Item 1. Financial Statements.
iBio, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands, except share and per share
amounts)
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
|
|
(Unaudited)
|
|
|
(See Note 2)
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
91,252
|
|
|
$
|
55,112
|
|
Accounts receivable – trade
|
|
|
180
|
|
|
|
75
|
|
Accounts receivable – other
|
|
|
52
|
|
|
|
-
|
|
Subscription receivable
|
|
|
-
|
|
|
|
5,549
|
|
Investments in debt securities
|
|
|
16,395
|
|
|
|
-
|
|
Work in process
|
|
|
1,071
|
|
|
|
798
|
|
Prepaid expenses and other current assets
|
|
|
1,932
|
|
|
|
214
|
|
Total Current Assets
|
|
|
110,882
|
|
|
|
61,748
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory note receivable and accrued interest
|
|
|
1,519
|
|
|
|
-
|
|
Finance lease right-of-use assets, net of accumulated amortization
|
|
|
26,786
|
|
|
|
27,616
|
|
Fixed assets, net of accumulated depreciation
|
|
|
5,010
|
|
|
|
3,657
|
|
Intangible assets, net of accumulated amortization
|
|
|
1,185
|
|
|
|
1,144
|
|
Security deposit
|
|
|
24
|
|
|
|
24
|
|
Total Assets
|
|
$
|
145,406
|
|
|
$
|
94,189
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable (related parties of $94 and $6 as of December 31, 2020 and June 30, 2020, respectively)
|
|
$
|
2,409
|
|
|
$
|
1,759
|
|
Accrued expenses (related party of $703 and $705 as of December 31, 2020 and June 30, 2020, respectively)
|
|
|
1,683
|
|
|
|
1,105
|
|
Finance lease obligation – current portion
|
|
|
312
|
|
|
|
301
|
|
Note payable – PPP loan– current portion
|
|
|
465
|
|
|
|
261
|
|
Contract liabilities
|
|
|
1,233
|
|
|
|
1,810
|
|
Total Current Liabilities
|
|
|
6,102
|
|
|
|
5,236
|
|
|
|
|
|
|
|
|
|
|
Note payable – PPP Loan – net of current portion
|
|
|
135
|
|
|
|
339
|
|
Finance lease obligation – net of current portion
|
|
|
31,848
|
|
|
|
32,007
|
|
Total Liabilities
|
|
|
38,085
|
|
|
|
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 December 31, 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 December 31, 2020 and June 30, 2020
|
|
|
-
|
|
|
|
-
|
|
Common stock - $0.001 par value; 275,000,000 and 275,000,000 shares authorized at December 31, 2020 and June 30, 2020, respectively; 211,769,103 and 140,071,110 shares issued and outstanding as of December 31, 2020 and June 30, 2020, respectively
|
|
|
212
|
|
|
|
140
|
|
Additional paid-in capital
|
|
|
273,258
|
|
|
|
206,931
|
|
Accumulated other comprehensive loss
|
|
|
(53
|
)
|
|
|
(33
|
)
|
Accumulated deficit
|
|
|
(166,082
|
)
|
|
|
(150,420
|
)
|
Total iBio, Inc. Stockholders’ Equity
|
|
|
107,335
|
|
|
|
56,618
|
|
Noncontrolling interest
|
|
|
(14
|
)
|
|
|
(11
|
)
|
Total Equity
|
|
|
107,321
|
|
|
|
56,607
|
|
Total Liabilities and Equity
|
|
$
|
145,406
|
|
|
$
|
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
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
$
|
705
|
|
|
$
|
314
|
|
|
$
|
1,115
|
|
|
$
|
422
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development (related party of $0, $0, $0 and $97)
|
|
|
2,444
|
|
|
|
888
|
|
|
|
4,206
|
|
|
|
1,865
|
|
General and administrative (related party of $510, $304, $903 and $572)
|
|
|
5,806
|
|
|
|
2,581
|
|
|
|
11,378
|
|
|
|
5,567
|
|
Total operating expenses
|
|
|
8,250
|
|
|
|
3,469
|
|
|
|
15,584
|
|
|
|
7,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(7,545
|
)
|
|
|
(3,155
|
)
|
|
|
(14,469
|
)
|
|
|
(7,010
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (related party of $612, $615, $1,226 and $1,235)
|
|
|
(615
|
)
|
|
|
(615
|
)
|
|
|
(1,229
|
)
|
|
|
(1,235
|
)
|
Interest income
|
|
|
27
|
|
|
|
4
|
|
|
|
31
|
|
|
|
8
|
|
Royalty income
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(586
|
)
|
|
|
(609
|
)
|
|
|
(1,196
|
)
|
|
|
(1,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(8,131
|
)
|
|
|
(3,764
|
)
|
|
|
(15,665
|
)
|
|
|
(8,228
|
)
|
Net loss attributable to noncontrolling interest
|
|
|
2
|
|
|
|
2
|
|
|
|
3
|
|
|
|
3
|
|
Net loss attributable to iBio, Inc.
|
|
|
(8,129
|
)
|
|
|
(3,762
|
)
|
|
|
(15,662
|
)
|
|
|
(8,225
|
)
|
Preferred stock dividends – iBio CMO Tracking Stock
|
|
|
(65
|
)
|
|
|
(65
|
)
|
|
|
(131
|
)
|
|
|
(131
|
)
|
Deemed dividends – down round of Series A Preferred and
Series B Preferred
|
|
|
-
|
|
|
|
(21,560
|
)
|
|
|
-
|
|
|
|
(21,560
|
)
|
Net loss available to iBio, Inc. stockholders
|
|
$
|
(8,194
|
)
|
|
$
|
(25,387
|
)
|
|
$
|
(15,793
|
)
|
|
$
|
(29,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
$
|
(8,131
|
)
|
|
$
|
(3,764
|
)
|
|
$
|
(15,665
|
)
|
|
$
|
(8,228
|
)
|
Other comprehensive loss – unrealized loss on debt securities
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
(20
|
)
|
|
|
-
|
|
Other comprehensive loss – foreign currency translation
adjustments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(8,144
|
)
|
|
$
|
(3,764
|
)
|
|
$
|
(15,685
|
)
|
|
$
|
(8,229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share attributable to iBio, Inc. stockholders - basic and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.69
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(1.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic and diluted
|
|
|
188,087
|
|
|
|
36,917
|
|
|
|
175,264
|
|
|
|
29,420
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
iBio, Inc. and Subsidiaries
Condensed Consolidated Statements of
Equity (Deficiency)
(Unaudited; in thousands)
Six Months Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,533
|
)
|
|
|
(1
|
)
|
|
|
(7,534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
180,318
|
|
|
|
180
|
|
|
|
237,867
|
|
|
|
(40
|
)
|
|
|
(157,953
|
)
|
|
|
(12
|
)
|
|
|
80,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital raises
|
|
|
-
|
|
|
|
-
|
|
|
|
31,451
|
|
|
|
32
|
|
|
|
38,243
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs to raise capital
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,117
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
265
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on debt securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,129
|
)
|
|
|
(2
|
)
|
|
|
(8,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
211,769
|
|
|
$
|
212
|
|
|
$
|
273,258
|
|
|
$
|
(53
|
)
|
|
$
|
(166,082
|
)
|
|
$
|
(14
|
)
|
|
$
|
107,321
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
iBio, Inc. and Subsidiaries
Condensed Consolidated Statements of
Equity (Deficiency)
(Unaudited; in
thousands)
Six Months Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital raise
|
|
|
5
|
|
|
|
-
|
|
|
|
2,450
|
|
|
|
2
|
|
|
|
4,513
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost to raise capital
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(60
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation shares
|
|
|
-
|
|
|
|
-
|
|
|
|
500
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
3,140
|
|
|
|
3
|
|
|
|
688
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed dividends – down round of Series A and Series B Preferred
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,560
|
|
|
|
-
|
|
|
|
(21,560
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of preferred stock to common stock
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
24,325
|
|
|
|
25
|
|
|
|
(25
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,762
|
)
|
|
|
(2
|
)
|
|
|
(3,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
|
|
6
|
|
|
$
|
-
|
|
|
|
54,567
|
|
|
$
|
55
|
|
|
$
|
135,071
|
|
|
$
|
(31
|
)
|
|
$
|
(135,606
|
)
|
|
$
|
(9
|
)
|
|
$
|
(520
|
)
|
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)
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
$
|
(15,665
|
)
|
|
$
|
(8,228
|
)
|
Adjustments to reconcile consolidated net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
616
|
|
|
|
105
|
|
Amortization of intangible assets
|
|
|
145
|
|
|
|
153
|
|
Amortization of finance lease right-of-use assets
|
|
|
830
|
|
|
|
830
|
|
Depreciation of fixed assets
|
|
|
211
|
|
|
|
137
|
|
Accrued interest receivable on convertible promissory note receivable
|
|
|
(19
|
)
|
|
|
-
|
|
Amortization of premiums on debt securities
|
|
|
50
|
|
|
|
-
|
|
Reserve for loss on contract
|
|
|
497
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable – trade
|
|
|
(104
|
)
|
|
|
(127
|
)
|
Accounts receivable – other
|
|
|
(52
|
)
|
|
|
-
|
|
Work in process
|
|
|
(273
|
)
|
|
|
-
|
|
Prepaid expenses and other current assets
|
|
|
(1,720
|
)
|
|
|
144
|
|
Accounts payable
|
|
|
491
|
|
|
|
(549
|
)
|
Accrued expenses
|
|
|
81
|
|
|
|
88
|
|
Contract liabilities
|
|
|
(577
|
)
|
|
|
1,755
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(15,489
|
)
|
|
|
(5,692
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of debt securities
|
|
|
(16,466
|
)
|
|
|
-
|
|
Issuance of convertible promissory note receivable
|
|
|
(1,500
|
)
|
|
|
-
|
|
Additions to intangible assets
|
|
|
(177
|
)
|
|
|
(36
|
)
|
Purchases of fixed assets
|
|
|
(1,413
|
)
|
|
|
(202
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(19,556
|
)
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from sales of preferred and common stock
|
|
|
70,397
|
|
|
|
4,515
|
|
Proceeds from subscription receivable
|
|
|
5,549
|
|
|
|
-
|
|
Proceeds from exercise of stock option
|
|
|
28
|
|
|
|
-
|
|
Proceeds from exercise of warrants
|
|
|
-
|
|
|
|
691
|
|
Costs to raise capital
|
|
|
(4,642
|
)
|
|
|
(60
|
)
|
Payment of finance lease obligation
|
|
|
(147
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
71,185
|
|
|
|
5,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
36,140
|
|
|
|
(784
|
)
|
Cash - beginning of period
|
|
|
55,112
|
|
|
|
4,421
|
|
Cash - end of period
|
|
$
|
91,252
|
|
|
$
|
3,637
|
|
|
|
|
|
|
|
|
|
|
Schedule of non-cash activities:
|
|
|
|
|
|
|
|
|
Unpaid fixed assets included in accounts payable
|
|
$
|
419
|
|
|
$
|
-
|
|
Conversion of preferred stock into common stock
|
|
$
|
29
|
|
|
$
|
25
|
|
Unpaid intangible assets included in accounts payable
|
|
$
|
9
|
|
|
$
|
-
|
|
Unrealized loss on available-for-sale debt securities
|
|
$
|
20
|
|
|
$
|
-
|
|
Deemed dividend
|
|
$
|
-
|
|
|
$
|
21,560
|
|
Increase in ROU assets under ASC 842
|
|
$
|
-
|
|
|
$
|
7,489
|
|
Intangible assets included in accounts payable in prior period, paid in current period
|
|
$
|
-
|
|
|
$
|
8
|
|
Compensation shares
|
|
$
|
-
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
1,228
|
|
|
$
|
1,089
|
|
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”). The Company applies its licensed and owned technologies to develop novel products
to fight fibrotic diseases, cancers, and infectious diseases. The Company uses its FastPharming® Development
and Manufacturing System (the “FastPharming System”) to increase “speed-to-clinic” for new candidates.
The Company is also using the FastPharming System to create proteins for research and development (“R&D”)
as well as further manufacturing uses, including 3D-bioprinting. In addition, the Company makes the FastPharming System
available to clients on a fee-for-service basis for the production of proteins.
During the year ended June 30, 2020, the
Company operated in two segments: (i) its CDMO segment, operated via its subsidiary iBio CDMO LLC (“iBio CDMO”), and
(ii) its biologics development and licensing activities, conducted within iBio, Inc. In the past, the Company’s primary focus
was the CDMO business, pursuant to which iBio CDMO provided manufacturing services to collaborators and third-party customers as
well as to the Company for its own product development purposes. However, during the second half of 2020 and subsequent to year
end, the Company shifted its primary focus to its biologics development programs, including new vaccines and therapeutics.
The Company’s current platforms and
programs include: (i) CDMO services using its licensed and owned FastPharming System and GlycaneeringTM
Services; (ii) the development of therapeutics, for which the Company intends to conduct preclinical and clinical trials; (iii)
the development of vaccines, for which the Company intends 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. The Company is developing
a portfolio of technologies, products, and services driven by the following platforms and programs, which it intends 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 the Company’s proprietary expression technologies, GlycaneeringTM Services, and production know-how (the FastPharming System), deployed in its 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. 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.
|
|
|
|
|
Fill / Finish
|
Aseptic vial and bottle filling and finishing services.
|
|
|
|
|
BioAnalytics
|
Method development and validation, including 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 12 -
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 11 – 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 Brazil is inactive at this time and management plans to liquidate the legal entity in
Q3 of fiscal year 2021.
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
is a summary of recent equity transactions that occurred:
|
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 $25.2 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. The offering was terminated by the Company on November 25, 2020. The Company issued 30.2 million shares of the Company’s common stock for net proceeds of approximately $68.83 million.
|
|
6.
|
On November 25, 2020, we entered
into a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald
& Co. ("Cantor Fitzgerald") to sell shares of common stock, from time to time, through an “at the market offering”
program having an aggregate offering price of up to $100,000,000 through which
Cantor Fitzgerald would act as sales agent (the “Sales Agent”). The issuance
and sale, if any, of common stock by us under the Sales Agreement was subject to the effectiveness of our registration statement
on Form S-3 (File No. 333-250973) (the “Registration Statement”), filed with the Securities and Exchange Commission
on November 25, 2020. The Registration Statement was declared effective on December 7, 2020.
|
|
7.
|
On
December 8, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald
& Co. (“Cantor Fitzgerald”) as underwriter, pursuant to which the Company (i) agreed to issue and sell in an underwritten
public offering (the “Offering”) 29,661,017 shares of common stock of the Company to Cantor Fitzgerald and (ii) granted
Cantor Fitzgerald an option for 30 days to purchase up to an additional 4,449,152 shares of common stock that may be sold upon
the exercise of such option by Cantor Fitzgerald. On December 10, 2020, pursuant to the terms of the Underwriting Agreement, 29,661,017
shares of common stock were purchased by Cantor Fitzgerald from the Company at a price of $1.0955 per share for net proceeds of
approximately $32.3 million to the Company from the Offering, excluding any proceeds that were received from the exercise of the
underwriter’s option to purchase additional shares, and after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company.
|
|
8.
|
In January 2021, Cantor Fitzgerald notified the Company of its
decision to partially exercise the option, and on January 11, 2021, the Company issued an additional 4,240,828 shares of
common stock to satisfy the underwriter’s option exercise. The Company received net proceeds of approximately $4.7million.
|
See Note 12 – 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 if cash resources were 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 $107.6 million as of December 31, 2020,
combined with subsequent sales of the Company’s common stock through the date of the filing of this report totaling approximately
$4.7 million, management believes the Company has adequate cash to support the Company’s activities through March 31, 2023 .
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 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 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 December 31, 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 Codification ("ASC") 606, “Revenue from Contracts with Customers. 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 falls 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.
If a loss on a contract is anticipated,
such loss is recognized in its entirety when the loss becomes evident. When the current estimates of the amount of consideration
that is expected to be received in exchange for transferring promised goods or services to the customer indicates a loss will be
incurred, a provision for the entire loss on the contract is made. During the three months ended December 31, 2020, the Company
recorded a reserve for the loss on a contract of $497,000.
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 and is summarized below (in thousands).
|
|
Three Months ended
December 31,
|
|
|
Six Months ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenue recognized at a point in time
|
|
$
|
705
|
|
|
$
|
289
|
|
|
$
|
1,115
|
|
|
$
|
349
|
|
Revenue recognized over time
|
|
|
-
|
|
|
|
25
|
|
|
|
-
|
|
|
|
73
|
|
Total revenue
|
|
$
|
705
|
|
|
$
|
314
|
|
|
$
|
1,115
|
|
|
$
|
422
|
|
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.
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 December 31, 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 December
31, 2020 and June 30, 2020, contract liabilities were $1,233,000 and $1,810,000, respectively. The Company recognized revenue of
$187,000 and $499,000 during the three and six months ended December 31, 2020, respectively, that was included in the contract
liabilities balance as of June 30, 2020. The Company recognized revenue of $25,000 and $118,000 during
the three and six months ended December 31, 2019, respectively, 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
the Company obtains the right to substantially all the economic benefit from the use of the asset, and whether the Company has
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 842 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 December 31,
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. Discounts and/or premiums paid when the debt securities are acquired are amortized to interest income over the terms
of the debt securities.
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 $1,071,000 and
$798,000 as of December 31, 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 11 - 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 six months ended December 31, 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 and six months ended December 31, 2020 and 2019, any translation adjustments were considered immaterial and did not have
a significant impact on the Company's condensed 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 14 - 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 two financial institutions which, at times, may exceed the insured amounts. The exposure to the Company is solely dependent
upon daily balances and the strength of the financial institutions. The Company has not incurred any losses on these accounts.
At December 31, 2020 and June 30, 2020, amounts in excess of insured limits were approximately $41,810,000 and $54,680,000, respectively.
Revenue
During the three
months ended December 31, 2020, the Company generated 100% of its revenue from four customers with one client accounting for 63.8%
of revenue. During the three months ended December 31, 2019, the Company generated 100% of revenue from four customers with one
customer accounting for 51.5% of revenue.
During the six months ended December 31, 2020, the Company generated
100% of its revenue from four customers, none of which singularly accounted for more than 50% of revenues. During the six months
ended December 31, 2019, the Company generated 100% of its revenue from five customers, none of which singularly accounted for
more than 50% of revenues.
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 and cash equivalents,
accounts receivable, accounts payable and accrued expenses in the Company’s condensed consolidated balance sheets approximated
their fair values as of December 31, 2020 and June 30, 2020 due to their short-term nature. The carrying value of the convertible
promissory note receivable and finance (capital) lease obligation approximated fair value as of December 31, 2020 and June 30,
2020 as the interest rates related to the financial instruments 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.
|
Convertible Promissory Note Receivable
|
On October 1, 2020, we entered into a master
services agreement with Safi (see Note 17). 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 Safi’s
common stock (as defined). Principal and accrued interest mature on October 1, 2023. For the three and six months ended December
31, 2020, interest income amounted to $19,000. As of December 31, 2020, the Note balance and accrued interest totaled $1,519,000.
6.
|
Investments in Debt Securities
|
Investments in debt securities consist
of AA and A rated corporate bonds bearing interest at rates from 0.45% to 4.25% with maturities from April 2021 to December 2022.
The components of investments in debt securities are as follows (in thousands):
|
|
December 31,
2020
|
|
Adjusted cost
|
|
$
|
16,415
|
|
Gross unrealized losses
|
|
|
(20
|
)
|
Fair value
|
|
$
|
16,395
|
|
The fair value of available-for-sale debt
securities, by contractual maturity, as of December 31, 2020, was as follows (in thousands):
Fiscal period ending on December 31:
|
|
Fair Value
|
|
2021
|
|
$
|
6,073
|
|
2022
|
|
|
10,322
|
|
|
|
$
|
16,395
|
|
Amortization of premiums paid on the debt securities amounted
to $50,000 for the three and six months ended December 31, 2020.
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 11 – 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):
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
ROU – Facility
|
|
$
|
25,761
|
|
|
$
|
25,761
|
|
ROU – Equipment
|
|
|
7,728
|
|
|
|
7,728
|
|
|
|
|
33,489
|
|
|
|
33,489
|
|
Accumulated amortization
|
|
|
(6,703
|
)
|
|
|
(5,873
|
)
|
Net finance lease ROU
|
|
$
|
26,786
|
|
|
$
|
27,616
|
|
Amortization expense was approximately $415,000 for both of
the three months ended December 31, 2020 and 2019. Amortization of finance lease ROU assets was approximately $830,000 for both
of the six months ended December 31, 2020 and 2019.
The following table summarizes by category
the gross carrying value and accumulated depreciation of fixed assets (in thousands):
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
Facility improvements
|
|
$
|
1,496
|
|
|
$
|
1,465
|
|
Medical equipment
|
|
|
2,788
|
|
|
|
1,760
|
|
Office equipment and software
|
|
|
537
|
|
|
|
398
|
|
Construction in progress
|
|
|
1,153
|
|
|
|
787
|
|
|
|
|
5,974
|
|
|
|
4,410
|
|
Accumulated depreciation
|
|
|
(964
|
)
|
|
|
(753
|
)
|
Net fixed assets
|
|
$
|
5,010
|
|
|
$
|
3,657
|
|
Depreciation expense was approximately
$114,000 and $71,000 for the three months ended December 31, 2020 and 2019, respectively. Depreciation expense was approximately
$211,000 and $137,000 for the six months ended December 31, 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") which license agreement was amended in August
2016 and again in December 2020. 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 an Investigational New Drug Application with the FDA or foreign equivalent covering the Licensed Technology ("IND")
– initially was required to be met by December 1, 2015, and on December 2, 2020, was extended to be required to be met by
December 31, 2021.
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 six months ended December 31, 2020 and 2019.
The following table summarizes by category the gross carrying
value and accumulated amortization of intangible assets (in thousands):
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
Intellectual property – gross carrying value
|
|
$
|
3,100
|
|
|
$
|
3,100
|
|
Patents – gross carrying value
|
|
|
2,814
|
|
|
|
2,628
|
|
|
|
|
5,914
|
|
|
|
5,728
|
|
Intellectual property – accumulated amortization
|
|
|
(2,633
|
)
|
|
|
(2,555
|
)
|
Patents – accumulated amortization
|
|
|
(2,096
|
)
|
|
|
(2,029
|
)
|
|
|
|
(4,729
|
)
|
|
|
(4,584
|
)
|
Net intangible assets
|
|
$
|
1,185
|
|
|
$
|
1,144
|
|
Amortization expense was approximately
$73,000 and $76,000 for the three months ended December 31, 2020 and 2019, respectively. Amortization expense was approximately
$145,000 and $153,000 for the six months ended December 31, 2020 and 2019, respectively.
10.
|
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 ten-month period beginning on the date of the note of April 9, 2020. The first principal payment is due by April 4, 2021.
|
|
|
|
|
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.
|
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.
|
|
|
|
|
5.
|
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. As of the date of the filing of this Form 10-Q, the Company has not filed for
the forgiveness as the Company's bank has temporarily paused accepting new PPP Forgiveness requests to make updates based on new
guidance from the SBA.
At both December
31, 2020 and June 30, 2020, the Company owes the Lender $600,000. $465,000 is payable for the 12 months ending December 31, 2021
and $135,000 is payable for the 12 months ending December 31, 2022.
11.
|
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 $44,000 and $35,000 for the three months ended
December 31, 2020 and 2019, respectively, and $86,000 and $66,000 for the six months ended December 31, 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 December 31, 2020 and
June 30, 2020 due to the Second Eastern Affiliate amounted to $703,000 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 $177,000
and $165,000 for the three months ended December 31, 2020 and 2019, respectively, and approximately $362,000 and $336,000 for the
six months ended December 31, 2020 and 2019, respectively. Interest expense related to the Second Eastern Affiliate was approximately
$612,000 and $615,000 for the three months ended December 31, 2020 and 2019, respectively, and approximately $1,226,000 and $1,235,000
for the six months ended December 31, 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).
|
|
Six Months
Ended
|
|
|
|
December 31,
2020
|
|
Finance Lease Cost:
|
|
|
|
|
Amortization of right-of-use assets
|
|
$
|
830
|
|
Interest on lease liabilities
|
|
|
1,226
|
|
Operating Lease Cost
|
|
|
86
|
|
Total Lease Cost
|
|
$
|
2,142
|
|
|
|
|
|
|
Other Information
|
|
|
|
|
Cash paid for amounts included in the measurement lease liabilities:
|
|
|
|
|
Operating cash flows from operating lease
|
|
$
|
86
|
|
Financing cash flows from finance lease obligation
|
|
$
|
147
|
|
|
|
December 31,
2020
|
|
Finance lease right-of-use assets
|
|
$
|
26,786
|
|
Finance lease obligation – current portion
|
|
$
|
312
|
|
Finance lease obligation - non-current portion
|
|
$
|
31,848
|
|
Weighted average remaining lease term - finance lease
|
|
|
29.18 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 December 31:
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
2021
|
|
$
|
312,161
|
|
|
$
|
2,437,839
|
|
|
$
|
2,750,000
|
|
2022
|
|
|
336,594
|
|
|
|
2,413,406
|
|
|
|
2,750,000
|
|
2023
|
|
|
362,941
|
|
|
|
2,387,059
|
|
|
|
2,750,000
|
|
2024
|
|
|
391,350
|
|
|
|
2,358,650
|
|
|
|
2,750,000
|
|
2025
|
|
|
421,982
|
|
|
|
2,328,018
|
|
|
|
2,750,000
|
|
Thereafter
|
|
|
30,335,069
|
|
|
|
36,352,431
|
|
|
|
66,687,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
32,160,097
|
|
|
$
|
48,277,403
|
|
|
$
|
80,437,500
|
|
Less: current portion
|
|
|
(312,161
|
)
|
|
|
|
|
|
|
|
|
Long-term portion of minimum lease obligations
|
|
$
|
31,847,936
|
|
|
|
|
|
|
|
|
|
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 December 31, 2020, no dividends have been declared. Accrued dividends total approximately $1,002,000 and $871,000 at December 31, 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 December 31, 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 December 31, 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 was 275 million. In addition, on December 9, 2020, the stockholders of the Company approved the Company’s 2020 Omnibus
Incentive Plan (the “2020 Plan”) and as of the filing date of this Report, the Company had reserved 32,000,000
shares of common stock for issuance pursuant to the grant of new awards under the 2020 Plan.
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 $4.5 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 and the prospectus supplement that was filed on March 20, 2020.
The Lincoln Park March
2020 Purchase Agreement provided that, from time to time on any trading day the Company selected, the Company had 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 would not exceed $5,000,000. There was no upper limit on the price per share that Lincoln
Park had to pay for common stock under the Lincoln Park March 2020 Purchase Agreement, but in no event would shares of common stock
be sold to Lincoln Park on a day the Company’s closing price of its common stock was less than the floor price of $0.20,
which was subject to adjustment 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 was 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, LLC ("NYSE American" or the "Exchange") 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
the Company sold 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 use of the net proceeds of sales under the Lincoln Park March 2020 Purchase Agreement was
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 $18.4 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 approximately
$6.8 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 were 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 were made
by means of ordinary brokers’ transactions at prevailing market prices at the time of sale, or as otherwise agreed with UBS.
UBS used 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 imposed).
The Company paid a commission rate of up
to 3.0% of the gross sales price per share sold and 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 contained 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 $37.8 million. The Company incurred costs of approximately
$1.3 million. In addition, the Company sold 2.36 million shares of common stock for net proceeds of approximately $5.5 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 November 13, 2020, the date of the last sale of shares under the UBS Agreement, approximately
10.41 million shares of common stock were issued for gross proceeds totaling approximately $28.4 million. The Company incurred
costs of approximately $1.7 million.
On November 25, 2020, the Company notified UBS Securities in
writing that it was terminating, effective November 25, 2020, the Equity Distribution Agreement. In total, the Company issued and
sold an aggregate of 30,184,399 shares of common stock for gross proceeds of approximately $72.0 million and net proceeds
of approximately $68.8 million pursuant to the Equity Distribution Agreement.
Cantor Fitzgerald Underwriting
On November 25, 2020, we entered into
a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.
("Cantor Fitzgerald") to sell shares of common stock, from time to time, through an “at the market offering”
program having an aggregate offering price of up to $100,000,000 through which
Cantor Fitzgerald would act as sales agent (the “Sales Agent”). The issuance
and sale, if any, of common stock by us under the Sales Agreement was subject to the effectiveness of our registration statement
on Form S-3 (File No. 333-250973) (the “Registration Statement”), filed with the Securities and Exchange Commission
on November 25, 2020. The Registration Statement was declared effective on December 7, 2020. As of the date of this Report, no
sales have been made under this Sales Agreement.
On December 8, 2020, the Company entered
into the Underwriting Agreement with Cantor Fitzgerald, pursuant to which the Company (i) agreed to issue and sell in an underwritten
public offering (the “Offering”) 29,661,017 shares of common stock of the Company to Cantor Fitzgerald and (ii) granted
Cantor Fitzgerald an option for 30 days to purchase up to an additional 4,449,152 shares of common stock that may be sold upon
the exercise of such option by Cantor Fitzgerald.
On December 10, 2020, this offering was closed. Approximately
29.66 million shares of common stock were issued for gross proceeds totaling approximately $35.2 million. The Company incurred
costs of approximately $2.9 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 December 31, 2020 and June 30,
2020, there were no Warrants outstanding.
13.
|
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
December 31,
|
|
|
Six Months ended
December 31,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Basic and diluted numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to iBio, Inc.
|
$
|
(8,129
|
)
|
|
$
|
(3,762
|
)
|
|
$
|
(15,662
|
)
|
|
$
|
(8,225
|
)
|
Preferred stock dividends – iBio CMO Preferred Tracking Stock
|
|
(65
|
)
|
|
|
(65
|
)
|
|
|
(131
|
)
|
|
|
(131
|
)
|
Deemed dividends – down round of Series A Preferred and Series B Preferred
|
|
-
|
|
|
|
(21,560
|
)
|
|
|
-
|
|
|
|
(21,560
|
)
|
Net loss available to iBio, Inc. stockholders
|
$
|
(8,194
|
)
|
|
$
|
(25,387
|
)
|
|
$
|
(15,793
|
)
|
|
$
|
(29,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
188,087
|
|
|
|
36,917
|
|
|
|
175,264
|
|
|
|
29,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share amount
|
$
|
(0.04
|
)
|
|
$
|
(0.69
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(1.02
|
)
|
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 December 31,
2020 and 2019, shares issuable which could potentially dilute future earnings were as follows:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Stock options
|
|
|
4,251
|
|
|
|
1,259
|
|
Restricted stock units
|
|
|
349
|
|
|
|
-
|
|
Series A Warrants
|
|
|
-
|
|
|
|
21,930
|
|
Series B Warrants
|
|
|
-
|
|
|
|
24,930
|
|
Series A Preferred
|
|
|
-
|
|
|
|
60
|
|
Series B Preferred
|
|
|
-
|
|
|
|
28,925
|
|
Series C Preferred
|
|
|
-
|
|
|
|
100
|
|
Shares excluded from the calculation of diluted loss per share
|
|
|
4,600
|
|
|
|
77,204
|
|
14.
|
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
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Research and development
|
|
$
|
47
|
|
|
$
|
5
|
|
General and administrative
|
|
|
218
|
|
|
|
32
|
|
Total
|
|
$
|
265
|
|
|
$
|
37
|
|
|
|
Six Months Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Research and development
|
|
$
|
94
|
|
|
$
|
12
|
|
General and administrative
|
|
|
522
|
|
|
|
93
|
|
Total
|
|
$
|
616
|
|
|
$
|
105
|
|
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 was determined
by the Board of Directors and stated in the award agreements. In general, vesting 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 was satisfied. The Company used historical data to estimate forfeiture rates. The 2018
Plan was terminated with the adoption of the iBio, Inc. 2020 Omnibus Equity Incentive Plan (see below).
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.
|
Stock options issued during
the six months ended December 31, 2020 were as follows:
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 up to 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 expire in ten years.
Effective December 1, 2020, the Company
granted an officer a stock option agreement under the 2018 Plan whereby the officer has the option to purchase 465,000 shares of
the Company's common stock at a price of $1.45 per share. The option expires in ten years and vests as follows: (1) 25% of the
option granted will vest after one year of employment with the Company; and (2) after one year of employment with the Company,
6.25% of the option granted will vest for each additional three (3) months of employment.
The Company estimated the fair value of
options granted using the Black-Scholes option pricing model with the following assumptions:
Weighted average risk-free interest rate
|
|
0.64% – 0.82
|
%
|
Dividend yield
|
|
0
|
%
|
Volatility
|
|
97.5
|
%
|
Expected term (in years)
|
|
9
|
|
iBio, Inc. 2020 Omnibus Equity Incentive
Plan (the “2020 Plan”)
On December 9, 2020, the Company's stockholders approved the
2020 Plan as a successor to the 2018 Plan. The total number of shares of common stock reserved under the 2020 Plan is 32 million
shares of common stock for issuance pursuant to the grant of new awards under the 2020 Plan. The 2020 Plan allows for the award
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.
Effective January 18, 2021, the Company
granted two officers stock option agreements under the 2020 Plan whereby the officers have the option to purchase 600,000 shares
of the Company's common stock at a price of $1.47 per share. The options expire in ten years and vest as follows: (1) 25% of the
options granted will vest after one year of employment with the Company; and (2) after one year of employment with the Company,
6.25% of the options granted will vest for each additional three (3) months of employment.
Restricted Stock Units (“RSUs”):
On March 27, 2020, the Company issued RSU’s
to acquire 41,150 shares of common stock to various employees at a market value of $1.15 per share. The RSU’s vest over a
four-year period. The grant-date fair value of the RSU’s totaled approximately $47,000.
Effective December 1, 2020, the Company
issued RSUs to acquire 309,000 shares of common stock to an officer at a market value of $1.45 per share. The RSUs vest in even
increments on the first three anniversaries of the grant date. The grant-date fair value of the RSUs totaled approximately
$448,000.
Effective
January 18, 2021, the Company issued RSUs to acquire 65,000 shares of common stock to an officer at a market value of $1.47 per
share. The RSUs vest in even increments on the first three anniversaries of the grant date. The grant-date fair value of the
RSUs totaled approximately $96,000.
15.
|
Related Party Transactions
|
Agreements with Eastern Capital Limited
and its Affiliates
As more fully discussed in Note 12 –
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 11 – 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 12 – 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.
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 $18,000 and $0 for the
three months ended December 31, 2020 and 2019, respectively, and approximately $35,000 and $0 for the six months ended December
31, 2020 and 2019, respectively. At both December 31, 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 and $506,000 for the three and six months ended December 31, 2020, respectively. At December 31, 2020, the Company owed
TechCXO approximately $88,000.
The Company recorded no income tax expense
for the six months ended December 31, 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.
17.
|
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 continue to affect
the economy in the United States and globally, especially if new strains of SARS-CoV-2 emerge.
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 11 – Finance Lease Obligation
for more details of the Sublease.
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 December 31, 2020 and 2019, employer contributions made to the Plan totaled approximately
$29,000 and $27,000, respectively, and $61,000 and $57,000 for the six months ended December 31, 2020 and 2019, 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 December 31, 2020 (in thousands)
|
|
iBio, Inc.
|
|
|
iBio CDMO
|
|
|
Eliminations
|
|
|
Total
|
|
Revenues – external customers
|
|
$
|
190
|
|
|
$
|
515
|
|
|
$
|
-
|
|
|
$
|
705
|
|
Revenues – intersegment
|
|
|
238
|
|
|
|
288
|
|
|
|
(526
|
)
|
|
|
-
|
|
Research and development
|
|
|
525
|
|
|
|
2,220
|
|
|
|
(301
|
)
|
|
|
2,444
|
|
General and administrative
|
|
|
2,981
|
|
|
|
3,050
|
|
|
|
(225
|
)
|
|
|
5,806
|
|
Operating loss
|
|
|
(3,078
|
)
|
|
|
(4,467
|
)
|
|
|
-
|
|
|
|
(7,545
|
)
|
Interest expense
|
|
|
-
|
|
|
|
(615
|
)
|
|
|
-
|
|
|
|
(615
|
)
|
Interest and other income
|
|
|
29
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29
|
|
Consolidated net loss
|
|
|
(3,049
|
)
|
|
|
(5,082
|
)
|
|
|
-
|
|
|
|
(8,131
|
)
|
Total assets
|
|
|
163,991
|
|
|
|
33,789
|
|
|
|
(52,374
|
)
|
|
|
145,406
|
|
Finance lease ROU assets
|
|
|
-
|
|
|
|
26,786
|
|
|
|
-
|
|
|
|
26,786
|
|
Fixed assets, net
|
|
|
-
|
|
|
|
5,010
|
|
|
|
-
|
|
|
|
5,010
|
|
Intangible assets, net
|
|
|
1,185
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,185
|
|
Amortization of ROU assets
|
|
|
-
|
|
|
|
415
|
|
|
|
-
|
|
|
|
415
|
|
Depreciation expense
|
|
|
-
|
|
|
|
114
|
|
|
|
-
|
|
|
|
114
|
|
Amortization of intangible assets
|
|
|
73
|
|
|
|
-
|
|
|
|
-
|
|
|
|
73
|
|
Three Months Ended December 31, 2019 (in thousands)
|
|
iBio, Inc.
|
|
|
iBio CDMO
|
|
|
Eliminations
|
|
|
Total
|
|
Revenues – external customers
|
|
$
|
242
|
|
|
$
|
72
|
|
|
$
|
-
|
|
|
$
|
314
|
|
Revenues – intersegment
|
|
|
184
|
|
|
|
331
|
|
|
|
(515
|
)
|
|
|
-
|
|
Research and development
|
|
|
376
|
|
|
|
884
|
|
|
|
(372
|
)
|
|
|
888
|
|
General and administrative
|
|
|
1,027
|
|
|
|
1,697
|
|
|
|
(143
|
)
|
|
|
2,581
|
|
Operating loss
|
|
|
(977
|
)
|
|
|
(2,178
|
)
|
|
|
-
|
|
|
|
(3,155
|
)
|
Interest expense
|
|
|
-
|
|
|
|
(615
|
)
|
|
|
-
|
|
|
|
(615
|
)
|
Interest and other income
|
|
|
5
|
|
|
|
1
|
|
|
|
-
|
|
|
|
6
|
|
Consolidated net loss
|
|
|
(972
|
)
|
|
|
(2,792
|
)
|
|
|
-
|
|
|
|
(3,764
|
)
|
Total assets
|
|
|
41,959
|
|
|
|
32,089
|
|
|
|
(37,664
|
)
|
|
|
36,384
|
|
Finance lease ROU assets
|
|
|
-
|
|
|
|
28,446
|
|
|
|
-
|
|
|
|
28,446
|
|
Fixed assets, net
|
|
|
1
|
|
|
|
2,657
|
|
|
|
-
|
|
|
|
2,658
|
|
Intangible assets, net
|
|
|
1,249
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,249
|
|
Amortization of ROU assets
|
|
|
-
|
|
|
|
415
|
|
|
|
-
|
|
|
|
415
|
|
Depreciation expense
|
|
|
2
|
|
|
|
69
|
|
|
|
-
|
|
|
|
71
|
|
Amortization of intangible assets
|
|
|
76
|
|
|
|
-
|
|
|
|
-
|
|
|
|
76
|
|
Six Months Ended December 31, 2020 (in thousands)
|
|
iBio, Inc.
|
|
|
iBio CDMO
|
|
|
Eliminations
|
|
|
Total
|
|
Revenues – external customers
|
|
$
|
397
|
|
|
$
|
718
|
|
|
$
|
-
|
|
|
$
|
1,115
|
|
Revenues – intersegment
|
|
|
476
|
|
|
|
498
|
|
|
|
(974
|
)
|
|
|
-
|
|
Research and development
|
|
|
867
|
|
|
|
3,858
|
|
|
|
(519
|
)
|
|
|
4,206
|
|
General and administrative
|
|
|
5,653
|
|
|
|
6,180
|
|
|
|
(455
|
)
|
|
|
11,378
|
|
Operating loss
|
|
|
(5,647
|
)
|
|
|
(8,822
|
)
|
|
|
-
|
|
|
|
(14,469
|
)
|
Interest expense
|
|
|
-
|
|
|
|
(1,229
|
)
|
|
|
-
|
|
|
|
(1,229
|
)
|
Interest and other income
|
|
|
32
|
|
|
|
1
|
|
|
|
-
|
|
|
|
33
|
|
Consolidated net loss
|
|
|
(5,615
|
)
|
|
|
(10,050
|
)
|
|
|
-
|
|
|
|
(15,665
|
)
|
Total assets
|
|
|
163,991
|
|
|
|
33,789
|
|
|
|
(52,374
|
)
|
|
|
145,406
|
|
Finance lease ROU assets
|
|
|
-
|
|
|
|
26,786
|
|
|
|
-
|
|
|
|
26,786
|
|
Fixed assets, net
|
|
|
-
|
|
|
|
5,010
|
|
|
|
-
|
|
|
|
5,010
|
|
Intangible assets, net
|
|
|
1,185
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,185
|
|
Amortization of ROU assets
|
|
|
-
|
|
|
|
830
|
|
|
|
-
|
|
|
|
830
|
|
Depreciation expense
|
|
|
-
|
|
|
|
211
|
|
|
|
-
|
|
|
|
211
|
|
Amortization of intangible assets
|
|
|
145
|
|
|
|
-
|
|
|
|
-
|
|
|
|
145
|
|
Six Months Ended December 31, 2019 (in thousands)
|
|
iBio, Inc.
|
|
|
iBio CDMO
|
|
|
Eliminations
|
|
|
Total
|
|
Revenues – external customers
|
|
$
|
350
|
|
|
$
|
72
|
|
|
$
|
-
|
|
|
$
|
422
|
|
Revenues – intersegment
|
|
|
426
|
|
|
|
492
|
|
|
|
(918
|
)
|
|
|
-
|
|
Research and development
|
|
|
658
|
|
|
|
1,709
|
|
|
|
(502
|
)
|
|
|
1,865
|
|
General and administrative
|
|
|
2,230
|
|
|
|
3,753
|
|
|
|
(416
|
)
|
|
|
5,567
|
|
Operating loss
|
|
|
(2,112
|
)
|
|
|
(4,898
|
)
|
|
|
-
|
|
|
|
(7,010
|
)
|
Interest expense
|
|
|
-
|
|
|
|
(1,235
|
)
|
|
|
-
|
|
|
|
(1,235
|
)
|
Interest and other income
|
|
|
16
|
|
|
|
1
|
|
|
|
-
|
|
|
|
17
|
|
Consolidated net loss
|
|
|
(2,096
|
)
|
|
|
(6,132
|
)
|
|
|
-
|
|
|
|
(8,228
|
)
|
Total assets
|
|
|
41,959
|
|
|
|
32,089
|
|
|
|
(37,664
|
)
|
|
|
36,384
|
|
Finance lease ROU assets
|
|
|
-
|
|
|
|
28,446
|
|
|
|
|
|
|
|
28,446
|
|
Fixed assets, net
|
|
|
1
|
|
|
|
2,657
|
|
|
|
-
|
|
|
|
2,658
|
|
Intangible assets, net
|
|
|
1,249
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,249
|
|
Amortization of ROU assets
|
|
|
-
|
|
|
|
830
|
|
|
|
-
|
|
|
|
830
|
|
Depreciation expense
|
|
|
2
|
|
|
|
135
|
|
|
|
-
|
|
|
|
137
|
|
Amortization of intangible assets
|
|
|
153
|
|
|
|
-
|
|
|
|
-
|
|
|
|
153
|
|
20.
|
Compliance
to Satisfy a Continued Listing Rule or Standard
|
On October 16, 2019, the Company received
notification from the NYSE American 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 the Company 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.
In January 2021, Cantor Fitzgerald notified
the Company of its decision to partially exercise the option, and on January 11, 2021, the Company issued an additional 4,240,828
shares of common stock to satisfy the underwriter’s option exercise. The Company received net proceeds of approximately $4.70
million.
Company management has decided to discontinue
the operations of its Brazilian subsidiary iBio Brazil. This is not expected to have a material impact on the Company’s consolidated
operations and in management’s opinion exit costs are not expected to be material. As such, the net liabilities and operations
of iBio Brazil were not classified as discontinued operations. It is expected that this will be completed in the third quarter
of fiscal year 2021.
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 for research and further manufacturing uses in a variety of
biopharmaceutical 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 December 31, 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. However, with the establishment
in January 2021 of a distinct Research & Development (“R&D”) organization reporting to the new position of
Chief Scientific Officer, we will begin reporting on revenues and expenses associated with the three new profit centers within
iBio, Inc., which include therapeutics, vaccines, and research and bioprocess products, effective with the quarter ending March
31, 2021.
Our current platforms and programs include: (i) CDMO services
using our licensed and owned FastPharming System and GlycaneeringTM Services; (ii) the development of
therapeutics, which we have been evaluating in preclinical studies, and for which we intend to conduct human clinical trials; (iii)
the development of vaccines, which we have been evaluating in preclinical studies, and for which we intend to conduct human clinical
trials, and (iv) the production of proteins for life science research and further manufacturing uses. We intend to commercialize
our existing and developing portfolio of technologies, products, and services 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.
|
|
o
|
Development of 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”) as a treatment
for for systemic scleroderma (for which we have received orphan drug designation), idiopathic pulmonary fibrosis, or other.fibrotic
diseases.
|
|
o
|
An ACE2-Fc fusion protein in-licensed from Planet Biotechnology,
Inc. (“Planet”), as a treatment for COVID-19 and, prospectively, other diseases emanating from the Coronaviridae family.
|
|
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”).
|
|
o
|
A novel virus-like particle platform being designed for development
of vaccine candidates.
|
|
¨
|
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 supplementation
and other applications.
|
|
o
|
Other products used 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 ("UBS"), as sales agent, pursuant to which we could sell from time to time, at our option, shares of our
common stock, par value $0.001 per share (the “common stock”), through UBS. 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 sold approximately 30.18 million shares of common stock for gross proceeds of approximately
$72.0 million and net proceeds of approximately $68.8 million. The Equity Distribution Agreement was terminated on November 25,
2020.
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 Safi’s common stock (as defined). Principal
and accrued interest matures on October 1, 2023.
On November 25, 2020, we entered into a
Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.
(“Cantor Fitzgerald”) to sell shares of common stock, from time to time, through an “at the market offering”
program having an aggregate offering price of up to $100,000,000 through which
Cantor Fitzgerald would act as sales agent (the “Sales Agent”). The issuance
and sale, if any, of common stock by us under the Sales Agreement was subject to the effectiveness of our registration statement
on Form S-3 (File No. 333-250973) (the “Registration Statement”), filed with the Securities and Exchange Commission
on November 25, 2020. The Registration Statement was declared effective on December 7, 2020. Under the Sales Agreement,
we set the parameters for the sale of shares of common stock, including the number of shares to be issued, the time period during
which sales were requested to be made, limitation on the number of shares that could be sold in any one trading day and any minimum
price below which sales may not be made. Subject to the terms and conditions of the Sales Agreement, Cantor Fitzgerald could sell
the shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities
Act of 1933, as amended (the “Securities Act”), including sales made directly on the NYSE American LLC or on any
other existing trading market for the common stock. In addition, with our prior written approval, Cantor Fitzgerald could also
sell shares by any other method permitted by law, including in negotiated transactions. As of the date of this Report, no sales
have been made under the Sales Agreement.
On November 27, 2020, we entered into the first Statement of
Work (“SOW1”) under a master services agreement with ATB Therapeutics (“atbtherapeutics”) to
produce its bioengineered antibody-toxin fusion proteins using the FastPharming System.
On
December 1, 2020, we appointed Randy J. Maddux as our Chief Operating Officer.
On December 8, 2020, we entered into an underwriting agreement
(the “Underwriting Agreement”) with Cantor Fitzgerald as underwriter, pursuant to which the Company (i) agreed to issue
and sell in an underwritten public offering (the “Offering”) 29,661,017 shares of common stock, of the Company to Cantor
Fitzgerald and (ii) granted to Cantor Fitzgerald an option for 30 days to purchase up to an additional 4,449,152 shares of common
stock that may be sold upon the exercise of such option by Cantor Fitzgerald. On December 10, 2020, pursuant to the terms of the
Underwriting Agreement, 29,661,017 shares of common stock were purchased by Cantor Fitzgerald from the Company at a price
of $1.0955 per share for net proceeds of approximately $32.3 million to us from the Offering, excluding any proceeds that we received
from the exercise of the underwriter’s option to purchase additional shares, and after deducting the underwriting discounts
and commissions and estimated offering expenses payable by us. On January 11, 2021, Cantor Fitzgerald partially exercised their
option and purchased 4,240,828 additional shares of common stock for additional net proceeds to the Company of approximately $4.7
million.
On January 18, 2021, we appointed Dr. Martin
B. Brenner as our Chief Scientific Officer.
Results of Operations - Comparison of
Three Months ended December 31, 2020 and 2019
Revenue
Gross revenues
for the three months ended December 31, 2020 and 2019 were approximately $705,000 and $315,000 , respectively, an increase of
approximately $390,000. During the three months ended December 31, 2020, the Company generated 100% of its revenue from four customers.
During the six months ended December 31, 2019, the Company generated 100% of its revenue from four customers.
Research and Development Expenses (“R&D”)
Research and development expenses for
the three months ended December 31, 2020 and 2019 were $2,444,000 and $888,000, respectively, an increase of approximately $1,556,000.
The increase is primarily attributable to an increase in laboratory consumables, supplies and other costs of approximately $1.4
million and an increase in research and development personnel costs (including new hires and temporary help) of approximately
$226,000 at iBio CDMO partially offset by a reduction of approximately $94,000 for other R&D costs.
General and Administrative Expenses (“G&A”)
General and administrative expenses for
the three months ended December 31, 2020 and 2019 were approximately $5,806,000 and $2,581,000, respectively, an increase of $3,225,000.
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 $1,440,000, facility repairs and maintenance of approximately $560,000, personnel costs of approximately $399,000,
public company costs of $336,000, insurance of approximately $275,000 and board of director fees of approximately $125,000.
Total operating expenses,
consisting primarily of R&D and G&A expenses, for the three months ended December 31, 2020 were approximately $8,250,000,
compared with approximately $3,469,000 in the same period of 2019.
Other Income (Expense)
Other income (expense) for the three months
ended December 31, 2020 and 2019 was approximately ($586,000) 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 December 31, 2020, other income (expense) included
interest expense of approximately $612,000 incurred under the finance lease and approximately $3,000 for the PPP loan offset by
interest income of approximately $27,000 and royalty income of approximately $2,000. For the three months ended December 31, 2019,
other income (expense) included interest expense of approximately $615,000 incurred under the finance lease offset by interest
income of approximately $4,000 and royalty income of approximately $2,000.
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 December 31, 2020 and 2019.
Net Loss Available to iBio, Inc. Stockholders
Net loss available to iBio,
Inc. stockholders for the three months ended December 31, 2020 was approximately $8,194,000, or $0.04 per share and includes preferred
stock dividends for iBio CMO Tracking Stock of approximately $65,000. Net loss available to iBio, Inc. stockholders for the three
months ended December 31, 2019 was approximately $25,387,000, or $0.69 per share, in the same period of 2019 and included preferred
stock dividends for iBio CMO Tracking Stock of approximately $65,000 and deemed dividends due to the down round feature of Series
A Preferred Stock and Series B Preferred Stock of approximately $21,560,000.
Results of Operations - Comparison of
Six Months ended December 31, 2020 and 2019
Revenue
Gross revenues
for the six months ended December 31, 2020 and 2019 were approximately $1,115,000 and $422,000, respectively, an increase of approximately
$693,000. During the six months ended December 31, 2020, the Company generated 100% of its revenue from four customers. During
the six months ended December 31, 2019, the Company generated 100% of its revenue from five customers.
Research and Development Expenses (“R&D”)
Research and development expenses for the
six months ended December 31, 2020 and 2019 were $4,206,000 and $1,865,000, respectively, an increase of approximately $2,341.000.
The increase is primarily attributable to an increase in laboratory consumables, supplies and other costs of approximately $2.17
million and an increase in research and development personnel costs (including new hires and temporary help) of approximately $360,000
at iBio CDMO offset by reduced payments to Novici of approximately $97,000 whom the Company was previously using for lab feasibility
studies the reduction of approximately $96,000 of other R&D costs.
General and Administrative Expenses (“G&A”)
General and administrative expenses
for the six months ended December 31, 2020 and 2019 were approximately $11,378,000 and $5,567,000, respectively, an increase
of $5,811,000. 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 $3,407,000, facility repairs and maintenance of approximately
$891,000, personnel costs of approximately $476,000, public company costs of $328,000, insurance of approximately $309,000
and board of director fees of approximately $275,000.
Total operating expenses,
consisting primarily of R&D and G&A expenses for the six months ended December 31, 2020 were approximately $15,584,000,
compared with approximately $7,432,000 in the same period of 2019.
Other Income (Expense)
Other income (expense) for the six months
ended December 31, 2020 and 2019 was approximately ($1,196,000) and ($1,218,000), respectively.
For the six months ended December 31, 2020,
other income (expense) included interest expense of approximately $1,226,000 incurred under the finance lease and approximately
$3,000 for the PPP loan offset by interest income of approximately $31,000 and royalty income of approximately $2,000. For the
three months ended December 31, 2019, other income (expense) included interest expense of approximately $1,235,000 incurred under
the finance lease offset by interest income of approximately $8,000 and royalty income of approximately $9,000.
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 six months ended December 31, 2020 and 2019.
Net Loss Available to iBio, Inc. Stockholders
Net loss available to iBio,
Inc. stockholders for the six months ended December 31, 2020 was approximately $15,793,000, or $0.09 per share and includes preferred
stock dividends for iBio CMO Tracking Stock of approximately $131,000. Net loss available to iBio, Inc. stockholders for the six
months ended December 31, 2019 was approximately $29,916,000, or $1.02 per share, in the same period of 2019 and included preferred
stock dividends for iBio CMO Tracking Stock of approximately $131,000 and deemed dividends due to the down round feature of Series
A Preferred Stock and Series B Preferred Stock of approximately $21,560,000.
Liquidity and Capital Resources
As of December 31, 2020, we had cash and
cash equivalents plus debt securities of approximately $107.6 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 March 31, 2023.
The following
is a summary of recent equity transactions that occurred:
|
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 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 $25.2 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 the Equity Distribution Agreement with UBS as sales agent
pursuant to which the Company could 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. The offering was terminated by the Company on November 25, 2020. The Company issued 30.2 million shares
of the Company’s common stock for net proceeds of approximately $68.8 million.
|
|
6.
|
On November 25, 2020, we entered into a
Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald &
Co. (“Cantor Fitzgerald”) to sell shares of common stock, from time to time, through an “at the market offering”
program having an aggregate offering price of up to $100,000,000 through which
Cantor Fitzgerald would act as sales agent (the “Sales Agent”). The issuance
and sale, if any, of common stock by us under the Sales Agreement was subject to the effectiveness of our registration statement
on Form S-3 (File No. 333-250973) (the “Registration Statement”), filed with the Securities and Exchange Commission
on November 25, 2020. The Registration Statement was declared effective on December 7, 2020. As of the date of this Report, no
sales have been made under this Sales Agreement.
|
|
7.
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On December 8, 2020, we entered into the “Underwriting Agreement” with Cantor Fitzgerald as underwriter, pursuant to which the Company (i) agreed to issue and sell in the “Offering” 29,661,017 shares of common stock, to Cantor Fitzgerald and (ii) granted Cantor Fitzgerald an option for 30 days to purchase up to an additional 4,449,152 shares of common stock that may be sold upon the exercise of such option by Cantor Fitzgerald. In January 2021, Cantor Fitzgerald notified us of its decision to partially exercise the option, and on January 11, 2021, we issued an additional 4,240,828 shares of common stock to satisfy the underwriter’s option exercise. We issued a total of 33.9 million shares of common stock for
net proceeds of approximately $36.9 million.
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Net Cash Used in Operating Activities
Net cash used in operating activities was
approximately $15,489,000 for the six months ended December 31, 2020. The decrease in cash was attributable to funding our net
loss for both periods.
Net Cash Used in Investing Activities
Net cash used in investing activities was
approximately $19,556,000 for the six months ended December 31, 2020. Cash used in investing activities was attributable primarily
to the acquisition of debt securities of $16,466,000, the issuance of the convertible note receivable to Safi of $1,500,000, additions
of intangible assets of $177,000 and fixed assets attributable to iBio CDMO of $1,413,000.
Net Cash Provided by Financing Activities
Net cash provided by financing activities
was approximately $71,185,000 for the six months ended December 31, 2020. The financing activities for the six months ended December
31, 2020 included (1) the net proceeds from the UBS Equity Distribution Agreement including the subscription receivable and the
Underwriting Agreement with Cantor Fitzgerald; 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 December 31, 2020, our accumulated
deficit was approximately $166,100,000, and we used approximately $15,500,000 of cash for operating activities during the six months
ended December 31, 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 $107.6 million as of December 31, 2020, we believe we have adequate cash to support our activities
through March 31, 2023.
We plan to fund our future business operations using existing
cash and liquid resources, 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 December 31, 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 December 31, 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:
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Valuation of intellectual property;
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Revenue recognition;
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Lease accounting;
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Legal and contractual contingencies;
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Research and development expenses; and
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Share-based compensation expenses.
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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.