SAB Biotherapeutics Inc

(1) Nature of Business

SAB Biotherapeutics, Inc., a Delaware corporation (“SAB” or “SAB Biotherapeutics”, and together with its subsidiaries, the “Company”), is a clinical-stage biopharmaceutical company focused on the development and commercialization of a portfolio of products from its proprietary immunotherapy platform to produce fully targeted human polyclonal antibodies, without using human plasma or serum. SAB’s novel immunotherapy platform that is developing fully-human hIgC for delaying onset or progression of T1D.

Australian Research and Development Tax Credit

In June 2023, the Company formed a new subsidiary in Australia, SAB BIO PTY LTD, a proprietary limited company (“SAB Australia”), primarily to conduct preclinical and clinical activities for product candidates. SAB Australia’s research and development activities qualify for the Australian government’s tax credit program, which provides a 39.5% credit for qualifying research and development expenses. The Company started Phase 1 trials in the fourth quarter of 2023.

Liquidity

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has experienced net losses, negative cash flows from operations and, as of December 31, 2023, had an accumulated deficit of$90.1 million. The Company anticipates to continue to generate losses for the foreseeable future and expects the losses to increase as the Company continues the development of, or seeks regulatory approvals for product candidates, and begins commercialization of products. As a result, the Company will require additional capital to fund operations in order to support long-term plans.

On September 29, 2023, the Company entered into a securities purchase agreement with certain accredited investors (the “September 2023 Purchase Agreement”), pursuant to which the Company agreed to issue and sell shares of preferred stock and warrants, in a private placement which provides for up to $110 million in proceeds across multiple tranches. Between October 2023 and November 2023, the Company received an aggregate of approximately $67.1 million for shares of preferred stock issued in this private placement offering. See Note 12, Warrants for further information about the private placement offering.

Based on the Company’s current level of operating expenses, existing resources will be sufficient to cover operating cash needs through the twelve months following the date these financials are issued. The Company plans to seek additional funding through a combination of equity or debt financings, or other third-party financing, collaborative or other funding arrangements. Should the Company seek additional financing from outside sources, the Company may not be able to raise such financing on terms acceptable to the Company or at all. If the Company is unable to raise additional capital when required or on acceptable terms, the Company may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.

(2) Summary of Significant Accounting Policies

A summary of the significant accounting policies applied in preparation of the accompanying consolidated financial statements is set forth below.

Basis of presentation

The financial statements have been prepared in conformity with GAAP and include all adjustments necessary for the fair presentation of the Company’s financial position for the years presented.

Emerging growth company status

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 orrevised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Principles of consolidation

The accompanying consolidated financial statements include the results of the Company and its wholly owned subsidiaries, SAB Sciences, Inc., SAB LLC, SAB Capra, LLC, Aurochs, LLC, and SAB Australia. Intercompany balances and transactions have been eliminated in consolidation.

Significant risks and uncertainties

The Company’s operations are subject to a number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to, the results of research and development efforts, clinical trial activities of the Company’s product candidates, the Company’s ability to obtain regulatory approval to market its product candidates, competition from products manufactured and sold or being developed by other companies, and the Company’s ability to raise capital.

The Company currently has no commercially approved products and there can be no assurance that the Company’s research and development will be successfully commercialized. Developing and commercializing a product requires significant time and capital and is subject to regulatory review and approval as well as competition from other biotechnology and pharmaceutical companies. The Company operates in an environment of rapid change and is dependent upon the continued services of its employees and obtaining and protecting intellectual property.

Funding from government grants is not guaranteed to cover all costs, and additional funding may be needed to cover operational costs as the Company moves forward to with our efforts to develop a commercially approved product.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the financial statements. The Company has used significant estimates in its determination of stock-based compensation assumptions, determination of the fair value of the Private Placement Warrant liabilities, determination of the incremental borrowing rate (“IBR”) used in the calculation of the Company’s right of use assets and lease liabilities, estimation of clinical and other accruals and the valuation allowance on deferred tax assets. Actual amounts realized may differ from these estimates.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy classifies the inputs to valuation techniques that would be used to measure fair value into one of three levels:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to the short-term nature of their maturities, such as cash and cash equivalents, accounts receivable, accounts payable and accrued expenses.

The Company accounts for warrants to purchase its preferred and common stock pursuant to ASC Topic 470, Debt, and ASC Topic 480, Distinguishing Liabilities from Equity, and classifies warrants for preferred and common stock as liabilities or equity. The warrants classified as liabilities are reported at their estimated fair value (see Note 13, Fair Value Measurements) and any changes in fair value are reflected in other income and expense. The warrants classified as equity are reported at their estimated relative fair value with no subsequent remeasurement. The Company’s outstanding warrants are discussed in more detail in Note 13, Fair Value Measurements.

Cash, cash equivalents, and restricted cash

Cash equivalents include short-term, highly liquid instruments, consisting of money market accounts and short-term investments with original maturities at the date of purchase of 90 days or less.

Accounts receivable

Accounts receivable are carried at original invoice amount, less an allowance for doubtful accounts. The Company estimates an allowance for doubtful accounts for potential credit losses that are expected to be incurred, based on management’s assessment of the collectability of specific accounts, the aging of the accounts receivable, historical information and other currently available evidence. Receivables are written off when deemed uncollectible. To date, no receivables have been written off. The Company hadno allowance for doubtful accounts as of December 31, 2023 and 2022.

Concentration of credit risk

The Company maintains its cash and cash equivalent balances in the form of business checking accounts and money market accounts, the balances of which, at times, may exceed federally insured limits. Although the Company currently believes that the financial institutions with whom it does business will be able to fulfill their commitments to the Company, there is no assurance that those institutions will be able to continue to do so. The Company has not experienced any credit losses associated with its balances in such accounts for the year ended December 31, 2023 and 2022.

Lease liabilities and right-of-use assets

The Company is party to certain contractual arrangements for equipment, lab space, and an animal facility, which meet the definition of leases under ASC 842. In accordance with ASC 842, the Company recorded right-of-use assets and related lease liabilities for the present value of the lease payments over the lease terms. The Company’s IBR was used in the calculation of its right-of-use assets and lease liabilities.

The Company elected not to apply the recognition requirements of ASC 842 to short-term leases, which are deemed to be leases with a lease term of twelve months or less. Instead, the Company recognized lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred. The Company elected this policy for all classes of underlying assets.

Research and development expenses

Expenses incurred in connection with research and development activities are expensed as incurred. These include licensing fees to use certain technology in the Company’s research and development projects, fees paid to consultants and various entities that perform certain research and testing on behalf of the Company, and expenses related to animal care, research-use equipment depreciation, salaries, benefits, and stock-based compensation granted to employees in research and development functions.

During the years ended December 31, 2023 and 2022, the Company had contracts with multiple CROs to complete studies as part of research grant agreements. These costs include upfront, milestone and monthly expenses as well as reimbursement for pass through costs. All research and development costs are expensed as incurred except when the Company is accounting for nonrefundable advance payments for goods or services to be used in future research and development activities. In these cases, these payments are capitalized at the time of payment and expensed in the period the research and development activity is performed. As actual costs become known, the Company will adjust the accrual; such changes in estimate may be a material change in the Company’s clinical study accrual, which could also materially affect reported results of operations. For the years ended December 31, 2023 and 2022, there were no material adjustments to the Company’s prior period estimates of accrued expenses for clinical trial.

Property, Plant and Equipment

The Company records property, plant, and equipment at cost less depreciation and amortization. Depreciation is calculated using straight-line methods over the following estimated useful lives:

Repairs and maintenance expenses are expensed as incurred.

Impairment of long-lived assets

The Company reviews the recoverability of long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If necessary, the Company compares the estimated undiscounted future net cash flows to the related asset’s carrying value to determine whether there has been an impairment. If an asset is considered impaired, the asset is written down to fair value, which is based either on discounted cash flows or appraised values in the period the impairment becomes known. The Company believes that long-lived assets are recoverable, andno impairment was deemed necessary, during the years ended December 31, 2023 and 2022.

Stock-based compensation

FASB ASC Topic 718, Compensation– Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. The Company recognizes compensation cost relating to stock-based payment transactions using a fair-value measurement method, which requires all stock-based payments to employees, directors, and non-employee consultants, including grants of stock options, to be recognized in operating results as compensation expense based on fair value over the requisite service period of the awards. The Company determines the fair value of common stock based on the closing market price at closing on the date of the grant.

In determining the fair value of stock-based awards, the Company utilizes the Black-Scholes option-pricing model, which uses both historical and current market data to estimate fair value. The Black-Scholes option-pricing model incorporates various assumptions, such as the value of the underlying common stock, the risk-free interest rate, expected volatility, expected dividend yield, and expected life of the options. For awards with performance-based vesting criteria, the Company estimates the probability of achievement of the performance criteria and recognizes compensation expense related to those awards expected to vest. No awards may have a term in excess often years. Forfeitures are recorded when they occur. Stock-based compensation expense is classified in the consolidated statements of operations based on the function to which the related services are provided. The Company recognizes stock-based compensation expense over the vesting period.

Income taxes

Deferred income taxes reflect future tax effects of temporary differences between the tax and financial reporting basis of the Company’s assets and liabilities measured using enacted tax laws and statutory tax rates applicable to the periods when the temporary differences will affect taxable income. When necessary, deferred tax assets are reduced by a valuation allowance, to reflect realizable value, and all deferred tax balances are reported as long-term on the consolidated balance sheet. Accruals are maintained for uncertain tax positions, as necessary.

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

Revenue recognition

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

Grant revenue is recognized during the period that the research and development services occur, as qualifying expenses are incurred or conditions of the grants are met. Deferred grant income represents grant proceeds received by the Company prior to the period in which the underlying research and development services have not yet been performed. The Company concluded that payments received under these grants represent conditional, nonreciprocal contributions, as described in ASC

958, Not-for-Profit Entities, and that the grants are not within the scope of ASC 606, Revenue from Contracts with Customers, as the organizations providing the grants do not meet the definition of a customer. Expenses for grants are tracked by using a project code specific to the grant, and the employees also track hours worked by using the project code.

Foreign Currency Translations and Transactions

Assets and liabilities of the Company's foreign subsidiary are translated at the year-end exchange rate. Operating results of the Company's foreign subsidiary are translated at average exchange rates during the period. Translation adjustments have no effect on net income and are included in “Accumulated other comprehensive income, net” in the accompanying Consolidated Balance Sheets.

Comprehensive income (loss)

Foreign currency translation adjustments of $26 thousand represent the difference between net loss and comprehensive loss for the year ended December 31, 2023. The Company had no items of comprehensive loss other than its net loss for the year ended December 31, 2022.

Litigation

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

Earnings per share

In accordance with ASC 260, Earnings per Share(“ASC 260”), basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common stock outstanding during the period. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted-average number of common stock outstanding for the period including potential dilutive common shares such as stock options.

Segment reporting

In accordance with ASC 280, Segment Reporting, the Company’s business activities are organized intoone reportable segment, as only the Company’s operating results in their entirety are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated and to assess performance.

Australian Research and Development Tax Credit

The Company recognizes other income from Australian research and development incentives when there is reasonable assurance that the income will be received, the relevant expenditure has been incurred, and the consideration can be reliably measured. The research and development incentive is one of the key elements of the Australian Government’s support for Australia’s innovation system and is supported by legislative law primarily in the form of the Australian Income Tax Assessment Act 1997, as long as eligibility criteria are met. Under the program, a percentage of eligible research and development expenses incurred by the Company through its subsidiary in Australia are reimbursed.

Management has assessed the Company’s research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under the research and development incentive regime described above. At each period end, management estimates the refundable tax offset available to the Company based on available information at the time and it is included in other income in the consolidated statements of operations.

Retroactive Adjustments for Common Stock Reverse Split

On January 5, 2024, the Company completed a 1-for-10 reverse stock split of the Company’s Common Stock. As a result of the Reverse Stock Split, every ten of the Company’s issued shares of Common Stock were automatically combined into one issued share of Common Stock, without any change to the par value per share. All share and per share numbers in this Annual Report on Form 10-K have been adjusted to reflect the Reverse Stock Split.

(3) New accounting standards

Recently-adopted standards

In July 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement of all expected credit losses of financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for periods beginning after December 15, 2022, and interim periods within those fiscal years. The Company adopted ASU 2016-13 at January 1, 2023, and the adoptiondid not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require (i) enhanced disclosures in connection with an entity's effective tax rate reconciliation and (ii) income taxes paid disaggregated by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

(4) Revenue

During the years ended December 31, 2023 and 2022, the Company worked on the following grants:

Government grants

The total revenue for government grants was approximately$2.2 million and$23.9 million respectively, for the years ended December 31, 2023 and 2022.

NIH-NIAID (Federal Award #1R44AI117976-01A1) – this grant was for $1.4 million and started in September 2019 through August 2021. This grant was subsequently amended to extend the end date to August 2022. No grant income was recognized for the year ended December 31, 2023. For the year ended December 31, 2022, there was approximately$182 thousand in grant income recognized from this grant. This grant was completed in 2022.

NIH-NIAID (Federal Award #1R41AI131823-02) – this grant was for approximately $1.5 million and started in April 2019 through March 2021. The grant was subsequently amended to extend the date through March 2023. For the years ended December 31, 2023 and 2022, approximately$192 thousand and$328 thousand, respectively, in grant income was recognized from this grant. This grant was completed as of June 30, 2023.

NIH-NIAID through Geneva Foundation (Federal Award #1R01AI132313-01, Subaward #S-10511-01) – this grant was for approximately $2.7 million and started in August 2017 through July 2021. The grant was subsequently amended to extend the end date to July 2023. For the years ended December 31, 2023 and 2022, there was approximately$273 thousand and$1.1 million, respectively, in grant income recognized from this grant. This grant was completed as of June 30, 2023.

DoD, JPEO through Advanced Technology International – this grant was for a potential of $25 million, awarded in stages starting in August 2019 and with potential stages running through February 2023. Additional contract modifications were added to this contract in 2020 and 2021 for work on a COVID therapeutic, bringing the contract total to $203.6 million. For the years ended December 31, 2023 and 2022, there was approximately$1.8 million and$22.2 million, respectively, in grant income recognized from this grant. This grant was terminated in 2022.

The grants for the JPEO Rapid Response contract are cost reimbursement agreements, with reimbursement of qualified direct research and development expense (labor and consumables) with an overhead charge (based on actual, reviewed quarterly) and a fixed fee (9%).

On August 3, 2022, the Company received notice from the DoD terminating the JPEO Rapid Response contract. The Company engaged in negotiations with the DoD to compensate the Company for services provided prior to the JPEO Rapid

Response Contract Termination and costs the Company would be expected to bear in future periods. A termination and settlement proposal was submitted the DoD on September 9, 2022; the Company submitted a final invoice on December 15, 2022; and received payment from the DoD on or about January 12, 2023. The terms of the arrangement provide for a cost-reimbursable structure, and state that the parties will work in good faith equitable reimbursement for work performed toward accomplishment of the tasks provided in the agreement. At this time, other than certain deferred obligations (presented within deferred grant income within the Company's consolidated balance sheet) potentially payable to the DoD solely due to subsequent negotiations with third-party vendors, the Company believes and has been advised there is a reasonable, good faith basis for the position that no present or future obligations exist. Revenue recognized subsequent to the JPEO Rapid Response Contract Termination relates to satisfaction of residual obligations under the termination and settlement agreement—see Note 2, Summary of Significant Accounting Policiesin the Company's consolidated financial statements for further information about the Company's established revenue recognition process.

(5) Earnings per share

Since the Company reported a net loss for the years ended December 31, 2023 and 2022, it was required by ASC 260 to use basic weighted-average shares outstanding when calculating diluted net loss per share for the years ended December 31, 2023 and 2022, as the potential dilutive securities are anti-dilutive.

The Company’s potentially dilutive securities, which include stock options, restricted stock awards, common stock warrants, earnout shares, and contingently issuable earnout shares have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

(1)

Contained within Common Stock Warrants are the 575,000 the Public Warrants,20,860 warrants held by assignees of Big Cypress Holdings, LLC (the “Private Placement Warrants”),30,000 warrants held by Ladenburg Thalmann & Co. Inc. (the “Ladenburg Warrants”),736,337 warrants issued to the investors in the December 2022 Private Placement (the “the PIPE Warrants”),21,091 warrants issued to the placement agent in the December 2022 Private Placement (the “PIPE Placement Agent Warrants”), and 850,119 warrants issued to the placement agent in the October 2023 Private Placement. See Note 12, Warrantsfor further details on the Company’s outstanding warrants.

(2)

The Earnout Shares are subject to certain vesting requirements not satisfied as of the years ended December 31, 2023 and 2022. The Earnout Shares held in escrow are excluded from calculating both basic and diluted earnings per share. See Note 10, Stockholders’ Equity for further details on the Company’s outstanding equity instruments.

(3)

Represents shares of common stock underlying 42,236 issued, outstanding, and convertible Series A-2 Preferred shares.

(4)

Represents 6,800,953 and 17,002,381 common shares underlying 42,846 outstanding Tranche B Warrants and 107,115 outstanding Tranche C Warrants, respectively.

(6) Property, Plant and Equipment

As of December 31, 2023 and 2022, the Company’s equipment was as follows:

Depreciation and amortization expense for the years ended December 31, 2023 and 2022 was$3.7 million and$3.2 million, respectively.

All tangible personal property with a useful life of at least three years and a unit acquisition cost of $5,000 or more will be capitalized and depreciated over its useful life using the straight-line method of depreciation. The Company will expense the full acquisition cost of tangible personal property below these thresholds in the year of purchase. The basis of accounting for depreciable fixed assets is acquisition cost and any additional expenditures required to make the asset ready for use. The carrying amount at the balance sheet date of long-lived assets under construction-in-progress includes assets purchased, constructed, or being developed internally that are not yet in service. Depreciation commences when the assets are placed in service.

As of December 31, 2023 and 2022, the Company’s construction-in-progress was as follows:

(7) Leases

The Company has an operating lease for lab space from Sanford Health, under a lease that started in June 2014 and initially ended in June 2019, at which time the lease was extended through August 2024. This lease can be terminated withone-year advance written notice. This lease was amended again in October 2022 to reduce the Company’s leased area to 21,014 square feet. Additionally, pursuant to the amendment in October 2022, the Company and Sanford Health agreed for the period of October 2022 to September 2023, the Company’s obligation to pay the Annual Rent shall be abated and not required to be paid when normally due (the “Abated Rent”). In exchange for the Abated Rent, effective October 1, 2022, the Company issued Sanford Health an 8% unsecured, convertible promissory note (see Note 9, Notes Payable for further discussion). The October 2022 amendment was accounted for as a lease modification under ASC 842 -Leases and the right-of-use asset and lease liability were remeasured at the modification date of October 1, 2022. The October 2022 lease amendment reduced the lease payment to approximately$45 thousand per month for the remainder of 2023 and approximately $46 thousand per month through 2024. The lease does not provide an implicit rate, and, therefore, the Company used an IBR of 6.92% as the discount rate when measuring the operating lease liability. The operating lease does not include an option to extend beyond the life of the current term. The Company estimated the IBR based upon comparing interest rates available in the market for similar borrowings and the credit quality of the Company.

The Company entered into a lease for office, laboratory, and warehouse space in November 2020, which the Company amended in July 2022. This lease has a 3-year term, with options to extend for 3 additional periods of 3 years each. The options were not included in the right of use calculation as it is unclear as to whether or not the location will meet the Company’s requirements beyond the next three years. The July 2022 amendment was accounted for as a separate contract under ASC 842 –Leases. This lease was renewed in November 2023. The lease costs are$36 thousand,$3 thousand, and$31 thousand per month for the November 2020 lease agreement, the July 2022 amended lease agreement, and the November 2023 lease renewal, respectively. The Company used an IBR of 4.69%,6.60%, and 8.14% as the discount rate when measuring the operating lease liability for the November 2020 lease agreement, the July 2022 amended lease agreement, and the November 2023 lease renewal, respectively. The Company estimated the IBR based upon comparing interest rates available in the market for similar borrowings and the credit quality of the Company.

The Company has the following finance leases:

•

In December 2018, the Company entered into a finance lease with Dakota Ag Properties for a new animal facility which includes the surrounding land. The facility and the land have been accounted for as separate lease components. The lease is based upon payback of $4 million in construction costs, with a 20-year term at an interest rate of 8%. The monthly payment for this lease is $34 thousand. The Company has the option to purchase the asset at any time during the term of the lease for the balance of the unamortized lease payments.

•

In December 2018, the Company entered into an equipment lease for a 12,000-gallon propane tank that is located on the Company’s animal facility. The lease is forfive years, with an annual payment of $8 thousand. The Company has the option to purchase the asset at any time during the term of the lease for the balance of the unamortized lease payments.

The lease agreements do not require material variable lease payments, residual value guarantees or restrictive covenants.

The amortizable lives of the operating lease assets are limited by their expected lease terms. The amortizable lives of the finance lease assets are limited by their expected lives, as the Company intends to exercise the purchase options at the end of the leases. The following is the estimated useful lives of the finance lease assets:

The Company’s weighted-average remaining lease term and weighted-average discount rate for operating and finance leases as of December 31, 2023 are:

The table below reconciles the undiscounted future minimum lease payments under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the consolidated balance sheet as of December 31, 2023:

Operating lease expense was approximately$1.0 million and$1.2 million, respectively, for the years ended December 31, 2023 and 2022. Operating lease costs are included within research and development expenses on the consolidated statements of operations.

Finance lease costs for the years ended December 31, 2023 and 2022 included approximately$0.1 million and$0.1 million respectively, in right-of-use asset amortization and approximately$0.3 million and$0.3 million, respectively, of interest expense. Finance lease costs are included within research and development expenses on the consolidated statements of operations.

Cash payments under operating and finance leases were approximately$0.6 million and$0.4 million, respectively, for the year ended December 31, 2023. Cash payments under operating and finance leases were approximately$1.2 million and$0.4 million, respectively, for the year ended December 31, 2022.

(8) Accrued Expenses and Other Current Liabilities

As of December 31, 2023 and 2022, accrued expenses and other current liabilities consisted of the following:

(9) Notes Payable

As of December 31, 2023 and 2022, notes payable was as follows:

8% Unsecured Convertible Note

Pursuant to the Fourth Amendment to the Company’s lease with Sanford Health, the Company and Sanford Health agreed to a period of Abated Rent from October 1, 2022 to September 30, 2023. In exchange for the Abated Rent, effective as of October 1, 2022, the Company issued to Sanford Health an 8% unsecured, convertible promissory note (the “8% Unsecured Convertible Note”).

Pursuant to the 8% Unsecured Convertible Note, the Company shall pay the sum of approximately $542 thousand (the “Principal”) plus accrued and unpaid interest thereon on September 30, 2024 (the “Maturity Date”). Simple interest shall accrue on the outstanding Principal from and after the date of the 8% Unsecured Convertible Note and shall be payable on the Maturity Date. Sanford Health shall have the right, but not the obligation, to convert all or any part of the outstanding Principal of the 8% Unsecured Convertible Note, together with any accrued and unpaid interest thereon to the date of such conversion, into such number of fully paid and non-assessable shares of the Company’s common stock, at any time and from time to time, prior to the later of the Maturity Date and the date on which the 8% Unsecured Convertible Note is paid in full, subject to certain restrictions, at a conversion price per share of common stock equal to greater of (x) $15.00 and (y) the price at which the Company sells shares of common stock in any bona fide private or public equity financing prior to the Maturity Date.

The Company evaluated the treatment of the 8% Unsecured Convertible Note under ASC 470 and determined the Principal in its entirety would be allocated to debt. The Company’s consolidated balance sheet as of December 31, 2023, includes accrued interest relating to the 8% Unsecured Convertible Note of approximately$43 thousand.

Insurance Financing

The Company obtained financing for certain Director & Officer liability insurance policy premiums. The agreement assigns First Insurance Funding (“Lender”) a first priority lien on and security interest in the financed policies and any additional premium required in the financed policies including (a) all returned or unearned premiums, (b) all additional cash contributions or collateral amounts assessed by the insurance companies in relation to the financed policies and financed by Lender, (c) any credits generated by the financed policies, (d) dividend payments, and (e) loss payments which reduce unearned premiums. If any circumstances exist in which premiums related to any Financed Policy could become fully earned in the event of loss, Lender shall be named a loss-payee with respect to such policy.

The total premiums, taxes and fees financed is approximately $765 thousand with an annual interest rate of 7.96%. In consideration of the premium payment by Lender to the insurance companies or the agent or broker, the Company unconditionally promises to pay Lender the amount financed plus interest and other charges permitted under the agreement. At December 31, 2023 and 2022, the Company recognized approximately$509 thousand and$773 thousand, respectively, as an insurance financing note payable in its consolidated balance sheets. The Company will pay the insurance financing through installment payments with the last payment for the current note being on September 22, 2024.

(10) Stockholder's Equity

Authorized Capital Stock

The total number of shares of the Company’s authorized capital stock is 810,000,000. The total amount of authorized capital stock consists of 800,000,000 shares of common stock and 10,000,000 shares of preferred stock.

Series A Preferred Stock

On September 29, 2023, the Company entered into a securities purchase agreement (the “September 2023 Purchase Agreement”) with certain accredited investors, pursuant to which the Company agreed to issue and sell, in a private placement (the “September 2023 Offering”), (i)7,500 shares of Series A-1 Convertible Preferred Stock, par value $0.0001 per share, for an aggregate offering price of $7.5 million (the “Series A-1 Preferred Stock”), (ii) tranche A warrants (the “Preferred Tranche A Warrants”) to acquire shares of Series A-1 Preferred Stock or Series A-3 Preferred Stock, par value $0.0001 per share, for an aggregate exercise price of $70.5 million (the “Series A-3 Preferred Stock”), (iii) tranche B warrants to acquire shares of Series A-3 Preferred Stock, par value $0.0001 per share, for an aggregate exercise price of $52.0 million (the “Preferred Tranche B Warrants”), and (iv) tranche C warrants to purchase Series A-3 Preferred Stock, par value $0.0001 per share, for an aggregate exercise price of $130.0 million (the “Preferred Tranche C Warrants” and together with the Preferred Tranche A Warrants, and Preferred Tranche B Warrants, the “Preferred Warrants” and the shares underlying the Preferred Warrants, the “Preferred Warrant Shares”).

On October 3, 2023, the Company closed on the issuance of the 7,500 shares of Series A-1 Preferred Stock (the “Initial Issuance Date”). In connection with the issuance of the 7,500 shares of Series A-1 Preferred Stock, gross proceeds were $7.5 million, before deducting fees to be paid to the placement agent and financial advisors of the Company and other offering expenses payable by the Company. The Company intends to use the net proceeds from the September 2023 Offering for working capital purposes and other general corporate purposes and to advance its SAB-142-101 clinical trial.

The Company recorded $7.5 million in gross proceeds associated with the initial issuance of the 2023 Private Placement transaction whereby the Company issued 7,500 shares of Series A-1 Convertible preferred stock and warrants to purchase common stock in the combined company. The Company estimated the initial value of the warrants to be $10.9 million. Since the warrants are classified as liabilities, the initial amount recorded as the warrant liability was equal to the estimated fair value of the warrants. Since the fair value of these warrants exceeded the equity proceeds, the entire amount of proceeds were allocated to the warrants and the remaining value allocated to the warrants resulted in a $3.4 million loss on the issuance of the Series A Preferred Stock.

Subject to the terms and limitations contained in the Certificate of Designation:

•

The Series A-1 Preferred Stock issued in the September 2023 Offering will not become convertible until the Company’s stockholders approve (i) the issuance of all common stock issuable upon conversion of the Issued Preferred Stock and the Preferred Warrant Shares, (ii) the issuance of the Preferred Warrant Shares upon exercise of the Preferred Warrants and (iii) an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 490,000,000 to 800,000,000 (collectively, the “Stockholder Approval”).

•

On the first trading day following the announcement of the Stockholder Approval, each share of Series A-1 Preferred Stock will automatically convert into common stock, at the conversion price of $6.30 per share (the “Conversion Price”), provided that to the extent such conversion would cause a holder of Series A-1 Preferred Stock to exceed the applicable beneficial ownership limitation, such holder will receive shares of Series A-2 Preferred Stock in lieu of common stock.

•

At the option of the holder, each share of Series A-2 Preferred Stock and Series A-3 Preferred Stock will be convertible into common stock, at the Conversion Price (which is subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization).

The Preferred Tranche A Warrants were exercisable beginning on October 2, 2023, (the “Issuance Date”) (as defined in the Form of Preferred Tranche A Warrant) until the earlier of (i) fifteen (15) trading days following the date of the public announcement of the fulsome data set from the Sanofi S.A. Protect trial or (ii) December 15, 2023. If any purchaser in the September 2023 Offering failed to exercise their Preferred Tranche A Warrant in full prior to its expiration date, such purchaser forfeited all Preferred Tranche A Warrants, Preferred Tranche B Warrants, and Preferred Tranche C Warrants issued to them.

The Preferred Tranche B Warrants are exercisable commencing on the Exercisability Date (as defined in the Form of Preferred Tranche B Warrant) until the later of (i) 15 days following the Company’s announcement of data from its SAB-142-101 clinical trial and (ii) March 31, 2025.

The Preferred Tranche C Warrants are exercisable commencing on the Exercisability Date (as defined in the Form of Preferred Tranche C Warrant) until the five (5) year anniversary of the Exercisability Date.

Prior to the extended mandatory exercise time, certain investors informed the Company that they would not exercise their mandatorily exercisable Preferred Tranche A Warrants. Certain of the investors agreed to assume and exercise 16,269 of the 27,115 unexercised Preferred Tranche A Warrants and received 10,846 of the Preferred Tranche B Warrants and 27,115 ofthe Preferred Tranche C Warrants from the transferring Investors. The balance of the unexercised Preferred Tranche A

Warrantsand the remaining Tranche B Warrants and Tranche C Warrants issued to the Investors who failed to exercise their Tranche B Warrants were cancelled. Following these updates to the offering, the Company issued 59,654 shares of Series A-1 Preferred Stock for aggregate proceeds of approximately $59.65 million upon the exercise of the Tranche A Warrants.

Pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Voting Preferred Stock, (the “Certificate of Designation”), all shares of Series A-1 Preferred Stock, subject to the Stockholder Approval obtained in November 2023, were automatically converted into an aggregate of 3,954,674 shares of common stock, par value $0.0001 per share and 42,236 shares of Series A-2 Preferred Stock, par value $0.0001 per share, of the Company (the “Series A-2 Preferred Stock”).

Following Shareholder Approval of the September 2023 Private Placement on November 22, 2023, the Company issued 67,154 shares of Series A-1 Convertible Preferred Stock. Following shareholder approval of the Company's 2023 Private Placement transaction,24,918 shares of Series A-1 Convertible Preferred Stock were converted into 3,954,674 common shares, with the remaining 42,236 shares of Series A-1 Convertible Preferred Stock being converted into Series A-2 Convertible preferred stock.

For information pertaining to the Company’s outstanding warrants to purchase shares of the Company’s preferred stock, see Note 12, Warrants.

Earnout Shares

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

Additionally, the Business Combination Agreement included an earnout provision whereby the shareholders of SAB Biotherapeutics shall be entitled to receive additional consideration (“Earnout Shares”) if the Company meets certain Volume Weighted Average Price (“VWAP") thresholds, or a change in control with a per share price exceeding the VWAP thresholds within a five-year period immediately following the Closing.

The Earnout Shares shall be released in four equal increments as follows:

(i)

25% of the Earnout Shares shall be released if, at any time during the five (5)-year period immediately following the Closing Date, the VWAP of the Company’s publicly traded common stock is greater than or equal to $150.00 for any twenty (20) trading days within a period of thirty (30) consecutive trading days (the “First Earnout”).

(ii)

25% of the Earnout Shares shall be released if, at any time during the five (5)-year period immediately following the Closing Date, the VWAP of the Company’s publicly traded common stock is greater than or equal to $200.00 for any twenty (20) trading days within a period of thirty (30) consecutive trading days (the “Second Earnout”).

(iii)

25% of the Earnout Shares shall be released if, at any time during the five (5)-year period immediately following the Closing Date, the VWAP of the Company’s publicly traded common stock is greater than or equal to $250.00 for any twenty (20) trading days within a period of thirty (30) consecutive trading days (the “Third Earnout”).

(iv)

25% of the Earnout Shares shall be released if, at any time during the five (5)-year period immediately following the Closing Date, the VWAP of the Company’s publicly traded common stock is greater than or equal to $300.00 for any twenty (20) trading days within a period of thirty (30) consecutive trading days (the “Fourth Earnout” and together with the First Earnout, the Second Earnout and the Third Earnout, the “Earnouts”).

Pursuant to the terms of the Business Combination Agreement, SAB Biotherapeutics’ securityholders (including vested option holders) who own SAB Biotherapeutics securities immediately prior to the Closing Date will have the contingent right to receive their pro rata portion of (i) an aggregate of 1,200,000 shares of common stock (“Earnout Shares”), of which 150,806 are contingently issuable based upon future satisfaction of the aforementioned VWAP thresholds. The remaining 1,049,194 are legally issued and outstanding, if the Company does not meet the above VWAP thresholds, or a change in control with a per share price below the VWAP thresholds occurs within a five-year period immediately following the Closing Date, the shares will be returned to the Company.

The Earnout Shares are indexed to the Company’s equity and meet the criteria for equity classification. On the Closing Date, the fair value of the 1,200,000 Earnout Shares was $101.3 million. The Company recorded the Earnout Shares as a stock dividendby reducing additional paid-in capital, which was offset by the increase in additional paid-in capital associated with the Business Combination.

Warrants

For information pertaining to the Company’s outstanding warrants to purchase shares of the Company’s common stock, see Note 12, Warrants.

(11) Stock Option Plans

On August 5, 2014, the Company approved a stock option grant plan (the “2014 Equity Incentive Plan”) for employees, directors, and non-employee consultants, which provides for the issuance of options to purchase common stock. As of December 31, 2023, there were 732,430 shares of common stock reserved for issuance under the 2014 Equity Incentive Plan, with 323,755 shares of common stock available for grant and 408,675 shares of common stock underlying outstanding grants.

The Company adopted the 2021 Omnibus Equity Incentive Plan (the “2021 Equity Incentive Plan”, and collectively with the 2014 Equity Incentive Plan, the “Equity Compensation Plans”), which reserved 1,100,000 shares of common stock for issuance. At of the beginning of each calendar year, the shares reserved for future issuance shall increase by two percent (2%) of the total number of Shares of Common Stock issued and outstanding on a fully-diluted basis as of the end of the Company’s immediately preceding fiscal year (or such lesser number of shares, including no shares, determined by the Board in its sole discretion); provided, however, that the aggregate number of additional Shares available for issuance pursuant to this paragraph (b) shall not exceed a total of 500,000 Shares. As of December 31, 2023, there were 1,287,762 shares of common stock reserved for issuance under the 2021 Equity Incentive Plan, with 620,031 shares of common stock available for grant and 667,731 shares of common stock underlying outstanding grants.

The expected term of the stock options was estimated using the “simplified” method, as defined by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment. The volatility assumption was determined by examining the historical volatilities for industry peer companies, as the Company does not have sufficient trading history for its common stock. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the options. The dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Therefore, the Company has assumed no dividend yield for purposes of estimating the fair value of the options.

Stock Options

Stock option activity for employees and non-employees under the Equity Compensation Plans for the years ended December 31, 2023 and 2022 was as follows:

Total unrecognized compensation cost related to non-vested stock options as of December 31, 2023 was approximately$3.1 million and is expected to be recognized within future operating results over a weighted-average period of 3.11 years.

The weighted average grant date fair value of options granted during the years ended December 31, 2023 and 2022, was$4.93 and$7.80 per share, respectively. During the years ended December 31, 2023 and 2022,124,530 options vested with a fair value totaling$2.5 million and 63,466 options vested with a fair value totaling$3.1 million, respectively.

The estimated fair value of stock options granted during to employees and consultants for the years ended December 31, 2023 and 2022, were calculated using the Black-Scholes option-pricing model using the following assumptions:

Restricted Stock

Stock award activity for employees and non-employees under the Equity Compensation Plans for the year ended December 31, 2023 was as follows:

At December 31, 2023, the Company had an aggregate of$0.5 million of unrecognized equity-based compensation related to restricted stock units outstanding. During the year ended December 31, 2023,12,816 shares with a fair value of$0.2 million vested. At December 31, 2023, the Company had 12,816 restricted stock units vested but not issued. The unrecognized expense for restricted stock units is expected to be recognized within future operating results over a weighted average period of 2.87 years.

Stock-based compensation expense

Stock-based compensation expense for the December 31, 2023 and 2022 was as follows:

(12) Warrants

Public Warrants

Each whole Public Warrant entitles the holder to purchaseone share of the Company's common stock at a price of $115.00 per share, subject to adjustment as discussed herein.

Once the warrants become exercisable, the Company may call the warrants for redemption:

•

in whole and not in part;

•

at a price of $0.01 per warrant;

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, the reported last sale price of the common stock equals or exceeds $180.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company send the notice of redemption to the warrant holders.

If the Company calls the warrants for redemption as described above, management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” If management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the excess of the “fair market value” (defined below) over the exercise price of the warrants by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.

Private Placement Warrants

The Private Placement Warrants and the common stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or saleable until after the completion of the Company's merger transaction in 2021. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable as long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

As of December 31, 2023,20,860 Private Placement Warrants classified as liabilities were outstanding.

PIPE Warrants and PIPE Placement Agent Warrants

In December 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors for the sale by the Company of 736,337 shares of common stock and warrants to purchase up to 736,337 shares of common stock (the “PIPE Warrants”), in a private placement offering. The combined purchase price each share and accompanying PIPE Warrant was $10.80 (the “December 2022 Private Placement”). Three directors of the Company participated in the December 2022 Private Placement, each paying a $1.25 premium per share and accompanying PIPE Warrant. The PIPE Warrants, including those purchased by the participating directors of the Company, are exercisable beginning six months from the date of issuance at an exercise price equal to $10.80 per share, and are exercisable forfive years from the date of issuance. The Company received gross proceeds of approximately $8.0 million before deducting transaction related fees and expenses. The Company paid Brookline Capital Markets, the placement agent, a cash fee equal toseven percent of the gross proceeds received by the Company in the December 2022 Private Placement. The Company also issued Brookline Capital Markets a warrant to purchase up to an aggregate of 21,091 shares of common stock (the “PIPE Placement Agent Warrants”), equal to 7% of the number of shares purchased by investors introduced to the Company by Brookline Capital Markets. The PIPE Placement Agent Warrants have an exercise price equal to $13.50 per share and are exercisable six months from the date of issuance and expire five years from the date of issuance.

2023 Ladenburg Agreement Warrants

On March 21, 2023, the Company entered into a settlement agreement with Ladenburg Thalmann & Co. Inc. (“Ladenburg”), effective March 23, 2023 (the “2023 Ladenburg Agreement”, regarding the action brought by Ladenburg, the “Ladenburg Action”). In connection with the 2023 Ladenburg Agreement, on March 24, 2023, the Company (i) issued the Ladenburg Warrants to purchase up to 30,000 shares of common stock, exercisable forthree years from the date of issuance at $5.424 per share; and (ii) furnished to Ladenburg a one-time cash payment of $500 thousand. Pursuant to the terms and subject to the conditions set forth in the 2023 Ladenburg Agreement, the Company will (i) no later than June 30, 2023, pay $1.5 million to Ladenburg in cash or shares of common stock, at the Company’s option; and (ii) no later than December 31, 2023, pay $1.1 million to Ladenburg in cash or shares of common stock, at the Company’s option. Following the completion of the Company’s obligations under the 2023 Ladenburg Agreement, Ladenburg has agreed to dismiss the Ladenburg Action with prejudice and extinguish any and all obligations of the Company in connection therewith. All consideration contemplated by the 2023 Ladenburg Agreement are contained within accrued expenses and other current liabilities within the Company’s consolidated balance sheet as of December 31, 2022. On June 30, 2023, in accord with the terms of the agreement, the Company issued 191,689 shares of common stock to satisfy a portion of its obligations under the 2023 Ladenburg Agreement. Following the completion of the 2023 Private Placement, the Company settled the remaining $1.1 million due to Ladenburg in cash.

September 2023 Purchase Agreement Warrants

As of December 31, 2023, the Company now has outstanding 42,846 Tranche B Warrants to acquire shares of Series A-3 Preferred Stock for an aggregate exercise price of approximately $42.85 million, and 107,115 Tranche C Warrants to purchase shares of Series A-3 Preferred Stock for an aggregate exercise price of approximately $107.1 million.

Both the Tranche B Warrants and Tranche C Warrants were classified as derivative liabilities because they are redeemable for cash upon occurrence of a Fundamental Transaction, as defined in the Forms for such warrants, which may be outside the control of the Company.

Preferred Placement Agent Warrant

On November 21, 2023 the Company issued to Chardan Capital Markets LLC, the placement agent for the Preferred Warrants, a warrant to purchase 850,119 shares (as adjusted following the Reverse Stock Split) of the Company’s common stock (“the Preferred PIPE Placement Agent Warrants”) The Preferred PIPE Placement Agent Warrants have an exercise price equal to $6.30 per share (subject to adjustment for stock dividends and splits) and are exercisable in whole or in part, at any time or times on or after the issuance date and on or before October 2, 2028. The Preferred Placement Agent Warrant was classified in equity in additional paid-in capital.

The following table summarizes warrant activity for the year ended December 31, 2023:

Presentation and Valuation of the Warrants — Liability Classified Warrants

Public Warrants and Private Placement Warrants

The Public Warrants and Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity and were presented within warrant liabilities on the consolidated balance sheets as of December 31, 2023 and 2022. The initial fair value of the warrant liabilities was measured at fair value at the Closing Date, and changes in the fair value of the warrant liabilities were presented within changes in fair value of warrant liabilities in the consolidated statements of operations for the years ended December 31, 2023 and 2022.

On the Closing Date, the Company established the fair value of the Private Placement Warrants utilizing both the Black-Scholes Merton formula and a MCS analysis. Specifically, the Company considered an MCS to derive the implied volatility in the publicly-listed price of the Public Warrants. The Company then considered this implied volatility in selecting the volatility for the application of a Black-Scholes Merton model for the Private Placement Warrants. The Company determined the fair value of the Public Warrants by reference to the quoted market price.

The Public Warrants were classified as a Level 1 fair value measurement, due to the use of the quoted market price, and the Private Placement Warrants held privately by assignees of Big Cypress Holdings LLC, were classified as a Level 3 fair value measurement, due to the use of unobservable inputs. See Note 13, Fair Value Measurements, for changes in fair value of the Private Placement Warrants.

The key inputs into the valuations as of the December 31, 2023 and 2022 were as follows:

Preferred Warrants

Should the Company enter into or be party to a fundamental transaction, the Company will be required to purchase all outstanding Warrants from the holders by paying cash in an amount equal to the Black Scholes Value of the unexercised portion of each Preferred Warrant. As a result, the Preferred Warrants are accounted for as derivative liabilities in accordance with ASC 480 and ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity and were presented within warrant liabilities on the consolidated balance sheet as of December 31, 2023. The initial fair value of the warrant liabilities was measured at fair value at the Closing Date, and changes in the fair value of the warrant liabilities were presented within changes in fair value of warrant liabilities in the consolidated statement of operations for the year ended December 31, 2023.

On the Initial Issuance Date, the Company established the fair value of the Preferred Warrants utilizing the Black-Scholes Merton formula.

All tranches of the Preferred Warrants were classified as Level 3 fair value measurements, due to the use of unobservable inputs. See Note 13, Fair Value Measurements, for changes in fair value of the Preferred Warrants.

The key inputs utilized in determining the fair value of each Tranche A Warrant as of the Initial Issuance Date was as follows:

The key inputs utilized in determining the fair value of each Tranche B Warrants as of the Initial Issuance Date and December 31, 2023 were as follows:

(1)

Reflects a probability-weighted input derived from multiple Black-Scholes calculations. These calculations take into account the various potential dates for the announcement of the SAB-142-101 data. Specifically, the Company assumed a 50.0% probability of no data release on the Initial Measurement Date. This probability was later adjusted to 45.0% as of December 31, 2023.

(2)

The key inputs utilized in determining the fair value of each Tranche C Warrants as of the Initial Issuance Date and December 31, 2023 were as follows:

(1)

Reflects a probability-weighted input derived from multiple Black-Scholes calculations. These calculations incorporate the company's estimated probability of dissolution, should SABS’ intellectual property fail to yield positive results in forthcoming clinical trials, potentially leading to the company's dissolution before 2028. Initially, the company estimated a 20.0% probability of continuing operations through the expected remaining term. This probability was later adjusted to 25.0% as of December 31, 2023.

(2)

Equity Classified Warrants

The Company determined the Ladenburg Warrants, PIPE Warrants, PIPE Placement Agent Warrants, and Preferred PIPE Placement Agent Warrants met all necessary criteria to be accounted for as equity in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity. As such, they are presented within additional paid-in capital within Company’s consolidated statements of changes in stockholders’ equity and consolidated balance sheets.

Warrants classified as equity are initially measured at fair value. Subsequent changes in fair value are not recognized as long as the warrants continue to be classified as equity.

The initial fair value of each PIPE Warrant and PIPE Placement Agent Warrant issued was determined using the Black-Scholes option-pricing model. All relevant terms and conditions for the PIPE Warrant and PIPE Placement Agent Warrant are identical with the exception of the exercise prices of $10.80 and $13.50, respectively.

The key inputs into the valuations as of the initial measurement date, December 7, 2022, were as follows:

Upon initial measurement, the fair value of the PIPE Warrants and PIPE Placement Agent Warrants were determined to be $0.42 and $0.39 per warrant, respectively, for aggregate fair values of approximately$3.1 million and$82 thousand, respectively. In the Private Placement, the Company recognized the PIPE Warrants and PIPE Placement Agent Warrants on a relative fair value basis with approximately$2.2 million and$58 thousand being allocated to each as a component of additional paid-in capital within the Company’s consolidated statements of changes in stockholders’ equity and consolidated balance sheets as of December 31, 2023 and 2022.

The initial fair value of each Ladenburg Warrant issued and exercisable at $5.424 has been determined using the Black-Scholes option-pricing model.

The key inputs into the valuations as of the 2023 Ladenburg Agreement initial measurement date, March 21, 2023, were as follows:

Upon initial measurement, the fair value of each Ladenburg Warrant was determined to be $3.10, per warrant for a value of approximately$93 thousand. The total fair value of the Ladenburg Warrants was recognized by the company as a non-cash expense and allocated to additional paid-in capital within the Company’s consolidated statement of changes in stockholders’ equity and consolidated balance sheet.

The initial fair value of each Preferred Placement Agent Warrant issued and exercisable at $6.30 has been determined using the Black-Scholes option-pricing model.

The key inputs into the valuations as of the October 3, 2023 initial measurement date were as follows:

Upon initial measurement, the fair value of each Preferred Placement Agent Warrant was determined to be$4.40, per warrant for a value of approximately$3.7 million. The total fair value of the Preferred PIPE Placement Agent Warrants was recognized by the Company as a non-cash expense and allocated to additional paid-in capital within the Company’s consolidated statement of changes in stockholders’ equity and consolidated balance sheet.

(13) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy classifies the inputs to valuation techniques that would be used to measure fair value into one of three levels:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis at December 31, 2023 and 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

The following table provides a summary of changes in Level 3 fair value measurements for the Private Placement Warrant Liability:

The following table provides a summary of the changes in Level 3 fair value measurements for the Preferred Warrant liabilities:

As of December 31, 2023 and 2022, the Company did not have any other assets or liabilities that are recorded at fair value on a recurring basis.

The Company believes that the carrying amounts of its cash and cash equivalents, accounts receivable, accounts payable, notes payable, accrued expenses and other current liabilities approximate their fair values due to their near-term maturities.

(14) Income Taxes

Net deferred tax assets as of December 31, 2023 and 2022 consisted of the following:

The reconciliation between the Company’s effective tax rate and the statutory tax rate of 21% includes the following significant items: changes in the valuation allowance and permanent items including the change in fair value of warrant liabilities and equity issuance costs. The rate reconciliation was as follows:

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical losses and the uncertainty of future taxable income over the periods which the Company will realize the benefits of its net deferred tax assets, management believes it is more likely than not that the Company will not fully realize the benefits on the balance of its net deferred tax asset and, accordingly, the Company has established a valuation allowance on its net deferred tax assets. The valuation allowance increased by approximately$6.9 million and increased by approximately$7.0 million, respectively, for the years ended December 31, 2023 and 2022.

As of December 31, 2023, the Company had approximately$40.8 million of federal net operating losses, which were generated after December 31, 2017 and can be carried forward indefinitely under the Tax Act and may generally be used to offset up to 80% of future taxable income. In addition, the Company had federal tax credit carryforwards of approximately$1.7 million and approximately$0.9 million, respectively for years ended December 31, 2023 and 2022 which are available to reduce future federal income taxes through 2043.

Utilization of the Company’s net operating loss (and tax credit carryforwards) are subject to annual limitation(s) due to an ownership change that occurred as a result of the October 2023 Private Placement. In general, an “ownership change”, as defined by Section 382 of the Internal Revenue Code of 1986, as amended, results from a transaction or series of transaction over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders. However, because the Company was already in a full valuation allowance position, the effect of the ownership was insignificant.

Prior to 2022, taxpayers had the option under Section 174 of the Internal Revenue Code to either deduct their research and development costs or capitalize and amortize such costs over a period of not less than 60 months. As part of the tax law changes in the Tax Act enacted in 2017, starting with tax years beginning after December 31, 2021, Congress requires taxpayers to capitalize expenditures that qualify as Section 174 research and development costs and recover them over 5 years for expenditures attributed to domestic research and 15 years for expenditures attributed to foreign research. The 2022 effective income tax rate was impacted by the Section 174 capitalization requirement combined with the restriction on net operating losses to only reduce taxable income by 80%.

U.S. GAAP provides that the tax effects from uncertain tax positions can be recognized in the consolidated financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position. As of December 31, 2023 and 2022, there wereno uncertain tax provisions. There wasno interest or penalties related to income taxes for the years ended December 31, 2023 and 2022, and there wasno accrued interest or penalties associated with uncertain tax positions as of December 31, 2023 and 2022.

The Company files tax returns as prescribed by the laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company’s tax years are still open under the statute from 2020 to present. However, to the extent allowed by law, the taxing authorities may have the right to examine the period from 2016 through 2023 where net operating losses were generated and carried forward and make adjustments to the amount of the net operating loss carryforward amount. The Company is not currently under examination by federal or state jurisdictions.

(15) Related Party Transactions

For the years ended December 31, 2023 and 2022, there were no related party transactions with directors, executive officers, or beneficial owners of 5% or more of any class of the Company's voting securities, immediate family members of any of the foregoing persons, and any entities in which any of the foregoing is an executive officer or is an owner of 5% or more ownership interest.

(16) Employee Benefit Plan

The Company sponsors a defined contribution retirement plan. All the Company’s employees are eligible to be enrolled in the employer-sponsored contributory retirement savings plan, which include features under Section 401(k) of the Internal Revenue Code of 1986, as amended, and provides for Company matching contributions. The Company’s contributions to the plan are determined by its Board of Directors, subject to certain minimum requirements specified in the plan. The Company has historically made matching contributions of 100% on 3% of the employee contributions, with an additional 50% match on the next 2% of employee contributions. The Company made contributions of approximately$278 thousand and$410 thousand, for the years ended December 31, 2023 and 2022, respectively.

(17) Commitments and Contingencies

The Company is not a party to any litigation, and, to its best knowledge, no action, suit or proceeding has been threatened against the Company which are expected to have a material adverse effect on its financial condition, results of operations or liquidity.

(18) Subsequent Events

Effective January 5, 2024, the Company filed articles of amendment to the Company’s articles of incorporation to affect aone-for-ten reverse split of the Company’s issued and outstanding shares of Common Stock. All references to common stock, warrants and options to purchase common stock, including per share data and related information contained in the accompanying Consolidated Financial Statements have been retroactively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

On January 26, 2024, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), relating to shares of our common stock. In accordance with the terms of the Sales Agreement, the Company may offer and sell shares of our common stock having an aggregate offering price of up to $20,000,000 from time to time through Cantor, acting as the Company’s sales agent. As of the date hereof, the Company hasnot offered or sold any shares of common stock pursuant to the Sales Agreement.