iBio Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

Discontinued Operations

6 Months Ended

Dec. 31, 2022

Discontinued Operations and Disposal Groups [Abstract]

3. Discontinued Operations

On November 3, 2022, the Company announced it is seeking to divest its contract development and manufacturing organization (iBio CDMO, LLC) in order to complete its transformation into an antibody discovery and development company. In conjunction with the divestment, the Company commenced a workforce reduction of approximately 60% of the current Company staffing levels (a reduction of approximately 69 positions). The Company substantially completed the employee reduction by January 2, 2023. Through the process of seeking to divest its contract development and manufacturing organization, the Company believes it would be able to sell the 130,000-square-foot cGMP facility location in Bryan, Texas along with certain equipment located at the facility, including but not limited to the furniture, warehouse racks, and modular clean rooms. The Company incurred pre-tax charges of approximately $1.9 million for the employee reduction which consisted of severance obligations, continuation of salaries and benefits over a 60-day transitional period during which impacted employees remain employed but were not expected to provide active service, and other customary employee benefit payments in connection with an employee reduction. At December 31, 2022, $0.8 million remains in accrued expenses as a current liability. The Company recorded a charge in discontinued operations for $33.6 million for the six months ended December 31, 2022, of which approximately $17.6 million as the result of a fixed asset impairment charge (see Note 11 – Fixed Assets for more information), approximately $4.9 million to write down inventory to its net realizable value, approximately $5.8 million of personnel costs including severance and the balance related to operational costs related to winding down the CDMO business.

As such, the results of iBio CDMO's operations are reported as discontinued operations for the three and six months ended December 31, 2022. The Company has retrospectively recast its condensed consolidated statement of operations for the three and six months ended December 31, 2021 presented. In addition, those assets and liabilities associated with the discontinued operations of the CDMO that the Company intends to sell have been classified as “held for sale” as of December 31, 2022. The Company has retrospectively recast its consolidated balance sheet as of June 30, 2022 for assets and liabilities held for sale. The Company has chosen not to segregate the cash flows of iBio CDMO in the consolidated statement of cash flows. Supplemental disclosures related to discontinued operations for the statements of cash flows has been provided below. Unless noted otherwise, discussion in the Notes to the Condensed Consolidated Financial Statements refers to the Company's continuing operations.

The following table presents a reconciliation of the major financial lines constituting the results of operations for discontinued operations to the loss from discontinued operations presented separately in the condensed consolidated statements of operations (in thousands):


	Three Months Ended		Three Months Ended
	December 31,		December 31,
	2022		2021
Revenues	$	130	$	168
Cost of goods sold		22		113
Gross profit		108		55
Operating expenses:
Research and development		2,462		1,472
General and administrative		1,980		2,990
Fixed asset impairments		17,600		—
Inventory reserve		833		—
Total operating expenses		22,875		4,462

Other income (expenses):
Interest expense - term note payable		(223)		(123)
Interest expense - related party		—		(206)
Other		—		7
Total other income (expenses)		(223)		(322)

Loss from discontinued operations	$	(22,990)	$	(4,729)


	Six Months Ended		Six Months Ended
	December 31,		December 31,
	2022		2021
Revenues	$	186	$	295
Cost of goods sold		27		153
Gross profit		159		142
Operating expenses:
Research and development		5,524		2,850
General and administrative		5,236		5,448
Fixed asset impairments		17,600		—
Inventory reserve		4,933		—
Total operating expenses		33,293		8,298

Other income (expenses):
Interest expense - term note payable		(448)		(123)
Interest expense - related party		—		(814)
Forgiveness of note payable and accrued interest - SBA loan		—		607
Other		(1)		6
Total other income (expenses)		(449)		(324)

Loss from discontinued operations	$	(33,583)	$	(8,480)

The following table presents net carrying values related to the major classes of assets that were classified as held for sale at December 31, 2022 and June 30, 2022 (in thousands):


	December 31,		June 30
	2022		2022
Current assets:
Inventory	$	25	$	3,900
Operating lease right-of-use assets		1,947		—
Property and equipment, net		18,485		—
Total current assets	$	20,457	$	3,900

Other assets:
Property and equipment, net	$	—	$	35,289
Finance lease right-of-use assets		—		74
Operating lease right-of-use assets		—		1,951
Total other assets	$	—	$	37,314

Current liabilities:
Finance lease obligation	$	—	$	46
Operating lease obligation		1,947		10
Total current liabilities	$	1,947	$	56

Long-term liabilities:
Finance lease obligation	$	—	$	30
Operating lease obligation		—		1,941
Total long-term liabilities	$	—	$	1,971

The following table presents the supplemental disclosures related to discontinued operations for the statements of cash flows (in thousands):


	Six Months Ended		Six Months Ended
	December 31,		December 31,
	2022		2021
Depreciation expense	$	271	$	823
Amortization of finance lease ROU assets		20		563
Purchase of fixed assets		1,070		25,843
Fixed asset impairments		17,600		—
Inventory reserve		4,933		—
Investing noncash transactions:
Fixed assets included in accounts payable in prior period, paid in current period		1,542		791
Unpaid fixed assets included in accounts payable		—		404