Kodiak Sciences Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 100 The Company has recorded a full valuation allowance against its net deferred tax assets due to the uncertainty as to whether such assets will be realized. The net change in the total valuation allowance for the years ended December 31, 2024 and 2023, was a decrease of approximately $126.3 million and an increase of $25.7 million, respectively. The decrease in the year ended December 31, 2024 was due to the expiration of a foreign intangible asset. NOLs and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service (“IRS”) and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change. The Company periodically completes a Section 382 analysis. Subsequent ownership changes since the most recent study may further affect the limitation in future years. As of December 31, 2024, the Company had $111.5 million of federal and $616.3 million of state net operating loss available to offset future taxable income. A portion of the federal net operating loss carryforwards begin to expire in 2035 and the state net operating loss carryforwards begin to expire in 2035, if not utilized. $93.4 million of the federal net operating loss are not subject to expiration. As of December 31, 2024, the Company also had federal and state research and development credit carryforwards of approximately $31.5 million and $9.9 million, respectively. The federal research and development credit carryforwards expire beginning 2035. The California tax credit can be carried forward indefinitely. A reconciliation of the Company’s effective tax rate to the statutory U.S. federal rate is as follows: December 31, 2024 December 31, 2023 December 31, 2022 Federal statutory income tax rate ................................................... 21.0% 21.0% 21.0% State taxes....................................................................................... 0.3 (2.6) 5.8 Foreign tax rate differential............................................................ (3.0) (4.3) (4.7) Intangible valuation........................................................................ (86.2) (0.8) - Research tax credit ......................................................................... 1.3 1.4 1.8 Stock-based compensation ............................................................. (5.1) (4.1) (3.9) Other............................................................................................... - (0.1) - Change in valuation allowance....................................................... 71.7 (10.5) (20.0) Provision for income taxes............................................................. 0.0% 0.0% 0.0% The decrease in the intangible valuation in the year ended December 31, 2024 was due to the expiration of a foreign intangible asset. The Company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical merits, as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement. As of December 31, 2024, 2023 and 2022, none of the unrecognized tax benefits would affect income tax expense with consideration of the valuation allowance. The Company does not anticipate the uncertain tax positions will materially change in the next 12 months. 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. The beginning and ending unrecognized tax benefits amounts are as follows (in thousands): December 31, 2024 December 31, 2023 December 31, 2022 Unrecognized tax benefits at beginning of period ..................................... $ 8,245 $ 7,578 $ 6,729 Increases related to current year tax positions ....................................... 558 667 849 Unrecognized tax benefits at end of period ............................................... $ 8,803 $ 8,245 $ 7,578