SAB Biotherapeutics(SABS) - 2025 Q2 - Quarterly Report

PART I Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, changes in stockholders' equity, and cash flows, along with detailed notes on business and accounting policies Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show a significant decrease in total assets and stockholders' equity from December 31, 2024, to June 30, 2025, primarily driven by a reduction in cash, cash equivalents, and short-term investments, alongside an increased accumulated deficit | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------ | :---------------- | :------- | :------- | | Cash and cash equivalents | $3,692,217 | $8,897,966 | $(5,205,749) | -58.50% | | Short-term investments | $2,021,335 | $11,862,746 | $(9,841,411) | -82.96% | | Total current assets | $9,308,121 | $23,792,229 | $(14,484,108) | -60.88% | | Total assets | $30,129,488 | $44,195,469 | $(14,065,981) | -31.83% | | Total current liabilities | $10,677,337 | $7,979,600 | $2,697,737 | 33.81% | | Warrant liabilities | $1,980,512 | $6,389,226 | $(4,408,714) | -68.99% | | Total liabilities | $18,113,273 | $18,225,893 | $(112,620) | -0.62% | | Total stockholders' equity | $12,016,215 | $25,969,576 | $(13,953,361) | -53.73% | | Accumulated deficit | $(139,479,893)| $(124,168,850) | $(15,311,043) | 12.33% | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported increased net losses for both the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to the absence of grant revenue and a negative change in the fair value of warrant liabilities in the three-month period. Operating expenses saw a slight increase in R&D for the three months but a slight decrease for the six months, while G&A expenses decreased for both periods | Metric (3 Months Ended June 30) | 2025 | 2024 | Change | % Change | | :------------------------------ | :------------ | :------------ | :------------ | :------- | | Grant revenue | $0 | $263,137 | $(263,137) | -100.00% | | Research and development | $6,996,660 | $6,822,198 | $174,462 | 2.56% | | General and administrative | $2,735,401 | $3,642,637 | $(907,236) | -24.90% | | Total operating expenses | $9,732,061 | $10,464,835 | $(732,774) | -7.00% | | Loss from operations | $(9,732,061) | $(10,201,698) | $469,637 | -4.60% | | Changes in fair value of warrant liabilities | $(627,056) | $2,216,973 | $(2,844,029) | -128.28% | | Net loss | $(10,114,270) | $(7,335,455) | $(2,778,815) | 37.88% | | Basic and diluted loss per share| $(1.09) | $(0.79) | $(0.30) | 37.97% | | Metric (6 Months Ended June 30) | 2025 | 2024 | Change | % Change | | :------------------------------ | :------------ | :------------ | :------------ | :------- | | Grant revenue | $0 | $1,207,712 | $(1,207,712) | -100.00% | | Research and development | $14,653,981 | $14,769,253 | $(115,272) | -0.78% | | General and administrative | $5,850,182 | $8,030,773 | $(2,180,591) | -27.15% | | Total operating expenses | $20,504,163 | $22,800,026 | $(2,295,863) | -10.07% | | Loss from operations | $(20,504,163) | $(21,592,314) | $1,088,151 | -5.04% | | Changes in fair value of warrant liabilities | $4,408,713 | $7,685,192 | $(3,276,479) | -42.63% | | Net loss | $(15,311,043) | $(12,361,200) | $(2,949,843) | 23.86% | | Basic and diluted loss per share| $(1.65) | $(1.34) | $(0.31) | 23.13% | Condensed Consolidated Statements of Changes In Stockholders' Equity The statements of changes in stockholders' equity reflect a decrease in total equity from $25.97 million at December 31, 2024, to $12.02 million at June 30, 2025, primarily due to the net loss incurred during the period and an increase in accumulated deficit. Stock-based compensation added to additional paid-in capital | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :---------------- | :------------ | | Common stock | $935 | $936 | | Additional paid-in capital | $155,794,142 | $157,032,218 | | Accumulated other comprehensive loss | $(135,410) | $(15,805) | | Accumulated deficit | $(124,168,850) | $(139,479,893)| | Total stockholders' equity | $25,969,576 | $12,016,215 | - Stock-based compensation for the six months ended June 30, 2025, was $1,240,149, contributing to additional paid-in capital[11] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities decreased compared to 2024, while investing activities shifted from a net cash outflow to a net cash inflow, primarily due to decreased purchases and increased sales/maturities of investments. Financing activities continued to use cash, but at a lower rate | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | Change | % Change | | :-------------------------------------------- | :-------------- | :-------------- | :-------------- | :------- | | Net cash used in operating activities | $(14,948,761) | $(18,467,790) | $3,519,029 | -19.05% | | Net cash provided by (used in) investing activities | $9,868,940 | $(20,140,390) | $30,009,330 | -149.00% | | Net cash used in financing activities | $(347,829) | $(715,457) | $367,628 | -51.38% | | Net decrease in cash and cash equivalents | $(5,205,749) | $(39,323,624) | $34,117,875 | -86.76% | | Cash and cash equivalents, End of period | $3,692,217 | $17,242,442 | $(13,550,225) | -78.59% | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the financial statements, covering the company's business, accounting policies, financial instruments, equity, and subsequent events. Key highlights include the company's focus on immunotherapeutic antibodies, its liquidity challenges, and a significant Series B private placement completed post-period end to fund clinical trials (1) Nature of Business SAB Biotherapeutics is a clinical-stage biopharmaceutical company developing human polyclonal immunotherapeutic antibodies for immune system disorders and infectious diseases. Its lead candidate, SAB-142, targets Type 1 Diabetes. The company faces liquidity challenges due to ongoing net losses and negative cash flows, but a recent $175 million Series B offering is expected to fund operations for the next twelve months and advance the SAB-142 Phase 2b SAFEGUARD study - SAB Biotherapeutics is a clinical-stage biopharmaceutical company focused on developing human polyclonal immunotherapeutic antibodies (hIgG) for immune system disorders and infectious diseases. Its lead candidate, SAB-142, is a human anti-thymocyte globulin (ATG) aimed at preventing or delaying Type 1 Diabetes (T1D)[13] - The company has experienced net losses and negative cash flows from operations, with an accumulated deficit of $139.5 million as of June 30, 2025, and anticipates continued losses[15] - On July 21, 2025, the company secured approximately $175 million in gross proceeds from a Series B private placement offering, intended to fund the Phase 2b SAFEGUARD study of SAB-142 and for general corporate purposes. This funding is expected to cover operating cash needs for the next twelve months[16][17] Australian R&D Tax Credit Income | Period | 2025 (million) | 2024 (million) | | :----- | :------------- | :------------- | | 3 months | $0.3 | $0.3 | | 6 months | $0.8 | $0.6 | (2) Summary of Significant Accounting Policies This section outlines the key accounting principles and methods used in preparing the condensed consolidated financial statements, including adherence to GAAP for interim reporting, the company's status as an emerging growth company, consolidation principles, use of estimates, fair value measurements, and policies for revenue recognition, R&D expenses, and stock-based compensation - The financial statements are prepared in accordance with U.S. GAAP for interim financial statements and SEC rules, with certain information condensed or omitted[19] - The company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[20][21] - Revenue is primarily generated from government grants, recognized as research and development services occur or conditions are met. No revenue was recognized for the three and six months ended June 30, 2025, due to grant terminations[51][52][63] - Research and development expenses are expensed as incurred, including licensing fees, consultant fees, animal care, equipment depreciation, salaries, and stock-based compensation[43] (3) New accounting standards The company is currently evaluating the impact of ASU 2024-03, 'Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Topic 220)', which requires additional disclosures for certain expenses and is effective for annual periods beginning after December 15, 2026 - ASU 2024-03 requires additional disclosure in the notes to financial statements of specified information about certain expenses such as purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation and other expenses[61] - This ASU is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact[62] (4) Revenue The company recognized no grant revenue for the three and six months ended June 30, 2025, a significant decrease from the prior year due to the termination of US Department of Defense grants in 2022 and the satisfaction of all related obligations by December 31, 2024 Grant Revenue | Period | 2025 | 2024 | | :----- | :--- | :--- | | 3 months ended June 30 | $0 | $0.3 million | | 6 months ended June 30 | $0 | $1.2 million | - The decrease in revenue is due to the termination of various US Department of Defense grants in 2022, with all obligations satisfied by December 31, 2024[63] (5) Earnings per share Due to net losses in both periods, basic and diluted loss per common share were identical, as all potentially dilutive securities were anti-dilutive. The loss per share increased for both the three and six months ended June 30, 2025, compared to 2024 Basic and Diluted Loss Per Share | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss attributable to shareholders | $(10,114,270) | $(7,335,455) | $(15,311,043) | $(12,361,200) | | Weighted-average common shares outstanding | 9,294,469 | 9,255,025 | 9,293,018 | 9,248,503 | | Net loss per share, basic and diluted | $(1.09) | $(0.79) | $(1.65) | $(1.34) | - Potentially dilutive securities (stock options, restricted stock awards, warrants, earnout shares, Series A Preferred Stock) were excluded from diluted EPS calculation as their effect would be anti-dilutive[64][65] (6) Property, plant and equipment Net property, plant, and equipment decreased from $15.37 million at December 31, 2024, to $13.86 million at June 30, 2025, primarily due to accumulated depreciation and amortization. Depreciation and amortization expense also decreased for both the three and six months ended June 30, 2025, compared to 2024 Property, Plant and Equipment, Net | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Property, plant and equipment, gross | $29,935,070 | $29,941,933 | | Less: accumulated depreciation and amortization | $(16,076,966) | $(14,573,924) | | Property, plant and equipment, net | $13,858,104 | $15,368,009 | Depreciation and Amortization Expense | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Expense | $0.8 million | $1.0 million | $1.5 million | $3.0 million | (7) Leases The company holds various operating and finance leases for lab space, office, and an animal facility. Operating lease liabilities increased significantly, while finance lease liabilities slightly decreased. The weighted-average remaining lease term for operating leases increased, reflecting new lease agreements, while the finance lease term slightly decreased - The company renewed an operating lease for lab space through December 31, 2029, with monthly costs of approximately $50 thousand through 2025 and annual 2% increases. It also entered a new office lease in Miami Beach in April 2024 for 62 months[68][69][70] - A finance lease for an animal facility, entered in December 2018, has a 20-year term at an 8% interest rate, with monthly payments of $34 thousand. The company has an option to purchase the asset[72] Lease Liabilities and Terms | Metric | June 30, 2025 (Operating) | June 30, 2025 (Finance) | December 31, 2024 (Operating) | December 31, 2024 (Finance) | | :-------------------------------- | :------------------------ | :---------------------- | :---------------------------- | :-------------------------- | | Operating lease right-of-use assets | $3,006,354 | N/A | $970,294 | N/A | | Finance lease right-of-use assets | N/A | $3,539,423 | N/A | $3,582,835 | | Operating lease liabilities, current portion | $815,064 | N/A | $393,430 | N/A | | Finance lease liabilities, current portion | N/A | $148,156 | N/A | $142,563 | | Operating lease liabilities, noncurrent | $2,255,008 | N/A | $581,148 | N/A | | Finance lease liabilities, noncurrent | N/A | $3,200,416 | N/A | $3,275,919 | | Weighted-average remaining lease term (years) | 3.99 | 13.42 | 2.85 | 13.92 | | Weighted-average discount rate (percentage) | 9.39% | 7.72% | 7.76% | 7.72% | (8) Accrued Expenses and Other Current Liabilities Total accrued expenses and other current liabilities increased by $1.62 million, or 29.6%, from December 31, 2024, to June 30, 2025, primarily driven by increases in payroll and employee-related costs and accrued research and development expenses Accrued Expenses and Other Current Liabilities | Category | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------ | :---------------- | :------- | :------- | | Payroll and employee-related costs | $5,085,498 | $4,170,381 | $915,117 | 21.94% | | Accrued research and development expenses | $808,363 | $237,164 | $571,199 | 240.85% | | Accrued legal fees | $264,224 | $42,159 | $222,065 | 526.77% | | Accrued financing fees payable | $213,000 | $479,250 | $(266,250)| -55.56% | | Other accrued expenses | $699,133 | $521,639 | $177,494 | 34.03% | | Total | $7,091,760 | $5,473,036 | $1,619,764 | 29.60% | (9) Notes Payable The company fully repaid its insurance financing note by June 22, 2025, resulting in no outstanding notes payable as of June 30, 2025. Interest expense related to these notes decreased for both the three and six months ended June 30, 2025, compared to the prior year - The company had no insurance financing note payable at June 30, 2025, as the current agreement was fully repaid through installment payments, with the final payment on June 22, 2025[81] Insurance Financing Note Payable and Interest Expense | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Insurance financing note payable | $0 | $275,849 | | Interest Expense (Insurance Financing Note) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Expense | $1 thousand | $4 thousand | $6 thousand | $12 thousand | (10) Stockholders' Equity The company's authorized capital stock includes 800 million common shares and 10 million preferred shares. Key activities include the issuance and conversion of Series A Preferred Stock, the contingent nature of Earnout Shares from a prior business combination, and the establishment of a sales agreement for up to $20 million in common stock, under which no shares have been sold as of June 30, 2025 - The company's authorized capital stock consists of 800,000,000 shares of common stock and 10,000,000 shares of preferred stock[83] - In connection with the September 2023 Offering, 67,154 shares of Series A-1 Preferred Stock were issued. Following stockholder approval, 24,918 shares converted into 3,954,674 common shares, and the remaining 42,236 shares converted to Series A-2 Preferred Stock, convertible into common stock at $6.30 per share[86][87] - The Business Combination Agreement includes an earnout provision for 1,200,000 Earnout Shares, contingent on the company meeting specific VWAP thresholds within five years. 150,806 shares are contingently issuable, while 1,049,194 are legally issued but returnable if thresholds are not met[90][91][92][94] - As of June 30, 2025, the company had not sold any shares under its $20 million Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co., entered into on January 26, 2024[96] (11) Stock Option Plans The company operates the 2014 and 2021 Equity Incentive Plans, with a significant increase in shares available for grant under the 2021 plan following a 2024 amendment. Stock option activity for the six months ended June 30, 2025, showed new grants, forfeitures, and expirations, resulting in a decrease in outstanding options. Unrecognized compensation cost for non-vested options is approximately $5.2 million. Restricted stock units also vested, with a portion withheld for taxes - As of June 30, 2025, 728,650 shares were reserved under the 2014 Equity Incentive Plan, and 7,712,758 shares were reserved under the 2021 Equity Incentive Plan, with 5,006,023 shares available for grant under the latter after an amendment increased the pool by 3,900,000 shares[98][99] Stock Option Activity (Six Months Ended June 30, 2025) | Metric | Options | Weighted Average Exercise Price | | :-------------------------- | :------ | :------------------------------ | | Outstanding, Dec 31, 2024 | 2,967,950 | $7.05 | | Granted | 25,000 | $1.67 | | Forfeited | (2,800) | $2.90 | | Expired | (55,122)| $21.68 | | Outstanding, June 30, 2025 | 2,935,028 | $6.73 | | Vested and exercisable, June 30, 2025 | 960,276 | $12.69 | - Total unrecognized compensation cost for non-vested stock options was approximately $5.2 million as of June 30, 2025, to be recognized over a weighted-average period of 2.58 years[102] Stock-based Compensation Expense | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development | $347,467 | $274,317 | $679,756 | $490,668 | | General and administrative | $279,731 | $327,116 | $560,393 | $728,210 | | Total | $627,198 | $601,433 | $1,240,149 | $1,218,878 | (12) Warrants The company has various outstanding warrants, including Public, Private Placement, PIPE, Ladenburg, and Preferred Warrants. Most warrants expire on October 22, 2026. Preferred Tranche B Warrants expired unexercised on January 1, 2025. Public and Private Placement Warrants are liability-classified, with their fair value changes impacting the statements of operations. Preferred Warrants are also derivative liabilities due to cash redemption clauses - All outstanding Public and Private Placement Warrants expire on October 22, 2026, unless earlier exercised or redeemed[109][111] - On January 1, 2025, 42,846 Preferred Tranche B Warrants expired unexercised, resulting in a $3 thousand gain recognized in other income[119][120] - Public Warrants and Private Placement Warrants are accounted for as liabilities, with changes in fair value recognized in the condensed consolidated statements of operations. Preferred Warrants are also classified as derivative liabilities due to cash redemption upon a fundamental transaction[122][125] Warrant Liabilities and Valuation Inputs (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Public Warrant liability | $191,475 | $432,975 | | Private Placement Warrant liability | $6,946 | $15,708 | | Preferred Warrants | $1,782,091 | $5,940,543 | | Valuation Input (Public/Private Placement Warrants) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------------- | :------------ | :---------------- | | Risk-free interest rate | 3.86% | 4.19% | | Expected term remaining (periods) | 1.31 | 1.81 | | Implied volatility | 208.9% | 160.9% | | Closing common stock price | $1.76 | $3.79 | | Valuation Input (Preferred Tranche C Warrants) | June 30, 2025 | December 31, 2024 | | :--------------------------------------------- | :------------ | :---------------- | | Risk-free interest rate | 3.70% | 4.32% | | Expected term remaining (periods) | 3.41 | 3.91 | | Implied volatility | 100.0% | 95.0% | | Underlying Stock Price (Preferred Series A) | $143.10 | $309.37 | (13) Fair Value Measurements The company measures certain assets and liabilities at fair value on a recurring basis, classifying them into a three-level hierarchy. Cash equivalents and mutual funds are Level 1, while Private Placement Warrants and Preferred Warrants are Level 3 due to the use of unobservable inputs. The fair value of Level 3 liabilities decreased significantly from December 31, 2024, to June 30, 2025 - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[128][129] Assets and Liabilities Measured at Fair Value (June 30, 2025) | Category | Total | Level 1 | Level 2 | Level 3 | | :-------------------------- | :------------ | :------------ | :------ | :------ | | Cash equivalents (Money market funds) | $2,946,517 | $2,946,517 | $0 | $0 | | Short-term investments (Mutual funds) | $2,021,335 | $2,021,335 | $0 | $0 | | Public Warrant liability | $191,475 | $191,475 | $0 | $0 | | Private Placement Warrant liability | $6,946 | $0 | $0 | $6,946 | | Preferred Warrants | $1,782,091 | $0 | $0 | $1,782,091| Changes in Level 3 Fair Value Measurements (Dec 31, 2024 to June 30, 2025) | Liability | Balance, Dec 31, 2024 | Change in fair value | Balance, June 30, 2025 | | :-------------------------------- | :-------------------- | :------------------- | :--------------------- | | Private Placement Warrant liability | $15,708 | $(8,762) | $6,946 | | Preferred Warrant liabilities | $5,940,543 | $(4,158,452) | $1,782,091 | (14) Investments The company held no available-for-sale debt securities as of June 30, 2025, a change from December 31, 2024, when it held U.S. treasury securities. Net gains on equity securities recognized during the period decreased for the three months but increased for the six months ended June 30, 2025, compared to 2024 - The company held no available-for-sale debt securities as of June 30, 2025. At December 31, 2024, it held $6.22 million in U.S. treasury securities[133] Net Gains (Losses) on Equity Securities | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net gains (losses) recognized | $(3,730) | $7,645 | $1,209 | $15,169 | | Realized net gains (losses) | $13,460 | $0 | $25,333 | $0 | | Unrealized net gains (losses) | $(17,190) | $7,645 | $(24,124) | $15,169 | (15) Income Taxes Due to current and prior year losses, the company does not expect to have an income tax provision and continues to record a valuation allowance on its net deferred tax assets, which increased by approximately $4.5 million during the six months ended June 30, 2025 - The company does not expect to have an Income Tax Provision due to current and prior year losses[138] - A valuation allowance on net deferred tax assets increased by approximately $4.5 million during the six months ended June 30, 2025[138] (16) Related Party Transactions There were no related party transactions for the three and six months ended June 30, 2025, and 2024 - No related party transactions occurred for the three and six months ended June 30, 2025, and 2024[139] (17) Employee Benefit Plan The company sponsors a 401(k) retirement plan with matching contributions. Contributions decreased slightly for the six months ended June 30, 2025, compared to the prior year - The company sponsors a 401(k) retirement plan with matching contributions of 100% on 3% of employee contributions and an additional 50% match on the next 2%[140] Company 401(k) Contributions | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Contributions | $85 thousand | $72 thousand | $220 thousand | $229 thousand | (18) Commitments and Contingencies The company is not currently involved in any material litigation or threatened legal actions that are expected to have a material adverse effect on its financial condition, results of operations, or liquidity - The company is not a party to any material litigation, nor is it aware of any pending or threatened litigation expected to materially affect its financial condition, results of operations, or liquidity[141] (19) Segment Reporting The company operates as a single reportable segment, with its chief executive officer reviewing overall operating results and significant expenses to allocate resources and assess performance. The primary focus is on the development of human anti-thymocyte globulin for T1D - The company's business activities are organized into one reportable segment, with the chief operating decision maker (CODM) reviewing operating results in their entirety[142] - The CODM assesses performance by reviewing GAAP operating expenses and significant expenses by function, along with the annual budget, on a quarterly basis[143] Operating Expense Categories | Expense Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total research and development expense | $6,996,660 | $6,822,198 | $14,653,981 | $14,769,253 | | Total general and administrative expenses | $2,735,401 | $3,642,637 | $5,850,182 | $8,030,773 | | Total operating expense | $9,732,061 | $10,464,835 | $20,504,163 | $22,800,026 | (20) Subsequent Events On July 21, 2025, the company completed a Series B private placement, issuing 1,000,000 Series B Convertible Preferred Stock shares and warrants, generating approximately $175 million in gross proceeds. The Series B Preferred Stock is convertible into 100,000,000 common shares, subject to stockholder approval and certain beneficial ownership limitations. The company also agreed to nominate up to two individuals designated by RA Capital Healthcare Fund, L.P. to its Board of Directors - On July 21, 2025, the company entered into a securities purchase agreement for a Series B private placement, issuing 1,000,000 Series B Convertible Preferred Stock shares and warrants to purchase up to 1,500,000 additional Series B Preferred Stock shares[146] - The Series B Offering generated approximately $175 million in gross proceeds, before fees and expenses[16] - Each Series B Preferred Stock share is convertible into 100 common shares at a conversion price of $1.75 per share, subject to stockholder approval and a conversion cap limiting beneficial ownership to 4.99% (or up to 19.99% by election)[148][149] - The company agreed to nominate up to two individuals designated by RA Capital Healthcare Fund, L.P. to its Board of Directors, reducing the board size to nine persons[151] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting its clinical-stage biopharmaceutical focus, lead product candidate SAB-142 for T1D, and the financial performance for the three and six months ended June 30, 2025, compared to 2024. It details revenue decline, changes in operating expenses, non-operating income, and liquidity, emphasizing the recent Series B offering to fund future operations and clinical trials Company Overview SAB Biotherapeutics is a clinical-stage biopharmaceutical company focused on developing human, multi-specific, high-potency immunoglobulins (IgGs) for autoimmune disorders, leveraging its proprietary Tc Bovine platform. Its lead candidate, SAB-142, is a human anti-thymocyte globulin (ATG) for Type 1 Diabetes (T1D), which has received FDA IND clearance and positive Phase 1 data. The company plans to advance SAB-142 into a Phase 2b SAFEGUARD study - SAB Biotherapeutics is a clinical-stage biopharmaceutical company developing human, multi-specific, high-potency immunoglobulins (IgGs) to treat and prevent autoimmune disorders, utilizing its proprietary Tc Bovine platform[155][156] - The lead product candidate, SAB-142, is a human anti-thymocyte globulin (ATG) focused on preventing or delaying the progression of Type 1 Diabetes (T1D)[157] - SAB-142 received FDA IND clearance in May 2024, announced positive topline Phase 1 clinical trial data in January 2025, and plans to advance into a Phase 2b SAFEGUARD study, with FDA alignment on the trial design[159] Components of Results of Operations This section details the primary components of the company's financial results: revenue, operating expenses (research and development, general and administrative), and nonoperating income/expense (warrant liabilities, other income, interest income, interest expense). Grant revenue has ceased, and R&D expenses are expected to increase with clinical trial advancements, while G&A expenses are also anticipated to rise with workforce expansion and commercialization efforts - Revenue is primarily from government grants, but no revenue was recognized for the three and six months ended June 30, 2025, due to the termination of US Department of Defense grants[162] - Research and development expenses, expensed as incurred, include salaries, benefits, lab supplies, animal care, and clinical trial costs. These are expected to increase as SAB-142 advances through Phase 2 clinical trials[163][165] - General and administrative expenses, including payroll, professional fees, and corporate costs, are anticipated to rise with workforce expansion and preparations for potential commercialization[168] - Nonoperating income (expense) includes changes in the fair value of warrant liabilities, Australian R&D tax credits, dividend income, and interest income/expense[169][170][171][172] Results of Operations The company experienced a 100% decrease in revenue for both the three and six months ended June 30, 2025, due to grant terminations. Research and development expenses slightly increased for the three-month period but slightly decreased for the six-month period, while general and administrative expenses decreased for both periods. Non-operating income saw a significant decrease due to changes in warrant liabilities, and interest income declined substantially due to lower cash and investment balances Revenue Comparison (YoY) | Period | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | 3 Months Ended June 30 | $0 | $263,137 | $(263,137) | -100.0% | | 6 Months Ended June 30 | $0 | $1,207,712 | $(1,207,712) | -100.0% | Research and Development Expenses Comparison (YoY) | Period | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | 3 Months Ended June 30 | $6,996,660 | $6,822,198 | $174,462 | 2.6% | | 6 Months Ended June 30 | $14,653,981 | $14,769,253 | $(115,272) | -0.8% | General and Administrative Expenses Comparison (YoY) | Period | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | 3 Months Ended June 30 | $2,735,401 | $3,642,637 | $(907,236) | -24.9% | | 6 Months Ended June 30 | $5,850,182 | $8,030,773 | $(2,180,591) | -27.2% | Non-operating Income Comparison (YoY) | Metric (3 Months Ended June 30) | 2025 | 2024 | Change | % Change | | :-------------------------------- | :--- | :--- | :----- | :------- | | Changes in fair value of warrant liabilities | $(627,056) | $2,216,973 | $(2,844,029) | -128.3% | | Total non-operating income | $(331,426) | $2,584,805 | $(2,916,231) | -112.8% | | Metric (6 Months Ended June 30) | 2025 | 2024 | Change | % Change | | :-------------------------------- | :--- | :--- | :----- | :------- | | Changes in fair value of warrant liabilities | $4,408,713 | $7,685,192 | $(3,276,479) | -42.63% | | Total non-operating income (expense) | $5,250,970 | $8,528,154 | $(3,277,184) | -38.43% | Interest Income Comparison (YoY) | Period | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | 3 Months Ended June 30 | $13,562 | $374,557 | $(360,995) | -96.38% | | 6 Months Ended June 30 | $76,060 | $872,450 | $(796,390) | -91.28% | Liquidity and Capital Resources The company continues to experience net losses and negative operating cash flows, with an accumulated deficit of $139.5 million as of June 30, 2025. However, a significant $175 million gross proceeds from a Series B offering in July 2025 is expected to fund operations for the next twelve months and the Phase 2b SAFEGUARD study. The company also has a shelf registration statement for up to $50 million in securities, with $20 million available under a sales agreement - As of June 30, 2025, the company had an accumulated deficit of $139.5 million and anticipates continued losses, requiring additional capital[189] - A Series B Offering on July 21, 2025, generated approximately $175 million in gross proceeds, intended to fund the Phase 2b SAFEGUARD study of SAB-142 and general corporate purposes, providing sufficient operating cash for the next twelve months[190][192] - The company has a Shelf Registration Statement allowing it to offer and sell up to $50.0 million in securities, with $20.0 million available under a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co[199] Cash Flows Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | Change | % Change | | :-------------------------------- | :-------------- | :-------------- | :-------------- | :------- | | Net cash used in operating activities | $(14,948,761) | $(18,467,790) | $3,519,029 | -19.05% | | Net cash provided by (used in) investing activities | $9,868,940 | $(20,140,390) | $30,009,330 | -149.00% | | Net cash used in financing activities | $(347,829) | $(715,457) | $367,628 | -51.38% | Contractual Obligations and Commitments As of June 30, 2025, there were no material changes to the company's contractual obligations and commitments outside the ordinary course of business - No material changes to contractual obligations and commitments outside the ordinary course of business as of June 30, 2025[205] Income Taxes Due to ongoing losses, the company does not anticipate an income tax provision and continues to maintain a valuation allowance on its net deferred tax assets, which increased by approximately $4.5 million during the first half of 2025 - The company does not expect to have an Income Tax Provision due to current and prior year losses[206] - A valuation allowance on net deferred tax assets increased by approximately $4.5 million during the six months ended June 30, 2025[206] Off-Balance Sheet Arrangements The company did not have any off-balance sheet financing arrangements or relationships with unconsolidated entities for the periods presented - The company did not have any off-balance sheet financing arrangements or relationships with unconsolidated entities for the periods presented[207] Critical Accounting Policies and Estimates The company's critical accounting estimates and assumptions, which require significant management judgment, remain consistent with those disclosed in its Annual Report on Form 10-K for 2024, with no significant changes during the three months ended June 30, 2025 - The company's critical accounting estimates and assumptions are consistent with those in its Annual Report on Form 10-K for the year ended December 31, 2024, with no significant changes during the three months ended June 30, 2025[209] JOBS Act Accounting Election As an 'emerging growth company' under the JOBS Act, the company has elected to take advantage of the extended transition period for complying with new or revised accounting standards, which may result in financial statements not being comparable to other public companies - The company is an 'emerging growth company' and has elected to take advantage of the extended transition period for complying with new or revised accounting standards under the JOBS Act[210][213] - This election means the company will adopt new or revised standards at the time private companies adopt them, potentially making its financial statements not comparable to other public companies[211][213] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk disclosures indicate no revenue for the current period, with prior revenue entirely from government grants. Its primary exposure to market risk is interest income volatility, but a 10% change in interest rates is not expected to have a material effect. Foreign currency risk is also deemed immaterial, as most business is conducted in U.S. dollars and foreign currency liabilities are not significant - The company recognized no revenue for the three and six months ended June 30, 2025; 100% of prior year revenue was from government grants[215] - Primary market risk exposure is to interest income volatility, but a 10% change in market interest rates is not expected to materially affect the business[216] - Foreign currency risk is not material, as most business is in U.S. dollars, and foreign currency liabilities are insignificant[217] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025. There were no material changes in internal control over financial reporting during the six months ended June 30, 2025 - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[219] - No material changes in internal control over financial reporting occurred during the six months ended June 30, 2025[220] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material litigation, nor is it aware of any pending or threatened litigation that would materially affect its business, operating results, financial condition, or cash flows - The company is not currently a party to any material litigation, nor is it aware of any pending or threatened litigation that would materially affect its business, operating results, financial condition, or cash flows[223] Item 1A. Risk Factors There have been no material changes to the risk factors described in the 2024 Annual Report, except for a new risk related to the obligation to file a registration statement for shares issuable upon conversion of Series B Preferred Stock and warrants. The potential sale of these shares could significantly dilute existing shareholders and cause a decline in the market price of the company's securities - No material changes from the risk factors described in the 2024 Annual Report, except for a new risk related to the Series B Offering[224] - The company is obligated to file a registration statement for the resale of shares of common stock issuable upon conversion of Series B Preferred Stock and warrants, which could represent 2,690% of total common stock outstanding as of June 30, 2025[225][226] - The registration and potential sale of these securities, or the perception of such sales, could cause the market price of the company's common stock and public warrants to decline significantly[225][226] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None[227] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - None[228] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable[229] Item 5. Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the six months ended June 30, 2025 - None of the company's directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the six months ended June 30, 2025[230] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certificates of designations, forms of warrants, securities purchase agreements, registration rights agreements, support agreements, and certifications from executive officers - Exhibits include Certificate of Designations of Series B Convertible Non-Voting Preferred Stock, Forms of Preferred Warrants, Securities Purchase Agreement, Registration Rights Agreement, Support Agreement, Letter Agreement with RA Capital Healthcare Fund, L.P., and certifications of principal executive and financial officers[231] Signatures The report is duly signed on August 7, 2025, by Samuel J. Reich, Chair and Chief Executive Officer, and Lucy To, Chief Financial Officer - The report was signed on August 7, 2025, by Samuel J. Reich (Chair and CEO) and Lucy To (CFO)[238]