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Item 1A. Risk Factors

2026-04-15 compared with 2025-03-31 · 525 added, 567 removed, 828 unchanged (57% of the section changed)

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Risks Related to Our Financial Position and Need for Additional Capital

The Company’s predecessor auditor noted substantial doubt about our ability to continue as a going concern.

The Company has a history of recurring losses and negative cash flows from operations, and experienced significant liquidity constraints in 2025, including in connection with its debt arrangement with Oxford Finance LLC, which required management to evaluate the Company’s ability to continue as a going concern.

Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business.

As described in Note 2 to the consolidated financial statements, the Company had an accumulated deficit of $694.9 million as of December 31, 2025 and had previously disclosed going concern uncertainty during the first, second, and third quarters of 2025.

As of the date of this annual report, management concluded that, after considering its plans and recent developments, substantial doubt about the Company’s ability to continue as a going concern was alleviated for the twelve months following the date the consolidated financial statements were issued.

There can be no assurance, however, that management’s plans will be successfully implemented or that the Company will be able to generate sufficient cash flows to meet its obligations as they become due.

If the Company is unable to maintain sufficient unrestricted cash and working capital, satisfy or refinance existing obligations, or otherwise obtain additional capital when needed on acceptable terms (or at all), it may be required to delay, reduce or terminate planned activities, pursue strategic alternatives on unfavorable terms, or seek protection under applicable insolvency laws.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

We have incurred significant losses from operations and negative cash flows from operations since our inception.

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As of December 31, 2025, we had an accumulated deficit of $694.9 million.

Prior to the sale of the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the AMPPLIFY Drug Delivery Technology, which we collectively refer to as the Commercial Business, to Alcon Pharmaceuticals Ltd.

and Alcon Vision, LLC, or collectively Alcon, in July 2022, we generated only limited revenues from sales of EYSUVIS and INVELTYS.

We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon in July 2022, our initial public offering, follow-on public offerings of common stock and sales under our at-the-market offering facilities, private placements of common stock and/or preferred stock (including our most recent private placements of common stock and preferred stock for gross proceeds of approximately $8.6 million in March 2024, $12.5 million in June 2024 and $10.8 million in December 2024), borrowings under credit facilities and the Loan and Security Agreement with Oxford Finance LLC, or the Loan Agreement, disbursements under a grant from CIRM (including our most recent disbursements of $3.2 million and $2.5 million from CIRM in August 2024 and December 2024, respectively, upon achievement of specified milestones), convertible promissory notes and warrants.

We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials, and prior to the sale of our Commercial Business to Alcon in July 2022, engaging in activities to launch and commercialize EYSUVIS and INVELTYS.

We are devoting substantial financial resources to the research and development and potential commercialization of KPI-012, our product candidate in clinical development for the treatment of persistent corneal epithelial defects, or PCED, and any other indications we determine to pursue, including Limbal Stem Cell Deficiency.

We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon in July 2022, our initial public offering (“IPO”), follow-on public offerings of Common Stock and sales under our at-the-market offering facilities, private placements of Common Stock and/or preferred stock, borrowings under credit facilities, disbursements under a grant from CIRM, convertible promissory notes and warrants.

We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials.

We have no revenue-generating commercial products, our cash flows have diminished as a result of the sale of our Commercial Business to Alcon and, as a result of our acquisition of Combangio, we may be required to pay certain milestones and royalty payments to former equityholders of Combangio.

Although we are eligible to receive up to $325.0 million in payments from Alcon based upon the achievement of specified commercial sales-based milestones with respect to EYSUVIS and INVELTYS, there can be no assurance as to when we may receive such milestone payments or of the amount of milestone payments we may receive, if any.

We also cannot assure you that we will achieve the remaining milestones under the CIRM award within required timeframes, or at all, and as such we may never receive the remaining $3.3 million under the award.

We expect to continue to incur significant expenses and operating losses for the foreseeable future, including in connection with our continued development, regulatory approval efforts and commercialization, if any, of KPI-012.

We expect to continue to incur significant expenses and operating losses for the foreseeable future, including in connection with our expanded business strategy.

We may never achieve or maintain profitability.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

We anticipate that our research and development expenses will increase substantially in the future as compared to prior periods as we advance the clinical development of KPI-012.

Our research and development expenses will also increase in the future as we conduct any necessary preclinical studies and clinical trials and other development activities for any other product candidates we may develop in the future, including our planned preclinical studies under our KPI-014 program, which is a mesenchymal secretome formulation that is in preclinical development for the treatment of inherited retinal degenerative diseases, such as Retinitis Pigmentosa and Stargardt Disease.

If we obtain marketing approval for KPI-012 or any product candidates we may develop, we expect that our general and administrative

expenses will increase substantially if and as we incur commercialization expenses related to product marketing, sales and distribution.

Our expenses will also increase if and as we:

● continue the clinical development of KPI-012 for PCED;

● initiate and continue the research and development of KPI-012 for additional indications, such as Limbal Stem Cell Deficiency, including initiating and conducting preclinical studies and clinical trials;

● scale up our manufacturing processes and capabilities to manufacture the clinical supply of KPI-012;

● seek regulatory approval for KPI-012 for PCED in the United States and other jurisdictions;

● seek regulatory approval for KPI-012 for additional indications;

● grow our sales, marketing and distribution capabilities in connection with the commercialization of any product candidates for which we may submit for and obtain marketing approval;

● initiate and progress any preclinical development programs under our mesenchymal stem cell secretome, or MSC-S platform, including from our KPI-014 program;

● conduct clinical trials and other development activities and/or seek marketing approval for any product candidates we may develop in the future;

● in-license or acquire the rights to other products, product candidates or technologies;

● maintain, expand and protect our intellectual property portfolio;

● hire additional clinical, quality control, scientific, manufacturing, commercial and management personnel to support our operations;

● expand our operational, financial and management systems;

● increase our product liability insurance coverage if we initiate commercialization efforts for our product candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.

Our expenses will increase from what we anticipate if:

● we elect or are required by the U.S.

Food and Drug Administration, or FDA, or non-U.S.

regulatory agencies to perform clinical trials or studies in addition to those expected;

● there are any delays in enrollment of patients in or completing our clinical trials or the development of our product candidates;

● we in-license or acquire rights to other products, product candidates or technologies;

● there are any third-party challenges to our intellectual property portfolio, or the need arises to defend against intellectual property-related claims or enforce our intellectual property rights.

We anticipate that our research and development expenses will increase substantially in the future as compared to prior periods as we develop and commercialize Researgency.

Because of the new direction of our business strategy, the discontinued clinical trials and the evaluation and development of Researgency, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.

Our ability to become and remain profitable depends on our ability to generate revenue.

We do not expect to generate revenue from KPI-012 or any other product candidate we may develop for the foreseeable future, if at all.

Achieving and maintaining profitability will require us to be successful in a range of challenging activities, including:

● completing the clinical development of KPI-012 for PCED and any other indications we determine to pursue, including Limbal Stem Cell Deficiency;

● subject to obtaining favorable results from our ongoing and planned clinical trials of KPI-012, applying for and obtaining marketing approval of KPI-012;

● successfully commercializing KPI-012, if approved;

● discovering, developing and successfully seeking marketing approval and commercialization of any additional product candidates we may develop in the future, including under our KPI-014 program;

● hiring and building a full commercial organization required for marketing, selling and distributing those products for which we obtain marketing approval;

● manufacturing at commercial scale, marketing, selling and distributing those products for which we obtain marketing approval;

● achieving an adequate level of market acceptance, and obtaining and maintaining coverage and adequate reimbursement from third-party payors for any products we commercialize;

● obtaining, maintaining and protecting our intellectual property rights.

We do not expect to generate revenue from Researgency, KPI-012 or any product candidate we may develop for the foreseeable future, if at all.

Achieving and maintaining profitability will require us to be successful in a range of challenging activities, including successfully developing, commercializing and marketing Researgency.

As a company, we have limited experience commercializing products, and we may not be able to commercialize a product successfully in the future.

There are numerous examples of unsuccessful product launches and failures to meet expectations of market potential, including by pharmaceutical companies with more experience and resources than us.

There are numerous examples of unsuccessful product launches and failures to meet expectations of market potential, including by pharmaceutical companies and AI-powered biotech companies with more experience and resources than us.

We may never succeed in the foregoing activities and we may never generate revenue that is sufficient to achieve profitability.

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If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development efforts or cease operations.

We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct research and development activities, and initiate and conduct clinical trials of, and seek regulatory approval for, KPI-012 and any other product candidate that we develop in the future.

If we do obtain regulatory approval for KPI-012 or any other product candidate that we develop, we expect to incur commercialization expenses related to product sales, marketing, distribution and manufacturing capabilities.

We expect to devote substantial financial resources to our ongoing and planned activities, including the exploration of strategic options relating to our MSC-S platform IP and dataset and the development, commercialization and marketing of Researgency.

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

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Our future capital requirements will depend on many factors, including:

● the timing and amount of milestone payments we ultimately receive from Alcon under the asset purchase agreement;

● the timing and amount of our future milestone payments to Combangio equityholders under the merger agreement;

● the timing and amount of milestone payments we ultimately receive from CIRM in connection with the CIRM Award;

● the progress, costs and results of our ongoing and planned clinical trials of KPI-012;

● the timing and amount of milestone payments we ultimately receive from Alcon under the Alcon Asset Purchase Agreement;

● development efforts for Researgency;

● if we were to resume research and development activities, development efforts for KPI-012 and KPI-014 for potential ocular diseases;

● the costs and timing of process development and manufacturing scale-up activities associated with KPI-012 for PCED and any other indications we determine to pursue;

● the costs, timing and outcome of regulatory review of KPI-012;

● the costs and timing of commercialization activities for KPI-012, if approved, including establishing and/or expanding product sales, marketing, medical affairs, distribution and outsourced manufacturing capabilities;

● our ability to successfully commercialize KPI-012, if approved, in the United States and other jurisdictions and the amount of revenue received from commercial sales;

● our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;

● the scope, progress, results and costs of research and development of any other product candidates that we may develop, including under our KPI-014 program;

● the scope, progress, results and costs of research and development of any other product candidates that we may develop;

● the extent to which we successfully advance and/or in-license or acquire rights to other products, product candidates or technologies;

● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims.

We expect to continue to incur significant expenses and operating losses.

We expect to continue to incur expenses and operating losses.

Net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

We expect that our cash and cash equivalents of $51.2 million as of December 31, 2024 will enable us to fund our operations, lease and debt service obligations and capital expenditure requirements into the first quarter of 2026.

We expect that our existing cash resources will be sufficient to enable us to obtain topline safety and efficacy data from our ongoing CHASE Phase 2b clinical trial of KPI-012 in PCED.

However, we do not expect that our existing cash resources will be sufficient to enable us to complete the clinical development of KPI-012 for PCED or for any other indication.

We expect that our cash and cash equivalents of $7.6 million as of December 31, 2025 will enable us to fund our operations, lease and capital expenditure requirements into the first quarter of 2027.

We expect that our existing cash resources will be sufficient to enable us to fund our strategic initiative to deploy and continue to develop the AI platform for the biotech industry.

We have based our estimates on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us.

For example, our estimates assume that we remain in compliance with the covenants and no event of default occurs under our Loan Agreement with Oxford Finance.

If an event of default occurs under our Loan Agreement and Oxford Finance exercises its rights under the Loan Agreement to foreclose on our cash, our ability to fund our operations, lease and debt service obligations will be shorter than we currently expect.

As a result, we could deplete our available capital resources sooner than we currently expect.

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Completion dates and completion costs can vary significantly for each product candidate and are difficult to predict.

We may never generate the necessary data or results required to obtain marketing approval and achieve product sales from KPI-012 or any other product candidate we

Also, even if we successfully develop KPI-012 or any other product candidate and one or more of those are approved, we may not achieve commercial success with them.

We may never generate the necessary data or results required to obtain marketing approval and achieve product sales from KPI-012 or any other product candidate we may develop.

Also, even if we continue clinical testing and successfully develop KPI-012 or any product candidate and one or more of those are approved, we may not achieve commercial success with them.

Accordingly, we will require additional financing to achieve our business objectives.

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Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, royalty agreements, and marketing and distribution arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other rights and preferences that adversely affect your rights as a common stockholder.

Debt financing and preferred equity financing, if available, may involve agreements that include pledging of assets as collateral and covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

For example, our pledge of our assets as collateral to secure our obligations under our Loan Agreement may limit our ability to obtain additional debt financing.

Under the Loan Agreement, we are also restricted from paying dividends on our common stock, granting liens, making investments, making acquisitions, making certain restricted payments, selling assets and making certain other uses of our cash without the lenders’ consent, subject in each case to certain exceptions.

In addition, under our securities purchase agreements for our 2022, 2023 and 2024 private placements, we have agreed that we will not, without the prior approval of the applicable requisite purchasers under such purchase agreements:

(1) issue or authorize the issuance of any equity security that is senior or pari passu to the Series E Preferred Stock, the Series F Preferred Stock, the Series G Preferred Stock, the Series H Preferred Stock and the Series I Preferred Stock with respect to liquidation preference, (2) incur any additional indebtedness for borrowed money in excess of $1.0 million, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of its existing indebtedness or (3) pay or declare any dividend or make any distribution on, any of our shares of capital stock, subject to specified exceptions.

In addition, if we raise additional funds through collaborations, strategic alliances, licensing arrangements, royalty agreements, or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

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If we were to cease operations and wind down the company under the bankruptcy laws or otherwise, we cannot assure our stockholders or other stakeholders of any specific level of recovery, or any recovery at all on their specific claims or interest.

Our substantial indebtedness may limit cash flow available to invest in the ongoing needs of our business and a failure to comply with the covenants under our Loan Agreement, such as the requirement that our common stock continue to be listed on The Nasdaq Stock Market, or to avoid the occurrence of specified events of default could result in an acceleration of amounts due.

We have a substantial amount of indebtedness.

As of December 31, 2024, we had $29.3 million of outstanding borrowings under the tranche A term loan under the Loan Agreement, which through June 30, 2023 bore interest at a floating rate equal to the greater of 30-day LIBOR and 0.11%, plus 7.89%.

Effective July 1, 2023, the term loan bears interest at a floating rate equal to the greater of (i) 8.00% and (ii) the sum of (a) the 1-Month CME Term Secured Overnight Financing Rate, (b) 0.10% and (c) 7.89%.

Fluctuations in interest rates could materially affect the interest expense on our Loan Agreement.

The start date for amortization payments under the Loan Agreement is July 1, 2025, at

which time the aggregate principal balance of the term loan then outstanding under the Loan Agreement is required to be repaid in monthly installments through November 1, 2026.

Pursuant to the Loan Agreement, we may also make partial prepayments of the term loan to the lender, subject to specified conditions, including the payment of applicable fees and accrued and unpaid interest on the principal amount of the term loan being repaid.

Our obligations under the Loan Agreement are secured by substantially all of our assets.

Our debt combined with our other financial obligations and contractual commitments could have significant adverse consequences, including:

● requiring us to dedicate a substantial portion of cash flow from operations or cash on hand to the payment of interest on, and principal of, our debt, which will reduce the amounts available to fund working capital, capital expenditures, product development efforts and other general corporate purposes;

● increasing our vulnerability to adverse changes in general economic, industry and market conditions;

● subjecting us to restrictive covenants that may reduce our ability to acquire other businesses for cash, take certain other corporate actions or obtain further debt or equity financing;

● limiting our flexibility in planning for, or reacting to, changes in our business and our industry;

● placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

We may not have sufficient funds or may be unable to arrange for additional financing to pay the amounts due under our existing debt, particularly if we are in default under our Loan Agreement and all of our indebtedness under the Loan Agreement is due, and funds from external sources may not be available on a timely basis or acceptable terms, if at all.

In addition, a failure to comply with the covenants under our Loan Agreement could result in an event of default and acceleration of amounts due.

In particular, a delisting of our common stock from The Nasdaq Capital Market or a transfer of the listing of our common stock to another nationally recognized stock exchange having listing standards that are less restrictive than The Nasdaq Capital Market, in each case after a specified cure period, are events of default under our Loan Agreement.

Our lender could also declare a default upon the occurrence of any event that is determined to be a material adverse change as defined under our Loan Agreement.

In such events, we may not be able to make accelerated payments, and the lender could seek to enforce security interests in the collateral securing such indebtedness, including by foreclosing on our cash, potentially requiring us to renegotiate our agreement on terms less favorable to us, or to immediately cease operations.

Acceleration of the repayment of the outstanding indebtedness would raise substantial doubt about our ability to continue as a going concern, shorten the period for which we will be able to fund our operations and capital expenditure requirements, would adversely effect our financial condition and ability to pursue our business strategy and may cause us to cease operations and seek protection and wind down the company under the bankruptcy laws or otherwise.

For more information about risks related to compliance with The Nasdaq Capital Market listing standards, please see “Risks Related to Our Common Stock - If we fail to comply with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.

If our common stock is delisted from Nasdaq, we will be in default under our Loan Agreement.”

The milestone consideration we are eligible to receive in connection with the sale of our Commercial Business to Alcon is subject to various risks and uncertainties.

The milestone consideration we are eligible to receive for the sale of our Commercial Business to Alcon is subject to various risks and uncertainties.

We are eligible to receive up to four commercial-based sales milestone payments from Alcon as follows:

We are eligible to receive up to four commercial-based sales milestone

payments from Alcon as follows:

(1) $25.0 million upon the achievement of $50.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $65.0 million upon the achievement of $100.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $75.0 million upon the achievement of $175.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160.0 million upon the achievement of $250.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029.

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Such changes to existing standards or changes in their interpretation may have an adverse effect on our reputation, business, financial position and results of operations.

Our limited operating history and our limited experience in developing biologics may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

Our limited operating history and our limited experience in developing AI technology or biologics may make it difficult to evaluate the success of our business to date and to assess our future viability.

Our operations to date have been limited to organizing and staffing our company, acquiring rights to intellectual property, business planning, raising capital, conducting research and development activities, and prior to the sale of our Commercial Business to Alcon in July 2022, developing and commercially launching EYSUVIS and INVELTYS.

While we have had experience with obtaining marketing approval for and commercially launching two commercial products, we no longer have any commercial products following the sale of our Commercial Business to Alcon, we have only one product candidate in clinical development and we cannot be certain that we will be able to develop, obtain marketing approval for and commercialize a product in the future.

If we are successful in developing and obtaining marketing approval for KPI-012 or any product candidate we may develop in the future, we will again have to transition from a company with a research and development focus to a company capable of supporting commercial activity.

We cannot be certain that we will be able to develop, obtain marketing approval for and commercialize a product in the future if we were to continue our clinical trials.

If we are successful in developing and obtaining marketing approval for any product candidate we may develop in the future, we will again have to transition from a company with a research and development focus to a company capable of supporting commercial activity.

We may not be successful in such a transition.

In addition, prior to our acquisition of KPI-012 in November 2021, we had no prior experience developing biological product candidates.

As such, we may encounter delays or difficulties in our efforts to develop and commercialize KPI-012.

In addition, we do not have experience developing, validating, deploying or supporting a commercial AI platform.

Our strategy depends in part on third-party licensed technology and will require new competencies that we have not previously demonstrated, including data-engineering, model evaluation and monitoring, security-by-design, on-premises or private-cloud deployment, service-level support and customer success functions.

We may face delays and unanticipated costs as we hire or contract for specialized technical talent, build processes appropriate for regulated life-sciences environments, integrate licensed components, and establish and document controls over data governance, privacy and cybersecurity.

Even if we are able to develop the platform as planned, customers may be slow to adopt on-premises AI solutions, require features we do not have or cannot build on our expected timelines, or require validation packages and audit trails that increase our costs and lengthen sales cycles.

Our lack of experience in these areas increases the risk that we will not achieve technical milestones, product-market fit, or commercialization on the schedule or at the cost levels currently contemplated deployment.

Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had prior experience developing biological product candidates or a longer operating and commercialization history.

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Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

Risks Related to Product Development

We are substantially dependent on the success of our product candidate, KPI-012.

If we are unable to successfully complete the clinical development of, and obtain marketing approval for, KPI-012 or any other product candidate we may develop in the future, or experience significant delays in doing so, or if, after obtaining marketing approvals, we fail to successfully commercialize such product candidates, our business will be materially harmed.

We are substantially dependent on the success of KPI-012 and any other product candidate we may develop in the future.

As a result, we intend to devote a substantial portion of our research and development resources and business efforts to the development of KPI-012.

The success of KPI-012 and any other product candidates we may develop in the future will depend on many factors, including the following:

● completing and obtaining favorable results from our ongoing and planned clinical trials of KPI-012 and any other product candidate we develop;

● clearance of any investigational new drug application, or IND, submission for any other product candidates we develop;

● applying for and receiving marketing approvals from the FDA and any other regulatory authorities for KPI-012 and any other product candidate we develop;

● if approved, successfully launching and commercializing KPI-012 or any other product candidate we develop in the United States, including establishing and maintaining sales, marketing, manufacturing and distribution capabilities for KPI-012 or any other product candidate we develop;

● if approved, obtaining acceptance of KPI-012 and any other product candidate we develop by patients, the medical community and third-party payors;

● obtaining and maintaining coverage, adequate pricing, and adequate reimbursement from third-party payors, including government payors, for our product candidates;

● obtaining and maintaining regulatory approval of our manufacturing processes and our third-party manufacturers’ facilities from applicable regulatory authorities and obtaining and maintaining adequate supply of any such approved products;

● maintaining a workforce of experienced scientists and others with experience in eye diseases and biologics to continue to develop our product candidates;

● effectively competing with other therapies;

● maintaining an acceptable potency, purity and safety profile of our products following approval;

● obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

● protecting our rights in our intellectual property portfolio;

● not infringing, misappropriating or otherwise violating others’ intellectual property rights.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize KPI-012 or any other product candidate we may develop in the future, which would materially harm our business.

We may never generate the necessary data or results required to

obtain regulatory approval of KPI-012 or any other product candidate we develop and the commercialization of KPI-012 or any other product candidate we develop may never occur.

If clinical trials of KPI-012 or any other biological product candidate that we develop fail to demonstrate potency, safety and purity to the satisfaction of the FDA or other regulatory authorities or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of such product candidate.

The risk of failure in developing product candidates is high.

It is impossible to predict when or if any product candidate would prove effective or safe in humans or will receive regulatory approval.

Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the potency, purity and safety for a biologic product in humans.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome.

A failure of one or more clinical trials can occur at any stage of testing.

The outcome of preclinical testing and early clinical trials may not be predictive of the success of later stage clinical trials, and interim results of a clinical trial do not necessarily predict final results.

For example, the results of Combangio’s Phase 1b clinical trial of KPI-012 in twelve patients, including nine with PCED, may not be indicative of future results in later stage clinical trials, including in our ongoing CHASE Phase 2b clinical trial of KPI-012 in patients with PCED.

Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their product candidates.

Furthermore, the failure of any product candidates to demonstrate potency, safety and purity in any clinical trial could negatively impact the perception of our other product candidates and/or cause the FDA or other regulatory authorities to require additional testing before approving any of our product candidates.

For example, in our STRIDE 2 Phase 3 clinical trial evaluating the safety and efficacy of EYSUVIS versus placebo in patients with dry eye disease, we did not achieve statistical significance for the primary symptom endpoint of ocular discomfort severity, and subsequently we received a complete response letter from the FDA indicating that positive efficacy data from an additional clinical trial was needed to support a new drug application for EYSUVIS.

If we are required to conduct additional clinical trials or other testing of KPI-012 or any other product candidate we develop beyond those that we currently expect, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

● be delayed in obtaining marketing approval for our product candidates;

● not obtain marketing approval at all;

● obtain approval for indications or patient populations that are not as broad as intended or desired;

● obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;

● be subject to additional post-marketing testing requirements;

● have the product removed from the market after obtaining marketing approval.

If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented, and our competitors could bring products to market before we do.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize KPI-012 or any other product candidate that we may develop, including:

● clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may recommend or require us, to conduct additional clinical trials or abandon product development programs;

● the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;

● our third-party contractors may fail to comply with regulatory requirements or meet their obligations to us in a timely manner, or at all;

● regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

● we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;

● we may decide, or regulators or institutional review boards may require us, to suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

● we may be subject to additional post-marketing testing requirements to maintain regulatory approval;

● regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate;

● the cost of clinical trials of our product candidates may be greater than we anticipate;

● the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate or may be delayed;

● our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate trials;

● restrictions resulting from health epidemics, including COVID-19, and their collateral consequences may result in internal and external operational delays and limitations;

● regulatory authorities may withdraw their approval of a product or impose restrictions on its distribution, such as in the form of a modified Risk Evaluation and Mitigation Strategy, or REMS.

Our product development costs will also increase if we experience delays in testing or marketing approvals.

We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all.

Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors, such as those developing treatments for PCED, to bring products to market before we do and impair our ability to successfully commercialize our product candidates.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for KPI-012 or any other product candidate we may develop if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States.

Patient enrollment is affected by a variety of factors, including:

● the prevalence and severity of the disease or condition under investigation;

● the patient eligibility criteria for the trial in question;

● the perceived risks and benefits of the product candidate under study;

● the existence of existing treatments for the indications for which we are conducting clinical trials;

● the efforts to facilitate timely enrollment in clinical trials;

● the patient referral practices of clinicians;

● the ability to monitor patients adequately during and after treatment;

● the proximity and availability of clinical trial sites for prospective patients;

● the conducting of clinical trials by competitors for product candidates that treat the same indications as our product candidates;

● the impact of public health epidemics, such as COVID-19;

● the lack of adequate compensation for prospective patients.

We are developing KPI-012 for PCED, which is a rare condition with an estimated incidence in the United States of 100,000 cases per year, and, we have in the past and may in the future have difficulty identifying and enrolling a sufficient number of patients in our clinical trials of KPI-012 given the limited number of patients with PCED.

Our inability to locate and enroll a sufficient number of patients for our clinical trials could result in significant delays, could cause us to reduce the number of patients that we enroll in a trial, could require us to abandon one or more clinical trials altogether and could delay or prevent our receipt of necessary regulatory approvals.

Enrollment delays in our clinical trials have in the past and may in the future result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.

If serious adverse or unacceptable side effects are identified during the development or commercialization of our product candidates, we may need to abandon or limit our development and/or commercialization efforts for such product candidates.

If KPI-012 or any other product candidate we develop are associated with serious adverse events or undesirable side effects in clinical trials or following approval and/or commercialization, or if any of our product candidates have characteristics that are unexpected, we may need to abandon their development or limit development or marketing to narrower uses or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.

While KPI-012 was generally well-tolerated in Combangio’s Phase 1b clinical trial, it was only administered in 12 subjects.

Compounds that initially show promise in clinical or earlier stage testing for treating eye disease or other diseases may later be found to cause side effects that prevent further development and commercialization of the compound.

In addition, adverse events which had initially been considered unrelated to the study treatment may later, even following approval and/or commercialization, be found to be caused by the study treatment.

Moreover, incorrect or improper use of a product by patients could result in additional unexpected side effects or adverse events.

There can be no assurance that any product we may develop will be used correctly, and if used incorrectly, such misuse could hamper commercial adoption or market acceptance of such products or product candidates, if approved, at the rate we currently expect.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications.

As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential.

In July 2022, we sold our Commercial Business, including EYSUVIS and INVELTYS, to Alcon and we made a strategic determination to cease the development of our preclinical pipeline programs that are unrelated to our MSC-S platform and to focus our research and development efforts solely on this platform.

We may never realize the anticipated benefits of these decisions and, as a result, we may be required to forego or delay other opportunities.

In addition, our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

Our spending on current and future research and development programs and KPI-012 for specific indications may not yield any commercially viable products.

If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

KPI-012 has been evaluated in a clinical trial outside of the United States and we may in the future conduct clinical trials for product candidates at sites outside the United States.

The FDA may not accept data from trials conducted in such locations.

Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to conditions imposed by the FDA.

For example, where data from foreign clinical trials are not intended to serve as the sole basis for approval in the United States, the FDA will not accept the data as support for a marketing application unless the clinical trial was well designed and conducted in accordance with good clinical practices, or GCP requirements.

The FDA must also be able to validate the data from the trial through an onsite inspection, if necessary.

In addition, these clinical trials are subject to the applicable local laws of the jurisdictions where the trials are conducted.

There can be no assurance that the FDA will accept data from trials conducted outside of the United States.

If the FDA does not accept the data from any trial that we conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and could delay or permanently halt our development of the applicable product candidates.

In addition, conducting clinical trials outside the United States could have a significant adverse impact on us.

Risks inherent in conducting international clinical trials include:

clinical practice patterns and standards of care that vary widely among countries;

regulatory authority requirements that could restrict or limit our ability to conduct our clinical trials;

compliance with foreign manufacturing, customs, shipment and storage requirements;

administrative

burdens of conducting clinical trials under multiple non-U.S.

regulatory authority schema;

foreign exchange fluctuations;

diminished protection of intellectual property in some countries;

and interruptions or delays resulting from geopolitical events, such as wars.

In 2020 and 2021, Combangio conducted a Phase 1b clinical trial of KPI-012 in nine patients with PCED in Mexico.

Based on the results of the Phase 1b clinical trial conducted in Mexico, we initiated a full preclinical development program and submitted an IND application to the FDA for KPI-012 which was approved in December 2022, and in February 2023, we dosed our first patient in the CHASE Phase 2b clinical trial of KPI-012 for PCED in the United States.

We have initiated several clinical trial sites in Argentina for the CHASE Phase 2b clinical trial and we are in the process of initiating additional clinical trial sites in Latin America.

If the FDA does not accept the data from any trial that we conduct outside the United States, it could delay or permanently halt our development of the applicable product candidates.

Risks Related to the Commercialization of our Product Candidates

Even if KPI-012 or any other product candidates that we may develop in the future receives marketing approval, such products may fail to achieve market acceptance by clinicians and patients, or adequate formulary coverage, pricing or reimbursement by third-party payors and others in the medical community, and the market opportunity for these products may be smaller than we estimate.

If KPI-012 or any other product candidate that we develop receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by clinicians, patients, third-party payors and others in the medical community.

We are developing KPI-012 for PCED, which is a rare disease.

Our understanding of both the number of people who have a PCED, as well as the subset of people with PCED diseases who have the potential to benefit from treatment with KPI-012, are based on estimates.

These estimates may prove to be incorrect.

The number of patients with PCED may turn out to be lower than expected, may not be otherwise amenable to treatment with KPI-012 or may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects.

Biosimilar and generic versions of any products that compete with KPI-012 or any other product candidates we may develop would likely be offered at a substantially lower price than we expect to offer for our product candidates, if approved.

As a result, clinicians, patients and third-party payors may choose to rely on such products rather than our product candidates.

Our assessment of the potential market opportunity for KPI-012 is based on industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties.

Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.

While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.

The potential market opportunity for the treatment of PCED is difficult to precisely estimate.

Our estimates of the potential market opportunities for KPI-012 include several key assumptions based on our industry knowledge, industry publications, third-party research and other surveys, which may be based on a small sample size and fail to accurately reflect market opportunities.

While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

If any of our assumptions or estimates, or these publications, research, surveys or studies prove to be inaccurate, then the actual market for KPI-012 for PCED may be smaller than we expect, and as a result our future product revenue may be limited and it may be more difficult for us to achieve or maintain profitability.

If KPI-012 or any other product candidate for which we may obtain marketing approval does not achieve adequate levels of acceptance by physicians and patients, formulary coverage, pricing or reimbursement, we may not generate significant product revenues and we may not become profitable.

The degree of market acceptance of KPI-012 or any other product candidate for which we may obtain marketing approval, will depend on a number of factors, including:

● the efficacy and potential advantages of our product candidates compared to alternative treatments, including the existing standard of care;

● our ability to offer our products for sale at competitive prices, particularly in light of the lower cost of alternative treatments;

● the availability of third-party formulary coverage and adequate reimbursement;

● the clinical indications for which the product is licensed or approved;

● the convenience and ease of administration compared to alternative treatments;

● the willingness of the target patient population to try new therapies and of clinicians to prescribe these therapies;

● the strength of our marketing and distribution support;

● the timing of market introduction of competitive products;

● the prevalence and severity of any side effects;

● any restrictions on the use of our products together with other medications.

Even if we are able to successfully commercialize KPI-012 or any other product candidate that we may develop, if and when they are approved, the products may become subject to unfavorable pricing regulations, third-party coverage or reimbursement practices or healthcare reform initiatives, which could harm our business.

Our ability to successfully commercialize KPI-012 or any other product candidate that we may develop if and when they are approved will depend, in part, on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government healthcare programs, private health insurers, managed care plans and other organizations.

Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.

A primary trend in the U.S.

healthcare industry and elsewhere is cost containment.

Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.

Increasingly, third-party payors are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products.

Coverage and reimbursement may not be available for KPI-012 or any other product candidate that we may commercialize and, even if they are available, the level of reimbursement may be limited or not satisfactory.

Inadequate reimbursement may adversely affect the demand for, or the price of KPI-012 or any other product candidate for which we obtain marketing approval.

Obtaining and maintaining adequate reimbursement for our products may be difficult.

We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies.

If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize KPI-012 or any other product candidate if and when they are approved.

There may be significant delays in obtaining coverage and reimbursement for newly approved products and coverage may be more limited than the indications for which the product is approved by the FDA or similar regulatory authorities outside the United States.

Reimbursement agencies in Europe may be more conservative than the Centers for Medicare & Medical Services, or CMS, in the United States.

For example, a number of cancer drugs have been approved for reimbursement in the United States and have not been approved for reimbursement in certain European countries.

Moreover, eligibility for coverage and reimbursement does not imply that a product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses.

Interim reimbursement levels for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent.

Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost products and may be incorporated into existing payments for other services.

Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of

products from countries where they may be sold at lower prices than in the United States.

Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies.

Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop would compromise our ability to generate revenues and become profitable.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new products vary widely from country to country.

Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals.

Some countries require approval of the sale price of a product before it can be marketed.

In many countries, the pricing review period begins after marketing or product licensing approval is granted.

In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country.

To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies.

Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

Even if a product candidate we develop is approved for sale in the United States or in other countries, there can be no assurance that such product candidate will be considered medically reasonable and necessary for a specific indication or cost-effective by third-party payors, or that coverage and an adequate level of reimbursement will be available or that third-party payors’ reimbursement policies will not adversely affect our ability to sell such product candidate profitably.

If we are unable to establish and maintain sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, if and when necessary, we may not be successful in commercializing KPI-012 or any other product candidate that we may develop if and when they are approved.

We established a sales, marketing and distribution infrastructure for the commercial launch of EYSUVIS and INVELTYS, and, as a company, we have limited experience in the sales, marketing and distribution of therapeutic products.

Following the sale of our Commercial Business to Alcon in July 2022 and our determination to focus our research and development efforts on KPI-012 and our MSC-S platform, we terminated our entire commercial sales force and certain employees in our commercial, scientific, manufacturing, finance and administrative functions.

To achieve commercial success for any product for which we obtain marketing approval in the future, we will again need to establish sales, marketing and distribution capabilities, either ourselves or through collaborations or other arrangements with third parties.

There are risks involved with establishing, maintaining and expanding, if and when necessary, our own sales, marketing and distribution capabilities.

For example, recruiting and training a sales force is expensive and time-consuming, may divert our management and business development resources and could delay any future product launch.

Establishing and maintaining a sales force would require us to continue to implement and improve our managerial, operational and financial systems, which we may not do effectively.

Any inability to manage growth, when necessary, could delay the execution of our business plans or disrupt our operations.

Further, we may overestimate or underestimate the size of the sales force required for a successful product launch.

We have not yet established our own commercial organization or distribution capabilities specific to KPI-012.

While we believe that we will be able to commercialize KPI-012, if approved, for the treatment of PCED with a small, targeted, internal sales force in the United States and potentially other major markets, our assumptions may prove inaccurate.

In the future, we may need a larger sales force and at a higher cost than previously anticipated.

If the commercial launch of any product candidate for which we establish a commercial infrastructure is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred commercialization expenses.

This may be costly, and our investment would be lost if we cannot retain or reposition any such sales, marketing and distribution personnel.

Factors that may inhibit our efforts to commercialize on our own KPI-012 or any other product candidate we develop, if and when approved, include:

● our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

● our inability to obtain and maintain coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors;

● the inability of sales personnel to obtain access to clinicians or persuade adequate numbers of clinicians to prescribe our products;

● the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines;

● unforeseen costs and expenses associated with establishing, maintaining and expanding, if and when necessary, an independent sales, marketing and distribution organization.

While we cannot be certain when, if ever, we will seek and/or receive marketing approval to commercialize any of our product candidates outside the United States, we may seek marketing approval and explore commercialization of KPI-012 in certain markets outside the United States utilizing a variety of collaboration, distribution, co-promotion and other marketing arrangements with one or more third parties.

Our product revenues and our profitability, if any, under any such third-party collaboration, distribution or other marketing arrangements are likely to be lower than if we were to market, sell and distribute KPI-012 ourselves.

We may also consider seeking marketing approval outside the United States for other product candidates we may develop in the future.

If we decide to seek regulatory approval for any of our product candidates outside the United States, we may need to seek additional patent approvals, seek licenses to patents held by third parties and/or face claims of infringing third-party patent rights.

In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute KPI-012 or any other product candidate we may develop or we may be unable to do so on terms that are favorable to us.

We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market effectively any product candidate for which we obtain marketing approval.

If we do not establish and maintain our sales, marketing and distribution capabilities successfully, when needed, either on our own or in collaboration with third parties, we will not be successful in commercializing any product candidate for which we obtain marketing approval.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

Our competitors include major pharmaceutical companies with significantly greater financial resources.

KPI-012 and any other product candidate we may develop, if approved, will also compete with existing branded, generic and off-label products.

The development and commercialization of new drug products is highly competitive.

We face competition with respect to our product candidate, KPI-012, and we will face competition with respect to any other product candidate that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.

Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

If approved, we expect KPI-012 to compete with Oxervate ® , which is the only approved prescription pharmaceutical product in the PCED space.

Oxervate (cenegermin-bkbj) was approved in August 2018 for the treatment of neurotrophic keratitis, or NK, a degenerative disease characterized by decreased corneal sensitivity and poor corneal healing, which we believe to represent approximately one-third of all PCED cases.

Oxervate is a topical eye drop that is administered six times per day at two-hour intervals for eight weeks.

Each administration of Oxervate requires the use of a vial containing the drug product, a vial adapter, a single-use pipette and disinfectant wipes.

To our knowledge, there are currently only two product candidates in active clinical development for the treatment of a broad PCED population.

KIO-201, a chemically modified form of the natural polymer hyaluronic acid administered as an eye drop, is currently being studied in a Phase 2 clinical trial in patients with PCED by Kiora Pharmaceuticals, Inc.

Nexagon ® , an antisense

oligonucleotide that inhibits connexin43 being developed by Amber Ophthalmics, is currently being studied in a Phase 2/3 clinical trial in patients with PCED.

A number of companies are pursuing development of product candidates for the treatment of NK, including ReGenTree, LLC (Timbetasin) and Claris Biotherapeutics, Inc.

We are also aware of potential competitors for KPI-012 for Limbal Stem Cell Deficiency, or LSCD.

Competitive products and product candidates in LSCD include two stem cell-based approaches.

ABCB5+ limbal stem cells, which are being studied in Phase 1/2 clinical trials and are being developed by RHEACELL GmbH & Co.

KG, utilize allogeneic limbal stem cells derived from human corneal rims, which are expanded ex-vivo and manufactured as an advanced-therapy medicinal product.

Holoclar utilizes autologous limbal stem cells derived from the healthy portion of the patient’s eye.

Holoclar is approved in the European Union for treatment of LSCD caused by ocular burns and is developed by Chiesi.

Additionally, Claris Biotherapeutics, Inc.

has initiated a Phase 1 study in LSCD of its recombinant hepatocyte growth factor product candidate, CSB-001.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than our products.

Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

Our competitors may develop products that are available on a generic basis, and our product candidates may not demonstrate sufficient additional clinical benefits to clinicians, patients or payors to justify a higher price compared to generic products.

In many cases, insurers or other third-party payors, particularly Medicare, seek to encourage the use of biosimilar and generic products.

Many of the companies against which we are competing or which we may compete against in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Product liability lawsuits against us could divert our resources and could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.

We face an inherent risk of product liability exposure related to the use of our product candidates that we develop in human clinical trials, including KPI-012.

We face an even greater risk if we commercially sell any products that we may develop.

If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities.

Regardless of merit or eventual outcome, liability claims may result in:

● decreased demand for products that we may develop;

● injury to our reputation and significant negative media attention;

● withdrawal of clinical trial participants;

● significant costs to defend the related litigation;

● substantial monetary awards to trial participants or patients;

● loss of revenue;

● reduced time and attention of our management to pursue our business strategy;

● the inability to successfully commercialize any products that we may develop.

We currently hold $10 million in product liability insurance coverage in the aggregate, with a per incident limit of $10 million, which may not be adequate to cover all liabilities that we may incur.

We may need to increase our insurance coverage if we expand our ongoing and planned clinical trials for KPI-012.

We will need to further increase our insurance coverage when and if we begin commercialization of KPI-012 or any other product candidate for which we obtain marketing approval.

Insurance coverage is increasingly expensive.

We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

Risks Related to Product Development and Monetization of our Biologics Assets

Our ability to monetize our biologics asset portfolio is subject to significant uncertainty, and we may be unable to enter into any licensing, collaboration, sale, or other strategic arrangement with respect to our KPI-012 or KPI-014 product candidates or related intellectual property on acceptable terms, or at all.

We have ceased active clinical development of our KPI-012 and KPI-014 product candidates following the failure of the CHASE Phase 2b clinical trial of KPI-012 to meet its primary or key secondary endpoints.

We are actively evaluating strategic options with respect to our MSC-S platform intellectual property, which may include licensing arrangements, out-licensing, collaborations, sale transactions, or other monetization strategies.

However, we may be unable to identify a suitable counterparty for any such arrangement on terms that are acceptable to us, or at all.

The value that any third party may be willing to ascribe to our biologics intellectual property is inherently uncertain and may be significantly diminished by the negative results of the CHASE trial.

Even if we enter into a licensing or collaboration arrangement, there can be no assurance that any such arrangement will generate revenue or value for our stockholders at the level we anticipate, or at all.

Any such transactions are also subject to complex negotiations, extensive due diligence processes, and may be subject to third-party consents or conditions that we cannot control.

If we are unable to execute on our monetization strategy for our biologics assets, our business, financial condition, and results of operations could be materially harmed.

If we were to resume research and development activities with respect to KPI-012, KPI-014 or any other product candidate, such activities would be subject to all of the risks inherent in the development of biologics and other pharmaceutical products, including the risk of clinical trial failure, regulatory rejection, manufacturing challenges, and the absence of adequate financing.

While we have suspended active clinical development, we continue to evaluate the potential to resume preclinical and clinical development activities for our MSC-S platform, including for potential additional indications for KPI-012 such as limbal stem cell deficiency, or LSCD, and for KPI-014 for inherited retinal degenerative diseases.

Any resumption of research and development activities would be subject to the availability of additional financing, the identification of a suitable development or co-development partner, and the successful completion of additional preclinical studies and regulatory filings to support a new IND or amendment to our existing IND.

There can be no assurance that we will be able to resume development activities or that, if resumed, any future clinical trials will achieve their primary or secondary endpoints.

The negative results of the CHASE trial may make it more difficult for us to raise the financing required to resume development or to attract a suitable development partner.

If we are unable to resume development activities on acceptable terms or at all, the value of our biologics intellectual property may continue to decline.

We are shifting our business to focus on developing an AI infrastructure platform for the biotech industry that may present risks to our business.

We may not be successful in driving the global deployment and customer adoption of digital offerings, including AI-enabled software solutions.

Our increasing focus on and investment in AI and software offerings present risks to our business.

We may not be successful in driving the global deployment and customer adoption of an AI platform.

A growing part of our business involves cloud, edge computing, AI (including generative AI), and software solutions, and we are devoting significant resources to developing and deploying such strategies.

Our success with these solutions will depend on the level of adoption of our offerings.

We may incur costs to develop AI solutions and to build and maintain infrastructure to support cloud and edge computing offerings.

Success with these solutions depends on execution in many areas, including:

● establishing and maintaining the utility, compatibility, and performance of our cloud, edge computing, AI, and software solutions (including the reliability of our third-party software vendors, network, and cloud providers) on a growing array of medical devices, software, and equipment;

● continuing to enhance the attractiveness of our solutions to our customers in the face of increasing competition from a significant number of existing and new entrants in the market, while meeting reliability and security expectations for these solutions;

● meeting regulatory requirements for the development, testing, marketing, and implementation of these solutions in a fast-moving space disrupted by changing regulations around data and the need for innovation, including obtaining marketing authorizations when required.

It is uncertain whether our strategies will attract customers or generate revenue required to succeed in this highly competitive and rapidly changing global market.

We plan to commit substantial efforts, funds, and other resources to R&D and IT infrastructure for AI platform, and the risk of failure is inherent.

Even where our digital offerings satisfy applicable regulations and reimbursement policies, customers may not adopt them due to concerns about the security of personal data or the customers’ absence of digital infrastructure to support and effectively use the offerings, a hesitancy to embrace new technology, or for other reasons.

We also may not effectively execute organizational and technical changes to accelerate innovation and execution.

In a number of countries, some AI and software solutions are restricted areas of foreign investment.

Collaborating with a domestic, qualified third party will increase costs and may create uncertainties in such jurisdictions.

The legality or validity of any collaboration may be challenged or subjected to scrutiny in such jurisdictions and the relevant governmental authorities have broad discretion in addressing such arrangements.

Any of these risks could have a material adverse effect on our business, results of operations, cash flows, financial condition, or prospects.

AI solutions in the biotech and pharmaceutical industry must comply with stringent regulations, including certification requirements, in many of the countries in which our customers are located, particularly in relation to obtaining, using, storing, and transferring personal data.

Our platform must be compliant with applicable regulations in the country in question before we can launch our offerings.

In some jurisdictions, we must obtain marketing authorizations before commercializing software solutions.

Such regulatory compliance may take longer or cost more than expected or require that design changes be incorporated into our offerings.

In addition, changes to reimbursement policies for digital healthcare offerings could potentially lead to delays and additional expense.

The inability of customers to obtain adequate reimbursement from private and governmental third-party payers could adversely affect purchasing decisions and prices and cause our revenue and profitability to suffer.

Additionally, we are making significant investments in AI initiatives and are building AI into our digital offerings.

We are planning to use AI, including generative AI, throughout our portfolios to build differentiated products and solutions and deploy those solutions through various modalities for our customers, including on the device, via edge computing or data centers, and/or via the cloud.

Using AI in this manner presents risks and challenges that could affect its adoption, acceptance, and effectiveness, including flawed AI algorithms;

insufficient, overly-broad, or biased datasets;

unauthorized use or access to personal data;

lack of acceptance from our customers;

difficulties in obtaining or maintaining the necessary regulatory approvals or clearances;

or failure to deliver positive outcomes.

As we seek to build clinical applications that leverage AI models built by third parties, we may have limited rights to access the

underlying intellectual property used to create these models, and, if requested, this may limit or impair our ability to independently verify the explainability, transparency, and reliability of the underlying model.

The use of AI in healthcare offerings also poses clinical risks resulting from potential misdiagnosis or misinformation provided from AI applications, diminishing critical judgment, or loss of interpersonal care from clinicians.

These deficiencies could undermine the decisions, predictions, or analysis AI applications produce, as well as their adoption, subjecting us to competitive harm;

legal liability, including under new legislation regulating AI in jurisdictions such as the EU or ongoing evolution in how data protection, privacy, IP, and other laws are interpreted;

regulatory actions;

and reputational harm.

Additionally, our obligations to comply with the evolving legal and regulatory landscape could entail significant costs or limit our ability to incorporate some AI capabilities into our offerings.

In addition, some AI scenarios present ethical, privacy, or other social issues, risking reputational harm and/or reduced market demand or acceptance of AI solutions.

The safeguards we have designed to promote the ethical implementation of AI may not be sufficient to protect us against negative outcomes.

Furthermore, we contract with numerous third parties to offer our digital content to customers as well as to assist with the development of their own software applications and services, and our reliance on access to these third parties’ healthcare digital applications, which may not continue to be available to us on commercially reasonable terms or at all, could impact our ability to offer a wide variety of our own digital offerings at reasonable prices with acceptable usage tools or continue to expand our geographic reach.

These risks are amplified by the critical nature of healthcare decisions and the sensitivity of health-related information, and the occurrence of any of the above could have a material adverse effect on our business, results of operations, cash flows, financial condition, or prospects.

We have invested and expect to continue to invest in research and development efforts that further enhance our computational platform.

Such investments may affect our operating results, and, if the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer

We have invested and expect to continue to invest in research and development efforts that further enhance our computational platform, often in response to our customers’ requirements.

These investments may involve significant time, risks, and uncertainties, including the risk that the expenses associated with these investments may affect our margins and operating results and that such investments may not generate sufficient revenues to offset liabilities assumed and expenses associated with these new investments.

The software industry changes rapidly as a result of technological and product developments, which may render our solutions less desirable.

For example, in recent years, a number of companies have entered the drug discovery industry utilizing different AI approaches.

While we believe we compete favorably and are meaningfully differentiated from such approaches with the combination of our physics-based computational platform and machine learning capabilities, the success of other such AI approaches to drug discovery could impact the demand for our solutions.

We believe that we must continue to invest a significant amount of time and resources in our platform and software solutions to maintain and improve our competitive position.

If we do not achieve the benefits anticipated from these investments, if the achievement of these benefits is delayed, if technological developments render our solutions less desirable, or if a slowdown in general computing power impacts the rate at which we expect our physics-based simulations to increase in power and domain applicability, our revenue and operating results may be adversely affected.

Risks Related to Our Dependence on Third Parties

We have relied, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.

We have relied on third parties, such as clinical research organizations, clinical data management organizations, medical institutions and clinical investigators, in conducting our clinical trials and expect to continue to rely on such parties to conduct clinical trials of any product candidate that we develop.

We or these third parties may terminate their engagements with us at any time for a variety of reasons, including a failure to perform by the third parties.

If we need to enter into alternative arrangements, that could delay our product development activities.

Our reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve us of our responsibilities.

For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial.

Moreover, the FDA requires us to comply with GCP standards for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.

We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes.

Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.

Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors.

We also have relied, and expect to continue to rely, on other third parties to store and distribute drug supplies for our clinical trials.

Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of products, producing additional losses and depriving us of potential product revenue.

We contract with third parties for the manufacture of KPI-012 and plan to contract with third parties for preclinical, clinical and commercial supply of any other product candidates we develop.

This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

We do not own or operate manufacturing facilities for the production of preclinical and clinical quantities of any product candidates.

We do not own or operate, and currently have no plans to establish, any manufacturing facilities for KPI-012.

We rely, and expect to continue to rely, on third parties for the manufacture of both drug substance and finished product for KPI-012 for preclinical and clinical testing, as well as for commercial manufacture of KPI-012 if it receives marketing approval.

We also rely, and expect to continue to rely, on third parties for packaging, labeling, sterilization, storage, distribution and other production logistics for KPI-012.

We have only limited supply agreements in place with respect to KPI-012, and these arrangements do not extend to commercial supply.

We obtain supplies of drug substance and finished product for KPI-012 on a purchase order basis and do not have long term committed supply arrangements with respect to KPI-012.

We may be unable to maintain our current arrangements for KPI-012 or enter into agreements for commercial supply of KPI-012 on acceptable terms or at all.

We also expect to rely on third-party manufacturers to manufacture preclinical, clinical and commercial supplies of any other product candidates we develop, as well as for packaging, serialization, storage, distribution and other production logistics.

We are subject to risks related to our reliance on third-party manufacturers for the manufacture of the drug substance and product of KPI-012, a biological product candidate.

Manufacturing biologics is complex, especially in large quantities.

Biologic products must be made consistently and in compliance with a clearly defined manufacturing process.

KPI-012 is a bone-marrow derived MSC-S therapeutic composed of biologically active components, including protease inhibitors and growth factors, and is produced from a proprietary cell bank.

The manufacturing process for KPI-012 is comprised of three stages:

(1) cultivation of mesenchymal stem cells from a working cell bank and production of unprocessed conditioned media (cell-free secretome), (2) production of drug substance as a chemically defined solution and (3) formulation and filling of drug product.

While the drug product for Combangio’s early research and Phase 1b clinical trial was cultivated using a planar culture model, we implemented a bioreactor cultivation model for our ongoing CHASE Phase 2b clinical trial of KPI-012.

We also plan to utilize a bioreactor cultivation model for our planned clinical trials and for commercial supply of KPI-012.

We are continuing the process of scaling up our manufacturing processes and capabilities with our third-party manufacturers to support longer term clinical development.

We do not currently have arrangements in place for redundant supply or a second source for bulk drug substance.

In addition, KPI-012 drug product is manufactured from a vial of a working cell bank, which in turn was produced from a vial of master cell bank.

KPI-012 master cell bank and working cell bank is stored in two separate locations.

It is possible that we could lose the cell bank in both locations and have our manufacturing severely impacted by the need to replace the cell bank.

Our third party manufacturers may encounter shortages in the raw materials necessary to produce our product candidates in the quantities needed for our clinical trials, or our product candidates, if approved, in sufficient quantities for commercialization or to meet an increase in demand, as a result of capacity constraints or delays or disruptions in the market for the raw materials, including shortages caused by the purchase of such raw materials by our competitors or others and shortages related to epidemics or pandemics, such as the COVID-19 pandemic.

The failure of us or our third party manufacturers to obtain the raw materials necessary to manufacture sufficient quantities of KPI-012 or any other product candidates we may develop, may have a material adverse effect on our business.

The FDA maintains strict requirements governing the manufacturing process and third-party manufacturers are subject to inspection and approval by the FDA before a company can commence the manufacture and sale of any of its products or product candidates, and thereafter subject to FDA inspection from time to time.

Failure by third-party manufacturers to pass such inspections and otherwise satisfactorily complete the FDA approval regimen with respect to products or product candidates may result in regulatory actions such as the issuance of FDA Form 483 notices of observations, warning letters or injunctions or the loss of operating licenses.

Depending on the severity of any potential regulatory action, our clinical or commercial supply could be interrupted or limited, which could have a material adverse effect on our business.

When a manufacturer seeks to modify or make even seemingly minor changes to the manufacturing process, the FDA may require the applicant to conduct a comparability study that evaluates the potential differences in the product resulting from the change in the manufacturing process.

In connection with any application for approval to market product candidates in the United States, we may be required to conduct a comparability study if the product we intend to market is supplied by a manufacturer different from the one who supplied the product evaluated in our clinical studies.

Delays in designing and completing this study to the satisfaction of the FDA could delay or preclude our development and commercialization plans and thereby limit our revenues and growth.

Reliance on third-party manufacturers entails additional risks, including reliance on the third-party for regulatory compliance and quality assurance, the possible breach of the manufacturing agreement by the third-party, the possible misappropriation of our proprietary information, including our trade secrets and know-how, and the possible termination or nonrenewal of the agreement by the third-party at a time that is costly or inconvenient for us.

Third-party manufacturers may not be able to comply with current good manufacturing practice, or cGMP, regulations or similar regulatory requirements outside the United States.

Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and harm our business and results of operations.

KPI-012 and any other product candidate that we may develop may compete with other product candidates and products for access to a limited number of suitable manufacturing facilities that operate under cGMP regulations.

For example, we were previously required to change our third-party manufacturer when the manufacturer was purchased by a third-party and exited the contract manufacturing business.

The process of changing manufacturers can cause substantial time delays, and if we are required to change our manufacturer again in the future, it may delay our ongoing and planned clinical trials or development timeline.

Our current and anticipated future dependence upon others for the manufacture of KPI-012 or any other product candidate we develop may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

The manufacture of biologics is complex and our third-party manufacturers may encounter difficulties in production.

If any of our third-party manufacturers encounter such difficulties, our ability to provide supply of product candidates for clinical trials or products for patients, if approved, could be delayed or prevented.

Manufacturing biologics, especially in large quantities, is often complex and may require the use of innovative technologies to handle living cells.

Each lot of an approved biologic must undergo thorough testing for identity, strength, quality, purity and potency.

Manufacturing biologics requires facilities specifically designed for and validated for this purpose, and sophisticated quality assurance and quality control procedures are necessary.

Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and quality control and testing, may result in lot failures, product recalls or spoilage.

When changes are made to the manufacturing process, we may be required to provide preclinical and clinical data showing the comparable identity, strength, quality, purity or potency of the products before and after such changes.

If microbial, viral or other contaminations are discovered at the facilities of our manufacturers, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and adversely harm our business.

In addition, there are risks associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with cGMPs, lot consistency and timely availability of raw materials.

Even if we obtain regulatory approval for KPI-012 or any product candidates we may develop in the future, there is no assurance that our manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other comparable foreign regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential commercial launch of the product or to meet potential future demand.

If our manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization, our development and commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects.

Our reliance on CIRM funding for KPI-012 adds uncertainty to our research and development efforts, imposes certain compliance obligations on us and imposes requirements that may increase the costs of commercializing KPI-012.

Our development of KPI-012 is currently being funded, in part, by an award from the California Institute for Regenerative Medicine, or CIRM.

On August 2, 2023, our wholly-owned subsidiary, Combangio, entered into an award agreement with CIRM for a $15.0 million grant, or the CIRM Award, to support the ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program.

The CIRM Award is subject to a co-funding requirement under which Combangio is obligated to spend a specified minimum amount on the development of KPI-012 to obtain the full award amount and the remaining $3.3 million under the award is payable to Combangio only upon the achievement of specified milestones that are primarily related to Combangio’s progress in conducting the CHASE clinical trial.

If we fail to satisfy the co-funding requirement under the CIRM Award or fail to achieve the milestones within the timeframes required by the CIRM Award, we may not receive full funding under the CIRM Award.

CIRM may permanently cease disbursements under the CIRM Award if the milestones are not met within four months of their scheduled completion dates or if the delay is not addressed to CIRM’s satisfaction, as determined by CIRM in its sole discretion.

We cannot be certain that we will achieve the remaining milestones under the CIRM Award within the required timeframes, or at all, and as such we may never receive the remaining $3.3 million under the award.

Additionally, if CIRM determines, in its sole discretion, that Combangio has not complied with the terms and conditions of the CIRM Award, CIRM may suspend or permanently cease disbursements.

Moreover, disbursements under the CIRM Award are contingent upon the availability of funds in the state of California’s Stem Cell Research and Cures Fund, which is outside of our control.

The CIRM Award also imposes financial conditions that may increase the costs of commercializing KPI-012, if approved.

Under the terms of the CIRM Award, Combangio is obligated to pay a royalty on net sales of any product, service or approved drug resulting in whole or in part from the CIRM Award in the amount of 0.1% per $1.0 million of funds utilized by us until the earlier of 10 years from the date of first commercial sale of such product, service or approved drug and such time as nine times the amount of funds awarded by CIRM has been paid in royalties, or the Base Royalty.

In addition, following the satisfaction of the Base Royalty, Combangio is obligated to pay a 1.0% royalty on net sales of any CIRM-funded invention in excess of $500 million per year until the last to expire patent covering such invention expires.

Additionally, there are significant compliance requirements associated with the CIRM Award, such as reporting, notification, recordkeeping and audit requirements, for which internal and external resources may be needed and which may increase our costs of doing business.

Noncompliance with the requirements of the CIRM Award may cause a default under our Loan Agreement with Oxford Finance.

It is an event of default under our Loan Agreement if we receive funding under the CIRM Award and are required to return such funds to CIRM in an amount in excess of $500,000 due to our or Combangio’s failure to comply with the requirements of the CIRM Award, or if we are required to return funds to CIRM in excess of $1.0 million due to non-utilization of such funds or because CIRM exercises its rights to recover such funds for any reason.

Such an event of default could result in the acceleration of amounts due under our Loan Agreement.

In such event, we may not be able to make accelerated payments, and the lender could seek to enforce security interests in the collateral securing such indebtedness.

Acceleration of the repayment of the outstanding indebtedness would raise substantial doubt about our ability to continue as a going concern, shorten the period for which we will be able to fund our operations and capital expenditure requirements and would adversely affect our financial condition and ability to pursue our business strategy.

In addition, as a result of the CIRM Award, we may not have the right to prohibit the State of California from using certain technologies developed by us.

Under the CIRM Award, the California government can exercise march-in rights, which may include granting a third party nonexclusive, partially exclusive, or exclusive rights to CIRM-funded technology in any territory and field of use, if it determines that such action is necessary, if Combangio fails to make reasonable efforts to achieve practical application of a CIRM-funded technology, fails to comply with agreed to access and pricing requirements, or because action is necessary to address a public health emergency declared by the governor of California.

We may enter into collaborations with third parties for the development or commercialization of our product candidates.

The involvement of third-party vendors and partners in developing and delivering our AI platform services introduces risks to quality control that could result in service failures, reputational harm, or liability.

We have entered into a collaboration and licensing agreement with Younet regarding the development and operation of Researgency.

As a result of this agreement, certain functions, systems, and deliverables related to Researgency are subject to Younet's engineering decisions, development timelines, and technical capacity.

We do not have direct control over Younet's internal processes, personnel, or development priorities, and we may have limited ability to influence or oversee the manner in which Younet performs its obligations under the agreement.

Delays, errors, or changes in Younet's approach could materially impair our ability to deliver services to our customers, achieve development milestones, or maintain the performance standards expected by our clients.

There can be no assurance that Younet will perform its obligations in a manner consistent with our requirements, expectations, or business objectives, and any failure by Younet to do so could have a material adverse effect on our business, financial condition, and results of operations.

In addition, we rely on third-party vendors and partners in connection with the development and delivery of our AI platform services, and we may have limited visibility into, or ability to audit or otherwise oversee, the processes, methodologies, and outputs of such third-party collaborators.

Deficiencies in third-party performance, including errors in code, inadequate testing protocols, failure to adhere to agreed-upon specifications, or other quality lapses, could result in service failures, delays in platform deployment, reputational harm, or claims of liability against us.

Our quality assurance measures may not be sufficient to identify or remediate all deficiencies arising from third-party involvement on a timely basis, or at all.

Any such deficiency could have a material adverse effect on our business, financial condition, and results of operations.

Our AI platform services depend, in part, on access to graphics processing unit ("GPU") infrastructure and other specialized computational resources.

The availability, cost, and performance of these resources are subject to factors beyond our control, including global supply constraints, vendor pricing adjustments, changes in hardware standards, and the allocation policies of third-party infrastructure providers.

Technological limitations inherent in current GPU architecture may constrain the scope, speed, or scalability of our platform's processing capabilities.

There can be no assurance that adequate computational capacity will be available to us on commercially reasonable terms, or at all, to meet our current or future operational requirements.

Any prolonged shortage, cost increase, or technological limitation affecting our access to necessary computational resources could delay our platform development, impair the quality of our services, and have a material adverse effect on our business, financial condition, and results of operations.

If we resume research and development activities and enter into arrangements with third-party manufacturers for the production of any of our product candidates, we will be exposed to risks associated with reliance on third-party manufacturers, including risks related to regulatory compliance, supply chain disruptions, manufacturing quality, and our ability to secure adequate quantities at acceptable cost.

The manufacture of biologics is inherently complex.

Any resumption of manufacturing activities for KPI-012 or any other product candidate would require us to re-establish manufacturing arrangements and potentially conduct comparability studies if manufacturing processes or manufacturers have changed.

We may not be able to establish or maintain manufacturing arrangements on acceptable terms, or at all, which could delay or prevent any resumption of development or commercialization activities.

If we continue to pursue development of our MSC-S platform, we may enter into collaborations with third parties for the development or commercialization of our clinical product candidates.

If our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.

We expect to utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to develop and commercialize KPI-012 or any other product candidate we develop and for which we seek or obtain marketing approval in markets outside the United States.

Although we have discontinued clinical development of KPI-012 and currently have no product candidates in clinical development, if we pursue any future product candidates or seek to out-license, co-develop or commercialize assets that may arise from our pipeline, we may rely on a variety of collaboration, distribution and other marketing arrangements with third parties to develop and commercialize KPI-012 or any other product candidate we develop and for which we seek or obtain marketing approval in markets outside the United States.

We also may enter into arrangements with third parties to perform these services in the United States if we do not establish our own sales, marketing and distribution capabilities in the United States for our product candidates or if we determine that such third-party arrangements are otherwise beneficial.

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● a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products;

product candidates, or might result in litigation or arbitration, any of which would divert management attention and resources, be time-consuming and expensive;

● disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would divert management attention and resources, be time-consuming and expensive;

● collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;

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All of the risks relating to product development, regulatory approval and commercialization described herein also apply to the activities of our collaborators.

Additionally, subject to its contractual obligations to us, if a collaborator of ours were to be involved in a business combination, it might de-emphasize or terminate the development or commercialization of any product or product candidate licensed to it by us.

product candidate licensed to it by us.

If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities could be harmed.

If we are not able to establish collaborations, we may have to alter our development and commercialization plans and our business could be adversely affected.

For some of our product candidates, we may decide to collaborate with pharmaceutical or biotechnology companies for the development of our product candidates or the potential commercialization of our product candidates.

If we are not able to establish collaborations or strategic partnerships relating to our AI platform, we may have to alter our development and commercialization plans and our business could be adversely affected.

We intend to pursue strategic partnerships with biotechnology and pharmaceutical companies, academic institutions, and contract research organizations for the deployment and adoption of our Researgency agentic AI research platform.

We face significant competition in seeking appropriate collaborators.

Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally.

Potential partners may evaluate the maturity and functionality of our platform, the availability of competing AI solutions, and the cost and complexity of on-premises deployment relative to cloud-based alternatives.

The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.

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In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay the potential commercialization of a product candidate or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of Researgency, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all.

If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product platform.

Risks Related to Our AI Platform Business

We are at an early stage of development of our AI platform business and may be unable to successfully develop, commercialize, or generate revenue from Researgency.

We recently entered into an exclusive license for the Researgency platform and have announced our intention to deploy the platform as a dedicated, on-premises AI infrastructure solution for biotechnology and pharmaceutical companies.

However, we have not yet completed commercial development of the platform, have not entered into any commercial arrangements with customers, and have not generated any revenue from the Researgency business.

We have limited experience developing and commercializing AI platform products, and there can be no assurance that we will be able to successfully develop a commercially viable version of the platform, attract and retain customers, generate recurring revenue, or compete effectively in the rapidly evolving market for AI platforms serving the life sciences industry.

The development and commercialization of the AI platform will require significant financial resources, technical expertise, and commercial infrastructure that we do not currently possess.

If we are unable to successfully build and commercialize the AI platform, our business and financial condition will be materially harmed.

Our Researgency business depends on an exclusive license for the Researgency platform, and the termination, modification, or invalidity of that license could materially harm our business.

Our ability to operate our Researgency business depends on our exclusive license for the Researgency platform.

If the licensor were to terminate the license agreement, assert that we have breached our obligations under the license, or otherwise challenge our rights to the platform, our ability to develop and commercialize Researgency would be materially impaired.

We may also be required to make milestone, royalty, or other payments under the license that could strain our financial resources.

Any changes to the platform's underlying technology that are outside of our control could also affect the commercial viability of our business.

In addition, if the intellectual property underlying the Researgency platform is found to be invalid or unenforceable, or if a third party asserts that the platform infringes its intellectual property rights, we could be subject to substantial litigation costs and may be required to cease using or licensing the platform.

Issues relating to the use of artificial intelligence and machine learning in our offerings could adversely affect our business and operating results.

We incorporate AI and machine learning solutions into our platform, in applications that are important to our operations and our drug discovery processes.

There are significant risks involved in utilizing AI.

Issues relating to the use of new and evolving technologies such as AI and machine learning may cause us to experience brand or reputational harm, competitive harm, legal liability, and new or enhanced governmental or regulatory scrutiny, and we may incur additional costs to resolve such issues.

Known risks of AI currently include inaccuracy, bias, toxicity, intellectual property infringement or misappropriation, privacy, data protection and cybersecurity issues, and data provenance disputes.

Perceived or actual technical, legal, compliance, privacy, data protection, cybersecurity, ethical or other issues relating to the use of AI may cause public confidence in AI to be undermined, which could slow our customers’ adoption of our products and services that use AI.

In addition, litigation or government regulation related to the use of AI may also adversely impact our and others’ abilities to develop and offer products that use AI, as well as increase the cost and complexity of doing so.

Developing, testing and deploying AI systems may also increase the cost profile of our product offerings due to the nature of the computing costs involved in such systems, which could impact our project margin and adversely affect our business and operating results.

In addition, AI may have or produce errors or inadequacies that are not easily detectable.

If the data used to train AI or the content, analyses, or recommendations that AI applications assist in producing are or are alleged to be deficient, inaccurate, incomplete, overbroad or biased, our business, financial condition, and results of operations may be adversely affected.

The legal landscape and subsequent legal protection for the use of AI and the collection and use of data used to train AI models remains uncertain, and development of the law in this area could impact our ability to enforce our proprietary rights or protect against infringing uses.

If we do not have sufficient rights to collect or use the data on which our AI relies or to the outputs produced by AI applications, we may incur liability through the alleged violation of certain laws, third-party privacy rights, online terms of service, or other contracts.

We may use, and our vendors may incorporate AI, both in our own development and implementation of AI and through the adoption of commercially available tools.

The use of AI presents risks and challenges that could adversely affect our business and reputation, including cybersecurity, data privacy, IT, confidentiality, regulatory, legal, operational, competitive, reputational, intellectual property and other risks.

Specifically, risks related to accuracy, bias, AI hallucinations, discrimination, harmful content, misinformation, fraud, scams, targeted attacks (including model poisoning or data poisoning), surveillance, data leakage, bias and inequality, environmental and other harms may flow from our development or use of AI technologies.

For example, use of certain AI tools may lead to false or misleading information being used, relied upon or referenced by us or our vendors.

Furthermore, use of certain AI tools may increase the risk of unauthorized disclosure of confidential information, compromise of proprietary intellectual property, or inadvertent inclusion of third-party intellectual property or other protected material, which could result in disputes or claims of infringement.

Our vendors may in turn incorporate AI tools into their offerings, and the providers of these AI tools may not meet existing or rapidly evolving regulatory or industry standards, including with respect to privacy, data security and data integrity.

Further, bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property.

In addition, the use of generative AI models in our internal or third-party systems may create new attack surfaces or methods for adversaries, which could impact us and our vendors.

Any of these effects could damage our reputation, result in the loss of valuable property and information, cause us to breach applicable laws and regulations, and adversely impact our business.

We are committed to implementing governance and control measures to mitigate these risks, but there can be no assurance that such measures will adequately prevent or mitigate the adverse effects that the integration and use of AI may have on our business, financial conditions and results of operations.

Regulatory and legislative developments related to the use of AI could adversely affect our use of such technologies in our products, services, and business.

We use AI throughout our business, including in our drug discovery processes and technology.

As the regulatory framework for AI (including generative AI) evolves, our business, financial condition and results of operations may be adversely affected.

The regulatory framework for AI and similar technologies is changing rapidly.

It is possible that new laws and regulations will be adopted in the United States and in non-U.S.

jurisdictions, or that existing laws and regulations may be interpreted in ways that would affect the operation of our drug discovery platform and data analytics and the way in which we use AI and similar technologies.

We may not be able to adequately anticipate or respond to these evolving laws and regulations, and we may need to expend additional resources to adjust our offerings in certain jurisdictions if applicable legal frameworks are inconsistent across jurisdictions.

In addition, because these technologies are themselves highly complex and rapidly developing, it is not possible to predict all of the legal or regulatory risks that may arise relating to our use of such technologies.

Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.

For example, in Europe, the European Union’s Artificial Intelligence Act (AI Act) entered into force on August 1, 2024.

The AI Act establishes a risk-based governance framework for regulating high-risk AI systems operating in or being used by the EU market.

The AI Act could impact our products, business, and use of AI, even if we do not have a direct presence in the EU.

This framework categorizes AI systems based on the risks associated with such AI systems’ intended purposes as creating “unacceptable”, “high” or “limited” risks.

While the AI Act has not yet been enforced, there is a risk that our current or future AI-powered software or applications may be categorized as “high” risk or “limited” risk, obligating us to comply with the applicable requirements of the AI Act, which may impose additional costs on us, increase our risk of liability, or adversely affect our business.

For example, “high” risk AI systems are required, amongst other things, to implement and maintain certain risk and quality management systems, conduct certain conformity and risk assessments, use appropriate data governance and management practices, including in development and training, and meet certain standards related to testing, technical robustness, transparency, human oversight, and cybersecurity.

Even if our AI systems are not categorized as “high” risk we may be subject to additional transparency and other obligations for “low” risk AI system providers.

The AI Act sets forth certain penalties, including fines of the greater of EUR 35 million or 7% of worldwide annual turnover (as defined in the AI Act) for the prior year for violations related to offering prohibited AI-systems or data governance, fines of the greater of EUR 15 million or 3% of worldwide annual turnover for the prior year for violations related to the requirements for “high” risk AI systems, and fines of the greater of EUR 7.5 million or 1.5% of worldwide annual turnover for the prior year for violations related to supplying incorrect, incomplete or misleading information to the EU and member state authorities.

The AI Act’s regulatory framework is expected to have a material impact on the way AI is regulated in the EU and across the world.

Other jurisdictions also have proposed, and in certain cases enacted, laws and regulations addressing the use and development of AI.

For example, in the United States, numerous states have proposed or have enacted laws addressing these matters, and in the United Kingdom, the government has published a white paper calling for existing regulators to implement certain specific principles to guide and inform the responsible development and use of AI.

The AI Act and other evolving laws and regulations addressing AI, together with developing guidance and/or decisions in this area, may affect our use of AI and our ability to provide and to improve our services, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us, and could adversely affect our business, financial condition and results of operations.

Additionally, government and supranational regulation related to AI is evolving as new laws and regulations are implemented globally and could increase the burden and operational cost of compliance, including through requirements related to transparency, accountability, risk management, human oversight, and data governance.

We expect to see increasing regulation related to AI governance, use and ethics, which may also significantly increase the burden and cost of research, development and compliance in this area.

The EU’s Artificial Intelligence Act, or the AI Act, started entered into force on August 1, 2024, with important sections scheduled to come into effect in August 2026.

As currently enacted, the AI Act imposes significant obligations on providers and deployers of high-risk AI systems, and encourages providers and deployers of artificial intelligence systems to account for EU ethical principles when developing and using AI technology.

The scope of requirements depends on legal and risk determinations that rely on legal provisions that have not yet been fully interpreted by courts or regulators, and non-compliance can lead to significant fines.

In the U.S., the regulatory environment is complex and uncertain.

Over the past year, states have advanced, and in some cases passed, dozens of laws focusing on AI governance and regulation, including on deployment of AI in healthcare settings.

At the federal level, the current administration has endorsed a federal moratorium on the enforcement of state AI laws, including through a December 11, 2025, executive order on “Ensuring a National Policy Framework for Artificial Intelligence.” So far, these efforts have not been successful at curtailing state action on AI regulation, contributing to a complicated legislative patchwork, which may be litigated in state and federal courts.

In addition, there is continued uncertainty regarding the application of existing federal and state legal frameworks to uses and development of AI, and legal norms and market standards regarding AI continue to evolve.

For example, various federal and state regulators have issued guidance and focused enforcement efforts on the use of AI in regulated sectors.

Food and Drug Administration, for example, issued guidance on the use of artificial intelligence in medical devices, requiring detailed risk management and review processes to obtain approvals.

If we develop or use AI systems that are governed by the these laws or regulations, we will need to meet higher standards of data quality, transparency, and human oversight, and we would need to adhere to specific, potentially burdensome and costly ethical, accountability, and administrative requirements.

We may also be subject to significant enforcement or litigation in the event of any perceived non-compliance.

The rapid evolution of AI will require the application of significant resources to design, develop, test and maintain our products and services to help ensure that AI is implemented in accordance with applicable law and regulation and to minimize any real or perceived unintended harmful impacts.

The use of certain AI technologies can also give rise to intellectual property risks, including by disclosing or otherwise compromising confidential or proprietary intellectual property, or by undermining our ability to assert or defend ownership rights in intellectual property created with the assistance of AI tools.

The market for AI platforms serving the biotechnology and pharmaceutical industries is intensely competitive, rapidly evolving, and may develop in ways that are adverse to our business.

Our prospective AI platform will compete in a market characterized by rapid technological change, short innovation cycles and significant incumbent and emerging competition.

We will face actual and potential competition from specialized AI-enabled drug discovery and research companies, large technology companies offering general-purpose AI infrastructure and tooling, open-source model communities and toolchains that can reduce barriers to entry, incumbent life-sciences software vendors that may add AI features to established offerings (including ELN/LIMS, data-management and workflow tools), systems integrator, and biotechnology and pharmaceutical companies that choose to build or extend their own internal AI platforms.

Many of these competitors have substantially greater financial, technical, data, marketing, sales, regulatory and procurement resources than we do, as well as longer operating histories, broader brand recognition and deeper relationships with our target customers.

They may be able to innovate more quickly, secure advantageous pricing or bundling arrangements, invest more heavily in validation and compliance features required in regulated environments, and obtain or generate datasets and benchmarks that improve perceived performance.

Existing and potential customers may prefer competing offerings that are more fully featured, more integrated with their existing systems, bundled with other capabilities, available on commercial terms we cannot match, or validated through prior deployments and references that we do not yet have.

Our strategy emphasizes on-premises or private-cloud deployment, data-sovereignty and customer control.

The market may not value these attributes, or may view them as outweighed by perceived benefits of multi-tenant or fully managed solutions.

Rapid advances in AI models, tooling and hardware may diminish or eliminate any early advantages we achieve, and competitors may replicate our features more quickly or at lower cost than we anticipate.

In addition, our platform depends in part on technology we license from third parties;

if comparable or superior capabilities become widely available from alternative vendors or open-source communities, our ability to differentiate may erode and our costs may increase.

If we are unable to compete effectively, keep pace with technological change, win procurement processes, achieve and demonstrate the levels of validation and compliance customers require, or otherwise differentiate our offerings, we may be unable to attract or retain customers or generate revenue on acceptable terms.

Adverse developments in the competitive landscape could therefore materially and adversely affect our business, financial condition and results of operations.

Our Researgency business model depends on market acceptance of on-premises AI deployment architectures by biotechnology and pharmaceutical companies, and there is no assurance that sufficient market demand will develop.

Our Researgency business model is predicated on the premise that a meaningful number of biotechnology and pharmaceutical companies will prefer or be required by their internal data governance policies or regulatory considerations, to deploy AI infrastructure on-premises within their own facilities rather than using cloud-based solutions.

This market thesis may prove incorrect.

Cloud-based AI solutions offered by large technology companies may offer cost advantages, ease of implementation, or other benefits that make them more attractive to our target customers than our on-premises deployment model, notwithstanding the data sovereignty and intellectual property protection advantages that we believe our model provides.

In addition, the addressable market for the software and services we offer may be smaller than we currently estimate, or potential customers may not perceive a sufficient need for the capabilities our platform provides to justify the costs of on-premises deployment.

Demand for our services may also be influenced by shifts in customer priorities, budgetary constraints, or the availability of alternative solutions that customers consider adequate for their needs.

Our assumptions regarding customer adoption rates and the size of the addressable market may prove to be incorrect.

The market for life sciences AI platform solutions is early-stage and evolving, and customer adoption patterns are difficult to predict.

If sufficient market demand for on-premises biotechnology AI infrastructure does not develop in the timeframes we anticipate, or if market preferences shift toward cloud-based or other alternatives, our business model could be materially impaired, and our revenue, financial condition, and results of operations could be materially and adversely affected.

We may not be able to protect our proprietary AI platform technology, and third parties may be able to develop competing products that use similar methods.

Our ability to compete in the AI platform market depends in part on our ability to protect our proprietary platform technology and the unique features of the Researgency platform.

We may not be able to obtain or maintain adequate intellectual property protection for the AI platform.

The legal framework for protecting AI-related inventions remains unsettled, and we cannot assure you that patent applications we may file, or patents we may obtain through our license arrangements, will be adequate to prevent competitors from developing substantially similar products.

In addition, AI platform technology may be susceptible to reverse engineering, and confidential information related to our platform architecture or capabilities could be misappropriated.

If we are unable to adequately protect our AI platform technology, our competitive position could be harmed.

Our use of artificial intelligence and machine learning in our AI platform business may be subject to methodological and processing limitations that could expose us to regulatory, legal, and reputational risks.

The research and analytical processes underlying Researgency may be subject to confirmation bias or other methodological limitations, which could adversely affect the reliability and commercial viability of platform outputs.

The processes may be influenced, whether consciously or unconsciously, by a predisposition toward outcomes that confirm our existing assumptions, hypotheses, or business model.

When researchers or developers design methodologies to verify a specific hypothesis, there is an inherent risk that such methodologies may produce results that reflect confirmation bias rather than an objective evaluation of the available data.

Any such bias could compromise the reliability of outputs generated by our platform and the validity of conclusions derived from those outputs by our customers.

We have implemented internal review processes intended to mitigate the risk of confirmation bias in our research and development activities;

however, we cannot assure you that such processes will be effective in identifying or eliminating all instances of bias.

If our platform outputs are perceived as unreliable or biased, our reputation and customer relationships could be harmed, and our business, financial condition, and results of operations could be materially and adversely affected.

Further, the costs of processing and analyzing data within Researgency may exceed our estimates, and we may be unable to deliver results within commercially viable timelines.

The volume, complexity, or format of data supplied by our customers or sourced by us for use on our AI platform may exceed our anticipated parameters, resulting in higher computational costs, longer processing times, or diminished output quality.

There can be no assurance that our current pricing model or operational budget will be sufficient to accommodate all potential data processing scenarios that may arise as our platform is deployed commercially.

Our failure to deliver platform outputs within acceptable cost parameters and timeframes could result in customer dissatisfaction, contract terminations, or claims for damages, any of which could have a material adverse effect on our business, financial condition, and results of operations.

The regulatory environment for artificial intelligence and machine learning products is rapidly evolving in the United States and internationally.

Although there are no comprehensive federal healthcare AI laws at this time, there are increasing legislative efforts and regulatory scrutiny of the use of AI in healthcare and life sciences applications.

In particular, the FDA has issued guidance on the use of AI and machine learning in medical devices and drug development, and future regulatory actions may apply to aspects of our AI platform.

We may also face potential liability if our Researgency platform generates outputs that are used in clinical decision-making and that contribute to adverse patient outcomes, even if our platform is not itself classified as a medical device or diagnostic tool.

Additionally, several states have enacted AI laws related to health data including imposing governance and transparency requirements that could apply to certain uses of our platform and may expand over time.

Further, new federal and state laws and regulations may impose additional requirements on our AI platform that may increase compliance costs, restrict certain features or use cases, or require us to modify Researgency in ways that could affect its commercial appeal.

We cannot predict the nature or scope of future AI-related regulation or litigation, and there can be no assurance that our Researgency business will be compliant with applicable regulations as they evolve.

Data security and privacy risks are heightened in our Researgency business given that our platform may process proprietary biological and clinical data of our customers.

Researgency is designed to be deployed within client environments to process proprietary biological data, clinical trial datasets, and other sensitive information of our biotechnology and pharmaceutical customers.

As a result, our platform may be subject to heightened data security and privacy requirements, including obligations under HIPAA, GDPR, CCPA, and other applicable privacy laws that govern the handling of protected health information and other sensitive personal data.

Legislative activity in the privacy area may result in new laws that are applicable to us and that may hinder our business, for example, by restricting use or sharing of customer data, limiting our ability to provide certain customer data, or otherwise regulating artificial intelligence or machine learning.

These new laws could materially affect our business or lead to significant increases in the cost of compliance.

Any actual or perceived breach of data security involving customer data processed by our platform could expose us to significant liability, regulatory penalties, and reputational harm.

In addition, the on-premises deployment model that underlies our business creates specific cybersecurity risks related to integration with customer IT environments, and any security vulnerabilities in our platform software could expose our customers' proprietary data to unauthorized access.

The costs and complexity of maintaining compliance with evolving data privacy and security requirements may be substantial.

Our plans to use our KPI-012 clinical development dataset as a proof-of-concept for Researgency may not generate the commercial benefits we expect, and may expose us to additional risks.

We intend to use our accumulated KPI-012 clinical development dataset, which includes data from 79 patients across 37 clinical trial sites, as an initial proof-of-concept validation environment for Researgency.

We may not be able to successfully use this dataset in the manner we anticipate, and even if we do, the results of this self-validation effort may not be persuasive to potential commercial customers or may not generate the commercial benefits we expect.

In addition, the use of clinical trial data for purposes beyond those originally described to trial participants may raise ethical, legal, or regulatory concerns, particularly with respect to patient consent and data governance requirements.

If existing consents or notices are deemed insufficient for such uses, we may be required to suspend or cease processing some or all of the dataset;

de-identify or segregate and delete records;

obtain additional required consents, approvals, or permissions;

or implement additional contractual and technical controls, any of which could delay or limit our AI platform development and commercialization.

We could also face complaints or investigations by trial sites, IRBs, or regulators, contractual disputes with CROs or investigators, participant claims, and be forced to rely on smaller de-identified subsets or synthetic data that may reduce the AI model performance and diminish the value proposition of Researgency.

The information, research, and analytical outputs generated by Researgency are based on data sources and methodologies that we believe to be reliable;

however, we make no representation or warranty, express or implied, as to the completeness, accuracy, or timeliness of such outputs.

There may be errors, omissions, or inaccuracies in the underlying data or in the manner in which such data has been interpreted, compiled, or presented by our platform.

Our customers and other users of our platform's outputs should not place undue reliance on such outputs without conducting their own independent review and verification.

If our platform outputs are found to contain material errors, omissions, or inaccuracies, we could be subject to claims of liability from our customers, suffer reputational harm, and experience reduced demand for our platform services, any of which could have a material adverse effect on our business, financial condition, and results of operations.

Risks Related to Our Intellectual Property

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Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology, products or product candidates, or limit the duration of the patent protection of our technology and product candidates.

Competitors may also be able to design around our patents.

Other parties may develop and obtain patent protection for more effective technologies, designs or methods.

Patents have a limited lifespan.

In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S.

non-provisional filing date.

Various extensions may be available, but the life of a patent, and the protection it affords, is limited.

Even if patents covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from competitive medications, including generic medications.

Given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

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Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information or trade secrets could be compromised by disclosure during this type of litigation.

We may be subject to a third-party preissuance submission of prior art to the U.S.

We may be subject to a third-party pre-issuance submission of prior art to the U.S.

Patent and Trademark Office, or become involved in other contested proceedings such as opposition, derivation, reexamination, inter partes review, post-grant review, or interference proceedings in the United States or elsewhere, challenging our patent rights or the patent rights of others.

An adverse determination in any such submission, proceeding or litigation could reduce the scope

of, or invalidate, our patent rights, allow third parties to commercialize our technology or product candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or product candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

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Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability to develop, manufacture, market, and sell KPI-012 and any other product candidate we may develop in the future and to use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and other proprietary rights of third parties.

There is a considerable amount of intellectual property litigation in the biotechnology and pharmaceutical industries.

Part of our commercial success depends upon our ability to use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and other proprietary rights of third parties.

The biotechnology and pharmaceutical industries are characterized by extensive and frequent litigation regarding patents and other intellectual property rights.

We cannot assure you that our products, product candidates or any future product candidates, including methods of making or using these product candidates, will not infringe existing or future third-party patents.

We may become party to, or threatened with, infringement litigation claims regarding our product candidates and technology, including claims from competitors or from non-practicing entities that have no relevant product revenue and against whom our own patent portfolio may have no deterrent effect.

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If we are found to infringe, misappropriate or otherwise violate a third-party’s intellectual property rights, we could be required to obtain a license from such third-party to continue developing, manufacturing, marketing and selling any products, if and when approved, product candidates and technology.

Under any such license, we would most likely be required to pay various types of fees, milestones, royalties or other amounts.

However, we may not be able to obtain any required license on commercially reasonable terms or at all.

Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us and could require us to make substantial licensing and royalty payments.

We could be forced, including by court order, to cease commercializing the infringing technology, products or product candidates.

Without such license, we could be forced, including by court order, to cease developing and commercializing the infringing technology, products or product candidates.

In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent and could be forced to indemnify our customers or collaborators.

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Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

Even if we are successful in defending against such claims, litigation can be expensive and time consuming and would divert management’s attention from our core business.

Any of these events could harm our business significantly.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

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While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.

Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.

If we or our licensors fail to maintain the patents and patent applications covering our product candidates, it would have a material adverse effect on our business.

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This could have a material adverse effect on our competitive business position and our financial condition, results of operations and our business prospects.

Our biologics product candidates, including KPI-012 and KPI-014, are protected by patent rights exclusively licensed from other companies or institutions.

Our AI platform operates under an exclusive license.

If any licensor terminates their agreement with us, fails to maintain or enforce the underlying patents, or if we otherwise lose our rights under these licenses, our ability to monetize our biologics assets or to operate our Researgency business could be materially harmed.

The value of our biologics asset portfolio, including KPI-012 and KPI-014, is substantially dependent on the continued validity and enforceability of the patent rights licensed to us from third parties.

If any such patent rights are challenged, invalidated, or circumvented, the commercial value of our biologics intellectual property could be materially diminished.

Our ability to attract licensing or collaboration partners for our biologics assets depends in part on the strength of the underlying patent portfolio, and any deterioration in the patent position for KPI-012 or KPI-014 could make it more difficult for us to enter into such arrangements on acceptable terms.

Similarly, with respect to our Researgency business, if the intellectual property underlying the Researgency platform is found to be invalid, or if our exclusive license is terminated for any reason, we would lose our ability to operate our Researgency business as currently planned.

Some intellectual property which we own or have licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for United States industry.

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If we fail to comply with our obligations under our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our business.

Our Stanford University License Agreement, under which we license certain patent rights related to KPI-012, imposes royalty and other financial obligations on us and other substantial performance obligations.

Our Stanford Agreement, under which we license certain patent rights related to KPI-012, imposes royalty and other financial obligations on us and other substantial performance obligations.

We also may enter into additional licensing and funding arrangements with third parties that may impose diligence, development and commercialization timelines and milestone payment, royalty, insurance and other obligations on us.

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Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology.

In addition, it is possible that Stanford may conclude that we have materially breached the Stanford University License Agreement and might therefore terminate the agreement, thereby removing our ability to market products covered by our license agreement with Stanford.

In addition, it is possible that Stanford may conclude that we have materially breached the Stanford Agreement and might therefore terminate the agreement, thereby removing our ability to market products covered by our license agreement with Stanford.

If the Stanford University License Agreement is terminated, or if the underlying patents fail to provide the intended market exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products similar or identical to ours.

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The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally.

Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us.

We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.

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In addition, many countries limit the enforceability of patents against government agencies or government contractors.

In these countries, the patent owner may have limited remedies, which could materially

diminish the value of such patent.

In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.

If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.

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Many of our and our licensors’ employees and contractors were previously employed at other biotechnology, medical device or pharmaceutical companies, including our competitors or potential competitors.

Although we try to ensure that our employees and contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer.

We may also in the future be subject to claims that we have caused an employee to breach the terms of his or her non-competition or non-solicitation agreement.

Litigation may be necessary to defend against these claims.

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Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our Common Stock.

Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.

Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing

or distribution activities.

We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately.

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We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants.

Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed.

Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.

Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business.

Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.

In addition, some courts inside and outside the United States are less willing or unwilling

to protect trade secrets.

In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.

If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.

If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating such trade secrets.

Patent reform legislation under Leahy-Smith America Invents Act could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

On September 16, 2011, Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law.

The Leahy-Smith Act includes a number of significant changes to United States patent law.

These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation.

The United States Patent Office has been developing new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013.

The first to file provisions limit the rights of an inventor to patent an invention if not the first to file an application for patenting that invention, even if such invention was the first invention.

Although it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

For example, the Leahy-Smith Act provides a new administrative tribunal known as the Patent Trial and Appeals Board, or PTAB, that provides a venue for companies to challenge the validity of competitor patents at a cost that is much lower than district court litigation and on timelines that are much faster.

Although it is not clear what, if any, long term impact the PTAB proceedings will have on the operation of our business, the initial results of patent challenge proceedings before the PTAB since its inception in 2013 have resulted in the invalidation of many U.S.

patent claims.

The availability of the PTAB as a lower-cost, faster and potentially more potent tribunal for challenging patents could therefore increase the likelihood that our own patents will be challenged, thereby increasing the uncertainties and costs of maintaining, defending and enforcing them.

Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters

If we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate significant revenue will be materially impaired.

The marketing approval process is expensive, time-consuming and uncertain.

Although we have suspended active clinical development of KPI-012 following the results of the CHASE Phase 2b clinical trial, we continue to evaluate opportunities to resume preclinical and clinical development activities, subject to the availability of additional financing and the identification of a suitable development partner.

If we were to resume development activities and seek marketing approval for KPI-012 or any other product candidate, the marketing approval process would be expensive, time-consuming and uncertain.

As a result, we cannot predict when or if we, or any collaborators we may have in the future, will obtain marketing approval to commercialize KPI-012 or any product candidates we may develop in the future.

KPI-012 and any other future product candidate and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, potency, purity, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries.

Although we have suspended active clinical development of KPI-012 following the results of the CHASE Phase 2b clinical trial, KPI-012 and any other future product candidate and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, potency, purity, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries.

Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate.

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Unlike most guidance documents issued by the FDA, the diversity action plan guidance when finalized will have the force of law.

On January 27, 2025, in response to an Executive Order issued by President Trump on January 21, 2025, on Diversity, Equity and Inclusion programs, the FDA removed the draft DAP guidance from its website.

That action, along with similar actions by the Trump Administration to remove many other healthcare webpages, is currently the subject of ongoing litigation.

On July 3, 2025, the U.S.

District Court for the District of Columbia ruled that the administration’s actions to remove these webpages, including the draft DAP guidance, is unlawful under the Administrative Procedure Act, or the APA.

The court ordered the restoration of many of these webpages.

As of July 24, 2025, the draft DAP guidance had not been restored to the FDA’s website.

Accordingly, in light of these ongoing actions, there is considerable uncertainty surrounding the draft DAP guidance and how the FDA will consider diversity action plans in connection with its review of marketing applications.

In February 2026, the Commissioner of FDA and the Director of Center for Biologics Evaluation and Research published an editorial in the New England Journal of Medicine in which they declared that, in most cases, the new default requirement for FDA approval of a new product will be one adequate and well-controlled pivotal clinical trial plus confirmatory evidence, rather than two pivotal clinical trials.

In determining whether to rely on one trial, the FDA will focus on the single trial’s quality, including magnitude of effect, appropriateness of control arms, endpoint selection, statistical power, blinding, handling of missing data, biological plausibility and alignment with intermediate biomarkers.

The FDA has long had authority to approve new products on the basis of one trial plus confirmatory evidence and, in recent years, the agency has exercised that authority with respect to certain types of products.

The FDA now takes the position that this will be the new official default standard for most product candidates.

At this point, it is unclear how this new policy will be implemented by the FDA and how, if at all, it will affect our clinical development programs.

Further, under the Pediatric Research Equity Act, or PREA, a Biologics License Application, or BLA or supplement to a BLA for certain biological products must contain data to assess the safety, potency and purity of the biological product in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe, potent and pure, unless the sponsor receives a deferral or waiver from the FDA.

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In April 2023, the U.S.

District Court for the Northern District of Texas stayed the approval by the FDA of mifepristone, a drug product which was originally approved in 2000 and whose distribution is governed by various conditions adopted under a REMS.

District Court for the Northern District of Texas stayed the approval by

the FDA of mifepristone, a drug product which was originally approved in 2000 and whose distribution is governed by various conditions adopted under a REMS.

The Court of Appeals for the Fifth Circuit declined to order the removal of mifepristone from the market, but did hold that plaintiffs were likely to prevail in their claim that changes allowing for expanded access of mifepristone that FDA authorized in 2016 and 2021 were arbitrary and capricious.

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As of January 1, 2025, the Medicines and Healthcare Products Regulatory Agency, or MHRA, is responsible for approving all medicinal products destined for the United Kingdom market (i.e., Great Britain and Northern Ireland).

On April 28, 2025, the United Kingdom Parliament adopted amendments to improve and strengthen the United Kingdom’s clinical trials regulatory regime;

they will take effect on April 28, 2026.

These changes were needed since the current United Kingdom requirements are based upon the now-repealed EU Clinical Trials Directive (2001/20/EC), which has been replaced by the European Clinical Trials Regulation (Regulation EU No 536/2014).

Since the United Kingdom left the European

Union prior to the date on which the EU Clinical Trials Regulation took effect, the United Kingdom’s legal framework did not benefit from the same revisions as occurred at European Union level.

At the same time, a new international recognition procedure, or IRP, will apply, which intends to facilitate approval of pharmaceutical products in the United Kingdom.

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The revisions may however have a significant impact on the pharmaceutical industry and our business in the long term.

On June 4, 2025, after almost two years of negotiations among the European Union Member States, the Council of the European Union adopted its position on the proposed overhaul of the European Union general pharmaceutical legislative framework, which is known as the new Pharma Package.

This proposal will now be the subject of additional negotiations and technical meetings, with the objective of reaching agreement on issues such as the regulatory data protection framework and the access and supply obligations.

Even if our product candidates receive regulatory approval, they will be subject to significant post-marketing regulatory requirements and oversight.

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Additionally, if another company with a competing product candidate were to obtain orphan drug exclusivity for its competing product candidate before we do, we may be barred from marketing our product candidate for the same indication as the competing product candidate during the exclusivity period.

Although we have suspended active clinical development, KPI-012 retains its Orphan Drug designation from the FDA for PCED, and these risks would become relevant if we or a future licensee or development partner were to resume development and seek marketing approval.

Under the Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is a drug or biologic intended to treat a rare disease or condition.

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The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan drug designation, in particular if the product is sufficiently profitable so that market exclusivity is no longer justified.

If a competing product candidate with an orphan designation for PCED were to obtain

regulatory approval before we are able to obtain approval of KPI-012 for PCED, we could be barred from marketing KPI-012 for PCED in the United States during the seven-year orphan exclusivity period, which would have a severe adverse effect on our business.

If a competing product candidate with an orphan designation for PCED were to obtain regulatory approval before we are able to obtain approval of KPI-012 for PCED, we could be barred from marketing KPI-012 for PCED in the United States during the seven-year orphan exclusivity period, which would have a severe adverse effect on our business.

In order for the FDA to grant orphan drug exclusivity to one of our products, the FDA must find that the product is indicated for the treatment of a condition or disease with a patient population of fewer than 200,000 individuals annually in the United States.

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fully embraced the reasoning of the court decision in another decision challenging the scope of orphan drug exclusivity.

On April 17, 2025, the FDA appealed this decision to the U.S.

Court of Appeals for the D.C.

The implications of this decision, and its impact on the FDA’s implementation of the Orphan Drug Act, are unclear at this point.

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In April 2023, the FDA designated KPI-012 for the treatment of PCED for Fast Track review.

Notably, in September 2025, we announced the discontinuation of the development of KPI-012 following the failure of the CHASE Phase 2b clinical trial to meet its primary endpoints.

As a result, clinical development of KPI-012 has been suspended.

The FDA may rescind the Fast Track designation previously granted to KPI-012 if it determines that the product candidate no longer meets the criteria for such designation, including because the CHASE Phase 2b clinical trial’s

failure to meet primary endpoints may been viewed to undermine KPI-012’s potential to address unmet medical needs.

Under FDA regulations and guidance, Fast Track designation may be withdrawn if the criteria under which the designation was granted are no longer met, and the suspension of active clinical development and the lack of demonstrated efficacy in the CHASE trial could each independently support such a determination.

The rescission of KPI-012's Fast Track designation could diminish the perceived value of our biologics portfolio, reduce the attractiveness of KPI-012 to potential licensing or collaboration partners, and adversely affect our ability to monetize our biologics assets, whether through out-licensing, partnership arrangements, or any future resumption of clinical development.

We may also seek a priority review designation for one or more of our product candidates.

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A priority review designation means that the goal is for the FDA to review an application for marketing approval in six months, rather than the standard review period of 10 months.

On June 17, 2025, the FDA announced the creation of a new voucher program to expedite the development and approval of new drug products.

Vouchers issued under the new program, which is known as the Commissioner’s National Priority Voucher, or CNPV, Program, may reportedly be redeemed by sponsors to shorten the review time of an NDA from approximately 10-12 months to 1-2 months.

The FDA has indicated that the new CNPV process will convene experts from the FDA’s offices for a team-based review rather than using the standard review system of a drug application being sent to numerous FDA offices.

Clinical information will be reviewed by a multidisciplinary team of physicians and scientists who will pre-review the submitted information and convene for a 1-day meeting.

Vouchers under this program will reportedly be given to companies aligned with U.S.

national priorities.

These designations are within the discretion of the FDA.

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In addition, even if one or more of our product candidates qualifies for these designations, such as the Fast Track designation for KPI-012 for the treatment of PCED, the FDA may later decide that the product candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

The risk that FDA will decide KPI-012 no longer meets the conditions for qualification of Fast Track designation could be heightened by our termination of the CHASE Phase 2b clinical trial due to failure to meet its primary endpoints and our subsequent suspension of clinical development of KPI-012.

In the European Union, we may seek PRIME designation for some of our product candidates in the future.

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If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations.

If any of the clinicians or other healthcare providers or entities with whom we do or expect to do business is found to be

not in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs.

any of the clinicians or other healthcare providers or entities with whom we do or expect to do business is found to be not in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs.

Existing and future legislation may affect our ability to commercialize our products, if and when approved, and increase the difficulty and cost for us to obtain reimbursement for our products, if and when approved.

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Florida will also need to relabel the drugs and perform quality testing of the products to meet FDA standards.

On May 21, 2025, the FDA announced that it would offer individual states the opportunity to submit a draft proposal for pre-review and meet with the agency to obtain initial feedback from FDA prior to formally submitting their section 804 importation program (SIP) proposal.

The intent of these meetings is to assist states in developing their proposals by further clarifying requirements, enhancing the quality of proposals submitted to the agency and ultimately shortening the review timeline.

Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

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The IRA has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage.

The IRA also, among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.

Further, the IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program.

It is unclear how any additional challenges or future healthcare reform measures will impact the ACA.

Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare beginning in 2026, with prices that can be negotiated subject to a cap;

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This provision applies to drug products that have been approved for at least 9 years and biologics that have been licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or condition.

With passage of the One Big Beautiful Bill Act (“OBBBA”) on July 3, 2025, which was signed into law by the President on July 4, 2025, Congress expanded the exemption from this provision to drugs and

biologics with multiple orphan drug designations.

Nonetheless, since CMS may establish a maximum price for these products in price negotiations, we would be at risk of government action if our products are the subject of Medicare price negotiations.

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On August 15, 2024, HHS published the results of the first Medicare drug price negotiations for ten selected drugs that treat a range of conditions, including diabetes, chronic kidney disease, and rheumatoid arthritis.

The prices of these ten drugs will become effective January 1, 2026.

The prices of these ten drugs became effective January 1, 2026.

On January 17, 2025, CMS announced its selection of 15 additional drugs covered by Part D for the second cycle of negotiations.

CMS issued a public statement on January 29, 2025, declaring that lowering the cost of prescription drugs is a top priority of the new administration and CMS is committed to considering opportunities to bring greater transparency in the negotiation program.

The second cycle of negotiations with participating drug companies will occur during 2025, and any negotiated prices for this second set of drugs will be effective starting January 1, 2027.

The second cycle of negotiations with participating drug companies were announced in March 2025, and any negotiated prices for this second set of drugs will be effective starting January 1, 2027.

Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation.

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There have been various decisions by the courts considering these cases since they were filed.

HHS has generally won the substantive disputes in these cases or succeeded in getting claims dismissed for lack of standing.

Most of these cases are now on appeal.

On October 30, 2024, the U.S.

Court of Appeals for the Third Circuit heard oral argument in three of these cases.

In April 2025, the U.S.

Court of Appeals for the Second Circuit and the U.S.

Court of Appeals for the Third Circuit heard argument in an additional three cases.

On May 8, 2025, the Third Circuit rejected AstraZeneca’s challenge to the Medicare price negotiation program, finding that the program did not violate the company’s due process rights under the constitution since there is no protected property interest in selling goods to Medicare beneficiaries at a price higher than what the government is willing to pay in reimbursement.

We expect that litigation involving these and other provisions of the IRA will continue, with unpredictable and uncertain results.

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In addition, any failure to comply with applicable laws or regulations could harm our business and divert our management’s attention.

Trump’s current administration has also taken several measures focusing on healthcare and drug pricing and access in particular.

For example, President Trump has signed multiple executive orders addressing drug pricing including:

on April 15, 2025, outlining several actions the Secretary of the Department of HHS must take to optimize healthcare regulations that will provide access to prescription drugs at lower costs;

on May 5, 2025, aiming to promote domestic production of critical medicines;

and on May 12, 2025, aiming to establish a most-favored-nation (“MFN”) drug pricing policy that would tie U.S.

drug prices to the prices paid for drugs in other countries.

On November 6, 2025, CMS announced a new voluntary payment initiative called the GENEROUS Model (GENErating cost Reductions for U.S.

Medicaid Model) where drug manufacturers may voluntarily offer supplemental rebates to participating state Medicaid programs that are intended to provide such Medicaid programs with a MFN price for participating manufacturers’ products.

On December 23, 2025, CMS published two proposed rules that would incorporate MFN pricing principles into federal reimbursement for prescription drugs.

The first proposal, the GLOBE Model (Global Benchmark for Efficient Drug Pricing Model) for Medicare Part B, would require manufacturers of specified single source drugs and sole source biologics to pay incremental rebates based on international benchmark prices, with participation triggered for products meeting CMS’s spending and eligibility criteria.

The second proposal, the GUARD Model (Guarding U.S.

Medicare Against Rising Drug Costs) for Medicare Part D, would similarly mandate manufacturer rebates for qualifying sole source drugs where the Medicare net price exceeds an MFN benchmark derived from international reference pricing methodologies.

On January 15, President Trump called upon Congress to enact “ The Great Healthcare Plan,” to codify lower drug pricing, lower insurance premiums, and increase healthcare price transparency, among other things.

On February 5, 2026, the Trump administration launched the TrumpRx platform designed to allow consumers to purchase certain drugs at reduced prices as negotiated between the drug manufacturers and the Trump administration.

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

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State Medicaid programs and other payers are developing strategies and implementing significant coverage barriers, or refusing to cover these products outright, arguing that accelerated approval drugs have insufficient or limited evidence despite meeting the FDA’s standards for accelerated approval.

This may be especially true with respect to products approved pursuant to the accelerated approval pathway.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns personnel losses, or regulatory reform could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.

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In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.

These current or future laws and regulations may impair our research, development or

production efforts.

These current or future laws and regulations may impair our research, development or production efforts.

Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

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Our operations are subject to anti-corruption laws, including the U.S.

Foreign Corrupt Practices Act, or FCPA, the U.K.

Foreign Corrupt Practices Act, or FCPA,

Bribery Act 2010, or Bribery Act, and other anti-corruption laws that apply in countries where we do business and may do business in the future.

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On February 10, 2025, President Trump issued an executive order directing the Attorney General to review the guidelines and policies governing FCPA investigations and enforcement actions.

Per the executive order, this review will result in new DOJ FCPA guidelines intended to enhance American economic competitiveness and to safeguard national

security interests.

Per the executive order, this review will result in new DOJ FCPA guidelines intended to enhance American economic competitiveness and to safeguard national security interests.

During the 180-day review period, any new FCPA investigations and enforcement actions are to be suspended absent authorization from the Attorney General, and all existing FCPA investigations and enforcement actions will be reviewed.

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Failure to comply with these rules can lead to a potential FTC enforcement action.

Additionally, the DOJ recently finalized a rule implementing Executive Order 14117, which creates similar restrictions related to the transfer of sensitive U.S.

Additionally, the DOJ recently finalized a rule implementing Executive

Order 14117, which creates similar restrictions related to the transfer of sensitive U.S.

data to countries such as China.

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Any contractual protections we may have from our vendors may not be sufficient to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections.

In addition to government regulation, privacy advocates and industry groups

have and may in the future propose self-regulatory standards from time to time.

In addition to government regulation, privacy advocates and industry groups have and may in the future propose self-regulatory standards from time to time.

These and other industry standards may legally or contractually apply to us, or we may elect to comply.

Similar to the laws in the United States, there are significant privacy and data security laws that apply in Europe, Latin America and other countries.

The collection, use, disclosure, transfer, or other processing of personal data, including personal health data, regarding individuals who are located in the European Economic Area, or EEA, and the processing of personal data that takes place in the EEA, is regulated by the GDPR, which imposes obligations on companies that operate in our industry with respect to the processing of personal data and the cross-border transfer of such data.

The collection, use, disclosure, transfer, or other processing of personal data, including personal health data, regarding individuals who are located in the European Economic Area, or EEA, and the

processing of personal data that takes place in the EEA, is regulated by the GDPR, which imposes obligations on companies that operate in our industry with respect to the processing of personal data and the cross-border transfer of such data.

The GDPR imposes onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and policies.

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Risks Related to Employee Matters

We have recently undertaken a cost reduction plan and may do so again in the future.

The assumptions underlying these activities may prove to be inaccurate, or we may fail to achieve the expected benefits therefrom.

As part of our strategic positioning to reduce costs, we have reduced our workforce such that as of the date of this Annual Report, we only have 3 full-time employees.

This reduction in force, and any other future reductions, and the attrition that may occur following them, result in the loss of institutional knowledge and expertise and the reallocation and combination of certain roles and responsibilities across the organization, all of which could adversely affect our operations.

These actions and other additional measures we might take to reduce costs could strain our workforce, divert management attention, yield attrition beyond our intended reduction in force, reduce employee morale, cause us to delay, limit, reduce or eliminate certain development plans or otherwise interfere with our ability to operate and grow our business effectively, each of which could have an adverse impact on our business, operating results and financial condition.

We may not complete the current or any cost reduction plan and reorganization on the anticipated timetable, and even if successfully completed, we may not achieve the anticipated cost savings, operating efficiencies or other benefits of such activities.

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the research and development, clinical, business development and commercialization expertise of Todd Bazemore, our interim Chief Executive Officer, President and Chief Operating Officer, Mary Reumuth, our Chief Financial Officer, Kim Brazzell, Ph.D., our Head of Research and Development and Chief Medical Officer and Darius Kharabi, our Chief Business Officer, as well as the other principal members of our management, scientific and clinical teams.

Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time.

We are highly dependent on the research and development, clinical, business development and commercialization expertise of Avi Minkowitz, our Chief Executive Officer and Chief Financial Officer, as well as the other principal members of our teams.

We do not maintain “key person” insurance for any of our executives or other employees.

In addition, we are highly dependent on the employees who joined us in connection with the Combangio Acquisition and their expertise developing biologics.

The success of our Researgency business depends in part on our ability to attract and retain personnel with expertise in artificial intelligence, machine learning, software engineering, and biotechnology.

There can be no assurance that we will be able to build and sustain a sufficient engineering team at costs consistent with our current estimates or operational budget.

The market for skilled software engineers and data scientists with expertise in artificial intelligence is highly competitive, and we expect such competition to intensify as the demand for AI talent continues to grow across industries.

Such individuals are in high demand and may be difficult to attract given our early stage of development, limited financial resources, and the competitive market for AI talent.

Engineers and other technical personnel hired or contracted by us may be recruited by competitors or other companies that are able to offer more competitive compensation, equity incentives, or other benefits.

The loss of key engineering or technical staff could disrupt our ongoing development efforts, delay product enhancements and platform improvements, and result in increased expenses related to recruitment, onboarding, and training of replacement personnel.

Our biologics asset monetization strategy also depends on our ability to retain personnel and consultants with deep expertise in clinical development, regulatory affairs, and pharmaceutical business development.

If we are unable to attract and retain key individuals across both of our business lines, our ability to execute on our business strategy could be materially impaired.

Recruiting and retaining qualified scientific, clinical, manufacturing, accounting, legal and other personnel will also be critical to our success.

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We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.

Our decision to sell our Commercial Business to Alcon, our determination to solely focus our research and development efforts on our MSC-S platform, including KPI-012, could harm our ability to attract and retain qualified personnel who are critical to our business.

Our decision to cease active clinical development of KPI-012 and our MSC-S platform, combined with the significant workforce reductions we implemented in September and October 2025, could harm our ability to attract and retain qualified personnel who are critical to our business.

In addition, we rely on consultants and advisors, including scientific, clinical and regulatory advisors, to assist us in formulating our research and development and commercialization strategy.

Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

If we are unable to continue to attract and retain high quality personnel, our ability to successfully develop and commercialize KPI-012 and any other product candidate we may develop in the future will be harmed.

Our internal computer systems, or those of our vendors, contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

Despite the implementation of security measures, our information technology systems and those of our current and any future vendors, contractors or consultants, including any collaborator, are vulnerable to damage from cyber-attacks, computer viruses, worms and other destructive or disruptive software, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

Cyber incidents or attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, unauthorized access to or deletion of files, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information.

Cyber incidents also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient.

System failures, accidents, cyberattacks or security breaches could cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions, in addition to possibly requiring substantial expenditures of resources to remedy.

The loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential, personal or proprietary information, we could incur liability, including civil fines and penalties under the GDPR, HIPAA and other relevant state and federal privacy laws in the United States and abroad, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed.

In addition, we may not have adequate insurance coverage to provide compensation for any losses associated with such events.

While we have not experienced any material losses relating to cyber-attacks, we have been the subject of a successful phishing attempt.

We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems and networks of our

company, including personal information of our employees.

In addition, outside parties may attempt to penetrate our systems or those of our vendors, contractors or consultants or fraudulently induce our employees or employees of our vendors, contractors or consultants to disclose sensitive information in order to gain access to our data.

Like other companies, we may experience threats to our data and systems, including malicious codes and viruses, and other cyber-attacks.

The number and complexity of these threats continue to increase over time.

If a material breach of our security or that of our vendors, contractors or consultants occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose business and our reputation and credibility could be damaged.

We could be required to expend significant amounts of money and other resources to repair or replace information systems or networks.

Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated.

Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.

If we are unable to continue to attract and retain high quality personnel, our ability to successfully develop our business and commercialize product candidate we may develop in the future will be harmed.

We implemented significant reductions in our workforce in September 2025 (approximately 51% reduction) and October 2025 (termination of substantially all remaining employees) following the failure of the CHASE trial and the default under our Loan Agreement with Oxford Finance.

These workforce reductions have resulted in the loss of significant institutional knowledge and clinical expertise.

Our ability to attract and retain new employees and consultants is also adversely affected by the uncertainty surrounding our business strategy and the stage of development of our AI platform business.

Qualified personnel in the AI and biotechnology fields typically have multiple employment options available to them and may be reluctant to join a company with our level of development-stage uncertainty and limited financial resources.

As of the date of this Annual Report, we only have 3 full-time employees.

A partially or fully remote workplace could negatively impact our business.

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As a result, our management team and the vast majority of our employees will work remotely and without dedicated office space, until such time as we determine to obtain a new operating lease.

Our employees are accessing our servers remotely through home or other networks to perform their job responsibilities, which may be less secure.

Our employees are accessing our servers remotely through home or other networks to perform their job

responsibilities, which may be less secure.

The risk of cyber incidents or other privacy or data security incidents may be heightened as a result of our remote work environment.

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We also expect to have to negotiate budgets and contracts with such third parties, and we may not be able to do so on favorable terms, which may result in delays to our development timelines and increased costs.

We are substantially dependent on our remaining employees and consultants, along with any other advisors and consultants we may engage, to facilitate pursuit of strategic options and additional financing.

Our ability to successfully identify and consummate any licensing, collaboration, or other strategic arrangements with respect to our biologics asset portfolio, to develop and commercialize our AI platform, and to obtain additional financing, if any, depends in large part on our ability to retain our remaining employees and consultants along with any other advisors and consultants we may engage.

One or more may terminate their engagement with us on short notice.

The loss of the services of any of these individuals could potentially harm our ability to identify, evaluate and pursue our strategic objectives and to identify and obtain potential additional financing.

Risks Related to Evaluation of Strategic Options and Bankruptcy Proceedings

Our pursuit of strategic options with respect to our biologics asset portfolio and the development of our AI platform business may not be successful, and there can be no assurance that either strategy will generate value for our stockholders.

We are currently pursuing a dual-track business strategy consisting of (i) the preservation and monetization of our MSC-S biologics asset portfolio through licensing, collaboration, sale, or other strategic arrangements, and (ii) the development and commercialization of our AI platform business through our exclusive license for the Researgency agentic AI research platform.

There can be no assurance that either of these strategies will be successful.

With respect to our biologics assets, the market for licensing or acquiring assets based on a product candidate that failed in a Phase 2b clinical trial is challenging, and we may be unable to identify a willing purchaser or licensee on acceptable terms.

With respect to our AI platform business, we are at an early stage of development and have not yet generated revenue or established a customer base.

The simultaneous pursuit of both strategies requires management attention and financial resources that are both limited, and the failure of either strategy could materially harm our business and financial condition.

Our board of directors may elect to commence bankruptcy or insolvency proceedings.

Our board of directors may decide that it is in the best interests of our stockholders to commence bankruptcy proceedings.

It may be necessary for us to pursue bankruptcy proceedings under Chapter 7 of the United States Bankruptcy Code.

In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the United States Bankruptcy Code.

It is unlikely that there will be cash available for distribution to stockholders in connection with a bankruptcy proceeding.

Accordingly, holders of our Common Stock and other securities could lose all or a significant portion of their investment in the company.

We may become involved in securities class action litigation that could divert management’s attention and harm our business, and insurance coverage may not be sufficient to cover all costs and damages.

In the past, securities class action litigation has often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction, or the announcement of negative events, such as clinical trial results.

These events may also result in investigations by the SEC.

We may be exposed to such litigation or investigation even if no wrongdoing occurred.

Litigation and investigations are usually expensive and divert management’s attention and resources, which could adversely affect any of our remaining cash resources and our ability to consummate a potential strategic option or identify additional funding.

Risks Related to Our Common Stock

If we fail to comply with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.

If our common stock is delisted from Nasdaq, we will be in default under our Loan Agreement.

Our common stock is currently listed on The Nasdaq Capital Market.

If we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our Common Stock may be delisted and the price of our Common Stock and our ability to access the capital markets could be negatively impacted.

Our Common Stock is currently listed on Nasdaq.

We must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price of $1.00 per share and either a minimum stockholders’ equity of $2,500,000, or a minimum market value of our Common Stock of at least $35,000,000, or risk delisting, which would have a material adverse effect on our business.

There are many factors that may adversely affect our ability comply with the requirements for continued listing on The Nasdaq Capital Market, including those described throughout this “Risk Factors” section.

Many of these factors are outside of our control.

As a result, we cannot assure you that we will continue to comply with the requirements for continued listing on The Nasdaq Capital Market, including the minimum stockholders’ equity requirement.

On November 10, 2025, we received a letter from the Staff of the Nasdaq Stock Market LLC notifying us that we were not in compliance with Nasdaq Listing Rule 5550(b)(2), the Minimum Market Value of Listed Securities (MVLS) Requirement, for continued listing on Nasdaq, as the market value of our listed securities was less than $35,000,000 for the previous 30 consecutive business days.

We have been provided a period of 180 calendar days, or until May 11, 2026, to regain compliance with the Minimum MVLS Requirement.

We also do not currently meet the alternative standards for continued listing on Nasdaq, as we do not have stockholders' equity of at least $2.5 million or net income from continued operations of at least $500,000 in the most recently completed fiscal year or for two of the three most recently completed fiscal years.

If we are unable to demonstrate compliance with the Minimum MVLS Requirement or an alternative listing standard by May 11, 2026, Nasdaq may initiate delisting proceedings.

We cannot assure you that we will be able to regain or maintain compliance with Nasdaq's continued listing requirements.

While we have not received a formal notice from Nasdaq, we believe that as of the date of this Form 10-K, we meet the Minimum MVLS Requirement and the requirement to have stockholders’ equity of at least $2.5 million.

We intend to inform Nasdaq prior to May 11, 2026, of such compliance.

We are currently taking steps to regain compliance with Nasdaq's continued listing requirements, including the pursuit of our AI platform business strategy and related financing activities, which we believe are designed in part to increase our market capitalization.

However, there can be no assurance that these actions will result in our Common Stock meeting the Minimum MVLS Requirement or any alternative listing standard within the required cure period.

A delisting of our Common Stock from Nasdaq could materially reduce the liquidity of our Common Stock , impair our ability to raise additional capital, and adversely affect the market price of our Common Stock.

In addition, any delisting of our Common Stock from Nasdaq or a transfer of our listing to an exchange with less restrictive listing standards, in each case after a specified cure period, may constitute an event of default under certain of our existing indebtedness.

Additionally, on January 20, 2026, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of our Common Stock for the 30 consecutive business days between December 3, 2025, to January 16, 2026, we did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).

The letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until July 20, 2026 (the “Bid Price Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

In order to regain compliance with the Minimum Bid Price Requirement, our Common Stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Bid Price Compliance Period.

In the event the Company does not regain compliance by the end of the Bid Price Compliance Period, we may be eligible for additional time to regain compliance.

To qualify, we will be required to meet the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary.

If we met these requirements, we may be granted an additional 180 calendar days to regain compliance.

However, if it appears to Nasdaq that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, Nasdaq will provide notice that our Common Stock will be subject to delisting.

There can be no assurance that we will be eligible for the additional 180 calendar day compliance period, if applicable, or that the Nasdaq staff would grant our request for continued listing subsequent to any delisting notification.

In the event of such a notification, we may appeal the Nasdaq staff’s determination to delist its securities.

A delisting of our Common Stock from Nasdaq could materially reduce the liquidity of our Common Stock and result in a corresponding material reduction in the price of our Common Stock.

In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors and employees and fewer business development opportunities.

In addition, delisting could harm our ability to pursue a strategic option and raise capital through alternative financing sources on terms acceptable to us, or at

In addition, any potential delisting of our Common Stock from Nasdaq would also make it more difficult for our stockholders to sell their shares in the public market.

We have a history of receiving deficiency letters from Nasdaq.

During 2022, we received multiple deficiency letters from Nasdaq notifying us of our noncompliance with various listing standards for continued inclusion on The Nasdaq Global Select Market.

On each of March 2, 2022 and May 24, 2022, we received a deficiency letter from Nasdaq notifying us that, for 30 consecutive business days, the bid price of our common stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on The Nasdaq Global Select Market pursuant to Nasdaq

Listing Rule 5450(a)(1), or the Bid Price Requirement.

We were provided a period of 180 calendar days to regain compliance with the Bid Price Requirement, and in each case, we regained compliance within the cure period, including in the second instance by implementing a reverse stock split of our common stock.

On July 6, 2022, we received another deficiency letter from Nasdaq notifying us that we were not in compliance with Nasdaq Listing Rule 5450(b)(2)(A), or the Minimum MVLS Requirement, for continued listing on The Nasdaq Global Select Market, as the market value of our common stock was less than $50,000,000 for the previous 30 consecutive business days.

Nasdaq also noted that we were not in compliance with Nasdaq Listing Rule 5450(b)(1)(A), as our stockholders’ equity was less than $10,000,000 and Nasdaq Listing Rule 5450(b)(3)(A), as our total assets and total revenue for the most recently completed fiscal year or for two of the three most recently completed fiscal years were less than $50,000,000.

A company that has its primary equity security listed on The Nasdaq Global Select Market must satisfy at least one of the standards in Nasdaq Listing Rule 5450(b).

On December 5, 2022, we received another deficiency letter from Nasdaq notifying us that we were not in compliance with Nasdaq Listing Rule 5450(b)(2)(C), or the Minimum MVPHS Requirement, for continued listing on The Nasdaq Global Select Market, as the market value of our publicly held shares was less than $15,000,000 for each of the previous 30 consecutive business days.

In accordance with Nasdaq Listing Rule 5810(c)(3), we were provided until January 2, 2023 to regain compliance with the Minimum MVLS Requirement and until June 5, 2023 to regain compliance with the Minimum MVPHS Requirement.

Alternatively, if we did not regain compliance with the Minimum MVLS Requirement or the Minimum MVPHS Requirement by the applicable compliance date, we were eligible to transfer the listing of our common stock to The Nasdaq Capital Market, provided that we met the applicable requirements for continued listing on The Nasdaq Capital Market.

Following the receipt of the proceeds from the second tranche of a private placement in December 2022 and after amending our Loan Agreement to permit a transfer, we applied to transfer the listing of our common stock to The Nasdaq Capital Market.

The transfer was approved effective January 11, 2023 following Nasdaq’s determination that we met the applicable requirements for continued listing on The Nasdaq Capital Market, including Nasdaq Listing Rule 5550(b)(1), the minimum stockholders equity requirement for continued listing on The Nasdaq Capital Market.

In addition, Nasdaq advised us that, upon the transfer of our listing to The Nasdaq Capital Market, we would be in compliance with Nasdaq Listing Rule 5550(a)(5), the market value of publicly held shares requirement for continued listing on The Nasdaq Capital Market.

Any delisting of our common stock from The Nasdaq Capital Market or a transfer of the listing of our common stock to another nationally recognized stock exchange having listing standards that are less restrictive than The Nasdaq Capital Market, in each case after a specified cure period, are events of default under our Loan Agreement, which could adversely effect our financial condition and ability to pursue our business strategy.

Moreover, any delisting of our Common Stock from Nasdaq or a transfer of the listing of our Common Stock to another nationally recognized stock exchange having listing standards that are less restrictive than Nasdaq, in each case after a specified cure period, are additional events of default under certain of our indebtedness.

We intend to monitor the market value of our Common Stock and may, if appropriate, consider available options to regain compliance with the Minimum MVLS Requirement and the Minimum Bid Price Requirement.

However, there can be no assurance that we will be able to regain compliance with Nasdaq’s continued listing requirements or that we will maintain compliance with the other Nasdaq markets listing requirements.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares.

Provisions in our Restated Certificate of Incorporation, as amended (“Certificate of Incorporation”), and the Third Amended and Restated By-Laws, as amended (“Bylaws”) may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares.

These provisions could also limit the price that investors might be willing to pay in the future for shares of our Common Stock , thereby depressing the market price of our Common Stock.

In addition, because our board of directors are responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.

In addition, because our Board is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.

Among other things, these provisions:

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The market price for our Common Stock may be influenced by many factors, including:

● results of preclinical studies and clinical trials of KPI-012 or any other product candidates we may develop;

● our ability to receive marketing approval for and to successfully commercialize KPI-012 or any other product candidate we may develop;

● our ability to receive marketing approval for and to successfully commercialize any product candidate we may develop;

● results of clinical trials of product candidates of our competitors;

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● the recruitment or departure of key scientific, commercial or management personnel;

● the level of expenses related to the development of KPI-012 and any other product candidate we develop;

● the level of expenses related to any product candidate we may develop;

● the results of our efforts to discover, develop, acquire or in-license additional products, product candidates or technologies for the treatment of diseases or conditions, the costs of commercializing any such products and the costs of development of any such product candidates or technologies;

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● market conditions in the pharmaceutical and biotechnology sectors;

● the societal and economic impact of public health epidemics, such as the COVID-19 pandemic;

● general economic, industry and market conditions;

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In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company.

We also may face securities class-action litigation if we cannot obtain regulatory approval for or fail to successfully commercialize KPI-012 or any other product candidate we develop.

We also may face securities class-action litigation if we cannot obtain regulatory approval for or fail to successfully commercialize future product candidate we develop.

Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management’s attention and resources.

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Sales of a substantial number of shares of our Common Stock , or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock.

As of March 28, 2025, we had outstanding 6,452,398 shares of common stock.

As of April 10, 2026, we had outstanding 929,491,578 shares of Common Stock.

Shares of our Common Stock may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act of 1933, as amended, or the Securities Act, or to the extent such shares have already been registered under the Securities Act and are held by non-affiliates of ours.

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These shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

In 2022, 2023 and 2024, we sold to certain institutional investors shares of our common stock and/or shares of our preferred stock in private placements.

We have filed registration statements on Form S-3 covering the resale of such shares of common stock and the common stock issuable upon conversion of the preferred stock issued in the private placements, and we have agreed to keep each such registration statements effective until the date the shares covered by it have been sold or can be resold without restriction under Rule 144 of the Securities Act.

In 2022, 2023, 2024, 2025 and 2026, we sold to certain investors shares of our Common Stock and/or shares of our preferred stock in private placements.

We have filed registration statements on Form S-3 covering the resale of such shares of Common Stock and the Common Stock issuable upon conversion of the preferred stock issued in the private placements, and we have agreed to keep each such registration statement effective until the date the shares covered by it have been sold or can be resold without restriction under Rule 144 of the Securities Act.

As of March 31, 2026, all of our shares of preferred stock were converted to Common Stock, except for our Series AA Preferred Stock, of which 681,818 shares are outstanding.

The sale or resale of these shares in the public market, or the market’s expectation of such sales, may result in an immediate and substantial decline in our stock price.

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Certain existing stockholders will experience dilution upon any future conversion of the outstanding shares of our preferred stock into shares of our Common Stock.

Each outstanding share of Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock is initially convertible into 100 shares of our common stock at any time at the option of the applicable holder, subject to certain beneficial ownership limitations which prohibit any such conversion if the holder would own, following such conversion, in excess of 9.99% of the outstanding shares of our common stock.

Such holder of preferred stock can also elect for its beneficial ownership limitation to be increased up to 19.99% upon 61 days’ notice.

Each outstanding share of Series AA Preferred Stock is convertible into 55 shares of our Common Stock.

Certain existing stockholders will experience dilution upon any future conversion of the outstanding shares of our preferred stock into shares of our Common Stock.

Our largest stockholder may have the ability to exercise significant influence over certain of our business decisions and could influence matters submitted to stockholders for approval.

Bakers Brothers Life Sciences, L.P.

and 667, L.P., which are affiliates of Baker Bros.

Advisors LP, which we refer to collectively as Baker Brothers owned, in the aggregate, shares of common stock representing approximately 18.63% of our outstanding common stock as of March 28, 2025.

Such stockholder also holds all of the outstanding shares of our Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock, and 35.87% of the outstanding shares of our Series H Preferred Stock.

Such stockholder could elect, upon 61 days’ notice to us, to convert a portion of its shares of preferred stock into common stock, up to the beneficial ownership limitation of 19.99%.

Baker Brothers holds a significant percentage of our outstanding shares of common stock and could exercise significant influence over matters submitted to our stockholders for approval.

In addition, pursuant to the terms of our securities purchase agreements for the 2022, 2023 and March 2024 private placement transactions, we have agreed that we will not, without the prior approval of Baker Brothers (1) issue or authorize the issuance of any equity security that is senior or pari passu to the Series E Preferred Stock, the Series F Preferred Stock or the Series G Preferred Stock with respect to liquidation preference, (2) incur any additional indebtedness for borrowed money in excess of $1.0 million, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (3) pay or declare any dividend or make any distribution on, any of our shares of capital stock, subject to specified exceptions.

Additionally, pursuant to the terms of our securities purchase agreement for the June 2024 private placement transaction, we have agreed that we will not, without the prior approval of the stockholders holding two-thirds of the outstanding shares of Series H Preferred Stock, issue or authorize the issuance of any equity security that is senior or pari passu to the Series H Preferred Stock with respect to liquidation preference.

As a holder of our Series E Preferred Stock, Baker Brothers has the right to have our board of directors nominate and recommend for election by the stockholders up to three designees to our board of directors, subject to certain requirements and exceptions.

In addition, as a holder of our Series E Preferred Stock, Baker Brothers has certain rights to participate in our future equity offerings, which rights are more fully described in Item 1, “Business” of our Annual Report on Form 10-K for the year ended December 31, 2024.

As a result of the foregoing, Baker Brothers may have the ability to exercise significant influence over certain matters affecting our business.

Such stockholder may have interests that differ from your interests, and it may vote as a stockholder or act in a way with which you disagree and that may be adverse to your interests.

This significant influence could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely this significant influence could result in the consummation of such a transaction that our other stockholders do not support.

This significant influence could also discourage a potential investor from acquiring our common stock due to the limited voting power of such stock relative to the common stock held by

Baker Brothers and may adversely affect the market price of our common stock and, in turn, the market value of our common stock for Nasdaq listing purposes.

We are a “smaller reporting company”, and the reduced disclosure requirements applicable to smaller reporting companies may make our Common Stock less attractive to investors.

We are a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

We are a “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act.

We would cease to be a smaller reporting company if we have a public float in excess of $250 million or have annual revenues in excess of $100 million and a public float in excess of $700 million, determined on an annual basis.

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Our management and other personnel devote a substantial amount of time to these compliance initiatives.

Moreover, these rules and regulations have increased our legal and financial compliance costs relative to prior years and will make some activities more time-consuming and costly.

Moreover, these rules and regulations have increased our legal and financial compliance costs and these costs are disproportionately burdensome for a company of our current size and stage of development and will make some activities more time-consuming and costly.

For as long as we remain a smaller reporting company, we may take advantage of certain exemptions from various reporting requirements.

For as long as we remain a smaller reporting company, we may take advantage of certain exemptions from various reporting requirements as described in the preceding risk factor.

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Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404.

we identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

If we identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be the sole source of gain for our stockholders.

We have never declared or paid cash dividends on our capital stock.

We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business.

In addition, the terms of our Loan Agreement and our securities purchase agreements for our 2022, 2023 and March 2024 private placements restrict us from paying dividends.

Any future debt agreements that we may enter into may preclude us from paying dividends without the lenders’ consent or at all.

As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

As a result, capital appreciation, if any, of our Common Stock will be sole source of gain for our stockholders for the foreseeable future.

Our Certificate of Incorporation designates the state courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against the company and our directors, officers and employees.

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This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees.

Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and operating results.

Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur

additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and operating results.

General Risk Factors

Cyber incidents also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient.

In addition, we may not have adequate insurance coverage to provide compensation for any losses associated with such events.

While we have not experienced any material losses relating to cyber-attacks, we have been the subject of a successful phishing attempt.

Like other companies, we may experience threats to our data and systems, including malicious codes and viruses, and other cyber-attacks.

The number and complexity of these threats continue to increase over time.

We could be required to expend significant amounts of money and other resources to repair or replace information systems or networks.

Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.

Cybersecurity risks are heightened for our AI platform business, which is designed to be deployed within customer IT environments and may process sensitive biological and clinical data.

In addition to the general cybersecurity risks above, our AI platform business presents additional and more acute cybersecurity risks because the platform is specifically designed to be deployed within the IT environments of our biotechnology and pharmaceutical customers and to process their proprietary biological data and clinical trial datasets.

Any vulnerability in our platform software, or any breach of security arising from our access to or integration with customer IT environments in connection with implementation, maintenance, or support services, could expose our customers' proprietary data to unauthorized access.

Such a breach could result in significant liability to us, the termination of our customer agreements, reputational harm that could materially impair our ability to attract new customers, and regulatory investigations or penalties.

The costs of investigating and remediating any such breach, as well as any resulting litigation, could be substantial.

We cannot assure you that our cybersecurity measures will be

adequate to prevent breaches or unauthorized access, and the rapidly evolving nature of cybersecurity threats means that our defenses may become obsolete more quickly than we can adapt them.

Changes in tax laws or in their implementation or interpretation could adversely affect our business and financial condition.

Changes in tax law may adversely affect our business or financial condition.

The 2017 Tax Act, as amended by the CARES Act, contained significant changes to corporate taxation, including a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% and the limitation of the deduction for NOLs to 80% of current year taxable income for losses arising in taxable years beginning after December 31, 2017 (though any such NOLs may be carried forward indefinitely).

In addition, beginning in 2022, the 2017 Tax Act eliminates the option to deduct research and development expenditures currently and requires corporations to capitalize and amortize them over five years or 15 years for expenditures attributable to foreign research.

The 2017 Tax Act, subject to amendments made by the CARES Act, contained significant changes to corporate taxation, including a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% and the limitation of the deduction for NOLs to 80% of current year taxable income for losses arising in taxable years beginning after December 31, 2017 (though any such NOLs may be carried forward indefinitely).

In addition, applicable law currently and requires corporations to capitalize and amortize expenditures attributable to foreign research over 15 years.

In addition to the CARES Act, as part of Congress’s response to the COVID-19 pandemic, economic relief legislation was enacted in 2020 and 2021 containing tax provisions.

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Thus, the excise tax could apply to certain transactions that are not traditional stock repurchases.

Regulatory guidance under the 2017 Tax Act, the IRA, and such additional legislation is and continues to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial

In addition, it is uncertain if and to what extent various states will conform to the 2017 Tax Act, the IRA and such additional legislation.

On September 16, 2011, Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law.

The Leahy-Smith Act includes a number of significant changes to United States patent law.

These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation.

patent claims.

In addition, various states may not conform entirely to the 2017 Tax Act, the IRA and such additional legislation.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors