2.   Basis of Presentation

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared from the books and records of the Company and include all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and Rule 8‑03 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission. Accordingly, these interim financial statements do not include all of the information and footnotes required for complete annual financial statements. Interim results are not necessarily indicative of the results that may be expected for the full year. Interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10‑K for the year ended June 30, 2019, from which the accompanying condensed consolidated balance sheet dated June 30, 2019 was derived.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated as part of the consolidation.

Going Concern 

Since our spin-off from Integrated BioPharma, Inc. in August 2008, we have incurred significant losses and negative cash flows from operations. As of September 30, 2019, the Company’s accumulated deficit was $110.3 million. For the three months ended September 30, 2019, the Company’s net loss was approximately $4.5 million and it had cash used in operating activities of $2.3 million. As of September 30, 2019, cash on hand totaled approximately $2.1 million. On October 29, 2019, the Company closed on an underwritten public offering with total net proceeds of $4,515,000 after deducting underwriting discounts, commissions and other offering expenses payable by the Company. The total net proceeds combined with the September 30, 2019 cash balance of approximately $2.1 million is expected to support the Company's activities at least through January 31, 2020.

The Company has historically financed its activities through the sale of common stock and warrants. Through September 30, 2019, the Company has dedicated most of its financial resources to research and development, including the development and validation of its own technologies and the development of a proprietary therapeutic product against fibrosis based upon those technologies, advancing its intellectual property, the build-out and recommissioning of its CDMO facility, and general and administrative activities.

As of September 30, 2019, the Company has not completed development of or commercialized any vaccine or therapeutic product candidates. As such, the Company expects to continue to incur significant expenses and operating losses for at least the next year. The Company anticipates that its expenses and losses will increase substantially if the Company:

To become and remain profitable, the Company must succeed in commercializing its technologies, alone or with its licensees, the service offerings provided by its CDMO facility, and in developing and eventually commercializing products that generate significant revenue. In addition, profitability will depend on continuing to attract and retain customers for the development, manufacturing and technology transfer services offered by the Company.

On June 26, 2018, the Company closed on an underwritten public offering with total gross proceeds of approximately $16,000,000, before deducting underwriting discounts, commissions and other offering expenses payable by the Company. The securities offered by the Company consisted of (i) 4,350,000 shares of Common Stock at $0.90 per share, (ii) 6,300 shares of Series A Convertible Preferred Stock, with a stated value of $1,000 per preferred share, and originally convertible into an aggregate of 7,000,000 shares of Common Stock at $0.90 per share, (iii) 5,785 shares of Series B Convertible Preferred Stock, with a stated value of $1,000 per preferred share, and originally convertible into an aggregate of 6,427,778 shares of Common Stock at $0.90 per share. The Company granted the underwriters, A.G.P./Alliance Global Partners, a 45‑day option to purchase up to an additional 2,666,666 shares of common stock to cover over-allotments, if any. On July 12, 2018, the Company received approximately $1,350,000, before deducting underwriting discounts, commissions and other offering expenses payable by the Company, from the proceeds of the sale of 1,500,000 over-allotment shares of Common Stock purchased at $0.90 by the underwriter during the 45‑day provision. See Note 10 for additional information.

In July 2019, iBio entered into a Master Manufacturing Services and Supply Agreement (“MSA”) with Lung Biotechnology PBC (“Lung Bio”), a subsidiary of United Therapeutics Corporation, to produce recombinant human collagen-based bioink for 3D bioprinted organ transplants. iBio will collaborate with Lung Bio to scale-up production of rhCollagen in tobacco plants using iBio’s FastPharming™ System. Under the MSA, the initial work to be performed by iBio involves the development of a scalable purification process for rhCollagen, as well as cGMP supply of the material for clinical trials. During the quarter ended September 30, 2019, iBio received a prepayment of approximately $1.6 million from LungBio, $1.0 million of which was allocated to the purchase of capital expenditures per the MSA and $620,000 related to the performance of related contracted services. The $1.6 million was recorded as a contract liability on its balance sheet. In Fiscal 2020, the Company recognized approximately $46,000 of the contract liability amount related to LungBio as revenue.

In addition, in June 2018, iBio established a strategic commercial relationship with CC-Pharming Ltd. of Beijing, China (“CC-Pharming”) for the joint development of products and manufacturing facilities for the Chinese biopharmaceutical market, utilizing iBio’s technology. The first product focus selected pursuant to the Master Joint Development Agreement executed between iBio and CC-Pharming is a therapeutic antibody. During the quarter ended September 30, 2018, iBio received prepayments of approximately $2.9 million from CC-Pharming which it recorded as a contract liability on its balance sheet. In Fiscal 2019, the Company recognized approximately $1.8 million of the contract liability amounts related to CC-Pharming as revenue. In Fiscal 2020, the Company recognized approximately $47,000 as revenue.

In November 2018, the Company received a capital contribution from the Eastern Affiliate of approximately $2,459,000 for working capital purposes.

On October 29, 2019, the Company closed on an underwritten public offering with total net proceeds of approximately $4,515,000 after deducting underwriting discounts, commissions and other offering expenses payable by the Company. The securities offered by the Company consisted of (i) shares of Common Stock, (ii) shares of Series C Convertible Preferred Stock ("Series C Preferred") convertible into shares of Common Stock at $0.20 per share, (iii) Series A Common Stock Purchase Warrants ("Series A Warrants") and (iv) Series B Common Stock Purchase Warrants ("Series B Warrants"). The Company also granted the underwriters an option to purchase shares of common stock to cover over-allotments, if any. See Note 10 for additional information.

The history of significant losses, the negative cash flow from operations, the limited cash resources on hand and the dependence by the Company on its ability – about which there can be no certainty – to obtain additional financing to fund its operations after the current cash resources are exhausted raises substantial doubt about the Company’s ability to continue as a going concern. These financial statements were prepared under the assumption that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

The Company plans to fund its future business operations using cash on hand, through proceeds from the sale of additional equity or other securities, and through proceeds realized in connection with the commercialization of its technologies and proprietary products, license and collaboration arrangements and the operation of our subsidiary, iBio CDMO.