33,489 |
|
Accumulated amortization |
|
|
(6,288 |
) |
|
|
(5,873 |
) |
Net finance lease ROU |
|
$ |
27,201 |
|
|
$ |
27,616 |
|
Amortization expense was approximately $415,000 for both of the
three months ended September 30, 2020 and 2019.
The following table summarizes by category the gross carrying value
and accumulated depreciation of fixed assets (in thousands):
|
|
September 30,
2020 |
|
|
June 30,
2020 |
|
Facility improvements |
|
$ |
1,496 |
|
|
$ |
1,465 |
|
Medical equipment |
|
|
2,589 |
|
|
|
1,760 |
|
Office
equipment and software |
|
|
453 |
|
|
|
398 |
|
Construction in progress |
|
|
146 |
|
|
|
787 |
|
|
|
|
4,684 |
|
|
|
4,410 |
|
Accumulated depreciation |
|
|
(850 |
) |
|
|
(753 |
) |
Net fixed assets |
|
$ |
3,834 |
|
|
$ |
3,657 |
|
Depreciation expense was approximately $97,000 and $66,000 for the
three months ended September 30, 2020 and 2019, respectively.
The Company has two categories of intangible assets – intellectual
property and patents. Intellectual property consists of all
technology, know-how, data, and protocols for producing targeted
proteins in plants and related to any products and product
formulations for pharmaceutical uses and for other applications.
Intellectual property includes, but is not limited to, certain
technology for the development and manufacture of novel vaccines
and therapeutics for humans and certain veterinary applications
acquired in December 2003 from Fraunhofer USA Inc., acting through
its Center for Molecular Biotechnology ("Fraunhofer"), pursuant to
a Technology Transfer Agreement, as amended (the "TTA"). The
Company designates such technology further developed and acquired
from Fraunhofer as iBioLaunch™ or LicKM™ or
FastPharming® technology. The value on the
Company's books attributed to patents owned or controlled by the
Company is based only on payments for services and fees related to
the protection of the Company's patent portfolio. The
intellectual property also includes certain trademarks.
In January 2014, the Company entered into a license agreement with
a U.S. university whereby iBio acquired exclusive worldwide rights
to certain issued and pending patents covering specific candidate
products for the treatment of fibrosis (the "Licensed Technology").
The license agreement provides for payment by the Company of a
license issue fee, annual license maintenance fees, reimbursement
of prior patent costs incurred by the university, payment of a
milestone payment upon regulatory approval for sale of a first
product, and annual royalties on product sales. In addition, the
Company has agreed to meet certain diligence milestones related to
product development benchmarks. As part of its commitment to the
diligence milestones, the Company successfully commenced production
of a plant-made peptide comprising the Licensed Technology before
March 31, 2014. The next milestone – filing a New Drug Application
with the FDA or foreign equivalent covering the Licensed Technology
("IND") – initially became due on December 1, 2015, and on August
11, 2016, the agreement was amended and subsequent six-month
extensions have been automatically granted extending the due date
until December 31, 2017, at which time, the Company and the
university agreed to set a new milestone schedule and are currently
undergoing an analysis based on new data and revised forecasted
timelines.
The Company accounts for intangible assets at their historical cost
and records amortization utilizing the straight-line method based
upon their estimated useful lives. Patents are amortized over a
period of 10 years and other intellectual property is amortized
over a period from 16 to 23 years. The Company reviews the carrying
value of its intangible assets for impairment whenever events or
changes in business circumstances indicate the carrying amount of
such assets may not be fully recoverable. Evaluating for impairment
requires judgment, and recoverability is assessed by comparing the
projected undiscounted net cash flows of the assets over the
remaining useful life to the carrying amount. Impairments, if any,
are based on the excess of the carrying amount over the fair value
of the assets. There were no impairment charges during the three
months ended September 30, 2020 and 2019.
The following table summarizes by category the gross carrying value
and accumulated amortization of intangible assets (in
thousands):
|
|
September 30,
2020 |
|
|
June 30,
2020 |
|
Intellectual property – gross carrying value |
|
$ |
3,100 |
|
|
$ |
3,100 |
|
Patents – gross carrying value |
|
|
2,792 |
|
|
|
2,628 |
|
|
|
|
5,892 |
|
|
|
5,728 |
|
Intellectual property – accumulated amortization |
|
|
(2,594 |
) |
|
|
(2,555 |
) |
Patents – accumulated amortization |
|
|
(2,062 |
) |
|
|
(2,029 |
) |
|
|
|
(4,656 |
) |
|
|
(4,584 |
) |
Net intangible assets |
|
$ |
1,236 |
|
|
$ |
1,144 |
|
Amortization expense was approximately $72,000 and $77,000 for the
three months ended September 30, 2020 and 2019, respectively.
9. |
Notes
Payable – PPP Loan |
On April 16, 2020, the Company received $600,000 related to its
filing under the Paycheck Protection Program and Coronavirus Aid,
Relief, and Economic Security Act (the “CARES Act”). The payment
terms of the note are as follows:
|
1. |
No
payments during the deferral period, which is defined as the
six-month period beginning on the date of the note of April 9,
2020. |
|
|
|
|
2. |
Commencing
one month after the expiration of the deferral period, and
continuing on the same day of each month thereafter until the
maturity date, the Company shall pay to JPMorgan Chase Bank, N.A.
(the “Lender”), monthly payments of principal and interest, each in
such equal amount required to fully amortize the principal amount
outstanding on the note on the last day of the deferral period by
the maturity date (twenty-four months from the date of the note, or
April 9, 2022). |
|
|
|
|
3. |
On
the maturity date, the Company shall pay the Lender any and all
unpaid principal plus accrued and unpaid interest plus interest
accrued during the deferral period. |
|
|
|
|
4. |
If
any payment is due on a date for which there is no numerical
equivalent in a particular calendar month then it shall be due on
the last day of such month. If any payment is due on a day that is
not a business day, the payment will be made on the next business
day. The term “business day” means a day other than a Saturday,
Sunday or any other day on which national banking associations are
authorized to be closed. |
|
|
|
|
5. |
Payments
shall be allocated among principal and interest at the discretion
of Lender unless otherwise agreed or required by applicable law.
Notwithstanding, in the event the Loan, or any portion thereof, is
forgiven pursuant to the Paycheck Protection Program under the
federal CARES Act, the amount so forgiven shall be applied to
principal. |
|
|
|
|
6. |
The
Company may prepay this note at any time without payment of any
premium. |
The Lender is participating in the Paycheck Protection Program to
help businesses impacted by the economic impact from COVID-19.
Forgiveness of this loan is only available for principal that is
used for the limited purposes that qualify for forgiveness under
the Small Business Administration’s (the “SBA”) requirements, and
that to obtain forgiveness, the Company must request it and must
provide documentation in accordance with Small Business
Administration requirements, and certify that the amounts the
Company is requesting to be forgiven qualify under those
requirements. Forgiveness of the loan is dependent upon approval of
the SBA and while the Company expects forgiveness of this loan
under the current terms of requirement by the SBA, there can be no
assurance or certainty that forgiveness will in fact occur.
At both September 30, 2020 and June 30, 2020, the Company owes the
Lender $600,000. $362,000 is payable for the 12 months ending
September 30, 2021 and $238,000 is payable for the 12 months ending
September 30, 2022.
10. |
Finance
Lease Obligation |
As discussed above, iBio CDMO is leasing its facility in Bryan,
Texas as well as certain equipment from the Second Eastern
Affiliate under the 34-year Sublease. iBio CDMO began operations at
the facility on December 22, 2015 pursuant to agreements between
iBio CDMO and the Second Eastern Affiliate granting iBio CDMO
temporary rights to access the facility. These temporary agreements
were superseded by the Sublease Agreement, dated January 13, 2016,
between iBio CDMO and the Second Eastern Affiliate. The 34-year
term of the Sublease expires in 2050 but may be extended by iBio
CDMO for a ten-year period, so long as iBio CDMO is not in default
under the Sublease. Under the Sublease, iBio CDMO is required to
pay base rent at an annual rate of $2,100,000, paid in equal
quarterly installments on the first day of each February, May,
August and November. The base rent is subject to increase annually
in accordance with increases in the Consumer Price Index (“CPI”).
The base rent under the Second Eastern Affiliate’s ground lease for
the property is subject to adjustment, based on an appraisal of the
property, in 2030 and upon any extension of the ground lease. The
base rent under the Sublease will be increased by any increase in
the base rent under the ground lease as a result of such
adjustments. iBio CDMO is also responsible for all costs and
expenses in connection with the ownership, management, operation,
replacement, maintenance and repair of the property under the
Sublease. The Company incurred rent expense of $42,000 and $32,000
for the three months ended September 30, 2020 and 2019,
respectively, related to the increases in the CPI.
In addition to the base rent, iBio CDMO is required to pay, for
each calendar year during the term, a portion of the total gross
sales for products manufactured or processed at the facility, equal
to 7% of the first $5,000,000 of gross sales, 6% of gross sales
between $5,000,001 and $25,000,000, 5% of gross sales between
$25,000,001 and $50,000,000, 4% of gross sales between $50,000,001
and $100,000,000, and 3% of gross sales between $100,000,001 and
$500,000,000. However, if for any calendar year period from January
1, 2018 through December 31, 2019, iBio CDMO’s applicable gross
sales are less than $5,000,000, or for any calendar year period
from and after January 1, 2020, its applicable gross sales are less
than $10,000,000, then iBio CDMO is required to pay the amount that
would have been payable if it had achieved such minimum gross sales
and shall pay no less than the applicable percentage for the
minimum gross sales for each subsequent calendar year. As the
Company accounts for leases under ASC 842, the minimum percentage
rent is included in the finance lease obligation.
Accrued expenses at September 30, 2020 and June 30, 2020 due to the
Second Eastern Affiliate amounted to $847,000 and $705,000,
respectively. General and administrative expenses related to Second
Eastern Affiliate, including rent related to the increases in CPI
and real estate taxes, were approximately $185,000 and $171,000 for
the three months ended September 30, 2020 and 2019, respectively.
Interest expense related to the Second Eastern Affiliate was
approximately $614,000 and $620,000 for the three months ended
September 30, 2020 and 2019, respectively.
The following tables present the components of lease expense and
supplemental balance sheet information related to the finance lease
obligation (in thousands).
|
|
Three Months
Ended |
|
|
|
September 30,
2020 |
|
Finance Lease Cost: |
|
|
|
|
Amortization of right-of-use assets |
|
$ |
415 |
|
Interest on lease liabilities |
|
|
614 |
|
Operating Lease Cost |
|
|
42 |
|
Total Lease Cost |
|
$ |
1,071 |
|
|
|
|
|
|
Other Information |
|
|
|
|
Cash
paid for amounts included in the measurement lease
liabilities: |
|
|
|
|
Operating cash flows from operating lease |
|
$ |
42 |
|
Financing cash flows from finance lease obligation |
|
$ |
73 |
|
|
|
September 30,
2020 |
|
Finance lease right-of-use assets |
|
$ |
27,201 |
|
Finance lease obligation – current portion |
|
$ |
306 |
|
Finance lease obligation - non-current portion |
|
$ |
31,928 |
|
Weighted average remaining lease term - finance lease |
|
|
29.43
years |
|
Weighted average discount rate - Finance lease obligation |
|
|
7.608 |
% |
Future minimum payments under the finance lease obligation are due
as follows:
Fiscal period ending on September 30: |
|
|
Principal |
|
|
Interest |
|
|
Total |
|
2021 |
|
|
$ |
306,334 |
|
|
$ |
2,443,666 |
|
|
$ |
2,750,000 |
|
2022 |
|
|
|
330,312 |
|
|
|
2,419,688 |
|
|
|
2,750,000 |
|
2023 |
|
|
|
356,167 |
|
|
|
2,393,833 |
|
|
|
2,750,000 |
|
2024 |
|
|
|
384,046 |
|
|
|
2,365,954 |
|
|
|
2,750,000 |
|
2025 |
|
|
|
414,106 |
|
|
|
2,335,894 |
|
|
|
2,750,000 |
|
Thereafter |
|
|
|
30,443,565 |
|
|
|
36,931,435 |
|
|
|
67,375,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
minimum lease payments |
|
|
|
32,234,530 |
|
|
$ |
48,890,470 |
|
|
$ |
81,125,000 |
|
Less:
current portion |
|
|
|
(306,334 |
) |
|
|
|
|
|
|
|
|
Long-term
portion of minimum lease obligations |
|
|
$ |
31,928,196 |
|
|
|
|
|
|
|
|
|
Preferred Stock
The Company’s Board of Directors is authorized to issue, at any
time, without further stockholder approval, up to 1 million shares
of preferred stock. The Board of Directors has the authority to fix
and determine the voting rights, rights of redemption and other
rights and preferences of preferred stock.
iBio CMO Preferred Tracking Stock
On February 23, 2017, the Company entered into an exchange
agreement with the Eastern Affiliate pursuant to which the Company
acquired substantially all of the interest in iBio CDMO held by the
Eastern Affiliate and issued one share of a newly created Preferred
Tracking Stock, in exchange for 29,990,000 units of limited
liability company interests of iBio CDMO held by the Eastern
Affiliate at an original issue price of $13 million. After giving
effect to the transaction, the Company owns 99.99% and the Eastern
Affiliate owns 0.01% of iBio CDMO.
On February 23, 2017, the Board of Directors of the Company created
the Preferred Tracking Stock out of the Company’s 1 million
authorized shares of preferred stock. Terms of the Preferred
Tracking Stock include the following:
|
1. |
The
Preferred Tracking Stock accrues dividends at the rate of 2% per
annum on the original issue price. Accrued dividends are cumulative
and are payable if and when declared by the Board of Directors,
upon an exchange of the shares of Preferred Tracking Stock and upon
a liquidation, winding up or deemed liquidation (such as a merger)
of the Company. As of September 30, 2020, no dividends have been
declared. Accrued dividends total approximately $937,000 and
$871,000 at September 30, 2020 and June 30, 2020,
respectively. |
|
2. |
The holders of Preferred Tracking Stock, voting separately as a
class, are entitled to approve by the affirmative vote of a
majority of the shares of Preferred Tracking Stock outstanding any
amendment, alteration or repeal of any of the provisions of, or any
other change to, the Certificate of Incorporation of the Company or
the Certificate of Designation that adversely affects the rights,
powers or privileges of the Preferred Tracking Stock, any increase
in the number of authorized shares of Preferred Tracking Stock, the
issuance or sale of any additional shares of Preferred Tracking
Stock or any securities convertible into or exercisable or
exchangeable for Preferred Tracking Stock, the creation or issuance
of any shares of any additional class or series of capital stock
unless the same ranks junior to the Preferred Tracking Stock, or
the reclassification or alteration of any existing security of the
Company that is junior to or pari passu with the Preferred Tracking
Stock, if such reclassification or alteration would render such
other security senior to the Preferred Tracking Stock.
|
|
3. |
Except
as required by applicable law, the holders of Preferred Tracking
Stock have no other voting rights. |
|
4. |
No
dividend may be declared or paid or set aside for payment or other
distribution declared or made upon the Company’s common stock and
no common stock may be redeemed, purchased or otherwise acquired
for any consideration by the Company unless all accrued dividends
on all outstanding shares of Preferred Tracking Stock are paid in
full. |
At any time, at our election or the election of the Eastern
Affiliate, the outstanding share of iBio CMO Preferred Tracking
Stock may be exchanged for 29,990,000 units of limited liability
company interests of iBio CDMO. Following such exchange, the
Company would own a 70% interest in iBio CDMO and the Eastern
Affiliate would own a 30% interest.
Series A Convertible Preferred Stock ("Series A
Preferred")
On June 20, 2018, the Board of Directors of the Company created the
Series A Preferred, par value $0.001 per share, out of the
Company’s 1 million authorized shares of preferred stock.
On June 26, 2018, the Company issued 6,300 shares of Series A
Preferred as part of a public offering. In Fiscal 2019, 2,223
shares of Series A Preferred were converted into 2,470,000 shares
of common stock. In Fiscal 2020, the remaining 3,987 shares of
Series A Preferred were converted into 5,887,997 shares of common
stock. At both September 30, 2020 and June 30, 2020, there were no
shares of Series A Preferred outstanding.
Terms of the Series A Preferred included the following:
|
1. |
Each
share of Series A Preferred was convertible into an amount of
shares of common stock determined by dividing the stated value of
$1,000 by the conversion price in effect at such time. The original
conversion price of $0.90 was adjusted to $0.20 upon the closing of
the Company’s public offering on October 29, 2019. See the section
below entitled “Public Offering – October 29, 2019” for
further information. |
|
2. |
Holders
were entitled to dividends on shares of Series A Preferred equal
(on an as-if-converted-to-common stock basis, without regards to
conversion limitations) to and in the same form as dividends
actually paid on shares of the common stock, when, as and if such
dividends were paid on shares of common stock. No other dividends
were declared for Series A Preferred. |
|
3. |
If at
any time the Company granted, issued or sold any common stock
equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the holders of any class of common
stock, then the holder(s) of Series A Preferred would be entitled
to acquire, upon the terms applicable to such purchase rights, the
aggregate purchase rights which the holder could have acquired if
the holder had held the number of shares of common stock acquirable
upon the complete conversion of such holder’s Series A Preferred
(as defined). |
Series B Convertible Preferred Stock ("Series B
Preferred")
On June 20, 2018, the Board of Directors of the Company created the
Series B Preferred, par value $0.001 per share, out of the
Company’s 1 million authorized shares of preferred stock.
On June 26, 2018, the Company issued 5,785 shares of Series B
Preferred as part of a public offering. At June 30, 2020, there
were 5,785 shares of Series B Preferred outstanding. In August
2020, all of the shares of Series B Preferred were converted into
28,925,000 shares of common stock.
Terms of the Series B Preferred included the following:
|
1. |
Each
share of Series B Preferred was convertible into an amount of
shares of common stock determined by dividing the stated value of
$1,000 by the conversion price in effect at such time. The original
conversion price of $0.90 was adjusted to $0.20 upon the closing of
the Company’s public offering on October 29, 2019. See the section
below entitled “Public Offering – October 29, 2019” for
further information. The number of shares of common stock to be
received was limited by the beneficial ownership limitation as
defined in the certificate of designation. Subject to limited
exceptions, a holder of Series B Preferred would not have the right
to exercise any portion of its Series B Preferred if such holder,
together with its affiliates, would beneficially own over 48% of
the number of shares of common stock outstanding immediately after
giving effect to such exercise. |
|
2. |
Holders
were entitled to dividends on shares of Series B Preferred equal
(on an as-if-converted-to-common stock basis, without regards to
conversion limitations) to and in the same form as dividends
actually paid on shares of the common stock, when, as and if such
dividends were paid on shares of common stock. No other dividends
were paid or accrued on the shares of Series B
Preferred. |
|
3. |
If at
any time the Company granted, issued or sold any common stock
equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the holders of any class of common
stock, then the holder(s) of Series B Preferred would be entitled
to acquire, upon the terms applicable to such purchase rights, the
aggregate purchase rights which the holder could have acquired if
the holder had held the number of shares of common stock acquirable
upon the complete conversion of such holder’s Series B Preferred
(as defined). |
Series C Convertible Preferred Stock (“Series C
Preferred”)
On October 28, 2019, the Board of Directors of the Company created
the Series C Preferred, par value $0.001 per share, out of the
Company’s 1 million authorized shares of preferred stock.
On October 29, 2019, the Company issued 4,510 shares of Series C
Preferred as part of a public offering. See the section below
entitled “Public Offering – October 29, 2019” for further
information. From October 29, 2019 through June 30, 2020, all
of the shares of Series C Preferred were converted into 22,550,000
shares of the Company’s common stock. At both September 30, 2020
and June 30, 2020, there were no shares of Series C Preferred
outstanding.
Terms of the Series C Preferred included the following:
|
1. |
Each
share of Series C Preferred was convertible into an amount of
shares of common stock determined by dividing the stated value of
$1,000 by the conversion price of $0.20, subject to adjustment. The
number of shares of common stock to be received was limited by the
beneficial ownership limitation as defined in the certificate of
designation. Subject to limited exceptions, a holder of Series C
Preferred would not have the right to exercise any portion of its
Series C Preferred if such holder, together with its affiliates,
would beneficially own over 4.99% (or, upon election by a holder
prior to the issuance of any Series C Preferred Shares, 9.99%) of
the number of shares of our common stock outstanding immediately
after giving effect to such exercise; provided, however, that upon
prior notice to us, such holder may increase such limitation,
provided that in no event will the limitation exceed 9.99% and any
such increase would not be effective until the 61st day
after such notice was delivered to the Company. |
|
2. |
Holders
were entitled to dividends on shares of Series C Preferred equal
(on an as-if-converted-to-common stock basis, without regards to
conversion limitations) to and in the same form as dividends
actually paid on shares of the common stock, when, as and if such
dividends are paid on shares of common stock. No other dividends
were paid or accrued on the shares of Series C
Preferred. |
Common Stock
The number of authorized shares of the Company’s common stock is
275 million. In addition, as of the filing date of this Report ,
the Company had reserved shares of common stock for up to 6.5
million shares of common stock for incentive compensation (stock
options and restricted stock units).
Recent issuances of common stock include the following:
Public Offering – October 29, 2019
On October 29, 2019, the Company closed on an underwritten public
offering with total gross proceeds of $5.0 million before deducting
underwriting discounts, commissions and other offering expenses
payable by the Company. The securities offered by the Company
consisted of (i) 2,450,000 shares (the “Shares”) of the Company’s
common stock, (ii) 4,510 shares of the Company’s newly designated
Series C Preferred, (iii) 25,000,000 Series A Common Stock Purchase
Warrants (“Series A Warrants”) to purchase shares of the Company’s
common stock and (iv) 25,000,000 Series B Common Stock Purchase
Warrants (“Series B Warrants”) to purchase shares of the Company’s
common stock.
Each share of common stock was sold together with two warrants, one
Series A Warrant with an expiry date on the second anniversary of
the original issuance date to purchase one share of common stock
and one Series B Warrant with an expiry date on the seventh
anniversary of the original issuance date, to purchase one share of
common stock. In addition, each Series C Preferred Share was sold
together with Series A Warrants to purchase one share of common
stock for each share of common stock issuable upon conversion of
the Series C Preferred Share and Series B Warrants to purchase one
share of common stock for each share of common stock issuable upon
conversion of the Series C Preferred Share. Each share of common
stock and accompanying Warrants was sold at a combined public
offering price of $0.20 and each Series C Preferred Share and
accompanying Warrants was sold at a combined public offering price
of $1,000.
The Shares, Series C Preferred Shares and Warrants were issued
pursuant to an underwriting agreement, dated October 25, 2019. The
net proceeds to the Company from the sale of the Shares, Series C
Preferred Shares, and Warrants was approximately $4.52 million,
after deducting underwriting discounts and commissions and other
offering expenses payable by the Company.
Due to the terms of the June 26, 2018 underwritten public offering,
any remaining outstanding Series A Preferred and Series B Preferred
were amended to convert at the same rate of the Series C Preferred
($0.20 per share). As a result of the reduction of the conversion
rates of Series A Preferred and Series B Preferred, the Company
recognized deemed dividends totaling $21,560,000 in the second
quarter of Fiscal 2020.
Lincoln Park March 2020 Purchase Agreement
On March 19, 2020, the Company entered into the Lincoln Park March
2020 Purchase Agreement with Lincoln Park pursuant to which the
Company had the right to sell to Lincoln Park up to an aggregate of
$50,000,000 of shares of the Company’s common stock over the
36-month term of the Lincoln Park March 2020 Purchase Agreement,
subject to certain limitations and conditions set forth in the
Lincoln Park March 2020 Purchase Agreement.
Concurrently with the execution of the Lincoln Park March 2020
Purchase Agreement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with Lincoln Park
pursuant to which the Company agreed, among other things, to file a
prospectus supplement pursuant to Rule 424(b) to register for sale
under the Securities Act of 1933, as amended (the “Securities
Act”), the shares of common stock that may be issued and sold to
Lincoln Park from time to time under the Lincoln Park March 2020
Purchase Agreement. The offer and sale of shares of common stock
under the Lincoln Park March 2020 Purchase Agreement was made under
the Company’s previously filed and currently effective Registration
Statement on Form S-3 which was declared effective on March 19,
2020. The prospectus supplement was filed on March 20, 2020.
The Lincoln Park March 2020 Purchase Agreement provides that, from
time to time on any trading day the Company selects, the Company
has the right, in its sole discretion, subject to the conditions
and limitations in the Lincoln Park March 2020 Purchase Agreement,
to direct Lincoln Park to purchase up to 1,000,000 shares of common
stock (each such purchase, a “Regular Purchase”) over the 36-month
term of the Purchase Agreement. The purchase price of shares of
common stock pursuant to the Lincoln Park March 2020 Purchase
Agreement was based on the prevailing market price at the time of
sale as set forth in the Lincoln Park March 2020 Purchase
Agreement. There were no trading volume requirements or
restrictions under the Lincoln Park March 2020 Purchase Agreement.
Lincoln Park’s obligation under each Regular Purchase shall not
exceed $5,000,000. There was no upper limit on the price per share
that Lincoln Park must pay for common stock under the Lincoln Park
March 2020 Purchase Agreement, but in no event will shares be sold
to Lincoln Park on a day the Company’s closing price is less than
the floor price of $0.20, which shall be appropriately adjusted for
any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction and, effective upon the
consummation of any such reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction, the Floor Price
shall mean the lower of (i) the adjusted price and (ii) $0.20.
Both the amount and frequency of the
Regular Purchases could be increased upon the mutual agreement of
the Company and Lincoln Park. The Company would control the timing
and amount of any sales of shares of common stock to Lincoln
Park.
The Company could, in its sole discretion, direct Lincoln Park to
purchase additional amounts as accelerated purchases or additional
accelerated purchases if on the date of a Regular Purchase the
closing sale price of the common stock was not below the Floor
Price as set forth in the Lincoln Park March 2020 Purchase
Agreement. The Company and Lincoln Park could mutually agree to
increase the amount of common stock sold to Lincoln Park on any
accelerated purchase date or additional accelerated purchase
date.
There were no restrictions on future financings, rights of first
refusal, participation rights, penalties or liquidated damages in
the Lincoln Park March 2020 Purchase Agreement or Registration
Rights Agreement other than a prohibition on entering into any
“Variable Rate Transaction,” as defined in the Lincoln Park March
2020 Purchase Agreement.
Under applicable rules of the NYSE American, in no event could the
Company issue or sell to Lincoln Park under the Lincoln Park March
2020 Purchase Agreement more than 19.99% (the “Exchange Cap”) of
the shares of common stock outstanding immediately prior to the
execution of the Lincoln Park March 2020 Purchase Agreement, (i)
unless stockholder approval was obtained to issue more than the
Exchange Cap or (ii) except to the extent the issuances and sales
of common stock pursuant to the Lincoln Park March 2020 Purchase
Agreement were deemed to be at a price equal to or in excess of the
greater of book or market value of the common stock as calculated
in accordance with the applicable rules of the NYSE American.
The Lincoln Park March 2020 Purchase Agreement prohibited the
Company from directing Lincoln Park to purchase any shares of
common stock if those shares, when aggregated with all other shares
of common stock then beneficially owned by Lincoln Park and its
affiliates, would result in Lincoln Park and its affiliates having
beneficial ownership, at any single point in time, of more than
9.99% of the then total outstanding shares of the common stock, as
calculated pursuant to Section 13(d) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and Rule 13d-3
thereunder.
Pursuant to the terms of the Lincoln Park March 2020 Purchase
Agreement, the offering of common stock pursuant to the Lincoln
Park March 2020 Purchase Agreement would terminate on the date that
all shares offered by the Lincoln Park March 2020 Purchase
Agreement have been sold or, if earlier, the expiration or
termination of the Lincoln Park 2020 Purchase Agreement.
The net proceeds under the Lincoln Park March 2020 Purchase
Agreement to the Company was dependent on the frequency and prices
at which we sell shares of common stock to Lincoln Park. Actual
sales of shares of common stock to Lincoln Park under the Lincoln
Park March 2020 Purchase Agreement and the amount of such net
proceeds will depend on a variety of factors to be determined by
the Company from time to time, including (among others) market
conditions, the trading price of the common stock and
determinations by the Company as to other available and appropriate
sources of funding for the Company. The Company intended to use the
net proceeds of sales under the Lincoln Park March 2020 Purchase
Agreement for working capital and general corporate purposes. As
consideration for Lincoln Park’s commitments under the Lincoln Park
March 2020 Purchase Agreement, we issued to Lincoln Park 815,827
shares of common stock.
From March 19, 2020 to June 30, 2020, Lincoln Park was issued
16,800,000 shares of common stock for proceeds totaling
approximately $18.44 million. For the period from July 1, 2020 to
July 27, 2020, Lincoln Park was issued 2.673 million shares of
common stock for proceeds totaling $6.79 million. The Company terminated the Lincoln Park March 2020
Purchase Agreement on July 24, 2020, without fee, penalty or cost
effective July 27, 2020.
Lincoln Park May 2020 Purchase Agreement
On May 13, 2020, the Company entered into the Lincoln Park May 2020
Purchase Agreement, pursuant to which the Company agreed to sell to
Lincoln Park and Lincoln Park agreed to purchase 1,000,000 shares
of the Company’s common stock at a price of $1.09 per share for an
aggregate purchase price of $1,090,000, pursuant to the Company’s
effective shelf registration statement on Form S-3 (Registration
No. 333-236735), filed with the ("SEC") in accordance with the
provisions of the Securities Act, and declared effective on March
19, 2020 (the “S-3 Registration Statement”), and the prospectus
supplement thereto dated May 14, 2020.
Equity Distribution Agreement
On June 17, 2020, as amended on July 29, 2020, the Company entered
into an equity distribution agreement (the “UBS Agreement”) with
UBS as sales agent pursuant to which the Company may sell from time
to time shares of its common stock through UBS, for the sale of up
to $72,000,000 of shares of the Company's common stock. Sales of
shares of common stock made pursuant to the agreement will be made
pursuant to the S-3 Registration Statement and the prospectus
supplements thereto dated May 14, 2020 and July 29, 2020.
Sales of the shares were and will be made by means of ordinary
brokers’ transactions at prevailing market prices at the time of
sale, or as otherwise agreed with UBS. UBS will use its
commercially reasonable efforts consistent with its normal trading
and sales practices and applicable state and federal laws, rules
and regulations to sell the Company’s common stock from time to
time, based upon the Company’s instructions (including any price,
time or size limits or other customary parameters or conditions the
Company may impose).
The Company is not obligated to make any sales of common stock
under this agreement and the Company cannot provide any assurances
that it will issue any shares pursuant to this agreement. The
Company currently intends to use the net proceeds of this offering
for operating costs, including working capital and other general
corporate purposes.
The Company will pay a commission rate of up to 3.0% of the gross
sales price per share sold and has agreed to reimburse UBS for the
reasonable fees and disbursements of its counsel, in connection
with entering into this agreement, in an amount not to exceed
$50,000, in addition to certain ongoing fees and disbursements of
its counsel. The agreement contains customary representations,
warranties and agreements and other obligations of the parties and
termination provisions. The Company has also agreed pursuant to the
agreement to provide UBS with customary indemnification and
contribution rights.
From June 17, 2020 to June 30, 2020, approximately 17.42 million
shares of common stock were issued for gross proceeds totaling
approximately $37.84 million. The Company incurred costs of
approximately $1.27 million. In addition, the Company sold 2.36
million shares of common stock for net proceeds of approximately
$5.55 million at the end of June 2020. The settlement dates of
these sales were on July 1, 2020 and July 2, 2020. As such, the
Company recorded a subscription receivable for such amount. The
proceeds from the subscription receivable were collected on July 1,
2020 and July 2, 2020. For the period from July 1, 2020 to the date
of the filing of this Report, approximately 10.41 million shares of
common stock were issued for net proceeds totaling
approximately $26.85 million.
Eastern – Share Purchase Agreements
On January 13, 2016, the Company entered into a share purchase
agreement with Eastern pursuant to which Eastern purchased 350,000
shares of the Company's common stock and the Company received
proceeds of $2,177,000. In addition, Eastern exercised warrants it
had previously acquired to purchase 178,400 shares of the Company's
common stock. The Company received proceeds of approximately
$945,000 from the exercise of the warrants.
On January 13, 2016, the Company entered into a separate share
purchase agreement with Eastern pursuant to which Eastern agreed to
purchase 650,000 shares of the Company's common stock at a price of
$6.22 per share, subject to the approval of the Company's
stockholders. The Company's stockholders approved the issuance of
the 650,000 shares to Eastern at the Company's annual meeting on
April 7, 2016. On April 13, 2016, the Company issued the 650,000
shares and received proceeds of $4,043,000. These shares were
subject to a three-year standstill agreement (the “Standstill
Agreement”) which restricted additional acquisitions of the
Company's equity by Eastern and its controlled affiliates to limit
its beneficial ownership of the Company's outstanding shares of
common stock to a maximum of 38% (the “Eastern Beneficial Ownership
Limitation”), absent the approval by a majority of the Company's
Board of Directors.
On November 27, 2017, the Company's Board of Directors authorized
the Company’s Chief Executive Officer to invite Eastern to purchase
shares in the November 2017 public offering with Aegis Capital
Corp., provided that such purchase did not result in Eastern being
the beneficial owner of more than 40% of the aggregate number of
shares of the Company’s outstanding common stock rather than the
limit of 38% set forth in the Standstill Agreement.
On June 26, 2018, in connection with the public offering with
A.G.P./Alliance Global Partners (“Alliance”), the Company entered
into an amendment (the “Amendment”) to the share purchase agreement
for 650,000 shares, dated January 13, 2016 (the “Purchase
Agreement”), with Eastern. Pursuant to the Purchase Agreement,
Eastern was subject to the Standstill Agreement (amended to 40%)
and the Eastern Beneficial Ownership Limitation therein. The
Amendment increased the Eastern Beneficial Ownership Limitation to
48% and extended the restrictions under the Standstill Agreement
until June 26, 2020. In accordance with the terms of the Standstill
Agreement, as amended, the Company’s Board of Directors duly
authorized the Company’s Chief Executive Officer to offer Eastern
to purchase shares in the public offering with Alliance, provided
that, when taken together with all other equity securities of the
Company beneficially owned by Eastern and its controlled affiliates
following consummation of the public offering with Alliance,
Eastern and its controlled affiliates would not beneficially own
more than 48% of the aggregate number of shares of common stock
outstanding as of the closing of the public offering with Alliance,
including all shares of common stock issuable upon conversion of
all outstanding shares of Series A Preferred and Series B
Preferred, and provided, further, that Eastern agreed to extend the
standstill restrictions for two (2) additional years beginning with
the date of Eastern’s or its controlled affiliate’s purchase of
securities in the public offering with Alliance. The restrictions
under the Standstill Agreement were not extended beyond June 26,
2020.
On February 23, 2017, the Company entered into an exchange
agreement with the Eastern Affiliate (the “Eastern Exchange
Agreement”) pursuant to which the Company acquired substantially
all of the interest in iBio CDMO held by the Eastern Affiliate and
issued one share of a newly created iBio CMO Preferred Tracking
Stock, in exchange for 29,990,000 units of limited liability
company interests of iBio CDMO held by the Eastern Affiliate at an
original issue price of $13 million. After giving effect to the
transactions contemplated in the Eastern Exchange Agreement, the
Company owns 99.99% of iBio CDMO and the Eastern Affiliate owns
0.01% of iBio CDMO. At any time, at the Company’s election or the
election of the Eastern Affiliate, the outstanding share of iBio
CMO Preferred Tracking Stock may be exchanged for 29,990,000 units
of limited liability company interests of iBio CDMO. Following such
exchange, the Company would own a 70% interest in iBio CDMO and the
Eastern Affiliate would own a 30% interest.
Warrants
As discussed above, the Company issued 25,000,000 Series A Warrants
and 25,000,000 Series B Warrants as part of its October 29, 2019
public offering. The Series A Warrants were exercisable at $0.22
per share, had a term of two years and were set to expire on
October 29, 2021. The Series B Warrants were exercisable at $0.22
per share, had a term of seven years and were set to expire on
October 29, 2026.
On February 20, 2020, the Company entered into a warrant amendment
and exchange agreement (the “Warrant Exchange Agreement”) with
certain holders (the “Warrant Holders”) of the Company’s Series A
Warrants (the “Original Series A Warrants”) and Series B Warrants
(the “Original Series B Warrants”).
Pursuant to the Warrant Exchange Agreement, the Warrant Holders
agreed to exchange their Series A Warrants and Series B Warrants
for (i) an aggregate of 14,999,998 shares of newly-issued common
stock and (ii) promissory notes in the aggregate principal amount
of $3,300,000. The Warrant Holders further agreed to amendments to
the remaining, unexchanged Series A Warrants and Series B Warrants
as described below (as amended, the “New Series A Warrants” and
“New Series B Warrants,” respectively, and collectively, the “New
Warrants” and together with the Original Series A Warrants and
Original Series B Warrants, the “Warrants”). Following the Warrant
Exchange Agreement, there were New Warrants to purchase an
aggregate of 9,595,002 shares of common stock.
Based on the terms of the Exchange Agreement, the Company
recognized deemed dividends on common stock totaling $6,600,000 in
the third quarter of Fiscal 2020.
From the date of the October 29, 2019 public offering through June
30, 2020, the Company issued 29.1 million shares of common stock
for the exercise of various Warrants and received proceeds of $6.4
million. In addition, the Company issued 5.9 million shares of
common stock for the cashless exercise of Warrants in which the
“assumed proceeds” totaling $1.3 million were used to reduce the
Company’s balances owed for the notes described above. Costs
related to the exchange under the Warrant Exchange agreement
totaled approximately $313,000 and were offset against additional
paid-in capital.
As of both September 30, 2020 and June 30, 2020, there were no
Warrants outstanding.
12. |
Earnings
(Loss) Per Common Share |
Basic earnings (loss) per common share is computed by dividing the
net income (loss) allocated to common stockholders by the
weighted-average number of shares of common stock outstanding
during the period. For purposes of calculating diluted earnings
(loss) per common share, the denominator includes both the
weighted-average number of shares of common stock outstanding
during the period and the number of common stock equivalents if the
inclusion of such common stock equivalents is dilutive. Dilutive
common stock equivalents potentially include stock options and
warrants using the treasury stock method. The following table
summarizes the components of the earnings (loss) per common share
calculation (in thousands, except per share amounts):
|
|
Three Months ended
September 30, |
|
|
|
2020 |
|
|
2019 |
|
Basic
and diluted numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to iBio, Inc. stockholders |
|
$ |
(7,533 |
) |
|
$ |
(4,463 |
) |
Preferred stock dividends |
|
|
(66 |
) |
|
|
(66 |
) |
Net loss available to iBio, Inc. stockholders |
|
$ |
(7,599 |
) |
|
$ |
(4,529 |
) |
|
|
|
|
|
|
|
|
|
Basic
and diluted denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
162,442 |
|
|
|
21,923 |
|
|
|
|
|
|
|
|
|
|
Per share
amount |
|
$ |
(0.05 |
) |
|
$ |
(0.21 |
) |
In Fiscal 2021 and Fiscal 2020, the Company incurred net losses
which cannot be diluted; therefore, basic and diluted loss per
common share is the same. As of September 30, 2020 and 2019, shares
issuable which could potentially dilute future earnings were as
follows:
|
|
Three Months Ended
September 30, |
|
|
|
2020 |
|
|
2019 |
|
|
|
(in
thousands) |
|
Stock options |
|
|
3,486 |
|
|
|
1,347 |
|
Restricted stock units |
|
|
41 |
|
|
|
- |
|
Series
A Preferred |
|
|
- |
|
|
|
430 |
|
Series B Preferred |
|
|
- |
|
|
|
6,428 |
|
Shares excluded from the calculation of diluted loss per share |
|
|
3,527 |
|
|
|
8,205 |
|
13. |
Share-Based
Compensation |
The following table summarizes the components of share-based
compensation expense in the condensed consolidated statements of
operations (in thousands):
|
|
Three Months Ended
September 30, |
|
|
|
2020 |
|
|
2019 |
|
Research and development |
|
$ |
47 |
|
|
$ |
7 |
|
General and administrative |
|
|
304 |
|
|
|
61 |
|
Total |
|
$ |
351 |
|
|
$ |
68 |
|
Stock Options
2008 Omnibus Equity Incentive Plan (the “2008 Plan”)
On August 12, 2008, the Company adopted the 2008 Plan for
employees, officers, directors and external service providers. The
2008 Plan provided that the Company could grant options to purchase
stock and/or make awards of restricted stock. Stock options granted
under the 2008 Plan could either be incentive stock options (as
defined by Section 422 of the Internal Revenue Code of 1986, as
amended) or non-qualified stock options at the discretion of the
Board of Directors. Vesting of service awards occurred ratably on
the anniversary of the grant date over the service period,
generally three or five years, as determined at the time of grant.
Vesting of performance awards occurred when the performance
criteria had been satisfied. The Company used historical data to
estimate forfeiture rates. The 2008 Plan had a term of ten (10)
years and, as a result, the 2008 Plan expired by its terms on
August 12, 2018.
iBio, Inc. 2018 Omnibus Equity Incentive Plan (the “2018
Plan”)
On December 18, 2018, the Company's stockholders, upon
recommendation of the Board of Directors on November 9, 2018,
approved the 2018 Plan. On March 5, 2020 at the Company’s 2019
Annual Meeting of Stockholders, the Company’s stockholders approved
an amendment to the 2018 Plan to increase the number of shares of
common stock authorized for issuance thereunder from 3.5 million
shares to 6.5 million shares and to incorporate changes to include
restricted stock units and performance-based awards as grant types
issuable under the 2018 Plan. The total number of shares of common
stock reserved under the 2018 Plan is 6.5 million. Stock options
granted under the 2018 Plan may be either incentive stock options
(as defined by Section 422 of the Internal Revenue Code of 1986, as
amended), non-qualified stock options, or restricted stock and
determined at the discretion of the Board of Directors.
Vesting of service awards will be determined by the Board of
Directors and stated in the award agreements. In general, vesting
will occur ratably on the anniversary of the grant date over the
service period, generally three or five years, as determined at the
time of grant. Vesting of performance awards will occur when the
performance criteria has been satisfied. The Company uses
historical data to estimate forfeiture rates. The 2018 Plan has a
term of ten (10) years and expires by its terms on November 9,
2028.
The Option Exchange
In addition, on December 18, 2018, the Company's stockholders, upon
recommendation of the Board of Directors, also approved an
amendment to the Company's 2008 Plan to allow the Company to permit
a one-time option exchange program under which the Company would
offer eligible employees and non-employee directors the opportunity
to exchange certain outstanding options on a four-for-three basis
for new stock options exercisable at a lower price under the 2018
Plan (the “Option Exchange”).
On January 22, 2019, the Company filed with the Securities and
Exchange Commission a Tender Offer Statement on Schedule TO
defining the terms and conditions of the Option Exchange, whereby
the Company was offering eligible employees and non-employee
directors (“Eligible Option Holders”) the opportunity to exchange
for new options covering a lesser number of shares of the Company's
common stock (“Replacement Options”), at a ratio of four-for-three
(the “Exchange Ratio”), any options issued by the Company prior to
January 22, 2019 that were outstanding under its 2008 Plan that had
an exercise price greater than the closing price per share of
iBio’s common stock on the NYSE American on the grant date of the
Replacement Options (“Eligible Exchange Options”), so that for each
four shares of common stock subject to an Eligible Exchange Option,
the Eligible Option Holder would receive a Replacement Option to
purchase three shares of common stock under the 2018 Plan. On
February 20, 2019, the completion date of the Option Exchange (the
“Replacement Option Grant Date”), the Company canceled the options
accepted for exchange and granted 874,310 Replacement Options in
exchange for 1,165,750 options issued under the 2008 Plan.
The Replacement Options:
|
• |
have
a per-share exercise price of $0.93, which was equal to the closing
price per share of the Company’s common stock on the Replacement
Option Grant Date; |
|
• |
have
a five-year term beginning on February 20, 2019 and vest one year
later on February 20, 2020. Generally, the options that were
replaced (the “Underwater Options”) had been scheduled to vest over
four years following the recipient’s employment start date or the
date of grant. As of November 19, 2018, approximately 94% of the
shares covered by the Underwater Options already were vested. All
other terms and conditions of the new stock options are generally
consistent with the terms and conditions of iBio’s standard
time-vesting stock option grants; |
|
• |
are
of the same type of options as the surrendered options. Eligible
Option Holders holding nonqualified stock options received
Replacement Options in the form of nonqualified stock options and
Eligible Option Holders holding incentive stock options received
Replacement Options in the form of incentive stock options;
and |
|
• |
have
the terms and be subject to the conditions as provided for in the
2018 Plan and option award agreement. |
No stock options were issued during the three months ended
September 30, 2020. On October 14, 2020, the Company granted three
new members of its Board of Directors stock option agreements under
the 2018 Plan whereby each director has the option to purchase
100,000 shares of the Company's common stock at a price of $2.05
per share. The options vest over a period of three years and are
set to expire in ten years.
iBio, Inc. 2020 Omnibus Equity Incentive Plan (the “2020
Plan”)
On November 3, 2020, the Company filed a Definitive Proxy Statement
on Schedule 14A seeking shareholder approval of the 2020 Plan at
the Company’s 2020 Annual Meeting of Shareholders to be held on
December 9, 2020. The following description of certain features of
the 2020 Plan is intended to be a summary only. The total number of
shares of common stock reserved under the 2020 Plan is 32 million
and allows for the reward of stock options, stock appreciation
rights, restricted stock, restricted stock units, unrestricted
stock, cash based awards, and dividend equivalent rights. The value
of all awards awarded under the 2020 Plan and all other cash
compensation paid by the Company to any non-employee director in
any calendar year may not exceed $500,000; provided, however, that
such amount shall be $750,000 for the calendar year in which the
applicable non-employee director is initially elected or appointed
to the Board of Directors and $1,500,000 for any non-executive
chair of our Board of Directors should one be appointed.
Notwithstanding the foregoing, the independent members of the Board
of Directors may make exceptions to such limits in extraordinary
circumstances. The term of the 2020 Plan will expire on the tenth
anniversary of the date the Plan is approved by the
stockholders.
14. |
Related
Party Transactions |
Novici Biotech, LLC
In January 2012, the Company entered into an agreement with Novici
Biotech, LLC (“Novici”) in which iBio’s President is a minority
stockholder. Novici performs laboratory feasibility analyses of
gene expression, protein purification and preparation of research
samples. In addition, the Company and Novici collaborate on the
development of new technologies and product candidates for
exclusive worldwide commercial use by the Company. No amounts were
due to Novici at both September 30, 2020 and June 30, 2020.
Research and development expenses related to Novici were
approximately $0 and $97,000 for the three months ended September
30, 2020 and 2019, respectively.
Agreements with Eastern Capital Limited and its
Affiliates
As more fully discussed in Note 11 – Stockholders’ Equity, the
Company entered into two share purchase agreements (the “Eastern
Purchase Agreements”) with Eastern and the Standstill
Agreement.
Concurrently with the execution of the Eastern Purchase Agreements,
iBio entered into a contract manufacturing joint venture with the
Eastern Affiliate to develop and manufacture plant-made
pharmaceuticals through iBio CDMO. The Eastern Affiliate
contributed $15.0 million in cash to iBio CDMO, for a 30% interest
in iBio CDMO. iBio retained a 70% equity interest in iBio CDMO. As
the majority equity holder, iBio has the right to appoint a
majority of the members of the Board of Managers that manages the
iBio CDMO joint venture. Specified material actions by the joint
venture require the consent of iBio and the Eastern Affiliate. iBio
contributed to the capital of iBio CDMO a royalty bearing license,
which grants iBio CDMO a non-exclusive license to use the iBio’s
proprietary technologies for research purposes and an exclusive
U.S. license for manufacturing purposes. iBio retains all other
rights in its intellectual property, including the right for itself
to commercialize products based on its proprietary technologies or
to grant licenses to others to do so.
In connection with the joint venture, the Second Eastern Affiliate,
which controls the subject property as sublandlord, granted iBio
CDMO the Sublease of a Class A life sciences building in Bryan,
Texas, located on land owned by the Texas A&M system, designed
and equipped for plant-made manufacture of biopharmaceuticals. The
terms of the sublease are described in Note 10 – Finance Lease
Obligation.
The Standstill Agreement took effect upon the issuance of the
shares to Eastern pursuant to a share purchase agreement for the
acquisition of 650,000 shares of common stock. The Standstill
Agreement which expired on April 13, 2019, has been amended twice
so that Eastern and its controlled affiliates are limited to its
beneficial ownership of the Company's outstanding shares of common
stock to a maximum of 48%, absent approval by a majority of the
Company's Board of Directors. Eastern agreed to extend the
standstill restrictions for two (2) additional years beginning with
the date of Eastern’s or its controlled affiliate’s purchase of
securities in the public offering with Alliance. See Note 11 –
Stockholders’ Equity for further information.
On February 23, 2017, the Company entered into the Eastern Exchange
Agreement with the Eastern Affiliate pursuant to which the Company
acquired substantially all of the interest in iBio CDMO held by the
Eastern Affiliate and issued one share of the Preferred Tracking
Stock in exchange for 29,990,000 units of limited liability company
interests of iBio CDMO held by the Eastern Affiliate at an original
issue price of $13 million. After giving effect to the transactions
in the Exchange Agreement, the Company owns 99.99% of iBio CDMO and
the Eastern Affiliate owns 0.01% of iBio CDMO. At any time, at the
Company’s election or the election of the Eastern Affiliate, the
outstanding share of iBio CMO Preferred Tracking Stock may be
exchanged for 29,990,000 units of limited liability company
interests of iBio CDMO. Following such exchange, the Company would
own a 70% interest in iBio CDMO and the Eastern Affiliate would own
a 30% interest.
Director Consulting Agreement
i.e. Advising, LLC (“IEA”) was retained by the Company as a
strategy and management consultant pursuant to a Consulting
Agreement, dated as of February 22, 2019 (the “Consulting
Agreement”), with services provided pursuant to statements of work
(SOW) entered into between the Company and Consultant from time to
time. Mr. Thomas Isett, our Chief Executive Officer and
Chairperson, was the Managing Director and sole owner of IEA.
Effective as of May 1, 2019, the Company entered into a Statement
of Work (the “May 1, 2019 SOW”) pursuant to the Consulting
Agreement, which provided for an engagement to be conducted on a
retainer basis with Mr. Isett as the primary engagement resource,
at a rate of $40,000 per month, and on a time and materials basis
for all other engagement resources provided by IEA, billable at the
rate of $85 to $450 per hour. IEA and the Company entered into an
additional SOW on December 1, 2019 (the “December 1, 2019 SOW”),
which provided that Consultant would be entitled to a bonus of 3%
to 4.5% of the transaction value if the Company or any of its
assets were sold during the term of the Statement of Work.
Consultant and the Company agreed to terminate the Consulting
Agreement and both the May 1, 2019 SOW and December 1, 2019 SOW on
March 10, 2020, when Mr. Isett became the Company’s Chief Executive
Officer.
Consulting expenses totaled approximately $150,000 for the three
months ended September 30, 2019. At June 30, 2020, the Company owed
the Consultant $0.
KBI Consulting
On April 1, 2020, the Company entered into a consulting agreement
with KBI Consulting for business support services provided by Mr.
Isett's wife. Per the consulting agreement the business support
services are billed at $5,800 per month. Consulting expenses
totaled approximately $17,000 and $0 for the three months ended
September 30, 2020 and 2019, respectively. At both September 30,
2020 and June 30, 2020, the Company owed the Consultant $5,800.
TechCXO LLC (“TechCXO”)
In July 2020, TechCXO was retained by the Company to provide an
interim principal financial officer until the Company can hire a
new full-time CFO. TechCXO assigned John Delta, TechCXO’s Managing
Partner of its Mid-Atlantic region. The Company appointed Mr. Delta
as the Company’s Principal Accounting Officer as of October 1, 2020
and Principal Financial Officer as of October 13, 2020. Consulting
expenses totaled approximately $191,000 for the three months ended
September 30, 2020. At September 30, 2020, the Company owed TechCXO
approximately $119,000.
The Company recorded no income tax expense for the three months
ended September 30, 2020 and 2019 because the estimated annual
effective tax rate was zero. As of September 30, 2020, the Company
continues to provide a valuation allowance against its net deferred
tax assets since the Company believes it is more likely than not
that its deferred tax assets will not be realized.
16. |
Commitments
and Contingencies |
COVID-19
As a result of the pandemic, the Company has at times experienced
reduced capacity to provide CDMO services as a result of
instituting social distancing at work requirements in our Texas
facility, restricting access to essential workers, as well as
taking other precautions. The Company also experienced a full
three-day operational shutdown in April 2020 for extensive facility
cleaning following the discovery that an employee had contracted
COVID-19, and successfully resumed operations on a reduced capacity
basis.
The Company has ascertained that certain risks associated with
further COVID-19 developments may adversely impact our operations
and liquidity, and its business and share price may also be
affected by the COVID-19 pandemic. However, the Company does not
anticipate any significant threat to its operations at this point
in time. Due to the general unknown nature surrounding the crisis,
the Company cannot reasonably estimate the potential for any future
impacts on its operations or liquidity.
The outbreak and spread of COVID-19 and continued progress in
various countries around the world, including the United States,
has led authorities around the globe to take various extraordinary
measures to stem the spread of the disease, such as emergency
travel and transportation restrictions, school closures,
quarantines and social distancing measures. The outbreak of
COVID-19 has had an adverse effect on global markets and may lead
to a major slowdown in the economy in the United States and
globally.
Planet Biotechnologies
On August 27, 2020, the
Company entered into an exclusive worldwide license agreement with
Planet Biotechnology Inc. (“Planet”) for the development of
Planet’s COVID-19 therapeutic candidate, ACE2-F. The
Company made a one-time up-front payment of $150,000 on September
11, 2020.
The Company shall make the following one-time, non-refundable,
milestone payments to Planet within 30 days of achieving each of
the development milestones listed in the “Milestone Event column
below. No further payment is required for any product that achieves
a milestone event that was previously paid and no milestone
payments will be due and payable in connection with any
registration application.
MILESTONE EVENT |
|
PAYMENT * |
Investigation New Drug Application Filed pursuant
to 21 C.F.R. Part 312 |
|
150,000 |
Fifth
patient enrolled in a Phase I Trial of a Product |
|
200,000 |
Fifth
patient enrolled in a Phase II Trial of a Product |
|
300,000 |
Fifth
patient enrolled in a Phase III Trial of a Product |
|
500,000 |
Approval
of Biologics License Application |
|
1,000,000 |
First
Anniversary of Biologics License Application approval |
|
1,000,000 |
Second
Anniversary of Biologics License Application approval |
|
1,000,000 |
Third
Anniversary of Biologics License Application approval |
|
1,000,000 |
Fourth
Anniversary of Biologics License Application approval |
|
1,000,000 |
* PAYMENT may be made in either the dollar amount specified per
MILESTONE EVENT or ITS EQUIVALENT IN CAPITAL STOCK AT LICENSEE’S
SOLE DISCRETION.
Agreements
Lease – Bryan, Texas
As discussed above, iBio CDMO is leasing its facility in Bryan,
Texas from the Second Eastern Affiliate under the Sublease. See
Note 10 – Finance Lease Obligation for more details of the
Sublease.
Lawsuits
On March 17, 2015, the Company filed a Verified Complaint in the
Court of Chancery of the State of Delaware against Fraunhofer and
Vidadi Yusibov (“Yusibov”), Fraunhofer CMB’s Executive Director,
seeking monetary damages and equitable relief based on Fraunhofer’s
material and continuing breaches of their contracts with the
Company. On September 16, 2015, the Company voluntarily dismissed
its action against Yusibov, without prejudice, and thereafter on
September 29, 2015, the Company filed a Verified Amended Complaint
against Fraunhofer alleging material breaches of its agreements
with the Company and seeking monetary damages and equitable relief
against Fraunhofer. The Court bifurcated the action to first
resolve the threshold question in the case – the scope of iBio’s
ownership of the technology developed or held by Fraunhofer –
before proceeding with the rest of the case and the parties
stipulated their agreement to that approach. After considering the
parties’ written submissions and oral argument, the Court resolved
the threshold issue in favor of iBio on July 29, 2016, holding that
iBio owns all proprietary rights of any kind to all plant-based
technology of Fraunhofer developed or held as of December 31, 2014,
including know-how, and was entitled to receive a technology
transfer from Fraunhofer. Fraunhofer’s motion to dismiss iBio’s
contract claims was denied by the Court on February 24, 2017. The
Court at that time also granted, over Fraunhofer’s opposition,
iBio’s motion to supplement and amend the Complaint to add
additional state law claims against Fraunhofer. Fraunhofer filed an
answer and counterclaims in March 2017, but in May 2017, Fraunhofer
obtained new counsel, and with iBio’s agreement (as a matter of
procedure), filed an amended answer and amended counterclaims in
July 2017. The Company replied to those counterclaims on
August 9, 2017. In November 2017, the Company engaged new counsel
to further lead its litigation efforts, and on November 3, 2017,
the Company filed a separate Verified Complaint in the Court of
Chancery of the State of Delaware against Fraunhofer-Gesellschaft,
the European unit of Fraunhofer (the “Second Complaint”). The
Second Complaint follows iBio’s pending litigation filed in March
2015, described above, against Fraunhofer USA, Inc., the U.S. unit
of Fraunhofer. The complaint against Fraunhofer-Gesellschaft was
dismissed by the Delaware Chancery Court on December 10, 2018 as
untimely filed. The dismissal of this action has no effect on the
action against the U.S. unit of Fraunhofer.
The case against Fraunhofer has proceeded and fact and expert
discovery has now closed.
Fraunhofer filed a motion for summary judgment in November 2019,
arguing that the Company’s claims should be dismissed as preempted
or duplicative, and that certain claims should be time barred.
Briefing was completed in January 2020, and a hearing on
Fraunhofer’s motion was held on June 11, 2020. On September 25,
2020, the Court granted in part and denied in part Fraunhofer’s
motion for summary judgment. The Court granted Fraunhofer’s motion
for summary judgment as to iBio’s fraud, conversion, constructive
trust, partial rescission, and unjust enrichment claims. The U.S.
Court denied Fraunhofer’s motion for summary judgment as to iBio’s
declaratory judgment, breach of contract, misappropriation of trade
secrets, tortious interference, and deceptive trade practices
claims, and ruled that those claims could proceed to trial.
On January 6, 2020, the Company filed a motion in the Court of
Chancery of the State of Delaware to initiate new litigation
against Fraunhofer-Gesellschaft through an amendment to its
Verified Amended Complaint. The motion asserts that new evidence
reveals that Fraunhofer-Gesellschaft exercised complete dominion
and control over its US subsidiary to wrongfully access and direct
use of iBio’s intellectual property on many occasions with new and
different third parties. The Court denied the Company’s motion for
leave to amend at a hearing on June 11, 2020, without prejudice and
with leave to refile the complaint at a later date.
The case is set for trial on March 1 to 5, 2021. The Company is
unable to predict the further outcome of this action at this
time.
Commencing January 1, 2018, the Company established the iBio, Inc.
401(K) Plan (the “Plan”). Eligible employees of the Company may
participate in the Plan, whereby they may elect to make elective
deferral contributions pursuant to a salary deduction agreement and
receive matching contributions upon meeting age and
length-of-service requirements. The Company will make a 100%
matching contribution that is not in excess of 5% of an eligible
employee’s compensation. In addition, the Company may make
qualified non-elective contributions at its discretion. For the
three months ended September 30, 2020 and 2019, employer
contributions made to the Plan totaled approximately $32,000 and
$30,000, respectively.
In accordance with FASB ASC 280, “Segment Reporting,” the
Company discloses financial and descriptive information about its
reportable segments. The Company operates in two segments, (i) our
biologics development and licensing activities, conducted within
iBio, Inc. and (ii) our CDMO segment, conducted within iBio CDMO.
These segments are components of the Company about which separate
financial information is available and regularly evaluated by the
chief operating decision maker in deciding how to allocate
resources and in assessing performance. The accounting policies of
the segments are the same as those described in the Summary of
Significant Accounting Policies. Please note that certain totals
may not sum due to rounding.
Three Months Ended September 30, 2020 (in thousands) |
|
iBio, Inc. |
|
|
iBio CDMO |
|
|
Eliminations |
|
|
Total |
|
Revenues – external customers |
|
$ |
207 |
|
|
$ |
203 |
|
|
$ |
- |
|
|
$ |
410 |
|
Revenues – intersegment |
|
|
238 |
|
|
|
210 |
|
|
|
(448 |
) |
|
|
- |
|
Research and development |
|
|
342 |
|
|
|
1,638 |
|
|
|
(218 |
) |
|
|
1,762 |
|
General and administrative |
|
|
2,672 |
|
|
|
3,130 |
|
|
|
(230 |
) |
|
|
5,572 |
|
Operating loss |
|
|
(2,569 |
) |
|
|
(4,355 |
) |
|
|
- |
|
|
|
(6,924 |
) |
Interest expense |
|
|
- |
|
|
|
(614 |
) |
|
|
- |
|
|
|
(614 |
) |
Interest and other income |
|
|
3 |
|
|
|
1 |
|
|
|
- |
|
|
|
4 |
|
Consolidated net loss |
|
|
(2,566 |
) |
|
|
(4,968 |
) |
|
|
- |
|
|
|
(7,534 |
) |
Total
assets |
|
|
132,207 |
|
|
|
33,320 |
|
|
|
(48,272 |
) |
|
|
117,254 |
|
Finance lease ROU assets |
|
|
- |
|
|
|
27,201 |
|
|
|
- |
|
|
|
27,201 |
|
Fixed
assets, net |
|
|
- |
|
|
|
3,834 |
|
|
|
- |
|
|
|
3,834 |
|
Intangible assets, net |
|
|
1,236 |
|
|
|
- |
|
|
|
- |
|
|
|
1,236 |
|
Amortization of ROU assets |
|
|
- |
|
|
|
415 |
|
|
|
|
|
|
|
415 |
|
Depreciation expense |
|
|
- |
|
|
|
97 |
|
|
|
- |
|
|
|
97 |
|
Amortization of intangible assets |
|
|
72 |
|
|
|
- |
|
|
|
- |
|
|
|
72 |
|
Three Months Ended September 30, 2019 (in thousands) |
|
iBio, Inc. |
|
|
iBio CDMO |
|
|
Eliminations |
|
|
Total |
|
Revenues – external customers |
|
$ |
108 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
108 |
|
Revenues – intersegment |
|
|
241 |
|
|
|
161 |
|
|
|
(402 |
) |
|
|
- |
|
Research and development |
|
|
280 |
|
|
|
860 |
|
|
|
(163 |
) |
|
|
977 |
|
General and administrative |
|
|
1,203 |
|
|
|
2,022 |
|
|
|
(239 |
) |
|
|
2,986 |
|
Operating loss |
|
|
(1,134 |
) |
|
|
(2,721 |
) |
|
|
- |
|
|
|
(3,855 |
) |
Interest expense |
|
|
- |
|
|
|
(620 |
) |
|
|
- |
|
|
|
(620 |
) |
Interest and other income |
|
|
11 |
|
|
|
- |
|
|
|
- |
|
|
|
11 |
|
Consolidated net loss |
|
|
(1,123 |
) |
|
|
(3,341 |
) |
|
|
- |
|
|
|
(4,464 |
) |
Total
assets |
|
|
37,360 |
|
|
|
10,517 |
|
|
|
(12,713 |
) |
|
|
35,164 |
|
Finance lease ROU assets |
|
|
- |
|
|
|
28,862 |
|
|
|
|
|
|
|
28,862 |
|
Fixed
assets, net |
|
|
2 |
|
|
|
2,592 |
|
|
|
- |
|
|
|
2,594 |
|
Intangible assets, net |
|
|
1,323 |
|
|
|
- |
|
|
|
- |
|
|
|
1,323 |
|
Amortization of ROU assets |
|
|
- |
|
|
|
415 |
|
|
|
|
|
|
|
415 |
|
Depreciation expense |
|
|
1 |
|
|
|
65 |
|
|
|
- |
|
|
|
66 |
|
Amortization of intangible assets |
|
|
77 |
|
|
|
- |
|
|
|
- |
|
|
|
77 |
|
19. |
Compliance
to Satisfy a Continued Listing Rule or Standard |
On October 16, 2019, the Company received notification from the
NYSE American (the “Exchange”) that the Company was not in
compliance with Section 1003(a)(ii) of the NYSE American Company
Guide (the “Guide”), which applies if a listed company has
stockholders’ equity of less than $4,000,000 and has reported
losses from continuing operations and/or net losses in three of its
four most recent fiscal years, and Section 1003(a)(iii) of the
Guide, which applies if a listed company has stockholders’ equity
of less than $6,000,000 and has reported losses from continuing
operations and/or net losses in its five most recent fiscal years.
On December 9, 2019, the Company received a further notice from the
Exchange that the Company currently was below the Exchange’s
continued listing standards set forth in Section 1003(a)(i) of the
Guide, which applies if a listed company has stockholders’ equity
of less than $2,000,000 and has reported losses from continuing
operations and/or net losses in two of its three most recent fiscal
years. The December 9, 2019 notification from the Exchange also
stated that the Exchange had determined that the Company’s
securities had been selling for a low price per share for a
substantial period of time and pursuant to Section 1003(f)(v) of
the Guide, the Company’s continued listing on the Exchange is
predicated on the Company effecting a reverse stock split or
otherwise demonstrating sustained improvement in its share price
within a reasonable period of time, which the Exchange has
determined to be no later than June 9, 2020. The Exchange notified
the Company on June 9, 2020, that it had regained compliance with
this section of the Exchange’s listing standards.
The Exchange notified the Company on October 1, 2020, that it had
regained compliance with all of the Exchange continued listing
standards set forth in Part 10 of the Guide. Specifically, the
notification stated that we had resolved the continued listing
deficiency with respect to Sections 1003(a)(i), 1003(a)(ii) and
1003(a)(iii) of the Guide by meeting the requirements of the $50
million market capitalization exemption in Section 1003(a) of the
Guide.
The Exchange notifications did not affect the Company’s business
operations or its reporting obligations under the SEC regulations
and rules and did not conflict with or cause an event of default
under any of the Company’s material agreements.
On October 1, 2020, we entered into a master services agreement
with Safi Biosolutions, Inc. ("Safi") to evaluate iBio’s
FastPharming® System for the expression of key
proteins to be used in the bioprocessing of Safi blood cell therapy
products. iBio’s process development, biochemistry and
pharmaceutical development teams plan to engage with Safi to
evaluate options to use iBio’s FastPharming System to generate cGMP
growth factors and cytokines.
In addition, we invested $1.5 million in Safi in the form of a
convertible promissory note (the "Note"). The Note bears interest
at the rate of 5% per annum and is convertible into shares of
Sofi's common stock (as defined). Principal and accrued interest
matures on October 1, 2023.
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
The following information should be read together with the
financial statements and the notes thereto and other information
included elsewhere in this Quarterly Report on Form 10-Q (this
“Report”) and in our Annual Report on Form 10-K for the year ended
June 30, 2020 as amended by a Form 10-K/A filed with the SEC on
October 27, 2020 (the “Annual Report”). Unless the context requires
otherwise, references in this Report to “iBio,” the “Company,”
“we,” “us,” or “our” and similar terms mean iBio, Inc.
Forward-Looking Statements
This Report contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). For this
purpose, any statements contained herein regarding our strategy,
future operations, financial position, future revenues, projected
costs and expenses, prospects, plans and objectives of management,
other than statements of historical facts, are forward-looking
statements. The words “anticipate,” “believe,” “estimate,” “may,”
“plan,” “will,” “would” and similar expressions are intended to
identify forward-looking statements, although not all
forward-looking statements contain these identifying words. Such
statements reflect our current views with respect to future events.
Because these forward-looking statements involve known and unknown
risks and uncertainties, actual results, performance or
achievements could differ materially from those expressed or
implied by these forward-looking statements for a number of
important reasons, including those discussed in this “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” and elsewhere in this Report, as well as in the section
titled “Risk Factors” in the Company’s Annual Report. We cannot
guarantee any future results, levels of activity, performance or
achievements. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this
Report as anticipated, believed, estimated or expected. The
forward-looking statements contained in this Report represent our
estimates as of the date of this Report (unless another date is
indicated) and should not be relied upon as representing our
expectations as of any other date. While we may elect to update
these forward-looking statements, we specifically disclaim any
obligation to do so unless otherwise required by securities
laws.
Overview
We are a biotechnology company and biologics contract development
and manufacturing organization (“CDMO”). We apply our licensed and
owned technologies to develop novel products to fight fibrotic
diseases, cancers, and infectious diseases. We use our
FastPharming® Development and Manufacturing
System (the “FastPharming System”) to increase “speed-to-clinic”
for new candidates. We are also using the FastPharming
System to create proteins and bioinks for research and further
manufacturing uses in a variety of R&D applications, including
3D-bioprinting. In addition, we make the FastPharming System
available to clients on a fee-for-service basis for the rapid,
scalable, eco-friendly production of high-quality proteins.
During the quarter ended September 30, 2020, we operated in two
segments: (i) our CDMO segment, operated via our subsidiary iBio
CDMO, and (ii) our biologics development and licensing activities,
conducted within iBio, Inc. In the past, our primary focus was the
CDMO business, pursuant to which iBio CDMO provided manufacturing
services to collaborators and third-party customers as well as used
for development of our own product candidates. However, during the
second half of 2020 and subsequent to year end, we shifted our
primary focus to our biologics development programs, including new
vaccines and therapeutics.
Our current platforms and programs include: (i) CDMO services using
our licensed and owned FastPharming System and
GlycaneeringTM Services; (ii) the development of
therapeutics, for which we intend to conduct preclinical and
clinical trials; (iii) the development of vaccines, for which we
intend to conduct preclinical and clinical trials, and (iv) the
production of proteins for research and further manufacturing use
in 3D-bioprinting and other applications. We are developing a
portfolio of technologies, products, and services driven by the
following platforms and programs, which we intend to use
individually, and in combination:
|
o |
Process
development and manufacturing of protein products in
hydroponically-grown, transiently-transfected plants, (typically
Nicotiana benthamiana, a relative of the tobacco plant) via
utilization of our proprietary expression technologies,
GlycaneeringTM Services, and production know-how
(the FastPharming System) deployed in our 130,000
square-foot manufacturing facility in Bryan, Texas. |
|
o |
“Factory
Solutions” for the clients who seek to insource biologics
manufacturing using the FastPharming System and instead of
outsourcing production to iBio CDMO. |
|
o |
Treatments
for fibrotic diseases, including a fusion of the endostatin-derived
E4 antifibrotic peptide to the hinge and heavy chain of human IgG1
(“IBIO-100”, formerly described as “CFB-03”) for systemic
scleroderma (for which we have received orphan drug designation),
idiopathic pulmonary fibrosis, and related conditions. |
|
o |
An
ACE2-Fc fusion protein as a treatment for COVID-19 and,
prospectively, other diseases emanating from the Coronaviridae
family, in-licensed from Planet Biotechnology, Inc.
(“Planet”). |
|
o |
A
novel virus-like particle antigen being designed for use in a
vaccine candidate targeting the SARS-CoV-2 virus
(“IBIO-200”). |
|
o |
The
lichenase (“LicKMTM”)-subunit vaccine for
COVID-19 (“IBIO-201”). |
|
o |
An E2
antigen, in combination with a selected adjuvant, for vaccination
of pigs against classical swine fever (“IBIO-400”). |
|
¨ |
Research
& Bioprocess Products |
|
o |
Protein
scaffolds for use as bioinks in the development of 3D-bioprinted
tissues and organs. |
|
o |
Cytokines
and growth factors for cell culture applications. |
|
o |
Biomaterials
for a range of life science research, development, and
bioprocessing applications. |
Recent Developments
On July 29, 2020, we entered into amendment no. 1 to the equity
distribution agreement we entered into on June 17, 2020 (as
amended, the “Equity Distribution Agreement”) with UBS Securities
LLC, as sales agent (the “Sales Agent”), pursuant to which we may
sell from time to time, at our option, shares of our common stock,
par value $0.001 per share (the “common stock”), through the Sales
Agent. The amendment increased by $27,000,000 the dollar amount of
shares of our common stock that may be sold pursuant to the Equity
Distribution Agreement from shares of common stock having an
aggregate gross sale price of $45,000,000 to shares of common stock
having an aggregate gross sale price of $72,000,000. As of the date
of filing of this Report we have sold 30.18 million shares for
gross proceeds of $72.00 million.
On August 28, 2020, we
announced entering into an exclusive worldwide license agreement
with Planet for the development of Planet’s COVID-19 therapeutic
candidate, ACE2-F.
In August 2020, we announced that preclinical immunization studies
with IBIO-200 and IBIO-201, combined with select adjuvants from the
Infectious Disease Research Institute (“IDRI”), induced
anti-SARS-CoV-2 antibodies with notable antibody responses with two
particular antigen-adjuvant combinations. Additional data from
cell-based pseudovirus neutralization assay testing demonstrated
that IBIO-201 induced the production of more anti-spike
neutralizing antibodies than IBIO-200 in immunized mice. Based on
these results, in September 2020, we announced the selection of
IBIO-201 as our lead candidate for the prevention of SARS-CoV-2
infection. We intend to conduct more focused studies on each of
IBIO-200 and IBIO-201 with the goal of advancing IBIO-201 to
toxicology studies ahead of planned clinical development while we
continue preclinical development of IBIO-200 and our VLP platform
as a potential ‘plug-and-play’ vaccine development system.
On October 1, 2020, we entered into a master services agreement
with Safi Biosolutions, Inc. ("Safi") to evaluate iBio’s
FastPharming® System for the expression of key
proteins to be used in the bioprocessing of Safi blood cell therapy
products. iBio’s process development, biochemistry and
pharmaceutical development teams plan to engage with Safi to
evaluate options to use iBio’s FastPharming System to generate cGMP
growth factors and cytokines. In addition, we invested $1.5 million
in Safi in the form of a convertible promissory note (the "Note").
The Note bears interest at the rate of 5% per annum and is
convertible into shares of Sofi's common stock (as defined).
Principal and accrued interest matures on October 1, 2023.
Results of Operations - Comparison of Three Months ended
September 30, 2020 and September 30, 2019
Revenue
Gross revenues for the three months ended September 30, 2020 and
the three months ended September 30, 2019 were approximately
$410,000 and $108,000, respectively, an increase of approximately
$302,000. The increase is primarily attributable to the completion
of specific deliverables for Corteva Agriscience (SOW1 – signed
July 2019) and AzarGen Biotechnologies (SOW2 - signed February
2020).
Research and Development Expenses (“R&D”)
Research and development expenses for the three months ended
September 30, 2020 and September 30, 2019 were $1,762,000 and
$977,000, respectively, an increase of approximately $785,000. The
increase is primarily attributable to an increase in laboratory
consumables and supplies of approximately $750,000 and an increase
in research and development personnel costs (including new hires
and temporary help) of approximately $134,000 at iBio CDMO offset
by reduced payments to Novici of approximately $97,000 whom the
Company was previously using for lab feasibility studies.
General and Administrative Expenses (“G&A”)
General and administrative expenses for the three months ended
September 30, 2020 and September 30, 2019 were approximately
$5,572,000 and $2,986,000, respectively, an increase of $2,586,000.
General and administrative expenses principally include officer and
employee salaries and benefits, depreciation and amortization,
professional fees, facility repairs and maintenance, rent,
utilities, consulting services, and other costs associated with
being a publicly traded company. The increase resulted primarily
from increases in professional and consulting fees including
recruiting of approximately $2,000,000, facility repairs and
maintenance of approximately $331,000, board of director fees of
approximately $150,000 and an increase in personnel costs of
approximately $77,000.
Total operating expenses,
consisting primarily of R&D and G&A expenses, for the
fiscal quarter ended September 30, 2020 were approximately $7.3
million, compared with approximately $4.0 million in the same
period of 2019.
Other Income (Expense)
Other
income (expense) for the three months ended September 30, 2020 and
September 30, 2019 was approximately ($610,000) and
($609,000), respectively.
As discussed above, iBio CDMO’s operations take place in a facility
in Bryan, Texas under a 34-year lease (the "Sublease") with the
second affiliate of another affiliate of Eastern Capital Limited
(“Eastern”), a stockholder of the Company (the “Second Eastern
Affiliate”). Such Sublease is accounted for as a finance lease. For
the three months ended September 30, 2020, other income (expense)
included interest expense of approximately $614,000 incurred under
the finance lease offset by interest income of approximately
$4,000. For the three months ended September 30, 2019, other income
(expense) included interest expense of approximately $620,000
incurred under the finance lease offset by interest and royalty
income of approximately $11,000.
Net Loss Attributable to Noncontrolling Interest
This represents the share of the loss in iBio CDMO for an affiliate
of Eastern (the “Eastern Affiliate”) for the three months ended
September 30, 2020 and the three months ended September 30,
2019.
Net Loss Attributable to iBio, Inc.
Net loss attributable to iBio
Inc. for the fiscal quarter ended September 30, 2020 was
approximately $7.5 million, or $0.05 per share, compared with a net
loss of approximately $4.5 million, or $0.21 per share, in the same
period of 2019.
Liquidity and Capital Resources
As of September 30, 2020, we had cash and cash equivalents plus
debt securities of approximately $83.6 million as compared to $55.1
million as of June 30, 2020. We believe that our current cash will
be sufficient to support our current operations through fiscal year
2022.
The following equity transactions occurred during the year ended
June 30, 2020 and subsequent thereto
|
1. |
On October
29, 2019, we closed on an underwritten public offering with total
net proceeds of $4.5 million after deducting underwriting
discounts, commissions and other offering expenses payable by
us. |
|
2. |
On March 19,
2020, we entered into a common stock purchase agreement (the
“Lincoln Park March 2020 Purchase Agreement”) with Lincoln Park
Capital Fund, LLC (“Lincoln Park”), an Illinois limited liability
company, pursuant to which Lincoln Park agreed to purchase from the
Company up to an aggregate of $50,000,000 of common stock (subject
to certain limitations) from time to time over the 36-month term of
the agreement. We terminated the Lincoln Park March 2020 Purchase
Agreement effective July 27, 2020. For the period from
March 19, 2020 through July 27, 2020, Lincoln Park acquired 19.47
million shares of our common stock for gross proceeds of
approximately $25.23 million. |
|
3. |
During the
fiscal year ended June 30, 2020, we received proceeds of $6.3
million from the exercise of various warrants. |
|
4. |
On May 13,
2020, we entered into a purchase agreement (the “Lincoln Park May
2020 Purchase Agreement”), pursuant to which we sold to Lincoln
Park and Lincoln Park purchased 1,000,000 shares of the our common
stock at a price of $1.09 per share for an aggregate purchase price
of $1.1 million. |
|
5. |
On June 17, 2020 as amended on July 29, 2020, we entered into an
equity distribution agreement (the “UBS Equity Distribution
Agreement”) with UBS Securities, LLC ("UBS") as sales agent
pursuant to which we may sell from time to time shares of our
common stock through UBS, for the sale of up to $72,000,000 of
shares of common stock the. As of the date of the filing of this
Report, we have issued 30.18 million shares of common stock for net
proceeds of approximately $68.97 million.
|
Net Cash Used in Operating Activities
Net cash used in operating activities was approximately $7,070,000
for the three months ended September 30, 2020 as compared to
approximately $2,287,000 for the three months ended September 30,
2019. The decrease in cash was attributable to funding our net loss
for the period.
Net Cash Used in Investing Activities
Net cash used in investing activities was approximately $6,600,000
for the three months ended September 30, 2020 as compared to
approximately $30,000 for the three months ended September 30,
2019. Cash used in investing activities was attributable primarily
to the acquisition of debt securities of $6,016,000, and to a
lesser extent additions of intangible assets of $164,000 and fixed
assets attributable to iBio CDMO of $419,000.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was approximately
$36,101,000 for the three months ended September 30, 2020 as
compared to no financing activities for the three months ended
September 30, 2019. The financing activities for the three months
ended September 30, 2020 included (1) the net proceeds from the UBS
Equity Distribution Agreement including the subscription
receivable; and (2) the net proceeds from the Lincoln Park March
2020 Purchase Agreement net of the payments under the finance lease
obligation.
Funding Requirements
We have incurred significant losses and negative cash flows from
operations since our spin-off from Integrated BioPharma in August
2008. As of September 30, 2020, our accumulated deficit was
approximately $158.0 million, and we used approximately $7.1
million of cash for operating activities during the three months
ended September 30, 2020.
In the past, the history of significant losses, the negative cash
flow from operations, the limited cash resources and the dependence
by us on our ability – about which there is no certainty – to
obtain additional financing to fund our operations after the
current cash resources are exhausted raised substantial doubt about
our ability to continue as a going concern. Based on the total cash
and cash equivalents plus debt securities of approximately $83.6
million as of September 30, 2020, we believe we have adequate cash
to support our activities through Fiscal 2022.
We plan to fund our future business operations using cash, through
proceeds realized in connection with the commercialization of our
technologies and proprietary products, license and collaboration
arrangements and the operation of iBio CDMO, and through proceeds
from the sale of additional equity or other securities. Although we
have been successful in raising capital during the past year, we
cannot be certain that such funding will be available in the future
on favorable terms or at all. To the extent that we raise
additional funds by issuing equity securities, our stockholders may
experience significant dilution. If we are unable to raise funds
when required or on favorable terms, this assumption may no longer
be operative, and we may have to: a) significantly delay, scale
back, or discontinue the product application and/or
commercialization of our proprietary technologies; b) seek
collaborators for our technology and product candidates on terms
that are less favorable than might otherwise be available; c)
relinquish or otherwise dispose of rights to technologies, product
candidates, or products that we would otherwise seek to develop or
commercialize; or d) possibly cease operations.
Off-Balance Sheet Arrangements
As part of our ongoing business, we do not participate in
transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred
to as structured finance or special purpose entities (SPEs), which
would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually limited
purposes. As of September 30, 2020, we were not involved in any SPE
transactions.
Critical Accounting Policies and Estimates
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.
Our condensed consolidated financial statements are presented in
accordance with U.S. GAAP, and all applicable U.S. GAAP accounting
standards effective as of September 30, 2020 have been taken into
consideration in preparing the condensed consolidated financial
statements. The preparation of condensed consolidated financial
statements requires estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues, 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
our condensed consolidated financial statements:
|
· |
Valuation
of intellectual property; |
|
|
|
|
· |
Revenue
recognition; |
|
|
|
|
· |
Lease
accounting; |
|
|
|
|
· |
Legal
and contractual contingencies; |
|
|
|
|
· |
Research
and development expenses; and |
|
|
|
|
· |
Share-based
compensation expenses. |
We base our estimates, to the extent possible, on historical
experience. Historical information is modified as appropriate based
on current business factors and various assumptions that we believe
are necessary to form a basis for making judgments about the
carrying value of assets and liabilities. We evaluate our estimates
on an on-going basis and make changes when necessary. Actual
results could differ from our estimates.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk.
As a smaller reporting company we are not required to provide the
information required by this Item 3.
Item 4. Controls and
Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, under the direction of our Chief Executive Officer
(our Principal Executive Officer) and Principal Financial Officer /
Principal Accounting Officer evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act as of September 30, 2020. The
term “disclosure controls and procedures,” as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means
controls and other procedures of a company that are designed to
ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the Company’s management,
including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. The Company’s
disclosure controls and procedures are also designed to ensure that
such information is accumulated and communicated to management 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. During the course of the prior year audit,
we identified a material weakness in our controls
relating to the sales of common stock that were recorded on the
settlement date rather than the trade date basis which resulted
from ineffective review for compliance with US GAAP and that was
not detected on a timely basis and concluded that our disclosure
controls and procedures were not effective as of June 30, 2020. In
light of the material weakness, management performed additional
procedures to validate the accuracy and completeness of the
financial results impacted by the control deficiency. Such
procedures included the review of share purchase agreements, share
purchase confirmations, transfer agent reports, and detailed
testing. Based on our evaluation of our disclosure controls and
procedures as of the end of the period covered by this Report, and
the performance and implementation of additional and more timely
procedures for certain internal controls related to the recording
and reconciliation of transactions, our Chief Executive Officer
(our Principal Executive Officer) and Principal Financial Officer /
Principal Accounting Officer have concluded that the material
weakness was remediated and our disclosure controls and procedures
were effective at a level that provides reasonable assurance
as of the last day of the period covered by this Report.
Changes in Internal Control over Financial Reporting
As previously disclosed in “Item 9A-- Internal Controls Over
Financial Reporting” in the Company’s Annual Report on Form 10-K
for the year ended June 30, 2020, Management concluded that our
internal control over financial reporting was not effective as
our controls over the recording of common stock sales did not
operate effectively. We failed to properly apply generally accepted
accounting principles (GAAP) and record common stock sales timely
during the quarters ended March and June 2020. This matter was
identified by our independent registered public accounting firm,
CohnReznick LLP and the common stock sales were corrected by
management during the quarter ended June 30, 2020. Management
subsequently investigated all other stock trade transactions during
fiscal year 2020. Management found the same material weakness
concerning stock transactions in the quarter ended March 2020.
We have remediated this material weakness by the retention of
consultants that have extensive knowledge of generally accepted
accounting principles and performing additional and more timely
procedures for certain internal controls related to the recording
and reconciliation of transactions and have concluded that the
disclosure controls were effective as of September 30, 2020.
There were no other changes in our internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act, during the quarter ended September 30, 2020
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Lawsuits
On March 17, 2015, the Company filed a Verified Complaint in the
Court of Chancery of the State of Delaware against Fraunhofer and
Vidadi Yusibov (“Yusibov”), Fraunhofer Center for Molecular
Biology’s Executive Director, seeking monetary damages and
equitable relief based on Fraunhofer’s material and continuing
breaches of its contracts with the Company. On September 16, 2015,
the Company voluntarily dismissed its action against Yusibov,
without prejudice, and thereafter on September 29, 2015, the
Company filed a Verified Amended Complaint against Fraunhofer
alleging material breaches of its agreements with the Company and
seeking monetary damages and equitable relief against Fraunhofer.
The Court bifurcated the action to first resolve the threshold
question in the case–the scope of iBio’s ownership of the
technology developed or held by Fraunhofer–before proceeding with
the rest of the case and the parties stipulated their agreement to
that approach. After considering the parties’ written submissions
and oral argument, the Court resolved the threshold issue in favor
of iBio on July 29, 2016, holding that iBio owns all proprietary
rights of any kind to all plant-based technology of Fraunhofer
developed or held as of December 31, 2014, including know-how, and
was entitled to receive a technology transfer from Fraunhofer.
Fraunhofer’s motion to dismiss iBio’s contract claims was denied by
the Court on February 24, 2017. The Court at that time also
granted, over Fraunhofer’s opposition, iBio’s motion to supplement
and amend the Complaint to add additional state law claims against
Fraunhofer. Fraunhofer filed an answer and counterclaims in March
2017, but in May 2017, Fraunhofer obtained new counsel, and with
iBio’s agreement (as a matter of procedure), filed an amended
answer and amended counterclaims in July 2017. The Company
replied to those counterclaims on August 9, 2017. In November 2017,
the Company engaged new counsel to further lead its litigation
efforts, and on November 3, 2017, the Company filed a separate
Verified Complaint in the Court of Chancery of the State of
Delaware against Fraunhofer-Gesellschaft, the European unit of
Fraunhofer (the “Second Complaint”). The Second Complaint follows
iBio’s pending litigation filed in March 2015, described above,
against Fraunhofer USA, Inc., the U.S. unit of Fraunhofer. On
December 10, 2018, the Delaware Chancery Court dismissed the Second
Complaint filed against Fraunhofer-Gesellschaft, the European unit
of Fraunhofer, as untimely filed. The dismissal of the Second
Complaint has no effect on the action against the U.S. unit of
Fraunhofer.
The case against Fraunhofer has proceeded and fact and expert
discovery has now closed.
Fraunhofer filed a motion for summary judgment in November 2019
arguing that the Company’s claims should be dismissed as preempted
or duplicative, and that certain claims should be time barred.
Briefing was completed in January 2020, and a hearing on
Fraunhofer’s motion was held on June 11, 2020. On September 25,
2020, the Court granted in part and denied in part Fraunhofer’s
motion for summary judgment. The Court granted Fraunhofer’s motion
for summary judgment as to iBio’s fraud, conversion, constructive
trust, partial rescission, and unjust enrichment claims. The Court
denied Fraunhofer’s motion for summary judgment as to iBio’s
declaratory judgment, breach of contract, misappropriation of trade
secrets, tortious interference, and deceptive trade practices
claims, and ruled that those claims could proceed to trial.
On January 6, 2020, the Company filed a motion in the Court of
Chancery of the State of Delaware to initiate new litigation
against Fraunhofer-Gesellschaft through an amendment to its
Verified Amended Complaint. The motion asserts that new evidence
reveals that Fraunhofer-Gesellschaft exercised complete dominion
and control over its US subsidiary to wrongfully access and direct
use of iBio’s intellectual property on many occasions with new and
different third parties. The Court denied the Company’s motion for
leave to amend at a hearing on June 11, 2020, without prejudice and
with leave to refile the complaint at a later date.
The case is set for trial on March 1 to 5, 2021. The Company is
unable to predict the further outcome of this action at this
time.
Item 1A. Risk Factors
Our business is subject to
risks and events that, if they occur, could adversely affect our
financial condition and results of operations and the trading price
of our securities. The following
information updates, and should be read in conjunction with, the
information disclosed in Part I, Item 1A, “Risk
Factors,” contained in the Annual Report. Except as
described below, our risk factors as of the date of this Report
have not changed materially from those described in “Part I, Item
1A. Risk Factors” of our Annual Report.
Risks Related to Dependence on Customer
Concentration
If revenue from a third-party customer or client is
concentrated in an amount that makes up a significant percentage of
our total revenues, we may be adversely impacted by the significant
dependence upon that client, including but not limited to, receipt
and collections of outstanding amounts, continued operational
allocations toward the client and related efficiencies, capacity
and opportunity costs.
During the three months ended
September 30, 2020 we generated 100% of our revenue solely from two
customers, Corteva Agriscience accounted for 50.5% of revenue and
AzarGen Biotechnologies accounted for 49.5% of revenue. During the
three months ended September 30, 2019 we generated 100% of our
revenue from only three customers, CC-Pharming accounted for 43.7%
of revenue, Lung Biotechnology accounted for 42.2% of revenue and
Corteva Agriscience accounted for 14.1% of revenue.
Although we plan to continue
to expand our client base for our CDMO services while also
diversifying our revenue streams with new products, our efforts may
be delayed or unsuccessful.
Risks Related to Our Financial Position and Need for Additional
Capital
We have incurred significant losses since our inception. We
expect to incur losses during our next fiscal year and may never
achieve or maintain profitability.
Since our 2008 spinoff from Integrated BioPharma, we have incurred
operating losses and negative cash flows from operations. Our net
loss was approximately $7.5 million for the three months ended
September 30, 2020 and $4.5 million for the three months ended
September 30, 2019. As of September 30, 2020, we had an accumulated
deficit of approximately $158.0 million.
To date, we have financed our operations primarily through the sale
of common stock, preferred stock and warrants. We have devoted
substantially all of our efforts to research and development,
including the development and validation of our technologies, our
CDMO facilities, and the development of a proprietary therapeutic
product against fibrosis and COVID-19 vaccines based upon our
technologies. We have not completed development of or
commercialized any vaccine or therapeutic product candidates. We
expect to continue to incur significant expenses and may incur
operating losses for at least the next year. We anticipate that our
expenses and losses will increase substantially if we:
|
· |
initiate clinical
trials of our product candidates; |
|
· |
continue the research
and development of our product candidates; |
|
· |
seek to discover
additional product candidates; and |
|
· |
add operational,
financial and management information systems and personnel,
including personnel to support our product development and
manufacturing efforts. |
To become and remain profitable, we must succeed in attracting and
maintaining customers for the development, manufacturing and
technology transfer services offered by iBio CDMO, or acquire
customers for our new Research & Bioprocess Products presently
in development. Our profitability in large part depends on the
spending on iBio CDMO’s services by its customers and potential
customers and our ability to successfully develop and commercialize
our product candidates. In addition, our profitability will also
depend on continuing to commercialize our technologies or we, alone
or with our licensees, must succeed in developing and eventually
commercializing products that generate significant revenue. This
will require us, alone or with our licensees and collaborators, to
be successful in a range of challenging activities, including
completing preclinical testing and clinical trials of our product
candidates, obtaining regulatory approval for these product
candidates and manufacturing, marketing and selling those products
for which regulatory approval is obtained or establishing
collaborations with parties willing and able to provide necessary
capital or other value. We may never succeed in these activities.
We may never generate revenues that are significant or large enough
to achieve profitability.
Even if we do achieve profitability, we may not be able to sustain
or increase profitability on a quarterly or annual basis. Our
failure to become and remain profitable would diminish the value of
our company and could impair our ability to raise capital, expand
our business, diversify our product offerings or continue our
operations. A decline in the value of our company could also cause
you to lose all or part of your investment.
Risks Relating to Our Common Stock
The sale of our common stock through current or future equity
offerings may cause dilution and could cause the price of our
common stock to decline.
We are entitled under our certificate of incorporation, as amended,
to issue up to 275,000,000 shares of our common stock and 1,000,000
shares of preferred stock. At our 2020 annual meeting of
stockholders, we are seeking stockholder approval of an amendment
to our certificate of incorporation to increase our authorized
common stock to 425,000,000.
On June 26, 2018, we closed an underwritten public offering with
total gross proceeds of approximately $16,000,000, before deducting
underwriting discounts, commissions and other offering expenses
payable by us. The securities offered by us consisted of (i)
4,350,000 shares of common stock at $0.90 per share, (ii) 6,300
shares of Series A Convertible Preferred Stock, with a stated value
of $1,000 per preferred share, and convertible into an aggregate of
7,000,000 shares of common stock at $0.90 per share, (iii) 5,785
shares of Series B Convertible Preferred Stock, with a stated value
of $1,000 per preferred share, and convertible into an aggregate of
6,427,778 shares of common stock at $0.90 per share. We granted the
underwriters Alliance Global Partners, a 45-day option to purchase
up to an additional 2,666,666 shares of common stock to cover
over-allotments, if any. On July 12, 2018, we received
approximately $1,350,000, before deducting underwriting discounts,
commissions and other offering expenses payable by us, from the
proceeds of the sale of 1,500,000 over-allotment shares of common
stock purchased at $0.90 by the underwriter during the 45-day
provision.
On October 29, 2019, we closed a public offering of (i) 2,450,000
shares of our common stock, (ii) 4,510 shares of our Series C
Convertible Preferred Stock, (iii) 25,000,000 Series A warrants to
purchase shares of our common stock and (iv) 25,000,000 Series B
warrants to purchase shares of our common stock. The net proceeds
to us from the sale of these securities was approximately $4.5
million after deducting underwriting discounts and commissions and
other offering expenses payable by the Company.
As of the date of the filing of this Report, we issued and sold an aggregate of (i)
30,184,399 shares of our common stock for net proceeds of
$68,967,559 pursuant to the equity distribution agreement with UBS
Securities, (ii) 19,473,013 shares of our common stock for net
proceeds of $25,228,437 pursuant to the Lincoln Park March 2020
Purchase Agreement and 815,827 shares of our common stock as a
commitment fee to Lincoln Park, and (iii) 1,000,000 shares of our
common stock for net proceeds of $1,090,000 in our offering in May
2020 with Lincoln Park.
As of the date of the filing of this Report, we had issued and
outstanding approximately 182.1 million shares of common stock and
one share of iBio CMO Preferred Tracking Stock. As of November 16,
2020, 3.83 million options and restricted stock units to purchase
shares of common stock were outstanding and we had
approximately 2.67 million shares of common stock reserved
for future issuance of additional option and restricted stock unit
grants under our 2018 Omnibus Equity Incentive Plan, as
amended.
Accordingly, we will be able to issue up to approximately 33.4
million additional shares of common stock and 999,999 shares of
preferred stock based on our current authorized number of shares of
common stock. Sales of our common stock offered through current or
future equity offerings may result in substantial dilution to our
stockholders. The sale of a substantial number of shares of our
common stock to investors, or anticipation of such sales, could
make it more difficult for us to sell equity or equity-related
securities in the future at a time and at a price that we might
otherwise wish to effect sales.
Item 5. Other
Information.
On November 13, 2020, our Board of Directors adopted resolutions
(the “Resolutions”) ratifying the issuance of certain options (the
“Issuance”) to purchase common stock granted to employees pursuant
to Section 204 of the General Corporation Law of the State of
Delaware (the “Ratification”) after determining that the Issuance
was a defective corporate act as it was in contravention of the
requirements of Section 157(c) of the General Corporation Law of
the State of Delaware. A copy of the Resolutions adopted by the
Board setting forth the information with respect to the
Ratification required under Section 204 of the General Corporation
Law of the State of Delaware is attached hereto as Exhibit
99.1. Any claim that the defective corporate acts
(including all putative options) identified in the Resolutions are
void or voidable due to the failure of authorization, or any claim
that the Court of Chancery of the State of Delaware should declare
in its discretion that the ratifications not be effective or be
effective only on certain conditions, must be brought within 120
days from the date of the filing of this Report with the
SEC.
Item 6. Exhibits.
Exhibit
No. |
|
Description |
|
1.1 |
|
Amendment No. 1 to
Equity Distribution Agreement, dated July 29, 2020, by and between
iBio, Inc. and UBS Securities LLC (Incorporated herein by reference
to Exhibit 1.1 to the Current Report on Form 8-K, filed with the
Securities and Exchange Commission on July 29,
2020) |
3.1 |
|
Certificate of
Incorporation of iBio, Inc., Certificate of Merger, Certificate of
Ownership and Merger, Certificate of Amendment of the Certificate
of Incorporation (incorporated herein by reference to Exhibit 3.1
to the Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on May 11, 2018 - File No.
001-35023) |
3.2 |
|
Certificate of Amendment
of the Certificate of Incorporation of iBio, Inc. (incorporated
herein by reference to Exhibit 3.2 to the Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on February
14, 2018 - File No. 001-35023) |
3.3 |
|
Certificate of Amendment
of the Certificate of Incorporation of iBio, Inc. (incorporated
herein by reference to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on June 8, 2018 -
File No. 001-35023) |
3.4 |
|
First Amended and
Restated Bylaws of iBio, Inc. (incorporated herein by reference to
Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 14, 2009 - File
No. 000-53125) |
31.1 |
|
Certification of
Periodic Report by Chief Executive Officer Pursuant to Rule 13a-14
and 15d-14 of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
* |
31.2 |
|
Certification of
Periodic Report by Principal Financial Officer Pursuant to Rule
13a-14 and 15d-14 of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
* |
32.1 |
|
Certification of
Periodic Report by Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 * |
32.2 |
|
Certification of Periodic Report by
Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
* |
99.1 |
|
Resolutions adopted by the Board of
Directors Ratifying Option Grants*
|
101.INS |
|
XBRL
Instance* |
101.SCH |
|
XBRL
Taxonomy Extension Schema* |
101.CAL |
|
XBRL
Taxonomy Extension Calculation* |
101.DEF |
|
XBRL
Taxonomy Extension Definition* |
101.LAB |
|
XBRL
Taxonomy Extension Labeled* |
101.PRE |
|
XBRL
Taxonomy Extension Presentation* |
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.
|
iBio, Inc. |
|
(Registrant) |
|
|
Date: November
16, 2020 |
/s/ Thomas
F. Isett 3rd |
|
Thomas F. Isett
3rd |
|
Chairman and Chief
Executive Officer
Principal Executive
Officer
|
|
|
Date: November
16, 2020 |
/s/ John
Delta |
|
John Delta |
|
Principal Accounting
Officer |
|
(Principal Financial
Officer and Principal Accounting Officer) |
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