Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' EQUITY

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STOCKHOLDERS' EQUITY
 9 Months Ended
Mar. 31, 2012
Stockholders' Equity Note Disclosure [Text Block]

NOTE C – STOCKHOLDERS’ EQUITY


January 2012 Units


On January 13, 2012, the Company raised net proceeds of approximately $9,036,000 after offering expenses of approximately $964,000 by issuing 15,385,000 shares of common stock at $0.65 per share and warrants to purchase 11,538,750 shares of common stock. The Company paid to the underwriter a discount expense of approximately $700,000. The common stock and warrants were sold together as units (the “Units”), each Unit consisting of one share of common stock and 0.75 of one warrant to purchase one share of common stock. Each warrant has an exercise price of $0.88 per share and will be exercisable after the first anniversary of issuance and will expire on the second anniversary date of issuance. In the event the Company issues rights, options or warrants to holders of its common stock, the exercise price of the warrants may be adjusted for the anti-dilutive effects of such an issuance. The Company used its effective registration statement on Form S-3 for this offering.


This equity offering triggered the anti-dilution provisions applicable to the August 2008 equity offering (see Note A – Fair Value of Financial Instruments relating to derivate instrument liability) and resulted in the following:


 

 

 

1)

Modification of the warrants issued to the investors in the August 2008 offering to provide for the purchase of an additional 1,353,439 shares of common stock and adjustment of the exercise prices as follows;

 

 

 

 

a)

Warrants for the purchase of 1,400,449 shares of common stock at $2.68 per common share were revised to the purchase of 2,065,814 at $1.82 per share; and

 

b)

Warrants for the purchase of 1,448,247 shares of common stock at $3.45 per common share were revised to the purchase of 2,136,321 shares of common stock at $2.34 per share.


Share-Based Compensation - Stock Options and Warrants


The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as expense over the period during which the recipient is required to provide services in exchange for that award. Options and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted, is expensed over the related vesting period. Adjustments to fair value at each reporting date may result in income or expense, depending upon the estimate of fair value and the amount of expense recorded prior to the adjustment. The Company reviews its agreements and the future performance obligation with respect to the unvested options or warrants for its vendors or consultants. When appropriate, the Company will expense the unvested options or warrants at the time when management deems the service obligation for future services has ceased.


On August 12, 2008, the Company adopted the iBioPharma, Inc. 2008 Omnibus Equity Incentive Plan (the “Plan”) for employees, officers, directors, or external service providers. 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 10,000,000 shares. There are 4,523,333 options available for future issuance under the Plan. Options granted under the Plan may be either “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or non-statutory stock options at the discretion of the Board of Directors and as reflected in the terms of the written option agreement. Options granted under the Plan during the three and nine months ended March 31, 2012 vest ratably at the end of each twelve-month period within either a three or five-year period from the date of grant, subject to certain conditions that result in acceleration of vesting or termination of the options. Previously granted options vest ratably at the beginning of each twelve-month period.


Share-based compensation expense was recorded as follows:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

Nine Months Ended
March 31,

 

 

 

 

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

Research and development

 

$

58,475

 

$

105,277

 

$

81,662

 

$

377,797

 

General and administrative

 

 

553,473

 

 

1,248,974

 

 

1,924,390

 

 

2,368,410

 

 

 

 

 

 

 

Total

 

$

611,948

 

$

1,354,251

 

$

2,006,052

 

$

2,746,207

 

 

 

 

 

 

 


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 up to ten years after the grant date. Current period option awards granted also include this provision. Through September 30, 2011, in its model for estimating the fair value of option awards, the Company used the simplified method of estimating the expected term for share-based compensation. During the three and six months ended December 31, 2011, the Company ceased using the simplified method and now estimates the expected term for each award to approximate its contractual term. The Company uses its historical stock price volatility consistent with the expected term of grant as the basis for its expected volatility assumption. The Company estimated the effect of the modification to be approximately $633,000. Such value was based upon the fair market value of the options prior to the modification and the fair market value after the modification. Accordingly, for the three and nine months ended March 31, 2012, the Company recorded a modification charge of approximately $59,000 and $510,000 respectively. The balance of $123,000 will be recorded over the remaining vesting period.


Summary of the changes in options outstanding during the nine months ended March 31, 2012 and the year ended June 30, 2011 is as follows:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of
Shares

 

Weighted
Average
Exercise
Price
Per Share

 

Weighted
Average
Remaining
Contractual
Term
(Years)

 

Aggregate
Intrinsic
Value

 

 

 

 

 

 

 

Outstanding at June 30, 2010

 

 

2,210,000

 

$

0.58

 

 

9.1

 

$

1,770,000

 

Granted

 

 

2,140,000

 

$

2.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2011 and expected to vest at June 30, 2011

 

 

4,350,000

 

$

1.49

 

 

8.7

 

$

6,112,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

1,160,000

 

$

1.80

 

 

9.6

 

 

 

 

Forfeited

 

 

(33,333

)

$

0.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2012 and expected to vest at March 31, 2012

 

 

5,476,667

 

$

1.56

 

 

8.1

 

$

1,234,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at March 31, 2012

 

 

2,631,333

 

$

1.29

 

 

7.8

 

$

930,000

 

 

 

 

 

 

 

 

 

 

 

 

 


The weighted average fair value of options granted at the date of grant during the nine months ended March 31, 2012 and 2011 were $1.58 and $1.96 per share, respectively on the dates of grant using the Black-Scholes option-pricing model. Options granted and options required to be revalued each reporting period were calculated with the following assumptions:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

Nine Months Ended
March 31,

 

 

 

 

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

Risk free interest rate

 

 

1.6% to 2.2%

 

 

1.5% to 2.7%

 

 

1.9% to 2.2%

 

 

0.3% to 3.6%

 

Dividend yield

 

 

Zero

 

 

Zero

 

 

Zero

 

 

Zero

 

Volatility

 

 

96.4% to 98.9%

 

 

133%

 

 

94.8% to 98.9%

 

 

98% to 133%

 

Range of expected option life (in years)

 

 

9.0 to 10.0

 

 

4.3 to 8.9

 

 

9.0 to 10.0

 

 

0.9 to 8.9

 


In October 2011, the Company issued 900,000 options to members of the Board of Directors and certain officers and 100,000 options to an employee to purchase shares of common stock at $1.96. These options vest between three to five years and expire in ten years. In addition, the Company issued 60,000 options to a member of the Board of Directors (see Note D).


In February 2012, the Company issued 100,000 options to an employee for the purchase of common stock at $0.77 per share.


A summary of the changes in warrants outstanding during the year ended June 30, 2011 and nine months ended March 31, 2012 is as follows:


 

 

 

 

 

 

 

 

 

 

Number of
Shares

 

Weighted
Average
Exercise
Price
Per Share

 

 

 

 

 

Outstanding at June 30, 2010

 

 

3,085,811

 

$

2.91

 

Granted (1)

 

 

7,973,020

 

$

2.41

 

Exercised

 

 

(95,000

)

$

1.54

 

Cancelled (1)

 

 

(3,015,224

)

$

3.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2011

 

 

7,948,607

 

$

2.37

 

Granted (1)

 

 

15,840,885

 

$

1.20

 

Cancelled (1)

 

 

(2,848,696

)

$

3.07

 

 

 

 

 

 

 

Outstanding at March 31, 2012

 

 

20,940,796

 

$

1.38

 

 

 

 

 

 

 

Exercisable at June 30, 2011

 

 

7,688,607

 

$

2.42

 

 

 

 

 

 

 

Exercisable at March 31, 2012

 

 

20,860,796

 

$

1.38

 

 

 

 

 

 

 


 

 

(1)

Includes a modification to 2,715,224 and 2,848,696 warrants during the year ended June 30, 2011 and for the nine months March 31, 2012, respectively, to purchase common stock pursuant to the terms of the warrant agreement from the August 2008 offering due to the anti-dilution provisions. The August 2008 warrants expire in August 2013.

 

 

 

In October 2011, the Company issued 100,000 warrants to purchase common stock at $2.00 per share to a consultant for investor relations services. The warrant has a term for two years and the fair market value at the date of grant was $0.71 per share using the Black-Scholes option-pricing model.