424B3

 

 

Filed Pursuant to Rule 424(b)(3)

Registration Statement No. 333-261496

 

Prospectus Supplement No. 1

(to Prospectus dated April 29, 2022)

https://cdn.kscope.io/0075665b965449a163435cb1e2f8c109-img99650118_0.jpg 

 

SAB Biotherapeutics, Inc.

Up to 14,434,301 Shares of Common Stock

Up to 5,958,600 Shares of Common Stock Issuable Upon Exercise of Warrants

 

 

 

 

 

 

This prospectus supplement is being filed to update and supplement the information contained in the prospectus dated April 29, 2022 (the “Prospectus”), related to: (a) the offer and sale from time to time of an aggregate of up to 14,434,301 shares of common stock, $0.0001 par value per share (the “Common Stock”), and (b) the offer and sale from time to time of an aggregate of up to 5,958,600 shares of Common Stock which consists of (i) the issuance of up to 208,600 shares of Common Stock upon exercise of 208,600 warrants issued in a private placement to Big Cypress Holdings LLC (the “Sponsor”), in connection with the initial public offering of Big Cypress Acquisition Corp. (the “Private Placement Warrants”), and (ii) the issuance of up to 5,750,000 shares of Common Stock issuable upon exercise of 5,750,000 warrants issued in the initial public offering of Big Cypress Acquisition Corp. (the “Public Warrants,” and, together with the Private Placement Warrants, the “Warrants”), with the information contained in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on May 12, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.
 

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.
 

The Common Stock and Public Warrants are listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “SABS” and “SABSW”, respectively. On May 12, 2022, the last reported sales price of Common Stock was $1.79 per share and the last reported sales price of our Public Warrants was $0.25 per warrant.

 

 

 

 

 

We are an “emerging growth company” under federal securities laws and are subject to reduced public company reporting requirements. Investing in our Common Stock involves a high degree of risk. See the section entitled “Risk Factors” beginning on page 15 of the Prospectus and in any applicable prospectus supplement to read about factors you should consider before buying our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is May 13, 2022.

 


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

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: 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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, 0.0001 par value per share

 

SABS

 

The Nasdaq Stock Market LLC

Warrants, each exercisable for one share of Common Stock at an exercise price of $11.50 per share

 

SABSW

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting 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 April 28, 2022, the registrant had 42,962,121 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

1

 

 

 

Item 1.

Consolidated Financial Statements (Unaudited)

1

 

Consolidated Balance Sheets

1

 

Consolidated Statements of Operations

2

 

Consolidated Statements of Changes In Stockholders’ Equity

3

 

Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

 

 

 

PART II.

OTHER INFORMATION

37

 

 

 

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.

Defaults Upon Senior Securities

40

Item 4.

Mine Safety Disclosures

40

Item 5.

Other Information

40

Item 6.

Exhibits

41

Signatures

42

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited).

 

SAB Biotherapeutics, Inc. and Subsidiaries

Consolidated Balance Sheets

 

 

 

March 31,
2022

 

 

December 31,
2021

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,408,409

 

 

$

33,206,712

 

Restricted cash

 

 

 

 

 

6,338,306

 

Accounts receivable, net

 

 

11,786,420

 

 

 

8,010,708

 

Prepaid expenses

 

 

1,974,908

 

 

 

864,513

 

Total current assets

 

 

36,169,737

 

 

 

48,420,239

 

Operating lease right-of-use assets

 

 

2,351,193

 

 

 

2,615,204

 

Financing lease right-of-use assets

 

 

3,978,116

 

 

 

4,019,322

 

Property, plant and equipment, net

 

 

24,973,432

 

 

 

24,314,455

 

Total assets

 

$

67,472,478

 

 

$

79,369,220

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

4,981,385

 

 

$

4,458,525

 

Forward share purchase liability

 

 

 

 

 

6,338,306

 

Notes payable

 

 

25,013

 

 

 

25,013

 

Operating lease liabilities, current portion

 

 

1,154,680

 

 

 

1,142,413

 

Finance lease liabilities, current portion

 

 

145,898

 

 

 

161,050

 

Due to related party

 

 

 

 

 

2,367

 

Deferred grant income

 

 

 

 

 

100,000

 

Income tax payable

 

 

92,281

 

 

 

 

Accrued expenses and other current liabilities

 

 

11,856,627

 

 

 

12,455,888

 

Total current liabilities

 

 

18,255,884

 

 

 

24,683,562

 

Operating lease liabilities, noncurrent

 

 

1,358,829

 

 

 

1,653,185

 

Finance lease liabilities, noncurrent

 

 

3,728,941

 

 

 

3,762,430

 

Warrant liabilities

 

 

2,870,558

 

 

 

10,720,130

 

Total liabilities

 

 

26,214,212

 

 

 

40,819,307

 

Commitments and contingencies (Note 17)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock; $0.0001 par value; 10,000,000 shares authorized, 0 shares issued and
     and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Common stock; $0.0001 par value; 490,000,000 shares authorized at
     March 31, 2022 and December 31, 2021; 43,501,779 and 43,487,279 shares
     issued, respectively, and 42,955,121 and 43,487,279 outstanding at March 31, 2022
     and December 31, 2021, respectively

 

 

4,350

 

 

 

4,349

 

Treasury stock, at cost; 546,658 and 0 shares held at March 31, 2022 and
     December 31, 2021, respectively

 

 

(5,521,246

)

 

 

 

Additional paid-in capital

 

 

74,918,250

 

 

 

67,674,515

 

Accumulated deficit

 

 

(28,143,088

)

 

 

(29,128,951

)

Total stockholders’ equity

 

 

41,258,266

 

 

 

38,549,913

 

Total liabilities and stockholders’ equity

 

$

67,472,478

 

 

$

79,369,220

 

See accompanying notes to the consolidated financial statements

 


 

SAB Biotherapeutics, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

 

 

 

 

 

Grant revenue

 

$

11,803,077

 

 

$

16,927,734

 

Total revenue

 

 

11,803,077

 

 

 

16,927,734

 

Operating expenses

 

 

 

 

 

 

Research and development

 

 

13,324,344

 

 

 

12,782,004

 

General and administrative

 

 

5,186,072

 

 

 

3,331,806

 

Total operating expenses

 

 

18,510,416

 

 

 

16,113,810

 

Income (loss) from operations

 

 

(6,707,339

)

 

 

813,924

 

Changes in fair value of warrant liabilities

 

 

7,849,572

 

 

 

 

Gain on debt extinguishment of Paycheck Protection Program SBA Loan

 

 

 

 

 

665,596

 

Interest expense

 

 

(72,022

)

 

 

(75,192

)

Interest income

 

 

7,933

 

 

 

5,506

 

Total other income

 

 

7,785,483

 

 

 

595,910

 

Income before income taxes

 

 

1,078,144

 

 

 

1,409,834

 

Income tax expense

 

 

92,281

 

 

 

 

Net income

 

$

985,863

 

 

$

1,409,834

 

Earnings per common share attributable to the
     Company’s shareholders

 

 

 

 

 

 

Basic earnings per common share

 

$

0.02

 

 

$

0.05

 

Diluted earnings per common share

 

$

0.02

 

 

$

0.05

 

Weighted-average common shares outstanding – basic

 

 

43,113,353

 

 

 

25,973,406

 

Weighted-average common shares outstanding – diluted

 

 

45,816,651

 

 

 

28,072,567

 

See accompanying notes to the consolidated financial statements.

 


 

SAB Biotherapeutics, Inc. and Subsidiaries

Consolidated Statements of Changes In Stockholders’ Equity

For the three months ended March 31, 2022 and 2021

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In Capital

 

 

Shares

 

 

Amount

 

 

Accumulated
Deficit

 

 

Total Stockholders’
Equity

 

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

 

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
     stock options

 

 

 

14,500

 

 

 

1

 

 

 

7,829

 

 

 

 

 

 

 

 

 

 

 

 

7,830

 

Forward Share Purchase Agreement,
     final settlement

 

 

 

 

 

 

 

 

 

817,060

 

 

 

 

 

 

 

 

 

 

 

 

817,060

 

Repurchase of common stock pursuant to
     the Forward Share Purchase Agreement

 

 

 

 

 

 

 

 

 

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

 

See accompanying notes to the consolidated financial statements.

3


 

SAB Biotherapeutics, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

985,863

 

 

$

1,409,834

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Gain on debt extinguishment of Paycheck Protection Program SBA Loan

 

 

 

 

 

(665,596

)

Depreciation and amortization

 

 

636,235

 

 

 

235,959

 

Amortization of right-of-use assets

 

 

41,207

 

 

 

41,259

 

Stock-based compensation expense

 

 

897,600

 

 

 

349,115

 

Gain on sale of equipment

 

 

(14,278

)

 

 

 

Changes in fair value of warrant liabilities

 

 

(7,849,572

)

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

 

(3,775,713

)

 

 

8,976,089

 

Prepaid expenses

 

 

(1,110,395

)

 

 

2,175

 

Operating lease right-of-use assets

 

 

(18,080

)

 

 

(17,060

)

Accounts payable

 

 

522,816

 

 

 

(3,836,356

)

Due to related party

 

 

(2,367

)

 

 

(16,778

)

Deferred grant income

 

 

(100,000

)

 

 

 

Income tax payable

 

 

92,281

 

 

 

 

Accrued expense and other current liabilities

 

 

(599,105

)

 

 

2,974,854

 

Net cash (used in) provided by operating activities

 

 

(10,293,508

)

 

 

9,453,495

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Proceeds from the sale of equipment

 

 

76,390

 

 

 

 

Purchases of equipment

 

 

(1,357,324

)

 

 

(1,890,156

)

Net cash used in investing activities

 

 

(1,280,934

)

 

 

(1,890,156

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Payments related to the Forward Share Purchase Agreement

 

 

(5,521,246

)

 

 

 

Principal payments on finance leases

 

 

(48,751

)

 

 

(45,471

)

Proceeds from exercise of stock options

 

 

7,830

 

 

 

 

Net cash used in financing activities

 

 

(5,562,167

)

 

 

(45,471

)

 

 

 

 

 

 

 

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

(17,136,609

)

 

 

7,517,868

 

Cash, cash equivalents, and restricted cash

 

 

 

 

 

 

Beginning of year

 

 

39,545,018

 

 

 

12,610,383

 

End of period

 

$

22,408,409

 

 

$

20,128,251

 

Supplemental disclosures:

 

 

 

 

 

 

Cash paid for interest

 

$

72,022

 

 

$

75,192

 

See accompanying notes to the consolidated financial statements.

4


 

SAb Biotherapeutics, Inc. and subsidiaries

Notes to consolidated financial statements

 

(1) Nature of Business

On October 22, 2021 (the "Closing Date"), we consummated the business combination contemplated by the agreement and plan of merger, dated as of June 21, 2021, as amended on August 12, 2021, made by and among Big Cypress Acquisition Corp., a Delaware corporation (“BCYP”), Big Cypress Merger Sub Inc., a Delaware corporation (“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 representative, agent and attorney-in-fact of the SAB Stockholders. Upon closing of the Business combination, Big Cypress Merger Sub merged with SAB Biotherapeutics, with SAB Biotherapeutics as the surviving company of the merger. Upon closing of the business combination, Big Cypress Acquisition Corp. changed its name to “SAB Biotherapeutics, Inc.”.

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 COVID-19 pandemic continues to evolve, and the extent to which it may impact the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the U.S. and other countries, business closures or business disruptions, and the effectiveness of 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 U.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 future impact of the COVID-19 pandemic on its business and consolidated financial statements.

(2) Summary of 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 presentation

The financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles ("GAAP") and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

The Business 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 reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization 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 are stated at historical cost, with no goodwill or other intangible assets recorded. SAB Biotherapeutics was determined to be the accounting acquirer based on the following predominant factors:

SAB Biotherapeutics’ shareholders have the largest portion of voting rights in the Company;
the Board and Management are primarily composed of individuals associated with SAB Biotherapeutics;
the operations of SAB comprise the ongoing operations of the Company.

The consolidated assets, liabilities and results of operations prior to the Reverse 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 one-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.

 

5


 

Emerging growth 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.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses 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.

Amounts held in escrow by the Company pursuant to the Forward Share Purchase Agreement were reported as restricted cash on the consolidated balance sheet as of December 31, 2021. There were no amounts held in escrow by the Company pursuant to the Forward Share Purchase Agreement as of March 31, 2022.

6


 

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:

 

 

March 31,
2022

 

 

March 31,
2021

 

Cash and cash equivalents

 

$

22,408,409

 

 

$

20,128,251

 

Restricted cash

 

 

 

 

 

 

Total cash, cash equivalents, and restricted cash

 

$

22,408,409

 

 

$

20,128,251

 

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 no allowance for doubtful accounts as of March 31, 2022 and December 31, 2021.

Concentration of credit risk

The Company maintains its cash and cash equivalent balances in the form of business checking accounts and money market accounts, the balances of which, at times, may exceed federally insured limits. Exposure to credit risk is reduced by placing such deposits in high credit quality federally insured financial institutions.

The Company received 100% of its total revenue through grants from government organizations during the three months ended March 31, 2022 and 2021.

Lease liabilities and right-of-use assets

The Company is party to certain contractual arrangements for equipment, lab space, and an animal facility, which meet the definition of leases under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, 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 months ended March 31, 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 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 March 31, 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 March 31, 2022.

7


 

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 no impairment was deemed necessary, during the three months ended March 31, 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 in 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 financial reporting basis of the Company’s assets and liabilities measured using enacted tax laws and statutory tax rates applicable to the periods when the temporary differences will affect taxable income. When necessary, deferred tax assets are reduced by a valuation allowance, to reflect realizable value, and all deferred tax balances 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 income taxes during the year. Current tax liabilities or receivables are recognized for estimated income tax payable and/or refundable for the current year.

The Company uses a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. The Company has elected to treat interest and penalties related to income taxes, to the extent they arise, as a component of income taxes.

 

8


 

Revenue recognition

The Company’s revenue is primarily generated through grants from government and other (non-government) organizations.

Grant revenue is recognized during the period that the research and development services occur, as qualifying expenses are incurred or conditions of the grants are met. The Company 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.

Comprehensive income (loss)

The Company had no items of comprehensive income (loss) other than its net income (loss).

Litigation

From time to time, the Company is involved in legal proceedings, investigations and claims generally incidental to its normal business activities. In accordance with U.S. GAAP, the Company accrues for loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Legal costs in connection with loss contingencies are expensed as incurred.

Earnings 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 income (loss) attributable to common stockholders by the weighted-average number of common stock outstanding during the period. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted-average number of common stock outstanding 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 one reportable segment, as only the Company’s operating results in their entirety are regularly reviewed by the Company’s chief operating decision maker to make 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 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 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.

 

9


 

(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.
 

10


 

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.

(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:

(i)
25% of the Earnout Shares shall be released if, at any time during the five (5)-year period immediately following the Closing Date, the VWAP of the Company's publicly traded common stock is greater than or equal to $15.00 for any twenty (20) trading days within a period of thirty (30) consecutive trading days (the “First Earnout”).
(ii)
25% of the Earnout Shares shall be released if, at any time during the five (5)-year period immediately following the Closing Date, the VWAP of the Company's publicly traded common stock is greater than or equal to $20.00 for any twenty (20) trading days within a period of thirty (30) consecutive trading days (the “Second Earnout”).
(iii)
25% of the Earnout Shares shall be released if, at any time during the five (5)-year period immediately following the Closing Date, the VWAP of the Company's publicly traded common stock is greater than or equal to $25.00 for any twenty (20) trading days within a period of thirty (30) consecutive trading days (the “Third Earnout”).
(iv)
25% of the Earnout Shares shall be released if, at any time during the five (5)-year period immediately following the Closing Date, the VWAP of the Company's publicly traded common stock is greater than or equal to $30.00 for any twenty (20) trading days within a period of thirty (30) consecutive trading days (the “Fourth Earnout” and together with the First Earnout, the Second Earnout and the Third Earnout, the “Earnouts”).

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 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,

11


 

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 three months ended March 31, 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 quarters ended March 31, 2022 and 2021, the Company worked on the following grants:

Government grants

The total revenue for government grants was approximately $11.8 million and $16.9 million respectively, for the three months ended March 31, 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. For the three months ended March 31, 2022 and 2021, there was approximately $27,000 and $56,000, respectively, in grant income recognized. 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 $186,000 in funding remaining for this grant as of March 31, 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. For the three months ended March 31, 2022 and 2021, there was approximately $13,000 and $9,000 respectively, in grant income recognized. There is approximately $801,000 in funding remaining for this grant as of March 31, 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. For the three months ended March 31, 2022 and 2021, there was approximately $23,000 and $0, respectively, in grant income recognized from this grant. 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 March 31, 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. For the three months ended March 31, 2022 and 2021, there was approximately $11.7 million and $16.9 million, respectively, in grant income recognized from this grant. There is approximately $77.4 million in funding remaining for this grant as of March 31, 2022.

The grants for the JPEO 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%).

12


 

(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 months ended March 31, 2022 and 2021:

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Calculation of basic EPS attributable to the Company’s shareholders

 

 

 

 

 

 

Net income attributable to the Company’s shareholders

 

$

985,863

 

 

$

1,409,834

 

Weighted-average common shares outstanding – basic

 

 

43,113,353

 

 

 

25,973,406

 

Net earnings per share, basic

 

$

0.02

 

 

$

0.05

 

Calculation of diluted EPS attributable to the Company’s shareholders

 

 

 

 

 

 

Net income attributable to the Company’s shareholders

 

$

985,863

 

 

$

1,409,834

 

Weighted-average common shares outstanding – diluted

 

 

45,816,651

 

 

 

28,072,567

 

Net earnings per share, diluted

 

$

0.02

 

 

$

0.05

 

The following table reconciles the weighted-average common shares outstanding used in the calculation of basic earnings per share (“EPS”) to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three months ended March 31, 2022 and 2021:

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Weighted-average common shares outstanding – basic

 

 

43,113,353

 

 

 

25,973,406

 

Stock options

 

 

2,703,298

 

 

 

2,099,161

 

Total

 

 

45,816,651

 

 

 

28,072,567

 

The shares in the table below were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Stock options

 

 

1,655,733

 

 

 

913,227

 

Common stock warrants

 

 

5,958,600

 

 

 

 

Earnout shares (1)

 

 

10,491,937

 

 

 

 

Contingently issuable earnout shares from unexercised Rollover Options

 

 

1,508,063

 

 

 

 

Total

 

 

19,614,333

 

 

 

913,227

 

(1)
As the Earnout shares are subject to certain vesting requirements not satisfied as of the three months ended March 31, 2022, the Earnout Shares held in escrow are excluded from calculating both basic and diluted earnings per share.

(7) Equipment

As of March 31, 2022 and December 31, 2021, the Company’s equipment was as follows:

 

 

March 31,
2022

 

 

December 31,
2021

 

Laboratory equipment

 

$

7,121,957

 

 

$

7,431,988

 

Animal facility

 

 

8,357,667

 

 

 

8,357,667

 

Animal facility equipment

 

 

1,143,213

 

 

 

1,253,879

 

Construction-in-progress

 

 

2,130,434

 

 

 

4,608,778

 

Leasehold improvements

 

 

8,777,864

 

 

 

5,700,364

 

Vehicles

 

 

192,683

 

 

 

135,593

 

Office furniture and equipment

 

 

1,013,383

 

 

 

46,202

 

Less: accumulated depreciation and amortization

 

 

3,763,769

 

 

 

3,220,016

 

Property, plant and equipment, net

 

$

24,973,432

 

 

$

24,314,455

 

 

13


 

Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $636,235 and $235,959, respectively.

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 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 March 31, 2022 and December 31, 2021, the Company’s construction-in-progress was as follows:

 

 

March 31,
2022

 

 

December 31,
2021

 

New office space at Headquarters

 

$

339,939

 

 

$

11,183

 

Laboratory space at Headquarters

 

 

 

 

 

2,506,482

 

Laboratory equipment at Headquarters

 

 

89,009

 

 

 

246,801

 

IT equipment at Headquarters

 

 

103,831

 

 

 

212,209

 

Software

 

 

137,811

 

 

 

137,811

 

Bioreactors

 

 

1,295,651

 

 

 

1,280,728

 

Other

 

 

164,193

 

 

 

213,564

 

Total construction-in-progress

 

$

2,130,434

 

 

$

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 include an option to extend beyond the life of the 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 market for similar borrowings and the credit 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 three 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 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:

In December 2018, the Company entered into a finance lease with Dakota Ag Properties for a new animal facility which includes the surrounding land. The facility and the land have been accounted for as separate lease components. The lease is based upon payback of $4,000,000 in construction costs, with a 20-year term at an interest rate of 8%. The monthly payment for this lease is $33,458. The Company has the option to purchase the asset at any time during the term of the lease for the balance of the unamortized lease payments.
In December 2018, the Company entered into an equipment lease for a 12,000-gallon propane tank that is located on the Company’s animal facility. The lease is for five years, with an annual payment of $8,199. The Company has the option to purchase the asset at any time during the term of the lease for the balance of the unamortized lease payments.
In July 2018, the Company entered into a lease agreement with a bank, for a Ruby Cell Analyzer. The lease agreement is for a five-year term. The monthly payment for this lease is $807. The Company has the option to purchase the asset at the end of the lease for $1.

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In March 2019, the Company entered into two lease agreements for laboratory equipment. The leases are each for a 3-year term and a combined monthly payment of $5,956. Both leases have a $1 purchase option at the end of the lease term.

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 March 31, 2022 are:

 

 

Operating

 

 

Finance

 

Weighted-average remaining lease term

 

2.18 years

 

 

16.60 years

 

Weighted-average discount rate

 

 

4.75

%

 

 

7.71

%

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 March 31, 2022:

 

 

Operating

 

 

Finance

 

2022 - remaining

 

$

928,943

 

 

$

324,265

 

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

 

 

2,634,446

 

 

 

6,719,586

 

Less: Amount representing interest payments

 

 

(120,937

)

 

 

(2,844,747

)

Total lease liabilities

 

 

2,513,509

 

 

 

3,874,839

 

Less current portion

 

 

(1,154,680

)

 

 

(145,898

)

Noncurrent lease liabilities

 

$

1,358,829

 

 

$

3,728,941

 

Operating lease expense was approximately $293,000 and $254,000, respectively, for the three months ended March 31, 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 March 31, 2022 and 2021 included approximately $41,000 and $41,000, respectively, in right-of-use asset amortization and approximately $72,000 and $75,000, 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 $311,000 and $121,000, respectively, for the three months ended March 31, 2022 . Cash payments under operating and finance leases were approximately $268,000 and $121,000, respectively, for the three months ended March 31, 2021.

Short-term lease expense recognized in the three months ended March 31, 2022 and 2021, was not material.

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(9) Accrued Expenses and Other Current Liabilities

As of March 31, 2022 and December 31, 2021, accrued expenses and other current liabilities consisted of the following:

 

 

March 31,
2022

 

 

December 31,
2021

 

Accrued vacation

 

$

678,855

 

 

$

552,629

 

Accrued payroll

 

 

274,104

 

 

 

674,858

 

Accrued construction-in-progress

 

 

291,132

 

 

 

548,988

 

Accrued supplies

 

 

61,253

 

 

 

709,027

 

Accrued consulting

 

 

122,618

 

 

 

179,082

 

Accrued clinical trial expense

 

 

455,786

 

 

 

423,634

 

Accrued outside laboratory services

 

 

222,291

 

 

 

128,752

 

Accrued bonus & severance

 

 

748,412

 

 

 

1,804,288

 

Accrued contract manufacturing

 

 

2,795,405

 

 

 

1,000,824

 

Accrued legal

 

 

720,152

 

 

 

833,646

 

Accrued financing fees payable

 

 

5,100,000

 

 

 

5,100,000

 

Accrued franchise tax payable

 

 

50,000

 

 

 

216,251

 

Other accrued expenses

 

 

336,619

 

 

 

283,909

 

 

 

$

11,856,627

 

 

$

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 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 three months ended March 31, 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.

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 Company’s Certificate of Incorporation 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, Series A-1 $1.88 per share, Series A-2 & A-2A $3.00 per share, and Series B $3.50 per share.

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The preferred stock was entitled to receive noncumulative dividends in preference to any dividend on the common stock when, as, and if declared by the Company’s board of directors. The holders of the preferred 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 at least $20,000,000 and the Company’s shares have been listed on a stock exchange, as defined; or b) the election of 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 of the redemption feature, the Company classified the series A-2A preferred stock as mezzanine 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 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.

As a result of the Business Combination, the Company adopted the 2021 Omnibus Equity Incentive Plan (hereinafter collectively with the 2014 Equity Incentive Plan referred to as the "Equity Compensation Plans"), representing 11,000,000 shares of common stock reserved for issuance under the 2021 Omnibus Equity Incentive Plan. As of the beginning of the 2022 calendar year, the shares reserved for future issuance increased by, 869,746, or two percent (2%) of the total number of shares of Common Stock issued and outstanding, to a total of 11,869,746 shares of common stock reserved for issuance under the 2021 Omnibus Equity Incentive Plan.

The expected term of the stock options was estimated using the “simplified” method, as defined by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment