Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read together with our financial statements and the notes thereto and other information included elsewhere in this 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.
Overview
We are a pioneering biotechnology company at the intersection of AI and biologics, committed to reshaping the landscape of discovery. Our core mission is to harness the potential of AI and machine learning to unveil elusive biologics that stand out and have evaded other scientists. Through our innovative platform, we champion a culture of innovation by identifying novel targets, forging strategic collaborations to enhance efficiency, diversify pipelines, and with the goal of accelerating preclinical processes.
Additionally, our groundbreaking EngageTx technology enables us to target bi-specific molecules. With the ability to navigate sequence diversity and promote Human-Cyno cross reactivity while mitigating cytokine release, our goal is to enhance agility and bolster preclinical safety assessments.
Our strategic approach to fulfilling our mission is outlined as follows:
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In essence, we are sculpting a future where cutting-edge AI-driven biotechnology propels the discovery of intricate biologics, fostering partnerships, accelerating innovation, and propelling the advancement of science.
AI-Technology Platform
Overview
Our platform comprises four key components, each playing a crucial role in the discovery and optimization of precision antibodies.
The first layer, epitope engineering, leverages the patented AI-engine to target specific regions of proteins, allowing us to engineer antibodies with high specificity and efficacy. The second layer involves the proprietary antibody library, which is built on clinically validated frameworks and offers a rich diversity of human antibodies. The third layer of the technology stack is the antibody optimizing StableHu AI technology, coupled with mammalian display technology. Finally, our EngageTx platform forms the fourth layer. Each layer of the tech stack is designed to work synergistically, enabling us to rapidly advance antibodies from concept to in vivo proof-of-concept (POC).
AI Epitope Steering Technology
Our epitope steering technology is designed to address these issues by guiding antibodies exclusively against the desired regions of the target protein. By focusing on these specific regions, we can overcome the limitations of traditional methods and significantly improve the efficiency and effectiveness of our antibody discovery process. Our AI engine creates engineered epitopes, which are small embodiments of epitopes on the target protein. The engine is trained to match the epitope structure as closely as possible and refine the designs for greater stability and water solubility, which are critically important factors. The optimized engineered epitope is then used to identify antibodies from naïve or immunized libraries.
Naïve Human Antibody Library
The fully human antibody library is built upon clinically validated, entirely human antibody frameworks. By leveraging public databases, we have extracted a diverse array of Complementarity-Determining Region (CDR) sequences. Subsequently, we have meticulously eliminated a range of sequence liabilities. Such careful curation process could potentially significantly reduce the development risk for antibodies identified from our library.
StableHuTM AI Antibody-Optimizing Technology
Our proprietary StableHu technology is instrumental in the optimization process. StableHu is an AI-powered tool designed to predict a library of antibodies with fully human CDR variants based on an input antibody. This input can range from an early, unoptimized molecule to an approved drug. The model has been trained utilizing a set of over 1 billion human antibodies, progressively masking known amino acids within CDRs until the algorithm could predict the correct human sequence.
While phage display libraries are often used in antibody optimization due to their vast diversity, they can increase developability risks such as low expression, instability, or aggregation of antibodies. Mammalian display libraries, on the other hand, offer significantly improved developability but reduced diversity due to the smaller library size they can handle. StableHu overcomes this limitation by utilizing a machine learning algorithm generating focused library diversity within the capacity of mammalian display.
Mammalian display is a technology that presents antibodies on the surface of mammalian cells, allowing for the direct screening and selection of antibodies in a mammalian cell environment. This approach is advantageous as antibodies that
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express well on the mammalian cells used in the display are more likely to express well in the production cell line. Moreover, single-cell sorting of antibody-displaying cells allows rapid selection of desired antibodies based on multiple dimensions, such as potency, selectivity, and cross-species selectivity.
When paired with mammalian display technology, StableHu enables antibody optimization with fewer iterative optimization steps, lower immunogenicity risk, and improved developability.
EngageTx CD3-Based T-Cell Engager Panel
We have used antibodies from an epitope steering campaign as well as a first-generation T-cell engager as input and utilized our StableHu technology to identify a next-generation CD3 antibody panel. The sequence diversity generated by StableHu led to an antibody panel with a wide range of potencies, which allows us to pair the panel with a wide variety of tumor-targeting antibodies. Importantly, we were able to retain T-cell activation and tumor cell killing capacity with significantly reduced cytokine release. This reduction is believed to lower the risk of cytokine release syndrome. Additionally, the increased humanness of the predicted antibodies, thanks to our StableHu technology, reduces the risk of immunogenicity.
Furthermore, our StableHu technology enabled us to engineer NHP cross-reactivity into EngageTx. This allows for advanced safety assessment in NHP ahead of clinical trials, providing another layer of safety assurance.
Pre-Clinical Pipeline
We are currently in the process of building and advancing our preclinical pipeline. The focus of our pipeline is primarily on immuno-oncology, with one program also dedicated to the immunology space. By leveraging our technology stack, the pipeline is geared towards hard-to-drug targets and molecules offering differentiation. To mitigate target risk and capitalize on the learnings of competitors, our programs are primarily adopting a fast follower strategy. This approach allows us to focus on targets that have to some extent been validated and learn from the advancements of those ahead in the field.
Recent Developments
On September 15, 2023, iBio CDMO entered into the Purchase and Sale Agreement with Majestic Realty Co., pursuant to which iBio CDMO agreed to sell to Majestic Realty for a purchase price of $17,250,000 its Facility located in Bryan, TX consisting of: (i) the ground leasehold estate and interest held under the Ground Lease Agreement, dated March 8, 2010, as amended by an Estoppel Certificate and Amendment to Ground Lease Agreement, dated as of December 22, 2015, between iBio CDMO (as assignee from College Station Investors LLC) and The Board of Regents of the Texas A&M University System (together, the “Ground Lease”), related to 21.401 acres in Brazos County, Texas land (the “Land”); (ii) the buildings, parking areas, improvements, and fixtures situated on the Land (the “Improvements”); (iii) all iBio CDMO’s right, title, and interest in and to furniture, personal property, machinery, apparatus, and equipment owned and currently
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used in the operation, repair and maintenance of the Land and Improvements and situated thereon (collectively, the “Personal Property”); (iii) all iBio CDMO’s rights under the contracts and agreements relating to the operation or maintenance of the Land, Improvements or Personal Property which extend beyond the closing date (the “Contracts”); and (iv) all iBio CDMO’s rights in intangible assets of any nature relating to any or all of the Land, the Improvements and the Personal Property (the “Intangibles”; and together with the Ground Lease, Improvements and Personal Property, collectively, the “Property”). The closing of the sale of the Property is to occur, with time being of the essence, on December 1, 2023 or such other date as mutually agreed. Pursuant to the terms of the Purchase and Sale Agreement, Majestic Realty deposited with a title company (the “Escrow Agent”) $200,000 as an earnest money deposit. Majestic Realty will also be afforded access to the Property to conduct a due diligence review of its condition. The closing is subject to certain closing conditions, including: (i) Majestic Realty’s delivery to iBio CDMO and the Escrow Agent of written notice of its approval of the condition of the Property on or before 5:00 p.m. Central time on October 16, 2023; (ii) Majestic Realty obtaining the approval of The Board of Regents of the Texas A&M University System of Majestic Realty’s purchase from it of the fee interest in the Land on or before 5:00 p.m. Central time on November 13, 2023; and (iii) the delivery at closing by the title company of a title policy to Majestic Realty in the amount of the Purchase Price.
Results of Operations
Revenue
Revenue from the CDMO operations is now included in discontinued operations and not broken out separately on the financial statements. Our ongoing business is primarily focused on i) development of our pipeline for which we do not expect revenue for many years, if at all, and ii) on our AI-driven discovery platform for which to date we have not generated any material revenue. We may have revenue with the AI-driven discovery platform in the future. During the year ended June 30, 2023, we reported no revenue. Revenue for the year ended June 30, 2022 was mainly related to a licensing agreement.
Research and Development Expenses (“R&D”)
R&D expenses for Fiscal year ended June 30, 2023 and Fiscal year ended June 30, 2022 were approximately $10.3 million and $9.8 million, respectively, an increase of approximately $0.5 million or 5%. The increase primarily related to the increase in activities related to our internal pipeline including IBIO-101, CCR8, and EGFRvIII, and the expansion of our AI-driven discovery platform to include an increased spend of approximately $1.7 million on lab supplies, lab equipment/maintenance, and facility rent for the San Diego facility and an increase of approximately $0.6 million in R&D personnel at the San Diego center. This increase was partially offset by a reduction of approximately $1.8 million in spend on consultants and contracted services. iBio anticipates R&D expenses in Fiscal year ended June 30, 2024 will be close to those of Fiscal year ended June 30, 2023.
R&D expenses relating to CDMO operations are captured separately under discontinued operations.
General and Administrative Expenses (“G&A”)
G&A expenses for Fiscal year ended June 30 2023 and Fiscal year ended June 30 2022 were approximately $19.0 million and $21.8 million, respectively, a decrease of ($2.8) million or (13)%. G&A expenses principally include officer and employee salaries and benefits, depreciation and amortization, professional fees, consulting services, operational costs and other costs associated with being a publicly traded company. The decrease is primarily attributable to a reduction in intangible asset impairment charges and related amortization of ($1.5) million, a reduction of legal fees expense of ($0.8) million, a reduction in profession/consulting fees and outside services of ($0.8) million, and reduced travel of ($0.2) million. The decrease was partially offset by an increase of ($0.5) million for IT security and related costs. iBio expects G&A expenses to continue to decrease in Fiscal year ended June 30, 2024.
G&A expenses relating to CDMO operations are captured separately under discontinued operations.
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Total Operating Expenses
Total operating expenses, consisting primarily of R&D and G&A expenses, for Fiscal year ended June 30, 2023 were approximately $29.3 million, compared to approximately $31.6 million for Fiscal ended June 30, 2022.
Other Income (Expense)
Other income (expense) for Fiscal year ended June 30, 2023 and Fiscal year ended June 30, 2022 was approximately $0.03 million and $0.2 million, a decrease of approximately ($0.2) million. The minimal increase in interest income was offset by interest expenses and loss on sale of debt securities for a total other income (expense) of approximately $0.03 million.
Net Loss Available to iBio, Inc. Stockholders from Continuing Operations
Net loss available to iBio, Inc. stockholders from continuing operations for Fiscal year ended June 30, 2023 was approximately ($29.3) million, or ($2.39) per share, compared to approximately ($29.6) million, or ($3.39) per share, in 2022.
Discontinued Operations
On November 2, 2022, we announced our plans to divest our contract development and manufacturing organization (iBio CDMO, LLC) in order to complete our transformation into an AI-driven, precision antibody drug discovery and development company. In conjunction with the restructuring, we completed a workforce reduction of approximately 60% and discontinued the CDMO operations. CDMO operations are reported as discontinued operations on our financial statements. Losses for Discontinued Operations for 2023 and 2022 were approximately ($35.7) million and ($20.8) million, respectively, an increase of ($14.9) million, or 72%. This increase was primarily due to the impairment of fixed assets ($17.9) million, impairment of consumable inventory of ($4.9) million, and ($3.1) million of personnel restructuring related charges including severance, benefits and the acceleration of stock compensation awards. This increase in expense was offset by the decrease of Facility related expenses of ($4.5) million, personnel costs of ($3.6) million, consultant/outside services of ($1.5) million, the gain on sale of fixed assets of ($0.8) million and the ($0.6) million forgiveness of the PPP loan in Fiscal year 2022, which did not reoccur in Fiscal year 2023.
Total Net Loss Available to iBio, Inc. Stockholders
Net loss available to iBio, Inc. stockholders from both continuing and discontinued operations for Fiscal year ended June 30, 2023 was approximately ($65.0) million, or ($5.31) per share, compared to approximately ($50.4) million, or ($5.78) per share, in Fiscal year ended June 30, 2022.
Liquidity and Capital Resources
The history of significant losses, the negative cash flow from operations, the limited cash resources on hand and the dependence by the Company on its ability to obtain additional financing to fund its operations after the current cash resources are exhausted raises substantial doubt about the Company's ability to continue as a going concern. Our management concluded that our recurring losses from operations and the fact that we have not generated significant revenue or positive cash flows from operations raise substantial doubt about our ability to continue as a going concern for the next 12 months after issuance of our financial statements. Our auditors also included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended June 30, 2023 with respect to this uncertainty.
In an effort to remain a going concern and increase cash reserves, we completed a public offering in December 2022, reduced our work force by approximately 60% (a reduction of approximately 69 positions) in November 2022, and ceased operations of our CDMO Facility thereby reducing annual spend on expenses by approximately 67% and generating cash savings of approximately 64% from first quarter Fiscal year 2023 compared to fourth quarter Fiscal year 2023. Additionally, we have executed the Purchase and Sale Agreement for the sale of the CDMO Facility, which sale if consummated will allow us to pay all outstanding amounts under the Term Loan; however, the consummation of the sale
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is subject to closing conditions for which there can be no assurance that they will be met or the closing will occur in a timely manner, if at all . If the closing is not consummated prior to the December 31, 2023 maturity date of the Term Loan it is unlikely that we will have sufficient funds the repay the Term Loan on its maturity date, which Term Loan has an outstanding balance of which is $12.7 million as of September 26, 2023.
During the first quarter of Fiscal 2023, we completed at-the-market offerings and sold 175,973 shares of our common stock, par value $.001 per share (the “Common Stock”) for net proceeds of approximately $1.2 million. During the second quarter of Fiscal 2023, we completed a public offering and raised gross proceeds of approximately $3.5 million selling an aggregate of 3,365,385 shares of its Common Stock (or pre-funded warrants in lieu thereof), Series A warrants to purchase up to 3,870,192 shares of Common Stock and Series B warrants to purchase up to 3,870,192 shares of Common Stock. Subsequently after the public offering, during the third quarter of Fiscal 2023, 341,300 Class A Warrants and 1,704,916 Class B Warrants were exercised for total proceeds of $2,128,000. Also, during the third quarter of Fiscal 2023, we completed at-the-market offerings and sold 1,375,906 shares of Common Stock for which we received approximately $2.0 million. In the fourth quarter of Fiscal 2023, an additional 76,300 Class B Warrants were exercised with total proceeds of approximately $79,000. Also, during the fourth quarter of Fiscal 2023, we completed at-the-market offerings and sold 4,230,992 shares of Common Stock of which we received approximately $3.3 million and holds a subscription receivable for $204,000 at June 30, 2023 for proceeds received on July 6, 2023. (See Note 17 – Stockholder’s Equity for more information.)
Subsequent to June 30, 2023, we completed at-the-market offerings and sold 3,419,795 shares of Common Stock which we received approximately $1.7 million. We also sold 3,622,834 shares of Common Stock under our Purchase Agreement with Lincoln Park and received approximately $1.2 million in proceeds.
Our cash, cash equivalents and restricted cash of approximately $7.6 millionas of June 30, 2023, is not anticipated to be sufficient to support operations through the second quarter of Fiscal 2024,unless we further reduce our burn rate, consummate the sale of the Facility for amounts above the debt on the Facility, or increase our capital as described above. Regardless of whether we are able to reduce our burn rate or sell or out-license certain assets or parts of the business, we will need to raise additional capital in order to fully execute our longer-term business plan. It is our goal to implement one or more potential options described herein to allow us to have a cash runway for at least 12 months from the date of the filing of this Annual Report. However, there can be no assurance that we will be successful in implementing any of the options that we are evaluating.
Our liquidity and operations could also be impacted by our obligations under the Woodforest Credit Agreement. As described below and in detail in Note 6 - Significant Transactions, to avoid violating the Liquidity Covenant associated with the parent guarantee of the debt, we need to pay off the debt through the sale of the Facility or we need to raise additional capital.
Woodforest Debt
On October 11, 2022, we and Woodforest entered into the First Amendment to the Credit Agreement pursuant to which the Credit Agreement was amended to: (i) include a payment of $5,500,000 of the outstanding principal balance owed under the Credit Agreement on the date of the amendment, (ii) include a payment of $5,100,000 of the outstanding principal balance owed under the Credit Agreement within two (2) business days upon our receipt of such amount owed to us by Fraunhofer as part of our legal settlement with them (see Item 3 – Legal Proceedings for more information), (iii) include principal payments of $250,000 per month in debt amortization for a six-month period commencing the date of the amendment through March 2023, (iv) include an amendment fee of $22,375 and all costs and expenses, (v) require delivery of a report detailing cash flow expenditures every two (2) weeks for the period prior to the delivery of the last report and a monthly 12-month forecast (vi) reduce the liquidity covenant in the Guaranty (as defined in the Credit Agreement) from $10 million to $7.5 million with the ability to lower the liquidity covenant to $5.0 million upon the occurrence of a specific milestone in the Credit Agreement, and (vii) change the annual filing requirement solely for the fiscal year ending June 30, 2022, such that the filing is acceptable with or without a “going concern” designation. In addition, Woodforest cancelled the irrevocable letter of credit issued by JPMorgan Chase Bank upon closing of the amendment.
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In January 2023, iBio’s unrestricted cash decreased below the required $7,500,000, which created an event of default under the Credit Agreement and Guaranty as a result of not complying with the Liquidity Covenant. As a result, on February 9, 2023, iBio CDMO and Woodforest entered into a second amendment to the Credit Agreement (the “Second Amendment”), which amended, among other things, added a milestone that had to be met by a specified date, the failure of which would be an event of default. In addition, on February 9, 2023, iBio, as guarantor, entered into a second amendment to the Guaranty, which amended, among other things, allowed iBio to account for the Fraunhofer Settlement Funds in determining whether the Company is in compliance with the Liquidity Covenant until a specified period dependent upon the occurrence of a specific milestone in the Credit Agreement.
On February 20, 2023, iBio CDMO entered into a third amendment to the Credit Agreement (the “Third Amendment”), which removed the added milestone specified in the Second Amendment, the failure of which would be an event of default. In addition, the Guaranty was amended to allow us until February 28, 2023, to account for the Fraunhofer Settlement Funds in determining whether we are in compliance with the Liquidity Covenant without being dependent upon a specified milestone. In addition, we agreed that each time it consummates an at-the-market issuance of Equity Interests (as defined within the Credit Agreement), no later than five (5) days following such issuance of Equity Interests, it will (i) pay to Woodforest in immediately available cash funds, without setoff or counterclaim of any kind, forty percent (40%) of the Net Proceeds (as defined within the Credit Agreement) received by us for such issuance of Equity Interests; provided, any such payment would cease upon payment obligations in full and (ii) provide Woodforest with a detailed accounting of each such issuance of Equity Interests.
On March 24, 2023, iBio CDMO and Woodforest entered into a fourth amendment to the Credit Agreement (the “Fourth Amendment”), which within the Fourth Amendment Woodforest agreed to (i) reduce the percentage of any payment to Woodforest we are required to make from the proceeds of sales of our common stock under its at-the-market facility from 40% to 20%, (ii) reduce the percentage of any payment to Woodforest we are required to make from the proceeds of sales of its equipment from 40% to 20%, and (iii) allowed us to retain $2,000,000 million of the $5,100,000 million that we received from the Fraunhofer Settlement Funds, with the remaining $3,000,000 million being held in our account at Woodforest. In addition, we are obligated to (y) deliver to Woodforest an executed copy of a purchase agreement (the “Purchase Agreement”) for the sale of the Facility, no later than April 14, 2023, and (z) pay to Woodforest a fee in the amount of $75,000 on the earlier of the date of the closing of the Purchase Agreement, or the Maturity Date (as defined in the Credit Agreement). In addition, on March 24, 2023, iBio, as guarantor, entered into a fourth amendment to the Guaranty, which reduced the Liquidity Covenant from $7,500,000 to $1,000,000.
On May 10, 2023, iBio CDMO and Woodforest entered into a fifth amendment to the Credit Agreement (the “Fifth Amendment”), which within the Fifth Amendment Woodforest agreed to: (i) waive our obligation to deliver to Woodforest an executed copy of a Purchase Agreement for the sale of the Facility no later than April 14, 2023 and, (ii) release $500,000 of the $3.0 million being held in our account at Woodforest when the outstanding principal amount is reduced to $10.0 million and for each additional $2.5 million reduction of the outstanding principal amount, an additional $750,00 will be released from our account at Woodforest. In addition, starting on the effective date of the Fifth Amendment, the interest on the Term Loan increased to 5.25%, and the Term Loan shall further accrue interest, payable in kind and added to the balance of the outstanding principal amount at a fixed rate per annum equal to (a) 1.00%, if the Facility is sold on or before June 30, 2023, (b) 2.00% if the Facility is sold after June 2023, but on or before September 30, 2023, or (c) 3:00%, if the Facility is sold after September 30, 2023, or not sold prior to the Maturity Date. We also agreed to pay Woodforest a fee in the amount of (x) $75,000 if the Facility is sold on or before June 30, 2023, (y) $100,000 if the Facility is sold after June 2023, but on or before September 30, 2023, or (x) $125,000, if the Facility is sold after September 30, 2023, or not sold prior to the Maturity Date.
On September 18, 2023, iBio CDMO and Woodforest entered into a sixth amendment to the Credit Agreement (the “Sixth Amendment”), to amend the Credit Agreement to: (i) set the maturity date of the term loan to the earlier of (a) December 31, 2023, or (b) the acceleration of maturity of the term loan in accordance with the Credit Agreement, (ii) provided that iBio CDMO will, immediately upon receipt of the proceeds of the sale of the Property, apply the net proceeds to satisfy all outstanding obligations under the term loan, and to the extent such net proceeds are sufficient, to pay off the term loan, and (iii) change the annual filing requirement solely for the fiscal year ending June 30, 2023, such that the filing is acceptable with or without a “going concern” designation; provided that (y) iBio CDMO shall deliver an executed copy of the Purchase and Sale Agreement for the sale of the Facility within one business day after entry into the Sixth
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Amendment, and (z) if the Facility is not sold on or before December 1, 2023, iBio CDMO will pay a fee in the amount of $20,000 upon the earlier of the date of the closing or the maturity date.
Cantor Fitzgerald Underwriting
On November 25, 2020, we entered into a Controlled Equity Offering SM 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. Between July 25, 2022, and June 30, 2023, Cantor Fitzgerald sold as sales agent pursuant to the Sales Agreement 5,782,871 shares of Common Stock. We received net proceeds of approximately $6.4 million during the Fiscal year 2023 and hold a subscription receivable for $204,000 at June 30, 2023 for proceeds received on July 6, 2023.
In Fiscal year 2022, Cantor Fitzgerald sold as sales agent pursuant to the Sales Agreement 175,973 shares of Common Stock. We received net proceeds of approximately $1.2 million. (See Note 17 - Stockholders’ Equity for more detail.)
Wainwright Underwriting
On December 6, 2022, we entered into an underwriting agreement (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”). Pursuant to the Underwriting Agreement, we agreed to sell to Wainwright, in a firm commitment underwritten offering (the “Offering”) (i) 1,530,769 shares of the Company’s Common Stock, (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 1,834,616 shares of Common Stock, (iii) Series A Common Stock purchase warrants (the “Series A Warrants”) to purchase up to 3,365,385 shares of Common Stock and (iv) Series B Common Stock purchase warrants (the “Series B Warrants” and together with the Series A Warrants, the “Common Warrants”) to purchase up to 3,365,385 shares of Common Stock. The offering closed on December 9, 2022.
Wainwright acted as the sole book-running manager for the Offering. We paid Wainwright an underwriting discount equal to 7.0% of the gross proceeds of the offering, and reimbursed Wainwright for the legal fees and certain expenses of the underwriter. Pursuant to the Underwriting Agreement, we granted Wainwright a 30-day option to purchase up to an additional 504,807 shares of Common Stock and/or Common Warrants to purchase up to an additional 1,009,614 shares of Common Stock at the public offering price, less the underwriting discounts and commissions, solely to cover over-allotments. Wainwright elected to purchase 504,807 Series A Warrants and 504,807 Series B Warrants.
We also agreed to issue to Wainwright, as the representative of the underwriters, warrants (the “Representative’s Warrants”) to purchase a number of shares of Common Stock equal to 6.0% of the aggregate number of shares of Common Stock and Pre-Funded Warrants being offered in the offering. Wainwright received warrants to purchase up to 201,923 shares of Common Stock.
We received net proceeds of approximately $2,864,000 after deducting underwriting discounts, commissions and other issuance costs. During the year ended June 30, 2023, 341,300 Class A Warrants and 1,781,216 Class B Warrants were exercised. The total proceeds from Class A and B Warrants exercised during the year ended June 30, 2023 was $2,207,000. (See Note 17 - Stockholders’ Equity for more detail.)
Series 2022 Convertible Preferred Stock
On May 12, 2022, we entered into a securities purchase agreement with a certain accredited investor for the issuance and sale of 1,000 shares of Series 2022 Convertible Preferred Stock, $0.001 par value per share (the “Preferred Stock”), at a price of $0.27 per share. The Preferred Stock permitted the holder to vote at the Special Meeting, on the Reverse Stock Split proposal, with the holders of the common stock as a single class, with each share of Preferred Stock being entitled to 200,000 votes per share, provided that any votes cast by the Preferred Stock with respect to the Proposal must be voted in the same proportion as the aggregate shares of common stock are voted on the Proposal. Pursuant to the terms of the preferred stock, our Board of Directors converted the Preferred Stock to common stock at a conversion ratio of 1:1 on July 19, 2022. (See Note 17 - Stockholders’ Equity for more detail.)
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Bryan Capital
On November 3, 2021, as part of consideration for the purchase of the Bryan site and other rights, iBio issued a warrant to purchase 51,583 shares of the Common Stock at an exercise price of $33.25 per share to affiliates of Eastern Capital Limited. The Warrant expires October 10, 2026, is exercisable immediately, provides for a cashless exercise at any time and automatic cashless exercise on the expiration date if on such date the exercise price of the Warrant exceeds its fair market value as determined in accordance with the terms of the Warrant and adjustments in the case of stock dividends and stock splits.
Also, as part of the consideration for the purchase of the Bryan site and other rights, iBio entered into a $22,375,000 Senior Secured Term Loan with Woodforest National Bank. The loan bears interest at 5.25% plus a payment in kind adjustment dependent on when the Facility is sold and original maturity date of November 1, 2023. See Note 14 – Debt for further details.
Lincoln Park Stock Purchase Agreement
On August 4, 2023, iBio entered into a purchase agreement, dated as of August 4, 2023 (the “Purchase Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which, under the terms and subject to the satisfaction of specified conditions set forth therein, we may sell to Lincoln Park up to $10.0 million (subject to certain limitations) of Common Stock, from time to time during the term of the Purchase Agreement. Additionally, on August 4, 2023, we entered into a registration rights agreement, dated as of August 4, 2023 (the “Registration Rights Agreement”), with Lincoln Park, pursuant to which we agreed to file a registration statement with the SEC, to register under the Securities Act of 1933, as amended (the “Securities Act”), the resale by Lincoln Park of shares of Common Stock that have been or may be issued and sold by us to Lincoln Park under the Purchase Agreement. We cannot sell any shares of Common Stock to Lincoln Park under the Purchase Agreement unless all of the conditions to Lincoln Park’s purchase obligation set forth in the Purchase Agreement, including that the resale registration statement that we are required to file with the SEC under the Registration Rights Agreement is declared effective by the SEC and a final prospectus relating thereto is filed with the SEC (the date on which all of such conditions are satisfied, the “Commencement Date”). The registration statement was declared effective on August 11, 2023.
Beginning on the Commencement Date and for a period of up to 24 months thereafter, under the terms and subject to the conditions of the Purchase Agreement, from time to time, at our discretion, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to $10 million of shares of Common Stock, subject to certain limitations set forth in the Purchase Agreement. Specifically, from time to time from and after the Commencement Date, we may, at our discretion, on any single business day on which the closing price of the common stock on the NYSE American is equal to or greater than $0.15, by written notice delivered to Lincoln Park, direct Lincoln Park to purchase up to 100,000 shares of Common Stock on such business day, at a purchase price per share that will be determined and fixed in accordance with the Purchase Agreement at the time the Company delivers such written notice to Lincoln Park (each, a “Regular Purchase”); provided, however, that the maximum number of shares we may sell to Lincoln Park in a Regular Purchase may be increased to up to (i) 150,000 shares, if the closing sale price of the Common Stock on the NYSE American on the applicable purchase date is not below $1.00, and (ii) 200,000 shares, if the closing sale price of the Common Stock on the applicable purchase date is not below $2.00; provided, however, that Lincoln Park’s maximum purchase commitment in any single Regular Purchase may not exceed $500,000. The foregoing share amounts and per share prices will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring after the date of the Purchase Agreement with respect to the Common Stock. The purchase price per share of Common Stock sold in each such Regular Purchase, if any, will be based on market prices of the Common Stock immediately preceding the time of sale, calculated as set forth in the Purchase Agreement.
In addition, provided that we have directed Lincoln Park to purchase the maximum amount of shares that we are then able to sell to Lincoln Park in a Regular Purchase on a particular business day on which the closing price of the common stock on the NYSE American is equal to or greater than $0.20, then in addition to such Regular Purchase, we may, in our sole discretion, also direct Lincoln Park to purchase additional shares of Common Stock in an “accelerated purchase,” and one or more “additional accelerated purchases” on the business day immediately following the purchase date for such Regular Purchase, as provided in the Purchase Agreement. The purchase price per share of Common Stock sold to Lincoln Park in
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each accelerated purchase and additional accelerated purchase, if any, will be based on market prices of the Common Stock at the time of sale on the applicable purchase date for such accelerated purchase and such additional accelerated purchase(s), as applicable, calculated as set forth in the Purchase Agreement. There are no upper limits on the price per share that Lincoln Park must pay for shares of Common Stock in any purchase under the Purchase Agreement.
We will control the timing and amount of any sales of Common Stock to Lincoln Park pursuant to the Purchase Agreement. Lincoln Park has no right to require the Company to sell any shares of Common Stock to Lincoln Park, but Lincoln Park is obligated to make purchases as we direct, subject to certain conditions.
Actual sales of shares of Common Stock to Lincoln Park will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, market prices of the Common Stock from time to time during the term of the Purchase Agreement and determinations by us as to the appropriate sources of funding for iBio and its operations. The net proceeds under the Purchase Agreement to iBio will depend on the frequency and prices at which we sell shares of Common Stock to Lincoln Park. We expect that any proceeds received by us from such sales to Lincoln Park will be used for working capital and general corporate purposes.
As consideration for Lincoln Park’s commitment to purchase shares of Common Stock at our direction pursuant to the Purchase Agreement, we issued 211,473 shares of Common Stock to Lincoln Park as commitment shares (the “Initial Commitment Shares”) and agreed to issue 211,474 additional shares of Common Stock to Lincoln Park as commitment shares (the “Additional Commitment Shares” and, collectively with the Initial Commitment Shares, the “Commitment Shares”) at such time as we have received an aggregate of $5,000,000 in cash proceeds from Lincoln Park from sales of Common Stock to Lincoln Park, if any, that we elect, in our sole discretion, to make from time to time from and after the Commencement Date, pursuant to the Purchase Agreement. (See Note 17 - Stockholders’ Equity for more detail.)
Between August 16, 2023 and September 15, 2023, Lincoln Park purchased pursuant to the Purchase Agreement 3,622,834 shares of Common Stock. The Company received net proceeds of approximately $1.2 million during the first quarter of Fiscal 2024.
Net Cash Used in Operating Activities
In fiscal year 2023, net cash used in operating activities was ($30.4) million, compared to net cash used in operating activities of ($37.5) million in 2022. The decrease in net cash was primarily used to support our ongoing operations.
Net Cash Provided by (Used in) Investing Activities
In fiscal year 2023, net cash provided by investing activities was $7.0 million, which primarily consisted of redemption and sales of debt securities of $10.8 million and the sale of fixed asset of $2.6 million, partially offset by the purchase of ($5.7) million of fixed assets and ($0.7) million for certain assets acquired from RubrYc. Offset by proceeds from the sales of fixed assets. In fiscal year 2022, our net cash used in investing activities was ($5.1) million, which primarily consisted of the purchase of RubrYc equity and acquisition of intangible assets related to our license of IBIO-101, and purchases of fixed assets, offset by the net redemption of debt securities.
Net Cash Provided by (Used in) Financing Activities
In fiscal year 2023, net cash provided by financing activities was $2.3 million, compared to net cash used in financing activities of ($6.1) million in 2022. Net cash generated from financing activities in 2023 primarily related to proceeds from sales of common stock offset by payments made towards term note payable while the net cash spent in 2022 mainly related to the purchase of the Facility.
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 June 30, 2023, our accumulated deficit was approximately ($288.9) million, and we used approximately ($21.1) million of net cash in fiscal year 2023.
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We plan to fund our future business operations using cash on hand, through proceeds realized in connection with the commercialization of our technologies, through proceeds from the sale of the CDMO Facility, through potential proceeds from the sale or out-licensing of assets, and through proceeds from the sale of additional equity or other securities. However, there can be no assurance that we will be successful in implementing these plans, many of which will take several years before we realize proceeds. The Term Loan with Woodforest and the Guaranty requires we maintain an unrestricted cash balance of $1.0 million, which limits our ability to use our funds for operations. If we should default on the Credit Agreement and Woodforest does not waive the default, and if Woodforest makes a demand for the acceleration of all payments due to this default, it could result in all obligations that are guaranteed being due and payable immediately without further notice. We cannot be certain that such funding will be available on favorable terms or available at all. 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 June 30, 2023, we were not involved in any SPE transactions.
Critical Accounting 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 consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All applicable U.S. GAAP accounting standards effective as of June 30, 2023, have been taken into consideration in preparing the consolidated financial statements. The preparation of 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. 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 ongoing basis and make changes when necessary. Actual results could differ from our estimates.
Critical accounting estimates are those estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the Company. The following accounting estimate had a material impact on the results of operations of the Company for the year ended June 30, 2023.
Impairment of Fixed Assets
We monitor fixed assets for impairment indicators throughout the year. When necessary, charges for impairments of long-lived assets are recorded for the amount by which the fair value is less than the carrying value of these assets. Changes in the Company’s business strategy or adverse changes in market conditions could impact impairment analyses and require the recognition of an impairment charge. Although we base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ from these estimates.
On November 3, 2022, we announced we are seeking to divest our contract development and manufacturing organization (iBio CDMO) in order to complete our transformation into an antibody discovery and development company. Through the process of seeking to divest its contract development and manufacturing organization, we have entered into a Purchase
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and Sale Agreement for the Facility. The decision to divest triggered a quantitative impairment analysis of our CDMO fixed assets of the Facility totaling $22.65 million and machinery and equipment totaling $13.4 million.
We utilized a market approach in the second quarter of Fiscal 2023, using independent third-party appraisals, including comparable assets, in addition to bids received from prospective buyers, to estimate the fair value of the Facility, the machinery and equipment. We recorded an impairment charge of $6.3 million for the facility and $11.3 million for the machinery and equipment in the quarter ended December 31, 2022. The key assumption in the valuation analysis is the expected sale price of $21.1 million for the Facility and the associated machinery and equipment less approximate costs to sell of $2.7 million. In the first quarter of Fiscal 2024, we entered into an agreement for the sale of the Facility for $17.25 million, and an additional impairment of $0.3 million was recorded in Fiscal 2023 to reflect the agreed upon sales price less estimated costs to sell. The carrying amount of the CDMO fixed assets after impairment on June 30, 2023 was $16.1 million.
On February 10, 2021, the “Company, entered into an Auction Sale Agreement (the “Auction Sale Agreement”) with Holland Industrial Group, together with Federal Equipment Company and Capital Recovery Group LLC (collectively, the “Auctioneers”) for the sale at public auction of equipment and other tangible personal property (the “Equipment”) located at the Facility. The Auctioneer guaranteed an amount of gross proceeds from the sale of the equipment of $2.1 million, which was paid to the Company on February 17, 2023. The auction, which commenced on March 24, 2023 and concluded on March 30, 2023, resulted in total proceeds of approximately $2.9 million. In accordance with the Auction Sale Agreement, the Company received 80% of the excess proceeds, after Holland was paid a fixed amount of $0.2 million for expenses, which was approximately $0.5 million.
We may have to record a further, potentially material, impairment to the fair value of this asset group if we do not realize a sale transaction for the expected amount of $17.25 million less costs to sell in the near term.
Impairment of Indefinite-Lived Intangible Assets
For indefinite life intangible assets, we perform an impairment test annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.
Evaluating for impairment requires judgment, including the estimation of future cash flows, future growth rates and profitability and the expected life over which cash flows will occur. Changes in our business strategy or adverse changes in market conditions could impact impairment analyses and require the recognition of an impairment charge. Although we base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ from these estimates.
During the fourth quarter of Fiscal 2023, we performed our annual impairment testing of the IBIO-101 therapeutic technology (or “IP”), classified as an indefinite-lived intangible asset, which had a carrying amount of $5 million at June 30, 2023. We engaged a third party to perform valuation assistance with estimating the fair value of IBIO-101 and preparing a market capitalization reconciliation. The Multi-Period Excess Earnings Method (“MPEEM”) under the income approach was utilized to value the indefinite-lived asset. The MPEEM determines the value of a specified asset by calculating the present value of future earnings attributed to the asset. Since IBIO-101 is currently in its pre-clinical development phase, a probability of success was applied to the cash flows to account for the probability of reaching each step of development. The MPEEM requires that charges for the use of other contributory assets be subtracted under the theory that the owner of the subject asset does not own the other contributory assets and would have to rent/lease them in order to earn the cash flows related to the subject asset.
The resulting probability of success adjusted “excess earnings” were discounted to the present value using a 13% discount rate, which was based on iBio’s weighted average cost of capital. The sum of the discounted excess earnings and the present value of the tax benefit related to amortization of the IBIO-101 indefinite-lived intangible indicated that the fair value was $7.1 million as of the April 1, 2023, valuation date. Given that the carrying amount of the asset was $5 million at June 30, 2023, it was concluded that no impairment existed.
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We will continue to monitor the value of the IP, since we believe it is at risk for impairment. The primary impairment indicators that may arise in the near future are (1) any sustained decline in our common stock market price and (2) FDA decisions on similar competing technologies that are applying for Phase 1 approval.
We continue to operate in a highly competitive environment, rising interest rates (and cost of capital) and experience liquidity challenges. Accordingly, we may have to adjust our cash flow projections and valuation assumptions in the near future to account for market trends and any changes to our research and development plans. Any such future adjustments may lead to material future impairments in the IP and other related assets.
Our remaining critical accounting estimates remain consistent with the information disclosed in the same section in our last annual report on Form 10-K for the year ended June 30, 2022.
In addition to the aforementioned critical accounting 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 consolidated financial statements:
● revenue recognition;
● legal and contractual contingencies;
● research and development expenses; and
● share-based compensation expenses.
We base our estimates, to the extent possible, on historical experience. Historical information is modified as appropriate based on current business factors and various assumptions that we believe are necessary to form a basis for making judgments about the carrying value of assets and liabilities. We evaluate our estimates on an ongoing basis and make changes when necessary. Actual results could differ from our estimates. See Note 4 – Summary of Significant Accounting Policies - for a complete discussion of our significant accounting policies and estimates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information under this Item is not required to be provided by smaller reporting companies.
Item 8. Financial Statements and Supplementary Data.
Financial statements and notes thereto appear on pages F-1 to F-44 of this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, under the direction of our Chief Executive Officer (our Principal Executive Officer) and Chief Financial Officer (our Principal Financial Officer) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as amended), as of June 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures are also designed to ensure that such
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information is accumulated and communicated to management to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2023.
Management’s Report on Internal Control over Financial Reporting
It is the responsibility of the management of iBio to establish and maintain effective internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting is designed to provide reasonable assurance to iBio’s management and board of directors regarding the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles.
iBio’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of iBio; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of iBio are being made only in accordance with authorizations of management and directors of iBio; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of iBio’s assets that could have a material effect on the financial statements of iBio.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management has performed an assessment of the effectiveness of iBio’s internal control over financial reporting as of June 30, 2023, based upon criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO Framework).
Based on this assessment, management has concluded that our internal control over financial reporting was effective as of June 30, 2023.
Changes in Internal Control Over Financial Reporting
We remediated the material weakness relating to our internal controls over the accounting for stock-based compensation, as described below. Except as otherwise described herein, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Remediation of Material Weakness in Internal Controls over Accounting for Stock-Based Compensation
We strengthened our internal controls over accounting for stock-based compensation through designing and implementing additional procedures and controls over stock-based compensation. Management believes that significant progress has been made in enhancing internal controls as of June 30, 2023 and has concluded that the enhanced controls are operating effectively. The material weakness described in in Item 4 Controls and Procedures in our Quarterly Report on Form 10-Q for the nine months ended March 31, 2023 has been fully remediated.
Report of Independent Registered Public Accounting Firm
This Annual Report does not include an attestation report by CohnReznick LLP ("CohnReznick"), our independent registered public accounting firm, regarding internal control over financial reporting. As a smaller reporting company, our internal control over financial reporting was not subject to audit by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report.
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Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable
PART III
Certain information required by Part III is omitted from this Annual Report because we intend to file our definitive proxy statement for our 2023 Annual Meeting of Stockholders, pursuant to regulation 14A of the Exchange Act, not later than 120 days after the end of the fiscal year covered by this Annual Report and certain information to be included in the definitive proxy statement is incorporated herein by reference.
Item 10. Directors, Executive Officers and Corporate Governance
Information required by this Item that will appear under the headings “Governance,” “Executive Officers,” and “Delinquent Section 16(a) Reports” in the definitive proxy statement to be filed with the SEC relating to our 2023 Annual Meeting of Stockholders is incorporated herein by reference.
Code of Ethics
We have adopted a written code of business conduct and ethics within the meaning of Item 406 of SEC Regulation S-K, which applies to all of our employees, including our principal executive officer and our chief financial officer, a copy of which can be found on our website at www.ibioinc.com. If we make any waivers or substantive amendments to the code of ethics that are applicable to our principal executive officer or our chief financial officer, we will disclose the nature of such waiver or amendment in a Current Report on Form 8-K in a timely manner. No waivers from any provision of our policy have been granted.
Item 11. Executive Compensation
Information required by this Item that will appear under the heading “Executive Compensation” and “Director Compensation” in the definitive proxy statement to be filed with the SEC relating to our 2023 Annual Meeting of Stockholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this Item that will appear under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the definitive proxy statement to be filed with the SEC relating to our 2023 Annual Meeting of Stockholders is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this Item that will appear under the headings “Certain Relationships and Related Transactions” and “Independence of Board” in the definitive proxy statement to be filed with the SEC relating to our 2023 Annual Meeting of Stockholders is incorporated herein by reference.
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Item 14. Principal Accountant Fees and Services
Information required by this Item that will appear under the heading “Independent Auditor Fees and Other Matters” in the definitive proxy statement to be filed with the SEC relating to our 2023 Annual Meeting of Stockholders is incorporated herein by reference.
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PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) Exhibits and Index
Item 16. Form 10-K Summary
Not Applicable
Exhibit No. Description
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21.1* Subsidiaries of Registrant
23.1* Consent of the Independent Registered Public Accounting Firm
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101.INS Inline XBRL Instance Document*
101.SCH Inline XBRL Taxonomy Extension Schema Document *
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document *
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document *
* Filed herewith.
* *Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally to the SEC a copy of any omitted schedule upon request.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
iBio, Inc.
(Registrant)
Dated: September 27, 2023 /s/ Martin Brenner
Martin Brenner
Chief Executive Officer
/s/ Felipe Duran
Felipe DuranChief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Name Title Date
/s/ Martin Brenner Chief Executive September 27, 2023
/s/ Felipe Duran Chief Financial Officer September 27, 2023
/s/Linda Armstrong Director September 27, 2023
Linda Armstrong
/s/Alexandra Kropotova Director September 27, 2023
Alexandra Kropotova
/s/William Clark Chairman of the Board September 27, 2023
William Clark
/s/Evert Schimmelpennink Director September 27, 2023
Evert Schimmelpennink
/s/James T. Hill Director September 27, 2023
General James T. Hill, USA (Retired)
/s/Gary Sender Director September 27, 2023
Gary Sender
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Annual Financial Statements
iBio, Inc.
Financial Statement Index
Page
Report of Independent Registered Public Accounting Firm – PCAOB ID 596 F-2
Financial Statements:
Consolidated Balance Sheets – June 30, 2023 and 2022 F-6
Notes to Consolidated Financial Statements F-11
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Report of Independent Registered Public Accounting Firm
The Board of Directors and
Stockholders of iBio, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of iBio, Inc. and Subsidiaries (the “Company”) as of June 30, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operating activities for the years ended June 30, 2023 and 2022 and has an accumulated deficit as of June 30, 2023. These matters, among others, raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
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matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Asset Purchase Agreement
Critical Audit Matter Description
As discussed in the notes to the consolidated financial statements, on September 16, 2022, the Company entered into an Asset Purchase Agreement with RubrYc Therapeutics, Inc. (“RubrYc”). The Company accounted for this agreement as an asset purchase and allocated the consideration to the various assets acquired.
The financial reporting for the terms of the Asset Purchase Agreement (the “Agreement”) involved significant estimation by management in its determination of the fair value of the assets acquired and the related fair value allocation of the Agreement. Given these factors, the related audit effort in evaluating management’s judgments of the fair value of the assets acquired and related fair value allocation related to the Agreement was challenging, subjective, and complex and required a high degree of auditor judgment.
How the Critical Audit Matter was addressed in the Audit
Our principal audit procedures related to the Company’s financial reporting for the Agreement included, among others:
● We verified the total consideration included among the terms of the Agreement.
Acquired License Impairment Assessment
As disclosed in the notes to the consolidated financial statements, the Company acquired an indefinite-lived license of approximately $5.003 million. This asset is assessed for impairment at least annually and upon the occurrence of a triggering event. The impairment test for indefinite life licenses consists of comparing the fair value, which is estimated using the income approach, to its carrying value. If the carrying value exceeds the fair value, an impairment loss is recognized in an amount equal to such excess. The determination of the fair value is primarily based on discounted future cash flows projected to be generated from the license, including the estimates of future revenue, future development costs, the probability of success in various phases of development programs, and potential post-launch cash flows. Changes in these assumptions could have a significant impact on either the fair value, the amount of any impairment charges, or both.
Significant judgment is exercised by management when developing the fair value measurement of the license. Given these factors, the related audit effort in evaluating management’s judgments of the fair value of the acquired license was challenging, subjective, and complex and required a high degree of auditor judgment.
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How the Critical Audit Matter was addressed in the Audit
Our principal audit procedures related to the Company’s financial reporting relating to potential impairment of the license included, among others:
● We tested management’s process for developing the fair value of the license.
Assets Held for Sale
As disclosed in the notes to the consolidated financial statements, the Company has Assets Held for Sale of approximately $18.065 million. Assets held for sale shall be measured at the lower of its carrying amount or fair value less costs to sell. A loss shall be recognized for any initial or subsequent write-down to fair value less costs to sell. The determination of fair value less costs to sell is based on a combination of appraisal of the respective building and associated land, discussions with the Company engaged brokers and estimated closing costs on any potential sale of the assets held for sale. Changes in the assumptions could have a significant impact on either the fair value, the amount of any impairment charges, or both.
Significant judgment is exercised by management when developing the fair value less costs to sell analysis related to the assets held for sale. Given these factors, the related audit effort in evaluating management’s judgments of the fair value less costs to sell was challenging, subjective and complex and required a high degree of auditor judgement.
How the Critical Audit Matter was addressed in the Audit
Our principal audit procedures related to the Company’s financial reporting relating to impairment of the assets held for sale included, among others:
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/s/ CohnReznick LLP
We have served as the Company's auditor since 2010.
Holmdel, New Jersey
September 27, 2023
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iBio, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents $ 4,301 $ 22,676
Restricted cash 3,025 —
Investments in debt securities — 10,845
Accounts receivable - trade — 1,000
Subscription receivable 204 —
Settlement receivable - current portion — 5,100
Prepaid expenses and other current assets 664 1,549
Current assets held for sale 18,065 3,900
Promissory note receivable and accrued interest 1,706 1,631
Finance lease right-of-use assets, net of accumulated amortization 610 —
Operating lease right-of-use asset 2,722 3,068
Fixed assets, net of accumulated depreciation 4,219 1,373
Intangible assets, net of accumulated amortization 5,388 4,851
Security deposits 50 29
Prepaid expenses - noncurrent — 74
Noncurrent assets held for sale — 37,314
Liabilities and Stockholders' Equity
Current liabilities:
Finance lease obligations - current portion 272 —
Operating lease obligation - current portion 389 91
Equipment financing payable - current portion 160 —
Term note payable - net of deferred financing costs 12,937 22,161
Contract liabilities — 100
Current liabilities related to assets held for sale 1,941 56
Finance lease obligations - net of current portion 351 —
Operating lease obligation - net of current portion 3,125 3,514
Equipment financing payable - net of current portion 241 —
Accrued expenses - noncurrent 527 —
Noncurrent liabilities related to assets held for sale — 1,971
Stockholders' Equity
Accumulated other comprehensive loss — (213)
Total Liabilities and Stockholders' Equity $ 41,207 $ 99,406
The accompanying notes are an integral part of these consolidated financial statements.
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iBio, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(In Thousands, except per share amounts)
Years Ended
June 30,
Revenues $ — $ 1,884
Operating expenses:
Other income (expense):
Interest expense (83) —
Loss on sale of debt securities (98) —
Royalty income — 7
Total other income 32 184
Consolidated net loss from continuing operations (29,311) (29,513)
Net loss attributable to noncontrolling interest — 1
Preferred stock dividends - iBio CDMO Tracking Stock — (88)
Loss from discontinued operations (35,699) (20,791)
Net loss available to iBio, Inc. stockholders $ (65,010) $ (50,391)
Comprehensive loss:
Other comprehensive income - foreign currency adjustment 33 —
Weighted-average common shares outstanding - basic and diluted 12,245 8,721
The accompanying notes are an integral part of these consolidated financial statements.
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iBio, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Years Ended June 30, 2023 and 2022
(In Thousands)
Accumulated
Additional Other
Shares Amount Shares Amount Capital Loss Deficit Interest Total
Sale of preferred stock 1 — — — — — — — —
Vesting of RSUs — — 9 — — — — — —
Exercise of stock options — — 3 — 77 — — — 77
Net loss — — — — — — (50,303) (1) (50,304)
Asset acquisition — — 102 — 650 — — — 650
Vesting of RSUs — — 218 — — — — — —
Foreign currency adjustment — — — — — 33 — — 33
Net loss — — — — — — (65,010) — (65,010)
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Table of Contents
iBio, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)