Kodiak Sciences Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 94 Stoc t k-Ba - sed Compensation The Company accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation- Stock Compensation. The Company measures stock-based compensation expense for stock options and restricted stock units granted to its employees, directors and non-employees based on the estimated fair value of the awards on the grant date. The fair value of options is calculated using the Black-Scholes valuation model or the Monte Carlo simulation model, which requires the input of subj u ective assumptions, including (i) the calculation of expected term of the award, (ii) the expected stock price volatility, (iii) the risk-free interest rate, and (iv) expected dividends. The expected term is determined based on hypothetical exercise data for unexercised stock options. The expected volatility is estimated based on the Company's historical information for its common stock and suppl u emented by the historical stock price volatility of a representative peer group over a period equivalent to the expected term of the equity award. The risk-free interest rate is estimated based on the U.S. Treasury securities with maturity dates commensurate with the expected term of the equity award. The Company has never paid, and does not expect to pay, dividends in the foreseeable future. The expense is recorded on a straight-line basis over the requisite service period, which is generally the vesting period, for the entire award. The Company accounts for forfeitur t es as they occur. The Company has certain stock options and restricted stock units that vest in conjunction with certain performance conditions. At each reporting date, the Company is required to evaluate whether achievement of the performance conditions is probabl a e. Compensation expense is recorded over the appropriate service period based upon the Company's assessment of accomplishing each performance provision. Refer to Note 12. Income Taxe a s The Company accounts for income taxes under the asset and liabi a lity method, which requires, among other things, that deferred income taxes be provided for temporary r differences between the tax basis of the Company’s assets and liabi a lities and their financial statement reported amounts. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses (“NOLs”) and research and development credit carryforwards and are measured using the enacted tax rates and laws that will be in effe f ct when such items are expected to reverse. A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized. The Company accounts for uncertain tax positions by assessing all material positions taken in any assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainabi a lity and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits. Comprehensive Loss Comprehensive loss is composed of net loss and other comprehensive income (loss). Other comprehensive income (loss) consists primarily of unrealized gains and losses on debt securities.