Aldeyra Therapeutics, Inc. Income Taxes Disclosure

No current or deferred tax provision expense has been recorded for federal income taxes as the Company has incurred losses since inception for tax purposes and maintains a full valuation allowance against net deferred tax assets. During 2025, the Company calculated a $30,000 state current tax provision for liability due from the Company's Massachusetts Security Corporation. However, due to immateriality, the tax expense was not recorded. There is no deferred tax provision expense recorded for state income taxes because the Company has a full valuation

allowance against net deferred tax assets. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for the year prior to the adoption of ASU 2023-09 is as follows:

The change in valuation allowance of $9.4 million from December 31, 2024 to December 31, 2025 was primarily the result of the pre-tax book loss and the current year generated tax credits partially offset by expensing of previously capitalized domestic research and development costs due to the OBBB Act.

In assessing the realizability of net deferred taxes in accordance with ASC 740, Income Taxes, the Company considers whether some portion or all the deferred tax assets are more likely than not to be unrealized. Based on the weight of available evidence, primarily the incurrence of net losses since inception, anticipated net losses in the near future, reversals of existing temporary differences, and expiration of various federal and state attributes, the Company does not consider some or all net deferred taxes more likely than not to be realized. Accordingly, a 100% valuation allowance has been applied against net deferred tax assets.

As of December 31, 2025, the Company had federal and state income tax net operating loss (NOL) carryforwards of approximately $327.9 million and $320.8 million, respectively. Federal NOL carryforwards generated through December 31, 2017 and state NOL carryforwards generated through December 31, 2025 will expire at various dates through 2045. The federal NOL carryforwards generated during the year ended December 31, 2018 and thereafter will carryforward indefinitely. As of December 31, 2025, the Company had federal and state research and development tax credit carryforwards of approximately $13.0 million and $3.1 million, respectively, which will expire at various dates through 2045. Additionally, as of December 31, 2025, the Company had a federal orphan drug tax credit carryforward of approximately $2.8 million which expire at various dates through 2045.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs and certain other tax assets to offset future taxable income or tax due. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years). Transactions involving the Company’s common stock within the testing period, even those outside the Company’s control such as purchases or sales by investors, could result in an ownership change. A limitation on the Company’s ability to utilize some or all its NOLs or credits could have a material adverse effect on the Company’s results of operations and cash flows. The Company believes, prior to December 31, 2021 that four ownership changes occurred since inception. Management believes that its aggregate Section 382 and 383 limitation (including the additional limitation for recognized "built-in gains") is sufficient so that no current impairment of its pre-ownership change tax attributes is required. Management believes there were no ownership changes from December 31, 2021 through December 31, 2025, based on a review of the Company's equity history during that period. Any future ownership changes, including those resulting from any recent or future financing activities, may cause our existing tax attributes to have additional limitations.

Future changes in federal and state tax laws pertaining to net operating loss carryforwards may also impose limitations or restrictions on claiming such net operating losses. If the net operating loss carryforwards become unavailable to the Company or are fully utilized, the Company's future taxable income will not be shielded from federal and state income taxation, absent certain U.S. federal and state tax credits, and the funds otherwise available for general corporate purposes would be reduced.

As of December 31, 2025, the Company is subject to tax in the U.S. (Federal and Massachusetts). The Company is open to examination for the tax years ended December 31, 2025, 2024, 2023, 2022, and 2021. In addition, any years remain open to the extent that losses or tax credits are available for carryover to future years.

It is the Company’s policy to include penalties and interest expense related to income taxes as a component of the provision for income taxes. As of December 31, 2025 and 2024, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations. For the year ended December 31, 2025, the Company generated research and development tax credits as well as an Orphan Drug Credit but has not conducted a study to document the qualified activities. This study may result in an adjustment to the Company’s research and development tax credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development tax credit carryforwards and, if an adjustment is required, this adjustment would result in an adjustment to the deferred tax asset established for the research and development tax credit carryforwards and the valuation allowance.