UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterquarterly period ended June 30, 2021
2022
☐ORTRANSITION 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 transition period from ___________________ to ___________________
Commission file number: File Number: 001-39871
SAB BIOTHERAPEUTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 85-3899721 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
2100 East 54th Street North Sioux Falls, South Dakota | 57104 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (605) 679-6980
300 W. 41st Street, Suite 202
Miami Beach, FL33140
(Address of principal executive offices)
(305)204-3338
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) | Name of each exchange on which | ||
| SABS | The Nasdaq Stock Market LLC | |||
Warrants, each | |||||
| The Nasdaq Stock Market LLC |
CheckIndicate by check mark whether the issuerregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company”,company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ ☐ No ☐☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
As of August 9, 2021, there were issued and outstanding July 29, 2022, the registrant had 14,792,200 43,030,885shares of common stock, $0.0001 par value $0.0001 per share.share, outstanding.
BIG CYPRESS ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTSTable of Contents
Page | ||
PART I. | 2 | |
Item 1. | 2 | |
2 | ||
3 | ||
| 4 | |
6 | ||
Notes to | 7 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | |
Quantitative and Qualitative Disclosures | 40 | |
40 | ||
| 41 | |
Item 1. | 41 | |
Item 1A. | 41 | |
Item 2. | 43 | |
43 | ||
43 | ||
43 | ||
44 | ||
45 | ||
i
PART I - I—FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.Statements (Unaudited).
BIG CYPRESS ACQUISITION CORP.SAB Biotherapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets
CONDENSED BALANCE SHEETS
|
| June 30, |
|
| December 31, |
| ||
|
| (Unaudited) |
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 16,616,493 |
|
| $ | 33,206,712 |
|
Restricted cash |
|
| — |
|
|
| 6,338,306 |
|
Accounts receivable, net |
|
| 9,612,672 |
|
|
| 8,010,708 |
|
Prepaid expenses |
|
| 1,521,376 |
|
|
| 864,513 |
|
Total current assets |
|
| 27,750,541 |
|
|
| 48,420,239 |
|
Long-term prepaid insurance |
|
| 535,082 |
|
|
| — |
|
Operating lease right-of-use assets |
|
| 2,085,923 |
|
|
| 2,615,204 |
|
Financing lease right-of-use assets |
|
| 3,946,306 |
|
|
| 4,019,322 |
|
Property, plant and equipment, net |
|
| 24,837,073 |
|
|
| 24,314,455 |
|
Total assets |
| $ | 59,154,925 |
|
| $ | 79,369,220 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
| ||
Current liabilities |
|
|
|
|
|
| ||
Accounts payable |
| $ | 4,943,581 |
|
| $ | 4,458,525 |
|
Forward share purchase liability |
|
| — |
|
|
| 6,338,306 |
|
Notes payable |
|
| 25,013 |
|
|
| 25,013 |
|
Operating lease liabilities, current portion |
|
| 1,169,139 |
|
|
| 1,142,413 |
|
Finance lease liabilities, current portion |
|
| 140,767 |
|
|
| 161,050 |
|
Due to related party |
|
| — |
|
|
| 2,367 |
|
Deferred grant income |
|
| — |
|
|
| 100,000 |
|
Accrued expenses and other current liabilities |
|
| 9,858,719 |
|
|
| 12,455,888 |
|
Total current liabilities |
|
| 16,137,219 |
|
|
| 24,683,562 |
|
Operating lease liabilities, noncurrent |
|
| 1,061,122 |
|
|
| 1,653,185 |
|
Finance lease liabilities, noncurrent |
|
| 3,694,834 |
|
|
| 3,762,430 |
|
Warrant liabilities |
|
| 1,140,478 |
|
|
| 10,720,130 |
|
Total liabilities |
|
| 22,033,653 |
|
|
| 40,819,307 |
|
Commitments and contingencies (Note 17) |
|
|
|
|
|
| ||
Stockholders’ equity |
|
|
|
|
|
| ||
Preferred stock; $0.0001 par value; 10,000,000 shares authorized, 0 shares issued |
|
| — |
|
|
| — |
|
Common stock; $0.0001 par value; 490,000,000 shares authorized at |
|
| 4,358 |
|
|
| 4,349 |
|
Treasury stock, at cost; 546,658 and 0 shares held at June 30, 2022 and |
|
| (5,521,246 | ) |
|
| — |
|
Additional paid-in capital |
|
| 75,557,244 |
|
|
| 67,674,515 |
|
Accumulated deficit |
|
| (32,919,084 | ) |
|
| (29,128,951 | ) |
Total stockholders’ equity |
|
| 37,121,272 |
|
|
| 38,549,913 |
|
Total liabilities and stockholders’ equity |
| $ | 59,154,925 |
|
| $ | 79,369,220 |
|
| June 30, 2021 | December 31, 2020 | |||||||
| (unaudited) | ||||||||
| Assets: | ||||||||
| Cash | $ | 756,803 | $ | 84,836 | ||||
| Prepaid expenses | 179,867 | 2,258 | ||||||
| Total current assets | 936,670 | 87,094 | ||||||
| Deferred offering costs | — | 235,111 | ||||||
| Marketable securities held in Trust Account | 116,155,315 | — | ||||||
| Total Assets | $ | 117,091,985 | $ | 322,205 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Accrued offering costs and expenses | $ | 152,879 | $ | 156,201 | ||||
| Promissory note – related party | — | 150,000 | ||||||
| Total current liabilities | 152,879 | 306,201 | ||||||
| Deferred underwriting fee | 4,220,500 | — | ||||||
| Warrant liability | 5,531,106 | — | ||||||
| Total liabilities | 9,904,485 | 306,201 | ||||||
| Commitments and Contingencies | - | |||||||
| Common Stock subject to possible redemption, and shares at redemption value at June 30, 2021 and December 31, 2020, respectively | 102,187,499 | — | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value; shares authorized; issued and outstanding | — | — | ||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding (excluding and shares subject to possible redemption) at June 30, 2021 and December 31, 2020, respectively | 467 | 288 | ||||||
| Additional paid-in capital | 4,237,471 | 24,712 | ||||||
| Retained earnings (Accumulated deficit) | 762,063 | (8,996 | ) | |||||
| Total stockholders’ equity | 5,000,001 | 16,004 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 117,091,985 | $ | 322,205 | ||||
TheSee accompanying notes are an integral partto the consolidated financial statements
2
SAB Biotherapeutics, Inc. and Subsidiaries
Consolidated Statements of these unaudited condensed financial statements.Operations
(Unaudited)
BIG CYPRESS ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Grant revenue |
| $ | 6,350,525 |
|
| $ | 18,209,502 |
|
| $ | 18,153,601 |
|
| $ | 35,137,236 |
|
Total revenue |
|
| 6,350,525 |
|
|
| 18,209,502 |
|
|
| 18,153,601 |
|
|
| 35,137,236 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Research and development |
|
| 8,584,427 |
|
|
| 18,683,402 |
|
|
| 21,947,692 |
|
|
| 31,465,406 |
|
General and administrative |
|
| 4,309,042 |
|
|
| 2,398,641 |
|
|
| 9,456,191 |
|
|
| 5,730,447 |
|
Total operating expenses |
|
| 12,893,469 |
|
|
| 21,082,043 |
|
|
| 31,403,883 |
|
|
| 37,195,853 |
|
Loss from operations |
|
| (6,542,944 | ) |
|
| (2,872,541 | ) |
|
| (13,250,282 | ) |
|
| (2,058,617 | ) |
Changes in fair value of warrant liabilities |
|
| 1,730,080 |
|
|
| — |
|
|
| 9,579,652 |
|
|
| — |
|
Gain on debt extinguishment of Paycheck Protection Program SBA Loan |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 665,596 |
|
Interest expense |
|
| (71,237 | ) |
|
| (74,434 | ) |
|
| (143,259 | ) |
|
| (149,626 | ) |
Interest income |
|
| 15,824 |
|
|
| 5,296 |
|
|
| 23,757 |
|
|
| 10,802 |
|
Total other income (expense) |
|
| 1,674,667 |
|
|
| (69,138 | ) |
|
| 9,460,150 |
|
|
| 526,772 |
|
Loss before income taxes |
|
| (4,868,277 | ) |
|
| (2,941,679 | ) |
|
| (3,790,132 | ) |
|
| (1,531,845 | ) |
Income tax expense (benefit) |
|
| (92,281 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Net loss |
| $ | (4,775,996 | ) |
| $ | (2,941,679 | ) |
| $ | (3,790,132 | ) |
| $ | (1,531,845 | ) |
Loss per common share attributable to the |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted loss per common share |
| $ | (0.11 | ) |
| $ | (0.11 | ) |
| $ | (0.09 | ) |
| $ | (0.06 | ) |
Weighted-average common shares outstanding – basic and diluted |
|
| 42,999,413 |
|
|
| 25,973,406 |
|
|
| 43,048,254 |
|
|
| 25,973,406 |
|
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
| Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||
| Operating costs | $ | 256,847 | $ | 368,459 | ||||
| Loss from Operations | (256,847 | ) | (368,459 | ) | ||||
| Other income (expense): | ||||||||
| Interest earned on marketable securities held in Trust Account | 2,896 | 5,315 | ||||||
| Offering costs allocated to warrants | — | (359,874 | ) | |||||
| Change in fair value of warrant liability | (1,948,210 | ) | 1,494,077 | |||||
| Total other income (expense) | (1,945,314 | ) | 1,139,518 | |||||
| Net income (loss) | $ | (2,202,161 | ) | $ | 771,059 | |||
| Basic and diluted weighted average shares outstanding (1) | 4,443,103 | 4,162,957 | ||||||
| Basic and diluted net income (loss) per common share | $ | (0.50 | ) | $ | 0.18 | |||
TheSee accompanying notes are an integral partto the consolidated financial statements.
3
SAB Biotherapeutics, Inc. and Subsidiaries
Consolidated Statements of these unaudited condensed financial statements.Changes In Stockholders’ Equity
(Unaudited)
BIG CYPRESS ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
| Common stock |
|
|
|
|
| Treasury Stock |
|
|
|
|
|
|
| |||||||||||||
|
|
| Shares |
|
| Amount |
|
| Additional |
|
| Shares |
|
| Amount |
|
| Accumulated |
|
| Total Stockholders’ |
| |||||||
Balance at December 31, 2021 |
|
|
| 43,487,279 |
|
| $ | 4,349 |
|
| $ | 67,674,515 |
|
|
| — |
|
| $ | — |
|
| $ | (29,128,951 | ) |
| $ | 38,549,913 |
|
Issuance of common stock for exercise of |
|
|
| 14,500 |
|
|
| 1 |
|
|
| 7,829 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,830 |
|
Forward Share Purchase Agreement, |
|
|
| — |
|
|
| — |
|
|
| 817,060 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 817,060 |
|
Repurchase of common stock pursuant to |
|
|
| — |
|
|
| — |
|
|
| 5,521,246 |
|
|
| (546,658 | ) |
|
| (5,521,246 | ) |
|
| — |
|
|
| — |
|
Stock-based compensation |
|
|
| — |
|
|
| — |
|
|
| 897,600 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 897,600 |
|
Net income |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 985,863 |
|
|
| 985,863 |
|
Balance at March 31, 2022 |
|
|
| 43,501,779 |
|
| $ | 4,350 |
|
| $ | 74,918,250 |
|
|
| (546,658 | ) |
| $ | (5,521,246 | ) |
| $ | (28,143,088 | ) |
| $ | 41,258,266 |
|
Issuance of common stock for exercise of |
|
|
| 75,764 |
|
|
| 8 |
|
|
| 69,133 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 69,141 |
|
Stock-based compensation |
|
|
| — |
|
|
| — |
|
|
| 569,861 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 569,861 |
|
Net loss |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,775,996 | ) |
|
| (4,775,996 | ) |
Balance at June 30, 2022 |
|
|
| 43,577,543 |
|
| $ | 4,358 |
|
| $ | 75,557,244 |
|
|
| (546,658 | ) |
| $ | (5,521,246 | ) |
| $ | (32,919,084 | ) |
| $ | 37,121,272 |
|
THREE AND SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
| Additional | Retained Earnings/ | Total | ||||||||||||||||||
| Common Stock | Paid-in | (Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit) | Equity | ||||||||||||||||
| Balance as of January 1, 2021 | 2,875,000 | $ | 288 | $ | 24,712 | $ | (8,996 | ) | $ | 16,004 | ||||||||||
| Sale of 11,500,000 Units, net of underwriting discount and offering expenses | 11,500,000 | 1,150 | 109,250,365 | — | 109,251,515 | |||||||||||||||
| Sale of 417,200 Private Placement Units | 417,200 | 42 | 4,171,958 | — | 4,172,000 | |||||||||||||||
| Proceeds received from sale of shares to representative | — | — | 2,105 | — | 2,105 | |||||||||||||||
| Initial recognition of warrant liability | (7,025,183 | ) | (7,025,183 | ) | ||||||||||||||||
| Common stock subject to possible redemption | (10,335,609 | ) | (1,035 | ) | (104,388,621 | ) | — | (104,389,656 | ) | |||||||||||
| Net income | — | — | — | 2,973,220 | 2,973,220 | |||||||||||||||
| Balance as of March 31, 2021 | 4,456,591 | $ | 445 | $ | 2,035,336 | $ | 2,964,224 | $ | 5,000,005 | |||||||||||
| Net loss | — | — | — | (2,202,161 | ) | (2,202,161 | ) | |||||||||||||
| Net income | — | — | — | (2,202,161 | ) | (2,202,161 | ) | |||||||||||||
| Change in common stock subject to possible redemption | 218,035 | 22 | 2,202,135 | — | 2,202,157 | |||||||||||||||
| Common stock subject to possible redemption | 218,035 | 22 | 2,202,135 | — | 2,202,157 | |||||||||||||||
| Balance as of June 30, 2021 | 4,674,626 | $ | 467 | $ | 4,237,471 | $ | 762,063 | $ | 5,000,001 | |||||||||||
TheSee accompanying notes are an integral part of these unaudited condensedto the consolidated financial statements.
4
BIG CYPRESS ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
| Common stock |
|
|
|
|
| Treasury Stock |
|
|
|
|
|
|
| |||||||||||||
|
|
| Shares |
|
| Amount |
|
| Additional |
|
| Shares |
|
| Amount |
|
| Accumulated |
|
| Total Stockholders’ |
| |||||||
Balance at December 31, 2020 |
|
|
| 25,973,406 |
|
| $ | 2,598 |
|
| $ | 50,989,657 |
|
|
| — |
|
| $ | — |
|
| $ | (11,984,420 | ) |
| $ | 39,007,835 |
|
Stock-based compensation |
|
|
| — |
|
|
| — |
|
|
| 349,115 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 349,115 |
|
Net income |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,409,834 |
|
|
| 1,409,834 |
|
Balance at March 31, 2021 |
|
|
| 25,973,406 |
|
| $ | 2,598 |
|
| $ | 51,338,772 |
|
|
| — |
|
| $ | — |
|
| $ | (10,574,586 | ) |
| $ | 40,766,784 |
|
Stock-based compensation |
|
|
| — |
|
|
| — |
|
|
| 433,431 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 433,431 |
|
Net loss |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,941,679 | ) |
|
| (2,941,679 | ) |
Balance at June 30, 2021 |
|
|
| 25,973,406 |
|
| $ | 2,598 |
|
| $ | 51,772,203 |
|
|
| — |
|
| $ | — |
|
| $ | (13,516,265 | ) |
| $ | 38,258,536 |
|
SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
| Cash flows from operating activities: | ||||
| Net Income | $ | 771,059 | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Interest earned on marketable securities held in Trust Account | (5,315 | ) | ||
| Offering costs allocated to warrants | 359,874 | |||
| Change in fair value of warrant liability | (1,494,077 | ) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | (177,609 | ) | ||
| Accrued expenses | 81,657 | |||
| Net cash used in operating activities | (464,411 | ) | ||
| Cash Flows from Investing Activities: | ||||
| Investment of cash in Trust Account | (116,150,000 | ) | ||
| Net cash used in investing activities | (116,150,000 | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds from sale of Units, net of underwriting discounts | 113,470,500 | |||
| Proceeds from sale of Private Placement Units | 4,172,000 | |||
| Proceeds from sale of representative shares | 2,105 | |||
| Repayment of promissory note – related party | (150,000 | ) | ||
| Payment of deferred offering costs | (208,227 | ) | ||
| Net cash provided by financing activities | 117,286,378 | |||
| Net change in cash | 671,967 | |||
| Cash, beginning of period | 84,836 | |||
| Cash, end of the period | $ | 756,803 | ||
| Supplemental disclosure of non-cash financing activities: | ||||
| Initial value of common stock subject to possible redemption | $ | 101,131,827 | ||
| Change in initial value of common stock subject to possible redemption | $ | 1,055,672 | ||
| Initial recognition of warrant liability | $ | 7,025,183 | ||
| Deferred underwriters’ discount payable charged to additional paid-in capital | $ | 4,220,500 | ||
| Change in accrued offering costs | $ | 84,979 |
TheSee accompanying notes are an integral partto the consolidated financial statements.
5
SAB Biotherapeutics, Inc. and Subsidiaries
Consolidated Statements of these unaudited condensedCash Flows
(Unaudited)
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (3,790,132 | ) |
| $ | (1,531,845 | ) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
| ||
Gain on debt extinguishment of Paycheck Protection Program SBA Loan |
|
| — |
|
|
| (665,596 | ) |
Depreciation and amortization |
|
| 1,385,427 |
|
|
| 494,850 |
|
Amortization of right-of-use assets |
|
| 73,016 |
|
|
| 82,518 |
|
Stock-based compensation expense |
|
| 1,467,461 |
|
|
| 782,546 |
|
Gain on sale of equipment |
|
| (14,278 | ) |
|
| (5,488 | ) |
Changes in fair value of warrant liabilities |
|
| (9,579,652 | ) |
|
| — |
|
Changes in operating assets and liabilities |
|
|
|
|
|
| ||
Accounts receivable |
|
| (1,601,964 | ) |
|
| 3,460,893 |
|
Prepaid expenses |
|
| (1,191,944 | ) |
|
| 847,781 |
|
Operating lease right-of-use assets |
|
| (36,056 | ) |
|
| (34,907 | ) |
Accounts payable |
|
| 485,058 |
|
|
| (1,877,260 | ) |
Due to related party |
|
| (2,367 | ) |
|
| (16,778 | ) |
Deferred grant income |
|
| (100,000 | ) |
|
| — |
|
Accrued expense and other current liabilities |
|
| (2,597,169 | ) |
|
| 1,530,885 |
|
Net cash (used in) provided by operating activities |
|
| (15,502,600 | ) |
|
| 3,067,599 |
|
|
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
|
| ||
Proceeds from the sale of equipment |
|
| 76,390 |
|
|
| — |
|
Purchases of equipment |
|
| (1,970,156 | ) |
|
| (5,353,607 | ) |
Net cash used in investing activities |
|
| (1,893,766 | ) |
|
| (5,353,607 | ) |
|
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
|
| ||
Payments related to the Forward Share Purchase Agreement |
|
| (5,521,246 | ) |
|
| — |
|
Principal payments on finance leases |
|
| (87,884 | ) |
|
| (91,699 | ) |
Proceeds from exercise of stock options |
|
| 76,971 |
|
|
| — |
|
Net cash used in financing activities |
|
| (5,532,159 | ) |
|
| (91,699 | ) |
|
|
|
|
|
|
| ||
Net decrease in cash, cash equivalents, and restricted cash |
|
| (22,928,525 | ) |
|
| (2,377,707 | ) |
Cash, cash equivalents, and restricted cash |
|
|
|
|
|
| ||
Beginning of year |
|
| 39,545,018 |
|
|
| 12,610,383 |
|
End of period |
| $ | 16,616,493 |
|
| $ | 10,232,676 |
|
Supplemental disclosures: |
|
|
|
|
|
| ||
Cash paid for interest |
| $ | 143,259 |
|
| $ | 149,626 |
|
See accompanying notes to the consolidated financial statements.
6
SAb Biotherapeutics, Inc. and subsidiaries
Notes to consolidated FINANCIAL statements (Unaudited)
(1) Nature of Business
BIG CYPRESS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30,On October 22, 2021
(Unaudited)
Note 1 — Organization (the "Closing Date"), we consummated the business combination contemplated by the agreement and Business Operations
plan of merger, dated as of June 21, 2021, as amended on August 12, 2021, made by and among Big Cypress Acquisition Corp. (the “Company”) is, a newly organized blank check company incorporated in Delaware on November 12, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businessescorporation (“Business Combination”).
As of June 30, 2021, the Company had not commenced any operations. All activity through June 30, 2021 relates to the Company’s formation and the Initial Public Offering (“IPO”) which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering and other income or loss resulting from changes in fair value of the warrant liability.
The registration statement for the Company’s IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on January 11, 2021 (the “Effective Date”). On January 14, 2021, the Company consummated the IPO of units (the “Units”) and, with respect to the shares of common stock included in the Units sold (the “Public Shares”BCYP”), which included the full exercise by the underwriters of the over-allotment option to purchase an additional Units, at $ per Unit, generating gross proceeds of $115,000,000, which is discussed in Note 4. Each Unit consists of one share of common stock, and one-half redeemable warrant to purchase one share of common stock at a price of $ per whole share.
Simultaneously with the closing of the IPO, the Company consummated the sale of units (the “Placement Units”), at a price of $ per unit, in a private placement to Big Cypress Holdings LLC (the “Sponsor”), generating gross proceeds of $4,172,000, which is discussed in Note 5.
Transaction costs of the IPO amounted to $6,108,360 consisting of $1,529,500 of underwriting fee, $4,220,500 of deferred underwriting fee, and $358,360 of other offering costs, and of which $359,874 were allocated to expense associated with the warrant liability.
Following the closing of the IPO on January 14, 2021, $116,150,000 ($10.10 per Unit) from the net offering proceeds of the sale of the Units in the IPO and the sale of the Placement Units was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its franchise and income tax obligations (less up to $100,000 of interest to pay dissolution expenses), the proceeds from this IPO and the sale of the Placement Units will not be released from the trust account until the earliest of (a) the completion of the Company’s initial business combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation, and (c) the redemption of the Company’s public shares if the Company is unable to complete the initial business combination within 15 months (or up to 21 months) from the closing of this IPO, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially approximately $10.10 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The Company will have 15 months (or up to 21 months) from the closing of the IPO on January 14, 2021 to consummate a Business Combination (the “Combination Period”). However, if the Company is unable to complete a Business Combination within the Combination Period, the Company will redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the trust account, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to the Company to pay its franchise and income taxes, divided by the number of then outstanding public shares, subject to applicable law and as further described in the registration statement, and then seek to dissolve and liquidate.
The Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares and placement shares in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to their founder shares and placement shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from the trust account with respect to their founder shares and placement shares if the Company fails to complete the initial business combination within the Combination Period.
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Company’s Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that it could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Business Combination Agreement
On June 21, 2021, the Company, entered into a business combination agreement (the “Business Combination Agreement”) by and among the Company, Big Cypress Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), SAB Biotherapeutics, Inc., a Delaware corporation (“SAB” or the “Company”), and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the stockholder representative, toagent and attorney-in-fact of the SAB stockholders. The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into SAB, with SAB surviving as a wholly-owned subsidiary of the Company (the “Merger”).Stockholders. Upon the closing of the Business Combination (the “Closing”), it is anticipated thatcombination, Big Cypress Merger Sub merged with SAB Biotherapeutics, with SAB Biotherapeutics as the Company will changesurviving company of the merger. Upon closing of the business combination, Big Cypress Acquisition Corp. changed its name to “SAB Biotherapeutics, Inc.” (“New SAB”.
SAB Biotherapeutics, Inc. is a clinical-stage biopharmaceutical company focused on the development and commercialization of a portfolio of products from its proprietary immunotherapy platform to produce fully targeted human polyclonal antibodies, without using human plasma or serum. SAB’s novel DiversitAb platform enables the rapid production of large amounts of targeted human polyclonal antibodies, leveraging transchromosomic cattle (Tc Bovine™). that have been genetically designed to produce human antibodies (immunoglobulin G) rather than bovine in response to an antigen. Animal antibodies have been made in rabbits, sheep and horses. However, SAB's platform is the first to produce fully human antibodies in large animals.
The MergerCOVID-19 pandemic continues to evolve, and the other transactions contemplated byextent to which it may impact the Business Combination AgreementCompany’s business will depend on future developments, which are hereinafter referred tohighly uncertain and cannot be predicted with confidence, such as the “Business Combination.” The Business Combination is expected to closeultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the fourth quarterU.S. and other countries, business closures or business disruptions, and the effectiveness of 2021,actions taken in the U.S. and other countries to contain and treat the disease. The Company is following, and will continue to follow, recommendations from the receiptU.S. Centers for Disease Control and Prevention, as well as federal, state, and local governments. To date, the Company has not experienced material business disruptions, but it cannot be certain of the required approval by the Company’s stockholders and the fulfilment of other customary closing conditions.
In accordance with the terms and subject to the conditionsfuture impact of the Business Combination Agreement, prior to the effective timeCOVID-19 pandemic on its business and consolidated financial statements.
(2) Summary of the Merger (the “Effective Time”) the outstanding preferred stock of SAB will convert into common stock and at the Effective Time, (i) the outstanding common (including the converted preferred stock) of SAB (collectively, the “SAB Shares”) will be automatically cancelled, extinguished and converted into a number of the Company’s common stock, par value $ per share (the “Company New Shares”), based on SAB’s equity value; (ii) each outstanding vested and unvested option to purchase SAB Shares will be canceled in exchange for a comparable option to purchase Company New Shares, based on SAB’s equity value; and (iii) each unvested award of restricted SAB Shares will be converted into a comparable right to receive restricted Company Shares, based on SAB’s equity value, in each of the foregoing cases, allocated in the manner described in the Business Combination Agreement. For purposes of the Business Combination Agreement, SAB’s equity value is $300.0 million.
In addition to the foregoing consideration, SAB stockholders shall be entitled to receive, as additional consideration, and without any action on behalf of the Company, Merger Sub, or the Company’s stockholders, additional Company New Shares (the “Earnout Shares”), to be issued as follows during the period from and after the Closing until the fifth anniversary of the Closing (the “Earnout Period”) During the Earnout Period, if New SAB experiences a Change of Control (as defined as defined in the Business Combination Agreement), then any Earnout Shares not already earned and issued to the SAB stockholders shall be deemed earned and the balance of the Earnout Shares shall be issuable by New SAB to the SAB stockholders immediately prior to consummation of such Change of Control transaction.
The Business Combination Agreement may be terminated under certain customary and limited circumstances described in the Business Combination Agreement, including, without limitation, each party’s right to terminate, subject to certain limited exceptions, if the Business Combination is not consummated by December 15, 2021. If the Business Combination Agreement is validly terminated, none of the parties to the Business Combination Agreement will have any liability with respect to the other parties to the Business Combination Agreement or any further obligation under the Business Combination Agreement, other than customary confidentiality obligations, except in the case of Willful Breach or Fraud (each, as defined in the Business Combination Agreement).
Note 2 — Restatement of Previously Issued Financial Statements
In April 2021, the Company concluded that, because of a misapplication of the accounting guidance related to its Public and Private Placement warrants the Company issued in January 2021, the Company’s previously issued balance sheet as of January 14, 2021 on Form 8-K filed with SEC on January 21, 2021 should no longer be relied upon. As such, the Company restated its balance sheet included in that Form 8-K as shown below.
On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Since issuance on January 14, 2021, the Company’s warrants were accounted for as equity within the Company’s previously reported balance sheet, and after discussion and evaluation, management, in consultation with its Audit Committee, concluded that the warrants should be presented as liabilities with subsequent fair value remeasurement.
Historically, the Warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the Warrants, based on our application of FASB ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. The Company reassessed its accounting for Warrants issued on January 14, 2021, in light of the SEC Staff’s published views. Based on this reassessment, management determined that the Warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company Statement of Operations each reporting period.
Impact of the Restatement
The impact to the balance sheet dated January 14, 2021, filed on Form 8-K on January 21, 2021 related to the impact of accounting for public and private warrants as liabilities at fair value resulted in a $7.0 million increase to the warrant liabilities line item on January 14, 2021 and offsetting decrease to the Class A common stock subject to redemption mezzanine equity line item. Transaction costs of the IPO of $355,750 were allocated to expense associated with the warrant liability, which is reflected in the change to the accumulated deficit line. There is no change to total stockholders’ equity at any reported balance sheet date.
Schedule of Restatement of Balance Sheet
| As of January 14, 2021 | ||||||||||||
| As Previously Reported | Restatement Adjustment | As Restated | ||||||||||
| Balance Sheet as of January 14, 2021 | ||||||||||||
| Total assets | $ | 117,645,054 | $ | — | $ | 117,645,045 | ||||||
| Liabilities and stockholders’ equity | ||||||||||||
| Total current liabilities | $ | 267,540 | $ | — | $ | 267,540 | ||||||
| Stock warrant liabilities | — | 7,025,183 | 7,025,183 | |||||||||
| Total liabilities | $ | 4,488,040 | 7,025,183 | 11,513,223 | ||||||||
| Class A common stock, $ par value; shares subject to possible redemption | 108,157,010 | (7,025,183 | ) | 101,131,827 | ||||||||
| Stockholders’ equity | ||||||||||||
| Preferred stock- $ par value | — | — | — | |||||||||
| Common stock - $ par value | 398 | 81 | 479 | |||||||||
| Additional paid-in-capital | 5,003,838 | 355,669 | 5,359,507 | |||||||||
| Accumulated deficit | (4,232 | ) | (355,750 | ) | (359,982 | ) | ||||||
| Total stockholders’ equity | 5,000,004 | — | 5,000,004 | |||||||||
| Total liabilities and stockholders’ equity | $ | 117,645,054 | $ | — | $ | 117,645,054 | ||||||
Note 3 — Significant Accounting Policies
A summary of the significant accounting policies applied in preparation of the accompanying consolidated financial statements is set forth below.
Basis of Presentationpresentation
The accompanying unaudited condensed financial statements have been prepared in accordanceconformity with accounting principles generally accepted in the United States of America (“GAAP”U.S. Generally Accepted Accounting Principles ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments consisting of a normal recurring nature, which are necessary for athe fair presentation of the Company’s financial position operating results and cash flows for the periods presentedpresented.
The accompanying unaudited condensedBusiness Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, BCYP is treated as the “acquired” company and SAB Biotherapeutics is treated as the acquirer for financial statements should be read in conjunction withreporting purposes. Accordingly, for accounting purposes, the Company’s Annual Report on Form 10-KReverse Recapitalization was treated as the equivalent of SAB Biotherapeutics issuing stock for the year ended December 31, 2020 as filednet assets of BCYP, accompanied by a recapitalization. The net assets of BCYP are stated at historical cost, with no goodwill or other intangible assets recorded. SAB Biotherapeutics was determined to be the SECaccounting acquirer based on April 2, 2021, which contains the audited financial statementsfollowing predominant factors:
The consolidated assets, liabilities and results of operations prior to be expected for the year endingReverse Recapitalization are those of SAB Biotherapeutics. At the Closing Date, and subject to the terms and conditions of the Merger Agreement, each share of SAB Biotherapeutics common stock, par value $0.0001 per share, and each share of the SAB Biotherapeutics convertible preferred stock that was convertible into a share of SAB Biotherapeutics common stock at a 1-to-one ratio, was converted into Common Stock equal to approximately 0.4653 (the "Exchange Ratio"). The shares and corresponding capital amounts and losses per share, prior to the Business Combination, have been retroactively restated based on shares reflecting the Exchange Ratio established in the Business Combination.
December 31, 2021 or for any future interim periods.
7
Emerging Growth Company Statusgrowth company status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Principles of consolidation
The accompanying consolidated financial statements include the results of the Company and its wholly owned subsidiaries, SAB Capra, LLC and Aurochs, LLC. Intercompany balances and transactions have been eliminated in consolidation.
Significant risks and uncertainties
The Company’s operations are subject to a number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to, the results of research and development efforts, clinical trial activities of the Company’s product candidates, the Company’s ability to obtain regulatory approval to market its product candidates, competition from products manufactured and sold or being developed by other companies, and the Company’s ability to raise capital.
The Company currently has no commercially approved products and there can be no assurance that the Company’s research and development will be successfully commercialized. Developing and commercializing a product requires significant time and capital and is subject to regulatory review and approval as well as competition from other biotechnology and pharmaceutical companies. The Company operates in an environment of rapid change and is dependent upon the continued services of its employees and obtaining and protecting intellectual property.
Funding from government grants is not guaranteed to cover all costs, and additional funding may be needed to cover operational costs as the Company moves forward with our efforts to develop a commercially approved product. The company believes its existing cash reserves and anticipated cash receipts will be sufficient to fund operations for the twelve months following the date these financials are made available for issuance
Use of Estimatesestimates
The preparation of financial statements in conformity with USU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and liabilitiesexpenses and the disclosure of contingent assets and liabilities in the financial statements. The Company has used significant estimates in its determination of stock-based compensation assumptions, determination of the fair value of the Company’s common stock, determination of the fair value of the Private Placement Warrant liabilities, determination of the incremental borrowing rate (“IBR”) used in the calculation of the Company’s right of use assets and lease liabilities, and the valuation allowance on deferred tax assets. Actual amounts realized may differ from these estimates.
Cash, cash equivalents, and restricted cash
Cash equivalents include short-term, highly liquid instruments, consisting of money market accounts and short-term investments with original maturities at the date of purchase of 90 days or less.
8
Amounts held in escrow by the financial statements andCompany pursuant to the Forward Share Purchase Agreement were reported amountsas restricted cash on the consolidated balance sheet as of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash EquivalentsDecember 31, 2021. There were
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did 0t have any cash equivalents amounts held in escrow by the Company pursuant to the Forward Share Purchase Agreement as of June 30, 20212022.
The reconciliation of cash, cash equivalents and restricted cash reported within the applicable balance sheet line items that sum to the total of the same such amount shown in the consolidated statements of cash flows is as follows:
|
| June 30, |
|
| June 30, |
| ||
Cash and cash equivalents |
| $ | 16,616,493 |
|
| $ | 10,232,676 |
|
Restricted cash |
|
| — |
|
|
| — |
|
Total cash, cash equivalents, and restricted cash |
| $ | 16,616,493 |
|
| $ | 10,232,676 |
|
Accounts receivable
Accounts receivable are carried at original invoice amount, less an allowance for doubtful accounts. The Company estimates an allowance for doubtful accounts for potential credit losses that are expected to be incurred, based on management’s assessment of the collectability of specific accounts, the aging of the accounts receivable, historical information and other currently available evidence. Receivables are written off when deemed uncollectible. To date, no receivables have been written off. The Company had 0 allowance for doubtful accounts as of June 30, 2022 and December 31, 2020.2021.
Concentration of credit risk
Marketable Securities Held in Trust Account
At June 30, 2021, substantially all of the assets heldThe Company maintains its cash and cash equivalent balances in the Trust Account were held inform of business checking accounts and money market fundsaccounts, the balances of which, investat times, may exceed federally insured limits. Exposure to credit risk is reduced by placing such deposits in U.S. Treasury securities.high credit quality federally insured financial institutions.
Warrant Liabilities
The Company evaluatedreceived 100% of its total revenue through grants from government organizations during the Public Warrantsthree and Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 2, Note 4, Note 5 and Note 9) in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the Condensed Balance Sheet and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the Condensed Statement of Operations in the period of change.
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock were charged to stockholders’ equity upon the completion of the Initial Public Offering. Transaction costs for the six months ended June 30, 2021 amounted to $2022 and 2021.
6,108,360Lease liabilities and right-of-use assets, of which $359,874 were allocated to expense associated with the warrant liability.
Common Stock Subject to Possible Redemption
The Company accountsis party to certain contractual arrangements for its common stock subject to possible redemption in accordance withequipment, lab space, and an animal facility, which meet the guidance indefinition of leases under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock842, Leases (“ASC 842”). In accordance with ASC 842, the Company recorded right-of-use assets and related lease liabilities for the present value of the lease payments over the lease terms. The Company’s IBR was used in the calculation of its right-of-use assets and lease liabilities.
The Company elected not to apply the recognition requirements of ASC 842 to short-term leases, which are deemed to be leases with a lease term of twelve months or less. Instead, the Company recognized lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred. The Company elected this policy for all classes of underlying assets.
Research and development expenses
Expenses incurred in connection with research and development activities are expensed as incurred. These include licensing fees to use certain technology in the Company’s research and development projects, fees paid to consultants and various entities that perform certain research and testing on behalf of the Company, and expenses related to salaries, benefits, and stock-based compensation granted to employees in research and development functions.
During the three and six months ended June 30, 2022 and 2021, the Company had contracts with multiple contract research organizations (“CRO”) to complete studies as part of research grant agreements. In the case of SAB-185, the CRO has been contracted and paid by the US government. For SAB-176, PPD Development, LP acting as the CRO oversaw the Phase 1 safety study. The terms of that agreement are subject to mandatory redemptionconfidentiality, and the status of the agreement is that it is current, in good standing and approximately 90% of the contract has been paid as of June 30, 2022. SAB has also contracted with hVIVO Services Limited to conduct the Phase 2a influenza study on SAB-176. The terms of that agreement are subject to confidentiality, and the status of the agreement is that it is current, in good standing and approximately 90% of the contract has been paid as of June 30, 2022.
9
Equipment
The Company records equipment at cost less depreciation. Depreciation is calculated using straight-line methods over the following estimated useful lives:
Animal facility equipment | 7 years |
Laboratory equipment | 7 years |
Leasehold improvements | Shorter of asset life or lease term |
Office furniture & equipment | 5 years |
Vehicles | 5 years |
Repairs and maintenance expenses are expensed as incurred.
Impairment of long-lived assets
The Company reviews the recoverability of long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If necessary, the Company compares the estimated undiscounted future net cash flows to the related asset’s carrying value to determine whether there has been an impairment. If an asset is considered impaired, the asset is written down to fair value, which is based either on discounted cash flows or appraised values in the period the impairment becomes known. The Company believes that long-lived assets are recoverable, and 0 impairment was deemed necessary, during the three and six months ended June 30, 2022 and 2021.
Stock-based compensation
FASB ASC Topic 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. The Company recognizes compensation cost relating to stock-based payment transactions using a fair-value measurement method, which requires all stock-based payments to employees, directors, and non-employee consultants, including grants of stock options, to be recognized in operating results as compensation expense based on fair value over the requisite service period of the awards. Prior to the Business Combination, the grant date fair value of the Company's common stock was typically determined by the Company's board of directors with the assistance of management and a third-party valuation specialist.
Subsequent to the Business Combination, the board of directors elected to determine the fair value of our post-merger common stock based on the closing market price at closing on the date of grant. In determining the fair value of stock-based awards, the Company utilizes the Black-Scholes option-pricing model, which uses both historical and current market data to estimate fair value. The Black-Scholes option-pricing model incorporates various assumptions, such as the value of the underlying common stock, the risk-free interest rate, expected volatility, expected dividend yield, and expected life of the options. For awards with performance-based vesting criteria, the Company estimates the probability of achievement of the performance criteria and recognizes compensation expense related to those awards expected to vest. No awards may have a term in excess of ten years. Forfeitures are recorded when they occur. Stock-based compensation expense is classified as a liability instrumentin the consolidated statements of operations based on the function to which the related services are provided. The company recognizes stock-based compensation expense over the expected term.
Income taxes
Deferred income taxes reflect future tax effects of temporary differences between the tax and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outsidefinancial reporting basis of the Company’s controlassets and subjectliabilities measured using enacted tax laws and statutory tax rates applicable to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value asthe periods when the temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
Income Taxes
The Company accounts for income taxes under ASC 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition ofdifferences will affect taxable income. When necessary, deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requiresare reduced by a valuation allowance, to be established when it is more likely than not thatreflect realizable value, and all or a portion of deferred tax assets will not be realized. Thebalances are reported as long-term on the consolidated balance sheet. Accruals are maintained for uncertain tax positions, as necessary.
Income tax expense includes the current tax liability from operations and the change in deferred tax assets were deemed to be de minimis as of June 30, 2021 and December 31, 2020.
ASC 740 also clarifies the accounting for uncertainty in income taxes during the year. Current tax liabilities or receivables are recognized in an enterprise’s financial statements and prescribesfor estimated income tax payable and/or refundable for the current year.
The Company uses a recognition threshold and measurement processattribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accruedhas elected to treat interest and penalties related to unrecognized tax benefitsincome taxes, to the extent they arise, as a component of income tax expense. There were taxes.
0 unrecognized tax benefits
10
Revenue recognition
The Company’s revenue is primarily generated through grants from government and no amounts accrued for interestother (non-government) organizations.
Grant revenue is recognized during the period that the research and penaltiesdevelopment services occur, as qualifying expenses are incurred or conditions of June 30, 2021 and December 31, 2020.the grants are met. The Company is currentlyconcluded that payments received under these grants represent conditional, nonreciprocal contributions, as described in ASC 958, Not-for-Profit Entities, and that the grants are not awarewithin the scope of any issues under review that could result in significant payments, accruals or material deviationASC 606, Revenue from its position. Contracts with Customers, as the organizations providing the grants do not meet the definition of a customer. Expenses for grants are tracked by using a project code specific to the grant, and the employees also track hours worked by using the project code.
Comprehensive income (loss)
The Company has identifiedhad no items of comprehensive income (loss) other than its net income (loss).
Litigation
From time to time, the United States as its only “major” tax jurisdiction. The Company is subjectinvolved in legal proceedings, investigations and claims generally incidental to income tax examinations by major taxing authorities since inception. These potential examinations may include questioningits normal business activities. In accordance with U.S. GAAP, the timingCompany accrues for loss contingencies when it is probable that a liability has been incurred and the amount of deductions, the nexus of income among various tax jurisdictions and complianceloss can be reasonably estimated. Legal costs in connection with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The provision for income taxes was deemed to be de minimis for the period ended June 30, 2021.loss contingencies are expensed as incurred.
Net lossEarnings per share
In accordance with ASC 260, Earnings per Share (“ASC 260”), basic net income (loss) per share attributable to common stockholders is computed by dividing net lossincome (loss) attributable to common stockholders by the weighted averageweighted-average number of shares of common stock outstanding during the period. The Company appliesDiluted net income (loss) per share attributable to common stockholders is computed by dividing the two-class method in calculating earnings per share. Sharesdiluted net income (loss) attributable to common stockholders by the weighted-average number of common stock subjectoutstanding for the period including potential dilutive common shares such as stock options.
Segment reporting
In accordance with ASC 280, Segment Reporting, the Company’s business activities are organized into 1 reportable segment, as only the Company’s operating results in their entirety are regularly reviewed by the Company’s chief operating decision maker to possible redemptionmake decisions about resources to be allocated and to assess performance.
Common stock valuations
Prior to the Business Combination, the Company was required to periodically estimate the fair value of its common stock with the assistance of an independent third-party valuation firm, as discussed above, when issuing stock options and computing estimated stock-based compensation expense. The assumptions underlying these valuations represented the Company's best estimates, which involved inherent uncertainties and the application of significant levels of judgment. In order to determine the fair value of its common stock, the Company considered, among other items, previous transactions involving the sale of our securities, our business, financial condition and results of operations, economic and industry trends, the market performance of comparable publicly traded companies, and the lack of marketability of our common stock.
Subsequent to the Business Combination, the Company now determines the fair value of common stock based on the closing market price at June 30, 2021, which are not currently redeemableclosing on the date of grant.
Compensation expense related to stock-based transactions is measured and are not redeemablerecognized in the financial statements at fair value of the post-merger common stock based on the closing market price at closing on the date of grant. Stock-based compensation expense is measured at the grant date based on the fair value of the equity award and is recognized as expense over the requisite service period, which is generally the vesting period, on the straight-line method. The Company estimates the fair value of each stock option award on the date of grant using the Black-Scholes option-pricing model. Determining the fair value of stock option awards at the grant date requires judgment, including estimating the expected volatility, expected term, risk-free interest rate, and expected dividends.
11
(3) New accounting standards
Recently-adopted standards
In May 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in ASU 2021-04 provide guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, including interim periods within those fiscal years. The Company adopted ASU 2021-04 at January 1, 2022, and the adoption did not have a material impact on its consolidated financial statements.
In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842) Lessors - Certain Leases with Variable Lease Payments, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities as well as disclosing key information about leasing transactions. This guidance is effective for all entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years for public business entities. The Company adopted ASU 2021-05 at January 1, 2022, and the adoption did not have a material impact on its consolidated financial statements.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This ASU increases the transparency of government assistance to include the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements. The guidance in ASU 2021-10 is effective for financial statements of all entities, including private companies, for annual periods beginning after December 15, 2021, with early application permitted. Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date. The Company adopted ASU 2021-10 at January 1, 2022, and the adoption did not have a material impact on its consolidated financial statements.
Recently-issued standards
In July 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement of all expected credit losses of financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for periods beginning after December 15, 2022, and interim periods within those fiscal years. The Company is currently evaluating the impact this ASU may have on its consolidated financial statements but does not expect it to have a material impact.
In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). This ASU requires that an acquirer entity in a business combination recognize and measure contract assets and liabilities acquired in a business combination at the acquisition date in accordance with Topic 606 as if the acquirer entity had originated the contracts. This ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those years. Early application of the amendments is permitted but should be applied to all acquisitions occurring in the annual period of adoption. The amendment should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company is currently evaluating the impact this ASU may have on its consolidated financial statements but does not expect it to have a material impact.
In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815) (“ASU 2022-01”), which clarifies the guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets. The standard is effective for public entities in fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU 2017-12. The Company is currently evaluating the impact this ASU may have on its consolidated financial statements but does not expect it to have a material impact.
12
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates the current guidance on troubled debt restructurings ("TDRs"), enhances current and introduces new disclosure requirements related to loan modifications. ASU 2022-02 is effective for the Company for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact this ASU may have on its consolidated financial statements but does not expect it to have a material impact.
In June 2022, the FASB issued ASU 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions" ("ASU 2022-03"). ASU 2022-03 clarifies the guidance on the fair value measurement of an equity security that is subject to a contractual sale restriction and requires specific disclosures related to such an equity security. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this ASU may have on its consolidated financial statements but does not expect it to have a material impact.
(4) Reverse Recapitalization and Business Combination
On the Closing Date, BCYP closed the Business Combination with SAB Biotherapeutics, as a result of which SAB Biotherapeutics became a wholly owned subsidiary of BCYP. While BCYP was the legal acquirer of SAB Biotherapeutics in the Business Combination, for accounting purposes, the Business Combination is treated as a Reverse Recapitalization. SAB Biotherapeutics is treated as the accounting acquirer with historical financial statements of SAB Biotherapeutics becoming the historic financial statements of BCYP (renamed SAB Biotherapeutics, Inc.) upon consummation of the Business Combination. Under this method of accounting, BCYP is treated as the "acquired" company and SAB Biotherapeutics is treated as the acquirer for financial reporting purposes. For accounting reporting purposes, the Business Combination was treated as the equivalent of SAB Biotherapeutics issuing stock for the net assets of BCYP, accompanied by a recapitalization. The net assets of BCYP were stated at historical cost, with no goodwill or other intangible assets recorded.
Pursuant to the Business Combination Agreement, the aggregate consideration payable to stockholders of SAB Biotherapeutics at the Closing Date consisted of 36,465,343 shares of New SAB Biotherapeutics common stock, par value $0.0001 per share ("Common Stock"). Each option of SAB Biotherapeutics that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BCYP and converted into an option to acquire an adjusted number of shares of Common Stock at an adjusted exercise price per share, in each case, pursuant to the terms of the Business Combination Agreement (the "Rollover Options").
Additionally, the Business Combination Agreement included an earnout provision whereby the shareholders of SAB Biotherapeutics shall be entitled to receive additional consideration (“Earnout Shares”) if the Company meets certain Volume Weighted Average Price (“VWAP") thresholds, or a change in control with a per share price exceeding the VWAP thresholds within a five-year period immediately following the Closing.
The Earnout Shares shall be released in four equal increments as follows:
At the Effective Time, each outstanding share of SAB Biotherapeutics common stock, including shares of SAB Biotherapeutics common stock resulting from the conversion of outstanding shares of SAB Biotherapeutics preferred stock (as calculated pursuant to the SAB Biotherapeutics certificate of incorporation), immediately prior to the Effective Time, was converted into the right to receive a pro rata portion of the total consideration and the contingent right to receive a pro rata portion of the Earnout Shares.
Pursuant to the terms of the Business Combination Agreement, SAB Biotherapeutics’ securityholders (including vested option holders) who own SAB Biotherapeutics securities immediately prior to the Closing Date will have the contingent right to receive their
13
pro rata portion of (i) an aggregate of 12,000,000 shares of Common Stock (“Earnout Shares”), of which 1,508,063 are contingently issuable based upon future satisfaction of the aforementioned VWAP thresholds. The remaining 10,491,937 are legally issued and outstanding, if the Company does not meet the above VWAP thresholds, or a change in control with a per share price below the VWAP thresholds occurs within a five-year period immediately following the Closing Date, the shares will be returned to the Company.
The Earnout Shares are indexed to our equity and meet the criteria for equity classification. On the Closing Date, the fair value of the 12,000,000 Earnout Shares was $101.3 million. We reflected the Earnout Shares in the consolidated balance sheet at December 31, 2021 as a stock dividend by reducing additional paid-in capital, which was offset by the increase in additional paid-in capital associated with the Business Combination.
Preceding the Business Combination, on October 12, 2021, BCYP entered into a Forward Share Purchase Agreement (the “Forward Share Purchase Agreement”) with Radcliffe SPAC Master Fund, L.P., a Cayman Islands exempted limited partnership (“Radcliffe”). Under the Forward Share Purchase Agreement, Radcliffe shall sell and transfer to BCYP, and BCYP shall purchase from Radcliffe, up to 1,390,000 shares of common stock owned by Radcliffe at the closing of the Business Combination at a per Share price (the “Purchase Price”) equal to $10.10 per share (the "Market Sales Price"). Further, BCYP shall purchase the remaining shares held by Radcliffe not sold in the open market in excess of the Market Sales Price at the later of (a) the 90th day after the closing of the Business Combination, or (b) the first business day following the 95th day after the closing of the Business Combination if BCYP directs Radcliffe to sell shares at a mutually agreed upon price other than the Market Sales Price.
Pursuant to the treatment of the Business Combination as a reverse recapitalization, SAB Biotherapeutics assumed the liability position as it existed as of the Effective Time. The net assets of the acquired entity were adjusted to include a forward share purchase liability of $13,098,599. In connection with the Business Combination, an amount matching the assumed forward share purchase liability was transferred into escrow, pending final settlement of the Forward Share Purchase Agreement in January 2022. Given the short-term nature of the Forward Share Purchase Agreement, the Company did not present value the forward share purchase liability. Subsequent settlements whereby Radcliffe sold shares in the open market in excess of the Market Sales Price were treated as a reduction in the assumed forward share purchase liability, with an offsetting increase in equity of the Company. Prior to December 31, 2021, a portion of the forward share purchase liability was settled. As of December 31, 2021, the forward share purchase liability balance was $6,338,306 on the consolidated balance sheet. The forward share purchase liability was settled in full during the six months ended June 30, 2022. As of December 31, 2021, the Company held $6.3 million in escrow pending the final settlement of the Forward Share Purchase Agreement; upon final settlement of the Forward Share Purchase Agreement, $817,060 in cash was released to the Company and the remaining $5.5 million was delivered to Radcliffe for the repurchase of 546,658 shares of the Company's common stock—these shares are accounted for as treasury stock at cost within the consolidated statements of changes in stockholders’ equity.
(5) Revenue
During the three and six months ended June 30, 2022 and 2021, the Company worked on the following grants:
Government grants
The total revenue for government grants was approximately $6.4 million and $18.2 million, respectively, the three months ended June 30, 2022 and 2021, and $18.2 million and $35.1 million, respectively, for the six months ended June 30, 2022 and 2021.
National Institute of Health – National Institute of Allergy and Infectious Disease (“NIH-NIAID”) (Federal Award #1R44AI117976-01A1) – this grant was for $1.4 million and started in September 2019 through August 2021. Grant income recognized was approximately $3,000 and $94,000, respectively, for the three months ended June 30, 2022 and 2021, and $30,000 and $150,000, respectively, for the six months ended June 30, 2022 and 2021. The Company applied for an extension on the grant funding, and the extension is pending approval—the Company has not historically experienced challenges renewing grant funding. If approved, there is approximately $184,000 in funding remaining for this grant as of June 30, 2022.
NIH-NIAID (Federal Award #1R41AI131823-02) – this grant was for approximately $1.5 million and started in April 2019 through March 2021. The grant was subsequently amended to extend the date through March 2022. Grant income recognized was approximately $118,000 and $20,000, respectively, for the three months ended June 30, 2022 and 2021, and $131,000 and $29,000, respectively, for the six months ended June 30, 2022 and 2021. There is approximately $683,000 in funding remaining for this grant as of June 30, 2022.
NIH-NIAID through Geneva Foundation (Federal Award #1R01AI132313-01, Subaward #S-10511-01) – this grant was for approximately $2.7 million and started in August 2017 through July 2021. Grant income recognized was approximately $26,000 and $47,000, respectively, for the three months ended June 30, 2022 and 2021, and $49,000 and $47,000, respectively, for the six months ended June 30, 2022 and 2021. The Company applied for an extension on the grant funding, and the extension is pending
14
approval—the Company has not historically experienced challenges renewing grant funding. If approved, there is approximately $1.4 million in funding remaining for this grant as of June 30, 2022.
Department of Defense, Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense Enabling Biotechnologies (“JPEO”) through Advanced Technology International – this grant was for a potential of $25 million, awarded in stages starting in August 2019 and with potential stages running through February 2023. Additional contract modifications were added to this contract in 2020 and 2021 for work on a COVID therapeutic, bringing the contract total to $204 million. Grant income recognized was approximately $6.2 million and $18.0 million, respectively, for the three months ended June 30, 2022 and 2021, and $17.9 million and $34.9 million, respectively, for the six months ended June 30, 2022 and 2021. There is approximately $71.3 million in funding remaining for this grant as of June 30, 2022.
The grants for the JPEO Rapid Response contract are cost reimbursement agreements, with reimbursement of our direct research and development expense (labor and consumables) with an overhead charge (based on actual, reviewed quarterly) and a fixed fee (9%). In August 2022, this contract was terminated. See Note 19, Subsequent Events for additional information.
(6) Earnings per share
The following is a reconciliation of the numerator and denominator used to calculate basic earnings per share and diluted earnings per share for the three and six months ended June 30, 2022 and 2021:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Calculation of basic and diluted loss per share |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss attributable to the Company’s shareholders |
| $ | (4,775,996 | ) |
| $ | (2,941,679 | ) |
| $ | (3,790,132 | ) |
| $ | (1,531,845 | ) |
Weighted-average common shares outstanding – |
|
| 42,999,413 |
|
|
| 25,973,406 |
|
|
| 43,048,254 |
|
|
| 25,973,406 |
|
Net loss per share, basic and diluted |
| $ | (0.11 | ) |
| $ | (0.11 | ) |
| $ | (0.09 | ) |
| $ | (0.06 | ) |
The Company’s potentially dilutive securities, which include stock options, common stock warrants, earnout shares, and contingently issuable earnout shares have been excluded from the calculationcomputation of basicdiluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share since suchattributable to common stockholders is the same. The Company excluded the following potential common shares, if redeemed, only participate in their pro ratapresented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Stock options |
|
| 1,846,889 |
|
|
| 2,325,760 |
|
|
| 2,398,870 |
|
|
| 2,219,915 |
|
Common stock warrants |
|
| 5,958,600 |
|
|
| — |
|
|
| 5,958,600 |
|
|
| — |
|
Earnout Shares (1) |
|
| 10,491,937 |
|
|
| — |
|
|
| 10,491,937 |
|
|
| — |
|
Contingently issuable Earnout Shares from unexercised |
|
| 1,508,063 |
|
|
| — |
|
|
| 1,508,063 |
|
|
| — |
|
Total |
|
| 19,805,489 |
|
|
| 2,325,760 |
|
|
| 20,357,470 |
|
|
| 2,219,915 |
|
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(7) Equipment
As of June 30, 2022 and December 31, 2021, the Company’s portion availableequipment was as follows:
|
| June 30, |
|
| December 31, |
| ||
Laboratory equipment |
| $ | 8,761,701 |
|
| $ | 7,431,988 |
|
Animal facility |
|
| 8,357,667 |
|
|
| 8,357,667 |
|
Animal facility equipment |
|
| 1,143,213 |
|
|
| 1,253,879 |
|
Construction-in-progress |
|
| 916,224 |
|
|
| 4,608,778 |
|
Leasehold improvements |
|
| 8,758,850 |
|
|
| 5,700,364 |
|
Vehicles |
|
| 192,683 |
|
|
| 135,593 |
|
Office furniture and equipment |
|
| 1,219,696 |
|
|
| 46,202 |
|
Less: accumulated depreciation and amortization |
|
| 4,512,961 |
|
|
| 3,220,016 |
|
Property, plant and equipment, net |
| $ | 24,837,073 |
|
| $ | 24,314,455 |
|
Depreciation and amortization expense was $749,192 and $258,891, respectively, for the three months ended June 30, 2022 and 2021, and $1,385,427 and $494,850, respectively, for the six months ended June 30, 2022 and 2021.
All tangible personal property with a useful life of at least three years and a unit acquisition cost of $5,000 or more will be capitalized and depreciated over its useful life using the straight-line method of depreciation. The Company will expense the full acquisition cost of tangible personal property below these thresholds in the year of purchase. The basis of accounting for depreciable fixed assets is acquisition cost and any additional expenditures required to pay taxes. make the asset ready for use. The carrying amount at the balance sheet date of long-lived assets under construction-in-progress includes assets purchased, constructed, or being developed internally that are not yet in service. Depreciation commences when the assets are placed in service.
The Company has several ongoing construction projects related to the expansion of its operating capacity. As of June 30, 2022 and December 31, 2021, the Company’s construction-in-progress was as follows:
|
| June 30, |
|
| December 31, |
| ||
New office space at Headquarters |
| $ | 525,626 |
|
| $ | 11,183 |
|
Laboratory space at Headquarters |
|
| — |
|
|
| 2,506,482 |
|
Laboratory equipment at Headquarters |
|
| 189,249 |
|
|
| 246,801 |
|
IT equipment at Headquarters |
|
| 63,538 |
|
|
| 212,209 |
|
Software |
|
| 137,811 |
|
|
| 137,811 |
|
Bioreactors |
|
| — |
|
|
| 1,280,728 |
|
Other |
|
| — |
|
|
| 213,564 |
|
Total construction-in-progress |
| $ | 916,224 |
|
| $ | 4,608,778 |
|
(8) Leases
The Company has an operating lease for lab space from Sanford Health (a former related party), under a lease that started in June 2014 and ran through June 2019, at which time the lease was amended to run through August 2024. This lease can be terminated with one year advance written notice. The lease is for $66,993 per month. The operating lease does not consideredinclude an option to extend beyond the effectlife of warrants soldthe current term. The lease does not provide an implicit rate, and, therefore, the Company used an IBR of 4.54% as the discount rate when measuring the operating lease liability. The Company estimated the incremental borrowing rate based upon comparing interest rates available in the Initial Public Offeringmarket for similar borrowings and the private placementcredit quality of the Company.
The Company entered into a lease for office, laboratory, and warehouse space in November 2020. This lease has a 3-year term, with options to extend for 3 additional periods of three years each. The options were not included in the right of use calculation as it is unclear as to whether or not the location will meet the Company’s requirements beyond the next three years. The lease cost is $36,125 per month. The Company used an IBR of 4.69% as the discount rate when measuring the operating lease liability. The Company estimated the incremental borrowing rate based upon comparing interest rates available in the market for similar borrowings and the credit quality of the Company.
The Company entered into a lease for barn space for the housing of goats in April 2020. This lease has a 2-year term, with automatic renewals for a one-year period after the initial term expires until either party terminates. The options were not included in the right of use calculation, as the goat project is mostly funded by government grants, and those grants do not currently extend beyond the initial lease term. The lease cost is $665 per month for the first year, then $678 per month for the second year. The Company used an IBR of
16
4.08% as the discount rate when measuring the operating lease liability. The Company estimated the incremental borrowing rate based upon comparing interest rates available in the market for similar borrowings and the credit quality of the Company.
The Company has the following finance leases:
The lease agreements do not require material variable lease payments, residual value guarantees or restrictive covenants.
The amortizable lives of the operating lease assets are limited by their expected lease terms. The amortizable lives of the finance lease assets are limited by their expected lives, as the Company intends to exercise the purchase options at the end of the leases. The following is the estimated useful lives of the finance lease assets:
Animal Facility | 40 years |
Equipment | 3 –7 years |
Land | Indefinite |
The Company’s weighted-average remaining lease term and weighted-average discount rate for operating and finance leases as of June 30, 2022 are:
|
| Operating |
|
| Finance |
| ||
Weighted-average remaining lease term |
| 1.94 years |
|
| 16.37 years |
| ||
Weighted-average discount rate |
|
| 4.75 | % |
|
| 7.72 | % |
The table below reconciles the undiscounted future minimum lease payments under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the consolidated balance sheet as of June 30, 2022:
|
| Operating |
|
| Finance |
| ||
2022 - remaining |
| $ | 619,587 |
|
| $ | 213,790 |
|
2023 |
|
| 1,169,559 |
|
|
| 406,339 |
|
2024 |
|
| 535,944 |
|
|
| 401,496 |
|
2025 |
|
| — |
|
|
| 401,496 |
|
2026 |
|
| — |
|
|
| 401,496 |
|
Thereafter |
|
| — |
|
|
| 4,784,494 |
|
Undiscounted future minimum lease payments |
|
| 2,325,090 |
|
|
| 6,609,111 |
|
Less: Amount representing interest payments |
|
| (94,829 | ) |
|
| (2,773,510 | ) |
Total lease liabilities |
|
| 2,230,261 |
|
|
| 3,835,601 |
|
Less current portion |
|
| (1,169,139 | ) |
|
| (140,767 | ) |
Noncurrent lease liabilities |
| $ | 1,061,122 |
|
| $ | 3,694,834 |
|
Operating lease expense was approximately $291,000 and $268,000, respectively, for the three months ended June 30, 2022 and 2021, and $585,000 and $522,000, respectively, for the six months ended June 30, 2022 and 2021. Operating lease costs are included within research and development expenses on the consolidated statements of operations.
Finance lease costs for the three months ended June 30, 2022 and 2021 included approximately $32,000 and $41,000, respectively, in right-of-use asset amortization and approximately $71,000 and $74,000, respectively, of interest expense. Finance lease costs for the six months ended June 30, 2022 and 2021 included approximately $73,000 and $82,000, respectively, in right-of-use asset
17
amortization and approximately $143,000 and $150,000, respectively, of interest expense. Finance lease costs are included within research and development expenses on the consolidated statements of operations.
Cash payments under operating and finance leases were approximately $309,000 and $110,000, respectively, for the three months ended June 30, 2022. Cash payments under operating and finance leases were approximately $621,000 and $231,000, respectively, for the six months ended June 30, 2022. Cash payments under operating and finance leases were approximately $283,000 and $121,000, respectively, for the three months ended June 30, 2021. Cash payments under operating and finance leases were approximately $552,000 and $241,000, respectively, for the six months ended June 30, 2021.
Short-term lease expense recognized in the three and six months ended June 30, 2022 and 2021, was not material.
(9) Accrued Expenses and Other Current Liabilities
As of June 30, 2022 and December 31, 2021, accrued expenses and other current liabilities consisted of the following:
|
| June 30, |
|
| December 31, |
| ||
Accrued vacation |
| $ | 626,039 |
|
| $ | 552,629 |
|
Accrued payroll |
|
| 479,526 |
|
|
| 674,858 |
|
Accrued construction-in-progress |
|
| 38,959 |
|
|
| 548,988 |
|
Accrued supplies |
|
| 155,560 |
|
|
| 709,027 |
|
Accrued consulting |
|
| 94,060 |
|
|
| 179,082 |
|
Accrued clinical trial expense |
|
| 389,779 |
|
|
| 423,634 |
|
Accrued outside laboratory services |
|
| 251,963 |
|
|
| 128,752 |
|
Accrued bonus & severance |
|
| 1,591,291 |
|
|
| 1,804,288 |
|
Accrued contract manufacturing |
|
| 12,285 |
|
|
| 1,000,824 |
|
Accrued legal |
|
| 720,154 |
|
|
| 833,646 |
|
Accrued financing fees payable |
|
| 5,123,500 |
|
|
| 5,100,000 |
|
Accrued franchise tax payable |
|
| 32,501 |
|
|
| 216,251 |
|
Other accrued expenses |
|
| 343,102 |
|
|
| 283,909 |
|
|
| $ | 9,858,719 |
|
| $ | 12,455,888 |
|
(10) Notes Payable
In December 2017, the Company entered into a loan agreement for the purchase of a tractor for $116,661 at a 3.6% interest rate. The loan included annual payments of $25,913 for the next five years starting in December 2018. The tractor loan balance as of June 30, 2022 and December 31, 2021 was $25,013. The total amount of the remaining loan balance is due in full in the fourth quarter of 2022.
On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). In April 2020, the Company entered into a loan agreement (the “PPP Loan”) with First Premier Bank under the Paycheck Protection Program (the “PPP”), which is part of the CARES Act administered by the United States Small Business Administration (“SBA”). As part of the application for these funds, the Company, in good faith, certified that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. The certification further requires the Company to take into account its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. Under the PPP, the Company received proceeds of approximately $661,612. In accordance with the requirements of the PPP, the Company utilized the proceeds from the PPP Loan primarily for payroll costs. The PPP Loan has a 1.00% interest rate per annum, matures in April 2022 and is subject to the terms and conditions applicable to loans administered by the SBA under the PPP. Under the terms of PPP, all or certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses, as described in the CARES Act. The Company recorded the entire amount of the PPP Loan as debt. In February 2021, the Company submitted a forgiveness application related to its PPP Loan. In March 2021, the SBA approved the forgiveness of the PPP Loan, plus accrued interest. We recorded a gain on extinguishment of PPP Loan of $665,596 for the forgiveness of the PPP Loan and accrued interest within gain on debt extinguishment of Paycheck Protection Program SBA Loan on the consolidated statement of operations for the six months ended June 30, 2021.
(11) Preferred Stock
On the Closing Date, pursuant to the Business Combination (as described in Note 4), 17,750,882 outstanding shares of Preferred Stock were automatically converted into 8,259,505 shares of common stock pursuant to the Exchange Ratio.
18
In addition, upon the closing of the Business Combination, pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Company authorized 10,000,000 shares of preferred stock with a par value $0.0001.
Prior to the Business Combination, in August 2019, the calculationCompany’s Certificate of diluted lossIncorporation was amended to authorize the Company to issue 50,000,000 shares of preferred stock, of which 6,615,000 shares were designated as Series A preferred stock, 2,525,800 shares were designated as series A-1 preferred stock, 4,039,963 shares were designated as series A-2 preferred stock, 3,333,333 shares were designated as series A-2A preferred stock, and 8,571,429 shares were designated as series B preferred stock. The carrying value of Series A preferred stock was $1 per share, sinceSeries A-1 $1.88 per share, Series A-2 & A-2A $3.00 per share, and Series B $3.50 per share.
The preferred stock was entitled to receive noncumulative dividends in preference to any dividend on the exercisecommon stock when, as, and if declared by the Company’s board of directors. The holders of the warrantspreferred stock also were entitled to participate pro rata in any dividends paid on the common stock on an as-if-converted basis.
Each holder of preferred stock was entitled to the number of votes equal to the number of shares of common stock that it could be converted into. As long as there were 8,000,000 shares of preferred stock outstanding, the vote or written consent of the holder of the majority of the outstanding preferred stock (all series voting as a single class) was required to approve any amendment of the certificate of incorporation that changes voting, preferences or privileges or restrictions of the preferred stock.
In the event of liquidation or winding up of the Company, the preferred stockholders also were entitled to receive in preference to the holders of the common stock the greater of: a) a per share amount equal to their respective original purchase price plus any declared but unpaid dividends (the “Liquidation Preference”); or b) the amount to be paid on the common stock on an as-if-converted basis. The remaining assets would be distributed to the common stockholders.
The holders of preferred stock had the right to convert the preferred stock into common stock, at any time, utilizing the then- effective conversion rate. The effective conversion rate as of December 31, 2020 was 1:1. All preferred shares were automatically converted into common shares utilizing the then effective preferred conversion rate upon: a) the closing of the Company’s sale of its common stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act of 1933, covering the sale of the Company’s common stock if gross proceeds are contingent uponat least $20,000,000 and the occurrenceCompany’s shares have been listed on a stock exchange, as defined; or b) the election of future events.the holders of a majority of the outstanding shares of preferred stock.
With any change of control of the Company or financing, the preferred stockholders were to approve through majority vote any such change in control or financing event approved by the board of directors or the majority of the common stockholders. The preferred stock contained certain anti-dilution provisions, as defined.
In addition to the rights described above, series A-2A preferred stock was redeemable at a price equal to $5 per preferred share at the option of the investor at any time during the redemption period, which was scheduled to commence in August 2022 and end in August 2023. As a result diluted net loss per common share isof the sameredemption feature, the Company classified the series A-2A preferred stock as basic net loss per common sharemezzanine equity as of January 1, 2020. However, the redemption feature was terminated during the year ended December 31, 2020, and the series A-2A preferred stock was reclassified from mezzanine equity to permanent equity.
(12) Stock Option Plans
On August 5, 2014, the Company approved a stock option grant plan (the “2014 Equity Incentive Plan”) for employees, directors, and non-employee consultants, which provides for the period presented.issuance of options to purchase common stock. The total shares authorized under the plan was originally 8,000,000; however, during 2019, the Plan was amended to increase the total shares authorized under the plan to 16,000,000. As a result of the Business Combination, the 2014 Equity Incentive Plan was amended to reduce the shares authorized to 7,444,800 based upon the impact of the Exchange Ratio.
Net Income per Common Share
The expected term of the stock options was estimated using the “simplified” method, as follows:
defined by the SEC’s Staff Accounting Bulletin No. 107, Schedule of Reconciliation of Net Income Per Common ShareShare-Based Payment
| Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||
| Common Stock Subject to Possible Redemption | ||||||||
| Numerator: Earnings allocable to common stock subject to possible redemption | ||||||||
| Interest earned on marketable securities held in Trust Account | $ | 2,896 | $ | 5,315 | ||||
| Less: Interest allocable to non-redeemable common stock | (915 | ) | (1,680 | ) | ||||
| Net income allocable to shares subject to possible redemption | $ | 1,981 | $ | 3,635 | ||||
| Denominator: Weighted Average Redeemable Class A Ordinary Shares | ||||||||
| Basic and diluted weighted average shares outstanding | 10,333,213 | 10,363,269 | ||||||
| Basic and diluted net income per share | $ | 0.00 | $ | 0.00 | ||||
| Non-Redeemable Common Stock | ||||||||
| Numerator: Net Income (Loss) Minus Net Earnings | ||||||||
| Net Income (Loss) | $ | (2,202,161 | ) | $ | 771,059 | |||
| Less: Income attributable to common stock subject to possible redemption | (1,981 | ) | (3,635 | ) | ||||
| Non-Redeemable net income (loss) | $ | (2,204,142 | ) | $ | 767,424 | |||
| Weighted average non-redeemable shares outstanding, basic and diluted | 4,443,103 | 4,162,957 | ||||||
| Basic and diluted net income (loss) per share | $ | (0.50 | ) | $ | 0.18 | |||
Concentration of Credit Risk
Financial instruments that potentially subject. The volatility assumption was determined by examining the historical volatilities for industry peer companies, as the Company to concentrationsdoes not have sufficient trading history for its common stock. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of credit risk consistthe options. The dividend assumption is based on the Company’s history and expectation of cash accounts in a financial institution, which, at times, may exceed the federal depository insurance coverage of $250,000.dividend payouts. The Company has never paid dividends on its common stock and does not experienced lossesanticipate paying dividends on these accounts and management believesits common stock in the foreseeable future. Therefore, the Company is not exposed to significant risks on such accounts.
Fair Valuehas assumed no dividend yield for purposes of Financial Instruments
The Company followsestimating the guidance in ASC 820, “Fair Value Measurement,” for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assetsoptions.
19
Stock Options
Stock option activity for employees and liabilities reflects management’s estimatenon-employees under the Equity Compensation Plans for the six months ended June 30, 2022 was as follows:
|
| Options |
|
| Weighted |
|
| Weighted Average Remaining Contractual Life (years) |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding options, December 31, 2021 |
|
| 5,107,672 |
|
| $ | 2.44 |
|
|
| 5.78 |
|
| $ | 28,948,535 |
|
Granted |
|
| 528,711 |
|
| $ | 2.84 |
|
|
|
|
|
|
| ||
Forfeited |
|
| (256,475 | ) |
| $ | 4.81 |
|
|
|
|
|
|
| ||
Exercised |
|
| (90,264 | ) |
| $ | 0.85 |
|
|
|
|
|
|
| ||
Outstanding options, June 30, 2022 |
|
| 5,289,644 |
|
| $ | 2.64 |
|
|
| 4.88 |
|
| $ | 2,146,863 |
|
Options vested and exercisable, June 30, 2022 |
|
| 3,950,063 |
|
| $ | 1.34 |
|
|
| 3.69 |
|
| $ | 2,146,863 |
|
Total unrecognized compensation cost related to non-vested stock options as of amountsJune 30, 2022 was approximately $5.2 million and is expected to be recognized within future operating results over a weighted-average period of 2.13 years.
The weighted average grant date fair value of options granted during the three months ended June 30, 2022 and 2021, was $1.79 per share and $5.40 per share, respectively. During the three months ended June 30, 2022 and 2021, 134,986 shares with a fair value totaling $595 thousand, and 151,577 shares with a fair value totaling $668 thousand, respectively, vested.
The weighted average grant date fair value of options granted during the six months ended June 30, 2022 and 2021, was $1.76 per share and $5.21 per share, respectively. During the six months ended June 30, 2022 and 2021, 315,370 shares with a fair value totaling $1.3 million, and 231,348 shares with a fair value totaling $0.9 million, respectively, vested.
The estimated fair value of stock options granted to employees and consultants during the three and six months ended June 30, 2022 and 2021, were calculated using the Black-Scholes option-pricing model using the following assumptions:
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||||||
Expected volatility |
| 85.4 |
| % |
| 75.9 - 104.3 |
| % |
| 78.0 - 85.4 |
| % |
| 75.9 - 104.3 |
| % | ||||
Weighted-average volatility |
|
| 85.4 |
| % |
|
| 96.7 |
| % |
|
| 79.0 |
| % |
|
| 98.1 |
| % |
Expected dividends |
| — |
| % |
| — |
| % |
| — |
| % |
| — |
| % | ||||
Expected term (in years) |
| 5.89 |
|
|
| 6.25 |
|
|
| 5.50 - 6.08 |
|
|
| 6.25 |
|
| ||||
Risk-free rate |
| 3.03 |
| % |
| 0.14 - 0.59 |
| % |
| 1.38 - 3.03 |
| % |
| 0.14 - 0.59 |
| % | ||||
Restricted Stock
Stock award activity for employees and non-employees under the Equity Compensation Plans for the six months ended June 30, 2022 was as follows:
|
| Number of shares |
|
| Weighted |
| ||
Unvested as of December 31, 2021 |
|
| — |
|
| $ | — |
|
Granted |
|
| 300,000 |
|
| $ | 1.89 |
|
Vested |
|
| — |
|
| $ | — |
|
Forfeited |
|
| — |
|
| $ | — |
|
Unvested as of June 30, 2022 |
|
| 300,000 |
|
| $ | 1.89 |
|
Total unrecognized compensation cost related to non-vested stock awards as of June 30, 2022 was approximately $0.6 million and is expected to be recognized within future operating results over a weighted-average period of 3.93 years.
20
Stock-based compensation expense
Stock-based compensation expense for the three and six months ended June 30, 2022 and 2021 was as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Research and development |
| $ | 149,814 |
|
| $ | 303,461 |
|
| $ | 518,039 |
|
| $ | 514,404 |
|
General and administrative |
|
| 420,047 |
|
|
| 129,970 |
|
|
| 949,422 |
|
|
| 268,142 |
|
Total |
| $ | 569,861 |
|
| $ | 433,431 |
|
| $ | 1,467,461 |
|
| $ | 782,546 |
|
(13) Fair Value Measurements
Fair value is defined as the price that the Company would havebe received in connection with the sale of the assetsto sell an asset or paid to transfer a liability (an exit price) in connection with the transfer ofprincipal or most advantageous market for the liabilitiesasset or liability in an orderly transaction between market participants aton the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy isclassifies the inputs to valuation techniques that would be used to classifymeasure fair value into one of three levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The following tables present information about the Company's assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
See Note 9 for additional information on assets and liabilities measured at fair value.
Recently Adopted Accounting Standards
In August 2020,value on a recurring basis and indicate the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company early adopted ASU 2020-06 on January 1, 2021. Adoptionfair value hierarchy of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
Note 4 — Initial Public Offering
Public Units
On January 14, 2021,valuation inputs the Company sold utilized to determine such fair value:
|
| As of June 30, 2022 |
| |||||||||||||
|
| Total |
|
| Quoted |
|
| Significant |
|
| Significant |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Public Warrant liability |
| $ | 1,092,500 |
|
| $ | 1,092,500 |
|
| $ | — |
|
| $ | — |
|
Private Placement Warrant liability |
|
| 47,978 |
|
|
| — |
|
|
| — |
|
|
| 47,978 |
|
Total |
| $ | 1,140,478 |
|
| $ | 1,092,500 |
|
| $ | — |
|
| $ | 47,978 |
|
11,500,000 Units, at a purchase price of $
|
| As of December 31, 2021 |
| |||||||||||||
|
| Total |
|
| Quoted |
|
| Significant |
|
| Significant |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Public Warrant liability |
| $ | 10,292,500 |
|
| $ | 10,292,500 |
|
| $ | — |
|
| $ | — |
|
Private Placement Warrant liability |
|
| 427,630 |
|
|
| — |
|
|
| — |
|
|
| 427,630 |
|
Total |
| $ | 10,720,130 |
|
| $ | 10,292,500 |
|
| $ | — |
|
| $ | 427,630 |
|
10.00 per Unit, which includes the full exercise by the underwriters of the over-allotment option to purchase an additional Units, at a purchase price of $ per Unit. Each Unit consists of one share of common stock, and one-half warrant to purchase one share of common stock (the “Public Warrants”).
Public Warrants
Each whole warrantPublic Warrant entitles the holder to purchase one share of the Company’sCompany's common stock at a price of $11.50 per share, subject to adjustment as discussed herein. The warrants will becomePublic Warrants became exercisable on the later of 12 months from the closing of this offering or 30 days after the completionClosing Date of its initial business combination,the Business Combination and will expire five years after the completionClosing Date of the Company’s initial business combination,Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
In addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial business combination at an issue price or effective issue price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Company’s sponsor or its affiliates, without taking into account any founder shares held by the Company’s sponsor or its affiliates, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial business combination on the date of the consummation of the initial business combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial business combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.21
The Company will not be obligated to deliver any shares of common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of common stock underlying the warrants is then effective and a prospectus is current. No warrant will be exercisable and the Company will not be obligated to issue shares of common stock upon exercise of a warrant unless common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of common stock underlying such unit.
Once the warrants become exercisable, the Company may call the warrants for redemption:
If the Company calls the warrants for redemption as described above, the management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” If the management exercisestakes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the excess of the “fair market value” (defined below) over the exercise price of the warrants by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
As of June 30, 2022, 5,750,000 Public Warrants were outstanding.
Note 5 — Private Placement Warrants
Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 417,200 Placement Units, at a price of $ per Placement Unit, for an aggregate purchase price of $4,172,000, in a private placement. A portion of the proceeds from the private placement was added to the proceeds from the IPO held in the Trust.
Each Placement Unit was identical to the Units sold in the IPO, except for the placement warrants (“Placement Warrants”). The Private Placement Warrants and the common stock issuable upon the exercise of the Private Placement Warrants willwere not be transferable, assignable or saleable until after the completion of athe Company's Business Combination, subject to certain limited exceptions.Combination. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. If the Company does not complete its initial business combination within 15 months (or up to 21 months) from the closing
As of this IPO, the proceeds from the saleJune 30, 2022, 208,600 Private Placement Warrants were outstanding.
Presentation and Valuation of the Placement Units held in the trust account will be used to fund the redemption of its public shares (subject to the requirements of applicable law) and the Placement Warrants will expire.
Note 6 — Related Party Transactions
Founder Shares
On November 12, 2020, the Company issued shares of common stock to the Sponsor for $ in cash, or approximately $ per share, in connection with formation. On December 7, 2020, the Sponsor forfeited founder shares to the Company and Ladenburg Thalmann & Co. Inc., the representative of the underwriters, and certain of its employees (“Ladenburg”) purchased from the Company an aggregate of representative shares at an average purchase price of approximately $ per share, for an aggregate purchase price of $.
On January 3, 2021, the Company effected a stock dividend of 1/3 of a share of common stock for every share of common stock outstanding, resulting in an aggregate of founder shares outstanding (including up to shares subject to forfeiture to the extent that the underwriters’ over-allotment was not exercised in full or in part). As a result of the underwriters’ election to fully exercise their over-allotment option on January 14, 2021, the shares are no longer subject to forfeiture.
As discussed further below, on January 4, 2021, the Sponsor forfeited founder shares to the Company and Ladenburg and certain of its employees purchased from the Company an aggregate of representative shares at an average purchase price of approximately $0.008 per share, for an aggregate purchase price of $. As a result, the Sponsor currently owns shares.
The Sponsor has agreed not to transfer, assign or sell 50% of its founder shares untilWarrants (both the earlier to occur of (A) six months after the completion of the Company’s initial business combination or (B) the date the last sale price of the Company’s common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizationsPublic Warrants and the like) for any 20 trading days within any 30-trading day period commencing after the Company’s initial business combination, and the remaining 50% of the founder shares until six months after the completion of the Company’s initial business combination, or earlier, if, in either case, subsequent to the Company’s initial business combination, the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of its stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Representative Shares
On December 7, 2020, the Sponsor forfeited founder shares to the Company and Ladenburg and certain of its employees purchased from the Company an aggregate of representative shares at an average purchase price of approximately $per share, for an aggregate purchase price of $. On January 4, 2021, the Sponsor forfeited founder shares to the Company and Ladenburg and certain of its employees purchased from the Company an aggregate of representative shares at an average purchase price of approximately $per share, for an aggregate purchase price of $. Following the 1/3 common stock dividend effected January 3, 2021 (as described herein), Ladenburg and certain of its employees now hold an aggregate of representative shares (of which up to were subject to forfeiture). As a result of the underwriters’ election to fully exercise of their over-allotment option, the shares are no longer subject to forfeiture.
Ladenburg and certain of its employees have entered into a subscription agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to their representative shares, as applicable, and public shares in connection with the completion of our initial business combination, (ii) waive their redemption rights with respect to their representative shares, as applicable, (iii) waive their rights to liquidating distributions from the trust account with respect to their representative shares if the Company fails to complete the initial business combination within the Combination Period.
Promissory Note — Related Party
On November 19, 2020, Company issued an unsecured promissory note to the Sponsor for an aggregate of up to $250,000 to cover expenses related to the IPO. This loan was non-interest bearing and payable on the earlier of March 31, 2021 or the completion of the IPO. As of December 31, 2020, the Company had drawn down $150,000 under the promissory note. On January 14, 2021, the Company paid the $150,000 balance on the note from the proceeds of the IPO.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into units at a price of $10.00 per unit at the option of the lender, upon consummation of the Company’s Initial Business Combination. The units would be identical to thePrivate Placement Units. Through June 30, 2021, no Working Capital Loans had been made.
Administrative Service Fee
The Company has agreed to pay an affiliate of the Company’s Sponsor a monthly fee of an aggregate of $10,000 for office space, utilities and secretarial and administrative support. Upon completion of the Company’s Business Combination or its liquidation, the Company will cease paying these monthly fees. For the three and six months ended June 30, 2021, the Company has recorded $30,000 and $60,000 in service fee expense, respectively, within operating costs in the accompanying condensed statements of operations.
Note 7 — Commitments and Contingencies
Underwriting Agreement
The underwriter had a 45-day option from the date of the IPO to purchase up to an aggregate of additional Units at the public offering price less the underwriting commissions to cover over-allotments, if any. On January 14, 2021, the underwriter fully exercised its over-allotment option.
Upon consummation of the IPO on January 14, 2021, the underwriters were paid a cash underwriting fee of 1.33% of the gross proceeds of the IPO, or $1,529,500 in the aggregate.
The underwriters are entitled to a deferred underwriting fee of 3.67% of the gross proceeds of the IPO, or $4,220,500 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Registration Rights
The holders of the founder shares, representative shares, placement units, and units that may be issued upon conversion of working capital loans will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement to be signed prior to or on the effective date of this offering. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Note 8 — Stockholders’ Equity
Preferred Stock — The Company is authorized to issue a total of preferred shares at par value of $ each. At June 30, 2021 and December 31, 2020, there were shares of preferred stock issued or outstanding.
Common Stock — The Company is authorized to issue a total of share of common stock at par value of $ each. At June 30, 2021 and December 31, 2020, there were and shares issued and outstanding, excluding and shares subject to possible redemption, respectively.
The Company’s initial stockholder has agreed not to transfer, assign or sell 50% of its founder shares until the earlier to occur of (A) six months after the completion of the Company’s initial business combination or (B) the date the last sale price of the Company’s common stock equals or exceeds $ per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing after the Company’s initial business combination, and not to transfer, assign or sell the remaining 50% of the founder shares until six months after the completion of the Company’s initial business combination, or earlier, if, in either case, subsequent to the Company’s initial business combination, the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of its stockholders having the right to exchange their shares of common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and other agreements of the Company’s initial stockholders with respect to any founder shares.
Note 9 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
| June 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Money Market held in Trust Account | $ | 116,155,315 | $ | 116,155,315 | $ | — | $ | — | ||||||||
| Liabilities: | ||||||||||||||||
| Public Warrants Liability | $ | 5,289,425 | $ | 5,289,425 | $ | — | $ | — | ||||||||
| Private Placement Warrants Liability | 241,681 | — | — | 241,681 | ||||||||||||
| Fair value of liabilities | $ | 5,531,106 | $ | 5,289,425 | $ | — | $ | 241,681 | ||||||||
The WarrantsWarrants) are accounted for as liabilities in accordance with ASC 815-40, Derivatives and areHedging—Contracts in Entity’s Own Equity and were presented within warrant liabilities on the Condensed Balance Sheet.consolidated balance sheet as of June 30, 2022 and December 31, 2021. The initial fair value of the warrant liabilities arewas measured at fair value at inceptionthe Closing Date, and on a recurring basis, with changes in the fair value of the warrant liabilities were presented within changechanges in fair value of warrant liabilities in the Condensed Statementconsolidated statements of Operations.
The Company establishedoperations for the initial fair value of the Public Warrantsthree and Private Warrants on January 14, 2021, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model. Onsix months ended June 30, 2021,2022.
On the Closing Date, the Company established the fair value of the Private Placement Warrants usingutilizing both the Black-Scholes Merton formula and a MontoMonte Carlo simulationSimulation (“MCS”) analysis. Specifically, the Company considered an MCS to derive the implied volatility in the publicly listed price of the Public Warrants. The Company then considered this implied volatility in selecting the volatility for the application of a Black-Scholes Merton model andfor the Private Placement Warrants. The Company determined the fair value of the Public Warrants by reference to the quoted market price.
The Public Warrants have traded on The Nasdaq Stock Market, LLC since January 14, 2021 under the trading symbol BCYPW. The Public and Private Warrants were classified as Level 3 at January 14, 2021 and the Private Warrants were classified as Level 3 at June 30, 2021 due to the use of unobservable inputs. As of June 30, 2021, the Public Warrants were transferred toa Level 1 fair value measurement, due to the use of the quoted market price.price, and the Private Placement Warrants held privately by Big Cypress Holdings LLC, a Delaware limited liability company which acted as the Company’s sponsor in connection with the IPO (the "Sponsor"), were classified as a Level 3 fair value measurement, due to the use of unobservable inputs.
The following table presentsprovides a summary of the changes in our Level 3 fair value measurements:
|
| June 30, |
| |
Balance, December 31, 2021 |
| $ | 427,630 |
|
Change in fair value of Private Placement Warrant liability |
|
| (317,072 | ) |
Balance, March 31, 2022 |
| $ | 110,558 |
|
Change in fair value of Private Placement Warrant liability |
|
| (62,580 | ) |
Balance, June 30, 2022 |
| $ | 47,978 |
|
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The initial measurement on the Closing Date for the Public Warrant liability was approximately $6.3 million and the fair value of the Level 3 liabilities:Public Warrant liability increased by approximately $4.0 million during the year ended December 31, 2021. The fair value of the Public Warrant liability decreased by approximately $1.7 million and $9.2 million, respectively, for the three and six months ended June 30, 2022.
Schedule of Change in Fair Value Liabilities
| Private Placement Warrants | Public Warrants | Warrant Liabilities | ||||||||||
| Fair Value as of December 31, 2020 | $ | — | $ | — | $ | — | ||||||
| Initial measurement on January 14, 2021 | 249,963 | 6,775,220 | 7,025,183 | |||||||||
| Change in valuation | (8,282 | ) | (1,485,795 | ) | (1,494,077 | ) | ||||||
| Transferred to Level 1 | — | (5,289,425 | ) | (5,289,425 | ) | |||||||
| Balance, June 30, 2021 | $ | 241,681 | $ | — | $ | 241,681 | ||||||
The key inputs into the Monte Carlo simulationvaluations as of January 14,June 30, 2022 and December 31, 2021 were as follows:
|
| June 30, |
|
| December 31, |
| ||
Risk-free interest rate |
|
| 3.00 | % |
|
| 1.24 | % |
Expected term remaining (years) |
|
| 4.31 |
|
|
| 4.81 |
|
Implied volatility |
|
| 73.0 | % |
|
| 43.0 | % |
Closing common stock price on the measurement date |
| $ | 1.45 |
|
| $ | 7.81 |
|
As of June 30, 2022 and December 31, 2021, the Company did 0t have any other assets or liabilities that are recorded at fair value on a recurring basis.
The Company believes that the carrying amounts of its cash and cash equivalents, accounts receivable, and notes payable approximate their fair values due to their near-term maturities.
(14) Income Taxes
The effective income tax rate for the six months ended June 30, 2022 is 0%, compared with an effective tax rate of 0% for the year ended December 31, 2021. The calculation of the annual effective tax rate did not produce a reliable estimate, so the actual effective tax rate for the year-to-date period is used as the best estimate of the annual effective tax rate.
Starting in 2022, Tax Cuts and Jobs Act amendments to Internal Revenue Code Section 174 will no longer permit an immediate deduction for research and development expenditures in the tax year that such costs are incurred. The 2022 first quarter effective income tax rate was impacted by the Section 174 capitalization requirement combined with the restriction on net operating losses to only reduce taxable income by 80%.
The Company continues to record a valuation allowance on its net deferred tax assets. The valuation allowance increased by approximately $2.9 million during the six months ended June 30, 2022. The Company has not recognized any reserves for uncertain tax positions.
(15) Related Party Transactions
For the three and six months ended June 30, 2022, under the Related Party Transaction Policy the Company adopted in the fourth quarter of 2021, there were no related party transactions with beneficial owners of 5% or more of any class of the Company’s voting securities, immediate family members of any of the foregoing persons, and any entities in which any of the foregoing is an executive officer or is an owner of 5% or more ownership interest.
For the three and six months ended June 30, 2021, werepreceding the Company's Merger and adoption of the aforementioned Related Party Transaction Policy, the Company had related party transactions as follows:
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(16) Employee Benefit Plan
ScheduleThe Company sponsors a defined contribution retirement plan. All the Company’s employees are eligible to be enrolled in the employer-sponsored contributory retirement savings plan, which include features under Section 401(k) of Key Inputsthe Internal Revenue Code of 1986, as amended, and provides for Company matching contributions. The Company’s contributions to the plan are determined by its Board of Directors, subject to certain minimum requirements specified in the plan. The Company has historically made matching contributions of 100% on 3% of the employee contributions, with an additional 50% match on the next 2% of employee contributions. The Company made contributions of approximately $166,000 and $78,000, respectively, during the three months ended June 30, 2022 and 2021 and approximately $259,000 and $178,000, respectively, during the six months ended June 30, 2022 and 2021.
(17) Commitments and Contingencies
The Company is not a party to any litigation, and, to its best knowledge, no action, suit, or proceeding has been threatened against the Company which are expected to have a material adverse effect on its financial condition, results of operations or liquidity.
(18) Joint Development Agreement
In June 2019, the Company entered into Monte Carlo Simulationa joint development agreement with the University of South Dakota Research Park, Inc. (“USDRP”) for the construction of a multi-tenant office building and a manufacturing building. Pursuant to the agreement, the Company also entered into a lease agreement for 41,195 square feet of leasable area located in the building. The lease will commence upon completion of the building for an initial term of 12 years at a monthly payment of approximately $118,000. Aurochs, LLC, a wholly owned subsidiary, was founded to manage the construction funds for this project. All pre-construction costs up to a budgeted $2.7 million were paid directly by the Company and reimbursed by USDRP. As of June 30, 2022 or December 31, 2021, USDRP has spent approximately $2.12 million in design costs for this facility, with approximately $580,000 of the $2.7 million budget remaining. There were 0 receivables or payables for this project as of June 30, 2022 or December 31, 2021. USDRP and the Company intend to secure outside funding for all expenses incurred after the pre-construction phase. If funding cannot be secured to finance the construction of this facility, the Company will not be required to refund any of the design costs incurred to date. This project is on hold as the Company works to develop existing production capabilities at its current facilities sufficient to support its ongoing research and development plans.
| (Initial Measurement) | ||||||||
| Inputs | January 14, 2021 | June 30, 2021 | ||||||
| Risk-free interest rate | 0.60 | % | 0.90 | % | ||||
| Expected term remaining (years) | ||||||||
| Expected volatility | % | % | ||||||
| Stock price | $ | 9.41 | $ | 9.96 | ||||
Note 10 — (19) Subsequent Events
On August 3, 2022, the Company received notice from the US Department of Defense (“DoD”) to terminate the Department of Defense, Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense Enabling Biotechnologies (“JPEO”) Rapid Response contract, dated as of August 7, 2019 by and between the Company and the DoD most recently amended as of September 14, 2021, relating to a prototype research and development of a Rapid Response Antibody Program and advanced clinical development through licensure and commercial manufacturing for SAB-185 (the "JPEO Rapid Response Contract Termination"). No termination penalties have been or will be incurred by the Company in connection therewith. The Company evaluated subsequent events and transactions that occurred afteranticipates entry into a termination settlement or similar arrangement with the balance sheet date up to the date that the financial statements were issued. Based upon this review,DoD whereby, among other things, the Company did not identify any subsequent events that would have required adjustment or disclosureexpects to be compensated for costs incurred in winding down activity surrounding the financial statements.JPEO Rapid Response contract.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.
References in this report (the “Quarterly Report”) to “we,” “us” orYou should read the “Company” refer to Big Cypress Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Big Cypress Holdings LLC. The following discussion and analysis of the Company’sour financial condition and results of operations should be read in conjunctiontogether with theour consolidated financial statements and the accompanying notes thereto contained elsewhereincluded in Part I, Item 1 of this Quarterly Report. CertainForm 10-Q. Some of the information contained in thethis discussion and analysis set forth below includescontains forward-looking statements that involve risks, uncertainties, and uncertainties.assumptions. As a result of many factors, including those factors set forth in the section titled “Risk Factors,” our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors.” Please also refer to the section titled “Special Note Regarding Forward Looking Statements.”
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report” or “Form 10-Q”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements involved known and unknown risks, relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. In addition, historic results, including but not limited to those related to discovery data of SAB-195 and SAB-142; Phase 1 & Phase 2a results of SAB-176; and Phase 1, 1b, and 2 results for SAB-185 do not guarantee that future research or trials will suggest the same conclusions, nor that historic results referred to herein will be interpreted in the same manner due to future preclinical and clinical trial results or otherwise. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section ofsections entitled “Risk Factors” in this Quarterly Report, the Company’s most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, and other periodic reports filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”)and available at https://www.sec.gov/. The Company’s securities filings can be accessedReaders are cautioned not to place undue reliance on the EDGAR sectionthese forward-looking statements, which speak only as of the SEC’s website at www.sec.gov.date hereof. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.
Overview
Overview
We are a blank checkclinical-stage, biopharmaceutical company formed underfocused on the lawsdevelopment of powerful and proprietary immunotherapeutic polyclonal human antibodies to treat and prevent infectious diseases and immune and autoimmune disorders, including infectious diseases resulting from outbreaks and pandemics as well as immunology, gastroenterology, and respiratory diseases that have significant mortality and health impacts on immunocompromised patients. We have applied advanced genetic engineering and antibody science to develop transchromosomic (Tc) Bovine™. Our versatile DiversitAb™ platform is applicable to a wide range of serious unmet needs in human diseases. It produces natural, specifically targeted, high-potency, fully-human polyclonal immunotherapies without the need for human donors. We currently have multiple drug development programs underway and collaborations with the US government and global pharmaceutical companies.
The platform has been expanded and validated through funding awarded from U.S. government emerging disease and medical countermeasures programs with cumulative grant award totals of approximately $203.6 million. We are advancing clinical programs in two indications, and preclinical development in three indications. In addition, we are executing on two research collaborations with global pharmaceutical companies, including CSL Behring and an undisclosed collaboration.
We generated total revenue of $6.4 million and $18.2 million for the three months ended June 30, 2022 and 2021, respectively, and $18.2 million and $35.1 million, respectively, for the six months ended June 30, 2022 and 2021. Our revenue to date has been primarily derived from government grants. As of June 30, 2022, $72.0 million in funding ($71.3 million of which was eliminated as a result of the StateJPEO Rapid Response Contract Termination) remains for our current government grants, with an additional $1.6 million remaining for our current government grants pending approval of Delawareextensions on November 12, 2020the funding for two of the grants.
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We plan to focus a substantial portion of our resources on continued research and development efforts towards deepening our technology and expertise with our platform and as well as indications in infectious disease and autoimmune indications. As a result, we expect to continue to make significant investments in these areas for the purposeforeseeable future. We incurred research and development expenses of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination$8.6 million and $18.7 million, respectively, for the three months ended June 30, 2022 and 2021, and $21.9 million and $31.5 million, respectively, for the six months ended June 30, 2022 and 2021. We incurred general and administrative expenses of $4.3 million and $2.4 million for the three months ended June 30, 2022 and 2021, respectively, and $9.5 million and $5.7 million for the six months ended June 30, 2022 and 2021. We expect to continue to incur significant expenses, and we expect such expenses to increase substantially in connection with one or moreour ongoing activities, including as we:
To date, we have primarily financed our operations from government agreements and the issuance and sale of common stock.
We intendgenerated a net loss of $4.8 million and $2.9 million, respectively, for the three months ended June 30, 2022 and 2021, and a net loss of $3.8 million and $1.5 million for the six months ended June 30, 2022 and 2021. As of June 30, 2022, we had an accumulated deficit of $32.9 million with cash and cash equivalents totaling $16.6 million.
Recent Developments
PPP Loan
In February 2021, we submitted a forgiveness application related to effectuate our initial business combination using cash fromPaycheck Protection Program (or PPP) loan (PPP Loan). In March 2021, the proceedsU.S. Small Business Administration (SBA) approved the forgiveness of the IPO (as defined below) and the sale of the Private Units (as defined below), our capital stock, debt or a combination of cash, stock and debt.PPP Loan, plus accrued interest.
Recent Events
Proposed Business Combination
As more fully described in Note 1 to the financial statements to this Quarterly Report and in a Current Report on Form 8-K filed by the Company with the SEC on JuneOn October 22, 2021, onwe consummated the Business Combination pursuant to that certain Agreement and Plan of Merger, dated June 21, 2021 the Company, entered into a business combination agreement (the “Business("Business Combination Agreement”Agreement"), by and among the Company,Big Cypress Acquisition Corp. (BCYP), Big Cypress Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Merger Sub”),BCYP, and SAB Biotherapeutics, Inc., a Delaware corporation (“SAB”)which changed its name to SAB Sciences, Inc. and Shareholder Representative Services LLC, asbecame our wholly-owned subsidiary in connection with the stockholder representative to the SAB stockholders. The Business Combination Agreement provides, among other things, that on the terms and subject(and which we refer to the conditions set forth therein, Merger Sub will merge with and into SAB, with SAB survivingnow as a wholly-owned subsidiary of the Company (the “Merger”)Legacy SAB). Upon the closingcompletion of the Business Combination, (the “Closing”), it is anticipated thatand pursuant to the Company will change its name to “SAB Biotherapeutics, Inc.” (“New SAB”). The Merger and the other transactions contemplated byterms of the Business Combination Agreement, the stockholders of Legacy SAB exchanged their Legacy SAB shares for our shares of common stock, and options to purchase shares of Legacy SAB were converted into options to purchase our shares of common stock. Additionally, (i) we issued 10,491,937 shares of common stock to the former stockholders of Legacy SAB, which are hereinafter referredbeing held in escrow and which will be released if certain conditions are met prior to October 22, 2026, and (ii) we granted 1,508,063 contingently issuable restricted stock units to the holders of Legacy SAB options, which restricted stock units will be settled in our shares of common stock if the same conditions are met prior to October 22, 2026. For more information, see Note 1 to our consolidated financial statements, Nature of Business.
Key Factors Affecting Our Results of Operations and Future Performance
We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in the section captioned “Part I, Item 1A, Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and supplemented with the following revised or additional risk factors in “Part II, Item 1A, Risk Factors.”
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Components of Results of Operations
Revenue
Our revenue has historically been generated through grants from government and other (non-government) organizations. We currently have no commercially approved products.
Grant revenue is recognized for the period that the research and development services occur, as qualifying expenses are incurred or conditions of the grants are met. We concluded that payments received under these grants represent conditional, nonreciprocal contributions, as described in Accounting Standards Codification ("ASC") 958, Not-for-Profit Entities, and that the grants are not within the scope of ASC 606, Revenue from Contracts with Customers, as the “Business Combination.” The Business Combination is expectedorganizations providing the grants do not meet the definition of a customer. Expenses for grants are tracked by using a project code specific to close in the fourth quarter of 2021, following the receipt of the required approval by the Company’s stockholdersgrant, and the fulfilment of other customary closing conditions. However,employees also track hours worked by using the Company cannot provide any assurance thatproject code.
The total revenue for government grants was approximately $6.4 million and $18.2 million, respectively, the Business Combination will be completed.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 12, 2020 (inception) throughthree months ended June 30, 2022 and 2021, were organizational activities, those necessary to prepareand $18.2 million and $35.1 million, respectively, for the IPO, described below,six months ended June 30, 2022 and identifying a target company for our initial business combination. We do not expect to generate any operating revenues until after the completion of the Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account (as defined below) and other income or loss resulting from changes in fair value of the warrant liability. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.2021.
For the three and six months ended June 30, 2021, we had operating costsworked on the following grants:
National Institute of $256,847Health – National Institute of Allergy and $368,459,Infectious Disease (“NIH-NIAID”) (Federal Award #1R44AI117976-01A1) – this grant was for $1.4 million and started in September 2019 through August 2021. Grant income recognized was approximately $3,000 and $94,000, respectively, consistingfor the three months ended June 30, 2022 and 2021, and $30,000 and $150,000, respectively, for the six months ended June 30, 2022 and 2021. The Company applied for an extension on the grant funding, and the extension is pending approval—the Company has not historically experienced challenges renewing grant funding. If approved, there is approximately $184,000 in funding remaining for this grant as of professionalJune 30, 2022.
NIH-NIAID (Federal Award #1R41AI131823-02) – this grant was for approximately $1.5 million and started in April 2019 through March 2021. The grant was subsequently amended to extend the date through March 2022. Grant income recognized was approximately $118,000 and $20,000, respectively, for the three months ended June 30, 2022 and 2021, and $131,000 and $29,000, respectively, for the six months ended June 30, 2022 and 2021. There is approximately $683,000 in funding remaining for this grant as of June 30, 2022.
NIH-NIAID through Geneva Foundation (Federal Award #1R01AI132313-01, Subaward #S-10511-01) – this grant was for approximately $2.7 million and started in August 2017 through July 2021. Grant income recognized was approximately $26,000 and $47,000, respectively, for the three months ended June 30, 2022 and 2021, and $49,000 and $47,000, respectively, for the six months ended June 30, 2022 and 2021. The Company applied for an extension on the grant funding, and the extension is pending approval—the Company has not historically experienced challenges renewing grant funding. If approved, there is approximately $1.4 million in funding remaining for this grant as of June 30, 2022.
Department of Defense, Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense Enabling Biotechnologies (“JPEO”) through Advanced Technology International – this grant was for a potential of $25 million, awarded in stages starting in August 2019 and with potential stages running through February 2023. Additional contract modifications were added to this contract in 2020 and 2021 for work on a COVID therapeutic, bringing the contract total to $204 million. Grant income recognized was approximately $6.2 million and $18.0 million, respectively, for the three months ended June 30, 2022 and 2021, and $17.9 million and $34.9 million, respectively, for the six months ended June 30, 2022 and 2021. There is approximately $71.3 million in funding remaining for this grant as of June 30, 2022.
The grants for the JPEO Rapid Response contract are cost reimbursement agreements, with reimbursement of our direct research and development expense (labor and consumables) with an overhead charge (based on actual, reviewed quarterly) and a fixed fee (9%). As a result of the JPEO Rapid Response Contract Termination in August 2022, this grant was terminated.
Research and Development Expenses
Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies and materials for employees and contractors engaged in research and product development, licensing fees to use certain technology in our research and development projects, fees paid to consultants and various entities that perform certain research and testing on our behalf. Research and development expenses are tracked by target/project code. Indirect general and administrative costs are allocated based upon a percentage of direct costs. We expense all research and development costs in the period in which they are incurred.
Research and development activities consist of discovery research for our platform development and the various indications we are working on. We have not historically tracked our research and development expenses on a product candidate-by-product candidate basis.
27
For the three and six months ended June 30, 2022 and 2021, we had contracts with multiple contract research organizations (“CRO”) to conduct and complete clinical studies. In the case of SAB-185, the CRO has been contracted and paid by the US government. For SAB-176, PPD Development, LP, acting as CRO oversaw the Phase 1 safety study. The terms of that agreement are subject to confidentiality, and the status of the agreement is that it is current, in good standing and approximately 90% of the contract has been paid through December 31, 2021. SAB has also contracted with hVIVO Services Limited to conduct the Phase 2a influenza study on SAB-176. The terms of that agreement are subject to confidentiality, and the status of the agreement is that it is current, in good standing and approximately 90% of the contract has been paid as of June 30, 2022.
We expect to continue to incur substantial research and development expenses as we conduct discovery research to enhance our platform and work on our indications. We expect to hire additional employees and continue research and development and manufacturing activities. As a result, we expect that our research and development expenses will continue to increase in future periods and vary from period to period as a percentage of revenue.
Major components within our research and development expenses are salaries and benefits (laboratory & farm), laboratory supplies, animal care, contract manufacturing, clinical trial expense, outside laboratory services, project consulting, and facility expense. Our platform allows us to work on multiple projects with the same resources, as the research and development process of each product is very similar (with minimal differences in the manufacturing process).
Research and development expenses by component for the three months ended June 30, 2022 and 2021:
|
| Three Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Salaries & benefits |
| $ | 3,577,501 |
|
| $ | 2,433,001 |
|
Laboratory supplies |
|
| 1,859,280 |
|
|
| 3,784,605 |
|
Animal care |
|
| 392,778 |
|
|
| 937,520 |
|
Contract manufacturing |
|
| 354,530 |
|
|
| 5,966,248 |
|
Clinical trial expense |
|
| 213,562 |
|
|
| 3,105,066 |
|
Outside laboratory services |
|
| 704,578 |
|
|
| 1,290,483 |
|
Project consulting |
|
| 118,395 |
|
|
| 424,592 |
|
Facility expense |
|
| 1,323,200 |
|
|
| 727,514 |
|
Other expenses |
|
| 40,603 |
|
|
| 14,373 |
|
Total research and development expenses |
| $ | 8,584,427 |
|
| $ | 18,683,402 |
|
Research and development expenses by component for the six months ended June 30, 2022 and 2021:
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Salaries & benefits |
| $ | 6,924,434 |
|
| $ | 4,448,632 |
|
Laboratory supplies |
|
| 3,798,613 |
|
|
| 7,589,679 |
|
Animal care |
|
| 1,073,559 |
|
|
| 1,993,823 |
|
Contract manufacturing |
|
| 4,783,733 |
|
|
| 9,601,881 |
|
Clinical trial expense |
|
| 270,880 |
|
|
| 3,233,757 |
|
Outside laboratory services |
|
| 1,887,392 |
|
|
| 2,235,115 |
|
Project consulting |
|
| 553,178 |
|
|
| 846,333 |
|
Facility expense |
|
| 2,559,991 |
|
|
| 1,397,591 |
|
Other expenses |
|
| 95,912 |
|
|
| 118,595 |
|
Total research and development expenses |
| $ | 21,947,692 |
|
| $ | 31,465,406 |
|
General and Administrative Expenses
General and administrative expenses primarily consist of salaries, benefits, and stock-based compensation costs for employees in our executive, accounting and finance, project management, corporate development, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses. General and administrative expenses also include rent and facilities expenses allocated based upon total direct costs. We also had other income (expense)expect that our general and administrative expenses will continue to increase in future periods, primarily due to increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of ($1,945,314)the SEC and $1,139,518, respectively, whichstock exchange listing standards, public relations, insurance and professional services. We expect these expenses to vary from period to period in absolute terms and as a percentage of revenue.
28
Nonoperating (Expense) Income
Gain on change in fair value of warrant liabilities
Gain on change in fair value of warrant liabilities consists of $2,896 and $5,315 of interest earned on marketable securities held in the Trust Account, nil and $359,874 of offering expense allocated to the warrants and ($1,948,210) and $1,494,077 gain resulting from the changechanges in the fair value of the warrant liabilities.
Gain on debt extinguishment of Paycheck Protection Program SBA Loan
Gain on extinguishment of debt consists of the forgiveness of the PPP Loan, plus accrued interest.
Interest income
Interest income consists of interest earned on cash balances in our warrant liability, respectively.bank accounts.
Interest expense
LiquidityInterest expense consists primarily of interest related to borrowings under notes payable for equipment.
Income Tax Expense (Benefit)
Income tax expense (benefit) consists primarily of domestic federal and Capital Resourcesstate income taxes.
Results of Operations
On January 14,The following tables set forth our results of operations for the three months ended June 30, 2022 and 2021:
|
| Three Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Revenue |
|
|
|
|
|
| ||
Grant revenue |
| $ | 6,350,525 |
|
| $ | 18,209,502 |
|
Total revenue |
|
| 6,350,525 |
|
|
| 18,209,502 |
|
Operating expenses |
|
|
|
|
|
| ||
Research and development |
|
| 8,584,427 |
|
|
| 18,683,402 |
|
General and administrative |
|
| 4,309,042 |
|
|
| 2,398,641 |
|
Total operating expenses |
|
| 12,893,469 |
|
|
| 21,082,043 |
|
Loss from operations |
|
| (6,542,944 | ) |
|
| (2,872,541 | ) |
Changes in fair value of warrant liabilities |
|
| 1,730,080 |
|
|
| — |
|
Interest expense |
|
| (71,237 | ) |
|
| (74,434 | ) |
Interest income |
|
| 15,824 |
|
|
| 5,296 |
|
Total other income (expense) |
|
| 1,674,667 |
|
|
| (69,138 | ) |
Loss before income taxes |
|
| (4,868,277 | ) |
|
| (2,941,679 | ) |
Income tax benefit |
|
| (92,281 | ) |
|
| — |
|
Net loss |
| $ | (4,775,996 | ) |
| $ | (2,941,679 | ) |
29
The following tables set forth our results of operations for the six months ended June 30, 2022 and 2021:
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Revenue |
|
|
|
|
|
| ||
Grant revenue |
| $ | 18,153,601 |
|
| $ | 35,137,236 |
|
Total revenue |
|
| 18,153,601 |
|
|
| 35,137,236 |
|
Operating expenses |
|
|
|
|
|
| ||
Research and development |
|
| 21,947,692 |
|
|
| 31,465,406 |
|
General and administrative |
|
| 9,456,191 |
|
|
| 5,730,447 |
|
Total operating expenses |
|
| 31,403,883 |
|
|
| 37,195,853 |
|
Loss from operations |
|
| (13,250,282 | ) |
|
| (2,058,617 | ) |
Changes in fair value of warrant liabilities |
|
| 9,579,652 |
| �� |
| — |
|
Gain on debt extinguishment of Paycheck Protection Program SBA Loan |
|
| — |
|
|
| 665,596 |
|
Interest expense |
|
| (143,259 | ) |
|
| (149,626 | ) |
Interest income |
|
| 23,757 |
|
|
| 10,802 |
|
Total other income |
|
| 9,460,150 |
|
|
| 526,772 |
|
Loss before income taxes |
|
| (3,790,132 | ) |
|
| (1,531,845 | ) |
Income tax expense |
|
| — |
|
|
| — |
|
Net loss |
| $ | (3,790,132 | ) |
| $ | (1,531,845 | ) |
Comparison of the three and six months ended June 30, 2022 and 2021 we consummated our initial public offering (the “IPO”) of 11,500,000 of our units (the “Public Units”) which included Public Units subject
Revenue
|
| Three Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Revenue |
| $ | 6,350,525 |
|
| $ | 18,209,502 |
|
| $ | (11,858,977 | ) |
|
| (65.1 | )% |
Total revenue |
| $ | 6,350,525 |
|
| $ | 18,209,502 |
|
|
|
|
|
|
| ||
Revenue decreased by $11.9 million, or 65.1%, in the three months ended June 30, 2022 as compared to the underwriters’ over-allotment option, which option was exercised in full. Each Public Unit consists of one share of common stock and one-half redeemable warrant, with each whole warrant entitling the holder to purchase one share of common stock at a price of $11.50 per share (the “Public Warrants”). The Public Units were sold at an offering price of $10.00 per Public Unit, generating gross proceeds of $115,000,000.
Simultaneously with the consummation of the IPO, we consummated the private placement (“Private Placement”) of 417,200 units (the “Private Units”) at a price of $10.00 per Private Unit with each Private Unit consisting of one share of common stock and one-half warrant, with each whole warrant entitling the holder to purchase one share of common stock at a price of $11.50 per share (the “Private Warrants”), generating total proceeds of $4,172,000. The Private Units were sold to the Sponsor. The Private Units and Private Warrants are identical to the Public Units and Public Warrants sold in the IPO, except that the Private Warrants underlying the Private Units are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the Sponsor or its permitted transferees.
Following the closing of the IPO and the sale of additional Private Units, an aggregate amount of $116,150,000 has been placed in the trust account (the “Trust Account”) established in connection with the IPO. Transaction costs amounted to $6,108,360 consisting of $1,529,500 of underwriting fee, $4,220,500 of deferred underwriting fee, and $358,360 of other offering costs. In addition, $1,216,731 of cash was held outside of the Trust Account, which is available for the payment of offering costs and for working capital purposes. As a result of the underwriters’ exercise of the over-allotment option in full, 375,000 of the founder shares are no longer subject to forfeiture.
As ofthree months ended June 30, 2021 we had marketable securities heldprimarily due to a decrease in work performed under the Trust Account of $116,155,315 (including $5,315 interest income) consisting of money market funds which investJPEO Rapid Response contract. Included in U.S. Treasury securities. Interest income onrevenues for the balance in the Trust Account may be used by us to pay taxes. Throughthree months ended June 30, 2021, we have not withdrawn any interest earned on2022 is $2.9 million for contract manufacturing, as compared to $9.6 million for contract manufacturing, $1.3 million for fixed asset reimbursement, and $0.1 million for animal purchases for the Trust Account.three months ended June 30, 2021.
|
| Six Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Revenue |
| $ | 18,153,601 |
|
| $ | 35,137,236 |
|
| $ | (16,983,635 | ) |
|
| (48.3 | )% |
Total revenue |
| $ | 18,153,601 |
|
| $ | 35,137,236 |
|
|
|
|
|
|
| ||
ForRevenue decreased by $17.0 million, or 48.3%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 net cash used in operating activities was $464,411. Net income of $771,059 was affected by interest earned on marketable securities held in the Trust Account of $5,315, offering costs allocatedprimarily due to warrants of $359,874, a change in the fair value of our warrant liability of $1,494,077, an increase in prepaid assets of $177,609 and a decrease in accruedwork performed under the JPEO Rapid Response contract. Included in revenues for the six months ended June 30, 2022 are $5.0 million for contract manufacturing and $0.3 million for fixed asset purchases, as compared to $10.1 million for contract manufacturing, $3.2 million for fixed asset reimbursement, and $1.7 million for animal purchases for the six months ended June 30, 2021.
We anticipate future revenues will be substantially derived from current period directly reimbursable expenses such as laboratory supplies, labor costs, and consulting fees plus, when applicable, an overhead charge and a flat-rate fixed fee. As a result of $81,657.the JPEO Rapid Response Contract Termination, we expect future revenues to be lower as our primary pipeline development targets of Clostridioides difficile Infection, influenza, and immune system disorders remain independently financed as the we explore potential partnerships, co-development opportunities, and licensing arrangements.
Research and Development
|
| Three Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Research and development |
| $ | 8,584,427 |
|
| $ | 18,683,402 |
|
| $ | (10,098,975 | ) |
|
| (54.1 | )% |
Total research and development expenses |
| $ | 8,584,427 |
|
| $ | 18,683,402 |
|
|
|
|
|
|
| ||
For30
Research and development expenses decreased by $10.1 million, or 54.1%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to decreases in laboratory supplies, contract manufacturing costs, clinical trial expense, and outside lab services due to a decrease in work performed under the JPEO Rapid Response contract. Please refer to the research and development expenses by component for the three months ended June 30, 2022 and 2021 table above for additional information.
|
| Six Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Research and development |
| $ | 21,947,692 |
|
| $ | 31,465,406 |
|
| $ | (9,517,714 | ) |
|
| (30.2 | )% |
Total research and development expenses |
| $ | 21,947,692 |
|
| $ | 31,465,406 |
|
|
|
|
|
|
| ||
Research and development expenses decreased by $9.5 million, or 30.2%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, net cash usedprimarily due to decreases in investing activities was $116,150,000laboratory supplies, contract manufacturing costs, clinical trial expense, and outside lab services due to a decrease in work performed under the JPEO Rapid Response contract. Please refer to the research and development expenses by component for the six months ended June 30, 2022 and 2021 table above for additional information.
As a result of the JPEO Rapid Response Contract Termination and in tandem with our investmentfocus on our primary pipeline development targets, future period research and development expenses will decrease as we no longer expect to incur high costs of contract manufacturing, outside laboratory services, project consulting, and facilities costs related to the production of SAB-185.
General and Administrative
|
| Three Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
General and administrative |
| $ | 4,309,042 |
|
| $ | 2,398,641 |
|
| $ | 1,910,401 |
|
|
| 79.6 | % |
Total general and administrative expenses |
| $ | 4,309,042 |
|
| $ | 2,398,641 |
|
|
|
|
|
|
| ||
General and administrative expenses increased by $1.9 million, or 79.6%, in the Trust Account.three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to increased compensation costs ($1.1 million) and increased insurance costs associated with being a public company ($0.7 million).
|
| Six Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
General and administrative |
| $ | 9,456,191 |
|
| $ | 5,730,447 |
|
| $ | 3,725,744 |
|
|
| 65.0 | % |
Total general and administrative expenses |
| $ | 9,456,191 |
|
| $ | 5,730,447 |
|
|
|
|
|
|
| ||
ForGeneral and administrative expenses increased by $3.7 million, or 65.0%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, net cash providedprimarily due to increases in business, regulatory consulting, and other compliance costs ($1.2 million); insurance costs associated with being a public company ($1.5 million); and increased compensation costs ($0.9 million).
Non-operating Income
|
| Three Months Ended June 30, |
|
|
|
|
|
| ||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change | |||
Changes in fair value of warrant liabilities |
| $ | 1,730,080 |
|
| $ | — |
|
| $ | 1,730,080 |
|
| N/M |
Total non-operating income |
| $ | 1,730,080 |
|
| $ | — |
|
|
|
|
|
| |
Total non-operating income increased by financing activities was $117,286,378 primarily from the sale of public and private Units$1.7 million in the amount of $117,644,605, net of underwriting discounts. This was partially offset bythree months ended June 30, 2022 as compared to the $150,000 repayment of a related party promissory note and payment of $208,227 in deferred offering costs.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete the Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete the Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As ofthree months ended June 30, 2021 we had cash of $756,803 outside the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete the Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with the Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete the Business Combination, we would repay such loaned amounts. In the event that the Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units at a price of $10.00 per unit, at the option of the lender. The units would be identical to the Private Units.
We do not believe we will need to raise additional fundschange in order to meet the expenditures required for operating our business. However, if our estimatefair value of the costs of identifyingwarrant liabilities which were issued as a target business, undertaking in-depth due diligence and negotiating the Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to the Business Combination. Moreover, we may need to obtain additional financing either to complete the Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummationresult of the Business Combination in which casethe fourth quarter of 2021.
|
| Six Months Ended June 30, |
|
|
|
|
|
| ||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change | |||
Changes in fair value of warrant liabilities |
| $ | 9,579,652 |
|
| $ | — |
|
| $ | 9,579,652 |
|
| N/M |
Gain on debt extinguishment of Paycheck |
|
| — |
|
|
| 665,596 |
|
|
| (665,596 | ) |
| N/M |
Total non-operating income |
| $ | 9,579,652 |
|
| $ | 665,596 |
|
|
|
|
|
| |
31
Total non-operating income increased by $8.9 million in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 primarily due to changes in the fair value of the warrant liabilities, partially offset by the forgiveness of the
PPP Loan, plus accrued interest, in the first quarter of 2021.
Interest Expense
|
| Three Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Interest expense |
| $ | 71,237 |
|
| $ | 74,434 |
|
| $ | (3,197 | ) |
|
| (4.3 | )% |
Total interest expense |
| $ | 71,237 |
|
| $ | 74,434 |
|
|
|
|
|
|
| ||
Interest expense remained largely unchanged in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, driven by adding no new Finance Leases or other interest-bearing debt.
|
| Six Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Interest expense |
| $ | 143,259 |
|
| $ | 149,626 |
|
| $ | (6,367 | ) |
|
| (4.3 | )% |
Total interest expense |
| $ | 143,259 |
|
| $ | 149,626 |
|
|
|
|
|
|
| ||
Interest expense remained largely unchanged in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, driven by adding no new Finance Leases or other interest-bearing debt.
Interest Income
|
| Three Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Interest income |
| $ | 15,824 |
|
| $ | 5,296 |
|
| $ | 10,528 |
|
|
| 198.8 | % |
Total interest income |
| $ | 15,824 |
|
| $ | 5,296 |
|
|
|
|
|
|
| ||
Interest income increased during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, due to higher interest earning cash balances.
|
| Six Months Ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Interest income |
| $ | 23,757 |
|
| $ | 10,802 |
|
| $ | 12,955 |
|
|
| 119.9 | % |
Total interest income |
| $ | 23,757 |
|
| $ | 10,802 |
|
|
|
|
|
|
| ||
Interest income increased during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, due to higher interest earning cash balances.
Income Tax Expense (Benefit)
|
| Three Months Ended June 30, |
|
|
|
|
|
| ||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change | |||
Income tax benefit |
| $ | (92,281 | ) |
| $ | — |
|
| $ | (92,281 | ) |
| N/M |
Total income tax benefit |
| $ | (92,281 | ) |
| $ | — |
|
|
|
|
|
| |
Income tax benefit increased by $92 thousand during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily attributable to the elimination of the existing option to deduct research and development expenditures and requirement for taxpayers to amortize them over five years pursuant to IRC Section 174.
Starting in 2022, TCJA amendments to IRC Section 174 will no longer permit an immediate deduction for research and development (R&D) expenditures in the tax year that such costs are incurred. The 2022 first quarter effective income tax rate was impacted by the Section 174 capitalization requirement combined with the restriction on net operating losses to only reduce taxable income by 80%. We will continue to recognize income tax expense and make quarterly estimated tax payments under enacted tax rates and laws expected to be in effect for the current tax year.
32
|
| Six Months Ended June 30, |
|
|
|
|
|
| ||||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change | |||
Income tax expense |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| N/M |
Total income tax expense |
| $ | — |
|
| $ | — |
|
|
|
|
|
| |
Income tax expense did not change during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily attributable to the consumption of prior period net operating losses offsetting our taxable income position attributable to the elimination of the existing option to deduct research and development expenditures and requirement for taxpayers to amortize them over five years pursuant to IRC Section 174.
Liquidity and Capital Resources
As of June 30, 2022 and December 31, 2021, we had $16.6 million and $33.2 million, respectively, of cash and cash equivalents. Additionally, as of December 31, 2021 we had $6.3 million in restricted cash held in escrow pending the final settlement of the Forward Share Purchase Agreement. Upon final settlement of the Forward Share Purchase Agreement during the first quarter of 2022, $817,060 in cash was released to the Company and the remaining $5.5 million was delivered to Radcliffe for the repurchase of 546,658 shares of the Company's common stock. To date, we have primarily relied on grant revenue in the form of government grants and the sale of common stock.
Our standard repayment terms for accounts receivable are thirty days from the invoice date. As a majority of our accounts receivable is from work performed under government grants, we have not had an uncollectible accounts receivable amount in over 5 years.
We intend to continue to invest in our business and, as a result, may incur operating losses in future periods. We expect to continue to invest in research and development efforts towards expanding our capabilities and expertise along our platform and the primary pipeline development targets we are working on, as well as building our business development team and marketing our solutions to partners in support of the growth of the business.
We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin commercialization of our products. As a result, we will require additional capital to fund our operations in order to support our long-term plans, in particular, following the JPEO Rapid Response Contract Termination.
Our current business plan, existing cash and cash equivalents, and anticipated cash flows from operations will be sufficient to meet our working capital and capital expenditure needs over at least the next twelve months, assuming, among other things, no significant unforeseen expenses. We intend to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements. Should we seek additional financing from outside sources, we may issue additional securities or incur debt in connection with the Business Combination. Subjectnot be able to compliance with applicable securities laws, we would only completeraise such financing simultaneously with the completion of the Business Combination.on terms acceptable to us or at all. If we are unable to completeraise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.
Sources of Liquidity
Since our inception, we have financed our operations primarily from revenue in the form of government grants and from equity financings.
Equity Financings and Option Exercises
As of June 30, 2022, we have raised approximately $82.5 million since our inception from the issuance and sale of convertible preferred shares, net of issuance costs associated with such financings, the Business Combination becausewith BCYP, and exercises of employee stock options.
We are not currently eligible to file a shelf registration statement; however, we believe that shelf registration statements can contribute, when used, to greater financing flexibility. To that end, we plan to file a shelf registration statement on Form S-3 with the SEC once we are eligible to do so. Until such time, if ever, we can generate substantial product revenue to support our cost structure, we expect to finance our cash needs through a combination of government or non-profit grants, equity offerings, debt financings, collaborations, and other similar arrangements.
33
Notes payable
In December 2017, the Company entered into a loan agreement for the purchase of a tractor for $116,661 at a 3.6% interest rate. The loan included annual payments of $25,913 for the next five years starting in December 2018. The tractor loan balance as of March 31, 2022 and December 31, 2021 was $25,013. The total amount of the remaining loan balance is due in full in the fourth quarter of 2022.
On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). In April 2020, the Company entered into a loan agreement (the “PPP Loan”) with First Premier Bank under the Paycheck Protection Program (the “PPP”), which is part of the CARES Act administered by the United States Small Business Administration (“SBA”). As part of the application for these funds, the Company, in good faith, certified that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. The certification further requires the Company to take into account its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. Under the PPP, the Company received proceeds of approximately $661,612. In accordance with the requirements of the PPP, the Company utilized the proceeds from the PPP Loan primarily for payroll costs. The PPP Loan has a 1.00% interest rate per annum, matures in April 2022 and is subject to the terms and conditions applicable to loans administered by the SBA under the PPP. Under the terms of PPP, all or certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses, as described in the CARES Act. The Company recorded the entire amount of the PPP Loan as debt. In February 2021, the Company submitted a forgiveness application related to its PPP Loan. In March 2021, the SBA approved the forgiveness of the PPP Loan, plus accrued interest. We recorded a gain on extinguishment of PPP Loan of $665,596 for the forgiveness of the PPP Loan and accrued interest within gain on debt extinguishment of Paycheck Protection Program SBA Loan on the consolidated statement of operations for the six months ended June 30, 2021.
Please refer to Note 10 to the Company's consolidated financial statements, Notes Payable, for additional information on our debt.
Cash Flows
The following table summarizes our cash flows for the six months ended June 30, 2022 and 2021:
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net cash (used in) provided by operating activities |
| $ | (15,502,600 | ) |
| $ | 3,067,599 |
|
Net cash used in investing activities |
|
| (1,893,766 | ) |
|
| (5,353,607 | ) |
Net cash used in financing activities |
|
| (5,532,159 | ) |
|
| (91,699 | ) |
Net decrease in cash, cash equivalents, and restricted cash |
| $ | (22,928,525 | ) |
| $ | (2,377,707 | ) |
Operating Activities
Net cash from operating activities decreased by $18.6 million in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to a $17.0 million decrease in revenue, offset by a $5.8 million decrease in operating expenses. Additionally, we experienced an increase of non-cash working capital of $4.9 million during the six months ended June 30, 2022 as compared to a $3.9 million decrease of non-cash working capital during the six months ended June 30, 2021.
Investing Activities
Net cash from investing activities increased by $3.5 million in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to a decrease in purchases of equipment and substantial completion of the HQ expansion.
Financing Activities
Net cash from financing activities decreased by $5.4 million in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to the final settlement of the Forward Share Purchase Agreement whereby $5.5 million of restricted cash was utilized for a repurchase of 546,658 shares of the Company's common stock.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations and commitments as of June 30, 2022:
34
|
| Payments Due by Period |
| |||||||||||||||||
|
| Total |
|
| Less than |
|
| 1-3 years |
|
| 3-5 years |
|
| Over |
| |||||
Notes payable (1) |
| $ | 25,013 |
|
| $ | 25,013 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Operating lease liabilities (2) |
|
| 2,325,090 |
|
|
| 619,587 |
|
|
| 1,705,503 |
|
|
| — |
|
|
| — |
|
Finance lease liabilities (2) |
|
| 6,609,111 |
|
|
| 213,790 |
|
|
| 807,835 |
|
|
| 802,992 |
|
|
| 4,784,494 |
|
Total |
| $ | 8,959,214 |
|
| $ | 858,390 |
|
| $ | 2,513,338 |
|
| $ | 802,992 |
|
| $ | 4,784,494 |
|
We enter into contracts in the normal course of business with third parties, including CROs. These payments are not included in the table above, as the amount and timing of such payments are not known.
As of June 30, 2022, there were no material changes outside of the ordinary course of business to our commitments and contractual obligations.
Income Taxes
We had approximately $25.8 million of federal net operating loss carryforwards as of June 30, 2022. Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. Our effective tax rate will vary depending on the relative use of tax credits, changes in the valuation of our deferred tax assets and liabilities, applicability of any valuation allowances, limitation of application for our NOL carryforwards, and changes in tax laws in jurisdictions in which we operate.
These carryforwards may generally be utilized in any future period but may be subject to limitations based upon changes in the ownership of our shares in a prior or future period. We have sufficient funds availablenot quantified the amount of such limitations, if any.
Beginning in 2022, the U.S. Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the existing option to us, we will be forceddeduct research and development expenditures and requires taxpayers to cease operationsamortize them over five years pursuant to IRC Section 174. The new amortization period begins with the midpoint of any taxable year that IRC Section 174 costs are first incurred, regardless of whether the expenditures were made prior to or after July 1, and liquidateruns until the Trust Account. In addition, followingmidpoint of year five for activities conducted in the Business Combination, if cashUnited States or year 15 in the case of development conducted on hand is insufficient, we may needforeign soil.
The Company continues to obtain additional financing in order to meet our obligations.record a valuation allowance on its net deferred tax assets. The valuation allowance increased by approximately $2.9 million during the six months ended June 30, 2022. The company has not recognized any reserves for uncertain tax positions.
Off-Balance Sheet Arrangements
We did not have, for the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of June 30, 2021.facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of one of our executive officers a monthly fee of $10,000 for office space, utilities and secretarial and administrative support. We began incurring these fees on January 14, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
Critical Accounting Policies and Estimates
TheWe have prepared our consolidated financial statements in accordance with U.S. GAAP. Our preparation of condensedthese consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires managementus to make estimates, assumptions and assumptionsjudgments that affect the reported amounts of assets, liabilities, revenue, expenses, and liabilities, disclosurerelated disclosures. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of contingentwhich form the basis for making judgments about the carrying value of assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.that are not readily apparent from other sources. Actual results could therefore differ materially differ from those estimates. The following are the criticalthese estimates under different assumptions or conditions.
While our significant accounting policies appliedare described in more detail in Note 2 to the Company's consolidated financial statements, Summary of Significant Accounting Policies, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
Our revenue is primarily generated through grants from government and other (non-government) organizations.
35
Grant revenue is recognized for the condensed financial statements:period that the research and development services occur, as qualifying expenses are incurred, or conditions of the grants are met. We concluded that payments received under these grants represent conditional, nonreciprocal contributions, as described in ASC 958, Not-for-Profit Entities, and that the grants are not within the scope of ASC 606, Revenue from Contracts with Customers, as the organizations providing the grants do not meet the definition of a customer. Expenses for grants are tracked by using a project code specific to the grant, and the employees also track hours worked by using the project code.
Stock-Based Compensation
Derivative Financial Instruments
The Company evaluates its financial instrumentsWe recognize compensation cost relating to stock-based payment transactions using a fair-value measurement method, which requires all stock-based payments to employees, directors, and non-employee consultants, including grants of stock options, to be recognized in operating results as compensation expense based on fair value over the requisite service period of the awards. Prior to the Business Combination, the grant date fair value of our common stock was typically determined by our board of directors with the assistance of management and a third-party valuation specialist. Subsequent to the Business Combination, the board of directors elected to determine the fair value of our post-merger common stock based on the closing market price at closing on the date of grant. In determining the fair value of our stock-based awards, we utilize the Black-Scholes option-pricing model, which uses both historical and current market data to estimate fair value. The Black-Scholes option-pricing model incorporates various assumptions, such as the value of the underlying common stock, the risk-free interest rate, expected volatility, expected dividend yield, and expected life of the options. For awards with performance-based vesting criteria, we estimate the probability of achievement of the performance criteria and recognize compensation expense related to those awards expected to vest. No awards may have a term in excess of ten years. Forfeitures are recorded when they occur. Stock-based compensation expense is classified in our consolidated statements of operations based on the function to which the related services are provided. We recognize stock-based compensation expense over the expected term.
36
In addition to considering the results of the independent third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common shares as of each grant date, which may be a date other than the most recent independent third-party valuation date, including:
The assumptions underlying these valuations represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment. As a result, if such instrumentsfactors or expected outcomes change and we use significantly different assumptions or estimates, the fair value of our common shares and our stock-based compensation expense could be materially different.
See Note 12 to the Company's consolidated financial statements, Stock Option Plan, for information concerning certain specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted for the three and six months ended June 30, 2022 and 2021.
Stock-based compensation expense was $0.6 million and $0.4 million, respectively, for the three months ended June 30, 2022 and 2021, and $1.5 million and $0.8 million, respectively, for the six months ended June 30, 2022 and 2021.
As of June 30, 2022, we had $5.2 million of total unrecognized stock-based compensation cost related to non-vested options, which we expect to recognize in future operating results over a weighted-average period of 2.13 years. Total unrecognized compensation cost related to non-vested stock awards as of June 30, 2022 was approximately $0.6 million and is expected to be recognized within future operating results over a weighted-average period of 3.93 years.
Warrant Liabilities Valuations
We are derivatives or contain features that qualifyrequired to periodically estimate the fair value of our Private Placement Warrant liabilities with the assistance of an independent third-party valuation firm. The assumptions underlying these valuations represented our best estimates, which involved inherent uncertainties and the application of significant levels of our judgment. The fair value of our Public Warrant liabilities are determined by reference to the quoted market price.
The warrants are accounted for as embedded derivativesliabilities in accordance with ASC Topic 815, “Derivatives815-40, Derivatives and Hedging.” Derivative instruments are recordedHedging—Contracts in Entity’s Own Equity, and were presented within warrant liabilities on the consolidated balance sheet as of June 30, 2022 and December 31, 2021. The initial fair value of the warrant liabilities were measured at fair value on the grant dateClosing Date, and re-valued at each reporting date, with changes in the fair value reportedof the warrant liabilities were presented within changes in fair value of warrant liabilities in the statementsconsolidated statement of operations. Derivative assets and liabilities are classified onoperations for the balance sheet as current or non-current based on whether or not net-cash settlement or conversion ofthree months ended June 30, 2022.
On the instrument could be required within 12 months ofClosing Date, we established the balance sheet date. The Company has determined the Public and Private Warrants are derivative instruments.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrantsPrivate Placement Warrants utilizing both the Black-Scholes Merton formula and a Monte Carlo Simulation (“MCS”) analysis. Specifically, we considered a MCS to derive the implied volatility in the publicly listed price of the Public Warrants. We then considered this implied volatility in selecting the common stock.
Common stock subjectvolatility for the application of a Black-Scholes Merton model for the Private Placement Warrants. We determined the fair value of the Public Warrants by reference to possible redemption
the quoted market price.
The Company accounts for its Common Stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption isPublic Warrants were classified as a liability instrument and is measured atLevel 1 fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either withinvalue measurement, due to the controluse of the holder or subject to redemption uponquoted market price, and the occurrence of uncertain events not solely withinPrivate Placement Warrants held privately by Big Cypress Holdings LLC, a Delaware limited liability company which acted as the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, shares of the Company’s common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Net income (loss) per common share
Net income per share of common stock is computed by dividing net income by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted income per share of common stock does not consider the effect of the warrants issuedsponsor in connection with the (i) IPO (the "Sponsor"), were classified as a Level 3 fair value measurement, due to the use of unobservable inputs.
The initial measurement on the Closing Date for the Public Warrant liability was approximately $6.3 million and contemporaneous issuancethe fair value of the Public Warrant liability increased by approximately $4.0 million during the year ended December 31, 2021. The fair value of the
37
Public Warrant liability decreased by approximately $1.7 million and $9.2 million, respectively, for the three and six months ended June 30, 2022.
The key inputs into the valuations as of the June 30, 2022 and December 31, 2021 were as follows:
|
| June 30, |
|
| December 31, |
| ||
Risk-free interest rate |
|
| 3.00 | % |
|
| 1.24 | % |
Expected term remaining (years) |
|
| 4.31 |
|
|
| 4.81 |
|
Implied volatility |
|
| 73.0 | % |
|
| 43.0 | % |
Closing common stock price on the measurement date |
| $ | 1.45 |
|
| $ | 7.81 |
|
See Note 13 to the Company's consolidated financial statements, Fair Value Measurements, for information concerning certain specific assumptions we used in applying the Black-Scholes Merton formula and MCS to determine the estimated fair value of the Private Placement Units, (ii) exerciseWarrants outstanding as of overallotment and (iii) Private Placement sinceJune 30, 2022.
Common Stock Valuations
Prior to becoming a public company, we were required to periodically estimate the exercisefair value of the warrants are contingent upon the occurrence of future events. The warrants are exercisable to purchase 5,958,600 shares ofour common stock inwith the aggregate.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect onassistance of an independent third-party valuation firm, as discussed above, when issuing stock options and computing our estimated stock-based compensation expense. The assumptions underlying these valuations represented our best estimates, which involved inherent uncertainties and the application of significant levels of our judgment. In order to determine the fair value of our common stock, we considered, among other items, previous transactions involving the sale of our securities, our business, financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversioncondition and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company early adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations, economic and industry trends, the market performance of comparable publicly traded companies, and the lack of marketability of our common stock.
Subsequent to the Business Combination, we now determine the fair value of our common stock based on the closing market price at closing on the date of grant.
Compensation expense related to stock-based transactions is measured and recognized in the financial statements at fair value of our post-merger common stock based on the closing market price at closing on the date of grant. Stock-based compensation expense is measured at the grant date based on the fair value of the equity award and is recognized as expense over the requisite service period, which is generally the vesting period, on the straight-line method. We estimate the fair value of each stock option award on the date of grant using the Black-Scholes option-pricing model. Determining the fair value of stock option awards at the grant date requires judgment, including estimating the expected volatility, expected term, risk-free interest rate, and expected dividends.
Lease Liabilities and Right-of-Use Assets
We are party to certain contractual arrangements for equipment, lab space, and an animal facility, which meet the definition of leases under ASC 842. In accordance with ASC 842, we, as of January 1, 2018 (the date of adoption), recorded right-of-use assets and related lease liabilities for the present value of the lease payments over the lease terms. We utilized the practical expedient regarding lease and non-lease components and have combined such items into a single combined component. Our incremental borrowing rate was used in the calculation of our right-of-use assets and lease liabilities.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3 to our consolidated financial statements, New Accounting Standards.
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus, or cash flows.COVID-19, as a pandemic, which continues to spread throughout the U.S. and worldwide. As with many companies around the world, our day-to-day operations were disrupted with the imposition of work from home policies and requirements for physical distancing for any personnel present in our offices and laboratories. The pandemic has also disrupted our activities as shelter-in-place orders, quarantines, supply chain disruptions, travel restrictions and other public health safety measures have impacted our ability to interact with our existing and potential partners for our activities. However, the COVID-19 pandemic did not materially impact our business, operating results, or financial condition. There is significant uncertainty as to the trajectory of the pandemic and its impacts on our business in the future. We could be materially and adversely affected by the risks, or the public perception of the risks, related to the COVID-19 pandemic or similar public health crises. Such crises could adversely impact our ability to conduct on-site laboratory activities, expand our laboratory facilities, secure critical supplies such as reagents, laboratory tools or immunized animals required for discovery research
38
activities, and hire and retain key personnel. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We remain focused on maintaining our operations, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from the COVID-19 pandemic.
JOBS Act Accounting Election
We qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements that are not otherwise applicable to public companies. These provisions include, but are not limited to:
We may use these provisions until the last day of our fiscal year in which the fifth anniversary of the completion of our initial public offering occurred. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.07 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
We have elected to take advantage of certain of the reduced disclosure obligations in this Form 10-Q and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than the information you receive from other public companies in which you hold stock.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, until those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which we will adopt the recently issued accounting standard.
39
Item 3. Quantitative and Qualitative Disclosures About Market RiskRisk.
Concentration of Credit Risk
We received 100% and of our total revenue through grants from government organizations for the three and six months ended June 30, 2022 and 2021, respectively. To date, no receivables have been written off. We do not believe the JPEO Rapid Response Contract Termination will have an impact on our outstanding receivables as of June 30, 2022.
Interest Rate Risk
As of June 30, 2022 and December 31, 2021, we were not subject to any market or interest rate risk. Following the consummationhad a cash and cash equivalents of our IPO, the net proceeds$16.6 million and $33.2 million, respectively, all of our IPO, including amountswhich was maintained in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certainbank accounts and money market funds that invest solelyin the U.S. Our primary exposure to market risk is to interest income volatility, which is affected by changes in the general level of interest rates. A 10% change in the market interest rates would not have a material effect on our business, financial condition, or results of operations. Additionally, as of December 31, 2021, we had $6.3 million in restricted cash.
Foreign Currency Risk
We conduct our business in U.S. treasuries. Duedollars and, thus, are not exposed to financial risks from exchange rate fluctuations between the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.U.S. dollar and other currencies.
Item 4. Controls and ProceduresProcedures.
Evaluation of Disclosure Controls and Procedures
DisclosureOur management, with the participation of our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by usa company in ourthe reports that it files or submits under the Exchange Act reports is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms,forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to ourthe Company’s management, including ourits principal executive officer and principal financial officer or persons performing similar functions,officers, as appropriate to allow timely decisions regarding required disclosure.
UnderManagement recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the supervisioncost benefit relationship of possible controls and withprocedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of ourCompany’s disclosure controls and procedures were effective as of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, due solely to the material weakness we have identifiedQuarterly Report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting described below, our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) underthat occurred during the Exchange Act) were not effective.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. We became aware of the need to change the classification of our warrants when the SEC issued a statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” on April 12, 2021. As a result, our principal executive officer and principal financial officer concluded that there was a material weakness in internal control over financial reporting as ofthree months ended June 30, 2021. In light of the material weakness, we performed additional analysis as deemed necessary2022, that have materially affected, or are reasonably likely to ensure that our financial statements for the Quarterly Report for the period ended March 31, 2021 filed with the SEC on May 21, 2021 and for this Quarterly Report on Form 10-Q were prepared in accordance with U.S. generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
Remediation Plan
As a newly created organization, we are currently in the process of implementing our financial reporting processes and will incorporate enhanced communication and documentation procedures between our operations team and the individuals responsible for preparation of financial statements. These controls are expected to include the implementation of additional supervision and review activities by qualified personnel, and the development and use of checklists and research tools to assist in compliance with GAAP. We intend to complete the enhancement of our financial reporting processes during fiscal year 2021. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments. Additionally, we must expend resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improvematerially affect, our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses.reporting.
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PART II - II—OTHER INFORMATION
Item 1. Legal ProceedingsProceedings.
We are not currently a party to any material litigation, nor are we aware of any pending or threatened litigation against us that we believe would materially affect our business, operating results, financial condition, or cash flows. Participants in our industry face frequent claims and litigation, including securities litigation, claims regarding patent and other intellectual property rights, and other liability claims. As a result, we may be involved in various legal proceedings from time to time in the future.
None
Item 1A. Risk FactorsFactors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report include theThe risk factors described in the section captioned “Part I, Item 1A, Risk Factors” in our final prospectus filedAnnual Report on Form 10-K for the
fiscal year ended December 31, 2021, are incorporated herein, and supplemented with the SEC on January 14, 2021.following revised or additional risk factors
We are a clinical-stage biopharmaceutical company and have incurred significant losses since our inception. We realized net loss in the fiscal year ended December 31, 2021, we may incur losses for the foreseeable future and may not be able to generate sufficient revenue to maintain profitability.
We are a clinical-stage biopharmaceutical company. We expect to experience variability in revenue and expenses which makes it difficult to evaluate our business and prospects. As of the date of this Quarterly Report, other than as described below, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC. Assuch, we have executed a Business Combination Agreement with SAB Biotherapeutics, Inc., we are also subject to,incurred and you should review and understand, the risk factors that will be set forth in our preliminary prospectus/proxy statement to be included in a Registration Statement on Form S-4anticipate that we will filecontinue to incur significant operating losses in the foreseeable future. Our historical losses resulted principally from costs incurred in research and development, preclinical testing, clinical development of product candidates as well as costs incurred for research programs and from general and administrative costs associated with these operations. In the SEC relatingfuture, we intend to continue to conduct research and development, preclinical testing, clinical trials, and regulatory compliance activities that, together with anticipated general and administrative expenses, will result in incurring further significant losses for the next several years. We expect that our proposedoperating expenses will continue to increase significantly, including as we:
Biopharmaceutical product development entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, secure market access and reimbursement and become commercially viable, and therefore any investment in us is highly speculative. Accordingly, before making an investment in us, you should consider our prospects, factoring in the costs, uncertainties, delays, and difficulties frequently encountered by companies in clinical development, especially clinical-stage biopharmaceutical companies such as ours. Any predictions you make about our future success or viability may not be as accurate as they would otherwise be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products. We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives.
Our expenses could increase beyond expectations for a variety of reasons, including as a result of our growth strategy and the increase in the scope and complexity of our operations. In executing our strategy and plans to invest in enhancing and scaling our business, we will need to generate significant additional revenue to achieve and maintain future profitability. We may not be able to generate
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sufficient revenue to achieve profitability and our recent and historical growth should not be considered indicative of future performance.
We have historically relied on awards from, and contracts with, the U.S. Government to fund our business and operations, and will need to find new and alternative sources of funding following the discontinuance of certain such arrangements.
We have historically relied on awards from, and contracts with, the U.S. Government to fund our business and operations, but we have recently mutually agreed with the U.S. federal Government (USG) to discontinue Project Agreement No. 01; MCDC1902-007, an award agreement which represented a substantial majority of our revenues. We therefore need to secure new and alternative sources of funding for our projects. There is no guarantee that we will find such other sources of funding on favorable terms or at all, which could have a direct adverse effect on our financial condition and ability to operate.
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.
The global credit and financial markets have experienced extreme volatility and disruptions in the Business Combinationpast, most recently as a result of the COVID-19 pandemic. These disruptions can result in severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our operations, growth strategy, financial performance and stock price and could require it to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget.
Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures and requires taxpayers to amortize them over five years pursuant to IRC Section 174. Although Congress is considering legislation that would defer the Business Combination Agreement.amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified. If we are unablethe requirement is not modified or deferred, it may materially reduce our cash flows beginning in 2022. Please refer to do so, we will incur substantial costs associated with withdrawing fromNote 14, Income Taxes, for additional information
The market price of our securities may be volatile, which could cause the transaction,value of any investment in our securities to decline.
The price of our securities may fluctuate significantly due to general market and economic conditions. An active trading market for our securities may not develop or, if developed, it may not be ablesustained. In addition, fluctuations in the price of our securities could contribute to find additional sourcesthe loss of financingall or part of your investment. Even if an active market for our securities develops and continues, the trading price of our securities could be volatile and subject to cover those costs.
wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on an investment in our securities and our securities may trade at prices significantly below the price paid for them. In connection withsuch circumstances, the Business Combination Agreement, we have incurred substantial costs researching, planningtrading price of our securities may not recover and negotiatingmay experience a further decline. Factors affecting the transaction. These coststrading price of our securities may include, but are not solely limited to, costs associated with securing sourcesthe risk factors identified herein.
The stock market in general, and Nasdaq and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of equity financing, costs associated with employingthese companies. Broad market and retaining third-party advisors who performed the financial, auditing and legal services required to complete the transaction, and the expenses generated by our officers, executives, managers and employees in connection with the transaction. If, for whatever reason, the transaction contemplated by the Business Combination Agreement fails to close, we will be responsible for these costs, but will have no source of revenue with which to pay them. Weindustry factors may need to obtain additional sources of financing in order to meet our obligations, which we may not be able to secure on the same terms as our existing financing or at all. If we are unable to secure new sources of financing and do not have sufficient funds to meet our obligations, we may be forced to cease operations and liquidate the Trust Account.
If the anticipated Business Combination with SAB Biotherapeutics, Inc. fails, it may be difficult to research a new prospective target business and negotiate and agree to a new business combination by April 14, 2022, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate.
Finding, researching, analyzing and negotiating with SAB Biotherapeutics, Inc. took a substantial amount of time, and if the Business Combination with SAB Biotherapeutics, Inc. fails, we may not be able to find a suitable target business and complete our Initial Business Combination within 15 months after the closing of our Initial Public Offering (or up to 21 months from the closing of this offering if we extend the period of time to consummate our initial business combination twice, each extension up to three months, as described in more detail in our IPO prospectus, dated January 12, 2021). If we have not completed our Initial Business Combination within such time period, we will be forced to cease all operations except for the purpose of winding up.
Our warrants are now accounted for as derivative liabilities and are recorded at fair value with changes in fair value each period reported in earnings, which may have an adverse effect onnegatively affect the market price of our common stock, regardless of our actual operating performance. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results, or may make it more difficult for us to consummate thefinancial condition. In addition, our Business Combination.
We issued 5,750,000 warrants as part of the units offeredCombination resulted in our initial public offering, and, concurrently therewith, we issued 208,600 private placement warrants that are part of 417,200 private placement units that we privately placed simultaneouslymerging with our IPO. We have accounted for both the warrants underlying the units offered in our initial public offering and the warrants that are part of our private placement units as a warrant liability. At each reporting period (1) the accounting treatment of the warrants will be re-evaluated for proper accounting treatment as a liability or equity and (2) the fair value of the liability of the public and private warrants will be remeasured and the changespecial purpose acquisition company, which can cause additional volatility in the fair value of the liability will be recorded as other income (expense) in our income statement.
Changes in the inputs and assumptions for the valuation model we use to determine the fair value of such liability may have a material impact on the estimated fair value of the embedded derivative liability. The share price of our common stock represents the primary underlying variable that impacts the value of the derivative instruments. Additional factors that impact the value of the derivative instruments include the volatility of our stock price, discount rates and stated interest rates. As a result, our condensed financial statements and results of operations will fluctuate quarterly, basedwarrants. There has also been increased focus by government agencies on various factors,transactions such as our Business Combination in the share price of our common stock, many of which are outside of our control. In addition, we may change the underlying assumptions used in our valuation model, which could in result in significant fluctuations in our results of operations. If our stock price is volatile,last year, and we expect that increased focus to continue, and we will recognize non-cash gains or losses onmay be subject to increased scrutiny by the SEC, other government agencies and holders of our warrants or any other similar derivative instruments each reporting periodsecurities, as a result. These market and that the amount of such gains or losses could be material. The impact of changes in fair value on earningsindustry factors may have an adverse effect onmaterially reduce the market price of our common stock. In addition, potential targets may seek a SPAC that does not havestock and warrants that are accounted for as a liability, or have any warrants at all, which may make it more difficult for us to consummate the Business Combination.
We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
After consultation with our independent registered public accounting firm following the issuance of the SEC Staff Statement on April 12, 2021, our management and our audit committee concluded that, in light of the SEC Staff Statement, it was appropriate to restate our previously issued and audited balance sheet as of January 14, 2021.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectivenessregardless of our internal controls and to disclose any changes and material weaknesses identified through such evaluation of those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.operating performance.
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As described elsewhere in this Quarterly Report, we have identified a material weakness in our internal control over financial reporting related to the accounting for a significant and unusual transaction related to the warrants we issued in connection with our initial public offering in January 2021. As a result of this material weakness, our management has concluded that our internal control over financial reporting was not effective. This material weakness resulted in a misstatement of our derivative warrant liabilities and related financial disclosures as of January 14, 2021. For a discussion of management’s consideration of the material weakness identified related to our accounting for a significant and unusual transaction related to the warrants we issued in connection with our IPO, see “Note 2—Restatement of Previously Issued Financial Statements” to the accompanying financial statements, as well as Part I, Item 4: Controls and Procedures included in this Report.
As described in Item 4. “Controls and Procedures,” we have concluded that our internal control over financial reporting was ineffective as of June 30, 2021 because a material weakness existed in our internal control over financial reporting. If we are unable to remediate our material weakness in a timely manner or we identify additional material weaknesses, we may be unable to provide required financial information in a timely or reliable manner and we may incorrectly report financial information. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In such a case, there could result a material adverse effect on our business. The existence of material weaknesses or significant deficiencies in internal control over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the trading price of our stock. In addition, we may incur additional costs to remediate the material weakness in our internal control over financial reporting, as described in Item 4. “Controls and Procedures.”
We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls or otherwise.
For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in our prospectus dated January 14, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
None.
Item 3. Defaults Upon Senior Securities.
None.
None.
Item 4. Mine Safety Disclosures.
Not applicable.Applicable.
Item 5. Other InformationInformation.
On August 3, 2022, the Company received notice from the DoD to terminate the JPEO Rapid Response contract, dated as of August 7, 2019 by and between the Company and the DoD most recently amended as of September 14, 2021, relating to a prototype research and development of a Rapid Response Antibody Program and advanced clinical development through licensure and commercial manufacturing for SAB-185. No termination penalties have been or will be incurred by the Company in connection therewith. The Company anticipates entry into a termination settlement or similar arrangement with the DoD whereby, among other things, the Company will be compensated for costs incurred in winding down activity surrounding the JPEO Rapid Response contract.
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibits.
| Description | Schedule/ Form | File No. | Exhibit | Filing Date | |
31.1* | ||||||
| ||||||
32.1* | ||||||
32.2* | ||||||
|
| |||||
101.SCH |
| |||||
101.CAL |
| |||||
101.DEF |
| |||||
101.LAB |
| |||||
101.PRE |
| |||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
¥ Denotes management contract or any compensatory plan, contract or arrangement.
SIGNATURES
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In accordance withSIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrantRegistrant has duly caused this reportReport to be signed on its behalf by the undersigned, thereunto duly authorized.authorized.
SAB BIOTHERAPEUTICS, INC. | |||
Date: August 9, | By: | /s/ | |
|
| Eddie J. | |
| Chief Executive | ||
By: | /s/ Russell Beyer | ||
Russell Beyer | |||
Chief Financial Officer | |||
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