SAB Biotherapeutics, Inc. Income Taxes Disclosure

(15) Income Taxes

During the years ended December 31, 2025 and 2024, the Company did not record a provision for income taxes because it has incurred operating losses and maintained a full valuation allowance against its deferred tax assets.

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 $8.9 million and increased by approximately $8.6 million, respectively, for the years ended December 31, 2025 and 2024.

As of December 31, 2025, the Company has federal and state net operating loss carryforwards in the amount of $82.6 million and $2 million, respectively. As of December 31, 2024, the Company has federal and state net operating loss carryforwards in the amount of $59.9 million and $1.1 million, respectively. The federal net operating loss can be carried forward indefinitely. The Company's state net operating loss carryforwards expiration periods range from 2041 to indefinite. In addition, the Company had federal tax credit carryforwards of $1.7 million and $2.0 million, respectively for the years ended December 31, 2025 and 2024 which are available to reduce future federal income taxes through 2045.

Utilization of the Company’s net operating loss (and tax credit carryforwards) are subject to annual limitation(s) due to ownership changes that occurred as a result of the October 2023 Private Placement and the July 2025 Purchase Agreement. 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.

The “One Big Beautiful Bill Act” (“OBBBA”) enacted on July 4, 2025, introduced notable changes to the U.S. Internal Revenue Code, including immediate expensing of domestic Section 174 costs. Section 174 costs are expenditures, which represent research and development costs that are incident to the development or improvement of a product, process, formula, invention, computer software, or technique. As previously required under the Tax Cuts and Jobs Act, we capitalized research and development expenditures in the years ended December 31, 2022 through December 31, 2024. The Company continues to capitalize research and development expenditures for the year ended December 31, 2025.

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, 2025 and 2024, there were no uncertain tax provisions. There was no interest or penalties related to income taxes for the years ended December 31, 2025 and 2024, and there was no accrued interest or penalties associated with uncertain tax positions as of December 31, 2025 and 2024.

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 2022 to present. However, to the extent allowed by law, the taxing authorities may have the right to examine the period from 2017 through 2024 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.