Azitra, Inc.AZTR
Azitra, Inc. Income Taxes Disclosure
Income Taxes
The provision for income taxes for the years ending December 31, 2025 and December 31, 2024 consists of:
December 31, | ||||||||
2025 | 2024 | |||||||
Current | ||||||||
Federal | $ | — | $ | — | ||||
Foreign | 8,319 | 9,031 | ||||||
State | — | — | ||||||
Total current | 8,319 | 9,031 | ||||||
Deferred | ||||||||
Federal | — | — | ||||||
Foreign | — | — | ||||||
State | — | — | ||||||
Total deferred | — | — | ||||||
Total provision for income taxes | $ | 8,319 | $ | 9,031 | ||||
The Company has adopted ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” on a prospective basis for the year ended December 31, 2025. A reconciliation of income tax computed using the U.S. federal statutory tax rate compared to that reflected in operations, as required by ASU 2023-09, for the years ending December 31, 2025 and December 31, 2024 consists of:
2025 | 2024 | ||||||||||||||||
Amount | Percent | Amount | Percent | ||||||||||||||
Income taxes using U.S. statutory rate | $ | (2,300,519) | 21.00 | % | $ | (1,870,405) | 21.00 | % | |||||||||
Warrant fair value adjustment | — | — | % | (847,155) | 9.51 | % | |||||||||||
Loss on Issuance of Common Stock | — | — | % | 447,888 | (5.03) | % | |||||||||||
State taxes, net of federal benefit | — | — | % | (704,887) | 7.91 | % | |||||||||||
Research and development tax credit | (266,515) | 2.43 | % | (385,677) | 4.33 | % | |||||||||||
Change in valuation allowance | 2,532,821 | (23.12) | % | 3,263,544 | (36.64) | % | |||||||||||
Foreign Tax Effects | 8,319 | (0.06) | % | — | — | % | |||||||||||
Nontaxable/Nondeductible Items | 48,726 | (0.44) | % | — | — | % | |||||||||||
Other, net | (14,513) | 0.13 | % | 105,723 | (1.19) | % | |||||||||||
$ | 8,319 | (0.06) | % | $ | 9,031 | (0.10) | % | ||||||||||
Deferred income taxes are provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for income tax reporting purposes. Deferred income tax assets / (liabilities) as of December 31, 2025 and 2024 are as follows:
December 31, | |||||||||||
2025 | 2024 | ||||||||||
Deferred tax assets: | |||||||||||
Net operating loss carryforwards | $ | 14,152,937 | $ | 10,360,042 | |||||||
Tax credits | 3,061,055 | 2,632,663 | |||||||||
Depreciation and amortization | 2,756,203 | 3,566,210 | |||||||||
Accrued expenses | 5,100 | 89,324 | |||||||||
Other | 25,115 | 18,218 | |||||||||
Total deferred tax assets | $ | 20,000,410 | $ | 16,666,457 | |||||||
Deferred tax liabilities: | |||||||||||
Depreciation and amortization | — | — | |||||||||
Total deferred tax liabilities | — | — | |||||||||
Valuation allowance | (20,000,410) | (16,666,457) | |||||||||
Net deferred tax assets | $ | — | $ | — | |||||||
The Company has federal net operating loss carryforwards of approximately $52,575,000 and $38,488,000 for the tax years ending December 31, 2025 and 2024, respectively, of which $1,285,000 will expire in tax years 2036 through 2037 and approximately $51,290,000 which does not expire. The Company has state net operating loss carryforwards of approximately $52,526,000 and $38,441,000 for the tax years ending December 31, 2025 and 2024, respectively, which will expire in tax years 2036 through 2045.
The Company has federal research tax credits of approximately $2,151,000 and $1,884,000 for the tax years ending December 31, 2025 and 2024, respectively, which expire in tax years 2039 through 2043. The Company has state research tax credits of approximately $706,000 and $582,000 for the tax years ending December 31, 2025 and 2024, respectively, of which $569,000 will expire in tax year 2036 through 2040 and the remainder can be carried forward indefinitely. The Company has Canadian research tax credits of approximately $352,000 and $288,000 for the tax years ending December 31, 2025 and 2024, respectively, which expire in tax years 2039 through 2045.
The U.S. Internal Revenue Code Section 382 imposes an annual limit on the ability of a corporation that undergoes a greater than 50% ownership change to use its net operating loss carry forwards to reduce its tax liability. If in the future the Company undergoes an ownership change exceeding the 50% limitation threshold imposed by Section 382, the Company’s net operating loss carryforwards may be significantly limited as to the amount of use in a particular year. In addition, all or a portion of the Company’s net operating loss carryforwards incurred before 2018, may expire unutilized.
The realization of deferred tax assets is dependent upon the Company’s ability to generate future taxable income during the periods in which the temporary differences become deductible. Based on the Company’s recent earnings history and projected future U.S. earnings, management believes that it is more likely than not that its federal and state deferred tax assets will not be fully realized in the foreseeable future. As a result of this assessment, management believes that a full valuation allowance against its net federal and state deferred tax assets is required.
The Company applies the provisions of ASC 740-10 to account for uncertain tax positions. ASC 740-10 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, the Company may recognize the tax benefit from an uncertain tax position
only if it is more likely that not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company has determined that it has no significant uncertain tax positions requiring recognition and measurement under ASC 740-10.
The Company is subject to U.S. federal income tax, Connecticut state income tax and Canada branch tax. The Company has not been audited by the IRS, state, or foreign tax authorities in connection with income taxes. The Company’s tax years remain open to examination for all federal and state tax matters until its net operating loss carryforwards are utilized and the applicable statute of limitations have expired. The Company’s tax years remain open to examination for all federal and state tax matters until its net operating loss carryforwards are utilized and the applicable statute of limitations have expired.
As a result of the Company adopting ASU 2023-09, the table below is presented to provide cash income taxes paid (net of refunds received) for the year ended December 31, 2025.
December 31, 2025 | |||||
Federal Taxes | $ | — | |||
State Taxes | — | ||||
Foreign Taxes: | |||||
Canada | 9,182 | ||||
$ | 9,182 | ||||
The Company will recognize interest and penalties related to unrecognized tax benefits, if applicable, as a component of income tax expense.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Mar 15, 2024 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.