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Item 5. Market for Registrant’s Common Equity

2023-04-14 compared with 2022-03-29 · 201 added, 147 removed, 249 unchanged (58% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Registrant ’

s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock and warrants are listed on Nasdaq under the symbols “SABS”

Our common stock and public warrants are listed on Nasdaq under the symbols “SABS”

and “SABSW”, respectively.

On March 25, 2022, the closing price of our common stock was $1.95 per share and the closing price of our warrants was $0.3454 per warrant.

On March 22, 2023, the closing price of our common stock was $0.51 per share and the closing price of our warrants was $0.05 per warrant.

Holders of Our Common Stock

As of March 25, 2022, we had 202 holders of record of our common stock.

As of March 28, 2023, we had 246 holders of record of our common stock.

Certain shares are held in “street”

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Securities Authorized for Issuance Under Equity Compensation Plans

The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Form 10-K.

Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.

Recent Sales of Unregistered Securities

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our registered equity securities during the period covered by this Form 10-K.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the accompanying notes included in Part II, Item 8 of this Form 10-K.

Some of the information contained in this discussion and analysis contains forward-looking statements that involve risks, uncertainties and 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.”

We are a clinical-stage biopharmaceutical company advancing a new class of immunotherapies based on its human polyclonal and monoclonal antibodies.

We have applied advanced genetic engineering and antibody science to develop transchromosomic (Tc) bovine herds that produce fully human antibodies targeted to specific diseases, including infectious diseases such as COVID-19 and influenza, immune system disorders including T1D and organ transplantation, and cancer.

Our versatile and scalable DiversitAb platform is applicable to a wide range of human diseases, capable of producing specifically targeted, high-potency immunotherapies.

In the first quarter of 2022, 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 at a price of $10.10 per share—these shares are accounted for as treasury stock at cost within the consolidated statements of changes in stockholders’

equity (deficit).

Not Applicable.

Management ’

s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report.

This discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those discussed below.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors”

included elsewhere in this Annual Report.

As used in this report, unless the context suggests otherwise, “we,”

“us,”

or “the Company”

refer to SAB Biotherapeutics, Inc.

and its subsidiaries.

We are a clinical-stage, biopharmaceutical company focused on the development 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, the most recent of which totals up to approximately $203.6 million.

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 $60.9 million and $55.2 million for the years ended December 31, 2021 and 2020, respectively (10.2% growth).

Our revenue to date has been primarily derived from government grants, including for the development of a COVID-19 therapeutic.

Approximately $90.0 million in funding remains for our current government grants, with an additional $1.7 million remaining for our current government grants pending approval of extensions on the funding for two of the grants.

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, autoimmune, and oncology indications.

We generated total revenue of  $23.9 million and $60.9 million for the years ended December 31, 2022 and 2021, respectively (60.7% decline).

Our revenue to date has been primarily derived from government grants.

As of December 31, 2022, $0.4 million in funding remains for our current government grants, with an additional $0.4 million remaining for our current government grants pending approval of extensions on the funding for two of the grants. 

As a result, we expect to continue to make significant investments in these areas for the foreseeable future.

We incurred research and development expenses of $57.2 million and $27.9 million for the years ended December 31, 2021 and 2020, respectively, and general and administrative expenses of $17.1 million and $6.8 million for the years ended December 31, 2021 and 2020, respectively.

We have also experienced significant growth in our workforce in recent periods, increasing from 86 employees as of December 31, 2020, to 139 employees as of December 31, 2021.

We expect to continue to incur significant expenses, and we expect such expenses to increase substantially in connection with our ongoing activities, including as we:

We incurred research and development expenses of  $36.4 million and $57.2 million for the years ended December 31, 2022 and 2021, respectively, and general and administrative expenses of $16.4 million and $17.1 million for the years ended December 31, 2022 and 2021, respectively. We expect to continue to incur significant expenses, and we expect such expenses to increase substantially in connection with our ongoing activities, including as we:

 ●

invest in research and development activities to optimize and expand our DiversitAb platform;

 ●

develop new and advance preclinical and clinical progress of pipeline programs;

 ●

market to and secure partners to commercialize our products;

 ●

expand and enhance operations to deliver products, including investments in manufacturing;

 ●

acquire businesses or technologies to support the growth of our business;

 ●

continue to establish, protect and defend our intellectual property and patent portfolio;

 ●

operate as a public company.

To date, we have primarily financed our operations from government agreements, including for the development of a COVID-19 therapeutic and Rapid Response Antibody Program, and the issuance and sale of preferred stock.

Our net loss for the year ended December 31, 2021 was $17.1 million and our net income for the year ended December 31, 2020 was $20.1 million.

As of December 31, 2021, we had an accumulated deficit of $29.1 million, cash and cash equivalents totaling $33.2 million, and $6.3 million in restricted cash.

To date, we have primarily financed our operations from government agreements and the issuance and sale of common stock. 

Our net loss for the year ended December 31, 2022 was $18.7 million and our net loss for the year ended December 31, 2021 was $17.1 million.

As of December 31, 2022, we had an accumulated deficit of $47.9 million, and cash and cash equivalents totaling $15.0 million.

Recent Developments

In February 2021, we submitted a forgiveness application related to our Paycheck Protection Program (or PPP) loan (PPP Loan).

In March 2021, the U.S.

Small Business Administration (SBA) approved the forgiveness of the PPP Loan, plus accrued interest.

Private Placement

On December 7, 2022, we consummated a private placement with certain institutional and accredited investors, whereby we issued an aggregate of 7,363,377 shares of common stock and warrants to purchase up to 7,363,377 shares of common stock (the “PIPE Warrants”), each share and PIPE Warrant sold at a combined purchase price of $1.08.

The PIPE Warrants become exercisable on the six-month anniversary of the date of grant for a price of $1.08 per share and are exercisable for five years from the date of issuance.

The issuance of shares of common stock upon exercise of the PIPE Warrants may result in material dilution to existing stockholders.

Termination of Contract with US Department of Defense

On August 3, 2022, we received notice from the DoD to terminate the Department of Defense, JPEO Rapid Response contract, dated as of August 7, 2019 with the DoD most recently amended as of September 14, 2021, relating to 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 us in connection therewith. 

Business Combination

(BCYP), Big Cypress Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of BCYP, and SAB Biotherapeutics, Inc., which changed its name to SAB Sciences, Inc.

On October 22, 2021, we consummated the Business Combination pursuant to that certain Agreement and Plan of Merger, dated June 21, 2021 ("Business Combination Agreement"), by and among BCYP, Big Cypress Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of BCYP, and SAB Biotherapeutics, Inc., which changed its name to SAB Sciences, Inc.

and became our wholly-owned subsidiary in connection with the Business Combination (and which we refer to now as Legacy SAB).

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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 Part I, Item 1A of this Form 10-K.

Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in Part I, Item 1A of this Annual Report.

Components of Results of Operations

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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 organizations providing the grants do not meet the definition of a customer.

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.

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Government grants

The total revenue for government grants was approximately $60.9 million and $52.8 million, respectively, for the years ended December 31, 2021 and 2020.

The total revenue for government grants was approximately $23.9 million and $60.9 million, respectively, for the years ended December 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 years ended December 31, 2021 and 2020, there was approximately $518,000 and $228,000, respectively, in grant income recognized from this grant.

We applied for an extension on the grant funding, which is pending approval.

If approved, there is approximately $203,000 in funding remaining for this grant as of December 31, 2021.

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.

The grant was subsequently amended to extend the date through August 2022.

For the years ended December 31, 2022 and 2021, there was approximately $182,000 and $518,000, respectively, in grant income recognized from this grant.

This grant was completed in 2022. 

NIH-NIAID (Federal Award #1R41AI131823-02) –

this grant was for approximately $1.5 million and started in April 2019 through March 2021.

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 2023.

For the years ended December 31, 2021 and 2020, approximately $51,000 and $99,000, respectively, in grant income was recognized from this grant.

Approximately $823,000 in funding remains for this grant as of December 31, 2021.

For the years ended December 31, 2022 and 2021, approximately $328,000 and $51,000, respectively, in grant income was recognized from this grant.

Approximately $429,000 in funding remains for this grant as of December 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 years ended December 31, 2021 and 2020, there was approximately $94,000 and $351,000, respectively, in grant income recognized from this grant.

We applied for an extension on the grant funding, which is pending approval.

If approved, there is approximately $1.5 million in funding remaining for this grant as of December 31, 2021.

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 approximately $2.7 million and started in August 2017 through July 2021.

The grant was subsequently amended to extend the date through July 2023.

For the years ended December 31, 2022 and 2021, there was approximately $1,052,000 and $94,000, respectively, in grant income recognized from this grant.

Approximately $0.4 million in funding remaining for this grant as of December 31, 2022.

DoD, 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 agreement in 2020 for work on a COVID therapeutic, bringing the agreement total to approximately $143 million.

In September 2021, an additional modification for $60.5 million was added to the agreement for advanced clinical development through licensure and commercial manufacturing, bringing the agreement total to approximately $203.6 million.

For the years ended December 31, 2021 and 2020, approximately $60.2 million and $52.1 million, respectively, in grant income was recognized from this grant.

Approximately $89.2 million in funding remains for this grant as of December 31, 2021.

Other grants (non-government)

We recorded no revenue for other grants (non-government) for the year ended December 31, 2021.

The total revenue for other grants (non-government) was approximately $2.4 million for the year ended December 31, 2020.

CSL Behring –

there were three contracts for a combined $2.4 million that were started and completed in 2020.

These contracts were related to research and development for a COVID-19 therapeutic ($2 million) and two other targets ($400,000).

For the year ended December 31, 2020, there was approximately $2.4 million in grant income recognized from this grant.

For the years ended December 31, 2022 and 2021, approximately $22.2 million and $60.2 million, respectively, in grant income was recognized from this grant.

This grant was terminated in 2022. 

The grants for 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%). 

On August 3, 2022, we received noticed from the DoD to terminate the JPEO Rapid Response contract, dated as of August 7, 2019 with the DoD most recently amended as of September 14, 2021, relating to a prototype research and development of Rapid Response Antibody Program and advanced clinical development through licensure and commercial manufacturing for SAB-185 (the "JPEO Rapid Response Contract Termination"). 

We engaged in negotiations with the DoD to compensate us for services provided prior to the JPEO Rapid Response Contract Termination and costs we would be expected to bear in future periods.

Operating Expenses

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We have not historically tracked our research and development expenses on a product candidate-by-product candidate basis.

For the years ended December 31, 2021 and 2020, 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 the years ended December 31, 2022 and 2021, we had contracts with multiple CRO to conduct and complete clinical studies.

In the case of SAB-185, the CRO has been contracted and paid by the US government - as of December 31, 2022, there is no active CRO engaged by us in work on the SAB-185.

For SAB-176, PPD Development, LP, acting as CRO oversaw the Phase 1 safety study.

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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 years ended December 31, 2021 and 2020 were as follows:

Research and development expenses by component for the years ended December 31, 2022 and 2021 were as follows:

Year Ended December 31,

Salaries & benefits

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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 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 the SEC and stock exchange listing standards, public relations, insurance and professional services.

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Nonoperating (Expense) Income

Loss on change in fair value of warrant liabilities

Loss on change in fair value of warrant liabilities consists of the changes in the fair value of the warrant liabilities.

Gain on change in fair value of warrant liabilities

Gain on change in fair value of warrant liabilities consists of the changes in the fair value of the warrant liabilities.

Gain on debt extinguishment of Paycheck Protection Program SBA Loan

Gain on extinguishment of debt consists the forgiveness of the PPP Loan, plus accrued interest.

Other income consists of primarily of gains on disposals of fixed assets.

Gain on extinguishment of debt consists of the forgiveness of the PPP Loan, plus accrued interest.

Other income consists of primarily of gains on disposals of fixed assets.

Interest income

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Interest expense consists primarily of interest related to borrowings under notes payable for equipment.

Income Tax Expense

Income tax expense consists primarily of domestic federal and state income taxes. 

Results of Operations

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Total operating expenses

(Loss) income from operations

Loss from operations

Other income (expense)

Changes in fair value of warrant liabilities

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Interest income

Net (loss) income

Total other income

Loss before income taxes

Income tax expense

Comparison of the Years Ended December 31, 2022 and 2021

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Total revenue

Revenue increased by $5.6 million, or 10.2%, in 2021, primarily due to an increase in work performed under the JPEO government grant.

Revenue decreased by $37.0 

million, or 60.7%, in 2022, primarily due to the JPEO Rapid Response Contract Termination (year-over-year decrease of $38 million, (63.1)%).

Included in revenues for the year ended December 31, 2022 are $5.3 million for contract manufacturing, $3.1 million for labor, and $5.4 million for supplies as compared to $12.7 million for contract manufacturing, $3.9 million for fixed asset reimbursement, $6.1 million for labor, and $16.7 million for supplies for the year ended December 31, 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 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 we explore potential partnerships, co-development opportunities, and licensing arrangements

Research and Development

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Total research and development expenses

Research and development expenses increased by $29.3 million, or 104.9%, in 2021, primarily due to increased headcount in the research and development function, contract manufacturing, increased clinical work, and increases in our production capacity and the associated expenses for materials and supplies supporting research and development activities.

Please refer to the research and development expenses by component for the years ended December 31, 2021 and 2020 table above for additional information.

Research and development expenses decreased by $20.7 million, or (36.3)%, in 2022, primarily due to decrease in laboratory supplies (year-over-year decrease of $8.2 million, (42.7)%) , contract manufacturing costs (year-over-year decrease of $7.4 million, (58.3)%), clinical trial and project consulting expense (year-over-year decrease of $6.0 million, (84.5)%), and animal care costs (year-over-year decrease of $3.1 million, (65.2)%), offset by an increase in salaries and benefits (year-over-year increase of $2.1 million, 21.2%), and facility costs (year-over-year increase of $1.9 million, 52.8%).  Please refer to the research and development expenses by component for the years ended December 31, 2022 and 2021 table above for additional information.

As a result of the JPEO Rapid Response Contract Termination and in tandem with our focus on primary pipeline development targets, future period research and development expenses will decrease as we no longer expect to incur costs of contract manufacturing, outside laboratory services, project consulting, and facilities costs related to the production of SABS-185. 

General and Administrative

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Total general and administrative expenses

General and administrative expenses increased by $10.3 million, or 152.3%, in 2021, primarily due to increased administrative salaries and benefits (year-over-year increase of $4.1 million, 93%), increases in business and regulatory consulting (year-over-year increase of $2.7 million, 343%), insurance costs (year-over-year increase of $0.7 million, 790%), and recruiting expenses (year-over-year increase of $0.4 million, 12,564%).

Further, we recognized considerable increased expenses as a result of becoming a public company in 2021 (year-over-year increase for corporate governance support of $2.4 million, 156%).

General and administrative expenses decreased by $0.7 million, or (4.1)%, in 2022, primarily due to decreased administrative salaries and benefits (year-over-year decrease of $2.3 million), decreases in business, regulatory and marketing consulting (year-over-year decrease of $0.7 million), offset by an increase in insurance costs (year-over-year increase of $2.0 million), and public reporting expenses (year-over-year increase of $0.3 million).

Non-operating (Expense) Income

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Total non-operating (expense) income

Total non-operating (expense) income changed by $3.5 million in 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 2021.

Total non-operating (expense) income changed by $13.9 million in 2022, 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

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Total interest expense

Interest expense decreased by less than $0.2 million in 2021, or 37.2%, due to the payoff of the line of credit in July 2020.

Interest expense remained largely unchanged in 2022, driven by adding no new Finance Leases or other interest-bearing debt.

We expect interest expense to increase in future periods as the accrued interest payable under the 8% Unsecured Convertible Note is realized over a full year.

Interest Income

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Total interest income

Interest income decreased by less than $0.1 million, or 11.5%, in 2021, primarily due to lower average cash balances, lower interest rates, and higher bank fees.

Interest income increased by  $47,957 in 2022, primarily due to higher average cash balances and higher interest rates on cash deposits.

Liquidity and Capital Resources

As of December 31, 2021 and December 31, 2020, we had $33.2 million and $12.6 million, respectively, of cash and cash equivalents.

Additionally, as of December 31, 2021 we had $6.3 million in restricted cash.

As of December 31, 2022 and December 31, 2021, we had $15.0 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 us and the remaining $5.5 million was delivered to Radcliffe for the repurchase of 546,658 shares of our common stock.

To date, we have primarily relied on grant revenue in the form of government grants and the sale of preferred stock.

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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.

As of December 31, 2021, we have received approximately $52.9 million of the $60.9 million in revenue recorded for the year ended December 31, 2021.

As of the date this annual report has been made available for issuance, our entire $5.6 million balance of accounts receivables as of December 31, 2022 has been fully collected.

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 indications 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.

Based on our current business plan, we believe the net proceeds from the Business Combination, together with our 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.

Our future capital requirements will depend on many factors, including, but not limited to our ability to successfully secure additional government grants and to secure contracts with new partners for the successful development and commercialization of our products.

If we are unable to execute on our business plan and adequately fund operations, or if the business plan requires a level of spending in excess of cash resources, we may be required to negotiate partnerships in which we receive greater near-term payments at the expense of potential downstream revenue.

Alternatively, we may need to seek additional equity or debt financing, which may not be available on terms acceptable to us or at all.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders.

Debt financing and preferred equity financing, if available, may involve agreements that include covenants restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making product acquisitions, making capital expenditures, or declaring dividends.

If we are unable to generate sufficient revenue or raise additional capital when desired, our business, financial condition, results of operations and prospects would be adversely affected.

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.

We have incurred operating losses for the past several years.

While we intend to continue to keep operating expenses at a reduced level there can be no assurance that our current level of operating expenses will not increase or that other uses of cash will not be necessary.

Based on our current level of operating expenses, existing cash and cash equivalents may not be sufficient to cover operating cash needs through the twelve months following the date these financials are 

made available for issuance.

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 not be able to raise such financing on terms acceptable to us or at all.

If we are unable to raise 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

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Equity Financings and Option Exercises

As of December 31, 2021, 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 with BCYP, and exercises of employee stock options.

Notes payable

As of December 31, 2021 and December 31, 2020, we had a notes payable balance of $25,013 and $710,768, respectively.

Note payable, related party

On February 24, 2016, we entered into a loan agreement with Christiansen Land and Cattle, Ltd., a related party, for a $3.0 million revolving line of credit secured by a blanket security interest in our assets.

We borrowed $2.5 million from the line of credit in 2016, and $350,000 in 2017.

The line of credit had a fixed rate per annum of 6% compounded annually.

The initial agreement was based upon repayment following a significant capital event –

closing of equity or debt financing with total proceeds to us of $15 million or more or one year from the agreement date, whichever occurred first.

The agreement was amended in August 2018 to extend the repayment timeframe to August 31, 2019.

The first payment to repay this loan was made on August 31, 2018 ($1.0 million payment).

Additional voluntary payments were being made at the rate of $30,000 per month.

In August 2019, the agreement was amended to extend the maturity date to the earlier of August 31, 2020 or the occurrence of a significant capital event.

The note payable balance as of December 31, 2019 was $1,364,644, which included accrued interest of $3,580.

In July 2020, the note payable was paid in full and the line of credit was terminated.

Notes payable

On November 15, 2017, we entered into a loan agreement with a bank, for the financing of an ultrasound machine for $18,997.

The agreement was for a four-year term, with monthly payments of $440.

The note payable had a balance as of December 31, 2019 of $9,203 and was paid off in full in September 2020.

In December 2017, we entered into two loan agreements with a financial institution.

One agreement was for the purchase of a tractor for $116,661 at a 3.6% interest rate, and a second agreement for the purchase of a trailer, truck, scale, and chute for $47,721 at a 5.9% interest rate.

The loan for the tractor included annual payments of $25,913 for the next five years starting in December 2018.

The loan for the trailer, truck, scale, and chute included monthly payments of $920 for five years starting in January 2018 through December 2022.

During 2019, the trailer, truck, scale, and chute loan was paid in full.

As of December 31, 2021 and December 31, 2020, the tractor loan balance was $25,013 and $49,156, respectively.

As of December 31, 2022, we have raised approximately $90.2 million since our inception from the issuance and sale of convertible preferred shares, net of issuance costs associated with such financings, the Business Combination with BCYP, and exercises of employee stock options.

Notes payable and Convertible Debt

As of December 31, 2022 and 2021 we had total debt balances of $1,314,309 and $1,796,724, respectively.

8% Unsecured Convertible Note

Pursuant to the Fourth Amendment to our lease with Sanford Health, we agreed to a period of Abated Rent from October 1, 2022 to September 30, 2023 pertaining to our leased laboratory bay at the Sanford Research Center.

In exchange for the Abated Rent, effective as of October 1, 2022, we issued to Sanford Health an 8% unsecured, convertible promissory note (the "8% Unsecured Convertible Note").

Pursuant to the 8% Unsecured Convertible Note, we shall pay the sum of $541,644 (the “Principal”) plus accrued and unpaid interest thereon on September 31, 2024 (the “Maturity Date”).

Simple interest shall accrue on the outstanding Principal from and after the date of the October Note, and shall be payable on the Maturity Date.

Sanford Health shall have the right, but not the obligation, to convert all or any part of the outstanding Principal of the 8% Unsecured Convertible Note, together with any accrued and unpaid interest thereon to the date of such conversion, into such number of fully paid and non-assessable shares of the Company’s common stock, at any time and from time to time, prior to the later of the Maturity Date and the date on which the 8% Unsecured Convertible Note is paid in full, subject to certain restrictions, at a conversion price per share of Common Stock equal to greater of (x) $1.50 and (y) the price at which the Company sells shares of common stock in any bona fide private or public equity financing prior to the Maturity Date.

Other Notes Payable

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

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Under the terms of the PPP Loan, monthly payments of principal and interest were due to commence November 1, 2020, however, the SBA is deferring loan payments for borrowers who apply for loan forgiveness until the SBA remits the borrower’s loan forgiveness amount to the lender.

No payments were made in 2020 and, as of December 31, 2020, the PPP Loan balance was $661,612 with accrued interest of $3,984.

An application for forgiveness of the PPP Loan was completed in February 2021.

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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 year ended December 31, 2021.

Please refer to Note 10 to the Company's consolidated financial statements, Notes Payable, for additional information on our debt.

Insurance Financing

We obtained financing for certain Director & Officer liability insurance policy premiums.

The agreement assigns First Insurance Funding (Lender) a first priority lien on and security interest in the financed policies and any additional premium required in the financed policies including (a) all returned or unearned premiums, (b) all additional cash contributions or collateral amounts assessed by the insurance companies in relation to the financed policies and financed by Lender, (c) any credits generated by the financed policies, (d) dividend payments, and (e) loss payments which reduce unearned premiums.

If any circumstances exist in which premiums related to any Financed Policy could become fully earned in the event of loss, Lender shall be named a loss-payee with respect to such policy.

The total premiums, taxes and fees financed is approximately $1,236,000 with an annual interest rate of 5.47%.

In consideration of the premium payment by Lender to the insurance companies or the Agent or Broker, we unconditionally promise to pay Lender the amount Financed plus interest and other charges permitted under the Agreement.

At December 31, 2022 and 2021 we recognized approximately $773,000 and $1,772,000, respectively, as insurance financing note payable in its consolidated balance sheet.

We will pay the insurance financing through installment payments with the last payment being on September 22, 2023.

In December 2017, we entered into a loan agreement with a financial institution for the purchase of a tractor for $116,661 at 3.6%.

The loan included annual payments of $25,913 for the next five years starting in December 2018.

The tractor was paid off in full in November 2022.

Please refer to Note 11 in our consolidated financial statements, Notes Payable, for additional information on our debt.

The following table summarizes our cash flows for the years ended December 31, 2022 and 2021:

Net cash provided by operating activities

Net cash provided (used) by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net increase in cash, cash equivalents, and restricted cash

Net decrease in cash, cash equivalents, and restricted cash

Operating Activities

Net cash provided by operating activities decreased by $7.3 million in 2021, primarily due to a $10.3 million increase in general and administrative expenses.

The main drivers include an increase in salaries and benefits of $4.6 million (added positions, higher stock compensation and bonus), an increase in business consulting of $2.0 million, and an increase in insurance of $0.7 million (higher D&O insurance).

Net cash provided (used) by operating activities decreased by $25.4 million in 2022, primarily due to a $15.5 million decrease in operating income, an $11.9 million increase in non-cash working capital, offset by an increase of $2.7 million in non-cash expenses.

Year-over-year changes in cash provided (used) by operating activities is explained by shifts in the company's non-cash working capital balances as we continue to advance our lead programs after the JPEO Rapid Response Contract Termination. 

Investing Activities

Net cash used in investing activities decreased by $1.8 million in 2021, primarily due to a decrease in purchases of equipment.

Net cash used in investing activities increased by $12.1 million in 2020, primarily due to investments in our manufacturing capabilities and equipment.

Net cash used in investing activities increased by $8.9 million in 2022, primarily due to a decrease in purchases of equipment as new equipment purchases under the JPEO Rapid Response Contract were substantially completed in 2021.

Capital asset purchases completed in 2022 relate substantially to leasehold improvements at the Corporate Headquarters and completion of the clinical manufacturing facility at the Sanford Research Center.

Financing Activities

Net cash provided by financing activities increased by $25.2 million in 2021, primarily due to $34.4 million in proceeds from the Business Combination, net of transaction costs, partially offset by the $10.0 million series B financing round in 2020.

Net cash provided by financing activities decreased by $34.8 million in 2022, primarily due to $34.4 million in proceeds from the Business Combination being fully realized in 2021.

In 2022, we received $7.7 million of funds (net of issuance costs) from the issuance of common stock in a private placement, offset by utilizing $6.3 million of restricted cash to settle the Forward Share Purchase Agreement.

Contractual Obligations and Commitments

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Payments Due by Period

Less than 1 year

Notes payable

Forward share purchase liability (2)

Operating lease liabilities (1)

Finance lease liabilities (1)

(1) One remaining annual payment on the purchase of a tractor.

(2) Pursuant to the Forward Share Purchase Agreement, the Company may be required to purchase up to 627,555 shares of its issued and outstanding common stock at a price of $10.10 per share.

Please refer to Note 4 to the Company's consolidated financial statements, Reverse Recapitalization and Business Combination , and Note 18 to the Company's consolidated financial statements, Subsequent Events , for additional information.

(3) We are party to certain contractual arrangements for equipment, lab space, and an animal facility, which meet the definition of leases under FASB ASC Topic 842, Leases (“ASC 842”).

We are party to certain contractual arrangements for equipment, lab space, and an animal facility, which meet the definition of leases under FASB ASC Topic 842, Leases  (“ASC 842”).

We enter into contracts in the normal course of business with third parties, including CROs.

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As of December 31, 2022, there were no material changes outside of the ordinary course of business to our commitments and contractual obligations.

We had $25.2 million of federal net operating loss carryforwards as of December 31, 2021.

We had $22.0 million of federal net operating loss carryforwards as of December 31, 2022.

Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.

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 not quantified the amount of such limitations, if any.

Going Concern

A fundamental principle of the preparation of financial statements in accordance with GAAP is the assumption that we will continue in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business.

As of December 31, 2022, we have experienced net losses, negative cash flows from operations and had an accumulated deficit of $47.9 million.

We anticipate we will continue to generate losses for the foreseeable future, and expects the losses to increase as we continue the development of, and seek regulatory approvals for, product candidates, and begin commercialization of products.

As a result, we will require additional capital to fund operations in order to support long-term plans, in particular, following the JPEO Rapid Response Contract Termination. These factors raise substantial doubt about our ability to continue as a going concern for the one-year period following the date that these financial statements were issued.

To continue as a going concern, we will need, among other things, to raise additional capital resources.

We plan to seek additional funding through a combination of equity or debt financings, or other third-party financing, collaborative or other funding arrangements.

Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all.

The consolidated financial statements for December 31, 2022, have been prepared on the basis that we will continue as a going concern, and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability for us to continue as a going concern.

Off-Balance Sheet Arrangements

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Critical Accounting Policies and Estimates

We have prepared our consolidated financial statements in accordance with U.S.GAAP.

We have prepared our consolidated financial statements in accordance with U.S.

Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures.

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Actual results could therefore differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are 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.

While our significant accounting policies are described in more detail in Note 3 in our 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

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As a result, if factors 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 years ended December 31, 2021 and 2020.

Stock-based compensation expense was $2.3 million and $1.3 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, we had $6.6 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 2.31 years.

Warrant Liabilities Valuations

See Note 13 in our 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 years ended December 31, 2022 and 2021.

Stock-based compensation expense was $2.7 million and $2.3 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022 we had $4.2 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 3.17 years.

Total unrecognized compensation cost related to non-vested stock awards as of December 31, 2022, was approximately $0.5 million and is expected to be recognized within future operating results over a weighted-average period of 3.46 years.

Warrant Valuations

Liability Classified Warrants

We are required 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 liabilities in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity , and were presented within warrant liabilities on the consolidated balance sheet as of December 31, 2021.

The initial fair value of the warrant liabilities were measured at fair value on the Closing Date, and changes in the fair value of the warrant liabilities were presented within changes in fair value of warrant liabilities in the consolidated statement of operations for the year ended December 31, 2021.

The fair value of our Public Warrant liabilities is determined by reference to the quoted market price.

The warrants are accounted for as liabilities in accordance with ASC 815-40, Derivatives and Hedging —

Contracts in Entity ’

s Own Equity , and were presented within warrant liabilities on the consolidated balance sheet as of December 31, 2022.

The initial fair value of the warrant liabilities was measured at fair value on the Closing Date, and changes in the fair value of the warrant liabilities were presented within changes in fair value of warrant liabilities in the consolidated statement of operations for the year ended December 31, 2022.

On the Closing Date, we established the fair value of the Private Placement Warrants utilizing both the Black-Scholes Merton formula and a Monte Carlo Simulation (“MCS”) analysis.

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We determined the fair value of the Public Warrants by reference to the quoted market price.

The Public Warrants were classified as a Level 1 fair value measurement, due to the use of the quoted market 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 initial measurement on the Closing Date for the Public Warrant liability was approximately $6.3 million and the change in fair value of the Public Warrant liability was approximately $4.0 million for the year ended December 31, 2021.

The Public Warrants were classified as a Level 1 fair value measurement, due to the use of the quoted market price, and the Private Placement Warrants held privately by Big Cypress Holdings LLC, a Delaware limited liability company which acted as our 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 measurement as of December 31, 2021 for the Public Warrant liability was approximately $428,000 and the change in fair value of the Public Warrant liability was approximately $417,000 for the year ended December 31, 2022. 

The key inputs into the valuations as of the Closing Date and December 31, 2022 were as follows:

(Initial Measurement)

October 22, 2021

December 31, 2021

Risk-free interest rate

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Closing common stock price on the measurement date

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 Warrants outstanding for the year ended December 31, 2021.

Equity Classified Warrants

On December 7, 2022, as a part of our 2022 Private Placement, the Company issued PIPE Private Placement Warrants to investors to purchase up to 7,363,377 shares of Common Stock.

The PIPE Private Placement Warrants, including those purchased by the participating directors of SAB are exercisable beginning six months from the date of issuance at an exercise price equal to $1.08 per share, and are exercisable for five years from the date of issuance. We also issued our placement agent, Brookline Capital Markets, PIPE Placement Agent Warrants to purchase up to an aggregate of 210,913 shares of Common Stock The Placement Agent Warrants have an exercise price equal to $1.35 per share and are exercisable six months from the date of issuance and expires five years from the date of issuance.

The PIPE Private Placement Warrants and PIPE Placement Agent Warrants met all necessary criteria to be accounted for as equity in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity.

As such, they are presented within additional paid-in capital within Company's Consolidated Statements of Changes in Stockholders’

Equity (Deficit) and consolidated balance sheets as of December 31, 2022. 

Warrants classified as equity are initially measured at fair value.

Subsequent changes in fair value are not recognized as long as the warrants continue to be classified as equity. The initial fair value of each PIPE Private Placement Warrant and PIPE Placement Agent Warrant issued has been determined using the Black-Scholes option-pricing model.

All relevant terms and conditions for the PIPE Private Placement Warrant and PIPE Placement Agent Warrant are identical with the exception of the exercise prices of $1.08 and $1.35, respectively;

the key inputs into the valuations as of the initial measurement date were as follows:

Risk-free interest rate

Expected term remaining (years)

Implied volatility

Closing common stock price on the measurement date, less discount for lack of marketability (1)

As the underlying shares are restricted from sale for a period of 180 days from the date of the 2022 Private Placement, the fair value of the warrants were estimated using the Black-Scholes option pricing model that uses several inputs, including market price of our common shares at the end of each reporting period (a level one input), less a discount for lack of marketability (a level two input).

The discount for lack of marketability was estimated upon consideration of volatility and the length of the lock-up period.

See Note 14 in our 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 Warrants, PIPE Private Placement Warrants, and PIPE Placement Agent Warrants outstanding for the year ended December 31, 2022.

Common Stock Valuations

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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 the Company's consolidated financial statements, New Accounting Standards.

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 4 in our consolidated financial statements, New Accounting Standards.

Impact of the COVID-19 Pandemic

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These provisions include, but are not limited to:

being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K;

not being required to comply with the auditor attestation requirements on the effectiveness of our internal controls over financial reporting;

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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-K and may elect to take advantage of other reduced reporting requirements in future filings.

our annual gross revenue exceeds $1.235 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 Annual Report 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.

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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.

Quantitative and Qualitative Disclosures about Market Risk.

Not Applicable. 

Financial Statements and Supplementary Data.

The consolidated financial statements required pursuant to this item are included in Part IV, Item 15 of this Annual Report, and are presented beginning on page F-1.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity