Azitra Inc(US:AZTR)2025-08-11 20:01markdown PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Azitra, Inc.'s unaudited condensed financial statements and notes detail financial position and performance for the reported periods [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) Balance sheets show decreased cash, assets, and equity from December 2024 to June 2025, reflecting operational losses | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------- | :------------------------ | :------------------ | | Cash and cash equivalents | $1,045,730 | $4,554,719 | | Total current assets | $1,799,690 | $5,228,290 | | Total assets | $3,956,022 | $7,358,802 | | Total current liabilities | $1,452,361 | $1,375,857 | | Total liabilities | $1,727,051 | $1,660,504 | | Total stockholders' equity | $2,228,971 | $5,698,298 | [Condensed Statements of Operations](index=6&type=section&id=Condensed%20Statements%20of%20Operations) No revenue for Q2/H1 2025; increased net losses driven by higher operating expenses, especially R&D | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $— | $7,500 | $— | $7,500 | | General and administrative | $1,469,513 | $1,549,228 | $3,319,651 | $3,037,755 | | Research and development | $1,401,839 | $1,118,552 | $2,651,939 | $2,591,522 | | Total operating expenses | $2,871,352 | $2,667,780 | $5,971,590 | $5,629,277 | | Net loss attributable to common shareholders | $(2,888,993) | $(2,631,993) | $(5,957,338) | $(5,564,868) | | Net loss per share, basic and diluted | $(0.18) | $(2.74) | $(0.40) | $(6.82) | [Condensed Statements of Preferred Stock and Stockholders' Equity](index=7&type=section&id=Condensed%20Statements%20of%20Preferred%20Stock%20and%20Stockholders'%20Equity) Stockholders' equity shows increased common stock and paid-in capital from offerings/ELOC, with a growing accumulated deficit | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Common stock shares issued/outstanding | **17,976,354** | **7,626,056** | | Additional paid-in capital | **$65,750,337** | **$63,263,360** | | Accumulated deficit | **$(63,523,164)** | **$(57,565,825)** | | Total stockholders' equity | **$2,228,971** | **$5,698,298** | - The company completed several follow-on public offerings in January and February **2025**, and drew on an Equity Line of Credit (ELOC) in April **2025**, significantly increasing common stock shares and additional paid-in capital[18](index=18&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) H1 2025 saw significant cash drain from operations, partially offset by financing, leading to a net decrease in cash | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | **$(5,886,798)** | **$(5,121,955)** | | Net cash used in investing activities | **$(57,973)** | **$(155,826)** | | Net cash provided by financing activities | **$2,435,782** | **$4,284,874** | | Net change in cash and cash equivalents | **$(3,508,989)** | **$(992,907)** | | Cash and cash equivalents at end of period | **$1,045,730** | **$803,082** | [Notes to Unaudited Condensed Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) Notes provide detailed disclosures on organization, accounting policies, equity, commitments, and contingencies, offering crucial context [Note 1. Organization and Nature of Operations](index=11&type=section&id=1.%20Organization%20and%20Nature%20of%20Operations) Azitra, Inc. develops skin disease therapeutics; public offerings fund operations, but accumulated deficit raises going concern doubt - Azitra, Inc. is a synthetic biology company focused on screening and genetically engineering microbes of the skin to discover and develop novel therapeutics for skin disease[24](index=24&type=chunk) - The company completed an IPO in June **2023** and multiple follow-on public offerings in February **2024**, July **2024**, January **2025**, and February **2025**, along with an Equity Line of Credit (ELOC) in April **2025**, to raise capital[25](index=25&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[36](index=36&type=chunk) - As of June **30**, **2025**, the company has an accumulated deficit of **$63.5 million**, a loss from operations of **$6.0 million**, and used **$5.9 million** to fund operations, raising substantial doubt about its ability to continue as a going concern[39](index=39&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements follow U.S. GAAP, relying on estimates; risks include CRO/CMO dependence and regulatory approvals; evaluating ASU 2024-03 - Financial statements are prepared in accordance with U.S. GAAP, with significant estimates related to research and development expenses, valuation of warrants, and valuation of equity awards[42](index=42&type=chunk)[46](index=46&type=chunk) - The company is dependent on contract research organizations (CROs) and contract manufacturing organizations (CMOs) for clinical trials and product supply, and its products require FDA or international regulatory approvals[48](index=48&type=chunk)[49](index=49&type=chunk) - Azitra, Inc. operates and manages its business as one operating segment, focused on discovering and developing novel therapeutics for skin diseases[51](index=51&type=chunk) - The company is evaluating ASU **2024**-**03**, effective for fiscal years beginning after December **15**, **2026**, which requires more detailed expense disaggregation disclosures[63](index=63&type=chunk) [Note 3. Property and Equipment](index=15&type=section&id=3.%20Property%20and%20Equipment) Net property and equipment decreased from $653,957 (Dec 2024) to $601,504 (June 2025) due to depreciation | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total property and equipment, net | **$601,504** | **$653,957** | | Depreciation and amortization expense (six months) | **$62,076** | **$59,870** | [Note 4. Intangible Assets](index=15&type=section&id=4.%20Intangible%20Assets) Net intangible assets (patents, trademarks) slightly increased from December 2024 to June 2025, with ongoing amortization | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Intangible assets, net | **$258,665** | **$246,420** | | Amortization expense (six months) | **$6,217** | **$5,082** | [Note 5. Accrued Expenses](index=16&type=section&id=5.%20Accrued%20Expenses) Total accrued expenses decreased from $602,787 (Dec 2024) to $513,166 (June 2025), mainly from reduced payroll and R&D | Accrued Expense Category | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- |\ | Employee payroll and bonuses | **$289,055** | **$410,781** | | Research and development projects | **$55,105** | **$75,047** | | Total accrued expenses | **$513,166** | **$602,787** | [Note 6. Stockholders' Equity](index=16&type=section&id=6.%20Stockholders'%20Equity) Stockholders' equity reflects multiple stock splits and public offerings in 2024-2025, increasing common and authorized shares; further split evaluated - The company effected a **7.1**-for-**1** Forward Stock Split in May **2023** and a **30**-for-**1** Reverse Stock Split in July **2024**, retroactively adjusting share and per share amounts[72](index=72&type=chunk)[75](index=75&type=chunk) - Multiple follow-on public offerings in February **2024**, July **2024**, January **2025**, and February **2025**, along with an Equity Line of Credit (ELOC) in April **2025**, have increased common stock shares and capital[73](index=73&type=chunk)[76](index=76&type=chunk)[80](index=80&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk) - In July **2025**, the number of authorized common shares was increased from **100,000,000** to **200,000,000**. A further reverse stock split is being evaluated by the Board[38](index=38&type=chunk)[86](index=86&type=chunk)[90](index=90&type=chunk) [Note 7. Warrants](index=18&type=section&id=7.%20Warrants) Various warrants are outstanding; fair value of liability-classified common stock warrants decreased from $381 (Dec 2024) to $184 (June 2025) - Warrants issued in **2018** with a redemption provision are classified as a liability and marked to market each reporting period[93](index=93&type=chunk) - The company issued Class A Warrants in July **2024** with a reset provision, initially classified as a liability, but reclassified to equity after the exercise price reset[96](index=96&type=chunk)[98](index=98&type=chunk) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Common stock warrants (liability) | **$184** | **$381** | | Total warrants outstanding | **16,368,593** | **33,014** | [Note 8. Stock Options](index=20&type=section&id=8.%20Stock%20Options) Company operates under 2023 and 2016 Stock Incentive Plans, with 41,608 options outstanding; H1 2025 stock-based compensation was $46,433 - The **2023** Stock Incentive Plan allows for grants of up to **1,211,068** shares, with **1,209,734** shares available for grant as of June **30**, **2025**, after amendments approved in November **2024**[107](index=107&type=chunk) | Metric | June 30, 2025 | | :----------------------------------- | :------------ | | Options outstanding | **41,608** | | Vested and Exercisable | **40,902** | | Stock-based compensation expense (six months) | **$46,433** | [Note 9. Fair Value Measurements](index=21&type=section&id=9.%20Fair%20Value%20Measurements) Fair value of Level 3 common stock warrants decreased from $381 (Dec 2024) to $184 (June 2025), driven by stock value and volatility, using Black-Scholes | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Common stock warrants (Level 3) | **$184** | **$381** | | Black-Scholes Assumption | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Underlying common stock value | **$0.26** | **$0.43** | | Expected term (years) | **2.79** | **3.29** | | Expected volatility | **178%** | **172%** | | Risk free interest rate | **4%** | **4%** | | Dividend yield | —% | —% | [Note 10. Net Loss Per Share](index=22&type=section&id=10.%20Net%20Loss%20Per%20Share) Potential common stock equivalents (options, warrants) were excluded from diluted net loss per share due to anti-dilutive effect | Potential Common Stock Equivalents | June 30, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------ | | Options to purchase shares | **41,608** | **41,608** | | Warrants outstanding | **16,368,593** | **33,014** | | Total | **16,410,201** | **74,622** | [Note 11. Commitments and Contingencies](index=22&type=section&id=11.%20Commitments%20and%20Contingencies) Company has commitments for legal, license, and leases; future minimum operating lease payments total $587,638, finance leases $19,217 - The company holds an exclusive license agreement for certain patents and a non-exclusive license for know-how, effective January **26**, **2022**[119](index=119&type=chunk) | Lease Type | Total Future Undiscounted Lease Payments (June 30, 2025) | | :--------- | :------------------------------------------------------- | | Operating | **$587,638** | | Finance | **$19,217** | [Note 12. Retirement Plan](index=23&type=section&id=12.%20Retirement%20Plan) Company sponsors a 401(k) safe harbor plan; H1 2025 employer matching contributions totaled $8,273 - The company sponsors a **401**(k) plan covering substantially all employees, with a safe harbor matching contribution structure[132](index=132&type=chunk) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :----------------------------------- | :------------------------------- | :----------------------------- | | Total employer matching contributions | **$3,692** | **$8,273** | [Note 13. Concentration of Credit Risk](index=25&type=section&id=13.%20Concentration%20of%20Credit%20Risk) Primary credit risk is concentrated in cash balances held in federally insured U.S. financial institutions, potentially exceeding FDIC limits - The company's significant concentrations of credit risk consist principally of cash and cash equivalents, deposited with a federally insured U.S. financial institution, sometimes in excess of FDIC limits[134](index=134&type=chunk) [Note 14. Related Parties](index=25&type=section&id=14.%20Related%20Parties) No related party revenue for Q2/H1 2025, down from $7,500 in 2024; Bayer ceased being a related party after July 2024 | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :---------------------- | :------------------------------- | :----------------------------- | | Related party revenue | $— | $— | - Bayer ceased to be considered a related party in July **2024**, as its holdings no longer exceeded **5%** of the total outstanding common stock[136](index=136&type=chunk) [Note 15. Segment Information](index=25&type=section&id=15.%20Segment%20Information) Azitra, Inc. operates as a single segment developing skin disease therapeutics, with fixed assets in the US and Canada - The company operates and manages its business as a single reportable segment, focused on discovering and developing novel therapeutics for treating skin diseases[137](index=137&type=chunk) - As of June **30**, **2025**, the company's fixed assets were located in the United States (**$893,238** original cost) and Canada (**$283,169** original cost)[138](index=138&type=chunk) [Note 16. Subsequent Events](index=25&type=section&id=16.%20Subsequent%20Events) Post-June 30, 2025, authorized shares increased to 200,000,000, with additional common shares and warrants issued under ELOC - In July **2025**, the company amended its Certificate of Incorporation to increase the number of authorized shares from **100,000,000** to **200,000,000**[139](index=139&type=chunk) - Subsequent to June **30**, **2025**, the company issued an additional **5,500,000** common shares and **460,000** warrants under the ELOC, generating estimated gross proceeds of **$888,714**[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Azitra, Inc.'s financial condition, operations, early-stage status, funding, and strategic focus on precision dermatology for the reported periods [Cautionary Statement](index=26&type=section&id=Cautionary%20Statement) This cautionary statement highlights that forward-looking statements involve risks and uncertainties, and future results may differ materially - The report contains forward-looking statements, and actual future results may differ materially due to various risks and uncertainties, including those detailed in the company's Form **10**-K[143](index=143&type=chunk)[144](index=144&type=chunk) [General Overview](index=26&type=section&id=General) Azitra, Inc., formed in 2014, is an early-stage biopharmaceutical company focused on dermatology, funded by private placements, IPO, and public offerings/ELOC - Azitra, Inc. was formed in January **2014** as an early-stage clinical biopharmaceutical company focused on developing innovative therapies for precision dermatology[145](index=145&type=chunk) - The company has capitalized operations through an IPO in June **2023**, follow-on public offerings in February and July **2024**, and January and February **2025**, and an Equity Line of Credit (ELOC) in April **2025**[146](index=146&type=chunk)[147](index=147&type=chunk) - As of August **11**, **2025**, the company had **23,476,354** shares of common stock issued and outstanding, with a **30**-for-**1** reverse stock split effected on July **1**, **2024**[150](index=150&type=chunk) [Business Overview and Strategy](index=28&type=section&id=Overview) Azitra, Inc. develops precision dermatology therapies using engineered proteins and live biotherapeutics, leveraging a microbial library and AI; strategy focuses on advancing lead programs and partnerships - The company's proprietary platform includes a microbial library of approximately **1,500** unique bacterial strains, augmented by AI and machine learning technology, to develop genetically engineered therapies for dermatology[151](index=151&type=chunk)[156](index=156&type=chunk) - Lead product candidates include ATR-**12** for Netherton syndrome (Phase **1**b clinical trial initiated August **2024**), ATR-**04** for EGFRi-associated rash (IND clearance August **2024**, Fast Track designation September **2024**, Phase **1**/**2** expected Q**3** **2025**), and ATR-**01** for ichthyosis vulgaris (IND-enabling studies planned for **2025**)[152](index=152&type=chunk)[153](index=153&type=chunk) - Strategic goals include building a sustainable precision dermatology company, advancing lead programs through clinical trials, broadening the platform through partnerships, leveraging academic collaborations, and expanding other product candidates[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) As an early-stage biopharmaceutical company with no revenue, Azitra, Inc. reported increased net losses for Q2/H1 2025, driven by higher R&D expenses Three Months Ended June 30, 2025 vs. 2024 Financial Highlights Q2 2025 revenue decreased by 100% to $0; operating expenses increased by 8% to $2.87 million (driven by 25% R&D increase), leading to 10% higher net loss of $(2.89) million | Metric | 2025 | 2024 | $ Change | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Total revenue | $— | $7,500 | $(7,500) | (100)% | | General and administrative | $1,469,513 | $1,549,228 | $(79,715) | (5)% | | Research and development | $1,401,839 | $1,118,552 | $283,287 | 25% | | Total operating expenses | $2,871,352 | $2,667,780 | $203,572 | 8% | | Net loss | $(2,888,993) | $(2,631,993) | $(257,000) | 10% | - The decrease in service revenue is attributable to a decrease in reimbursable development costs incurred in **2025**, with no further service revenue expected[164](index=164&type=chunk) - R&D expenses increased by **$283,287** (**25%**) due to increased clinical trial costs for ATR-**12** and ATR-**04** programs, and R&D costs for ATR-**01**[167](index=167&type=chunk) Six Months Ended June 30, 2025 vs. 2024 Financial Highlights H1 2025 revenue decreased by 100% to $0; operating expenses increased by 6% to $5.97 million (driven by 9% G&A, 2% R&D), resulting in 7% higher net loss of $(5.96) million | Metric | 2025 | 2024 | $ Change | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Total revenue | $— | $7,500 | $(7,500) | (100)% | | General and administrative | $3,319,651 | $3,037,755 | $281,896 | 9% | | Research and development | $2,651,939 | $2,591,522 | $60,417 | 2% | | Total operating expenses | $5,971,590 | $5,629,277 | $342,313 | 6% | | Net loss | $(5,957,338) | $(5,564,868) | $(392,470) | 7% | - General and administrative costs increased by **$281,896** (**9%**) due to higher accounting, business consultant, legal, and public relations fees, partially offset by decreased financing and insurance costs[174](index=174&type=chunk) - Research and development expenses increased by **$60,417** (**2%**) due to increased R&D and clinical trial costs for ATR-**12** and ATR-**01**, and higher payroll and benefits, partially offset by decreased clinical consultant expenditures[177](index=177&type=chunk) - The company is an early-stage clinical biopharmaceutical company with limited operating history and has not commenced revenue-producing operations, focusing primarily on research and development[161](index=161&type=chunk) [Financial Condition and Liquidity](index=34&type=section&id=Financial%20Condition) As of June 30, 2025, Azitra, Inc. had $4.0 million in assets, $0.3 million working capital, and $1.0 million cash, raising substantial doubt about going concern without more financing - As of June **30**, **2025**, the company had total assets of approximately **$4.0 million**, working capital of approximately **$0.3 million**, and **$1.0 million** in cash and cash equivalents[181](index=181&type=chunk) - Management has determined there is substantial doubt about the company's ability to continue as a going concern due to lack of revenue, significant losses, and the need for additional capital[184](index=184&type=chunk) - The company intends to seek additional funds through equity/debt financing, federal grants, licensing fees, and joint ventures, but there is no assurance such funds will be available on reasonable terms[181](index=181&type=chunk)[182](index=182&type=chunk) [Cash Flows Analysis](index=35&type=section&id=Cash%20Flows) H1 2025 cash flows: $5.9 million used in operations, $58,000 in investing, $2.4 million provided by financing, leading to $3.5 million net cash decrease | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(5,886,798) | $(5,121,955) | | Net cash used in investing activities | $(57,973) | $(155,826) | | Net cash provided by financing activities | $2,435,782 | $4,284,874 | | Net decrease in cash | $(3,508,989) | $(992,907) | - Operating activities used **$5.9 million** in cash, primarily driven by the net loss of **$6.0 million**[186](index=186&type=chunk) - Financing activities provided **$2.4 million**, mainly from January and February **2025** public offerings and draws on the equity line of credit[188](index=188&type=chunk) [Critical Accounting Policies and Estimates](index=35&type=section&id=Critical%20Accounting%20Policies) Revenue recognition and common stock fair value are no longer critical policies; no material changes to critical accounting estimates occurred - Revenue recognition and estimating the fair value of common stock are no longer considered critical accounting policies due to the absence of revenue-producing transactions and the company's public trading status[189](index=189&type=chunk) - There were no material changes to the company's critical accounting estimates as reported in its Form **10**-K for the year ended December **31**, **2024**[190](index=190&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No quantitative or qualitative disclosures about market risk are applicable to the company for the reported period - This item is not applicable to the company[191](index=191&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management identified a material weakness in disclosure controls due to inadequate segregation of accounting functions; no material changes to internal control - Management identified a material weakness in disclosure controls and procedures as of June **30**, **2025**, due to a lack of adequate segregation of accounting functions[191](index=191&type=chunk) - The company intends to increase staffing within its accounting infrastructure to address the material weakness[191](index=191&type=chunk) - There were no changes in internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control over financial reporting during the six months ended June **30**, **2025**[192](index=192&type=chunk) PART II - OTHER INFORMATION [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section highlights Form 10-K risk factors and introduces a new risk regarding adverse impacts of changes in U.S. and international trade policies - The report contains forward-looking statements, and readers should carefully consider the risk factors discussed in the company's Form **10**-K for the year ended December **31**, **2024**[194](index=194&type=chunk) - A new risk factor highlights that changes in U.S. and international trade policies, such as tariffs, could adversely impact the company's business and operating results, potentially increasing manufacturing costs or affecting raw material imports[195](index=195&type=chunk)[196](index=196&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including corporate governance documents, warrant forms, purchase agreements, and certifications - The exhibits include corporate documents like the Second Amended and Restated Certificate of Incorporation and Bylaws, various warrant forms, and the Purchase Agreement with Alumni Capital LP[197](index=197&type=chunk) - Certifications under Section **302** and Section **906** of the Sarbanes-Oxley Act of **2002** are also filed electronically[197](index=197&type=chunk) SIGNATURES This section contains the duly authorized signatures of Azitra, Inc.'s President/CEO and CFO, affirming the report filing - The report is signed by Francisco D. Salva, President and Chief Executive Officer, and Norman Staskey, Chief Financial Officer, on August **11**, **2025**[201](index=201&type=chunk)