EXOZYMES INC. Income Taxes Disclosure

11. Income Taxes

 

Amounts recognized for income taxes are reported in “income tax expense (benefit)” on the consolidated statements of operations.

 

Income tax expense (benefit) consisted of the following:

 Schedule of Income Tax Expense (Benefit)

		2025				2024
Current taxes:
Federal		$	(105,205	)		$	-
State			-				-
Deferred taxes:
Federal							-
State			-				-
Income Tax Expense (Benefit)		$	(105,205	)		$	-

 

Total cash taxes paid as of December 31, 2025 and 2024 were $0. For 2025, the reported amount reflects the receipt of a tax refund.

 

As of December 31, 2025, the Company’s taxable entities had approximately $17,545,871 of net operating loss carryforwards for federal income tax purposes which can be carried forward indefinitely. The company also had approximately $17,071,123 of net operating loss carryforwards for California tax purposes which can be carried forward for 20 years. However, for taxable years 2024 through 2026, California has suspended the net operating loss (NOL) deduction for corporations with income subject to California taxation of $1 million or more. Corporations may continue to compute and carry over NOLs during the suspension period, with the carryover period extended for each suspended year. A similar suspension was in place for taxable years 2020 and 2021 but was lifted for 2022.

 

Effective for the year ended December 31, 2025, the Company adopted ASU 2023-09 prospectively. The reconciliation of income tax expense computed at the U.S. federal statutory income tax rate of 21% to the recognized income tax expense for the year ended December 31, 2025, presented in accordance with the disclosure requirements of ASU 2023-09, as codified under ASC 740-10-50-12A, is as follows:

 Schedule of Reconciliation of the Federal Statutory Tax Rate to the Effective Tax Rate

		Year Ended December 31,
		2025
U.S. federal statutory income tax rate			(1,950,074	)			21.00	%
State, net of federal tax benefit			(648,502	)			6.98	%
Nontaxable or nondeductible items
Stock options			325,060				-3.50	%
Equity based award vestings			(1,618	)			0.02	%
Meals & entertainment			4,602				-0.05	%
Other state adjustments			107,971				-1.16	%
Changes in valuation allowances			2,057,356				-22.16	%
Effective rate			(105,205	)			1.13	%

 

 

A reconciliation of the federal statutory tax rate to the effective tax rate for the year ended December 31, 2024 is as follows:

 

		Year Ended December 31,								Year Ended December 31,
		2024								2023
U.S. federal statutory income tax rate			(1,230,880	)			21.00	%			(419,185	)			21.00	%
State, net of federal tax benefit			(409,332	)			6.98	%			(118,270	)			5.93	%
Permanent differences			235,127				-4.01	%			8,069				-0.40	%
Return-to-provision adjustments			(236	)			0.00	%			(155,781	)			7.80	%
Other			264,819				-4.52	%			(59,308	)			2.97	%
Valuation allowance			1,140,502				-19.46	%			786,743				-39.41	%
Income tax expense			-				0.00	%			42,267				-2.12	%

 

Deferred Tax Assets and Liabilities

 

Significant components of the deferred tax assets and liabilities were as follows:

 Schedule of Significant Components of the Deferred Tax Assets and Liabilities

		2025				2024
		Year Ended December 31,
		2025				2024
Deferred tax assets:
Start-up expenditures			13,313				14,792
Sec 174 - Research & development costs			0				1,538,557
Charitable Contribution			5,119				-
Lease liability			347,902				388,085
Investment Securities			43,437				43,437
Warrants			67,366				67,366
Bonus expense			198,344				188,820
Net operating loss carryforwards			4,876,812				1,306,652
Valuation allowance			(5,123,316	)			(3,065,959	)
Total deferred tax assets			428,977				481,750
Deferred tax liabilities:
Right-of-use asset			(325,260	)			(372,623	)
Property and equipment principally due to differences in depreciation			(103,717	)			(109,127	)
Total deferred tax liabilities			(428,977	)			(481,750	)
Net deferred tax assets/(liabilities)			-				-

 

 

Net deferred tax assets and liabilities were classified on the consolidated balance sheets as follows:

 

		2025				2024
		Year Ended December 31,
		2025				2024
Deferred tax assets			428,977				481,750
Deferred tax liabilities			(428,977	)			(481,750	)
Other noncurrent assets/(liabilities)			-				-

 

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 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 scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. At December 31, 2025, based on projections of future taxable income for the periods in which the deferred tax assets are deductible, valuation allowances of approximately $5,123,316 were recorded for tax carryforwards and attributes to reduce the net deferred tax assets to an amount that is more likely than not to be recognized. The amount of deferred tax assets considered realizable could be reduced in the future if estimates of future taxable income during the carryforward period are reduced.

 

In accordance with the applicable accounting standards, the Company recognizes only the impact of income tax positions that, based on their merits, are more likely than not to be sustained upon audit by a taxing authority. To evaluate its current tax positions in order to identify any material uncertain tax positions, the Company developed a policy of identifying and evaluating uncertain tax positions that considers support for each tax position, industry standards, tax return disclosures and schedules and the significance of each position. It is the Company’s policy to recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company had no material uncertain tax positions at December 31, 2025 and December 31, 2024. The tax years 2022 – 2025 remain open to examination for federal income tax purposes.