(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 was renewed in January 2025 for a five-year-term ending on December 31, 2029. This lease can be terminated with one-year advance written notice and does not include an option to extend beyond the life of the current term. The lease costs are approximately $50 thousand per month through 2025, with an annual increase of 2% through 2029. The lease does not provide an implicit rate, and, therefore, the Company used an IBR of 9.90% as the discount rate when measuring the operating lease liability. 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, as amended in July 2022, and renewed in November 2023. This renewed 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 was unclear as to whether or not the location will meet the Company’s requirements beyond the next three years. The lease costs are $31 thousand per month for the November 2023 lease renewal. The Company used an IBR of 8.14% as the discount rate when measuring the operating lease liability for the November 2023 lease renewal. 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 space in April 2024. The Company leased 1,272 square feet, representing the Company’s principal executive offices, in Miami Beach, Florida. The initial term of the lease is 62 months. The lease costs are approximately $7 thousand per month through 2024, with annual increases of 4% through 2029. The Company used an IBR of 7.12%, as the discount rate when measuring the operating lease liability. In September 2025, the Company signed a new lease, expanding the lease space of 1,272 square feet to 3,099 square feet. As of September 30, 2025 the lease has not commenced. 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 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.

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:


Animal Facility	40 years
Equipment	3–7 years
Land	Indefinite

The Company’s weighted-average remaining lease term and weighted-average discount rate for operating and finance leases as of September 30, 2025 and December 31, 2024 are:


	September 30, 2025		December 31, 2024
	Operating	Finance	Operating	Finance
Weighted-average remaining lease term (years)	3.80	13.17	2.85	13.92
Weighted-average discount rate (percentage)	9.42%	7.72%	7.76%	7.72%

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 condensed consolidated balance sheets as of September 30, 2025:


	Operating			Finance
2025 - remaining	$	263,903		$	100,374
2026		1,007,017			401,496
2027		712,653			401,496
2028		728,650			401,496
2029		708,989			401,496
Thereafter		—			3,580,006
Undiscounted future minimum lease payments		3,421,212			5,286,364
Less: Amount representing interest payments		(546,465	)		(1,973,769	)
Total lease liabilities		2,874,747			3,312,595
Less current portion		(837,286	)		(151,033	)
Noncurrent lease liabilities	$	2,037,461		$	3,161,562

Operating lease expense was approximately $268 thousand and $803 thousand for the three and nine months ended September 30, 2025, respectively, and $199 thousand and $647 thousand for the three and nine months ended September 30, 2024, respectively. Operating lease costs are included within research and development expenses on the condensed consolidated statements of operations and comprehensive income (loss).

Finance lease costs for the three and nine months ended September 30, 2025 included approximately $22 thousand and $65 thousand, respectively, in right-of-use asset amortization and approximately $64 thousand and $195 thousand, respectively, of interest expense.

Finance lease costs for the three and nine months ended September 30, 2024 included approximately $22 thousand and $65 thousand, respectively, in right-of-use-asset amortization and approximately $67 thousand and $202 thousand, respectively, of interest expense. Finance lease costs are included within research and development expenses on the condensed consolidated statements of operations and comprehensive income (loss).

Cash payments under operating leases were approximately $264 thousand and $740 thousand for the three and nine months ended September 30, 2025, respectively. Cash payments under finance leases were approximately $100 thousand and $301 thousand for the three and nine months ended September 30, 2025, respectively.

Cash payments under operating leases were approximately $195 thousand and $672 thousand for the three and nine months ended September 30, 2024, respectively. Cash payments under finance leases were approximately $100 thousand and $301 thousand for the three and nine months ended September 30, 2024, respectively.

SAB Biotherapeutics, Inc. 10-Q