UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
xx
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
¨¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2015
OR
For the transition period from ___ to ___
Commission file number 001-35023
iBio, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
26-2797813
(I.R.S. Employer Identification No.)
600 Madison Avenue, Suite 1601, New York, NY
(Address of principal executive offices)
10022-1737
(Zip Code)
Registrant’s telephone number, including area code: (302) 355-0650
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.001 par value
Name of exchange on which registered
NYSE MKT
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act:
Large accelerated filer ¨
Non-accelerated filer ¨
Accelerated filer ¨
Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately
$33,200,000 as of December 31, 2014, based upon the closing sale price on the NYSE MKT of $0.685 per share reported for such date.
There were 77,325,410 shares of the registrant’s common stock issued and outstanding as of October 5, 2015.
iBio, Inc.
Annual Report on Form 10-K
Table of Contents
PART I
PART II
Business
Risk Factors
Unresolved Staff Comments
Property
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Directors, Executive Officers and Corporate Governance
PART III
Item 11.
Item 12.
Item 13.
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
PART IV
2
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4
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27
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41
43
43
Unless the context requires otherwise, references in this Annual Report on Form 10-K to “iBio,” the “Company,” “we,” “us,” “our” and
similar terms mean iBio, Inc.
Certain statements in this Annual Report on Form 10-K may constitute forward-looking statements as defined in Section 27A of the
Securities Act of 1933 (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), the Private
Securities Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by the Securities and Exchange Commission (the “SEC”), all
as may be amended from time to time. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and
the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. All statements contained in this
Annual Report on Form 10-K, other than statements that are purely historical, are forward-looking statements. Forward looking-statements
can be identified by, among other things, the use of forward-looking language, such as the words “plans,” “intends,” “believes,” “expects,”
“anticipates,” “estimates,” “projects,” “potential,” “may,” “will,” “would,” “could,” “should,” “seeks,” or “scheduled to,” or other similar
words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions.
Forward-looking statements are based upon management’s present expectations, objectives, anticipations, plans, hopes, beliefs, intentions
or strategies regarding the future and are subject to known and unknown risks and uncertainties that could cause actual results, events or
developments to be materially different from those indicated in such forward-looking statements, including the risks and uncertainties set
forth in Item 1A of this Annual Report on Form 10-K and in other securities filings by the Company. These risks and uncertainties should
be considered carefully, and readers are cautioned not to place undue reliance on such forward-looking statements. As such, no assurance
can be given that the future results covered by the forward-looking statements will be achieved. All information in this Annual Report on
Form 10-K is as of October 12, 2015, unless otherwise indicated. The Company does not intend to update this information to reflect events
after the date of this report.
We maintain a website at www.ibioinc.com to provide information to the general public and our stockholders on iBio and its management,
financial results and press releases. Copies of this Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports
on Form 8-K and our other reports filed with the SEC can be obtained free of charge as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC on our website at www.ibioinc.com or directly from the SEC’s website at www.sec.gov.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on
Form 10-K.
3
Item 1. Business.
Overview
PART I
We are a biotechnology company focused on commercializing our proprietary platform technologies, iBioLaunch™ and
iBioModulator™, and developing select product candidates based upon these platforms. iBioLaunch is a proprietary, transformative
platform technology for development and production of biologics using transient gene expression in hydroponically grown, unmodified
green plants. iBioModulator is a proprietary technology platform that is designed to improve the potency and duration of effect of both
prophylactic and therapeutic vaccines produced with any recombinant expression technology including iBioLaunch.
Stated simply, iBioLaunch harnesses the natural protein production capability that plants use to sustain their own growth, and
directs it instead to produce proteins that comprise the active pharmaceutical ingredients in vaccines and biopharmaceuticals. The
platform’s ability to produce a wide array of biologics is evidenced by, among other things, our validated pipeline of iBioLaunch-produced
product candidates. The iBio pipeline includes products against fibrotic diseases, vaccines, enzyme replacements, monoclonal antibodies,
and recombinant versions of marketed products that are currently derived from human blood plasma.
In addition to the broad array of biological products that can be produced with iBioLaunch, we believe this technology offers other
advantages that are not available with conventional manufacturing systems. These anticipated advantages may include reduced production
time and lower capital and operating costs. In May 2013, the speed of iBioLaunch production was demonstrated when a third party
laboratory using the iBioLaunch platform was able, in a 21 day period from receipt of antigen sequence information to purification of
recombinant protein, to successfully produce a vaccine candidate for the newly emerged H7N9 influenza virus. We believe the successful
production of this vaccine candidate demonstrates, among other things, that it is possible to utilize the iBioLaunch platform to produce
vaccine doses for emergency use against pandemic and bioterrorism threats in weeks rather than the months necessary with the use of
engineered or attenuated virus strains. Further, we believe that the capital investment required to construct facilities that will manufacture
proteins on the iBioLaunch platform will be substantially less than the capital investment which would be required for the construction of
similar capacity facilities utilizing conventional manufacturing methods dependent upon animal cells, bacterial fermenters and chicken
eggs. Additionally, operating costs in a manufacturing facility using the iBioLaunch platform are expected to be reduced significantly in
comparison to conventional manufacturing processes due to the rapid nature of the iBioLaunch production cycle and the elimination of the
expenses associated with the operation and maintenance of bioreactors, fermenters, sterile liquid handling systems and other expensive
equipment which is not required in connection with the use of the iBioLaunch platform.
The ability of the iBioLaunch platform to manufacture proteins that are difficult or impossible to produce on a commercially
practicable basis with conventional manufacturing systems has been demonstrated by the production of antigens for vaccine candidates for
both hookworm and malaria. These iBioLaunch-produced vaccine candidates are being developed by the Sabin Institute and the Bill and
Melinda Gates Foundation, respectively. Phase 1 clinical trials for each have commenced.
In addition to the clinical development of these vaccine candidates, Bio-Manguinhos/FioCruz, or FioCruz, a unit of the Oswaldo
Cruz Foundation, a central agency of the Ministry of Health of Brazil, is sponsoring the development an iBioLaunch-produced yellow
fever vaccine to replace the vaccine it currently makes in chicken eggs for the populations of Brazil and more than 20 other nations. These
advances are occurring subsequent to the demonstration of safety of iBioLaunch-produced vaccine candidates against each of the H1N1
“Swine” flu virus and the H5N1 avian flu virus in successfully completed Phase 1 clinical trials.
We developed our iBioModulator technology based on the use of a modified form of the cellulose degrading enzyme lichenase, or
LicKM, from Clostridium thermocellum, a thermophilic and anaerobic bacterium. iBioModulator enables an adjuvant component to be
fused directly to preferred recombinant antigens to create a single protein for use in vaccine applications. Multiple proteins or antigenic
domains of proteins can be fused to various portions of LicKM to enhance vaccine performance.
The iBioModulator platform has been shown to be applicable to a range of vaccine proteins and can significantly modify the
immune response to a vaccine in two important ways. Animal efficacy studies have demonstrated that it can increase the strength of the
initial immune response to a vaccine antigen (as measured by antibody titer) and also extend the duration of the immune response. These
results suggest the possibility that use of the iBioModulator platform may lower vaccine antigen requirements and enable fewer doses to
establish prolonged protective immunity. We believe that the ability to provide better immune response and longer-term protection with
fewer or zero booster inoculations would add significant value to a vaccine by reducing the overall costs and logistical difficulties of its use.
Our near-term focus is to realize two key objectives: (1) the establishment of additional business arrangements pursuant to which
commercial, government and not-for-profit licensees will utilize iBioLaunch and iBioModulator in connection with the production and
development of therapeutic proteins and vaccine products; and (2) the further development of select product candidates based upon or
enhanced by our technology platforms. These objectives are the core components of our strategy to commercialize the proprietary
technology we have developed and validated.
4
Our strategy to engage in partnering and out-licensing of our technology platforms seeks to preserve the opportunity for iBio to
share in the successful development and commercialization of product candidates by our licensees while enhancing our own capital and
financial resources for development, alone or through commercial alliances with others, of high-potential product candidates based upon
our platforms. In addition to financial resources we may receive in connection with the license of our platform technologies, we believe that
successful development by third party licensees of iBioLaunch-derived and iBioModulator-enhanced product candidates will further
validate our technology, increase awareness of the advantages that may be realized by the use of such platforms and promote broader
adoption of our technologies by additional third parties.
The advancement of iBioLaunch-derived and iBioModulator-enhanced product candidates is a key element of our strategy. We
believe that selecting and developing products which individually have substantial commercial value and are representative of classes of
pharmaceuticals that can be successfully produced using either or both of our technology platforms will allow us to maximize the near and
longer term value of each platform while exploiting individual product opportunities. To realize this result, we are currently advancing
designated product candidates through the preclinical phase of development and undertaking the studies required for submission of
Investigational New Drug Applications, or INDs. The most advanced product candidate we are currently internally advancing through
preclinical IND enabling studies is a proprietary recombinant protein we call IBIO-CFB03 for treatment of idiopathic pulmonary fibrosis,
systemic sclerosis, and potentially other fibrotic diseases. To the extent that we anticipate the opportunity to realize additional value, we
may elect to further the development of this or other product candidates through the early stages of clinical development before seeking to
license the product candidate to other industry participants for late stage clinical development and if successful, commercialization.
Recent Business Highlights
Purchase Agreement with Aspire Capital Fund LLC
Common Stock Purchase Agreement
On May 15, 2015, we entered into a common stock purchase agreement (the “2015 Aspire Purchase Agreement”) with Aspire
Capital Fund, LLC, (“Aspire Capital”), pursuant to which we have the option to require Aspire Capital to purchase up to an aggregate of
$15.0 million of shares of our common stock (the “Purchase Shares”) upon and subject to the terms of the 2015 Aspire Purchase
Agreement (which are summarized below under “Summary of Terms of 2015 Aspire Purchase Agreement”). We previously entered into a
common stock purchase agreement, dated August 25, 2014 (the “2014 Aspire Purchase Agreement”), with Aspire Capital, pursuant to
which we had the option to require Aspire Capital to purchase up to $10 million of our common stock upon and subject to the terms of the
agreement over a two-year period. As of April 28, 2015, Aspire Capital fulfilled its commitment to purchase $10.0 million of our common
stock under the 2014 Aspire Purchase Agreement.
Summary of Terms of 2015 Aspire Purchase Agreement
On any business day over the 36-month term of the agreement, we have the right, in our sole discretion, to present Aspire Capital
with a purchase notice (each, a “Purchase Notice”) directing Aspire Capital to purchase up to 200,000 Purchase Shares per business day;
however, no sale pursuant to such a Purchase Notice may exceed five hundred thousand dollars ($500,000) per business day, unless we and
Aspire Capital mutually agree. We and Aspire Capital also may mutually agree to increase the number of shares that may be sold to as
much as an additional 2,000,000 Purchase Shares per business day. The purchase price per Purchase Share pursuant to such Purchase
Notice (the “Purchase Price”) is the lower of (i) the lowest sale price for our common stock on the date of sale or (ii) the average of the
three lowest closing sale prices for our common stock during the 10 consecutive business days ending on the business day immediately
preceding the purchase date. The applicable Purchase Price will be determined prior to delivery of any Purchase Notice.
In addition, on any date on which we submit a Purchase Notice to Aspire Capital for at least 150,000 Purchase Shares and the
closing sale price of our common stock is higher than $0.40, we also have the right, in our sole discretion, to present Aspire Capital with a
volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of our
common stock equal to up to 35% of the aggregate shares of common stock traded on the next business day (the “VWAP Purchase Date”),
subject to a maximum number of shares determined by us (the “VWAP Purchase Share Volume Maximum”). The purchase price per
Purchase Share pursuant to such VWAP Purchase Notice (the “VWAP Purchase Price”) shall be the lesser of the closing sale price of our
common stock on the VWAP Purchase Date or 97% of the volume weighted average price for our common stock traded on the VWAP
Purchase Date if the aggregate shares to be purchased on that date does not exceed the VWAP Purchase Share Volume Maximum, or the
portion of such business day until such time as the sooner to occur of (1) the time at which the aggregate shares traded has exceeded the
VWAP Purchase Share Volume Maximum, or (2) the time at which the sale price of our common stock falls below the VWAP Minimum
Price Threshold (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or
other similar transaction). The “VWAP Minimum Price Threshold” is the greater of (i) 80% of the closing sale price of our common stock
on the business day immediately preceding the VWAP Purchase Date or (ii) such higher price as set forth by us in the VWAP Purchase
Notice.
The number of Purchase Shares covered by and timing of each Purchase Notice or VWAP Purchase Notice are determined at our
discretion. The aggregate number of shares that we can sell to Aspire Capital under the 2015 Aspire Purchase Agreement may in no case
exceed 15,343,406 shares of our common stock (which is equal to approximately 19.99% of the common stock outstanding on the date of
the 2015 Aspire Purchase Agreement, including the 450,000 shares of our common stock (the “Commitment Shares”) issued to Aspire
Capital in consideration for entering into the 2015 Aspire Purchase Agreement) (the “Exchange Cap”), unless (i) shareholder approval is
obtained to issue more, in which case the Exchange Cap will not apply; provided that at no time shall Aspire Capital (together with its
affiliates) beneficially own more than 19.99% of our common stock.
The 2015 Aspire Purchase Agreement contains customary representations, warranties, covenants, closing conditions and
indemnification and termination provisions. The 2015 Aspire Purchase Agreement may be terminated by us at any time, at our discretion,
without any cost or penalty.
Our net proceeds will depend on the Purchase Price, the VWAP Purchase Price and the frequency of sales of Purchase Shares to
Aspire Capital; subject to the maximum $15.0 million available amount. Our delivery of Purchase Notices and VWAP Purchase Notices
will be made subject to market conditions, in light of our capital needs from time to time. We expect to use proceeds from sales of Purchase
Shares for general corporate purposes and working capital requirements.
Registration Rights
In connection with the 2015 Aspire Purchase Agreement, we also entered into a Registration Rights Agreement (the “Registration
Rights Agreement”) with Aspire Capital, dated May 15, 2015. The Registration Rights Agreement provides, among other things, a
requirement to register the sale of the Commitment Shares and the Purchase Shares to Aspire Capital pursuant to our existing shelf
registration statement (the “Registration Statement”). We further agreed to keep the Registration Statement effective and to indemnify
Aspire Capital for certain liabilities in connection with the sale of the Securities under the terms of the Registration Rights Agreement.
The foregoing descriptions of the 2015 Aspire Purchase Agreement and the Registration Rights Agreement are not complete and
are qualified by reference to the full text of such documents, copies of which are filed as Exhibits 10.4 and 4.7, respectively, to this Annual
Report and are incorporated herein by reference. The representations and warranties contained in the 2015 Aspire Purchase Agreement,
which are qualified by the disclosure schedules thereto, are solely for the purpose of allocating contractual risk between the parties, are not
for the benefit of any party other than the parties to such agreements and are not intended as documents for investors and the public to
obtain factual information about the current state of affairs of the parties thereto. Rather, investors and the public should look to other
disclosures contained in our filings with the SEC.
5
Our Business
Our Technology Platforms – iBioLaunch and iBioModulator
iBioLaunch
iBioLaunch is a proprietary, transformative platform technology for the development and production of therapeutic proteins and
vaccines using transient gene expression in unmodified green plants. Based upon the results of successful Phase 1 clinical trials
demonstrating the safety of vaccine candidates against H1N1 influenza and H5N1 influenza, immunogenicity data from in vivo preclinical
studies in well-established highly predictive animal models and results from feasibility studies and other discovery and development work
we have performed, we believe that the iBioLaunch platform can produce therapeutic proteins and vaccines more efficiently, as measured
by time, cost and yield, than current conventional biologics manufacturing methods. As awareness of these advantages increases, we expect
broader adoption of the iBioLaunch platform by biologics market participants.
An additional advantage of the iBioLaunch platform includes successful production of proteins that are difficult or impossible to
produce on a commercially practical basis with conventional systems. This unique capability has been demonstrated by production of
antigens for vaccine candidates for both hookworm and malaria, each of which require production and purification of proteins that could
not be feasibly made with other systems. For companies developing proprietary product opportunities, challenges often include overcoming
obstacles to efficient production of complex or multiple proteins with simultaneous control of enzymes that modify the properties of the
desired end product. iBioLaunch technology offers the flexibility and sophistication necessary to enable practical development of such
complex products.
With iBioLaunch, it is possible to manufacture product candidates in less than a month from identifying the protein of interest.
This rapid production cycle makes iBioLaunch particularly well-suited for producing treatments and vaccines for pandemic diseases and
for bioterror response. The rapid production cycle is also advantageous to researchers and others seeking to develop new products as a
greater number of experiments can be conducted in any time period at a cost less than that associated with conventional expression systems.
Utilizing expression technology which is transient, occurring over a period of four to seven days after introducing a foreign gene,
iBioLaunch eliminates the initial steps upon which other conventional expression technologies are dependent – namely the need to isolate a
high producing cell clone from millions of non-productive cells and then grow the clonal cells in a sterile fermenter to start the
manufacturing process. This saves the year of process development time commonly associated with mammalian cell systems and eliminates
the need for expensive fermenters and a sterile liquid-handling system to prevent bacterial, fungal, or viral contamination of the protein
drug. In the iBioLaunch system, no animal- or human-derived materials are used, eliminating the risk of contamination by human
infectious agents. In place of such materials, normal green plants, grown under clean and controlled conditions, provide the biomass for
pharmaceutical protein manufacturing. Because this entire process uses commonly available materials, we are not dependent on unique
sources of raw material, nor are we limited to purchasing from single suppliers.
The iBioLaunch process begins with robotic seeding into an inert matrix for hydroponic growth, followed by automated
infiltration of the young seedlings for gene expression and protein production. The innovation of the iBioLaunch technology is typified by
its proprietary vector technology. The iBioLaunch vectors are designed to bring foreign DNA to the nucleus of cells in the leaves of plants
by allowing a vector and bacterial host to be introduced into the plant by “infiltrating” the bacterial vector host under a slight vacuum. The
bacterial vector “launches” the foreign DNA into the plant nucleus, where it is coded into instructions that direct the plant’s own protein
manufacturing apparatus to make foreign proteins. A clever arrangement of genes for plant viral enzymes causes these protein production
instructions to be copied hundreds of thousands of times in each plant cell. Our proprietary gene transfer vectors combine the desirable
features of the DNA mobilization plasmid of Agrobacterium tumefaciens with gene control elements taken from single-stranded RNA plant
viruses.
6
Subsequent to the incorporation of the iBioLaunch vector in the plant tissues, the following steps lead to target protein synthesis:
The vector is transported to the nucleus of each cell, where RNA polymerase II transcribes viral-related sequences and the gene(s)
of interest into messenger RNA.
The viral-related messenger RNA moves to the plant cell cytoplasm, and is translated on ribosomes to make proteins representing
the viral replicase gene, movement protein, and our protein of interest.
The viral replicase protein causes the production of hundreds of additional messenger RNA molecules encoding the production of
our protein of interest, and these messengers dominate the plant protein production machinery.
Large amounts of the protein of interest accumulate and await purification.
·
·
·
·
The net effect of applying the iBioLaunch system is that the natural plant protein production capability becomes devoted to the
expression of the desired gene, and the target protein rapidly accumulates to extremely high levels suitable for commercial use.
iBioModulator
In addition to iBioLaunch, we have developed iBioModulator, a technology platform that is designed to improve the potency and
duration of effect of both prophylactic and therapeutic vaccines produced with any recombinant expression technology including
iBioLaunch. We developed our iBioModulator technology based on the use of a modified form of the cellulose degrading enzyme
lichenase, or LicKM, from Clostridium thermocellum, a thermophilic and anaerobic bacterium.
Using LicKM, iBioModulator enables an adjuvant component to be fused directly to preferred recombinant antigens to create a
single protein for use in vaccine applications. Multiple proteins or antigenic domains of proteins can be fused to various portions of LicKM
to enhance vaccine performance.
The iBioModulator platform has been shown to be applicable to a range of vaccine proteins, and can significantly modify the
immune response to a vaccine in two important ways. Animal efficacy studies have demonstrated that it can increase the strength of the
initial immune response to a vaccine antigen (as measured by antibody titer) and also extend the duration of the immune response. These
results suggest the possibility that use of the iBioModulator platform may lower vaccine antigen requirements and enable fewer doses to
establish prolonged protective immunity. We believe that the ability to provide better immune response and longer-term protection with
fewer or zero booster inoculations would add significant value to a vaccine by reducing the overall costs and logistical difficulties of its use.
Completed preclinical studies demonstrating the ability of the iBioModulator platform to improve the performance of vaccines
include the following:
· An iBioModulator-Pfs 25 antigen malaria vaccine candidate in advanced pre-IND testing elicited transmission blocking activity at
lower doses and for a longer period of time following immunization compared to a vaccine candidate containing the antigen alone;
titers of specific immunoglobulins to Pfs 25 were approximately ten-fold higher across dose levels when the iBioModulator was
used.
7
·
·
·
Therapeutic HPV (human papilloma virus) vaccine candidates constructed with iBioModulator provided superior protection from
HPV-16 E7-induced tumors and extended survival in a mouse model when compared with vaccination with native E7 protein alone.
The HPV tumor protection was both prophylactic and therapeutic. It produced tumor-free survival of mice immunized with the E7
iBioModulator antigen.
iBioModulator has been used as a fusion to express peptide or protein domain antigens in a number of other successful vaccine
candidates, including those for anthrax.
iBioModulator has been used improve the solubility and stability of recombinant vaccine antigens.
Application of iBioLaunch and iBioModulator - Target Markets and Product Candidates
Target Markets and Commercialization Activities
Based on the scientific data that have been derived from the successful Phase 1 clinical trials of the iBioLaunch-derived influenza
vaccine candidates and the results of the feasibility and preclinical studies conducted to date evaluating iBioLaunch-produced and
iBioModulator-enhanced product candidates, we believe that we have demonstrated the suitability and applicability of these platform
technologies to a broad range of therapeutic protein classes and both prophylactic and therapeutic vaccines.
Currently, we are engaged in efforts to commercialize our iBioLaunch and iBioModulator platforms. Our strategy is to enter
important markets through license agreements and commercial collaborations and our current marketing efforts focus on those decision
makers whom we expect will be attracted to the cost and efficiency advantages that may be obtained through use of our platforms. We
believe that the advantages of our platforms will enable us to compete effectively against the providers of other manufacturing systems that
may be slower, more capital intensive and more costly to operate. We anticipate realizing revenues in connection with licenses we may
grant and technology transfer services we may provide.
In all geographic regions, including the U.S. and Western Europe, the robust ability of the iBioLaunch platform to favorably
produce virtually all biologics, including its ability to produce product candidates that are otherwise not feasible to commercially
manufacture, offers us the opportunity to obtain value through exclusive, individual product licenses which can be worldwide or
geographically limited. In other geographic regions, such as Brazil, India and China where the economies and middle classes are growing
rapidly and decision-makers are building domestic biologics infrastructures, we anticipate entering into and deriving revenues from licenses
that may include multiple product categories to which the iBioLaunch and iBioModulator technology applies.
Additionally, we believe that governments and state corporations seeking to establish and maintain autonomous biodefense
capabilities will also be attracted to the advantages realizable with our platforms. The market for biodefense countermeasures reflects
continued awareness of the threat of global terror and biowarfare activity as well as the need to have capacities to quickly manufacture both
vaccines and therapeutics to a numerous and ever evolving list of biological agents that could be used to harm populations.
To enhance our success in the commercialization of our two platforms, we are engaging in efforts to advance select iBioLaunch-
produced product candidates. Our current internal efforts focus on the further development of a proprietary recombinant protein product
candidate, IBIO-CFB03, for the treatment of idiopathic pulmonary fibrosis, systemic sclerosis, and other fibrotic diseases. We have
selected this product candidate for further advancement on the basis of its individual commercial value and its value as representative of a
class of products in an attractive market that may be successfully derived from the iBioLaunch platform. We believe that demonstration of
successful utilization of our two platforms by each of us and our license partners will enhance market awareness of the broad applicability
and potential advantages realizable with the platforms and generate increased opportunities for us to realize value from these assets.
8
Product Candidates
The table below summarizes key information regarding the category and product class and the status of the most advanced product
candidates generated from our platforms:
Market
Class
Product
Status /Other
Therapeutic Protein
Anti-fibrosis Protein
Plasma-Derived Proteins
Enzyme Replacement
Monoclonal Antibodies
IBIO-CFB03
C1 Esterase Inhibitor
Alpha-Galactosidase
Palivizumab
Preclinical
Preclinical
Preclinical Orphan Designation
Preclinical
Vaccines
Viral Disease Vaccines
Parasitic Pathogen Vaccine
H1N1 Influenza
H5N1 Influenza
Yellow Fever
Malaria
Hookworm
Therapeutic Vaccine
Human Papillomavirus (HPV)
Phase I - Completed
Phase I - Completed
Preclinical
Phase I
Phase I
Preclinical
Biodefense
Bacterial Disease Vaccine
Bacterial Disease Vaccine
Monoclonal Antibody
Anthrax
Anthrax/Plague
Anthrax
Phase I
Preclinical
Preclinical
Therapeutic Protein Product Candidates
Using iBioLaunch, we have expressed and demonstrated the feasibility of production of substantially all classes of therapeutic
proteins. The proteins that we have successfully produced range from large and complex monoclonal antibodies to smaller proteins such as
interferons, growth factors, and enzymes.
IBIO-CFB03, a Proprietary Product for Treatment of Fibrosis
iBio has exclusively licensed and is developing, on its iBioLaunch™ platform, an innovative new product we have designated
“IBIO-CFB03” for treatment of idiopathic pulmonary fibrosis (IPF) and systemic sclerosis (SSc), both fatal and incurable diseases. The
total number of people affected by IPF, while large in comparison to many biotechnology target markets, is small enough for iBio’s drug to
qualify for the regulatory and financial benefits available under U.S. and European Orphan Drug incentives.
No available therapy, other than lung transplantation, is available to stop or reverse the progression of IPF. Two drug candidates
that have recently completed Phase 3 clinical trials are expected to be approved and available for use in the United States and Europe
during 2015. However, clinical data on these new product candidates suggest that individual patients are unlikely to perceive the benefit, if
any, provided by either drug because their disease will continue to worsen since those drugs only slow the pace of disease progression with
no evidence of disease reversal.
The prevalence of IPF, depending on the diagnostic criteria used, is up to 70,000 persons in the U.S. (up to 53,000 new cases
diagnosed each year) and up to 82,000 in Europe (European Respiratory Review, 2012). The total number of people in the U.S. and Europe
with either IPF or systemic sclerosis, a related fibrotic disease, exceeds 250,000. A successful product for treatment of IPF will likely be
effective against additional untreatable fibrotic diseases such as systemic sclerosis and localized scleroderma, and iBio intends to pursue
those indications in parallel with its IPF program.
iBio’s candidate product has demonstrated efficacy in both animal disease models and through the reversal of fibrosis in human
skin organ culture. Preclinical studies have established a strong safety profile for IBIO-CFB03 with no toxicity seen at concentrations well
above the predicted effective doses. The drug is readily diffusible into organs and tissues and can reach its target site via several modes of
administration. Systemic administration is effective at reducing skin and lung fibrosis. The anti-fibrotic effects of IBIO-CFB03 are
observed even after the onset of fibrosis, suggesting that it is capable of reversing fibrosis—an effect not observed with any of the potential
anti-fibrotic therapies that are currently known or that have been tested, including the most recently reported candidates completing phase 3
clinical trials. Fibrosis is a complex disease unlikely to respond for long, if at all, to drugs that target only one of several key disease drivers.
In addition, patients with existing fibrosis enter the clinic long after the onset of their disease, and thus do not benefit significantly from a
drug used to prevent fibrosis rather than treat existing fibrosis.
Experimental drugs demonstrating efficacy against life-threatening diseases in early clinical trials are given higher priority review
for marketing approval by regulatory agencies in the U.S. and Europe. In addition, both the U.S. and Europe offer financial and regulatory
incentives for the development of new drugs for the treatment of smaller patient populations (Orphan Drugs), and such drugs can be
approved for marketing faster and with less total investment than drugs that are intended to treat major diseases. iBio plans to seek Orphan
Drug designation for its drug candidate for both IPF and for SSc.
9
Recombinant forms of Plasma Derived Products
Using iBioLaunch, we have successfully produced human C1 esterase inhibitor and human alpha 1-antitrypsin, each of which are
important therapeutic products that have been traditionally derived from human blood plasma. The production via the iBioLaunch system
of plasma sparing recombinant forms of these products offers an alternative process that may lessen reliance on human blood supplies and
eliminate the safety concerns that may be associated with use of animal and human cells or other tissue components.
Other Therapeutic Proteins
In addition to the recombinant form of plasma derived products, using iBioLaunch, we have been able to express and demonstrate
the feasibility of production of substantially all other classes of therapeutic proteins. The therapeutic proteins that we have successfully
produced range from large and complex monoclonal antibodies to smaller proteins such as interferons, growth factors, and enzymes. All the
candidate therapeutic proteins manufactured using iBioLaunch have assembled correctly assembled and demonstrated full activity in
relevant bioassays. We are currently evaluating several potential proprietary iBioLaunch produced therapeutic protein candidates for
further development internally at iBio or together with collaborators.
Vaccine Candidates
We have used iBioLaunch to successfully express and demonstrate the feasibility of production of a broad array of vaccine
candidates, including vaccine candidates that have to date been impossible to produce on a commercially practical basis using conventional
manufacturing systems. Additionally, we have used iBioModulator to improve the performance of therapeutic vaccine candidates.
The ability of the iBioLaunch platform to manufacture proteins that are difficult or impossible to produce on a commercially
practical basis with conventional manufacturing systems has been demonstrated by the production of antigens for vaccine candidates for
both hookworm and malaria. These iBioLaunch-produced vaccine candidates are being developed by the Sabin Institute and the Bill and
Melinda Gates Foundation, respectively, and each is being advanced to Phase 1 clinical trials that are expected to be commenced in the next
12 months, subject availability of funding at each respective organization and satisfaction of other conditions.
The safety of an iBioLaunch-produced H1N1 influenza vaccine candidate and an iBioLaunch H5N1 influenza vaccine has been
demonstrated in successfully completed Phase 1 human clinical trials and the efficacy of these iBioLaunch derived vaccine candidates has
been demonstrated in well established, highly predictive animal models. We have also demonstrated the efficiencies of our iBioLaunch
technology at the laboratory level by producing candidate influenza vaccines in weeks versus the months required for commercially used
chicken egg methods. The rapid production of an iBioLaunch derived vaccine candidate for the recently emerged new strain of influenza,
H7N9, demonstrates the flexibility and responsiveness of the platform. This speed of production is an advantage that we believe may be
particularly attractive to public health authorities seeking to protect citizens in the case of a pandemic outbreak.
Our collaborator, FioCruz, is advancing the development of an iBioLaunch-produced yellow fever vaccine candidate. In addition
to furthering preclinical IND enabling studies of this vaccine candidate, in April 2013, FioCruz committed to the design of a new plant-
based multipurpose manufacturing facility in Brazil and anticipates construction of such facility in the next few years. This multipurpose
facility is being designed in manner that will enable the incorporation and utilization of our iBioLaunch platform.
Biodefense Countermeasures
The iBioLaunch and iBioModulator platforms have advantages that we believe are particularly well suited for the biodefense
market. Speed of production and capability to produce both vaccines and therapeutic proteins using the iBioLaunch platform and the
potential to improve performance of vaccines through the application of the iBioModulator platform are each key features of biologics
manufacturing systems that may be sought by governments and state corporations seeking to establish autonomous capabilities to protect
their populations from bioterrorism threats. In addition to our demonstration of the feasibility of iBioLaunch produced monoclonal
antibody candidates for the treatment of anthrax, next generation anthrax vaccine candidates derived from the iBioLaunch platform have
been evaluated by our collaborator, Fraunhofer, pursuant to a funding award granted to Fraunhofer in December 2012 by the National
Institute of Allergy and Infectious Diseases. With Fraunhofer, we are evaluating opportunities and seeking funding from additional sources
to further demonstrate the applicability and advantages of our platforms in connection with the development of biodefense
countermeasures.
Strategic Alliances and Collaborations
A significant component of our business plan is to enter into strategic alliances and collaborations with other for-profit entities,
governments, foundations, and others as appropriate to gain access to funding, capabilities, technical resources and intellectual property to
further our development efforts, commercialize our technology and to generate revenues.
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Collaboration with Fraunhofer Center for Molecular Biology (“Fraunhofer”)
In 2003, we engaged Fraunhofer to perform research and development activities to develop the iBioLaunch platform and to create
our first product candidate. Pursuant to the Technology Transfer Agreement (“TTA”) between our company and Fraunhofer, effective in
January 2004, we paid $3.6 million to Fraunhofer to acquire the exclusive rights to intellectual property owned by Fraunhofer which, as
subsequently enhanced and improved, constitutes the iBioLaunch platform.
Following this initial engagement, we expanded our relationship with Fraunhofer to include additional and continuing research and
development activities and we benefited from the establishment of numerous non-commercial arrangements among the Company, certain
government entities, a non-governmental organization (which we refer to as a “NGO”) and Fraunhofer which allowed us to further advance
the development of our technology platforms and select product candidates through indirect access to non-dilutive funding.
To evidence these expanded activities, at various times, we entered into additional agreements with Fraunhofer and periodically
amended the TTA, including most recently a settlement agreement we entered into with Fraunhofer in September 2013 (the “Settlement
Agreement”). The amendments to the TTA include a commitment by Fraunhofer to further develop exclusively for and transfer to us rights
to proprietary technology and intellectual property rights in the fields defined in the agreements comprising principally plant-based human
vaccines, human antibodies, and human therapeutic proteins and veterinary applications of plant-based influenza vaccines. Additionally the
TTA provides that Fraunhofer will pay to us a royalty payment equal to 9% of all receipts, if any, realized by Fraunhofer from sales,
licensing or commercialization of the intellectual property licensed from us.
Prior to the effective date of the Settlement Agreement, we were obligated to make non-refundable payments to Fraunhofer
aggregating $10,000,000, in installments of $2,000,000 per year over a five year period commencing in November 2009 and expiring in
November 2014, and Fraunhofer was required to expend an amount at least equal to the amounts payable by us for the purpose of engaging
in services to further the development of our technology. In addition to the annual research service payments, we were required to make
royalty payments to Fraunhofer equal to 1% of all receipts derived by us from sales of products utilizing our proprietary technology and
15% of all receipts derived by us from licensing our propriety technology to third parties for a period of fifteen years. Additionally,
beginning in 2010 and continuing until 2024, the TTA provided that we remit minimum annual royalty payments to Fraunhofer in the
amount of $200,000 (the “Minimum Annual Payment”).
The Settlement Agreement, which is intended to better align the mutual interests of iBio and Fraunhofer, has the following effects:
Our liabilities to Fraunhofer in the amount of approximately $2.9 million as of June 30, 2013 were released and terminated;
Our obligation under the TTA, prior to the Settlement Agreement, to make three $1 million payments to Fraunhofer in April 2013,
November 2013, and April 2014 (“Guaranteed Annual Payments”) was terminated and replaced with an undertaking to engage
Fraunhofer for at least $3 million in work requested and directed by iBio before December 31, 2015. We believed that our right to
select and direct specific projects would improve the efficiency of our product development activities and that the extension of the
period over which this commitment must be fulfilled would enhance our ability to manage our cash outflow;
We terminated and released Fraunhofer from the obligation to make further financial contributions toward the enhancement,
improvement and expansion of our technology in an amount at least equal to the Guaranteed Annual Payments, because we believed
our technology development phase was completed and prospectively would be focusing on product development. In addition, we
terminated and released Fraunhofer from the obligation to further reimburse us for certain past and future patent-related expenses;
Our obligation to remit to Fraunhofer minimum annual royalty payments in the amount of $200,000 was terminated. Instead we will
be obligated to remit royalties to Fraunhofer only on technology license revenues that we actually receive and on revenues from
actual sales by us of products derived from our technology until the later of November 2023 or until such time as the aggregate
royalty payments total at least $4 million;
The rate at which we will be obligated to pay royalties to Fraunhofer on iBioLaunch and iBioModulator license revenues we receive
was reduced from 15% to 10%; and
Any and all other claims of each party to any other amounts due at June 30, 2013 were mutually released.
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Additionally, we and Fraunhofer entered into research and development service agreements with respect to two projects,
specifically the further development of the recombinant form of C1 esterase inhibitor and additional development services in connection
with the transfer of our technology related to facility design to FioCruz. The technology transfer for facility design was completed for
$97,767. The C-1 program was suspended after payment of $544,687.
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Alliance with GE Healthcare
In July 2012, we formed a global alliance with GE Healthcare (“GEHC”) to commercialize our plant-based technologies for the
manufacture of biopharmaceuticals and vaccines. The alliance builds on the development and marketing agreement which we entered into
with GEHC in 2010 and seeks to combine the iBioLaunch platform with GEHC’s capabilities in start-to-finish technologies for
biopharmaceutical manufacturing. Under the terms of global alliance agreement, iBio will be the preferred provider of vaccine or
therapeutic product manufacturing technology incorporating a plant based protein expression system, while GEHC will be the preferred
provider of engineering services and bioprocess solutions, to any customers that may be interested in a bio-manufacturing facility
incorporating a plant-based expression system. The global alliance agreement further specifies allocation of responsibilities for product
development, process scale-up, facilities design and development, and technology transfer among iBio, Fraunhofer, and GEHC.
Additionally, the global alliance agreement also sets forth the terms of a non-exclusive commercial license to iBio’s technology that we
have agreed to offer to any customer referred to it by GEHC as a part of the global alliance.
In April 2013, together with GEHC, we announced that FioCruz has committed to build and has recently contracted with GEHC
for the design of new plant-based manufacturing facility that will use our iBioLaunch technology.
The design contract is the first contract resulting from our global alliance which GE Healthcare and we believe it is an example of
how the respective capabilities of iBio and GE Healthcare can be adopted by governments, state corporations and others seeking to
manufacture biologics in a capital and cost efficient manner.
FioCruz Collaboration and License
In January 2011, we entered into collaboration and granted a commercial, royalty-bearing license to FioCruz for the use of our
proprietary technology in connection with the development, manufacture and commercialization by FioCruz of certain vaccine products.
FioCruz, a unit of the Oswaldo Cruz Foundation, a central agency of the Ministry of Health of Brazil, is a leader in the production,
development and commercialization in Latin America of vaccines, reagents and biopharmaceuticals. Additionally, FioCruz, a certified
World Health Organization provider to United Nations agencies, is a global leader in the manufacture of yellow fever vaccine. FioCruz
manufactures and exports yellow fever vaccine to over 60 countries. The World Health Organization has estimated that 200,000
unvaccinated people contract yellow fever each year, and approximately 30,000 die from the disease.
Pursuant to the terms of the collaboration and license agreement among iBio, Fraunhofer and FioCruz, FioCruz has the right to
develop and commercialize yellow fever vaccine derived from the use of our iBioLaunch technology in Latin America, the Caribbean and
Africa. FioCruz will fund development of this vaccine product and if successfully developed and commercialized, iBio will receive royalty
payments from the sales of the product in those territories. iBio has retained the right, which is sublicenseable, to commercialize the
product in all other territories subject to payment of a royalty back to FioCruz. Additionally, FioCruz has engaged iBio to perform certain
research and development activities associated with the yellow fever vaccine project. Based upon the expertise possessed by Fraunhofer, we
engaged Fraunhofer as a subcontractor to perform these research and development services.
In April 2013, FioCruz committed to the design of a new plant-based multipurpose manufacturing facility in Brazil and anticipates
construction of such facility in the next few years. This multipurpose facility is being designed in manner that will enable the incorporation
and utilization of our iBioLaunch platform.
On June 12, 2014, Fiocruz, Fraunhofer and iBio executed an amendment to the Agreement (the “Amended Agreement”) which
provides for revised research and development, work plans, reporting, objectives, estimated budget, and project billing process. The effect
of the amendment resulted in a charge of approximately $1.007 million to general and administrative expenses for the noncollectibility of
an accounts receivable from Fiocruz for revenues recorded for the year ended June 30, 2013 and a credit of approximately $1.007 million to
research and development expenses and a corresponding adjustment to accounts payable relating to expenses accrued at June 30, 2013
owed to Fraunhofer.
For the year ended June 30, 2014, under the Amended Agreement, the Company recognized revenue of $205,000 for work
performed for Fiocruz pursuant to the Amended Agreement by the Company’s subcontractor, Fraunhofer, and recognized research and
development expenses of the same amount — $205,000 – due Fraunhofer for that work.
For the year ended June 30, 2015, under the Amended Agreement, the Company recognized revenue of $1,851,000 for work
performed for Fiocruz pursuant to the Amended Agreement by the Company’s subcontractor, Fraunhofer, and recognized research and
development expenses of the same amount — $1,851,000 - due Fraunhofer for that work.
License and Collaboration with Caliber Biotherapeutics LLC
In February 2013, we entered into a license with Caliber Biotherapeutics LLC, a for-profit biotechnology company that is focused
on the development and commercialization of therapeutic proteins. This license to Caliber is for use of the iBioLaunch platform in
connection with the development of an undisclosed monoclonal antibody-based therapeutic protein for an oncology indication. Caliber will
conduct and fund the development of the product candidate and if successfully developed and commercialized, iBio will receive royalties
on the sale of such product and other revenues.
Research and Development
Our research and development activities are directed and led by our President and by our Chief Scientific Officer. Excepting such
direction and management, we outsource all our research and development activities. Outsourcing our research and development work
allows us to develop our product candidates, and thereby promote the value of such product candidates and our technology platforms for
licensing and product development purposes, without bearing the full risk and expense of establishing and maintaining our own research
and development staff and facilities.
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Fraunhofer was our principal research and development contractor and provided research and development services to us and our
predecessor company from 2003 through 2014. As a part of our collaboration with Fraunhofer, we established a business structure that
allowed us to enlarge and broaden the scope of applications of our platform technology and enhance the value of our retained commercial
rights by leveraging certain funding received by Fraunhofer from governmental entities, NGOs and other similar organizations.
We achieved this result by granting licenses (a) to the government and NGO entities for not-for-profit applications of the
intellectual property for which they have provided funding, and (b) to Fraunhofer for research purposes and applications in fields other than
those retained by iBio or granted to the governmental entity or NGO. iBio retained ownership of the intellectual property and exclusive
worldwide commercial rights in the fields of human health and veterinary influenza applications of the intellectual property. At this time,
we are not pursuing development of such intellectual property in the field of veterinary influenza.
Through June 30, 2015, Fraunhofer has been awarded a total of approximately $33 million in grants from the Bill & Melinda Gates
Foundation for development of product candidates based on the iBioLaunch platform and for research and development of vaccines against
influenza, including H5N1 avian influenza, malaria and African sleeping sickness (trypanosomiasis). To facilitate the grant and continuing
support by the Bill & Melinda Gates Foundation of the activities undertaken by Fraunhofer, we agreed to make our iBioLaunch platform
available to various programs to complete development and provide “Global Access” to vaccines against influenza, rabies virus, malaria
and trypanosomiasis, provided that if the Bill & Melinda Gates Foundation and Fraunhofer do not pursue such programs to completion, the
subject rights revert to us. The term “Global Access” means access for people most in need within the developing world in low income and
lower-middle-income countries, as identified by the World Bank. Because we have exclusive commercial rights to the technology and these
products for human health applications, this grant and any further similar grants benefit us by enabling the enhancement of Fraunhofer to
enhance our platform technology and expansion of the information about the technical performance of product candidates derived from our
technology. We may decide to commercially license such technology to collaborators for advancement into human clinical evaluation and
eventual commercial development.
DoD has also provided funding to Fraunhofer for advanced development of our technology platform and for preclinical and clinical
studies of an anthrax-plague combination vaccine and for an H1N1 influenza vaccine project. Through June 30, 2015, Fraunhofer received
funding and funding commitments for these projects totaling approximately $34 million. This funding is similarly beneficial to us because
we have retained the commercial rights to any technology improvements resulting from those projects.
In December 2012, the National Institute of Allergy and Infectious Diseases, a part of the National Institutes of Health, awarded a
contract to Fraunhofer, for the development of a new generation anthrax vaccine. Fraunhofer is developing this new generation vaccine
using the iBioLaunch platform and the funding it receives pursuant to the National Institute of Allergy and Infectious Diseases. We expect
funded work to advance our technology.
In summary, the advancement of our technology has indirectly benefited from the funding and funding commitments of research
and development activities at Fraunhofer in recent years by U.S. government and non-governmental organizations in aggregate amounts
exceeding $67 million.
Manufacturing
In addition to the platform and product development engagements, in 2006, we engaged Fraunhofer to create a prototype
production module for products made through the use of the iBioLaunch platform. The purpose of this engagement was to attract grants for
the improvement of the prototype to become a pilot plant and to demonstrate the ease and economy with which iBioLaunch-derived
products could be manufactured in order to attract potential licensees and increase the value of our share of business arrangements entered
into with entities. The prototype design, which encompassed the entire production process from seeding, pre-infiltration plant growth,
infiltration of plants with agrobacteria, harvesting of plant tissue and purification of target proteins, was completed in May 2008. A pilot
plant based upon this prototype funded substantially by DARPA was subsequently constructed by Fraunhofer at its facility in Newark,
Delaware. The physical assets consisting of the pilot plant, and the equipment in it, are owned by Fraunhofer and have been validated for
current Good Manufacturing Practices (“cGMP”) production. We are not limited to the use of this facility and have also contracted with
Caliber Biotherapeutics LLC for certain manufacturing services. We also expect to contract with other third party providers for
development, manufacturing, fill and finish services.
Intellectual Property
We exclusively control intellectual property developed at Fraunhofer for human health applications. We also exclusively control
the veterinary field for plant-made influenza vaccines. Our success will depend in part on our ability to obtain and maintain patent
protection for our technologies and products and to preserve our trade secrets. Our policy is to seek to protect our proprietary rights, by
among other methods, filing patent applications in the U.S. and foreign jurisdictions to cover certain aspects of our technology.
We currently own 20 U.S. patents and 28 international patents. Additionally, we have one international patent application allowed,
as well as 6 U.S. and 20 international applications pending. International patents and applications include numerous foreign countries
including Australia, Brazil, Canada, China, Hong Kong, India, Korea, and several countries in Europe. We continue to prepare patent
applications relating to our expanding technology in the U.S. and abroad.
The technology and products covered by our issued and pending patent applications is summarized below:
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Technology and Product Patents (U.S.)
Virus-induced gene silencing in plants
Transient expression of foreign genes in plants
Production of foreign nucleic acids and polypeptides in sprout systems
Production of pharmaceutically active proteins in sprouted seedlings
Systems and method for clonal expression in plants
Recombinant carrier molecule for expression, delivery and purification of target polypeptides
Influenza antigens, vaccine compositions, and related methods
Plague antigens, vaccine compositions, and related methods
Influenza therapeutic antibodies
Trypanosomiasis vaccine
Anthrax antigens, vaccine compositions, and related methods
Pending Technology Patent Applications (U.S. and International)
Virus-induced gene silencing in plants
Activation of transgenes in plants by viral vectors
Protein production in seedlings
Agroinfiltration of plants with launch vector
Transient expression of proteins in plants
Thermostable carrier molecule
Protein expression in clonal root cultures
Production of proteins in plants with launch vector
In vivo deglycosylation of recombinant proteins in plants
Pending Product Patent Applications (U.S. and International)
Antibodies
Influenza vaccines
Influenza therapeutic antibodies
Anthrax vaccines
Plague vaccines
HPV vaccines
Trypanosomiasis vaccine
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o Malaria vaccines
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a
strong emphasis on proprietary products. We face competition from many different sources, including commercial pharmaceutical and
biotechnology enterprises, academic institutions, government agencies and private and public research institutions. Our commercial
opportunities will be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have
fewer side effects or are less expensive than any products that we or our collaborators may develop based on the use of our platform
technology.
While we believe that the potential advantages of the iBioLaunch and iBioModulator platforms will enable us to compete
effectively against other providers of technology for biologic product manufacturing, many of our competitors have significantly greater
financial resources and expertise in research and development, manufacturing, preclinical testing, clinical trials, regulatory approvals and
marketing approved products than we do. Smaller or early stage companies may also prove to be significant competitors, particularly
through arrangements with large and established companies, and this may reduce the value of our platform technologies for the purposes of
establishing license agreements. In addition, these third parties compete with us in recruiting and retaining qualified scientific and
management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and
technology licenses complementary to our programs or advantageous to our business.
We expect to rely upon licensees, collaborators or customers for support in advancing certain of our drug candidates and intend to
rely on additional work with our collaborators during our efforts to commercialize our product candidates. Our licensees, collaborators or
customers may be conducting multiple product development efforts within the same disease areas that are the subjects of their agreements
with us. Agreements with collaborators may not preclude them from pursuing development efforts using a different approach from that
which is the subject of our agreement with them. Any of our drug candidates, therefore, may be subject to competition with a drug
candidate under development by a customer.
There are currently approved vaccines and therapies for many of the diseases and conditions addressed by the product candidates
in our pipeline. There are also a number of companies working to develop new drugs and other therapies for diseases of commercial interest
to us that are undergoing various stages of testing including clinical trials. The key competitive factors affecting the success of our
platforms for commercial product candidates are likely to be efficacy, safety profile, price, and convenience.
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Government Regulation and Product Approval
Regulation by governmental authorities in the U.S. and other countries is a significant factor in the development, manufacturing
and marketing of pharmaceutical drugs and vaccines. All of the vaccine and therapeutic products developed from our platform technologies
will require regulatory approval by governmental agencies prior to commercialization. In particular, pharmaceutical drugs and vaccines are
subject to rigorous preclinical testing and clinical trials and other pre-marketing approval requirements by the FDA and regulatory
authorities in other countries. In the U.S., various federal, and, in some cases, state statutes and regulations, also govern or impact the
manufacturing, safety, labeling, storage, record-keeping and marketing of vaccines and pharmaceutical products. The lengthy process of
seeking required approvals and the continuing need for compliance with applicable statutes and regulations requires the expenditure of
substantial resources. Regulatory approval, if and when obtained for any of our product candidates, may be limited in scope, which may
significantly limit the indicated uses for which our product candidates may be marketed. Further, approved vaccines and drugs are subject
to ongoing review and discovery of previously unknown problems that may result in restrictions on their manufacture, sale or use or in
their withdrawal from the market.
Before any product candidates with potential immunization or therapeutic value may be tested in human subjects, we must satisfy
stringent government requirements for preclinical studies. Preclinical testing includes both in vitro and in vivo laboratory evaluation and
characterization of the safety and efficacy of the product candidate. “In vitro” refers to tests conducted with cells in culture and “in vivo”
refers to tests conducted in animals. Preclinical testing results obtained from studies in several animal species, as well as data from in vitro
studies, are submitted to the FDA as part of an IND and are reviewed by the FDA prior to the commencement of human clinical trials.
These preclinical data must provide an adequate basis for evaluating both the safety and the scientific rationale for the initial clinical trials.
In the case of vaccine candidates, animal immunogenicity and immune protection tests must establish a sound scientific basis to believe
that the product candidate may be beneficial when administered to humans.
An IND becomes effective automatically 30 days after receipt by the FDA, unless the FDA raises concern or questions about the
conduct of the clinical trials as outlined in the IND prior to that time. In such an event, the IND sponsor and the FDA must resolve any
outstanding concerns before clinical trials can proceed. For additional information on the most recent FDA regulations and guidance on
vaccine and therapeutic product testing and approval, visit its website at http://www.fda.gov.
Any products we or a licensee manufactures or distributes under FDA approval are subject to continuing regulation by the FDA,
including record-keeping requirements and reporting of adverse experiences with the products. Drug manufacturers and their
subcontractors are required to register with the FDA and, where appropriate, state agencies, and are subject to periodic unannounced
inspections by the FDA and state agencies for compliance with current cGMPs, which are the standards the FDA requires be met during the
manufacturing of drugs and biologic products, and which impose procedural and documentation requirements upon us and any third party
manufacturers we utilize.
To the extent we conduct vaccine or therapeutic product development activities outside the United States, we will also be subject
to a wide variety of foreign regulations governing the development, manufacture and marketing of our product candidates. Whether or not
FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must still be obtained
prior to manufacturing or marketing the product in those countries. The approval process varies from country to country and the time
needed to secure approval may be longer or shorter than that required for FDA approval. We cannot assure you that clinical trials
conducted in one country will be accepted by other countries or that approval in one country will result in approval in any other country.
The product testing and clinical trial requirements that must be met before a product candidate can be marketed are substantial, time-
consuming, and require investments of millions of dollars per product candidate.
Employees
As of October 5, 2015, we had nine employees. Our employees are not represented by any union and are not the subject of a
collective bargaining agreement. We consider our relations with our employees to be good. Since our business strategy is based on
outsourcing our development and clinical trial work to third parties, we believe this staffing level will be sufficient to meet our needs.
Item 1A. Risk Factors.
Our business faces many risks. Past experience may not be indicative of future performance, and as noted elsewhere in this
Annual Report on Form 10-K, we have included forward-looking statements about our business, plans and prospects that are subject to
change. Forward-looking statements are particularly located in, but not limited to, the sections “Business” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.” In addition to the other risks or uncertainties contained in this report, the
risks described below may affect our operating results, financial condition and cash flows. If any of these risks occur, either alone or in
combination with other factors, our business, financial condition or operating results could be adversely affected and the trading price of
common stock may decline. Moreover, readers should note this is not an exhaustive list of the risks we face; some risks are unknown or not
quantifiable, and other risks that we currently perceive as immaterial may ultimately prove more significant than expected. Statements
about plans, predictions or expectations should not be construed to be assurances of performance or promises to take a given course of
action.
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Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant losses since our inception. We expect to incur losses during our next fiscal year and may never achieve or
maintain profitability.
Since our 2008 spinoff from Integrated BioPharma, Inc., we have incurred operating losses and negative cash flows from
operations. Our net loss was approximately $6.6 million for the year ended June 30, 2015 and approximately $3.7 million for the year
ended June 30, 2014. As of June 30, 2015, we had an accumulated deficit of approximately $47.8 million.
To date, we have financed our operations primarily through the sale of common stock and warrants. We have devoted
substantially all of our efforts to research and development, including the development and validation of our iBioLaunch and
iBioModulator technology platforms and the development of a proprietary therapeutic product against fibrosis based upon our platform. We
have not completed development of or commercialized any vaccine or therapeutic product candidates. We expect to continue to incur
significant expenses and operating losses for at least the next year. We anticipate that our expenses and losses will increase substantially if
we:
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initiate clinical trials of our product candidates;
continue the research and development of our product candidates;
seek to discover additional product candidates; and
add operational, financial and management information systems and personnel, including personnel to support our product
development efforts.
To become and remain profitable, we must succeed in commercializing our iBioLaunch and iBioModulator platforms or we, alone
or with our licensees, must succeed in developing and eventually commercializing iBioLaunch-derived and iBioModulator-enhanced
products that generate significant revenue. This will require us, alone or with our licensees and collaborators, to be successful in a range of
challenging activities, including completing preclinical testing and clinical trials of our product candidates, obtaining regulatory approval
for these product candidates and manufacturing, marketing and selling those iBioLaunch-produced or iBioModulator-enhanced products
for which regulatory approval is obtained or establishing collaborations with parties willing and able to provide necessary capital or other
value. We may never succeed in these activities and may never generate revenues that are significant or large enough to achieve
profitability.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our
failure to become and remain profitable would diminish the value of our company and could impair our ability to raise capital, expand our
business, diversify our product offerings or continue our operations. A decline in the value of our company could also cause you to lose all
or part of your investment.
We will need substantial additional funding to execute our business plan, which funding may not be available on commercially acceptable
terms or at all. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our product development
programs or commercialization efforts.
We have limited financial resources and will need substantial additional funding in connection with our continuing operations. To
the extent that we initiate or continue clinical development without securing collaborator or licensee funding, our research and development
expenses could increase substantially. Additionally, to the extent that our efforts to outlicense our technology platforms and product
candidates are unsuccessful or we find that it is necessary to advance the development of product candidates further than contemplated by
our current business plans to secure favorable licensing terms, we would require substantial additional capital.
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The extent to which we utilize the purchase agreement with Aspire Capital described under Item 1. Business – Overview – Recent
Business Highlights as a source of funding will depend on a number of factors, including the prevailing market price of our common stock,
the volume of trading in our common stock and the extent to which we are able to secure funds from other sources. The number of shares
that we may sell to Aspire Capital under the purchase agreement on any given day and during the term of the agreement is limited.
Additionally, we and Aspire Capital may not effect any sales of shares of our common stock under the purchase agreement during the
continuance of an event of default under the purchase agreement. Even if we are able to access the full $15.0 million under the purchase
agreement, we may still need additional capital to fully implement our business, operating and development plans.
When we elect to raise additional funds or additional funds are required, we may raise such funds from time to time through
public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives, as
well as through sales of common stock to Aspire Capital under the purchase agreement. Additional equity or debt financing or corporate
collaboration and licensing arrangements may not be available on acceptable terms, if at all. If we are unable to raise capital in sufficient
amounts when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or
commercialization efforts and our ability to generate revenues and achieve or sustain profitability will be substantially harmed.
We expect that our existing cash on hand as of June 30, 2015 in the amount of $9.5 million, together with funds we expect to
develop from sales pursuant to the Aspire agreement, will be sufficient to meet our projected operating requirements through fiscal year
ending June 30, 2016. We have based this projection on assumptions that may prove to be wrong, in which case we may deplete our cash
resources sooner than we currently anticipate. Our future capital requirements will depend on many factors, including:
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our ability to attract additional licensees or other third parties willing to fund development, and if successful, commercialization of
iBioLaunch-produced and iBioModulator-enhanced product candidates;
the success and expansion of our existing collaboration with FioCruz and any new license agreements we may enter into;
the costs, timing and regulatory review of our product candidates;
the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related
claims; and
the extent to which we acquire or invest in businesses, products and technologies.
Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to
complete, and we may never generate the data necessary to attract additional licensees and we and our current licensees may never generate
the data required for iBioLaunch-derived or iBioModulator-enhanced product candidates to obtain the regulatory approvals necessary for
product sales. Even if approved, iBioLaunch-derived and iBioModulator- enhanced product candidates may not achieve commercial
success. Currently, we expect our commercial revenues, if any, to be product development fees, development milestone payments, and
other license proceeds, including royalties derived from sales of products that we do not expect to be commercially available for several
years, if at all. Accordingly, to achieve our business objectives we will need to continue to rely on additional financing which may not be
available to us on acceptable terms, or at all.
If we are unsuccessful in raising additional capital or other alternative financing, we might have to defer or abandon our efforts to
commercialize our intellectual property and decrease or even cease operations.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our
technologies or product candidates.
Until such time as we can generate substantial license or product revenues, we expect to finance our cash needs through a
combination of equity offerings, collaborations, strategic alliances, licensing and other arrangements. Sources of funds may not be available
or, if available, may not be available on terms satisfactory to us.
If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available,
would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to
take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or
additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our
stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to
relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on
terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or prohibitively
expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected
and we may be unable to continue our operations.
To the extent that we raise additional capital through a public or private offering and sale of equity securities, your ownership
interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a
stockholder. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may
have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses
on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or
prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and
adversely affected and we may be unable to continue our operations.
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We have a limited operating history, which may limit the ability of investors to make an informed investment decision.
We commenced independent operations in 2008, and our operations to date have included organizing and staffing our company,
business planning, raising capital, acquiring and developing our proprietary iBioLaunch and iBioModulator technology platforms,
identifying potential product candidates and undertaking, through third parties, preclinical trials and clinical trials of product candidates
derived from our technologies .. Excepting two iBioLaunch-derived vaccine candidates that have recently been evaluated in completed
Phase 1 clinical trials, all our other vaccine and therapeutic protein product candidates are still in preclinical development. Neither we nor
our collaborators have completed any other clinical trials for any iBioLaunch-derived or iBioModulator-enhanced vaccine or therapeutic
protein product candidate. As a result, we have not yet demonstrated our ability to successfully complete any Phase 2 or pivotal clinical
trials, obtain regulatory approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct
sales and marketing activities necessary for successful product commercialization. Consequently, any conclusion you reach about our
future success or viability may not be as predictive as it might be if we had a longer operating history.
Risks Related to the Development and Commercialization of Our Platform Technologies and Product Candidates
We may expend our limited resources to pursue a particular technology or product candidate and fail to capitalize on technologies or
product candidates that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on specific product candidates derived from or enhanced by
our technologies. As a result, we may forego or delay pursuit of opportunities with other technology platforms or product candidates that
later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial
products or profitable market opportunities. Our spending may not yield any commercially viable products.
We have based our research and development efforts on our iBioLaunch and iBioModulator platforms and product candidates
derived from such platforms. Notwithstanding our large investment to date and anticipated future expenditures in these platforms, we have
not yet developed, and may never successfully develop, any marketed products using these technologies. As a result of our exclusive use of
the iBioLaunch and iBioModulator platforms, we may fail to address or develop product candidates based on other scientific approaches
that may offer greater commercial potential or for which there is a greater likelihood of success.
We also may not be successful in our efforts to identify or discover additional product candidates using our iBioLaunch and
iBioModulator platforms. Research programs to identify new product candidates require substantial technical, financial and human
resources. These research programs may initially show promise in identifying potential product candidates, yet fail to yield product
candidates for clinical development.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish
valuable rights to that product candidate through collaboration, licensing or other royalty arrangements on terms less favorable to us than
possible.
We are very early in our development efforts. If we or our collaborators are unable to successfully develop and commercialize product
candidates or experience significant delays in doing so, our business will be materially harmed.
We are very early in our development efforts and the clinical experience with iBioLaunch-derived and iBioModulator-enhanced
product candidates is very limited. Excepting two iBioLaunch-derived vaccine candidates that have recently been evaluated in completed
Phase 1 clinical trials, all our other vaccine and therapeutic protein product candidates are still in preclinical development We have
invested substantially all of our efforts and financial resources in developing iBioLaunch and iBioModulator, identifying potential product
candidates, and conducting preclinical studies. Our ability to generate product sales revenues, which we do not expect will occur for many
years, will depend heavily on the successful development and eventual commercialization of our product candidates. The success of our
product candidates will depend on several factors, including the following:
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completion of preclinical studies and clinical trials with positive results;
receipt of marketing approvals from applicable regulatory authorities;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
• making arrangements with third-party manufacturers for commercial manufacturing capabilities;
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launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;
successfully maintaining existing collaborations and entering into new ones throughout the development process as appropriate,
from preclinical studies through to commercialization;
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acceptance of the products, if and when approved, by patients, the medical community and third-party payors;
effectively competing with other products;
obtaining and maintaining coverage and adequate reimbursement by third-party payors, including government payors, for any
products we successfully develop;
protecting our rights in our intellectual property portfolio; and
• maintaining a continued acceptable safety profile of the products following approval.
If we or our collaborators do not achieve one or more of these factors in a timely manner or at all, we could experience significant
delays or an inability to successfully develop and commercialize our product candidates, which would materially harm our business.
We may not be successful in our efforts to use iBioLaunch and iBioModulator to build a pipeline of product candidates and develop
marketable products.
While we believe that data we and our collaborators have obtained from preclinical studies and Phase 1 clinical trials of
iBioLaunch-derived and iBioModulator-enhanced product candidates has validated these technology platforms, our platforms have not yet,
and may never lead to, approvable or marketable products. Even if we are successful in further validating our platforms and continuing to
build our pipeline, the potential product candidates that we identify may not be suitable for clinical development for many possible reasons,
including harmful side effects, limited efficacy or other characteristics that indicate that such product candidates are unlikely to be products
that will receive marketing approval and achieve market acceptance. If we and our collaborators do not successfully develop and
commercialize product candidates based upon our technological approach, we will not obtain product or collaboration revenues in future
periods, which likely would result in significant harm to our financial position and adversely affect our stock price.
Neither we nor our licensees will be able to commercialize product candidates based on our platform technologies if preclinical studies do
not produce successful results or clinical trials do not demonstrate safety and efficacy in humans.
Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and has an
uncertain outcome. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and
interim results of a clinical trial do not necessarily predict final results. We and our licensees may experience numerous unforeseen events
during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent the commercialization of product
candidates based on our iBioLaunch and iBioModulator technologies, including the following:
· Preclinical or clinical trials may produce negative or inconclusive results, which may require additional preclinical testing, additional
clinical trials or the abandonment of projects that we expect to be promising. For example, promising animal data may be obtained
about the anticipated efficacy of a therapeutic protein product candidate and then human tests may not result in such an effect. In
addition, unexpected safety concerns may be encountered that would require further testing even if the therapeutic protein product
candidate produced an otherwise favorable response in human subjects.
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Initial clinical results may not be supported by further or more extensive clinical trials. For example, a licensee may obtain data that
suggest a desirable immune response from a vaccine candidate in a small human study, but when tests are conducted on larger numbers
of people, the same extent of immune response may not occur. If the immune response generated by a vaccine is too low or occurs in
too few treated individuals, then the vaccine will have no commercial value.
· Enrollment in our or our licensee’s clinical trials may be slower than projected, resulting in significant delays. The cost of conducting a
clinical trial increases as the time required to enroll adequate numbers of human subjects to obtain meaningful results increases.
Enrollment in a clinical trial can be a slower-than-anticipated process because of competition from other clinical trials, because the
study is not of interest to qualified subjects, or because the stringency of requirements for enrollment limits the number of people who
are eligible to participate in the clinical trial.
· We or our licensees might have to suspend or terminate clinical trials if the participating subjects are being exposed to unacceptable
health risks. Animal tests do not always adequately predict potential safety risks to human subjects. The risk of any candidate product
is unknown until it is tested in human subjects, and if subjects experience adverse events during the clinical trial, the trial may have to
be suspended and modified or terminated entirely.
· Regulators or institutional review boards may suspend or terminate clinical research for various reasons, including safety concerns or
noncompliance with regulatory requirements.
· Any regulatory approval ultimately obtained may be limited or subject to restrictions or post-approval commitments that render the
product not commercially viable.
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· The effects of iBioLaunch-derived or iBioModulator-enhanced product candidates may not be the desired effects or may include
undesirable side effects.
Significant clinical trial delays could allow our competitors to bring products to market before we or our licensees do and impair
our ability to commercialize our technology platform and product candidates based on our technology platform. Poor clinical trial results or
delays may make it impossible to license a product candidate or so reduce its attractiveness to prospective licensees that we will be unable
to successfully develop and commercialize such a product candidate.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our
product candidates or will not be able to do so as soon as anticipated, and our ability to generate revenue will be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including their design, testing,
manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to
comprehensive regulation by the FDA and by similar regulatory authorities outside the United States. Failure to obtain marketing approval
for a product candidate will prevent us from commercializing the product candidate. We have not received approval to market any of our
product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications
necessary to gain marketing approvals and expect to rely on third parties to assist us in this process. Securing marketing approval requires
the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication
to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the
product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Our product candidates may not
be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other
characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. If any of our product candidates
receives marketing approval, the accompanying label may limit the approved use in such a restrictive manner that it is not possible to
obtain commercial viability for such product.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive and may take many years. If
additional clinical trials are required for certain jurisdictions, these trials can vary substantially based upon a variety of factors, including
the type, complexity and novelty of the product candidates involved, and may ultimately be unsuccessful. Changes in marketing approval
policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review
process for each submitted product application, may cause delays in the review and approval of an application. Regulatory authorities have
substantial discretion in the approval process and may refuse to accept a marketing application as deficient or may decide that our data is
insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained
from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we
ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not
commercially viable.
Although the FDA and other regulatory authorities have approved plant-based therapeutics in the past, consistent with the
oversight of all products, the FDA is monitoring whether these plant-based therapeutics pose any health and human safety risks. While they
have not issued any regulations to date adverse to plant-based vaccines or therapeutics, it is possible that the FDA and other regulatory
authorities could issue regulations in the future that could adversely affect our product candidates.
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects
for our product candidates may be harmed and our ability to generate revenues will be materially impaired.
Alternative technologies may supersede our technologies or make them noncompetitive, which would harm our ability to generate future
revenue.
The manufacture of biologics and the methods of such manufacture are intensely competitive fields. Each of these fields is
characterized by extensive research efforts, which result in rapid technological progress that can render existing technologies obsolete or
economically noncompetitive. If our competitors succeed in developing more effective technologies or render our technologies obsolete or
noncompetitive, our business will suffer. Many universities, public agencies and established pharmaceutical, biotechnology, and other life
sciences companies with substantially greater resources than we have are developing and using technologies and are actively engaging in
the development of products similar to or competitive with our technologies and products. To remain competitive, we must continue to
invest in new technologies and improve existing technologies. To make such renewing investment we will need to obtain additional
financing. If we are unable to secure such financing, we will not have sufficient resources to continue such investment.
Our competitors may devise methods and processes for protein expression that are faster, more efficient or less costly than that
which can be achieved using iBioLaunch. There has been and continues to be substantial academic and commercial research effort devoted
to the development of such methods and processes. If successful competitive methods are developed, it would undermine the commercial
basis for iBioLaunch and iBioModulator.
We have no experience in the sales, marketing and distribution of pharmaceutical products.
If we fail to establish commercial licenses for our iBioLaunch and iBioModulator platforms or fail to enter into arrangements with
partners with respect to the sales and marketing of any of our future potential product candidates, we might need to develop a sales and
marketing organization with supporting distribution capability in order to directly market product candidates we successfully develop.
Significant additional expenditures would be required for us to develop such an in-house sales and marketing organization.
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Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we
may develop.
We face the risk of product liability exposure in connection with the testing of our product candidates in human clinical trials and
will face an even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against
claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual
outcome, liability claims may result in:
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decreased demand for any product candidates or products that we may develop;
injury to our reputation and significant negative media attention;
• withdrawal of clinical trial participants;
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significant costs to defend the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
reduced resources of our management to pursue our business strategy; and
the inability to commercialize any products that we may develop.
Prior to commencing human clinical trials, we will seek to obtain product liability insurance coverage. Such insurance coverage is
expensive and may not be available in coverage amounts we seek or at all. If we obtain such coverage, we may in the future be unable to
maintain such coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Risks Related to Dependence on Third Parties
Establishing and maintaining collaborations is a key component of our business strategy. If we are unable to establish new collaborations
and maintain both new and existing collaborations, or if these collaborations are not successful, our business could be adversely affected.
Our current business plan contemplates that we will in the future derive significant revenues from collaborators and licensees that
successfully utilize iBioLaunch and iBioModulator in connection with the production, development and commercialization of vaccines and
therapeutic protein product candidates. Our realization of these revenues and dependence on existing collaborations, and any future
collaborations we enter into, is subject to a number of risks, including the following:
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Collaborators may have significant discretion in determining the efforts and resources that they will apply to these collaborations;
collaborators may not perform their obligations as expected;
collaborators may not pursue development and, if successful, commercialization of product candidates or may elect not to continue
or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or
available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a
product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our
products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or
can be commercialized under terms that are more economically attractive than ours, which may cause collaborators to cease to
devote resources to the commercialization of our product candidates;
collaborators with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may
not commit sufficient resources to the marketing and distribution of such product or products; or commercialization of product
candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or
arbitration, any of which would be time-consuming and expensive;
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collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a
way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to
potential litigation;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
collaborations may be terminated for the convenience of the collaborator and, if terminated, we would potentially lose the right to
pursue further development or commercialization of the applicable product candidates;
collaborators may learn about our technology and use this knowledge to compete with us in the future;
results of collaborators’ preclinical or clinical studies could produce results that harm or impair other products using our technology;
there may be conflicts between different collaborators that could negatively affect those collaborations and potentially others; and
the number and type of our collaborations could adversely affect our attractiveness to future collaborators or acquirers.
If our collaborations do not result in the successful development and commercialization of products or if one or more of our
collaborators terminates its agreement with us, we may not receive any future research and development funding or milestone or royalty
payments under the collaboration. If we do not receive the funding we expect under these agreements, our continued development of our
product candidates could be delayed and we may need additional resources to develop additional product candidates. There can be no
assurance that our collaborations will produce positive results or successful products on a timely basis or at all.
We seek to establish and collaborate with additional pharmaceutical and biotechnology companies for development and potential
commercialization of iBioLaunch-produced and iBioModulator- enhanced product candidates. We face significant competition in seeking
appropriate collaborators. Our ability to reach a definitive agreement for a collaboration depends, among other things, upon our assessment
of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s
evaluation of a number of factors. If we fail to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all,
we may have to curtail the development of a product candidate, reduce or delay its development or the development of one or more of our
other product candidates, or increase our expenditures and undertake additional development or commercialization activities at our own
expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional
expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do
not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to
further develop our product candidates or bring them to market or continue to develop our product platform and our business may be
materially and adversely affected.
If third parties on whom we or our licensees will rely for the conduct of preclinical studies and clinical trials do not perform as
contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our product candidates and
our business may suffer.
We do not have the ability to independently conduct the preclinical studies and clinical trials required to obtain regulatory
approval for our product candidates. We have not yet contracted with any third parties to conduct clinical trials of product candidates we
develop independently of collaborators. We will depend on licensees or on independent clinical investigators, contract research
organizations and other third party service providers to conduct the clinical trials of our product candidates. We will rely heavily on these
parties for successful execution of our clinical trials but will not control many aspects of their activities. For example, the investigators
participating in our clinical trials will not be our employees. However, we will be responsible for ensuring that each of our clinical trials is
conducted in accordance with the general investigational plan and protocols for the trial. Third parties may not complete activities on
schedule, or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols. The failure of these
third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our product
candidates.
Risks Related to Intellectual Property
If we or our licensors are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent
protection obtained is not sufficiently broad, competitors could develop and commercialize technology and products similar or identical to
ours, and our ability to successfully commercialize our technology and products may be impaired.
Our success depends in part on our ability to obtain and maintain patent and other intellectual property protection in the United
States and other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing
patent applications in the United States and abroad related to our novel technologies and product candidates.
The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or
desirable patent applications at a reasonable cost, in a timely manner, or in all jurisdictions. It is also possible that we will fail to identify
patentable aspects of our research and development output before it is too late to obtain patent protection.
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The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and
factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our
rights to the same extent as the laws of the United States and we may fail to seek or obtain patent protection in all major markets. For
example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States
and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with
certainty whether we were the first to make the inventions claimed in our owned patents or pending patent applications, or that we were the
first to file for patent protection of such inventions, nor can we know whether those from whom we license patents were the first to make
the inventions claimed or were the first to file. As a result, the issuance, scope, validity, enforceability and commercial value of our patent
rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology
or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes
in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents
or narrow the scope of our patent protection.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the
enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was
signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include provisions that
affect the way patent applications are prosecuted and may also affect patent litigation. The U.S. Patent and Trademark Office, or U.S. PTO,
recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes
to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013.
Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith
Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the
enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.
Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S. PTO, or become involved in
opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or
the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or
invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment
to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the
breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from
collaborating with us to license, develop or commercialize current or future product candidates.
Even if our pending or future patent applications issue as patents, they may not issue in a form that will provide us with any
meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our
competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing
manner.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be
challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to
operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop
others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our
technology and products. Given the amount of time required for the development, testing and regulatory review of new product candidates,
patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio
may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-
consuming and ultimately unsuccessful.
Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may
be required to file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers
could provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property. In addition, in a patent
infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s
claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the
technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or
interpreted narrowly, which could adversely affect us and our collaborators.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would
be uncertain and could have a material adverse effect on the success of our business.
Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell
our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable
intellectual property litigation in the biotechnology and pharmaceutical industries. While no such litigation has been brought against us and
we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology,
products or use of our products do not infringe third-party patents. It is also possible that we have failed to identify relevant third-party
patents or applications. For example, applications filed before November 29, 2000 and certain applications filed after that date that will not
be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are
published approximately 18 months after the earliest filing, which is referred to as the priority date. Therefore, patent applications covering
our products or technology could have been filed by others without our knowledge. Additionally, pending patent applications which have
been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, our products or the use
of our products.
23
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with
respect to our products and technology, including interference or derivation proceedings before the U.S. PTO and similar bodies in other
countries. Third parties may assert infringement claims against us based on existing intellectual property rights and intellectual property
rights that may be granted in the future.
If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party
to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on
commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors
access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing
technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are
found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or
force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the
confidential information or trade secrets of third parties could have a similar negative impact on our business.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur
significant expenses, and could distract our limited number of personnel from their normal responsibilities. In addition, there could be
public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or
investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation
or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future
sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings
adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can
because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other
proceedings could compromise our ability to compete in the marketplace.
If we are unable to protect our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including
unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade
secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our
employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties.
We also seek to enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these
efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may
not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties by other means, such as
breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is
difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States
are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by
a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to
compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position
would be harmed.
Risks Related to Business Operations
If we acquire companies, products or technologies, we may face integration risks and costs associated with those acquisitions that could
negatively impact our business, results from operations and financial condition.
If we are presented with appropriate opportunities, we may acquire or make investments in complementary companies, products or
technologies. We may not realize the anticipated benefit of any acquisition or investment. If we acquire companies or technologies, we will
face risks, uncertainties and disruptions associated with the integration process, including difficulties in the integration of the operations of
an acquired company, integration of acquired technology with our products, diversion of our management’s attention from other business
concerns, the potential loss of key employees or customers of the acquired business, and impairment charges if future acquisitions are not
as successful as we originally anticipate. In addition, our operating results may suffer because of acquisition-related costs or amortization
expenses or charges relating to acquired intangible assets. Any failure to successfully integrate other companies, products or technologies
that we may acquire may have a material adverse effect on our business and results of operations. Furthermore, we may have to incur debt
or issue equity securities to pay for any additional future acquisitions or investments, the issuance of which could be dilutive to our existing
stockholders.
24
Risks Relating to Our Common Stock
Our operating results may vary significantly in the future, which may adversely affect the price of our common stock.
It is likely that our operating results may vary significantly in the future and that period-to-period comparisons of our operating
results are not necessarily meaningful indicators of the future. You should not rely on the results of one quarter as an indication of our
future performance. It is also possible that in some future quarters our operating results will fall below our expectations or the expectations
of market analysts and investors. If we do not meet these expectations, the price of our common stock may decline significantly.
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.
Provisions of our certificate of incorporation, bylaws and provisions of applicable Delaware law may discourage, delay or prevent
a merger or other change in control that a stockholder may consider favorable. Pursuant to our certificate of incorporation, our Board of
Directors may issue additional shares of common or preferred stock. Any additional issuance of common stock could have the effect of
impeding or discouraging the acquisition of control of us by means of a merger, tender offer, proxy contest or otherwise, including a
transaction in which our stockholders would receive a premium over the market price for their shares, and thereby protect the continuity of
our management. Specifically, if in the due exercise of its fiduciary obligations, the Board of Directors were to determine that a takeover
proposal was not in our best interest, shares could be issued by our Board of Directors without stockholder approval in one or more
transactions that might prevent or render more difficult or costly the completion of the takeover by:
• Diluting the voting or other rights of the proposed acquirer or insurgent stockholder group,
•
•
Putting a substantial voting block in institutional or other hands that might undertake to support the incumbent Board of Directors,
or
Effecting an acquisition that might complicate or preclude the takeover.
Our certificate of incorporation also allows our Board of Directors to fix the number of directors in the by-laws. Cumulative
voting in the election of directors is specifically denied in our certificate of incorporation. The effect of these provisions may be to delay or
prevent a tender offer or takeover attempt that a stockholder may determine to be in his, her or its best interest, including attempts that might
result in a premium over the market price for the shares held by the stockholders.
We also are subject to Section 203 of the Delaware General Corporation Law. In general, these provisions prohibit a Delaware
corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that
the stockholder became an interested stockholder, unless the transaction in which the person became an interested stockholder is approved
in a manner presented in Section 203 of the Delaware General Corporation Law. Generally, a “business combination” is defined to include
mergers, asset sales and other transactions resulting in financial benefit to a stockholder. In general, an “interested stockholder” is a person
who, together with affiliates and associates, owns, or within three years did own, 15% or more of a corporation’s voting stock. This statute
could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us.
We do not anticipate paying cash dividends for the foreseeable future, and therefore investors should not buy our stock if they wish to
receive cash dividends.
We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future
earnings to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock
in the foreseeable future.
The sale of our common stock through current or future equity offerings may cause dilution and could cause the price of our common stock
to decline.
We are entitled under our certificate of incorporation to issue up to 175 million shares of common stock, par value $.001 per share,
and 1 million shares of preferred stock, with no par value. As of June 30, 2015, we had issued and outstanding approximately 77.2 million
shares of common stock, and 6.6 million and 9.5 million warrants and options, respectively, to purchase shares of common stock.
Additionally, we had approximately 5.5 million shares of common stock reserved for future issuance of additional option grants under our
2008 Omnibus Equity Incentive Plan and 14.9 million shares reserved under the 2015 Aspire Purchase Agreement. Accordingly, we will be
able to issue up to approximately 61.3 million additional shares of common stock and 1.0 million shares of preferred stock. Sales of our
common stock offered through current or future equity offerings may result in substantial dilution to our stockholders. The sale of a
substantial number of shares of our common stock to investors, or anticipation of such sales, could make it more difficult for us to sell
equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
25
The issuance of preferred stock or additional shares of common stock could adversely affect the rights of the holders of shares of our
common stock.
Our Board of Directors is authorized to issue up to 1,000,000 shares of preferred stock without any further action on the part of
our stockholders. Our Board of Directors has the authority to fix and determine the voting rights, rights of redemption and other rights and
preferences of preferred stock. Currently, we have no shares of preferred stock outstanding. Our Board of Directors may, at any time,
authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to
receive dividend payments before dividends are distributed to the holders of common stock, and the right to the redemption of the shares,
together with a premium, before the redemption of our common stock, which may have a material adverse effect on the rights of the holders
of our common stock. In addition, our Board of Directors, without further stockholder approval, may, at any time, issue large blocks of
preferred stock. In addition, the ability of our Board of Directors to issue shares of preferred stock without any further action on the part of
our stockholders may impede a takeover of our company and may prevent a transaction that is favorable to our stockholders.
Risks Related to Our Agreement with Aspire Capital
Sales of our common stock to Aspire Capital may cause substantial dilution to our existing stockholders and the sale of the shares of our
common stock acquired by Aspire Capital could cause the price of our common stock to decline.
On May 29, 2015, we filed a prospectus supplement to our Registration Statement on Form S-3 (Registration No. 333-200410) registering
$15.0 million of our common stock that we may issue and sell to Aspire Capital from time to time pursuant to the 2015 Aspire Purchase
Agreement described under Item 1. Business – Overview – Recent Business Highlights, together with the 450,000 Commitment Shares
issued to Aspire Capital in consideration for entering into the 2015 Aspire Purchase Agreement. It is anticipated that shares offered to
Aspire Capital will be sold over a period of up to 36 months from the date of the prospectus supplement. The number of shares ultimately
offered for sale to Aspire Capital is dependent upon the number of shares we elect to sell to Aspire Capital under the 2015 Aspire Purchase
Agreement. Depending upon market liquidity at the time, sales of shares of our common stock under the 2015 Purchase Agreement may
cause the trading price of our common stock to decline.
Aspire Capital may ultimately purchase all, some or none of the $15.0 million of our common stock that we may sell under the 2015
Aspire Purchase Agreement. After Aspire Capital has acquired shares under the 2015 Aspire Purchase Agreement, it may sell all, some or
none of those shares. Sales to Aspire Capital by us pursuant to the 2015 Aspire Purchase Agreement may result in substantial dilution to the
interests of other holders of our common stock. The sale of a substantial number of shares of our common stock to Aspire Capital, or
anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price
that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of our shares to
Aspire Capital and the 2015 Aspire Purchase Agreement may be terminated by us at any time at our discretion without any cost to us.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Property.
Our principal office is located in subleased space, leased on a month-to-month basis, at 600 Madison Avenue, New York, New York, and
includes shared use of common facilities. In this space, we perform or maintain oversight of our administrative, clinical development,
regulatory affairs and business development functions.
26
Item 3. Legal Proceedings.
The following information supplements and amends our discussion set forth under Part II, Item 1 “Legal Proceedings” in the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.
On October 22, 2014, the Company filed a Verified Complaint in the Court of Chancery of the State of Delaware against PlantForm
Corporation (“PlantForm”) and PlantForm’s president seeking equitable relief and damages based upon PlantForm’s interference with
several contracts between the Company and Fraunhofer USA’s Center for Molecular Biotechnology unit (“Fraunhofer”) and one of the
Company’s consultants and misappropriating the Company’s intellectual property including trade secrets and know-how. On May 14,
2015, after mediation ordered and supervised by the Chancery Court, PlantForm represented and agreed that all drug development and
manufacturing activities of PlantForm with Fraunhofer had ceased and would not be renewed at least until after the termination of the
Company’s litigation regarding similar subject matter with Fraunhofer, and all of the accrued claims between the Company and PlantForm
and its President were voluntarily dismissed with prejudice.
On March 17, 2015 the Company filed a Verified Complaint in the Court of Chancery of the State of Delaware against Fraunhofer and
Vidadi Yusibov (“Yusibov”), Fraunhofer’s Executive Director, seeking monetary damages and equitable relief based on Fraunhofer’s
material and continuing breaches of their contracts with the Company. On September 16, 2015, the Company voluntarily dismissed its
action against Yusibov, without prejudice, and thereafter on September 29, 2015, the Company filed a Verified Amended Complaint
against Fraunhofer alleging material breaches by Fraunhofer of its agreements with the Company and seeking monetary damages and
equitable relief against Fraunhofer. The Company is unable to predict the ultimate outcome of this action at this time.
On October 24, 2014, a putative class action captioned Juan Pena, Individually and on Behalf of All Others Similarly Situated v. iBio, Inc.
and Robert B. Kay was filed in the United States District Court for the District of Delaware. The action alleged that the Company and its
Chief Executive Officer made certain statements in violation of federal securities laws and sought an unspecified amount of damages. On
February 23, 2015, the Court issued an order appointing a new lead plaintiff. On April 6, 2015, the plaintiffs filed an amended class action
complaint in the same matter captioned Vamsi Andavarapu, Individually And On Behalf Of All Others Situated v. iBio, Inc., Robert B. Kay,
and Robert Erwin. The action alleged that the Company, its Chief Executive Officer, and its President made certain statements in violation
of federal securities laws and sought an unspecified amount of damages. On May 6, 2015, the Company, Mr. Kay, and Mr. Erwin filed a
motion to dismiss the amended class action complaint. On September 15, 2015, after voluntary mediation, the Plaintiffs and the Company
reached an agreement-in-principle to settle the action. The terms of the settlement are subject to preliminary and final approval by the
Court. The Company expects that the settlement will be approved by the Court and funded by the Company’s insurance carrier.
Item 4. Mine Safety Disclosures.
Not applicable.
27
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
PART II
Market Information
Our common stock is traded on the NYSE MKT under the trading symbol “IBIO.”
The following table sets forth the high and low sale prices for our common stock during the years ended June 30, 2015 and 2014 as
reported by the NYSE MKT. The quotations shown represent inter-dealer prices without adjustment for retail markups, markdowns or
commissions, and may not necessarily reflect actual transactions.
Year ended June 30, 2015:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year ended June 30, 2014:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
Low
$
$
$
$
$
$
$
$
0.75 $
3.21 $
1.06 $
1.07 $
0.62 $
0.45 $
0.68 $
0.52 $
0.39
0.61
0.42
0.74
0.42
0.29
0.35
0.36
Holders
As of October 5, 2015, there were 108 holders of record of our common stock.
Dividends
We have never declared or paid any cash dividends on our common stock.
Item 6. Selected Financial Data.
The information under this Item is not required to be provided by smaller reporting companies.
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 on Form 10-K.
Forward-Looking Information and Factors That May Affect Future Results
The following discussion contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995. All statements contained in the following discussion, other than statements that are purely historical, are forward-
looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,”
“may,” “will,” “should,” “potential,” “anticipates,” “plans,” or “intends” or the negative thereof, or other variations thereof, or comparable
terminology, or by discussions of strategy. Forward-looking statements are based upon management’s present expectations, objectives,
anticipations, plans, hopes, beliefs, intentions or strategies regarding the future and are subject to known and unknown risks and
uncertainties that could cause actual results, events or developments to be materially different from those indicated in such forward-looking
statements, including the risks and uncertainties set forth in Item 1A - Risk Factors. These risks and uncertainties should be considered
carefully and readers are cautioned not to place undue reliance on such forward-looking statements. As such, no assurance can be given
that the future results covered by the forward-looking statements will be achieved.
Overview
We are a biotechnology company focused on commercializing our proprietary platform technologies, iBioLaunch™ and
iBioModulator™, and developing select product candidates based upon these platforms. iBioLaunch is a proprietary, transformative
platform technology for development and production of biologics using transient gene expression in hydroponically grown, unmodified
green plants. iBioModulator is a proprietary technology platform that is designed to improve the potency and duration of effect of both
prophylactic and therapeutic vaccines produced with any recombinant expression technology including iBioLaunch.
28
Stated simply, iBioLaunch harnesses the natural protein production capability that plants use to sustain their own growth, and
directs it instead to produce proteins that comprise the active pharmaceutical ingredients in vaccines and biopharmaceuticals. The
platform’s ability to produce a wide array of biologics is evidenced by, among other things, our validated pipeline of iBioLaunch-produced
product candidates. The iBio pipeline includes products against fibrotic diseases, vaccines, enzyme replacements, monoclonal antibodies,
and recombinant versions of marketed products that are currently derived from human blood plasma.
In addition to the broad array of biological products that can be produced with iBioLaunch, we believe this technology offers other
advantages that are not available with conventional manufacturing systems. These anticipated advantages may include reduced production
time and lower capital and operating costs. In May 2013, the speed of iBioLaunch production was demonstrated when a third party
laboratory using the iBioLaunch platform was able, in a 21 day period from receipt of antigen sequence information to purification of
recombinant protein, to successfully produce a vaccine candidate for the newly emerged H7N9 influenza virus. We believe the successful
production of this vaccine candidate demonstrates, among other things, that it is possible to utilize the iBioLaunch platform to produce
vaccine doses for emergency use against pandemic and bioterrorism threats in weeks rather than the months necessary with the use of
engineered or attenuated virus strains. Further, we believe that the capital investment required to construct facilities that will manufacture
proteins on the iBioLaunch platform will be substantially less than the capital investment which would be required for the construction of
similar capacity facilities utilizing conventional manufacturing methods dependent upon animal cells, bacterial fermenters and chicken
eggs. Additionally, operating costs in a manufacturing facility using the iBioLaunch platform are expected to be reduced significantly in
comparison to conventional manufacturing processes due to the rapid nature of the iBioLaunch production cycle and the elimination of the
expenses associated with the operation and maintenance of bioreactors, fermenters, sterile liquid handling systems and other expensive
equipment which is not required in connection with the use of the iBioLaunch platform.
The ability of the iBioLaunch platform to manufacture proteins that are difficult or impossible to produce on a commercially
practicable basis with conventional manufacturing systems has been demonstrated by the production of antigens for vaccine candidates for
both hookworm and malaria. These iBioLaunch-produced vaccine candidates are being developed by the Sabin Institute and the Bill and
Melinda Gates Foundation, respectively. Phase 1 clinical trials for each have commenced.
In addition to the clinical development of these vaccine candidates, Bio-Manguinhos/FioCruz, or FioCruz, a unit of the Oswaldo
Cruz Foundation, a central agency of the Ministry of Health of Brazil, is sponsoring the development an iBioLaunch-produced yellow
fever vaccine to replace the vaccine it currently makes in chicken eggs for the populations of Brazil and more than 20 other nations. These
advances are occurring subsequent to the demonstration of safety of iBioLaunch-produced vaccine candidates against each of the H1N1
“Swine” flu virus and the H5N1 avian flu virus in successfully completed Phase 1 clinical trials.
We developed our iBioModulator technology based on the use of a modified form of the cellulose degrading enzyme lichenase, or
LicKM, from Clostridium thermocellum, a thermophilic and anaerobic bacterium. iBioModulator enables an adjuvant component to be
fused directly to preferred recombinant antigens to create a single protein for use in vaccine applications. Multiple proteins or antigenic
domains of proteins can be fused to various portions of LicKM to enhance vaccine performance.
The iBioModulator platform has been shown to be applicable to a range of vaccine proteins and can significantly modify the
immune response to a vaccine in two important ways. Animal efficacy studies have demonstrated that it can increase the strength of the
initial immune response to a vaccine antigen (as measured by antibody titer) and also extend the duration of the immune response. These
results suggest the possibility that use of the iBioModulator platform may lower vaccine antigen requirements and enable fewer doses to
establish prolonged protective immunity. We believe that the ability to provide better immune response and longer-term protection with
fewer or zero booster inoculations would add significant value to a vaccine by reducing the overall costs and logistical difficulties of its use.
Our near-term focus is to realize two key objectives: (1) the establishment of additional business arrangements pursuant to which
commercial, government and not-for-profit licensees will utilize iBioLaunch and iBioModulator in connection with the production and
development of therapeutic proteins and vaccine products; and (2) the further development of select product candidates based upon or
enhanced by our technology platforms. These objectives are the core components of our strategy to commercialize the proprietary
technology we have developed and validated.
Our strategy to engage in partnering and out-licensing of our technology platforms seeks to preserve the opportunity for iBio to
share in the successful development and commercialization of product candidates by our licensees while enhancing our own capital and
financial resources for development, alone or through commercial alliances with others, of high-potential product candidates based upon
our platforms. In addition to financial resources we may receive in connection with the license of our platform technologies, we believe that
successful development by third party licensees of iBioLaunch-derived and iBioModulator-enhanced product candidates will further
validate our technology, increase awareness of the advantages that may be realized by the use of such platforms and promote broader
adoption of our technologies by additional third parties.
The advancement of iBioLaunch-derived and iBioModulator-enhanced product candidates is a key element of our strategy. We
believe that selecting and developing products which individually have substantial commercial value and are representative of classes of
pharmaceuticals that can be successfully produced using either or both of our technology platforms will allow us to maximize the near and
longer term value of each platform while exploiting individual product opportunities. To realize this result, we are currently advancing
designated product candidates through the preclinical phase of development and undertaking the studies required for submission of
Investigational New Drug Applications, or INDs. The most advanced product candidate we are currently internally advancing through
preclinical IND enabling studies is a proprietary recombinant protein we call IBIO-CFB03 for treatment of idiopathic pulmonary fibrosis,
systemic sclerosis, and potentially other fibrotic diseases. To the extent that we anticipate the opportunity to realize additional value, we
may elect to further the development of this or other product candidates through the early stages of clinical development before seeking to
license the product candidate to other industry participants for late stage clinical development and if successful, commercialization.
29
Results of Operations
Revenue
Gross revenue for 2015 and 2014 was approximately $1.85 million and $205,000, respectively.
Revenue has been attributable to technology services provided to FioCruz in connection with the development by FioCruz of a yellow fever
vaccine using our iBioLaunch™ technology. To fulfill our obligations, we engage Fraunhofer USA Inc. as a subcontractor to perform the
services required. During 2013, the Company, FioCruz and Fraunhofer were awaiting approval by the Brazilian government of a contract
amendment reflecting the agreed modifications to the work plan. During this waiting period, no revenues were recognized by the Company
in connection with services provided to FioCruz through the subcontract arrangement with Fraunhofer. In June 2014, the Company,
FioCruz and Fraunhofer amended their Collaboration and License Agreement reflecting the agreed modifications to the work plan and work
was resumed by Fraunhofer for the Company to continue development of a yellow fever vaccine using the Company’s iBioLaunch ™
technology.
Research and Development Expenses
Research and development expenses for 2015 were $3.5 million. Research and development expenses for 2014 were approximately
($150,000). However, research and development expenses for 2014 included (i) a credit of $1.04 million resulting from the reversal of
expenses accrued through June 30, 2013 under the TTA prior to the Settlement Agreement with Fraunhofer completed in September 2013
and (ii) the reversal of expenses totaling $1.007 million incurred during 2013 as the result of the Amendment discussed above. Adjusting
for this, research and development spending was approximately $1.9 million for 2014, an increase of approximately $1.6 million. The
increase was primarily related to the modifications to the work plan described above.
General and Administrative Expenses
General and administrative expenses for 2015 were approximately $5.0 million, as compared to approximately $4.2 million for 2014.
However, general and administrative expenses for the prior year included (i) a credit of $700,000 resulting from the reversal of royalty
expenses accrued through June 30, 2013 under the TTA prior to the Settlement Agreement with Fraunhofer completed in September 2013
and (ii) the write-off of an accounts receivable of $1.007 million recorded in 2013 as a result of the Amendment discussed above. Adjusting
for this, general and administrative spending was approximately $3.9 million for 2014, an increase in the current period of approximately
$1.1 million over the adjusted results of 2014. The increase is attributable primarily to legal fees. General and administrative expenses
principally include officer and employee salaries and benefits, legal and accounting fees, insurance, consulting services, investor and public
relations services, and other costs associated with being a publicly traded company.
Other Income (Expense)
Other income for 2015 was approximately $41,000, as compared to other income of approximately $174,000 for 2014. However, other
income for the prior period included a credit of $122,000 resulting from the reversal in interest expense accrued through June 30, 2013
under the TTA prior to the Settlement Agreement with Fraunhofer completed in September 2013. Adjusting for this, other income was
approximately $52,000 for the prior period.
Liquidity and Capital Resources
As of June 30, 2015, we had cash of $9.5 million as compared to $3.6 million as of June 30, 2014.
30
Net Cash Used in Operating Activities
Net cash used in operating activities was $4.7 million. The decrease in cash was primarily attributable to funding the loss for the period.
Net Cash Used in Investing Activities
Net cash used in investing activities was approximately $215,000. Cash used in investing activities was attributable to additions to
intangible assets of $202,000 and purchases of fixed assets for iBio Brazil of $13,000.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $10.9 million. Aspire Capital purchased 8,768,806 shares of common stock for $10 million
pursuant to the terms of the common stock purchase agreement entered into with Aspire Capital on August 25, 2014 (the “2014 Aspire
Purchase Agreement”), fulfilling its commitment under the 2014 Aspire Purchase Agreement. In addition, the Company issued 1,663,000
shares of common stock for the exercise of warrants and received proceeds of approximately $867,000.
On May 15, 2015, the Company entered into a common stock purchase agreement (the “2015 Aspire Purchase Agreement”) with Aspire
Capital described under Item 1. Business – Overview – Recent Business Highlights, pursuant to which the Company has the option to
require Aspire Capital to purchase up to an aggregate of $15.0 million of shares of its common stock upon and subject to the terms of the
2015 Aspire Purchase Agreement. As of the date of the filing of this report, Aspire Capital has not purchased any shares under 2015 Aspire
Purchase Agreement.
Funding Requirements
We have incurred significant losses and negative cash flows from operations since our spinoff from Integrated BioPharma, Inc. in August
2008. As of June 30, 2015, our accumulated deficit was approximately $47.8 million, and we used approximately $4.7 million of cash for
operating activities for the year ended June 30, 2015. As of June 30, 2015, cash on hand of approximately $9.5 million is expected to
support the Company’s activities through June 30, 2016.
We have historically financed our activities through the sale of common stock and warrants. We plan to fund our future business operations
using cash on hand, through proceeds from the sale of additional equity and other securities and through proceeds realized in connection
with license and collaboration arrangements.
On August 25, 2014, we entered into the 2014 Aspire Purchase Agreement with Aspire Capital, pursuant to which the Company had the
option to require Aspire Capital to purchase up to $10 million of its common stock upon and subject to the terms of the agreement over a
two-year period. As of April 28, 2015, Aspire Capital fulfilled its commitment to purchase $10.0 million of the Company’s common stock
under the 2014 Aspire Purchase Agreement . On May 15, 2015, the Company entered into a new common stock purchase agreement with
Aspire Capital (the “2015 Aspire Purchase Agreement”), pursuant to which the Company has the option to require Aspire Capital to
purchase up to $15 million of its common stock, upon and subject to the terms of the agreement, over a three-year term. Despite the receipt
of these proceeds, we may still need additional capital to fully implement our business, operating and development plans for periods
beyond June 30, 2016.
On November 20, 2014, we filed with the Securities and Exchange Commission a Registration Statement on Form S-3 under the Securities
Act, which was declared effective by the Securities and Exchange Commission on December 2, 2014. This registration statement allows us,
from time to time, to offer and sell shares of common stock, shares of preferred stock, debt securities, units comprised of shares of common
stock, preferred stock, debt securities and warrants in any combination, and warrants to purchase common stock, preferred stock, debt
securities and/or units, up to a maximum aggregate amount of $100 million of such securities. On May 29, 2015, we filed a prospectus
supplement to the Registration Statement registering $15.0 million of our common stock that we may issue and sell to Aspire Capital from
time to time pursuant to the 2015 Aspire Purchase Agreement, together with the 450,000 Commitment Shares issued to Aspire Capital in
consideration for entering into the 2015 Aspire Purchase Agreement. We currently have no other firm agreements with any third parties for
the sale of our securities pursuant to this registration statement. We cannot be certain that funding will be available on favorable terms or
available 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, 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, 2015, 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 financial statements are presented in accordance with accounting principles that are generally accepted in the U.S. (“U.S. GAAP”). All
applicable U.S. GAAP accounting standards effective as of June 30, 2015 have been taken into consideration in preparing the financial
statements. The preparation 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 financial statements.
31
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.
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.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or
determinable, and collectability is reasonably assured. Deferred revenue represents billings to a customer to whom the services have not yet
been provided.
Research and Development Costs
All research and development costs are expensed as incurred. These expenses consist primarily of payments to third-party contractual
service providers and internal personnel costs.
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, and the vesting schedule. 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.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized. The effect of a
change in tax rates or laws on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date of
the rate change. A valuation allowance is established to reduce the deferred tax assets to the amounts that are more likely than not to be
realized from operations.
Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position
taken on an income tax return.
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-22 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
32
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Our management, under the direction of our Executive Chairman and Chief Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15 under the Exchange Act) as of June 30, 2015. Based on that evaluation, our
Executive Chairman and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30,
2015.
(b) Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) under the Exchange Act,
during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
(c) Management’s Report on Internal Control over Financial Reporting
It is the responsibility of the management of iBio, Inc. 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, 2015 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, 2015.
/s/Robert B. Kay
Robert B. Kay
Executive Chairman
(Principal Executive Officer)
October 13, 2015
/s/Mark Giannone
Mark Giannone
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
October 13, 2015
(d) Report of Independent Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report by CohnReznick LLP, 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 Securities and Exchange
Commission that permit us to provide only management’s report.
Item 9B. Other Information.
None.
33
Item 10. Directors, Executive Officers and Corporate Governance
DIRECTORS
PART III
The name, age, years of service on our board of directors, principal occupation and business experience and certain other information for
each of our directors as of October 5, 2015 is set forth below:
Name
Robert B. Kay
Glenn Chang
Arthur Elliott, Ph.D.
Seymour Flug.
General (Ret.) James T. Hill
John D. McKey, Jr.
Philip K. Russell, M.D.
Age
75
67
79
80
69
72
83
Years of Service on our Board of Directors
Director since August 2008
Director since August 2008
Director since October 2010
Director since December 2012
Director since August 2008
Director since August 2008
Director since March 2010
The principal occupation, business experience and certain other information for each our directors is set forth below.
Robert B. Kay is our Executive Chairman and Chief Executive Officer and has served in these capacities since we became a publicly traded
company in August 2008. Previously, Mr. Kay was a founder and senior partner of the New York law firm of Kay Collyer & Boose LLP,
with a particular focus on mergers and acquisitions and joint ventures. Mr. Kay received his B.A. from Cornell University’s College of Arts
& Sciences and his J.D. from New York University Law School. Mr. Kay oversees every aspect of our business in his role as executive
chairman and chief executive officer. Given his years with the company and his prior experience, we believe that Mr. Kay has an excellent
understanding of our business and the global markets in which we operate and those in which we anticipate operating in the future.
Glenn Chang Since February 2014, Glenn Chang serves as Chief Financial Officer of Singer Vehicle Design, a private company in the
business of automotive design and restoration. Mr. Chang served as the Chief Financial Officer of Alma Bank, a New York headquartered
bank with over $900 million of assets and 13 branches in the New York City Metropolitan area from late 2012 to February 2014. Before
joining Alma, from 1999 to 2012, Mr. Chang served as a founder, Director, Chief Financial Officer and consultant to First American
International Bank which is the largest locally owned Chinese American Bank. Prior to that he spent 20 years at Citibank, N.A as Vice
President. Mr. Chang is a retired Certified Public Accountant. Mr. Chang’s extensive executive and financial leadership in his current and
former positions and his training and experience as a Certified Public Accountant adds vital expertise to our board of directors and our
Audit Committee in the form of financial understanding, business perspective and audit expertise. Mr. Chang is qualified as an Audit
Committee Financial Expert as defined in Regulation S-K Item 407(d)(5)(ii).
Arthur Y. Elliott, Ph.D. serves as a member of the American Association for Advancement of Science, American Society for
Microbiology, and American Tissue Culture Association. Prior to retiring, Dr. Elliott spent 16 years with Merck & Co., serving ultimately
as Executive Director of Biological Operations, Merck Manufacturing Division, responsible for the bulk manufacture, testing, release and
registration of all biological products sold. Dr. Elliott also directed the manufacturing, process development, and other operations of North
American Vaccine, Inc. for six years, and most recently served as consultant to Aventis (Sanofi Pasteur) Pharmaceutical Corporation in its
design and implementation of new, highly automated manufacturing facilities for influenza vaccines. Dr. Elliott has served with the United
States Department of Health and Human Services (“HHS”) in the Avian Influenza Pandemic Preparedness Program in Washington, D.C. as
Senior Program Manager for the Antigen Sparing Project since 2006. The program involves the cooperation of three pharmaceutical
companies and four government groups (NIH, CDC, United States Food and Drug Administration, and HHS). While at Merck, he worked
closely with both Merck Research Laboratories and the Merck Vaccine Division to forecast the timely transfer of technology for new and
improved products from the research laboratories through the manufacturing area and into the marketing division for sales introductions.
He has served as a biological consultant to the World Health Organization, NIH, and The Bill & Melinda Gates Foundation. Dr. Elliott
holds a Ph.D. in Virology from Purdue University, and an M.S. in Microbiology and a B.A. in Biology from North Texas State University.
Dr. Elliot’s extensive experience and expertise with the manufacture of vaccines and therapeutics is particularly relevant to our business and
our efforts to manufacture such products which in a key component of our business.
Seymour Flug prior to retiring was Chairman of the Board and CEO of Diners Club International and a Managing Director of Citibank.
Prior to joining Citibank, Mr. Flug served as Senior Vice President of Hess Oil Company. Mr. Flug began his career as Certified Public
Accountant at Deloitte & Touche, a predecessor to the firm now known as Deloitte. Mr. Flug received his B.B.A from Baruch College.
Mr. Flug’s experience leading a multinational company and his experience as a certified public accountant allow him to offer us unique
perspectives on global business opportunities, best business practices and additional audit expertise. Mr. Flug is qualified as an Audit
Committee Financial Expert as defined in Regulation S-K Item 407(d)(5)(ii).
34
General (Ret.) James T. Hill was the Commander of the 4-Star United States Southern Command, reporting directly to the President and
Secretary of Defense at the time of his retirement from active duty. As such he led all U.S. military forces and operations in Central
America, South America and the Caribbean, worked directly with U.S. Ambassadors, foreign heads of state, key Washington decision-
makers, foreign senior military and civilian leaders, developing and executing United States policy. His responsibilities included
management, development and execution of plans and policy within the organization including programming, communications, manpower,
operations, logistics and intelligence. General Hill’s experience implementing plans and policies within diverse geographic regions and his
insights regarding the conduct of business affairs in Central and South America is a key resource for us.
John D. McKey, Jr. serves since 2003 as of counsel at McCarthy, Summers, Bobko, Wood, Sawyer & Perry, P.A. in Stuart, Florida, and
previously was a partner from 1987 through 2003. From 1977 to 1987, Mr. McKey was a partner at Gunster Yoakley in Palm Beach,
Florida. Mr. McKey received his B.B.A at the University of Georgia and his J.D. from the University Of Florida College Of Law. Mr.
McKey’s extensive experience representing private and public companies operating in varied business sectors brings our board insights and
acumen to best corporate practices and implementation of strategic and financial plans.
Philip K. Russell, M.D. served in the U.S. Army Medical Corps from 1959 to 1990, pursuing a career in infectious disease and tropical
medicine research. Following his military service, Dr. Russell joined the faculty of Johns Hopkins University’s School of Hygiene and
Public Health and worked closely with the World Health Organization as special advisor to the Children’s Vaccine Initiative. He was
founding board member of the International AIDS Vaccine Initiative, and is an advisor to the Bill & Melinda Gates Foundation. He has
served on numerous advisory boards of national and international agencies, including the Centers for Disease Control (“CDC”), the
National Institutes of Health (“NIH”) and the Institute of Medicine. Dr. Russell is a past Chairman of the Albert B. Sabin Vaccine Institute.
Dr. Russell’s extensive experience and expertise in the field of infectious diseases and his association with leading governmental and not-
for-profit entities engaged in pioneering work throughout the world provides us with invaluable insights into priorities for these entities and
business development opportunities for us.
EXECUTIVE OFFICERS
The following table sets forth the names, ages and biographical information of our executive officers as of October 5, 2015:
Name
Robert B. Kay
Robert L. Erwin
Mark Giannone
Terence Ryan, Ph.D.
Age
75
62
58
60
Position Held With Us
Executive Chairman and Chief Executive Officer
President
Chief Financial Officer
Chief Scientific Officer
The following are brief biographies of each executive officer:
Robert B. Kay has been our executive chairman and chief executive officer since we became a publicly traded company in August 2008.
Mr. Kay was a founder and senior partner of the New York law firm of Kay Collyer & Boose LLP, with a particular focus on mergers and
acquisitions and joint ventures. Mr. Kay received his B.A. from Cornell University’s College of Arts & Sciences and his J.D. from New
York University Law School.
Robert L. Erwin has been our President since we became a publicly traded company in August 2008. Mr. Erwin led Large Scale Biology
Corporation from its founding in 1988 through 2003, including a successful initial public offering in 2000, and continued as non-executive
Chairman until 2006. He served as Chairman of Icon Genetics AG from 1999 until its acquisition by a subsidiary of Bayer AG in 2006. Mr.
Erwin recently served as Managing Director of Bio-Strategic Directors LLC, providing consulting services to the life sciences industry. He
is currently Chairman of Novici Biotech, a private biotechnology company and a Director of Oryn Therapeutics. Mr. Erwin’s non-profit
work focuses on applying scientific advances to clinical medicine, especially in the field of oncology. He is co-founder, President and
Director of the Marti Nelson Cancer Foundation, Oncology. Mr. Erwin received his BS degree with Honors in Zoology and an MS degree
in Genetics from Louisiana State University.
Mark Giannone has served as our Chief Financial Officer since December 2013. Mr. Giannone has been a member of the accounting firm
of Bosco Giannone LLC since its formation in 1999. His prior experience included employment as a senior accountant at Kenneth
Leventhal & Co. (acquired by Ernst &Young LLP) and as a tax manager at BDO Seidman, a lecturer in various continuing education
programs for the New York State Society of Certified Public Accountants and New York University.
Terence E. Ryan , Ph.D., has been our chief scientific officer since March 2012, and prior to that served as senior vice president since
joining the Company in July 2010. Dr. Ryan previously served as assistant vice president, Systems Biology at Wyeth Pharmaceuticals
(later Pfizer, Inc.) from 2007 to 2010, and director of Integrative Biology at GlaxoSmithKline from 2003 to 2007. He has also been director,
Cell Biology at Celera Genomics from 2000 to 2003 and associate director of Cell Technologies and Protein Sciences at Regeneron
Pharmaceuticals, Inc. Dr. Ryan received his A.B. in Biology from Princeton University, his M.S. and Ph.D. in Microbiology from Rutgers
University and was a post-doctoral fellow in Molecular Virology at the University of Wisconsin.
35
CORPORATE GOVERNANCE
Board Committees
Our board of directors has the authority to appoint committees to perform certain management and administrative functions. Our board of
directors has constituted audit, compensation and nominating committees.
Nominating Committee and Nomination Process
The Nominating Committee was formed to address general governance and policy oversight; succession planning; to identify qualified
individuals to become prospective board members and make recommendations regarding nominations for our board of directors; to advise
the board with respect to appropriate composition of board committees; to advise the board about and develop and recommend to the board
appropriate corporate governance documents and assist the board in implementing guidelines; to oversee the annual evaluation of the board
and our chief executive officer, and to perform such other functions as the board may assign to the committee from time to time. The
Nominating Committee has a charter which is available on our website at www.ibioinc.com. The Nominating Committee consists of three
independent directors: Arthur Y. Elliott, Ph.D., (Nominating Committee Chairman), Glenn Chang and General James T. Hill.
Our directors take a critical role in guiding our strategic direction and oversee the management of our company. Board candidates are
considered based upon various criteria, such as their broad-based business and professional skills and experiences, a global business and
social perspective, concern for the long-term interests of our stockholders and personal integrity and judgment. In addition, directors must
have time available to devote to board activities and to enhance their knowledge of the life sciences industry. Accordingly, we seek to
attract and retain highly qualified directors who have sufficient time to attend to their substantial duties and responsibilities.
Our board of directors believes given the diverse skills and experience required to grow our company that the input of all members of the
Nominating Committee is important for considering the qualifications of individuals to serve as directors but does not have a diversity
policy. Further, the Nominating Committee believes that the minimum qualifications for serving as our director are that a nominee
demonstrate, by significant accomplishment in his or her field, an ability to make a meaningful contribution to the board’s oversight of our
business and affairs of and have an impeccable record and reputation for honest and ethical conduct in both his or her professional and
personal activities. Whenever a new seat or a vacated seat on the board is being filled, candidates that appear to best fit the needs of the
board and our company are identified and unless such individuals are well known to the board, they are interviewed and further evaluated
by the Nominating Committee. Candidates selected by the Nominating Committee are then recommended to the full board for their
nomination to stockholders. The Nominating Committee recommends a slate of directors for election at the annual meeting. In accordance
with NYSE MKT LLC rules, the slate of nominees is approved by a majority of the independent directors.
In carrying out its responsibilities, our board will consider candidates suggested by stockholders. If a stockholder wishes to formally place a
candidate’s name in nomination, however, he or she must do so in accordance with the provisions of our First Amended and Restated
Bylaws. Suggestions for candidates to be evaluated by the Nominating Committee must be sent to Secretary, iBio, Inc., 600 Madison
Avenue, Suite 1601, New York, NY 10022-1737.
Audit Committee
The Audit Committee of the board of directors makes recommendations regarding the retention of the independent registered public
accounting firm, reviews the scope of the annual audit undertaken by our independent registered public accounting firm and the progress
and results of their work, reviews our financial statements, and oversees the internal controls over financial reporting and corporate
programs to ensure compliance with applicable laws and regulations. The Audit Committee reviews all services performed for us by the
independent registered public accounting firm and determines whether they are compatible with maintaining the registered public
accounting firm's independence. The Audit Committee has a charter, which is reviewed annually and as may be required due to changes in
industry accounting practices or the promulgation of new rules or guidance documents. The Audit Committee charter is available on our
website at www.ibioinc.com. The Audit Committee consists of two independent directors as determined by NYSE MKT LLC listing
standards: Glenn Chang (Audit Committee Chairman) and Seymour Flug. Mr. Chang and Mr. Flug are each qualified as an Audit
Committee Financial Expert as defined in Regulation S-K Item 407(d)(5)(ii).
Compensation Committee
The Compensation Committee of the Board of Directors reviews and approves executive compensation policies and practices, reviews
salaries and bonuses for our senior executive officers, administers our equity incentive plan and other benefit plans, and considers other
matters as may, from time to time, be referred to them by our board of directors. The Compensation Committee has a charter which is
available on our website at www.ibioinc.com. The members of the Compensation Committee are General James T. Hill (Compensation
Committee Chairman), Arthur Y. Elliott, Ph.D. and Philip K. Russell, M.D.
Board Leadership Structure and Role in Risk Oversight
Our chief executive officer also serves as the executive chairman of our board of directors. We do not have a lead independent director.
Our executive chairman, when present, presides over all meetings of our board. We believe this leadership structure is appropriate for our
Company at this time because (1) of our size, (2) of the size of our board, (3) our chief executive officer is responsible for our day-to-day
operation and implementing our strategy, and (4) discussion of developments in our business and financial condition and results of
operations are important parts of the discussion at meetings of our board of directors and it makes sense for our chief executive officer to
chair those discussions.
Our board of directors oversees our risk management. This oversight is administered primarily through the following:
36
· Our board’s review and approval of our business strategy, including the projected opportunities and challenges facing our
business;
· At least quarterly review of our business developments and financial results;
· Our Audit Committee’s oversight of our internal controls over financial reporting and its discussions with management and
the independent registered public accountants regarding the quality and adequacy of our internal controls and financial
reporting; and
· Our board’s review and recommendations regarding our executive officer compensation and its relationship to our business
objectives and goals.
Meetings of the Board of Directors and Committees
During the fiscal year ended June 30, 2015, the board of directors held four meetings in person or by telephone and acted by unanimous
written consent on one occasion and the Audit Committee held four meetings in person or by telephone. No meetings in person or by
telephone were held and no actions were taken by either the Nominating Committee or Compensation Committee as matters addressable by
such committees were considered and approved by the full board. Between meetings, members of the board of the directors are provided
with information regarding our operations and are consulted on an informal basis with respect to pending business. Each director attended
at least 75% of the aggregate of the total number of meetings of the board and the total number of meetings of the committees on which
such director serves. All of our directors attended our 2014 Annual Meeting of Stockholders.
Although we do not have a policy with regard to board members’ attendance at our annual meetings of stockholders, all of the directors are
encouraged to attend such meetings.
Stockholder Communications with the Board of Directors
Interested parties may communicate with the board or specific members of the board, including the independent directors and the members
of the Audit Committee, by submitting correspondence addressed to the Board of Directors of iBio, Inc. c/o any specified individual
director or directors at 600 Madison Avenue, Suite 1601, New York, New York 10022-1737. Any such correspondence will be forwarded
to the indicated directors.
Code of Ethics
We have adopted a written code of 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a
registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our
common stock and other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports
were required, during the fiscal year ended June 30, 2015, all Section 16(a) filing requirements applicable to our officers, directors and
greater than ten percent beneficial owners were complied with, except the following report was not filed on a timely basis: a Statement of
Changes in Beneficial Ownership on Form 4 filed by Carl DeSantis reporting the disposition of 53,130 shares of our common stock on
September 15, 2014, which was filed on September 18, 2014.
Item 11. Executive Compensation
Summary Compensation Table
The table below summarizes the total compensation paid or earned by our principal executive officer, principal financial officer and our
two other most highly compensated executive officers who were serving as executive officers at June 30, 2015, the end of our last
completed fiscal year. We refer to the executive officers identified in this table as our “named executive officers.”
37
Name and
Principal Position
Robert B. Kay
Executive Chairman
Scott Kain
Chief Financial Officer
Mark Giannone
Chief Financial Officer
Robert Erwin
President
Terence E. Ryan, Ph.D.
Chief Scientific Officer
Fiscal
Year
Salary
Bonus
Option
Awards (1)
Total
2015 $
2014
309,735
300,000
$
0 $
0
238,961 $
132,281
2015
2014
2015
2014
2015
2014
2015
2014
0
125,000(2)
48,000
22,000(3)
230,000
230,000
200,000
200,000
0
0
0
0
0
0
0
0
0
0
21,263
51,155
238,261
132,281
0
0
548,696
432,281
0
125,000
69,263
73,155
468,261
362,281
200,000
200,000
(1) Reflects the aggregate grant date fair value computed in accordance with FASB ASC 718.
(2) Mr. Kain’s employment ended November 30, 2013.
(3) Mr. Giannone’s employment commenced December 5, 2013
Outstanding Equity Awards at Fiscal Year-Ending June 30, 2015
The following table shows information regarding unexercised stock options held by our named executive officers as of June 30, 2015.
Name
Robert Kay (2)
Robert Kay (2)
Robert Kay (4)
Robert Kay (3)
Robert Kay (3)
Robert Kay (4)
Robert Kay (4)
Robert Kay (4)
Robert Kay (5)
Robert Erwin (2)
Robert Erwin (2)
Robert Erwin (2)
Robert Erwin (4)
Robert Erwin (4)
Robert Erwin (4)
Robert Erwin (5)
Terence Ryan (6)
Terence Ryan (6)
Mark Giannone (5)
Mark Giannone (5)
Unexercised
Options
Exercise
Price
Expiration
Date
Market
Value (1)
250,000 $
250,000 $
300,000 $
500,000 $
500,000 $
300,000 $
300,000 $
300,000 $
600,000 $
250,000 $
250,000 $
300,000 $
300,000 $
300,000 $
300,000 $
600,000 $
100,000 $
100,000 $
100,000 $
50,000 $
0.20
0.66
1.73
3.07
3.07
1.96
1.10
0.50
1.00
0.20
0.66
1.73
1.96
1.10
0.50
1.00
1.38
1.96
0.58
0.49
2/13/19 $
8/10/19 $
8/16/20 $
12/30/20 $
12/30/20 $
10/21/21 $
7/24/22 $
7/16/23 $
9/5/24 $
2/13/19 $
8/10/19 $
8/16/20 $
10/21/21 $
7/24/22 $
7/16/23 $
9/5/24 $
7/14/20 $
10/21/21 $
1/24/24 $
9/5/24 $
187,500
72,500
-
-
-
-
-
135,000
-
187,500
72,500
-
-
-
135,000
-
-
-
37,000
23,000
(1) The market value for each award is based upon the closing stock price of $0.95 per share of common stock on June 30, 2015, less the
exercise price of the option.
(2) Options vested in five equal annual installments on the anniversary date of grant. Options fully vested as of July 31, 2015.
(3) Options vested in three annual installments on the anniversary of the grant. Options fully vested as of July 31, 2015.
(4) Options vest in five equal annual installments on the anniversary date of grant.
(5) Options vest in three equal annual installments on the anniversary date of grant.
(6) Options vested in three equal annual installments on the anniversary date of grant. Options fully vested as of July 31, 2015.
38
Employment Agreements
As of June 30, 2015, we did not have any employment contracts or other similar agreements or arrangements with any of our named
executive officers.
Equity Incentive Plan
On August 12, 2008, the Company adopted the iBioPharma 2008 Omnibus Equity Incentive Plan (the “Plan”) for employees, officers,
directors and external service providers. In December 2013 our stockholders approved an amendment to the Plan to increase the number of
shares of our common stock authorized for issuance thereunder from 10 million shares to 15 million shares. Under the provisions of the
Plan, the Company may grant options to purchase stock and/or make awards of restricted stock up to an aggregate amount of 15 million
shares. Stock options granted under the Plan may be either 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 awards occurs ratably on the
anniversary of the grant date over the service period as determined at the time of grant.
Director Compensation
Compensation for our non-employee directors has historically consisted of a grant of stock options vesting over a three-year period and
additional cash compensation. We do not have a fixed policy with respect to this compensation, but the compensation is generally equal for
each non-employee director except in cases where a director assumes additional responsibilities above and beyond standard board service.
Directors who are also our employees receive no additional compensation for their services as directors.
Director Compensation Table
The following table sets forth summary information concerning the total compensation paid to our non-employee directors for services to
the Company during the fiscal year ended June 30, 2015:
Director Compensation
General James T. Hill
Glenn Chang
John D. McKey
Philip K. Russell
Arthur Elliot
Seymour Flug
Fees
Earned
or Paid
in Cash
Option
Awards
(1)(2)
$
25,000 $
10,000
10,000
10,000
10,000
10,000
25,516 $
25,516
25,516
25,516
25,516
25,516
Total
50,516
35,516
35,516
35,516
35,516
35,516
75,000
153,096
228,096
(1) Reflects the aggregate grant date fair value computed in accordance with FASB ASC 718.
(2) The aggregate number of stock options outstanding for each non-employee director was as follows: Gen. Hill 390,000, Mr. Chang
390,000, Mr. McKey 490,000, Dr. Russell 300,000, Dr. Elliott 300,000, and Mr. Flug 180,000.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information with respect to the beneficial ownership of our outstanding common stock as of October 5, 2015:
·
·
·
·
each person who is known by us to be the beneficial owner of 5% or more of our outstanding common stock;
each of our directors including our chief executive officer;
each of our other named executive officers; and
all of our current executive officers and directors as a group.
Except as otherwise noted in the footnotes below, to our knowledge, each of the persons named in this table has sole voting and investment
power with respect to the securities indicated as beneficially owned.
39
Name and Address of Beneficial Owner(1)
5% Stockholders
Eastern Capital Limited
E. Gerald Kay
Carl DeSantis
Directors
Robert B. Kay
Glenn Chang
Arthur Y. Elliott, Ph.D.
John McKey, Jr.
Seymour Flug
General James T. Hill
Philip K. Russell, M.D.
Other Executive Officers
Robert L. Erwin
Terence E. Ryan, Ph.D.
Mark Giannone
All current directors and executive officers as a group (10 persons)
Number of
Shares
Beneficially
Owned (2)
Percent of
Shares
Beneficially
Owned(2)
23,744,000(3)
5,945,695(4)
5,014,873(5)
30.0%
7.7%
6.5%
3,570,962(6)
342,150(7)
240,000(8)
916,558(9)
100,000(8)
345,000(10)
240,000(8)
1,540,000(8)
200,000(8)
72,834(11)
7,567,504(12)
4.5%
0.4%
0.3%
1.2%
0.1%
0.4%
0.3%
2.0%
0.3%
0.1%
9.1%
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
The address of Eastern Capital Limited (“Eastern”) is Box 31363, Grand Cayman, E9 KY1 1206. The address of E. Gerald Kay is
c/o Integrated BioPharma, Inc., 225 Long Avenue, Box 278, Hillside, New Jersey 07205. The address of Carl DeSantis is c/o CDS
International Holdings, Inc., 3299 NW 2nd Avenue, Boca Raton, FL 33431. The address of each of our directors and executive
officers is c/o iBio, Inc., 600 Madison Avenue, Suite 1601, New York, New York 10022-1737.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to
shares of our common stock. On October 5, 2015, there were 77,325,410 shares of common stock outstanding. Shares of common
stock issuable under warrants or stock options that are exercisable within 60 days after October 5, 2015 are deemed outstanding and
are included for purposes of computing the number of shares owned and percentage ownership of the person holding the warrants
or option but are not deemed outstanding for computing the percentage ownership of any other person.
Consists of 21,960,000 shares of common stock and warrants to purchase 1,784,000 shares of common stock held by Eastern. This
information is based solely on information set forth in a Schedule 13D/A Amendment No. 4 filed with the SEC on May 28, 2015 by
Eastern, Portfolio Services Ltd. and Kenneth B. Dart.
Consists of 5,945,695 shares of common stock. This information is based solely on information set for forth in a Schedule 13D filed
with the SEC on June 13, 2013 by E. Gerald Kay and EGK, LLC. The number of shares of common stock beneficially owned by
these entities may have changed since the filing of the Schedule 13D.
Consists of 5,014,873 shares of common stock. This information is based solely on information set forth in a Schedule 13D/A
Amendment No. 3 filed with the SEC on November 18, 2014 by Carl DeSantis, the DeSantis Revocable Trust, and CD Financial
LLC.
Includes (i) 211,333 shares of common stock, (ii) 819,629 shares of common stock held by EVJ LLC, of which Mr. Kay is the
manager, and (iii) 2,540,000 shares of common stock underlying vested stock options held by Mr. Kay.
Includes 330,000 shares of common stock underlying vested stock options.
All shares listed are shares of common stock underlying vested stock options
Includes 430,000 shares of common stock underlying vested stock options
(10)
Includes 330,000 shares of common stock underlying vested stock options.
(11)
Includes 50,000 shares of common stock underlying vested stock options.
(12)
Includes 6,000,000 shares of common stock underlying vested stock options.
40
Equity Compensation Plans
The following table provides information regarding the status of the Plan at June 30, 2015:
Number of
Shares of
Common
Stock to be Issued
Upon Exercise of
Outstanding
Options
Weighted-Average
Exercise Price of
Outstanding
Options
Equity compensation plan approved by stockholders
9,523,334 $
1.22
Number of Options
Available for
Future Issuance
Under
Equity
Compensation
Plans
(excluding
securities
reflected in the
previous columns)
5,476,666
Equity compensation plans not approved by stockholders
—
—
—
Total
9,523,334 $
1.22
5,476,666
Item 13. Certain Relationships and Related Transactions and Director Independence\.
Director Independence
Our board of directors has determined that Messrs. Chang, Flug and McKey, Drs. Elliott and Russell and General Hill are each
“independent directors” as such term is defined in Section 803 of the New York Stock Exchange MKT Company Guide.
Policies and Procedures for Related Person Transactions
The policy our board of directors is to review with management and our independent registered public accounting firm any related party
transactions brought to the board’s attention which could reasonably be expected to have a material impact on our financial statements. The
Company’s practice is for management to present to the board of directors each proposed related party transaction, including all relevant
facts and circumstances relating thereto, and to update the board of directors as to any material changes to any approved related party
transaction. In connection with this requirement, each of the transactions or relationships disclosed below were disclosed to and approved
by our board of directors. In addition, transactions involving our directors and their affiliated entities were disclosed and reviewed by our
board of directors in its assessment of our directors’ independence requirements.
Research and Development Services Vendor
In January 2012, the Company entered into an agreement with a vendor in which iBio’s President is a minority stockholder. The vendor
performs laboratory feasibility analyses of gene expression, protein purification and preparation of research samples. The transaction has
been conducted on an arm’s length basis at market terms. The accounts payable balance includes amounts due this vendor of approximately
$153,000 and $38,000 at June 30, 2015 and 2014, respectively. Research and development expenses related to this vendor were
approximately $995,000 and $527,000 for the years ended June 30, 2015 and 2014, respectively
Operating Lease with Minority Stockholder
Effective January 1, 2015, the Company is leasing office space on a month-to-month basis from an entity owned by a minority stockholder
of the Company for approximately $2,000 per month.
Fraunhofer - Shared Employee
From July 1, 2011 through February 29, 2012, the Company employed as our Chief Scientific Officer an executive of Fraunhofer Center
for Molecular Biology (“Fraunhofer”). As of March 1, 2012, the Fraunhofer executive ceased to be an employee of the Company and
became a consultant pursuant to an agreement with the Company, with the title and role of Chief Scientific Advisor to the Company. The
agreement was terminable at will by either party and provided that during its term stock options previously granted when the executive was
an employee would continue to vest. On October 17, 2014, the Company terminated the agreement for cause and all of the options were
cancelled.
Limitation of Liability of Officers and Directors and Indemnification
Our certificate of incorporation, as amended, provides for indemnification of our officers and directors to the extent permitted by Delaware
law, which generally permits indemnification for actions taken by officers or directors as our representatives if the officer or director acted
in good faith and in a manner he or she reasonably believed to be in the best interest of the corporation.
41
As permitted under Delaware law, the By-laws contain a provision indemnifying directors against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred by them in connection with an action, suit or proceeding if
they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of our Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful.
Historical Relationship with Integrated BioPharma, Inc.
We were a subsidiary of Integrated BioPharma, Inc. (“Integrated BioPharma”) from February 21, 2003 until August 18, 2008. On that date,
Integrated BioPharma spun off iBio in a transaction that was intended to be a tax free distribution to Integrated BioPharma and its U.S.
stockholders. As part of that transaction, we entered into a number of agreements with Integrated BioPharma including an indemnification
and insurance matters agreement and a tax responsibility allocation agreement. Messrs. E. Gerald Kay and Carl DeSantis, affiliates of
Integrated BioPharma, were in 2008 and continue to remain beneficial holders of more than 5% of our common stock. The agreements are
described below.
Indemnification. In general, under the indemnification and insurance matters agreement, we agreed to indemnify Integrated BioPharma, its
affiliates and each of its and their respective directors, officers, employees, agents and representatives from all liabilities that arise from:
·
·
·
·
·
·
·
·
any breach by us of the separation and distribution agreement or any ancillary agreement;
any of our liabilities reflected on our consolidated balance sheets included in the information statement relating to the spin-off;
our assets or businesses;
the management or conduct of our assets or businesses;
the liabilities allocated to or assumed by us under the separation and distribution agreement, the indemnification and insurance
matters agreement or any of the other ancillary agreements;
various on-going litigation matters in which we are named defendant, including any new claims asserted in connection with those
litigations, and any other past or future actions or claims based on similar claims, facts, circumstances or events, whether involving
the same parties or similar parties, subject to specific exceptions;
claims that are based on any violations or alleged violations of U.S. or foreign securities laws in connection with transactions arising
after the distribution relating to our securities and the disclosure of financial and other information and data by us or the disclosure
by Integrated BioPharma as part of the distribution of our financial information or our confidential information; or
any actions or claims based on violations or alleged violations of securities or other laws by us or our directors, officers, employees,
agents or representatives, or breaches or alleged breaches of fiduciary duty by our board of directors, any committee of our board or
any of its members, or any of our officers or employees.
Integrated BioPharma agreed to indemnify us and our affiliates and our directors, officers, employees, agents and representatives from all
liabilities that arise from:
·
·
·
·
any breach by Integrated BioPharma of the separation and distribution agreement or any ancillary agreement;
any liabilities allocated to or to be retained or assumed by Integrated BioPharma under the separation and distribution agreement, the
indemnification and insurance matters agreement or any other ancillary agreement;
liabilities incurred by Integrated BioPharma in connection with the management or conduct of Integrated BioPharma’s businesses;
and
various ongoing litigation matters to which we are not a party.
Integrated BioPharma is not obligated to indemnify us against any liability for which we are also obligated to indemnify Integrated
BioPharma. Recoveries by Integrated BioPharma under insurance policies will reduce the amount of indemnification due from us to
Integrated BioPharma only if the recoveries are under insurance policies Integrated BioPharma maintains for our benefit. Recoveries by us
will in all cases reduce the amount of any indemnification due from Integrated BioPharma to us.
Under the indemnification and insurance matters agreement, a party has the right to control the defense of third-party claims for which it is
obligated to provide indemnification, except that Integrated BioPharma has the right to control the defense of any third-party claim or
series of related third- party claims in which it is named as a party whether or not it is obligated to provide indemnification in connection
with the claim and any third-party claim for which Integrated BioPharma and we may both be obligated to provide indemnification. We
may not assume the control of the defense of any claim unless we acknowledge that if the claim is adversely determined, we will indemnify
Integrated BioPharma in respect of all liabilities relating to that claim. The indemnification and insurance matters agreement does not apply
to taxes covered by the tax responsibility allocation agreement.
Offset. Integrated BioPharma is permitted to reduce amounts it owes us under any of our agreements with Integrated BioPharma, by
amounts we may owe to Integrated BioPharma under those agreements.
Assignment. We may not assign or transfer any part of the indemnification and insurance agreement without Integrated BioPharma’s prior
written consent. Nothing contained in the agreement restricts the transfer of the agreement by Integrated BioPharma.
42
Tax Responsibility Allocation Agreement
In order to allocate our responsibilities for taxes and certain other tax matters, we and Integrated BioPharma entered into a tax
responsibility allocation agreement prior to the date of the distribution. Under the terms of the agreement, with respect to consolidated
federal income taxes, and consolidated, combined and unitary state income taxes, Integrated BioPharma will be responsible for, and will
indemnify and hold us harmless from, any liability for income taxes with respect to taxable periods or portions of periods ending prior to the
date of distribution to the extent these amounts exceed the amounts we have paid to Integrated BioPharma prior to the distribution or in
connection with the filing of relevant tax returns. Integrated BioPharma is also responsible for, and will indemnify and hold us harmless
from, any liability for income taxes of Integrated BioPharma or any member of the Integrated BioPharma group (other than us) by reason
of our being severally liable for those taxes under U.S. Treasury regulations or analogous state or local provisions. Under the terms of the
agreement, with respect to consolidated federal income taxes, and consolidated, combined and unitary state income taxes, we are
responsible for, and will indemnify and hold Integrated BioPharma harmless from, any liability for our income taxes for all taxable periods,
whether before or after the distribution date. With respect to separate state income taxes, we are also responsible for, and will indemnify
and hold Integrated BioPharma harmless from, any liability for income taxes with respect to taxable periods or portions of periods
beginning on or after the distribution date. We are also responsible for, and will indemnify and hold Integrated BioPharma harmless from,
any liability for our non-income taxes and our breach of any obligation or covenant under the terms of the tax responsibility allocation
agreement, and in certain other circumstances as provided therein. In addition to the allocation of liability for our taxes, the terms of the
agreement also provide for other tax matters, including tax refunds, returns and audits.
Item 14. Principal Accountant Fees and Services.
The following table represents aggregate fees billed to us by CohnReznick LLP:
Audit Fees
Audit-related Fees
Tax Fees
Other Fees
Total Fees
For the Year Ended
June 30,
2015
2014
$
$
88,357 $
—
—
—
88,357 $
103,475
—
—
—
103,475
In the above table, in accordance with the SEC’s definitions and rules, “audit fees” are fees we paid CohnReznick LLP for professional
services for the audit of our financial statements included in our Annual Reports on Form 10-K, review of our financial statements included
in our Quarterly Reports on Form 10-Q and services normally provided in connection with statutory and regulatory filings or engagements,
consents and assistance with and review of our documents filed with the Securities and Exchange Commission.
Pre-Approval Policies and Procedures
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public
accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is
generally detailed as to the particular service or category of services and is generally subject to a specific budget. The independent
registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of
services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services
performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Audit Committee has
determined that the rendering of the services other than audit services by CohnReznick LLP is compatible with maintaining the principal
accountant’s independence.
Item 15. Exhibits and Financial Statement Schedules.
(a) Exhibits and Index
PART IV
(1) A list of the financial statements filed as part of this report is set forth in the index to financial statements at page F-1 and is
incorporated herein by reference.
(2) An index of exhibits incorporated by reference or filed with this Report is provided below:
43
Exhibit No. Description
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
10.1
Certificate of Incorporation of the Company (1)
Certificate of Amendment of the Certificate of Incorporation of the Company (1)
First Amended and Restated Bylaws of the Company (2)
Form of Common Stock Certificate (3)
Form of Investor Warrant (2010) (4)
Form of Common Stock Purchase Warrant (2012) (5)
Form of Common Stock Purchase Warrant (2013) (6)
Form of Registration Rights Agreement (2010) (4)
Registration Rights Agreement, dated August 25, 2014, between the Company and Aspire Capital Fund, LLC (7)
Registration Rights Agreement, dated May 15, 2015, between the Company and Aspire Capital Fund LLC (8)
Technology Transfer Agreement, dated as of January 1, 2004, between the Company and Fraunhofer USA Center for
Molecular Biotechnology, Inc. as amended (9)
10.2
Ratification dated September 6, 2013 of Terms of Settlement by and between the Company and Fraunhofer USA Center for
Molecular Biotechnology, Inc. (10)+
10.3
10.4
23.1
31.1
Common Stock Purchase Agreement, dated August 25, 2014 between the Company and Aspire Capital Fund, LLC (7)
Common Stock Purchase Agreement, dated May 15, 2015 between the Company and Aspire Capital Fund, LLC (8)
Consent of Independent Registered Public Accounting Firm *
Certification of Periodic Report by Chief Executive Officer Pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2
Certification of Periodic Report by Chief Financial Officer Pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1
Certification of Periodic Report by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 *
32.2
Certification of Periodic Report by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 *
XBRL Instance*
101.INS
101.SCH XBRL Taxonomy Extension Schema*
101.CAL XBRL Taxonomy Extension Calculation*
101.DEF XBRL Taxonomy Extension Definition*
101.LAB XBRL Taxonomy Extension Labeled*
101.PRE XBRL Taxonomy Extension Presentation*
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
Incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 2014
(Commission File No. 001-35023).
Incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 14, 2009
(Commission File No. 000-53125).
Incorporated herein by reference to the Company’s Form 10-12G filed with the SEC on July 11, 2008 (Commission File No. 000-
53125).
Incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 15, 2010
(Commission File No. 000-53125).
Incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 10, 2012
(Commission File No. 001-35023).
Incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 23, 2013
(Commission File No. 001-35023).
Incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 26, 2014
(Commission File No. 001-35023).
Incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 2015
(Commission File No. 001-35023).
Incorporated herein by reference to the Company’s Form 10-12G filed with the SEC on June 18, 2008 Commission File No. 000-
53125).
Incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013, filed
with the SEC on September 30, 2013 (Commission File No. 001-35023).
* Filed herewith.
+ Confidential treatment requested as to certain portions, which portions have been separately filed with the Securities and Exchange
Commission.
44
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.
SIGNATURES
Dated: October 13, 2015
Dated: October 13, 2015
iBio, Inc.
(Registrant)
/s/Robert B. Kay
Robert B. Kay
Executive Chairman
(Principal Executive Officer)
/s/Mark Giannone
Mark Giannone
Chief 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/Robert B. Kay
Robert B. Kay
/s/Mark Giannone
Mark Giannone
/s/Glenn Chang
Glenn Chang
/s/Arthur Y. Elliott
Arthur Y. Elliott, Ph.D.
/s/Seymour Flug
Seymour Flug
/s/James T. Hill
General James T. Hill, USA (Retired)
/s/John D. McKey, Jr.
John D. McKey, Jr.
/s/Philip K. Russell
Philip K. Russell, M.D.
Executive Chairman
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
45
October 13, 2015
October 13, 2015
October 13, 2015
October 13, 2015
October 13, 2015
October 13, 2015
October 13, 2015
October 13, 2015
iBio, Inc.
Financial Statement Index
Report of Independent Registered Public Accounting Firm
Financial Statements:
Consolidated Balance Sheets – June 30, 2015 and 2014
Consolidated Statements of Operations and Comprehensive Loss – Fiscal years ended June 30, 2015 and 2014
Consolidated Statements of Stockholders’ Equity – Fiscal years ended June 30, 2015 and 2014
Consolidated Statements of Cash Flows – Fiscal years ended June 30, 2015 and 2014
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and
Stockholders of iBio, Inc.
We have audited the accompanying consolidated balance sheets of iBio, Inc. and Subsidiaries (the “Company”) as of June 30, 2015 and
2014, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the years then
ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of iBio,
Inc. and Subsidiaries as of June 30, 2015 and 2014, and the results of their operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of America.
/s/ CohnReznick LLP
Eatontown, New Jersey
October 13, 2015
F-2
iBio, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, except share and per share amounts)
Assets
Current assets:
Cash
Accounts receivable – trade
Prepaid expenses and other current assets
Total current assets
Fixed assets, net of accumulated depreciation
Intangible assets, net of accumulated amortization
Total Assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable (related party of $153 and $38 as of June 30, 2015 and 2014, respectively)
Accrued expenses
Total Liabilities
Commitments and Contingencies
Stockholders' Equity
Preferred stock - no par value; 1,000,000 shares authorized; no shares issued and outstanding
Common stock - $0.001 par value; 175,000,000 shares authorized; 77,205,410 and 65,642,095 shares
issued and outstanding at June 30, 2015 and 2014, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total Stockholders' Equity
June 30, 2015 June 30, 2014
$
$
$
9,494 $
445
182
10,121
13
2,360
12,494 $
1,104 $
159
1,263
3,590
205
118
3,913
6
2,575
6,494
297
98
395
-
-
77
59,006
(25)
(47,827)
11,231
66
47,235
-
(41,202)
6,099
Total Liabilities and Stockholders' Equity
$
12,494 $
6,494
The accompanying notes are an integral part of these consolidated financial statements.
F-3
iBio, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(In Thousands, except per share amounts)
Revenues
Operating expenses:
Research and development (related party of $995 and $527)
Research and development - effect of Settlement Agreement (Note 8)
Research and development - effect of amendment to Collaboration and License Agreement (Note 8)
General and administrative
General and administrative - effect of Settlement Agreement (Note 8)
General and administrative - effect of amendment to Collaboration and License Agreement (Note 8)
Total operating expenses
Operating loss
Other income (expense):
Interest income
Interest expense - effect of Settlement Agreement (Note 8)
Royalty income
Other income (expenses)
Loss on disposal of fixed assets
Total other income
Net loss
Comprehensive loss:
Net loss
Other comprehensive loss-foreign currency translation adjustments
Comprehensive loss
Loss per common share - basic and diluted
Weighted-average common shares outstanding - basic and diluted
Years Ended
June 30,
2015
2014
$
1,851 $
205
3,495
-
-
5,022
-
-
8,517
1,898
(1,041)
(1,007)
3,888
(700)
1,007
4,045
(6,666)
(3,840)
9
-
32
-
-
41
8
122
42
3
(1)
174
(6,625) $
(3,666)
(6,625) $
(25)
(3,666)
-
(6,650) $
(3,666)
(0.09) $
(0.06)
71,495
62,968
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
iBio, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Years Ended June 30, 2015 and 2014
(In Thousands)
Preferred Stock
Common Stock
Accumulated
Other
Additional
Paid-In Comprehensive Accumulated
Shares Amount
Shares Amount Capital
Loss
Deficit
Total
Balance as of July 1, 2013
- $
- 56,692 $
57 $
42,547 $
- $
(37,536) $
5,068
Common stock issued for
warrant exercises
Common stock issued for
private placement
Cost to raise capital
Share-based compensation
Expiration of warrants
Net loss
Balance as of June 30, 2014
Balance as of July 1, 2014
Sale of common stock
Commitment fee
Exercises of warrants
Share-based compensation
Foreign currency adjustment
Net loss
-
-
-
-
-
-
- $
- $
-
-
-
-
-
-
-
7,750
8
3,092
-
1,200
-
-
-
-
-
-
-
-
1
-
479
(29)
-
1,075
-
-
71
-
-
-
-
-
-
-
-
3,100
-
480
-
(29)
-
1,075
-
71
(3,666)
(3,666)
- 65,642 $
66 $
47,235 $
- $
(41,202) $
6,099
- 65,642 $
66 $
47,235 $
- $
(41,202) $
6,099
-
8,769
9
9,991
-
1,132
-
1,663
-
-
-
-
-
-
1
1
-
-
-
-
866
914
-
-
-
-
-
-
- 10,000
-
1
-
867
-
914
(25)
-
(25)
-
(6,625)
(6,625)
Balance as of June 30, 2015
- $
- 77,206 $
77 $
59,006 $
(25) $
(47,827) $ 11,231
The accompanying notes are an integral part of these consolidated financial statements.
F-5
iBio, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Effect of Settlement Agreement
Share-based compensation
Amortization of intangible assets
Depreciation
Loss on disposal of fixed assets
Loss on abandonment of intangible assets
Changes in operating assets and liabilities
Accounts receivable – trade
Prepaid expenses and other current assets
Accounts payable
Accrued expenses
Net cash used in operating activities
Cash flows from investing activities:
Additions to intangible assets
Purchases of fixed assets
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from sale of common stock
Proceeds from exercise of warrants
Costs to raise capital
Net cash provided by financing activities
Effect of exchange rate changes
Net increase in cash
Cash - beginning of year
Cash - end of year
Schedule of non-cash activities:
Reversal of accrued warrants
Unpaid intangible assets included in accounts payable
Unpaid intangible assets included in accrued expenses
Effect of amendment to Collaboration and License Agreement on accounts receivable and accounts
payable
Years Ended
June 30,
2015
2014
$
(6,625) $
(3,666)
-
914
358
5
-
48
(240)
(64)
806
73
(1,863)
1,075
358
3
1
56
(205)
97
56
(28)
(4,725)
(4,116)
(202)
(13)
(215)
10,000
867
-
10,867
(23)
5,904
3,590
9,494 $
- $
- $
(12) $
(255)
(4)
(259)
480
3,100
(29)
3,551
-
(824)
4,414
3,590
71
12
20
- $
1,007
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-6
1. Nature of Business
iBio, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
iBio, Inc. and Subsidiaries (“iBio” or the “Company”) is a biotechnology company focused on the commercialization of its proprietary
plant-based protein expression technologies - the iBioLaunch™ platform for vaccines and therapeutic proteins and the iBioModulator™
platform for vaccine enhancement – and on developing and commercializing select biopharmaceutical product candidates. The advantages
of iBio’s technology include the ability to manufacture therapeutic proteins that are difficult or commercially infeasible to produce with
conventional methods, and reduced production time, capital and operating costs for biopharmaceuticals. iBio was established as a public
company in August 2008 as the result of a spinoff from Integrated BioPharma, Inc. The Company operates in one business segment under
the direction of its Executive Chairman. The Company has two wholly-owned subsidiaries, iBioDefense Biologics LLC (“iBioDefense”), a
Delaware limited liability company formed in July 2013 to explore development and commercialization of defense-specific applications of
the Company’s proprietary technology, and iBio Peptide Therapeutics LLC, a Delaware limited liability company formed in November
2013. Both of these subsidiaries are dormant. Additionally the Company has a 99% interest in a subsidiary organized in Brazil, iBIO DO
BRASIL BIOFARMACÊUTICA LTDA. (“iBio Brazil”), 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”) beyond the current Yellow Fever Vaccine program (see Note 8) and development of biosimilar 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.
2. Basis of Presentation
Liquidity
The Company’s primary sources of liquidity are cash on hand and cash available from the sale of common stock of the Company. At this
time, cash flows from operating activities represent net outflows for operating expenses and expenses for technology and product
development. As of June 30, 2015, the Company had $9.5 million in cash on hand which is expected to support the Company’s activities
through June 30, 2016.
Since its spin-off from Integrated BioPharma, Inc. in August 2008, the Company has incurred significant losses and negative cash flows
from operations. As of June 30, 2015, the Company’s accumulated deficit was $47.8 million, and it had cash used in operating activities of
$4.7 million and $4.1 million for the years ended June 30, 2015 and 2014, respectively. The Company has historically financed its activities
through the sale of common stock and warrants. Through June 30, 2015, the Company has dedicated most of its financial resources to
investing in its iBioLaunch™ and iBioModulator™ platforms, its proprietary candidates for treatment of fibrotic diseases, advancing its
intellectual property, and general and administrative activities. On August 25, 2014, the Company entered into a stock purchase agreement
with Aspire Capital Fund, LLC (“Aspire Capital”) pursuant to which the Company had the option to require Aspire Capital to purchase up
to $10 million of its common stock upon and subject to the terms of the agreement over a two-year period. As of June 30, 2015, the
Company sold 8,768,806 shares to Aspire pursuant to the stock purchase agreement and received proceeds of $10,000,000 therefrom. As of
April 28, 2015, Aspire Capital fulfilled its commitment to purchase $10.0 million of the Company’s common stock under the agreement.
On May 15, 2015, the Company entered into a new common stock purchase agreement with Aspire Capital pursuant to which the Company
has the option to require Aspire Capital, subject to the terms of the agreement, to purchase up to $15 million of its common stock, upon
and, over a three-year term.
The Company plans to fund its future business operations using cash on hand, through proceeds from the sale of additional equity or other
securities, including sales of common stock to Aspire Capital pursuant to the common stock purchase agreement entered into on May 15,
2015, and through proceeds realized in connection with license and collaboration arrangements. The Company cannot be certain that such
funding will be available on favorable terms or available at all. To the extent that the Company raises additional funds by issuing equity
securities, its stockholders may experience significant dilution.
The Company’s financial statements were prepared under the assumption that the Company will continue as a going concern. If the
Company is unable to raise funds when required or on favorable terms, this assumption may no longer be operative, and the Company may
have to: a) significantly delay, scale back, or discontinue the product application and/or commercialization of its proprietary technologies;
b) seek collaborators for its 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 it would otherwise seek to develop or
commercialize; or d) possibly cease operations.
F-7
3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions
have been eliminated as part of the consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 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 any other factors considered appropriate. The Company writes off accounts receivable against the allowance for doubtful
accounts when a balance is determined to be uncollectible. At June 30, 2015 and 2014, the Company determined that an allowance for
doubtful accounts was not needed.
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, generally three to five 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 years ended June 30, 2015 and 2014.
Derivative Instruments
The Company does not use derivative instruments in its ordinary course of business.
In connection with the issuances of debt and/or equity instruments, the Company may issue options or warrants to purchase common stock.
In certain circumstances, these options or warrants may be classified as liabilities rather than as equity. In addition, the debt and/or equity
instrument may contain embedded derivative instruments, such as conversion options or anti-dilution features, which in certain
circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability
instrument. The Company accounts for derivative liability instruments under the provisions of FASB ASC 815, “Derivatives and Hedging.”
There are no options or warrants of the Company presently outstanding that require accounting as a derivative liability.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or
determinable, and collectability is reasonably assured. Deferred revenue represents billings to a customer to whom the services have not yet
been provided.
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.
Research and Development Costs
All research and development costs are expensed as incurred. These expenses consist primarily of payments to third-party contractual
service providers and internal personnel costs.
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, and the vesting schedule. 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.
F-8
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized. The effect of a
change in tax rates or laws on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date of
the rate change. A valuation allowance is established to reduce the deferred tax assets to the amounts that are more likely than not to be
realized from operations.
Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position
taken on an income tax return. The Company has no liability for uncertain tax positions as of June 30, 2015 and 2014. Interest and
penalties, if any, related to unrecognized tax benefits would be recognized as income tax expense. The Company does not have any accrued
interest or penalties associated with unrecognized tax benefits, nor was any significant interest expense recognized during the years ended
June 30, 2015 and 2014.
4. New Accounting Pronouncements
The Company adopted Accounting Standards Update (“ASU”) No. 2013-11, “ Income Taxes (Topic 740): Presentation of an Unrecognized
Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ” (“ASU 2013-11”) on
January 1, 2014. ASU 2013-11 is expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax
benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result
from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The
amendments in this update are applied prospectively for annual and interim periods beginning after December 15, 2013. The adoption of
ASU 2013-11 did not have a material effect on the Company’s consolidated financial statements.
In May 2014, ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) was issued. The amendments in ASU 2014-
09 affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of
nonfinancial assets unless contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will
supersede the revenue recognition requirements in ASC 605, “Revenue Recognition,” and most industry-specific guidance, and creates an
ASC 606, “Revenue from Contracts with Customers.”
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To
achieve that core principle, an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
ASU 2014-09 was scheduled to be effective for annual reporting periods beginning after December 15, 2016, including interim periods
within that reporting period. Early application is not permitted. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts
with Customers (Topic 606): Deferral of Effective Date” (“ASU 2015-14”) which defers the effective date of ASU 2014-09 by one year.
ASU 2014-09 is now effective for annual reporting periods after December 15, 2017 including interim periods within that reporting period.
Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods
within that reporting period. The Company is currently evaluating the effects of adopting ASU 2014-09 on its consolidated financial
statements.
F-9
In June 2014, ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target
Could Be Achieved after the Requisite Service Period” (“ASU No. 2014-12”) was issued. ASU No. 2014-12 requires that a performance
target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. An entity
should recognize compensation cost in the period in which it becomes probable that the performance target will be achieved and should
represent the compensation cost attributable to the periods for which the requisite service has already been rendered. If the performance
target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost
should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during
and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those
awards that ultimately vest. ASU 2014-12 becomes effective for interim and annual periods beginning on or after December 15, 2015.
Early adoption is permitted. The Company is currently evaluating the effects of adopting ASU 2014-12 on its consolidated financial
statements but the adoption is not expected to have a significant impact on the Company’s consolidated financial statements.
In June 2014, ASU 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about
an Entity’s Ability to Continue as a Going Concern” (“ASU No. 2014-15”) was issued. Before the issuance of ASU 2014-15, there was no
guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to
continue as a going concern or to provide related footnote disclosures. This guidance is expected to reduce the diversity in the timing and
content of footnote disclosures. ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by
incorporating and expanding upon certain principles that are currently in U.S. auditing standards as specified in the guidance. ASU 2014-15
becomes effective for the annual period ending after December 15, 2016 and for annual and interim periods thereafter. Early adoption is
permitted. The Company is currently evaluating the effects of adopting ASU 2014-15 on its consolidated financial statements but the
adoption is not expected to have a significant impact on the Company’s consolidated financial statements.
In January 2015, the FASB issued ASU 2015-01, “ Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying
Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU 2015-01”). ASU 2015-01 eliminates the
concept of an extraordinary item from U.S.GAAP. As a result, an entity will no longer be required to segregate extraordinary items from the
results of ordinary operations, to separately present an extraordinary item on its income statement, net of tax, after income from continuing
operations or to disclose income taxes and earnings-per-share data applicable to an extraordinary item. However, ASU 2015-01 will still
retain the presentation and disclosure guidance for items that are unusual in nature and occur infrequently. ASU 2015-01 becomes effective
for interim and annual periods beginning on or after December 15, 2015. Early adoption is permitted. The Company is currently evaluating
the effects of adopting ASU 2015-01 on its consolidated financial statements but the adoption is not expected to have a significant impact
on the Company’s consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, “ Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt
Issuance Costs” ("ASU 2015-03") as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The
FASB received feedback that having different balance sheet presentation requirements for debt issuance costs and debt discount and
premium creates unnecessary complexity. Recognizing debt issuance costs as a deferred charge (that is, an asset) also is different from the
guidance in International Financial Reporting Standards, which requires that transaction costs be deducted from the carrying value of the
financial liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges
conflicts with the guidance in FASB Concepts Statement No. 6, "Elements of Financial Statements," which states that debt issuance costs
are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. FASB Concepts
Statement No. 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. To simplify
presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The
recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. For public business
entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and
interim periods within those fiscal years. The Company will evaluate the effects of adopting ASU 2015-03 if and when it is deemed to be
applicable.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a
material effect on the accompanying consolidated financial statements.
5. Financial Instruments and Fair Value Measurement
The carrying values of cash, prepaid expenses and other current assets, accounts payable and accrued expenses in the Company’s
consolidated balance sheets approximated their fair values as of June 30, 2015 and 2014 due to their short-term nature.
F-10
6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
Other prepaid expenses
Other current assets
Total prepaid expenses and other current assets
7.
Intangible Assets
June 30,
2015
June 30,
2014
$
$
165 $
17
182 $
110
8
118
The Company has two categories of intangible assets – intellectual property and patents. Intellectual property consists of technology for
producing targeted proteins in plants for the development and manufacture of novel vaccines and therapeutics for humans and certain
veterinary applications (the “Technology”) 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”). Patents consist of payments for
services and fees related to the further development and protection of the Company’s patent portfolio.
In January 2014, the Company entered into a license agreement with a U.S. university whereby iBio acquired exclusive worldwide rights to
certain issued and pending patents covering specific candidate products for the treatment of fibrosis (the “Licensed Technology”). The
license agreement provides for payment by the Company of a license issue fee, annual license maintenance fees, reimbursement of prior
patent costs incurred by the university, payment of a milestone payment upon regulatory approval for sale of a first product, and annual
royalties on product sales. In addition, the Company has agreed to meet certain diligence milestones related to product development
benchmarks. As part of its commitment to the diligence milestones, the Company successfully commenced production of a plant-made
peptide comprising the Licensed Technology before March 31, 2014. The next milestone – filing a New Drug Application with the FDA
covering the Licensed Technology – becomes due on December 1, 2015.
The following table summarizes by category the gross carrying value and accumulated amortization of intangible assets (in thousands):
Intellectual property – gross carrying value
Patents – gross carrying value
Intellectual property – accumulated amortization
Patents – accumulated amortization
Net intangible assets
June 30,
2015
June 30,
2014
$
$
3,100 $
2,181
5,281
(1,776)
(1,145)
(2,921)
2,360 $
3,100
2,068
5,168
(1,621)
(972)
(2,593)
2,575
Amortization expense, included in general and administrative expenses, was approximately $358,000 for each of the years ended June 30,
2015 and 2014, respectively. In addition, for the years ended June 30, 2015 and 2014, the Company incurred losses on the abandonment of
patents of approximately $48,000 and $56,000, respectively. The weighted-average remaining life for intellectual property and patents at
June 30, 2015 was approximately 8.5 years and 6.8 years, respectively. The estimated annual amortization expense for the next five years
and thereafter is as follows (in thousands):
For the Year Ending
June 30,
2016
2017
2018
2019
2020
Thereafter
Total
$
$
353
337
319
289
256
806
2,360
F-11
8. Significant Vendor
Fraunhofer was the Company’s most significant vendor. The accounts payable balance includes amounts due Fraunhofer of approximately
$445,000 and $205,000 as of June 30, 2015 and 2014, respectively. For the years ended June 30, 2015 and 2014, research and development
expenses related to Fraunhofer were approximately $1.85 million and $0.8 million, respectively. See Note 16 – Commitments and
Contingencies.
In September 2013, the Company and Fraunhofer completed the Terms of Settlement for the TTA Seventh Amendment (the “Settlement
Agreement”), the significant terms of which are as follows:
·
·
·
·
·
·
The Company’s liabilities to Fraunhofer in the amount of approximately $2.9 million as of June 30, 2013 were released and
terminated;
The Company’s obligation under the TTA, prior to the Settlement Agreement, to make three $1 million payments to Fraunhofer
in April 2013, November 2013, and April 2014 (the “Guaranteed Annual Payments”) was terminated and replaced with an
undertaking to engage Fraunhofer to perform for at least $3 million in work requested and as directed by iBio before December
31, 2015. See Note 16 – Commitments for additional information;
The Company terminated and released Fraunhofer from the obligation to make further financial contributions toward the
enhancement, improvement and expansion of iBio’s technology in an amount at least equal to the Guaranteed Annual Payments.
In addition, the Company terminated and released Fraunhofer from the obligation to further reimburse iBio for certain past and
future patent-related expenses;
The Company’s obligation to remit to Fraunhofer minimum annual royalty payments in the amount of $200,000 was terminated.
Instead the Company will be obligated to remit royalties to Fraunhofer only on technology license revenues that iBio actually
receives and on revenues from actual sales by iBio of products derived from the Company’s technology until the later of
November 2023 or until such time as the aggregate royalty payments total at least $4 million;
The rate at which the Company will be obligated to pay royalties to Fraunhofer on iBioLaunch and iBioModulator license
revenues received was reduced from 15% to 10%; and
Any and all other claims of each party to any other amounts due at June 30, 2013 were mutually released.
The effect of the Settlement Agreement was the elimination of approximately $1.7 million of accrued expenses and $1.2 million of
accounts payable from the Company’s books, as well as a $1 million reduction in prepaid expenses and an approximately $1.9 million
positive impact on earnings resulting from the reversal of expenses incurred by the Company under the terms of the previous agreement.
This $1.9 million is composed of credits of $1.04 million to research and development expenses, $0.7 million to general and administrative
expenses, and $122,000 to interest expense, respectively.
On January 4, 2011, the Company entered into the Collaboration and License Agreement (the “CLA”) which is a three party agreement
involving the Company, Fraunhofer and FioCruz, a foundation, member of the Indirect Federal Public Administration of Brazil and
attached to the Health Ministry of Brazil, acting through its unit Bio-Manguinhos. The CLA provides for the development of a yellow fever
vaccine to be manufactured and distributed within Latin America and Africa by FioCruz. The CLA was supplemented by a bilateral
agreement between iBio and Fraunhofer dated December 27, 2010 in which the Company engaged Fraunhofer as a contractor to provide
the research and development services (both, together, the “Agreement”). The services are billed to FioCruz at Fraunhofer’s cost, so
revenue is equivalent to expense and there is no profit. At June 30, 2013, the Company had a receivable of $1.007 million and an accounts
payable of the same amount.
On June 12, 2014, FioCruz, Fraunhofer and iBio executed an amendment to the Agreement (the “Amended Agreement”) which provides
for revised research and development, work plans, reporting, objectives, estimated budget, and project billing process. The effect of the
amendment resulted in a charge of approximately $1.007 million to general and administrative expenses for the noncollectibility of an
accounts receivable from FioCruz for revenues recorded for the year ended June 30, 2013 and a credit of approximately $1.007 million to
research and development expenses and a corresponding adjustment to accounts payable relating to expenses accrued at June 30, 2013
owed to Fraunhofer.
For the years ended June 30, 2015 and 2014, under the Amended Agreement, the Company recognized revenue of $1,851,000 and
$205,000, respectively, for work performed for FioCruz pursuant to the Amended Agreement by the Company’s subcontractor, Fraunhofer,
and recognized research and development expenses of the same amount due Fraunhofer for that work.
On March 17, 2015 the Company filed a Verified Complaint in the Court of Chancery of the State of Delaware against Fraunhofer and
Vidadi Yusibov, Fraunhofer's Executive Director. See Note 16 - Lawsuits for additional information.
F-12
9. Accrued Expenses
Accrued expenses consist of the following (in thousands):
Stock exchange fees
Salaries and benefits
Other accrued expenses
Total accrued expenses
10. Stockholders’ Equity
June 30,
2015
June 30,
2014
$
$
65 $
39
55
159 $
-
32
66
98
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. As of June 30, 2015 and 2014, there were no shares of preferred stock issued and outstanding.
Common Stock
As of June 30, 2013, the Company was authorized to issue up to 100 million shares of common stock. On December 18, 2013, the
Company amended its certificate of incorporation and increased the number of authorized shares of common stock to 175 million. As of
June 30, 2015, the Company had reserved up to 15 million shares of common stock for incentive compensation (stock options and
restricted stock) and approximately 6.6 million shares of common stock for the exercise of warrants.
Issuances of common stock were as follows:
Warrant Exercise Inducement
On October 15, 2013, the Company announced that it was providing holders of its warrants issued as part of the January 2012 equity
offering (the “January 2012 Warrants”) the opportunity to exercise at a reduced price for a limited period of time. The original exercise
price of $0.88 was reduced to $0.40 until 5:00 p.m. on November 12, 2013 (the “Expiration Time”), after which the exercise price reverted
back to $0.88 until these January 2012 Warrants expired on January 14, 2014. In October 2013, pursuant to this warrant exercise
inducement, the Company issued 7.75 million shares of common stock and received exercise proceeds of approximately $3.1 million, net
of expenses.
November 2013 Private Placement Offering
In November 2013, the Company completed a private placement offering of 1.2 million shares of its common stock at a price of $0.40 per
share, resulting in net proceeds of approximately $0.5 million. The shares were issued in January 2014.
Aspire Capital – 2014 Facility
On August 25, 2014, the Company entered into a common stock purchase agreement with Aspire Capital Fund, which provided that, upon
the terms and subject to the conditions and limitations set forth therein, Aspire Capital was committed to purchase up to an aggregate of
$10.0 million of shares of the Company’s common stock over the approximately 24-month term of the purchase agreement. As of April 28,
2015, Aspire Capital fulfilled its commitment to purchase $10.0 million of the Company’s common stock under the agreement.
In consideration for entering into the purchase agreement, following the approval of the issuance of the shares by NYSE MKT, Aspire
Capital received a commitment fee of $300,000 – 3% of the $10 million commitment – payable in 681,818 shares of the Company’s
common stock priced at $0.44 per share, the closing price on the day preceding execution of the agreement. In addition, on September 19,
2014 following approval of the issuance of the shares by NYSE MKT, Aspire Capital purchased 1,136,354 shares of common stock at
$0.44 per share for $500,000 pursuant to the terms of the purchase agreement.
Concurrently with entering into the purchase agreement, the Company also entered into a registration rights agreement with Aspire Capital,
in which the Company agreed to file one or more registration statements as permissible and necessary to register under the Securities Act of
1933, as amended, the sale of shares of the Company’s common stock under the purchase agreement.
After the Securities and Exchange Commission declared effective the registration statement, on any trading day on which the closing sale
price of the Company’s common stock exceeded the “Floor Price” of $0.44 (the closing sale price of the Company’s shares on the business
day before the Company entered into the purchase agreement with Aspire Capital), the Company had the right, in its sole discretion, to
present Aspire Capital with a purchase notice, directing Aspire Capital (as principal) to purchase up to 150,000 shares of common stock per
trading day, provided that the aggregate price of such purchase did not exceed $500,000 per trading day, up to an additional $9.5 million of
common stock in the aggregate at a per share price equal to the lesser of the lowest sale price of common stock on the purchase date, or the
arithmetic average of the three lowest closing sale prices of common stock during the ten consecutive trading days ending on the trading
day immediately preceding the purchase date.
F-13
In addition, on any date on which the Company submitted a purchase notice to Aspire Capital in an amount equal to 150,000 shares of
common stock and the closing sale price of common stock was equal to or greater than the Floor Price of $0.44, the Company also had the
right, in its sole discretion, to present Aspire Capital with a volume-weighted average price (“VWAP”) purchase notice directing Aspire
Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of the Company’s common stock traded on the NYSE
MTK on the next trading day, subject to a maximum number of shares determined by the Company, and a minimum trading price equal to
the greater of (a) 80% of the closing price of common stock on the business day immediately preceding the date of the VWAP purchase, or
(b) such higher price as set forth by the Company in the notice for the VWAP purchase. The purchase price per share pursuant to such
VWAP purchase notice was the lower of (i) the closing sale price on the date of sale and (ii) 97% of the volume-weighted average price for
common stock traded on the NYSE MKT on (i) the date of the VWAP purchase if the aggregate stock to be purchased on that date did not
exceed the volume maximum stated in the Company’s notice for the VWAP purchase, or (ii) the portion of such business day until such
time as aggregate stock to be purchased equaled the volume maximum stated in the Company’s notice or the time at which the sale of the
stock fell below the minimum trading price described above.
The purchase agreement provided that the Company and Aspire Capital could not effect any sales under the purchase agreement on any
purchase date where the closing sale price of common stock is less than $0.44 (the closing sale price of shares on the business day before
the Company entered into the purchase agreement referred to as the “Floor Price”). A lower Floor Price of $0.20 per share of Common
Stock applied, if the Company’s stockholders approved the transaction contemplated by the Purchase Agreement. The Company was under
no obligation to request our stockholders to approve the transaction contemplated by the Purchase Agreement. However, the purchase price
for any purchases of shares under the purchase agreement could not be less than $0.44 per share, unless stockholder approval was obtained.
There were no trading volume requirements or restrictions under the purchase agreement with Aspire Capital, and the Company controlled
the timing and amount of any sales of our common stock to Aspire Capital. Aspire Capital had no right to require any sales by the
Company, but was obligated to make purchases from the Company as directed in accordance with the purchase agreement. There were no
limitations on use of proceeds, financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights,
penalties or liquidated damages in the purchase agreement.
Aspire Capital purchased 8,768,806 shares of common stock for $10,000,000 pursuant to the terms of the purchase agreement, fulfilling its
commitment to purchase $10.0 million of the Company’s common stock under the agreement.
Aspire Capital – 2015 Facility
On May 15, 2015, the Company entered into a common stock purchase agreement (the “2015 Aspire Purchase Agreement”) with Aspire
Capital, pursuant to which the Company has the option to require Aspire Capital to purchase up to an aggregate of $15.0 million of shares
of the Company’s common stock (the “Purchase Shares”) upon and subject to the terms of the 2015 Aspire Purchase Agreement. In
consideration for entering into the purchase agreement, Aspire Capital received a commitment fee of 450,000 shares (the “Commitment
Shares”).
On any business day after the Commencement Date (as defined below) and over the 36-month term of the 2015 Aspire Purchase
Agreement, the Company has the right, in its sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”)
directing Aspire Capital to purchase up to 200,000 Purchase Shares per business day; however, no sale pursuant to such a Purchase Notice
may exceed five hundred thousand dollars ($500,000) per business day, unless the Company and Aspire Capital mutually agree. The
Company and Aspire Capital also may mutually agree to increase the number of shares that may be sold to as much as an additional
2,000,000 Purchase Shares per business day. The purchase price per Purchase Share pursuant to such Purchase Notice (the “Purchase
Price”) is the lower of (i) the lowest sale price for the Company’s common stock on the date of sale or (ii) the average of the three lowest
closing sale prices for the Company’s common stock during the 10 consecutive business days ending on the business day immediately
preceding the purchase date. The applicable Purchase Price will be determined prior to delivery of any Purchase Notice.
F-14
In addition, on any date on which the Company submits a Purchase Notice to Aspire Capital for at least 150,000 Purchase Shares and the
closing sale price of the Company’s common stock is higher than $0.40, the Company also has the right, in its sole discretion, to present
Aspire Capital with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to
purchase an amount of the Company’s common stock equal to up to 35% of the aggregate shares of common stock traded on the next
business day (the “VWAP Purchase Date”), subject to a maximum number of shares determined by the Company (the “VWAP Purchase
Share Volume Maximum”). The purchase price per Purchase Share pursuant to such VWAP Purchase Notice (the “VWAP Purchase Price”)
shall be the lesser of the closing sale price of the Company’s common stock on the VWAP Purchase Date or 97% of the volume weighted
average price for the Company’s common stock traded on the VWAP Purchase Date if the aggregate shares to be purchased on that date
does not exceed the VWAP Purchase Share Volume Maximum, or the portion of such business day until such time as the sooner to occur of
(1) the time at which the aggregate shares traded has exceeded the VWAP Purchase Share Volume Maximum, or (2) the time at which the
sale price of the Company’s common stock falls below the VWAP Minimum Price Threshold (to be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction). The “VWAP Minimum
Price Threshold” is the greater of (i) 80% of the closing sale price of the Company’s common stock on the business day immediately
preceding the VWAP Purchase Date or (ii) such higher price as set forth by the Company in the VWAP Purchase Notice.
The number of Purchase Shares covered by and timing of each Purchase Notice or VWAP Purchase Notice are determined at the
Company’s discretion. The aggregate number of shares that the Company can sell to Aspire Capital under the 2015 Aspire Purchase
Agreement may in no case exceed 15,343,406 shares of our common stock (which is equal to approximately 19.99% of the common stock
outstanding on the date of the 2015 Aspire Purchase Agreement, including the 450,000 Commitment Shares issued to Aspire Capital in
consideration for entering into the 2015 Aspire Purchase Agreement) (the “Exchange Cap”), unless (i) shareholder approval is obtained to
issue more, in which case the Exchange Cap will not apply; provided that at no time shall Aspire Capital (together with its affiliates)
beneficially own more than 19.99% of the Company’s common stock.
The 2015 Aspire Purchase Agreement contains customary representations, warranties, covenants, closing conditions and indemnification
and termination provisions. Sales under the 2015 Aspire Purchase Agreement could commence only after certain conditions were satisfied
(the date on which all requisite conditions have been satisfied being referred to as the “Commencement Date”), which conditions included
the delivery to Aspire Capital of a prospectus supplement covering the Commitment Shares and the Purchase Shares, approval for listing on
NYSE MKT of the Purchase Shares and the Commitment Shares, the issuance of the Commitment Shares to Aspire Capital, and the receipt
by Aspire Capital of a customary opinion of counsel and other certificates and closing documents. Either party had the option to terminate
the 2015 Aspire Purchase Agreement in the event the Commencement Date had not occurred by July 1, 2015. The 2015 Aspire Purchase
Agreement may be terminated by the Company at any time, at its discretion, without any cost or penalty.
The Company’s net proceeds will depend on the Purchase Price, the VWAP Purchase Price and the frequency of the Company’s sales of
Purchase Shares to Aspire Capital; subject to the maximum $15.0 million available amount. The Company’s delivery of Purchase Notices
and VWAP Purchase Notices will be made subject to market conditions, in light of the Company’s capital needs from time to time. The
Company expects to use proceeds from sales of Purchase Shares for general corporate purposes and working capital requirements.
In connection with the 2015 Aspire Purchase Agreement, the Company also entered into a Registration Rights Agreement (the
“Registration Rights Agreement”) with Aspire Capital, dated May 15, 2015. The Registration Rights Agreement provides, among other
things, a requirement to register the sale of the Commitment Shares and the Purchase Shares to Aspire Capital pursuant to the Company’s
existing shelf registration statement (the “Registration Statement”). The Company further agreed to keep the Registration Statement
effective and to indemnify Aspire Capital for certain liabilities in connection with the sale of the Securities under the terms of the
Registration Rights Agreement.
No shares have been sold under the 2015 Facility as of the date of the filing of this report.
Exercises of Warrants
During the year ended June 30, 2015, the Company issued 1,636,000 shares of common stock for the exercise of warrants and received
proceeds of approximately $867,000. In addition, during the year the Company issued 26,691 shares of common stock for the cashless
exercise of 75,000 warrants.
During the period from July 1, 2015 to the date of the filing of this report, the Company issued 120,000 shares of common stock for the
exercise of warrants and received proceeds of approximately $64,000.
F-15
Warrants
The Company has historically financed its operations through the sale of common stock and warrants, sold together as units.
The following table summarizes all warrant activity for the years ended June 30, 2015 and 2014:
Outstanding as of July 1, 2013
Exercised
Expired
Outstanding as of June 30, 2014
Exercised
Expired
Outstanding as of June 30, 2015
Exercisable as of June 30, 2015
Weighted-
average
Exercise
Price
1.23
0.40
1.18
1.38
0.51
0.66
1.63
1.63
Warrants
25,395,940 $
(7,750,000) $
(8,876,029) $
8,769,911 $
(1,711,000) $
(425,587) $
6,633,324 $
6,633,324 $
During the year ended June 30, 2015, the Company issued 1,636,000 shares of common stock for the exercise of warrants and received
proceeds of approximately $867,000. In addition, the Company issued 26,691 shares of common stock for the cashless exercise of 75,000
warrants.
12. Earnings (Loss) Per Common Share
Basic earnings (loss) per common share is computed by dividing the net income (loss) allocated to common stockholders by the weighted-
average number of shares of common stock outstanding during the period. For purposes of calculating diluted earnings 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):
Years ended
June 30,
2015
2014
Basic and diluted numerator:
Net loss
$
(6,625) $
(3,666)
Basic and diluted denominator:
Weighted-average common shares outstanding
71,495
62,968
Per Share Amount
$
(0.09) $
(0.06)
For the years ended June 30, 2015 and 2014, the Company incurred net losses which cannot be diluted; therefore, basic and diluted loss per
common share is the same. As of June 30, 2015, shares issuable which could potentially dilute future earnings included approximately 9.5
million stock options and 6.6 million warrants. As of June 30, 2014, shares issuable which could potentially dilute future earnings
included approximately 8.5 million stock options and 8.8 million warrants.
F-16
13. Share-Based Compensation
The following table summarizes the components of share-based compensation expense in the Consolidated Statements of Operations (in
thousands):
Research and development
General and administrative
Totals
Year Ended
June 30,
2015
2014
$
$
- $
914
914 $
97
978
1,075
Stock Options
On August 12, 2008, the Company adopted the iBioPharma 2008 Omnibus Equity Incentive Plan (the “Plan”) for employees, officers,
directors and external service providers. The original Plan provided that the Company may grant options to purchase stock and/or make
awards of restricted stock up to an aggregate amount of 10 million shares. On December 18, 2013, the Plan was amended to increase the
number of shares reserved for awards under the Plan from 10 million to 15 million. As of June 30, 2015, there were approximately 6.7
million shares of common stock reserved for future issuance under the Plan. Stock options granted under the Plan may be either 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 occurs 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 occurs when the performance criteria have been
satisfied. The Company uses historical data to estimate forfeiture rates.
Issuances of stock options during the year ended June 30, 2015 were as follows:
On September 5, 2014, the Company granted stock options to members of the Board of Directors, officers and employees to purchase 1.64
million shares of common stock. These options vest ratably on the anniversary of the date of grant over a three year service period, expire
ten years from the date of grant, and have a weighted-average exercise price of $0.86 per share.
On November 20, 2014, the Company granted stock options to a consultant to purchase 100,000 shares of common stock. These options
vest over a three year service period, expire four years from the date of grant, and have an exercise price of $1.15 per share.
On October 17, 2014, a consulting agreement dated March 1, 2012 with a former employee was terminated for cause. As a result, 500,000
options with an exercise price of $0.87 were cancelled.
Issuances of stock options during the year ended June 30, 2014 were as follows:
During the year ended June 30, 2014, the Company granted stock options to members of the Board of Directors and officers to purchase
1,060,000 shares of common stock. These options vest ratably on the anniversary of the date of grant over a three to five year service
period, expire ten years from the date of grant, and have an exercise price of $0.51 per share.
During the year ended June 30, 2014, the Company granted stock options to employees to purchase 730,000 shares of common stock.
These options vest ratably on the anniversary of the date of grant over a two to three year service period, expire ten years from the date of
grant, and have a weighted-average exercise price of $0.41 per share.
On August 14, 2013, the Company granted stock options to a consultant to purchase 200,000 shares of common stock. These options vested
based on defined performance goals, expired ten years from the date of grant, and had an exercise price of $0.47 per share. The options
were cancelled in January/February 2015.
Issuances of stock options for the period from July 1, 2015 to the date of the filing of this report were as follows:
On September 4, 2015, the Company granted stock options to members of the Board of Directors, officers and employees to purchase 2.55
million shares of common stock. These options vest ratably on the anniversary of the date of grant over a three to five year service period,
expire ten years from the date of grant, and have an exercise price of $1.72 per share.
F-17
The following table summarizes all stock option activity during the years ended June 30, 2015 and 2014:
Weighted-
average
Exercise
Price
Weighted-
average
Remaining
Contractual
Term (in years)
Outstanding as of July 1, 2013
Granted
Forfeited/expired
Outstanding as of June 30, 2014
Granted
Forfeited/expired
Outstanding as of June 30, 2015
As of June 30, 2015 vested and expected to vest
Exercisable as of June 30, 2015
Stock
Options
6,760,000 $
1,990,000 $
(266,666) $
8,483,334 $
1,740,000 $
(700,000) $
9,523,334 $
9,499,292 $
6,156,677 $
1.45
0.47
0.62
1.25
0.88
0.75
1.22
1.22
1.42
Aggregate
Intrinsic Value
(in thousands)
161
7.5 $
7.0 $
179
6.6 $
6.6 $
5.6 $
1,848
1,836
1,105
The total fair value of stock options that vested during both of the years ended June 30, 2015 and 2014 was approximately, $0.9 million and
$1.1 million, respectively. As of June 30, 2015, there was approximately $1.2 million of total unrecognized compensation cost related to
non-vested stock options that the Company expects to recognize over a weighted-average period of 1.9 years.
The weighted-average grant date fair value of stock options granted during the years ended June 30, 2015 and 2014 was $0.43 and $0.40
per share, respectively. The Company estimated the fair value of options granted using the Black-Scholes option pricing model with the
following assumptions:
Risk-free interest rate
Dividend yield
Volatility
Expected term (in years)
2015
1.3% - 2.3%
0%
2014
2.3% - 2.7%
0%
96.7% - 113.9% 97.4% - 100.6%
4 - 9
9
In November and December 2011, the Board of Directors modified the cancellation provision of previously issued options, permitting an
option holder, upon termination without cause, to exercise the vested portion of an option post-termination for up to ten years after the
grant date (the life of the option). Option awards granted in the current period also include this provision. Effective September 30, 2011, the
Company ceased using the simplified method for share-based compensation expense and now estimates the expected term for each award
to approximate its contractual term. The Company determined the effect of the modification to be approximately $633,000, based upon the
difference in the fair market value of the options immediately before and after the modification occurred. For the year ended June 30, 2014,
the Company recorded modification charges to research and development and to general and administrative expenses of approximately
$14,000.
F-18
14. Related Party Transactions
Research and Development Services Vendor
In January 2012, the Company entered into an agreement with Novici Biotech, LLC (“Novici”) in which iBio’s President is a minority
stockholder. Novici performs laboratory feasibility analyses of gene expression, protein purification and preparation of research samples.
The accounts payable balance includes amounts due to Novici of approximately $153,000 and $38,000 at June 30, 2015 and 2014,
respectively. Research and development expenses related to Novici were approximately $995,000 and $527,000 for the years ended June
30, 2015 and 2014, respectively.
Operating Lease with Minority Stockholder
Effective January 1, 2015, the Company is leasing office space on a month-to-month basis from an entity owned by a minority stockholder
of the Company for approximately $2,000 per month.
15. Income Taxes
The components of net loss consist of the following (in thousands):
United States
Brazil
Total
For the Years Ended
June 30,
2015
2014
$
$
(6,532) $
(93)
(6,625) $
(3,666)
-
(3,666)
The components of the provision (benefit) for income taxes consist of the following (in thousands):
Current – Federal, state and foreign
Deferred – Federal
Deferred – State
Deferred – Foreign
Total
Change in valuation allowance
Income tax expense
For the Years Ended
June 30,
2015
2014
$
$
- $
(2,299)
(377)
(12)
(2,688)
2,688
- $
-
(1,267)
(215)
-
(1,482)
1,482
-
The Company has deferred income taxes due to income tax credits, net operating loss carryforwards, and the effect of temporary
differences between the carrying values of certain assets and liabilities for financial reporting and income tax purposes.
The components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets (liabilities):
Net operating loss
Share-based compensation
Research and development tax credits
Intangible assets
Vacation accrual and other
Valuation allowance
Total
As of June 30,
2015
2014
$
$
14,213 $
3,992
890
(188)
16
(18,923)
- $
11,954
3,626
764
(122)
13
(16,235)
-
The Company has a valuation allowance against the full amount of its net deferred tax assets due to the uncertainty of realization of the
deferred tax assets due to operating loss history of the Company. The Company currently provides a valuation allowance against deferred
taxes when it is more likely than not that some portion, or all of its deferred tax assets will not be realized. The valuation allowance could
be reduced or eliminated based on future earnings and future estimates of taxable income.
Federal net operating losses of approximately $5.5 million were used by the Former Parent prior to June 30, 2008 and are not available to
the Company. The Former Parent allocated the use of the Federal net operating losses available for use on its consolidated Federal tax
return on a pro rata basis based on all of the available net operating losses from all the entities included in its control group.
U.S. Federal and state net operating losses of approximately $37.2 million and $21.6 million, respectively, are available to the Company as
of June 30, 2015 and will expire at various dates through 2035. These carryforwards could be subject to certain limitations in the event
there is a change in control of the Company pursuant to Internal Revenue Code Section 382, though the Company has not performed a
study to determine if the loss carryforwards are subject to these Section 382 limitations. The Company has a research and development
credit carryforward of approximately $890,000 at June 30, 2015. In addition, the Company has foreign net operating losses totaling
approximately $70,000 with no expiration date.
F-19
A reconciliation of the statutory tax rate to the effective tax rate is as follows:
Statutory federal income tax rate
State (net of federal benefit)
Research and development tax credit
Change in valuation allowance
Effective income tax rate
Years Ended
June 30,
2015
2014
34%
6%
1%
(41)%
-%
34%
6%
1%
(41)%
-%
The Company has not been audited in connection with income taxes. iBio files U.S. Federal and state income tax returns subject to varying
statutes of limitations. The 2010 through 2014 tax returns generally remain open to examination by U.S. Federal and state tax authorities. In
addition, the 2014 Brazilian federal tax return remains open to examination by Brazil Federal tax authorities.
16. Commitments and Contingencies
Under the terms of the Settlement Agreement described in Note 8 – Significant Vendor above, the Company undertook to engage
Fraunhofer for at least $3 million in work requested and directed by iBio before December 31, 2015. Effective January 31, 2014, the
Company terminated a $1.5 million research services agreement with Fraunhofer after having engaged Fraunhofer to perform $0.5 million
in research and development services.
On June 12, 2014, FioCruz, Fraunhofer and iBio executed an amendment to the CLA (the “Amended Agreement”) to create a new research
and development plan for the development of a recombinant yellow fever vaccine providing revised reporting, objectives, estimated
budget, and project billing process. Under the CLA and bilateral agreement between iBio and Fraunhofer dated December 27, 2010,
Fraunhofer, which has been engaged to act as the Company's subcontractor for performance of research and development services for the
new research and development plan, will bill FioCruz directly on behalf of the Company at the rates, amounts and times provided in the
Amended Agreement, and the proceeds of such billings and only the proceeds will be paid to Fraunhofer for its services so the Company's
expense is equal to its revenue and no profit is recognized for these activities under the Amended Agreement. For the year ended June 30,
2015, $2.1 million in research and development services have been performed by Fraunhofer for the Company pursuant to the amended
CLA. As of June 30, 2015, the total engagement of Fraunhofer for work requested by iBio is $2.7 million.
Under the terms of the TTA (described in Note 8 – Significant Vendor) and for a period of 15 years: 1) the Company shall pay Fraunhofer
a defined percentage (per the agreement) of all receipts derived by the Company from sales of products produced utilizing the Technology
and a defined percentage (per the agreement) of all receipts derived by the Company from licensing the Technology to third parties. The
Company will be obligated to remit royalties to Fraunhofer only on technology license revenues that iBio actually receives and on revenues
from actual sales by iBio of products derived from the Company’s technology until the later of November 2023 or until such time as the
aggregate royalty payments total at least $4 million. All new intellectual property invented by Fraunhofer during the period of the TTA is
owned by and is required to be transferred to iBio.
On June 12, 2014, Fiocruz, Fraunhofer and iBio executed an amendment to the CLA (the “Amended Agreement”) which provides for
revised research and development, work plans, reporting, objectives, estimated budget, and project billing process. Under the CLA and
bilateral agreement between iBio and Fraunhofer dated December 27, 2010, Fraunhofer, the Company’s subcontractor for performance of
research and development services, bills Fiocruz directly on behalf of the Company at the rates, amounts and times provided in the
Amended Agreement, and the proceeds of such billings and only the proceeds are paid to Fraunhofer for its services, so the Company's
expense is equal to its revenue and no profit is recognized for these activities under the Amended Agreement . See Note 8 – Significant
Vendor for additional information.
On January 14, 2014 (the “Effective Date”), the Company entered into an exclusive worldwide License Agreement (“LA”) with the
University of Pittsburgh (“UP”) covering all of the U.S. and foreign patents and patent applications and related intellectual property owned
by UP pertinent to the use of endostatin peptides for the treatment of fibrosis. The Company paid an initial license fee of $20,000 and is
required to pay all of UP’s patent prosecution costs that were incurred prior to, totaling $30,627, and subsequent to the Effective Date. On
each anniversary date the Company is to pay license fees ranging from $25,000 to $150,000 for the first five years and $150,000 on each
subsequent anniversary date until the first commercial sale of the licenced technology. Beginning with commerical sales of the technology
or approval by the FDA or foreign equivalent, the Company will be required to pay milestone payments, royalties and a percentage of any
non-royalty sublicense income to UP.
F-20
On December 30, 2013, the Company entered into a Project Agreement with the Medical University of South Carolina (“MUSC”)
providing for the performance of research and development services by MUSC related to peptides for the treatment of fibrosis. The
agreement requires the Company to make payments totaling $78,000 through December 1, 2014 and provides the Company with certain
intellectual property rights. Effective September 1, 2014, the Company and MUSC executed an Amendment to the agreement. The
Amendment extends the term of the agreement to December 31, 2015 and increases the total payments due MUSC from the Company by
$161,754.
Lawsuits
On October 22, 2014, the Company filed a Verified Complaint in the Court of Chancery of the State of Delaware against PlantForm
Corporation (“PlantForm”) and PlantForm’s president seeking equitable relief and damages based upon PlantForm’s interference with
several contracts between the Company and Fraunhofer USA’s Center for Molecular Biotechnology unit (“Fraunhofer”) and one of the
Company’s consultants and misappropriating the Company’s intellectual property including trade secrets and know-how. On May 14,
2015, after mediation ordered and supervised by the Chancery Court, PlantForm represented and agreed that all drug development and
manufacturing activities of PlantForm with Fraunhofer had ceased and would not be renewed at least until after the termination of the
Company’s litigation regarding similar subject matter with Fraunhofer, and all of the accrued claims between the Company and PlantForm
and its President were voluntarily dismissed with prejudice.
On March 17, 2015 the Company filed a Verified Complaint in the Court of Chancery of the State of Delaware against Fraunhofer and
Vidadi Yusibov (“Yusibov”), Fraunhofer’s Executive Director, seeking monetary damages and equitable relief based on Fraunhofer’s
material and continuing breaches of their contracts with the Company. On September 16, 2015, the Company voluntarily dismissed its
action against Yusibov, without prejudice, and thereafter on September 29, 2015, the Company filed a Verified Amended Complaint
against Fraunhofer alleging material breaches by Fraunhofer of its agreements with the Company and seeking monetary damages and
equitable relief against Fraunhofer. The Company is unable to predict the ultimate outcome of this action at this time.
On October 24, 2014, a putative class action captioned Juan Pena, Individually and on Behalf of All Others Similarly Situated v. iBio, Inc.
and Robert B. Kay was filed in the United States District Court for the District of Delaware. The action alleged that the Company and its
Chief Executive Officer made certain statements in violation of federal securities laws and sought an unspecified amount of damages. On
February 23, 2015, the Court issued an order appointing a new lead plaintiff. On April 6, 2015, the plaintiffs filed an amended class action
complaint in the same matter captioned Vamsi Andavarapu, Individually And On Behalf Of All Others Situated v. iBio, Inc., Robert B. Kay,
and Robert Erwin. The action alleged that the Company, its Chief Executive Officer, and its President made certain statements in violation
of Federal securities laws and sought an unspecified amount of damages. On May 6, 2015, the Company, Mr. Kay, and Mr. Erwin filed a
motion to dismiss the amended class action complaint. On September 15, 2015, after voluntary mediation, the Plaintiffs and the Company
reached an agreement-in-principle to settle the action. The terms of the settlement are subject to preliminary and final approval by the
Court. The Company expects that the settlement will be approved by the Court and funded by the Company’s insurance carrier.
F-21
17. Segment Reporting
As discussed above, iBio Brazil began operations in the first quarter of fiscal 2015. In accordance with FASB ASC 280, “ Segment
Reporting,” the Company discloses financial and descriptive information about its reportable geographic segments. Geographic segments
are components of an enterprise 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.
Year ended June 30, 2015
Net revenues
Research and development expenses
General and administrative expenses
Operating loss
Total assets
iBio
iBio
Brazil
Total
$
1,851 $
3,495
4,929
(6,573)
12,448
- $
-
93
(93)
46
1,851
3,495
5,022
(6,666)
12,494
F-22
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-171315, File No. 333-175420 and
File No. 333-200410) of iBio, Inc. and Subsidiaries of our report dated October 13, 2015, on our audits of the consolidated financial
statements of iBio, Inc. and Subsidiaries as of June 30, 2015 and 2014 and for the years then ended, included in this Annual Report on
Form 10-K.
Exhibit 23.1
/s/ CohnReznick LLP
Eatontown, New Jersey
October 13, 2015
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Robert B. Kay, certify that:
1.
I have reviewed this Annual Report on Form 10-K of iBio, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
October 13, 2015
/s/Robert B. Kay
Robert B. Kay
Executive Chairman
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Mark Giannone, certify that:
1.
I have reviewed this Annual Report on Form 10-K of iBio, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
October 13, 2015
/s/Mark Giannone
Mark Giannone
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of iBio, Inc. (the Company) on Form 10-K for the year ended June 30, 2015 as filed with
the Securities and Exchange Commission on the date hereof (the Report), I, Robert B. Kay, Executive Chairman of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1.
2.
October 13, 2015
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/Robert B. Kay
Robert B. Kay
Executive Chairman
(Principal Executive Officer)
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to iBio, Inc. and
will be furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of iBio, Inc. (the Company) on Form 10-K for the year ended June 30, 2015 as filed with
the Securities and Exchange Commission on the date hereof (the Report), I, Mark Giannone, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1.
2.
October 13, 2015
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Mark Giannone
Mark Giannone
Chief Financial Officer
(Principal Financial Officer)
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to iBio, Inc. and
will be furnished to the Securities and Exchange Commission or its staff upon request.