KALA BIO, Inc. Income Taxes Disclosure

Note 13: Income Taxes

The Company has had no income tax expense due to operating losses incurred for the years ended December 31, 2024 and 2023. The Company has also not recorded any income tax benefits for the net operating losses incurred in each period due to its uncertainty of realizing a benefit from those items. All of the Company’s losses before income taxes were generated in the United States.

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:

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Net deferred tax assets as of December 31, 2024 and 2023 consisted of the following:

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The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2024 and 2023. The valuation allowance increased by $10,776 and $7,325 during the years ended December 31, 2024 and 2023, respectively. The current year and prior year increase is largely the result of an increase to federal net operating losses and generation of federal and state research and development tax credits. Management reevaluates the positive and negative evidence at each reporting period.

As of December 31, 2024 and 2023, the Company had federal net operating loss carryforwards of $405,544 and $369,337, respectively, which may be available to offset future federal tax liabilities and expire at various dates beginning in 2030. As of December 31, 2024 and 2023, the Company had state net operating loss carryforwards of $469,053 and $413,711, respectively, which may be available to offset future state income tax liabilities and expire at various dates beginning in 2025. As of December 31, 2024 and 2023, the Company had federal and state research and development credit carryforwards of $2,476 and $1,154, respectively.

Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of Section 382 of the Internal Revenue Code of 1986, certain substantial changes in the Company’s ownership, including a sale of the Company, or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards, which could be used annually to offset future taxable income. The Company has completed an analysis as of December 31, 2022 and determined that an additional ownership change occurred during December 2022 as a result of the issuance of Series E Preferred Stock, further limiting the net operating loss carryforwards and research and development tax credits due to the expiration of those attributes. As a result, the utilization of the Company’s net operating loss carryforwards is subject to an annual limitation of $222, which is reflected in the numbers presented above.

The Company files its corporate income tax returns in the United States and various states. All tax years since the date of incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (‘‘IRS’’) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax year.

As of December 31, 2024 and 2023 the Company had no uncertain tax positions. The Company’s policy is to recognize interest and penalties related to income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the years ended December 31, 2024 and 2023.