SAB Biotherapeutics, Inc 10-Q for FY2021 Q2
SAB Biotherapeutics, Inc. (SABS)
About this 10-Q
SAB Biotherapeutics, Inc filed this 10-Q on August 9, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $2.2M
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
For the transition period from to
Commission file number:
| (Exact Name of Registrant as Specified in Its Charter) |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| The | ||||
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| The |
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See 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 | ☐ |
| ☒ | 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).
As of August 9, 2021, there were issued and outstanding shares of common stock, par value $0.0001 per share.
BIG CYPRESS ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BIG CYPRESS ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| June 30, 2021 |
December 31, 2020 |
|||||||
| (unaudited) | ||||||||
| Assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Deferred offering costs | ||||||||
| Marketable securities held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Accrued offering costs and expenses | $ | $ | ||||||
| Promissory note – related party | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting fee | ||||||||
| Warrant liability | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Common Stock subject to possible redemption, and shares at redemption value at June 30, 2021 and December 31, 2020, respectively | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value; shares authorized; issued and outstanding | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding (excluding and shares subject to possible redemption) at June 30, 2021 and December 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings (Accumulated deficit) | ( |
) | ||||||
| Total stockholders’ equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
BIG CYPRESS ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Operating costs | $ | $ | ||||||
| Loss from Operations | ( |
) | ( |
) | ||||
| Other income (expense): | ||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||
| Offering costs allocated to warrants | ( |
) | ||||||
| Change in fair value of warrant liability | ( |
) | ||||||
| Total other income (expense) | ( |
) | ||||||
| Net income (loss) | $ | ( |
) | $ | ||||
| Basic and diluted weighted average shares outstanding (1) | ||||||||
| Basic and diluted net income (loss) per common share | $ | ( |
) | $ | ||||
| (1) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 4 |
BIG CYPRESS ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE AND SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
| Additional | Retained Earnings/ | Total | ||||||||||||||||||
| Common Stock | Paid-in | (Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit) | Equity | ||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Sale of | ||||||||||||||||||||
| Sale of | ||||||||||||||||||||
| Proceeds received from sale of shares to representative | — | — | 2,105 | — | 2,105 | |||||||||||||||
| Initial recognition of warrant liability | ( | ) | ( | ) | ||||||||||||||||
| Common stock subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net income | — | |||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | $ | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Net income | — | ( | ) | ( | ) | |||||||||||||||
| Change in common stock subject to possible redemption | ||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | $ | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
BIG CYPRESS ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
| Cash flows from operating activities: | ||||
| Net Income | $ | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Interest earned on marketable securities held in Trust Account | ( |
) | ||
| Offering costs allocated to warrants | ||||
| Change in fair value of warrant liability | ( |
) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | ( |
) | ||
| Accrued expenses | ||||
| Net cash used in operating activities | ( |
) | ||
| Cash Flows from Investing Activities: | ||||
| Investment of cash in Trust Account | ( |
) | ||
| Net cash used in investing activities | ( |
) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds from sale of Units, net of underwriting discounts | ||||
| Proceeds from sale of Private Placement Units | ||||
| Proceeds from sale of representative shares | ||||
| Repayment of promissory note – related party | ( |
) | ||
| Payment of deferred offering costs | ( |
) | ||
| Net cash provided by financing activities | ||||
| Net change in cash | ||||
| Cash, beginning of period | ||||
| Cash, end of the period | $ | |||
| Supplemental disclosure of non-cash financing activities: | ||||
| Initial value of common stock subject to possible redemption | $ | |||
| Change in initial value of common stock subject to possible redemption | $ | |||
| Initial recognition of warrant liability | $ | |||
| Deferred underwriters’ discount payable charged to additional paid-in capital | $ | |||
| Change in accrued offering costs | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 6 |
BIG CYPRESS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Note 1 — Organization and Business Operations
Big Cypress Acquisition Corp. (the “Company”) is a newly organized blank check company incorporated in Delaware on November 12, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
As of June 30, 2021, the Company had not commenced any operations. All activity through June 30, 2021 relates to the Company’s formation and the Initial Public Offering (“IPO”) which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering and other income or loss resulting from changes in fair value of the warrant liability.
The registration statement for the Company’s
IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on January 11, 2021 (the “Effective
Date”). On January 14, 2021, the Company consummated the IPO of units (the “Units”) and, with respect to
the shares of common stock included in the Units sold (the “Public Shares”), which included the full exercise by the underwriters
of the over-allotment option to purchase an additional Units, at $ per Unit, generating gross proceeds of $
Simultaneously with the closing of the IPO, the Company
consummated the sale of units (the “Placement Units”), at a price of $ per unit, in a private placement to Big
Cypress Holdings LLC (the “Sponsor”), generating gross proceeds of $
Transaction costs of the IPO amounted to $
Following the closing of the IPO on January 14, 2021,
$
The Company will provide its public stockholders with
the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination either (i) in
connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision
as to whether the Company will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be
made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion of the
amount then on deposit in the Trust Account (initially approximately $
| 7 |
The Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares and placement shares in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to their founder shares and placement shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from the trust account with respect to their founder shares and placement shares if the Company fails to complete the initial business combination within the Combination Period.
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that it could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Business Combination Agreement
On June 21, 2021, the Company, entered into a business combination agreement (the “Business Combination Agreement”) by and among the Company, Big Cypress Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”) SAB Biotherapeutics, Inc., a Delaware corporation (“SAB”) and Shareholder Representative Services LLC, as the stockholder representative to the SAB stockholders. The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into SAB, with SAB surviving as a wholly-owned subsidiary of the Company (the “Merger”). Upon the closing of the Business Combination (the “Closing”), it is anticipated that the Company will change its name to “SAB Biotherapeutics, Inc.” (“New SAB”). The Merger and the other transactions contemplated by the Business Combination Agreement are hereinafter referred to as the “Business Combination.” The Business Combination is expected to close in the fourth quarter of 2021, following the receipt of the required approval by the Company’s stockholders and the fulfilment of other customary closing conditions.
In accordance with the terms and subject to the conditions
of the Business Combination Agreement, prior to the effective time of the Merger (the “Effective Time”) the outstanding
preferred stock of SAB will convert into common stock and at the Effective Time, (i) the outstanding common (including the converted preferred
stock) of SAB (collectively, the “SAB Shares”) will be automatically cancelled, extinguished and converted into a number
of the Company’s common stock, par value $ per share (the “Company New Shares”), based on SAB’s equity
value; (ii) each outstanding vested and unvested option to purchase SAB Shares will be canceled in exchange for a comparable option to
purchase Company New Shares, based on SAB’s equity value; and (iii) each unvested award of restricted SAB Shares will be converted
into a comparable right to receive restricted Company Shares, based on SAB’s equity value, in each of the foregoing cases, allocated
in the manner described in the Business Combination Agreement. For purposes of the Business Combination Agreement, SAB’s equity
value is $
| 8 |
In addition to the foregoing consideration, SAB stockholders shall be entitled to receive, as additional consideration, and without any action on behalf of the Company, Merger Sub, or the Company’s stockholders, additional Company New Shares (the “Earnout Shares”), to be issued as follows during the period from and after the Closing until the fifth anniversary of the Closing (the “Earnout Period”) During the Earnout Period, if New SAB experiences a Change of Control (as defined as defined in the Business Combination Agreement), then any Earnout Shares not already earned and issued to the SAB stockholders shall be deemed earned and the balance of the Earnout Shares shall be issuable by New SAB to the SAB stockholders immediately prior to consummation of such Change of Control transaction.
The Business Combination Agreement may be terminated under certain customary and limited circumstances described in the Business Combination Agreement, including, without limitation, each party’s right to terminate, subject to certain limited exceptions, if the Business Combination is not consummated by December 15, 2021. If the Business Combination Agreement is validly terminated, none of the parties to the Business Combination Agreement will have any liability with respect to the other parties to the Business Combination Agreement or any further obligation under the Business Combination Agreement, other than customary confidentiality obligations, except in the case of Willful Breach or Fraud (each, as defined in the Business Combination Agreement).
Note 2 — Restatement of Previously Issued Financial Statements
In April 2021, the Company concluded that, because of a misapplication of the accounting guidance related to its Public and Private Placement warrants the Company issued in January 2021, the Company’s previously issued balance sheet as of January 14, 2021 on Form 8-K filed with SEC on January 21, 2021 should no longer be relied upon. As such, the Company restated its balance sheet included in that Form 8-K as shown below.
On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Since issuance on January 14, 2021, the Company’s warrants were accounted for as equity within the Company’s previously reported balance sheet, and after discussion and evaluation, management, in consultation with its Audit Committee, concluded that the warrants should be presented as liabilities with subsequent fair value remeasurement.
Historically, the Warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the Warrants, based on our application of FASB ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. The Company reassessed its accounting for Warrants issued on January 14, 2021, in light of the SEC Staff’s published views. Based on this reassessment, management determined that the Warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company Statement of Operations each reporting period.
Impact of the Restatement
The impact to the balance sheet dated January 14,
2021, filed on Form 8-K on January 21, 2021 related to the impact of accounting for public and private warrants as liabilities at fair
value resulted in a $
| 9 |
Schedule of Restatement of Balance Sheet
| As of January 14, 2021 | ||||||||||||
| As Previously Reported |
Restatement Adjustment |
As Restated | ||||||||||
| Balance Sheet as of January 14, 2021 | ||||||||||||
| Total assets | $ | $ | $ | |||||||||
| Liabilities and stockholders’ equity | ||||||||||||
| Total current liabilities | $ | $ | $ | |||||||||
| Stock warrant liabilities | ||||||||||||
| Total liabilities | $ | |||||||||||
| Class A common stock, $ par value; shares subject to possible redemption | ( |
) | ||||||||||
| Stockholders’ equity | ||||||||||||
| Preferred stock- $ par value | ||||||||||||
| Common stock - $ par value | ||||||||||||
| Additional paid-in-capital | ||||||||||||
| Accumulated deficit | ( |
) | ( |
) | ( |
) | ||||||
| Total stockholders’ equity | ||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | $ | |||||||||
Note 3 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented
The accompanying unaudited condensed financial statements
should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the
SEC on April 2, 2021, which contains the audited financial statements and notes thereto. The interim results for the three months and
six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending
December 31, 2021 or for any future interim periods.
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.
| 10 |
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with
an original maturity of three months or less when purchased to be cash equivalents. The Company did
Marketable Securities Held in Trust Account
At June 30, 2021, substantially all of the assets held in the Trust Account were held in money market funds which invest in U.S. Treasury securities.
Warrant Liabilities
The Company evaluated the Public Warrants and Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 2, Note 4, Note 5 and Note 9) in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the Condensed Balance Sheet and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the Condensed Statement of Operations in the period of change.
Offering Costs Associated with the Initial Public Offering
The Company complies
with the requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred
through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable
financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received.
Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of
operations. Offering costs associated with the Class A common stock were charged to stockholders’ equity upon the completion of
the Initial Public Offering. Transaction costs for the six months ended June 30, 2021 amounted to $
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
| 11 |
Income Taxes
The Company accounts for income taxes under ASC 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. The deferred tax assets were deemed to be de minimis as of June 30, 2021 and December 31, 2020.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were
Net loss per share is computed by dividing net loss
by the weighted average number of shares of common stock outstanding during the period. The Company applies the two-class method in calculating
earnings per share. Shares of common stock subject to possible redemption at June 30, 2021, which are not currently redeemable and are
not redeemable at fair value, have been excluded from the calculation of basic net loss per common share since such shares, if redeemed,
only participate in their pro rata share of the Trust Account earnings, less the Company’s portion available to pay taxes. The Company
has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase
Net Income per Common Share
Schedule of Reconciliation of Net Income Per Common Share
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
|||||||
| Common Stock Subject to Possible Redemption | ||||||||
| Numerator: Earnings allocable to common stock subject to possible redemption | ||||||||
| Interest earned on marketable securities held in Trust Account | $ | $ | ||||||
| Less: Interest allocable to non-redeemable common stock | ( |
) | ( |
) | ||||
| Net income allocable to shares subject to possible redemption | $ | $ | ||||||
| Denominator: Weighted Average Redeemable Class A Ordinary Shares | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
| Non-Redeemable Common Stock | ||||||||
| Numerator: Net Income (Loss) Minus Net Earnings | ||||||||
| Net Income (Loss) | $ | ( |
) | $ | ||||
| Less: Income attributable to common stock subject to possible redemption | ( |
) | ( |
) | ||||
| Non-Redeemable net income (loss) | $ | ( |
) | $ | ||||
| Weighted average non-redeemable shares outstanding, basic and diluted | ||||||||
| Basic and diluted net income (loss) per share | $ | ( |
) | $ | ||||
| 12 |
Concentration of Credit Risk
Financial instruments that potentially subject the
Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the federal
depository insurance coverage of $
Fair Value of Financial Instruments
The Company follows the guidance in ASC 820, “Fair Value Measurement,” for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1 — | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
| Level 2 — | Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
| Level 3 — | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
See Note 9 for additional information on assets and liabilities measured at fair value.
Recently Adopted Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company early adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
| 13 |
Note 4 — Initial Public Offering
Public Units
On January 14, 2021, the Company sold Units, at a purchase price of $ per Unit, which includes the full exercise by the underwriters of the over-allotment option to purchase an additional Units, at a purchase price of $ per Unit. Each Unit consists of one share of common stock, and one-half warrant to purchase one share of common stock (the “Public Warrants”).
Public Warrants
Each whole warrant entitles the holder to purchase one share of the Company’s common stock at a price of $ per share, subject to adjustment as discussed herein. The warrants will become exercisable on the later of 12 months from the closing of this offering or 30 days after the completion of its initial business combination, and will expire five years after the completion of the Company’s initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of common stock underlying the warrants is then effective and a prospectus is current. No warrant will be exercisable and the Company will not be obligated to issue shares of common stock upon exercise of a warrant unless common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of common stock underlying such unit.
Once the warrants become exercisable, the Company may call the warrants for redemption:
| ● | in whole and not in part; | |
| ● | at a price of $ | |
| ● | upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and | |
| ● | if,
and only if, |
If the Company calls the warrants for redemption as described above, the management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” If the management exercises this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the excess of the “fair market value” (defined below) over the exercise price of the warrants by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
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Note 5 — Private Placement
Simultaneously with the closing of the IPO, the Sponsor
purchased an aggregate of Placement Units, at a price of $ per Placement Unit, for an aggregate purchase price of $
Each Placement Unit was identical to the Units sold in the IPO, except for the placement warrants (“Placement Warrants”). The Placement Warrants and the common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or saleable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. If the Company does not complete its initial business combination within 15 months (or up to 21 months) from the closing of this IPO, the proceeds from the sale of the Placement Units held in the trust account will be used to fund the redemption of its public shares (subject to the requirements of applicable law) and the Placement Warrants will expire.
Note 6 — Related Party Transactions
Founder Shares
On November 12, 2020, the Company issued shares of common stock to the Sponsor for $ in cash, or approximately $ per share, in connection with formation. On December 7, 2020, the Sponsor forfeited founder shares to the Company and Ladenburg Thalmann & Co. Inc., the representative of the underwriters, and certain of its employees (“Ladenburg”) purchased from the Company an aggregate of representative shares at an average purchase price of approximately $ per share, for an aggregate purchase price of $.
On January 3, 2021, the Company effected a stock dividend of 1/3 of a share of common stock for every share of common stock outstanding, resulting in an aggregate of founder shares outstanding (including up to shares subject to forfeiture to the extent that the underwriters’ over-allotment was not exercised in full or in part). As a result of the underwriters’ election to fully exercise their over-allotment option on January 14, 2021, the shares are no longer subject to forfeiture.
As discussed further below, on January 4, 2021, the Sponsor forfeited founder shares to the Company and Ladenburg and certain of its employees purchased from the Company an aggregate of representative shares at an average purchase price of approximately $0.008 per share, for an aggregate purchase price of $. As a result, the Sponsor currently owns shares.
Representative Shares
On December 7, 2020, the Sponsor forfeited founder shares to the Company and Ladenburg and certain of its employees purchased from the Company an aggregate of representative shares at an average purchase price of approximately $per share, for an aggregate purchase price of $. On January 4, 2021, the Sponsor forfeited founder shares to the Company and Ladenburg and certain of its employees purchased from the Company an aggregate of representative shares at an average purchase price of approximately $per share, for an aggregate purchase price of $. Following the 1/3 common stock dividend effected January 3, 2021 (as described herein), Ladenburg and certain of its employees now hold an aggregate of representative shares (of which up to were subject to forfeiture). As a result of the underwriters’ election to fully exercise of their over-allotment option, the shares are no longer subject to forfeiture.
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Ladenburg and certain of its employees have entered into a subscription agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to their representative shares, as applicable, and public shares in connection with the completion of our initial business combination, (ii) waive their redemption rights with respect to their representative shares, as applicable, (iii) waive their rights to liquidating distributions from the trust account with respect to their representative shares if the Company fails to complete the initial business combination within the Combination Period.
Promissory Note — Related Party
On November 19, 2020, Company issued an unsecured
promissory note to the Sponsor for an aggregate of up to $
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans
but no proceeds from the Trust Account would be used to repay the Working Capital Loans.
Administrative Service Fee
The Company has agreed to pay an affiliate of
the Company’s Sponsor a monthly fee of an aggregate of $
Note 7 — Commitments and Contingencies
Underwriting Agreement
The underwriter had a 45-day option from the date of the IPO to purchase up to an aggregate of additional Units at the public offering price less the underwriting commissions to cover over-allotments, if any. On January 14, 2021, the underwriter fully exercised its over-allotment option.
Upon consummation of the IPO on January 14, 2021,
the underwriters were paid a cash underwriting fee of
The underwriters are entitled to a deferred
underwriting fee of
| 16 |
Registration Rights
The holders of the founder shares, representative shares, placement units, and units that may be issued upon conversion of working capital loans will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement to be signed prior to or on the effective date of this offering. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Note 8 — Stockholders’ Equity
Preferred Stock — The Company is authorized to issue a total of preferred shares at par value of $ each. At June 30, 2021 and December 31, 2020, there were shares of preferred stock issued or outstanding.
Common Stock — The Company is authorized to issue a total of share of common stock at par value of $ each. At June 30, 2021 and December 31, 2020, there were and shares issued and outstanding, excluding and shares subject to possible redemption, respectively.
Note 9 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
| June 30, | Quoted Prices In Active Markets |
Significant Other Observable Inputs |
Significant Other Unobservable Inputs |
|||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Money Market held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Public Warrants Liability | $ | $ | $ | $ | ||||||||||||
| Private Placement Warrants Liability | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Condensed Balance Sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the Condensed Statement of Operations.
| 17 |
The Company established the initial fair value of the Public Warrants and Private Warrants on January 14, 2021, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model. On June 30, 2021, the Company established the fair value of the Private Warrants using a Monto Carlo simulation model, and the fair value of the Public Warrants by reference to the quoted market price. The Public Warrants have traded on The Nasdaq Stock Market, LLC since January 14, 2021 under the trading symbol BCYPW. The Public and Private Warrants were classified as Level 3 at January 14, 2021 and the Private Warrants were classified as Level 3 at June 30, 2021 due to the use of unobservable inputs. As of June 30, 2021, the Public Warrants were transferred to Level 1 due to the use of the quoted market price.
The following table presents the changes in the fair value of the Level 3 liabilities:
Schedule of Change in Fair Value Liabilities
| Private Placement Warrants | Public Warrants |
Warrant Liabilities | ||||||||||
| Fair Value as of December 31, 2020 | $ | $ | $ | |||||||||
| Initial measurement on January 14, 2021 | ||||||||||||
| Change in valuation | ( |
) | ( |
) | ( |
) | ||||||
| Transferred to Level 1 | ( |
) | ( |
) | ||||||||
| Balance, June 30, 2021 | $ | $ | $ | |||||||||
The key inputs into the Monte Carlo simulation as of January 14, 2021 and June 30, 2021 were as follows:
Schedule of Key Inputs into Monte Carlo Simulation
| (Initial Measurement) | ||||||||
| Inputs | January 14, 2021 | June 30, 2021 | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term remaining (years) | ||||||||
| Expected volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Big Cypress Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Big Cypress Holdings LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on November 12, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. We intend to effectuate our initial business combination using cash from the proceeds of the IPO (as defined below) and the sale of the Private Units (as defined below), our capital stock, debt or a combination of cash, stock and debt.
Recent Events
Proposed Business Combination
As more fully described in Note 1 to the financial statements to this Quarterly Report and in a Current Report on Form 8-K filed by the Company with the SEC on June 22, 2021, on June 21, 2021, the Company, entered into a business combination agreement (the “Business Combination Agreement”) by and among the Company, Big Cypress Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), SAB Biotherapeutics, Inc., a Delaware corporation (“SAB”) and Shareholder Representative Services LLC, as the stockholder representative to the SAB stockholders. The Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into SAB, with SAB surviving as a wholly-owned subsidiary of the Company (the “Merger”). Upon the closing of the Business Combination (the “Closing”), it is anticipated that the Company will change its name to “SAB Biotherapeutics, Inc.” (“New SAB”). The Merger and the other transactions contemplated by the Business Combination Agreement are hereinafter referred to as the “Business Combination.” The Business Combination is expected to close in the fourth quarter of 2021, following the receipt of the required approval by the Company’s stockholders and the fulfilment of other customary closing conditions. However, the Company cannot provide any assurance that the Business Combination will be completed.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 12, 2020 (inception) through June 30, 2021 were organizational activities, those necessary to prepare for the IPO, described below, and identifying a target company for our initial business combination. We do not expect to generate any operating revenues until after the completion of the Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account (as defined below) and other income or loss resulting from changes in fair value of the warrant liability. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three and six months ended June 30, 2021, we had operating costs of $256,847 and $368,459, respectively consisting of professional and administrative expense. We also had other income (expense) of ($1,945,314) and $1,139,518, respectively, which consists of $2,896 and $5,315 of interest earned on marketable securities held in the Trust Account, nil and $359,874 of offering expense allocated to the warrants and ($1,948,210) and $1,494,077 gain resulting from the change in the fair value of our warrant liability, respectively.
Liquidity and Capital Resources
On January 14, 2021, we consummated our initial public offering (the “IPO”) of 11,500,000 of our units (the “Public Units”) which included Public Units subject to the underwriters’ over-allotment option, which option was exercised in full. Each Public Unit consists of one share of common stock and one-half redeemable warrant, with each whole warrant entitling the holder to purchase one share of common stock at a price of $11.50 per share (the “Public Warrants”). The Public Units were sold at an offering price of $10.00 per Public Unit, generating gross proceeds of $115,000,000.
Simultaneously with the consummation of the IPO, we consummated the private placement (“Private Placement”) of 417,200 units (the “Private Units”) at a price of $10.00 per Private Unit with each Private Unit consisting of one share of common stock and one-half warrant, with each whole warrant entitling the holder to purchase one share of common stock at a price of $11.50 per share (the “Private Warrants”), generating total proceeds of $4,172,000. The Private Units were sold to the Sponsor. The Private Units and Private Warrants are identical to the Public Units and Public Warrants sold in the IPO, except that the Private Warrants underlying the Private Units are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the Sponsor or its permitted transferees.
Following the closing of the IPO and the sale of additional Private Units, an aggregate amount of $116,150,000 has been placed in the trust account (the “Trust Account”) established in connection with the IPO. Transaction costs amounted to $6,108,360 consisting of $1,529,500 of underwriting fee, $4,220,500 of deferred underwriting fee, and $358,360 of other offering costs. In addition, $1,216,731 of cash was held outside of the Trust Account, which is available for the payment of offering costs and for working capital purposes. As a result of the underwriters’ exercise of the over-allotment option in full, 375,000 of the founder shares are no longer subject to forfeiture.
As of June 30, 2021, we had marketable securities held in the Trust Account of $116,155,315 (including $5,315 interest income) consisting of money market funds which invest in U.S. Treasury securities. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through June 30, 2021, we have not withdrawn any interest earned on the Trust Account.
For the six months ended June 30, 2021, net cash used in operating activities was $464,411. Net income of $771,059 was affected by interest earned on marketable securities held in the Trust Account of $5,315, offering costs allocated to warrants of $359,874, a change in the fair value of our warrant liability of $1,494,077, an increase in prepaid assets of $177,609 and a decrease in accrued expenses of $81,657.
For the six months ended June 30, 2021, net cash used in investing activities was $116,150,000 for our investment in the Trust Account.
For the six months ended June 30, 2021, net cash provided by financing activities was $117,286,378 primarily from the sale of public and private Units in the amount of $117,644,605, net of underwriting discounts. This was partially offset by the $150,000 repayment of a related party promissory note and payment of $208,227 in deferred offering costs.
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We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete the Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete the Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2021, we had cash of $756,803 outside the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete the Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with the Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete the Business Combination, we would repay such loaned amounts. In the event that the Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units at a price of $10.00 per unit, at the option of the lender. The units would be identical to the Private Units.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating the Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to the Business Combination. Moreover, we may need to obtain additional financing either to complete the Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of the Business Combination, in which case we may issue additional securities or incur debt in connection with the Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of the Business Combination. If we are unable to complete the Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following the Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2021.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of one of our executive officers a monthly fee of $10,000 for office space, utilities and secretarial and administrative support. We began incurring these fees on January 14, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The following are the critical accounting policies applied in the preparation of the condensed financial statements:
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the Public and Private Warrants are derivative instruments.
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FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the common stock.
Common stock subject to possible redemption
The Company accounts for its Common Stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, shares of the Company’s common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Net income (loss) per common share
Net income per share of common stock is computed by dividing net income by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted income per share of common stock does not consider the effect of the warrants issued in connection with the (i) IPO and contemporaneous issuance of Private Placement Units, (ii) exercise of overallotment and (iii) Private Placement since the exercise of the warrants are contingent upon the occurrence of future events. The warrants are exercisable to purchase 5,958,600 shares of common stock in the aggregate.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company early adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2021, we were not subject to any market or interest rate risk. Following the consummation of our IPO, the net proceeds of our IPO, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, due solely to the material weakness we have identified in our internal control over financial reporting described below, our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective.
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A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. We became aware of the need to change the classification of our warrants when the SEC issued a statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” on April 12, 2021. As a result, our principal executive officer and principal financial officer concluded that there was a material weakness in internal control over financial reporting as of June 30, 2021. In light of the material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements for the Quarterly Report for the period ended March 31, 2021 filed with the SEC on May 21, 2021 and for this Quarterly Report on Form 10-Q were prepared in accordance with U.S. generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
Remediation Plan
As a newly created organization, we are currently in the process of implementing our financial reporting processes and will incorporate enhanced communication and documentation procedures between our operations team and the individuals responsible for preparation of financial statements. These controls are expected to include the implementation of additional supervision and review activities by qualified personnel, and the development and use of checklists and research tools to assist in compliance with GAAP. We intend to complete the enhancement of our financial reporting processes during fiscal year 2021. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments. Additionally, we must expend resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in our final prospectus filed with the SEC on January 14, 2021. As of the date of this Quarterly Report, other than as described below, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC. As we have executed a Business Combination Agreement with SAB Biotherapeutics, Inc., we are also subject to, and you should review and understand, the risk factors that will be set forth in our preliminary prospectus/proxy statement to be included in a Registration Statement on Form S-4 that we will file with the SEC relating to our proposed business combination with SAB Biotherapeutics, Inc.
We may not be able to effect the Business Combination pursuant to the Business Combination Agreement. If we are unable to do so, we will incur substantial costs associated with withdrawing from the transaction, and may not be able to find additional sources of financing to cover those costs.
In connection with the Business Combination Agreement, we have incurred substantial costs researching, planning and negotiating the transaction. These costs include, but are not limited to, costs associated with securing sources of equity financing, costs associated with employing and retaining third-party advisors who performed the financial, auditing and legal services required to complete the transaction, and the expenses generated by our officers, executives, managers and employees in connection with the transaction. If, for whatever reason, the transaction contemplated by the Business Combination Agreement fails to close, we will be responsible for these costs, but will have no source of revenue with which to pay them. We may need to obtain additional sources of financing in order to meet our obligations, which we may not be able to secure on the same terms as our existing financing or at all. If we are unable to secure new sources of financing and do not have sufficient funds to meet our obligations, we may be forced to cease operations and liquidate the Trust Account.
If the anticipated Business Combination with SAB Biotherapeutics, Inc. fails, it may be difficult to research a new prospective target business and negotiate and agree to a new business combination by April 14, 2022, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate.
Finding, researching, analyzing and negotiating with SAB Biotherapeutics, Inc. took a substantial amount of time, and if the Business Combination with SAB Biotherapeutics, Inc. fails, we may not be able to find a suitable target business and complete our Initial Business Combination within 15 months after the closing of our Initial Public Offering (or up to 21 months from the closing of this offering if we extend the period of time to consummate our initial business combination twice, each extension up to three months, as described in more detail in our IPO prospectus, dated January 12, 2021). If we have not completed our Initial Business Combination within such time period, we will be forced to cease all operations except for the purpose of winding up.
Our warrants are now accounted for as derivative liabilities and are recorded at fair value with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock or may make it more difficult for us to consummate the Business Combination.
We issued 5,750,000 warrants as part of the units offered in our initial public offering, and, concurrently therewith, we issued 208,600 private placement warrants that are part of 417,200 private placement units that we privately placed simultaneously with our IPO. We have accounted for both the warrants underlying the units offered in our initial public offering and the warrants that are part of our private placement units as a warrant liability. At each reporting period (1) the accounting treatment of the warrants will be re-evaluated for proper accounting treatment as a liability or equity and (2) the fair value of the liability of the public and private warrants will be remeasured and the change in the fair value of the liability will be recorded as other income (expense) in our income statement.
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Changes in the inputs and assumptions for the valuation model we use to determine the fair value of such liability may have a material impact on the estimated fair value of the embedded derivative liability. The share price of our common stock represents the primary underlying variable that impacts the value of the derivative instruments. Additional factors that impact the value of the derivative instruments include the volatility of our stock price, discount rates and stated interest rates. As a result, our condensed financial statements and results of operations will fluctuate quarterly, based on various factors, such as the share price of our common stock, many of which are outside of our control. In addition, we may change the underlying assumptions used in our valuation model, which could in result in significant fluctuations in our results of operations. If our stock price is volatile, we expect that we will recognize non-cash gains or losses on our warrants or any other similar derivative instruments each reporting period and that the amount of such gains or losses could be material. The impact of changes in fair value on earnings may have an adverse effect on the market price of our common stock. In addition, potential targets may seek a SPAC that does not have warrants that are accounted for as a liability, or have any warrants at all, which may make it more difficult for us to consummate the Business Combination.
We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
After consultation with our independent registered public accounting firm following the issuance of the SEC Staff Statement on April 12, 2021, our management and our audit committee concluded that, in light of the SEC Staff Statement, it was appropriate to restate our previously issued and audited balance sheet as of January 14, 2021.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation of those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
As described elsewhere in this Quarterly Report, we have identified a material weakness in our internal control over financial reporting related to the accounting for a significant and unusual transaction related to the warrants we issued in connection with our initial public offering in January 2021. As a result of this material weakness, our management has concluded that our internal control over financial reporting was not effective. This material weakness resulted in a misstatement of our derivative warrant liabilities and related financial disclosures as of January 14, 2021. For a discussion of management’s consideration of the material weakness identified related to our accounting for a significant and unusual transaction related to the warrants we issued in connection with our IPO, see “Note 2—Restatement of Previously Issued Financial Statements” to the accompanying financial statements, as well as Part I, Item 4: Controls and Procedures included in this Report.
As described in Item 4. “Controls and Procedures,” we have concluded that our internal control over financial reporting was ineffective as of June 30, 2021 because a material weakness existed in our internal control over financial reporting. If we are unable to remediate our material weakness in a timely manner or we identify additional material weaknesses, we may be unable to provide required financial information in a timely or reliable manner and we may incorrectly report financial information. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In such a case, there could result a material adverse effect on our business. The existence of material weaknesses or significant deficiencies in internal control over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the trading price of our stock. In addition, we may incur additional costs to remediate the material weakness in our internal control over financial reporting, as described in Item 4. “Controls and Procedures.”
We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls or otherwise.
For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in our prospectus dated January 14, 2021.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| No. | Description of Exhibit | |
| 31* | Certification of Principal Executive and Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32* | Certification of Principal Executive and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101* | The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021 formatted in Inline Extensible Business Reporting Language (Inline XBRL): | |
| 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||
| 101.SCH Inline XBRL Taxonomy Extension Schema | ||
| 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase | ||
| 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase | ||
| 101.LAB Inline XBRL Taxonomy Extension Label Linkbase | ||
| 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase | ||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BIG CYPRESS ACQUISITION CORP. | ||
| Date: August 9, 2021 | By: | /s/ Samuel J. Reich |
| Name: | Samuel J. Reich | |
| Title: | Chief Executive and Chief Financial Officer | |
| (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
| 27 |
EXHIBIT 31
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Samuel J. Reich, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Big Cypress Acquisition Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and
b) (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 9, 2021
| /s/ Samuel J. Reich | |
| Samuel J. Reich | |
| Chairman and Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer and Principal Financial and Accounting Officer) |
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Big Cypress Acquisition Corp. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), I, Samuel J. Reich, Chief Executive and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.
Dated: August 9, 2021
| /s/ Samuel J. Reich | |
| Samuel J. Reich | |
| Chairman and Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer and Principal Financial and Accounting Officer) |