Dogwood Therapeutics, Inc. Income Taxes Disclosure
14. Income Taxes
As of December 31, 2025, the Company has U.S. federal net operating loss carryforwards of approximately $45,410,000, which have an indefinite carryforward and Georgia and Florida state net operating loss carryforwards of approximately $58,689,000 and $1,750,000, respectively, which have a twenty-year carryforward and begin expiring in 2037. As of December 31, 2025, the Company had Canadian non-capital loss carryforwards of approximately $22,024,000, which have a twenty year carryforward and begin expiring in 2026 and Hong Kong tax losses carryforwards of approximately $58,026,000 which have no expiry. These net operating loss carryforwards may be limited under Section 382 of the internal revenue code. The Company will need to perform a formal Section 382 study to determine how the equity transactions discussed above impact the limitation on the utilization of its net operating loss carryforwards.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. The OBBBA did not change the US federal corporate income-tax rate and did not materially affect Dogwood’s US income-tax position. The OBBBA did reinstate the immediate expensing of domestic research and development (“R&D”) expenditures under Section 174A, effective for tax years beginning after December 31, 2024. This change reverses the prior requirement to capitalize and amortize R&D costs over five years. The Company has elected to continue to capitalize R&D expenditures under Section 174A and amortize these costs over 60-months. Therefore there was no remeasurement of deferred tax assets due to the OBBBA’s enactment and there was no impact on the Company’s income tax provision for the year ended December 31, 2025. The Company maintains a full
valuation allowance against its deferred tax assets, including those related to net operating loss carryforwards and R&D credits.
The Company adopted ASU 2023-09 effective January 1, 2025, applying the guidance prospectively, as permitted by the standard. Comparative prior-year disclosures have not been restated. The adoption of ASU 2023-09 did not affect the Company’s recognition or measurement of income tax amounts, as the ASU amends disclosure requirements only and does not modify the underlying accounting guidance in ASC 740.
Income taxes paid by the Company are as follows:
| Year Ended December 31, | |||||
| 2025 | | 2024 | |||
Federal | $ | — | $ | — | ||
State | — | — | ||||
Foreign | — | — | ||||
Total income taxes paid | $ | — | $ | — | ||
A reconciliation of the worldwide consolidated income tax rate to the Company’s effective tax rate as of December 31, 2025 is as follows:
|
| Year Ended | |||
| December 31, 2025 | ||||
| | ||||
Pretax Income | (7,147,720) | 21.00 | % | ||
Domestic state and local income taxes, net of federal effect (a) |
| — | — | % | |
Foreign tax effects: |
| ||||
Canada | |||||
Other | 368,275 | (1.08) | % | ||
Other Adjustment - NOLs | 1,639,371 | (4.82) | % | ||
Change in valuation allowance | (1,442,061) | 4.24 | % | ||
Other | 896 | — | % | ||
Effect of cross-border tax laws | — | — | % | ||
Tax credits | — | — | % | ||
Nontaxable or Nondeductible Items, net | |||||
Debt conversion | 1,288,165 | (3.79) | % | ||
Other |
| 75,693 | (0.22) | % | |
Other adjustments |
| 224 | — | % | |
Change in valuation allowance | 5,438,253 | (15.98) | % | ||
221,096 | (0.65) | % | |||
A reconciliation of the worldwide consolidated income tax rate to the Company’s effective tax rate as of December 31, 2024 is as follows:
|
| Year Ended | |
| December 31, | ||
| 2024 | | |
U.S. federal statutory income tax rate | 21.00 | % | |
Permanent differences |
| (2.60) | % |
State taxes, net of federal benefit |
| 2.60 | % |
Foreign exchange | 0.43 | % | |
Other adjustments | — | % | |
Change in valuation allowance |
| (21.43) | % |
Effective Income Tax rate |
| — | % |
Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets are comprised of the following:
| As of December 31, | |||||
| 2025 | | 2024 | |||
Deferred tax assets: | ||||||
Net operating loss carryforwards | $ | 27,632,096 | $ | 26,081,361 | ||
Research and development tax credits | 2,484,004 | 8,765,999 | ||||
Capitalized research and development expenditures | 2,814,581 | 1,627,842 | ||||
Stock compensation |
| 1,440,022 |
| 1,434,890 | ||
Depreciation and amortization | 3,023,531 | 275,412 | ||||
Lease liabilities | 43,381 | 58,227 | ||||
Other | 50 | — | ||||
Investment in partnership | — | 30,035 | ||||
Gross deferred tax assets |
| 37,437,665 |
| 38,273,766 | ||
Valuation allowance |
| (36,952,112) |
| (31,370,027) | ||
Net deferred tax assets | 485,553 | 6,903,739 | ||||
Deferred tax liabilities: | ||||||
Right-of-use asset | (42,187) | (55,341) | ||||
In-process research and development intangible assets | (12,112,367) | (17,741,842) | ||||
Prepaid expenses | (440,403) | (421,481) | ||||
Deferred tax liabilities | (12,594,957) | (18,218,664) | ||||
Net deferred taxes | $ | (12,109,404) | $ | (11,314,925) | ||
For tax years beginning on or after January 1, 2022, the 2017 Tax Cuts and Jobs Act amended Section 174 of the code to eliminate current-year deductibility of research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and fifteen years for research activities performed outside of the United States. For the 2025 and 2024 tax years, the Company has capitalized $8,871,522 and $2,810,785 of research and development expenses, respectively.
At December 31, 2024, the Company evaluated the realizability of its deferred tax assets and determined that the valuation allowance should be adjusted for the consideration of the acquired in-process research and development intangible assets. An income tax benefit for the year ended December 31, 2025 is reflected in the consolidated statement of operations.
The Company experienced a net change in valuation allowance of $5,582,085 and $21,443,255 for the years ended December 31, 2025 and 2024, respectively. The large valuation adjustment for the year ended December 31, 2024, primarily related to the Combination of Pharmagesic and acquired in-process research and development intangible assets.
The components of the income tax expense (benefit) are as follows:
| As of December 31, | |||||
| 2025 | | 2024 | |||
Current: | ||||||
Federal | $ | — | $ | — | ||
State | — | — | ||||
Foreign | — | — | ||||
$ | — | $ | — | |||
Deferred: | ||||||
Federal | $ | — | — | |||
State |
| — |
| — | ||
Foreign |
| 221,096 |
| (503) | ||
$ | 221,096 | $ | (503) | |||
Total income tax expense (benefit) | $ | 221,096 | $ | (503) | ||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 18, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 1, 2024 | |
| 2022 | Mar 14, 2023 | |
| 2021 | Mar 18, 2022 | |
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.