Ibio, Inc. quarterly report, Q1 FY2012

iBio, Inc. Form 10-Q Summary

Reporting period: Three months ended September 30, 2011, the first quarter of fiscal 2012. The financial statements are unaudited. iBio is a biotechnology company commercializing its iBioLaunch platform for vaccines and therapeutic proteins through collaborations and licensing arrangements.

Financial Performance and Position

Metric	Q1 FY2012	Q1 FY2011
Revenue	$320,348	$0
Research and development expense	$1,456,640	$157,543
General and administrative expense	$1,188,734	$1,213,264
Operating loss	$(2,325,026)	$(1,370,807)
Net income (loss)	$383,143	$(2,817,931)
Basic diluted EPS	$0.01	$(0.10)
Net cash used in operating activities	$(1,228,318)	$(526,229)
Cash at period end	$1,522,652	$313,826

Revenue was generated from technology services provided to Fiocruz/Bio-Manguinhos under the Yellow Fever vaccine collaboration.
Operating margin was approximately negative 726%; net income margin was approximately 120%, substantially influenced by a non-cash derivative fair-value gain rather than operating profitability.
The $2,704,492 derivative fair-value gain produced positive net income. The related derivative liability was $1,483,277 at September 30, 2011, compared with $4,187,769 at June 30, 2011.
Total assets were $5,576,741, including $3,040,651 of net intangible assets. Total liabilities were $4,690,641, consisting primarily of accounts payable of $2,980,785, accrued expenses of $226,579, and the derivative liability. The filing does not identify conventional debt balances.
Stockholders’ equity increased to $886,100 from $196,642 at June 30, 2011, reflecting net income and $338,292 of share-based compensation, partly offset by the warrant-related equity adjustment.
Cash used in investing activities was $92,330, entirely related to additions to intangible assets.

Material Changes Versus the Prior Comparable Period

Revenue increased from zero to $320,348 as commercial collaboration-related technology services commenced.
Research and development expense increased by approximately $1.299 million, primarily due to new FhCMB research agreements, Yellow Fever vaccine development, and Technology Transfer Agreement costs.
General and administrative expense decreased by approximately $24,000. Lower warrant-related share-based compensation was largely offset by higher salaries, benefits, and professional fees.
The Company moved from a $2.818 million net loss to $383,143 of net income, driven principally by the change from a $1.441 million derivative fair-value charge to a $2.704 million non-cash gain.
Operating cash use increased by approximately $702,000, while ending cash was higher than the prior-year period because the prior-year beginning cash balance was substantially lower.

Outlook, Liquidity, Risks, and Unusual Items

Management stated that September 30 cash of approximately $1.523 million was expected to fund activities only through January 2012. The Company planned to seek milestone and licensing receipts, royalties, and/or equity financing.
The filing expressly states that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. Failure to obtain financing or sufficient licensing revenue could require material reductions, delays, or discontinuation of development activities, unfavorable collaborations, disposal of technology rights, or cessation of operations.
A Form S-3 registration statement became effective in July 2011, permitting offerings of up to $100 million of securities. No securities had been issued under the registration statement as of the filing date, and no firm financing agreements were disclosed.
The Company’s principal development programs included H1N1 and H5N1 influenza vaccines, Yellow Fever vaccine, and several therapeutic proteins. Products remained in preclinical or early clinical development and required further research, clinical testing, and regulatory approval.
Management reported positive interim Phase 1 results for the H1N1 vaccine and expected H5N1 Phase 1 results toward the end of calendar fourth quarter 2011. These developments do not establish commercial viability or regulatory approval.
The derivative liability arose from warrants containing a down-round provision and is remeasured using a Black-Scholes model. Future income or expense may fluctuate materially with the Company’s share price, volatility, and other valuation assumptions; the warrants may expire in August 2013 or be exercised.
FhCMB-related commitments included a Technology Transfer Agreement requiring annual payments of $2 million for five years beginning in November 2009, additional research agreements, and specified royalty or minimum payment obligations. Accounts payable to FhCMB were $2.181 million at September 30, 2011.
On November 4, 2011, NYSE Amex notified the Company that it was below a continued-listing standard related to losses, resources, and its ability to continue operations. The Company had until November 28, 2011 to submit a compliance plan and was expected to demonstrate compliance by January 25, 2012. Delisting could adversely affect share price and liquidity.
No material legal proceedings were reported. Management concluded that disclosure controls and procedures were effective as of September 30, 2011.

Important Facts for Investors to Verify

Whether the Company obtained financing, licensing milestones, or other funding after September 30, 2011 and whether such funding addressed the going-concern uncertainty.
The status and acceptance of the NYSE Amex compliance plan and any subsequent listing or delisting action.
Actual progress and clinical results for the H1N1, H5N1, Yellow Fever, and therapeutic-protein programs, including regulatory milestones.
The terms, timing, and cash requirements of FhCMB commitments and the Fiocruz/Bio-Manguinhos collaboration.
The composition and settlement or exercise status of the derivative-linked warrants, including potential dilution and future fair-value volatility.
Whether revenue growth can outpace research and development spending and reduce recurring operating cash burn.