SAB Biotherapeutics, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” included elsewhere in this Annual Report. As used in this report, unless the context suggests otherwise, “we,” “us,” our” or “the Company” refer to SAB Biotherapeutics, Inc. and its subsidiaries. Company Overview We are a clinical-stage biopharmaceutical company focused on the development of human polyclonal immunotherapeutic antibodies, or hIgG, to address immunology disorders. Our programs are based on mechanisms of action that have achieved proof-of-concept in clinical trials in indications with significant unmet medical needs. We are focused on developing product candidates for disease targets where a differentiated approach has the greatest potential to be either first-in-class against novel targets or best-in-class against complex targets to treat diseases, including T1D and other autoimmune disorders. Our internally discovered antibodies are both target-specific and polyclonal, meaning they are comprised of multiple hIgG and can bind to multiple sites on targeted immunogens, making them ideally suited to address the complexities associated with many immune-mediated disorders. Our proprietary platform, referred to as holds the potential to generate additional novel therapeutic candidates to expand our pipeline. Our platform utilizes the human immune response to generate the optimal repertoire of hIgG for drug targets of interest. We believe it is the only technology capable of producing disease-targeted, hIgG in large quantities without the need for human plasma donors. We have optimized genetic engineering in the development of transchromosomic cattle, or Tc Bovine, which produce hIgG. Our engineering of our production platform drives IgG1 production across our pipeline. In addition, this differentiated approach using polyclonal antibodies has no biosimilar pathway which provides a significant barrier to competitive polyclonal approaches. Recent Developments On January 28, 2025 we announced positive topline phase 1 clinical results with the Company’s potentially disease-modifying T1D therapy SAB-142. Based on the data, we plan to advance SAB-142 into a Phase 2b trial in 2025 to evaluate the therapeutic candidate in adult and pediatric patients with new-onset T1D. The SAB-142 Phase 1 trial was designed as a randomized, double-blind, placebo-controlled, single-ascending dose, adaptive design clinical study among healthy volunteers and one cohort of participants with T1D. The objectives include establishing the safety, tolerability, pharmacokinetic, immunogenicity and pharmacodynamic profile for SAB-142. SAB-142 demonstrated a favorable safety profile with no reported serum sickness or anti-drug antibodies (ADA) across Phase 1 doses (0.03mg/kg to 2.5mg/kg), supporting chronic ambulatory dosing, while exhibiting sustained immunomodulation and a multi-target mechanism of action analogous to rabbit ATG, with correlations to C-peptide preservation. Corporate Strategy We are focused on developing product candidates for disease targets where a differentiated approach has the greatest potential to be either first-in-class against novel targets or best-in-class against complex targets to treat diseases with significant unmet medical needs, including immune and autoimmune disorders including T1D. Our business strategy is focused on SAB-142 as a first-in-class, human, multi-target antibody treatment designed to provide superior efficacy and safety in delaying the onset or progression of T1D. Our proprietary platform, represents the first technology of its kind to produce large-scale human high-titer and high-avidity antibodies across multiple modalities. Leveraging our proprietary production system will help us advance a robust pipeline of differentiated hIgG-based therapies for the treatment of immune system disorders and infectious diseases. Our hIgG have been safely demonstrated up through Phase 3 clinical trials with a patient safety database that includes over 700 patients who were safely administered our hIgG therapeutics. We have a demonstrated regulatory pathway through each of the FDA, CBER, MHRA, and TGA. These organizations understand our science and are familiar with the multivalent and multitarget properties of our single vial drug products. This further streamlines our ability to develop new and novel drug products rapidly and efficiently where single target mAbs cannot replicate or duplicate our drug product attributes. 63 Key Factors Affecting Our Results of Operations and Future Performance We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in Part I, Item 1A of this Annual Report. Components of Results of Operations Revenue Our revenue has historically been generated through grants from government and other (non-government) organizations. We currently have no commercially-approved products. Grant revenue is recognized for the period that the research and development services occur, as qualifying expenses are incurred or conditions of the grants are met. We concluded that payments received under these grants represent conditional, nonreciprocal contributions, as described in 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. Government grants Total revenue recognized from government grants was approximately $1.3 million and $2.2 million for the years ended December 31, 2024 and 2023, respectively. We had two grants from The National Institute of Health – National Institute of Allergy and Infectious Disease (“NIH-NIAID”). The first grant, directly from NIH-NIAID, totaled approximately $1.5 million, and the second grant through Geneva Foundation, totaling approximately $2.7 million. Both of these grants were completed as of June 30, 2023. No grant income was recognized for these grants for the year ended December 31, 2024 and for the year ended December 31, 2023, we recognized approximately $0.4 million in total grant income, $0.2 million from each grant, respectively. The Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense Enabling Biotechnologies (“JPEO”) Rapid Response Contract (the “JPEO Rapid Response Contract”), initially awarded for up to $25 million and later expanded to $203.6 million, was terminated in 2022 (the “JPEO Rapid Response Contract Termination”). A final settlement was reached with the US Department of Defense (the “DoD”) in January 2023. Approximately $1.3 million and $1.8 million in deferred grant income was recognized for the JPEO Rapid Response Contract for the years ended December 31, 2024 and December 31, 2023, respectively. See Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements for further information about our established revenue recognition process and Note 4, Revenue, to our consolidated financial statements for further information about revenue recognized from government grants for the years ended December 31, 2024 and 2023. Operating Expenses Research and development expenses Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies and materials for employees and contractors engaged in research and product development, licensing fees to use certain technology in our research and development projects, fees paid to consultants and various entities that perform certain research and testing on our behalf. Research and development expenses are tracked by target/project code. Indirect general and administrative costs are allocated based upon a percentage of direct costs. We expense all research and development costs in the period in which they are incurred. Research and development activities consist of discovery research for our platform development and the indications we are working on. For SAB-142, Avance Clinical PTY, Ltd (“Avance”), acts as the contract research organization (“CRO”) overseeing our Phase 1 safety study. This study started in December 2023 and the terms of that agreement are subject to confidentiality and the status of the agreement is that it is current. For the years ended December 31, 2024 and 2023 we continued to incur costs to advance our progress towards commercialization of SAB-142. We expect to continue to incur substantial research and development expenses as we conduct discovery research to enhance our platform and work on our 64 indications. We expect to hire additional employees and continue research and development and manufacturing activities. As a result, we expect that our research and development expenses will continue to increase in future periods and vary from period to period. Major components within our research and development expenses are salaries and benefits (laboratory & animal care), laboratory supplies, animal care, contract manufacturing, clinical trial expense, outside laboratory services, project consulting, and facility expenses. Research and development expenses by component for the years ended December 31, 2024 and 2023 were as follows: Year Ended December 31, 2024 2023 Salaries & benefits $ 10,159,122 $ 6,623,281 Laboratory supplies 1,408,336 1,006,756 Animal care 524,937 936,192 Contract manufacturing — 388,518 Clinical trial expense 4,169,487 809,678 Outside laboratory services 5,721,954 987,613 Project consulting 1,442,436 371,235 Facility expense 6,636,750 5,278,702 Other expenses 188,645 113,030 Total research and development expenses $ 30,251,667 $ 16,515,005 General and administrative expenses General and administrative expenses primarily consist of salaries, benefits, and stock-based compensation costs for employees in our executive, accounting and finance, project management, corporate development, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses. General and administrative expenses also include rent and facilities expenses allocated based upon total direct costs. We anticipate that general and administrative expenses will rise as we expand our workforce and invest in the advancement of our lead therapeutic candidate in preparation for potential commercialization. Additionally, as our operations grow in complexity and we progress toward commercialization, we may incur higher costs related to accounting, audit, legal, regulatory compliance, director and officer insurance, and investor relations. We expect these expenses to vary from period to period in absolute terms and as a percentage of revenue. Nonoperating Income (Expense) Gain (loss) on change in fair value of warrant liabilities Gain (loss) on change in fair value of warrant liabilities consists of the changes in the fair value of the warrant liabilities. Other income (expense) Other income primarily consists of income associated with the refundable portion of the Australian research and development tax credit and dividend income from non-interest bearing short-term investments. Interest income Interest income consists of interest earned on our investments in debt securities, cash, and cash equivalents. Interest expense Interest expense consists primarily of interest related to abated rent and insurance financing. 65 Results of Operations The following tables set forth our results of operations for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Revenue Grant revenue $ 1,322,410 $ 2,238,991 Total revenue 1,322,410 2,238,991 Operating expenses Research and development 30,251,667 16,515,005 General and administrative 13,981,263 23,799,306 Total operating expenses 44,232,930 40,314,311 Loss from operations (42,910,520 ) (38,075,320 ) Other income (expense) Changes in fair value of warrant liabilities 5,385,009 (4,823,237 ) Interest expense (318,401 ) (315,284 ) Interest income 1,285,998 584,966 Other income 2,452,605 435,089 Total other income (expense) 8,805,211 (4,118,466 ) Loss before income taxes (34,105,309 ) (42,193,786 ) Net loss $ (34,105,309 ) $ (42,193,786 ) Comparison of the Years Ended December 31, 2024 and 2023 Revenue Year Ended December 31, 2024 2023 Change % Change Revenue $ 1,322,410 $ 2,238,991 $ (916,581 ) (40.9 )% Total revenue $ 1,322,410 $ 2,238,991 Revenue decreased by $0.9 million, or 40.9%, in 2024, primarily due to the JPEO Rapid Response Contract Termination. Included in revenues for the year ended December 31, 2024, are amounts for billable costs related to closeout activities and charges of $1.3 million for supplies, as compared to $0.1 million for labor, $0.8 million for supplies, and $1.4 million for outside research manufacturing services for the year ended December 31, 2023. We expect to recognize no further revenue on the JPEO Rapid Response Contract Termination and do not anticipate pursuing additional funded research opportunities outside of our primary focus area in T1D. Research and development Year Ended December 31, 2024 2023 Change % Change Research and development $ 30,251,667 $ 16,515,005 $ 13,736,662 83.2 % Total research and development expenses $ 30,251,667 $ 16,515,005 Research and development expenses increased by $13.7 million, or 83.2%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to increases in outside lab services (year-over-year increase of $4.7 million, 479.4%), laboratory supplies (year-over-year increase of $0.4 million, 39.9%), an out-of-period adjustment of $0.9 million, salaries and benefits (year-over-year increase of $3.5 million, 53.4%), project consulting (year-over-year increase of $1.1 million, 288.6%), overhead costs (year-over-year increase of $0.5 million, 9.0%), clinical trial costs (year-over-year increase of $3.4 million, 415.0%), offset by contract manufacturing costs (year-over-year decrease of $0.4 million, 100.0%) and animal care (year-over-year decrease of $0.4 million, 43.2%). We expect Research and Development expenses 66 to increase in future years as we advance our lead therapeutic candidate through Phase 2 clinical trials and invest in the necessary foundation to support potential commercialization. General and administrative Year Ended December 31, 2024 2023 Change % Change General and administrative $ 13,981,263 $ 23,799,306 $ (9,818,043 ) (41.3 )% Total general and administrative expenses $ 13,981,263 $ 23,799,306 General and administrative expenses decreased by $9.8 million, or 41.3%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to other administrative support fees relating to IT, human resources, and legal (year-over-year decrease of $1.5 million, 25.3%); non-capitalized financing costs (year-over-year decrease of $7.5 million, 100.0%); salaries and benefits (year-over-year decrease of $0.2 million, 2.6%); insurance costs (year-over-year decrease of $0.5 million, 31.7%); and forgiveness of a trade payable of $0.7 million; offset by project consulting (year-over-year increase of $0.6 million, 131.5%). While administrative support and non-capitalized financing costs declined substantially in the year ended December 31, 2024, we anticipate that general and administrative expenses will rise as we expand our workforce and invest in the advancement of our lead therapeutic candidate in preparation for potential commercialization. Additionally, as our operations grow in complexity and we progress toward commercialization, we may incur higher costs related to accounting, audit, legal, regulatory compliance, director and officer insurance, and investor relations. Non-operating (expense) income Year Ended December 31, 2024 2023 Change % Change Changes in fair value of warrant liabilities $ 5,385,009 $ (4,823,237 ) $ 10,208,246 (211.65 )% Other income 2,452,605 435,089 2,017,516 463.70 % Total non-operating income (expense) $ 7,837,614 $ (4,388,148 ) Total non-operating income increased by $12.2 million, or (278.61)% for the year ended December 31, 2024 as compared to the year ended December 31, 2023. This increase was primarily driven by changes in the fair value of the warrant liabilities (year-over-year increase of $10.2 million, 211.6%); a $1.6 million increase in the Australian research and development tax credit; and a $0.4 million increase in income from non-interest-bearing short-term investments, primarily consisting of dividend income and realized gains and losses. 67 Interest expense Year Ended December 31, 2024 2023 Change % Change Interest expense $ 318,401 $ 315,284 $ 3,117 0.99 % Total interest expense $ 318,401 $ 315,284 Interest expense for the year ended December 31, 2024 remained consistent with interest expense for the year ended December 31, 2023, primarily due to the stability of our finance lease portfolio year-over-year. Interest income Year Ended December 31, 2024 2023 Change % Change Interest income $ 1,285,998 $ 584,966 $ 701,032 119.84 % Total interest income $ 1,285,998 $ 584,966 Interest income increased by $701 thousand, or 119.84% for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to interest earned on our investments in debt securities, and higher interest earning cash, and cash equivalent balances. Future interest income will be largely dependent on our total liquid cash and investment balances, which are in turn influenced by our capital resources and future fundraising activities. Liquidity and Capital Resources As of December 31, 2024 and December 31, 2023, we had $20.8 million and $56.6 million, respectively, of cash, cash equivalents and investments. We intend to continue to invest in our business and, as a result, may incur operating losses in future periods. We expect to continue to invest in research and development efforts towards expanding our capabilities and expertise along our platform and the primary pipeline development targets we are working on, as well as building our business development team and marketing our solutions to partners in support of the growth of the business. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin commercialization of our products. As a result, we will require additional capital to fund our operations in order to support our long-term plans. We have incurred operating losses for the past several years. While we intend to continue to keep operating expenses at a reduced level there can be no assurance that our current level of operating expenses will not increase or that other uses of cash will not be necessary. Based on our current level of operating expenses, existing resources will not be sufficient to cover operating cash needs through the twelve months following the date these financials are made available for issuance. These conditions raise substantial doubt about our ability to continue as a going concern. We intend to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations. Sources of Liquidity Since our inception, we have financed our operations primarily from revenue in the form of government grants and from equity financings. 68 Notes payable 8% Unsecured Convertible Note Pursuant to the fourth amendment to our lease with Sanford Health, we agreed to a period of abated rent (the “Abated Rent”) from October 1, 2022 to September 30, 2023. In exchange for the Abated Rent, effective as of October 1, 2022, we issued to Sanford Health an 8% unsecured, convertible promissory note (the “8% Unsecured Convertible Note”). Pursuant to the 8% Unsecured Convertible Note, we shall pay the sum of 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. We repaid the Principal of $542 thousand and total accrued interest of $87 thousand during the year ended December 31, 2024. Insurance Financing We obtained financing for certain Director & Officer liability insurance policy premiums. For the year ended December 31, 2024, the agreement assigns AFCO Direct as the 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. For the year ended December 31, 2023, we entered into a similar agreement with First Insurance Funding. This agreement also assigned First Insurance Funding a first priority lien on the security interest in the financed policies and associated rights. The total premiums, taxes, and fees financed under the current insurance financing agreement are approximately $516 thousand, for AFCO Direct with an annual interest rate of 7.37%. In consideration of the premium payment by the AFCO Direct to the insurance companies or the Agent or Broker (as defined in the agreement with the lender), we unconditionally promise to pay the lender the amount financed plus interest and other charges permitted under the agreement. At December 31, 2024, and 2023, we recognized approximately $276 thousand and $509 thousand, respectively, as an insurance financing note payable in our consolidated balance sheets. We incurred $17 thousand and $22 thousand of interest expense related to the insurance financing note for the years ended December 31, 2024, and 2023, respectively. Our current insurance financing agreement is being repaid through installment payments, with the final payment scheduled for September 22, 2025. During the year ended December 31, 2024, we also made payments on a prior insurance financing agreement, which had an original principal balance of $765 thousand with an annual interest rate of 7.96%. This prior agreement was fully repaid, with the final installment made on September 22, 2024. Please refer to Note 9, Notes Payable , in our consolidated financial statements for additional information on our debt. Cash Flows The following table summarizes our cash flows for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Net cash used in operating activities $ (34,292,009 ) $ (25,119,405 ) Net cash used in investing activities (11,962,267 ) (152,704 ) Net cash provided by (used in) financing activities (1,172,626 ) 66,773,137 Effect of exchange rate changes on cash and cash equivalents (241,198 ) 18,144 Net increase (decrease) in cash and cash equivalents $ (47,668,100 ) $ 41,519,172 Operating Activities Net cash used by operating activities increased by $9.2 million in the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to an increase in our net loss adjusted for non-cash items of $4.5 million, compounded by an increase in cash used in operating activities related to change in our operating assets and liabilities of $4.6 69 million. Year-over-year changes in cash used for operating activities were primarily driven by working capital needs to support the advancement of our Phase 1 trial. Investing Activities Net cash used by investing activities increased by $11.8 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to increased purchases of short-term investments following the completion of the Company’s 2023 PIPE. Capital expenditures were minimal in 2024, as major asset purchases in prior years were primarily related to leasehold improvements at our Corporate Headquarters. We do not anticipate a significant increase in capital asset purchases in the near term, as our investment focus remains on advancing our lead therapeutic candidate through Phase 2 clinical trials. Financing Activities Net cash provided by (used in) financing activities decreased by $67.9 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to the absence of any material equity financing activities in 2024. Contractual Obligations and Commitments We enter into contracts in the normal course of business with third parties, including contract research organizations (“CRO”). These payments are not included in the table above, as the amount and timing of such payments are not known. As of December 31, 2024, there were no material changes outside of the ordinary course of business to our commitments and contractual obligations. Income Taxes We had $59.9 million of federal net operating loss carryforwards as of December 31, 2024. Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. These carryforwards may generally be utilized in any future period but may be subject to limitations based upon changes in the ownership of our shares in a prior or future period. We have not quantified the amount of such limitations, if any. Off-Balance Sheet Arrangements We did not have, for the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Critical Accounting Policies and Estimates We have prepared our consolidated financial statements in accordance with U.S. GAAP. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements. 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 our research and development projects, fees paid to consultants and various entities that 70 perform certain research and testing on behalf of us, and expenses related to animal care, research-use equipment depreciation, salaries, benefits, and stock-based compensation granted to employees in research and development functions. We 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 we are 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, we will adjust the accrual; such changes in estimate may result in a material change in our clinical study accrual, which could also materially affect reported results of operations. 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. We recognize 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. We determine 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, we utilize 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, we estimate the probability of achievement of the performance criteria and recognizes compensation expense related to those awards expected to vest. No awards may have a term in excess of ten years. Forfeitures are recorded when they occur. Stock-based compensation expense is classified in the consolidated statements of operations based on the function to which the related services are provided. We recognize stock-based compensation expense over the vesting period. Warrants Liability Classified Warrants We account for our Public Warrants, Private Placement Warrants, and Preferred Warrants as liabilities in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity ’ s Own Equity. 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 our consolidated statements of operations. On the Closing Date, the Company established the fair value of the Private Placement Warrants utilizing both the Black-Scholes Merton formula and a Monte Carlo Simulation (the “MCS”) analysis. Specifically, we considered an MCS to derive the implied volatility in the publicly-listed price of the Public Warrants. We then considered this implied volatility in selecting the volatility for the application of a Black-Scholes Merton model for the Private Placement Warrants. We determined the fair value of the Public Warrants by reference to the quoted market price. See Note 12, Warrants , for the key inputs and further details for our warrants classified as liabilities. Our Public Warrants were classified as a Level 1 fair value measurement, due to the use of the quoted market price, and our 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. Equity Classified Warrants We 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 our 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 Ladenburg Warrant, PIPE Warrant and PIPE Placement Agent Warrant issued was determined using the Black-Scholes option-pricing model. See Note 12, Warrants for further details on our warrants classified as equity. 71 Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3, New Accounting Standards, in our consolidated financial statements . JOBS Act Accounting Election The Jumpstart Our Business Startups (“JOBS”) Act, enacted in April 2012, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have and intend to continue to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards, for an emerging growth company under Section 107 of the JOBS Act. We may use these provisions until the last day of our fiscal year in which the fifth anniversary of the completion of our initial public offering occurred. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.235 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. We have elected to take advantage of certain of the reduced disclosure obligations in this Annual Report and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than the information you receive from other public companies in which you hold stock. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, until those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which we will adopt the recently issued accounting standard. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Not Applicable. Item 8. Financial Statements and Supplementary Data. The consolidated financial statements required pursuant to this item are included in Part IV, Item 15 of this Annual Report, and are presented beginning on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.