Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2025, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective.
Management’s annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).
Based on that assessment and the most recent change in business strategy, our management noted the following deficiency that was believed to be material weakness.
● Insufficient personnel following the Company’s restructuring has resulted in key controls over the financial reporting process not being fully implemented or operating effectively to support financial reporting in accordance with U.S. GAAP and SEC reporting requirements.
108
Table of Contents
Our management is planning to implement the following to remediate the above mentioned deficiency:
(i) hiring additional accounting and financial personnel to address the staffing shortage following the Company’s restructuring and to support the proper design and operation of key controls over financial reporting; and
(ii) organizing regular training for accounting staff to enhance their understanding of U.S. GAAP and SEC reporting requirements and to strengthen the execution of key controls; and
(iii) developing and implementing a U.S. GAAP accounting policies and procedures manual, which will be maintained, reviewed, and updated on a regular basis to support consistent application of accounting standards and improve the effectiveness of financial reporting controls.
As a non-accelerated filer and a “smaller reporting company”, as defined in Rule 12-b-2 under the Exchange Act, our independent registered public accounting firm is not required to issue an attestation report on the internal control over financial reporting.
Changes in internal control over financial reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fourth quarter ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
(a) Loan and Security Agreement
On February 9, 2026, the Company made the Loan in the principal amount of $7,000,000 evidenced by a secured promissory note to the Borrower, Minglemint Solutions LLC in connection with the Company’s determination that a portion of its cash on hand was in excess of its near-term working capital requirements and operational needs. In order to optimize the return on such excess cash, rather than holding the full balance in a bank deposit account, which offered a materially lower yield, the Company elected to deploy that portion into the Loan, which bears interest at a rate of 8.0% per annum. The Company believes that the interest rate obtained under the Loan, together with the security interest granted to the Company over all fixtures and personal property of the Borrower, provides a more favorable risk-adjusted return on idle cash than the return available through conventional bank deposit arrangements, while preserving the Company’s ability to meet its anticipated working capital and operational obligations. The Loan bears interest at a rate of 8.0% per annum, and is due and payable on February 9, 2027.
The Note includes customary event of default provisions, including, but not limited to, for a breach of any representations and warranties or covenants, any bankruptcy or insolvency proceedings of the Borrower, and the failure of the Borrower to pay, upon 15 days’ written notice of default, any principal amount of the Loan or interest due. The Note provides for a default interest rate of 13.0%. As described in the Note, upon the occurrence of certain events of default, the Company may, among other remedies, declare the outstanding balance of the Note including all accrued interest thereon immediately due and payable.
Additionally, the Note is secured by the Collateral, a continuing first priority lien and security interest in all fixtures and personal property of the Borrower, pursuant to the Security Agreement with the Borrower dated February 9, 2026. The Collateral includes, but is not limited to, all accounts, goods, documents, instruments, securities and investment properties, money, accounts and rights to payment of the Borrower, and any proceeds, records and obligations relating to the foregoing, as more fully detailed in the Security Agreement.
(b) 10b-1 Insider Trading Arrangements
None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the three months ended December 31, 2025.
109
Table of Contents
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers and Directors
Set forth below are the names, ages as of March 31, 2026 and positions of each of the current directors and executive officers of the Company. Each director has served on the Board since January 2026.
Name
Age
Position
Executive Officers
Avi Minkowitz
38
Chief Executive Officer, Chief Financial Officer and Director
Directors
Avi Minkowitz
38
Chief Executive Officer, Chief Financial Officer and Director
Chaim (Dovi) Berger (1) (3)
45
Director
Yonatan Colman (1) (2)
41
Director
Brendan Purdy (2) (3)
39
Director
Hillel Posen (1) (2) (3)
36
Director
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating and Corporate Governance Committee.
Composition of the Board of Directors
The number of directors of the Company is established by the Board, subject to the rights of holders of any of series of preferred stock of the Company to elect directors. The Board consists of three classes: Class I, Class II and Class III. Each class consists of one-third of the total number of directors constituting the entire Board. The allocation of directors among classes is determined by resolution of the Board.
Our Board currently consists of 5 members divided into 3 classes, with members of each class holding office for staggered 3-year terms. There are currently 2 Class I directors, Hillel Posen and Chaim (Dovi) Berger, whose terms expire at the 2027 annual meeting of stockholders; 1 Class II director, Avi Minkowitz, whose term expires at the 2028 annual meeting of stockholders; and 2 Class III directors, Yonatan Colman and Brendan Purdy, whose terms expire at the 2026 annual meeting of stockholders (in all cases subject to the election and qualification of their successors or to their earlier death, resignation or removal).
Executive Officer and Directors Biographies
Avi Minkowitz has served as a director of the Company since January 2026 and as Chief Executive Officer and Chief Financial Officer of the Company since February 2026. He has been a director at NuRAN Wireless (CSE-listed) since November 2025 and at International Star Inc. (OTC-listed) since October 2022, reflecting his broad involvement in public company governance. From January 2021 to October 2024, Mr. Minkowitz was a member of the team at Leonite Capital, where he contributed to deal structuring and strategic growth, with direct responsibilities spanning underwriting and portfolio management. Earlier in his career, he founded and successfully exited two businesses. Mr. Minkowitz has extensive experience with both public and private companies across real estate financing, management, and capital markets, including work with NorthLink Properties Ltd., a private real estate family office based in Toronto; Smart Parking Solutions Canada Inc., a company he co-founded and sold to Parkit Enterprise Inc. in 2018; and Parkit
110
Table of Contents
Enterprise Inc., a TSX-listed public company (symbol: PKT), where he subsequently served as VP of Acquisitions. He has advised startups and finance firms and has been involved in community-based entrepreneurship initiatives, including teaching real estate. Mr. Minkowitz holds a Specialized Honours bachelor’s in psychology and a Master's in Disaster and Emergency Management from York University (Toronto). We believe that Mr. Minkowitz's experience as an entrepreneur and finance professional spanning real estate, private equity, and business development makes him a highly qualified member of our Board.
Chaim (Dovi) Berger serves as Managing Attorney at Berger Law Firm LLC, a New York-based law firm where he has provided lead transactional counsel to a multi-strategy family office, overseeing deal structuring, negotiation, and execution across private equity, real estate, and specialty finance transactions since July 2019. Mr. Berger has also served as an Assistant Professor at Touro College since September 2007, teaching courses in accounting, finance, and law. He previously worked at Deloitte Tax from 2007 to 2009 and is a licensed CPA in New York State. Mr. Berger has held executive positions in finance roles at Edison Home Health Care and Reliance Global Holdings. He currently serves as a director of Nova Minerals Ltd., an Australian public company, where he is a member of the Audit Committee. We believe Mr. Berger's legal expertise and experience with negotiating and executing financing transactions qualifies him to serve as a member of our board of directors.
Hillel Posen has served on the board of directors of Rio Verde Industries Inc. since December 2020, where he also serves on the Audit Committee. He has served as Regional Operations Manager for High Tide Inc., a publicly traded national retail chain with over 200 stores across Canada since October 2018, where he oversees store openings, staffing and scheduling, procurement initiatives, and coordination among construction, compliance, marketing, sales, HR, and IT functions. Prior to his current role, Mr. Posen held a series of positions with this national retail chain, including business development and customer service roles supporting retail store purchasing, vendor relationships, and process efficiencies. Mr. Posen holds a Bachelor of Judaic Studies from Talpiot College. We believe Mr. Posen has expertise in business development and operations which qualifies him to serve as a director.
Yonatan Colman has served as Director of Leadership Development at NCSY since 2008, where he oversees organizational growth through talent development with a focus on people, strategy, and transformation. Mr. Colman regularly consults internationally, helping executives and their organizations transform, lead change, and build thriving, people-focused cultures. He holds a B.A. in Psychology from York University and an M.S. in Organizational Leadership from Colorado State University Global. Mr. Colman has served as a director of Rio Verde Industries Inc. since December 2020 and as a director of Newfoundland Goldbar Resources Inc. since May 2021, serving on the Audit Committee of each. He has also served as a board member of Yeshivas Limudei Hashem Society, a registered charity, since November 2021. He previously served as a director and Audit Committee member of Global Tactical Metals Corp. from November 2021 to December 2022 and of Green Scientific Labs Holdings Inc. from July 2021 to November 2021. Mr. Colman's qualifications to serve on the Board include his expertise in organizational leadership and strategy, his international consulting experience, and his service on the boards and audit committees of multiple public companies.
Brendan Purdy is a practicing securities lawyer and has served as a Partner at Fish Purdy LLP since June 2022. Prior to that, he served as President and Director of Purdy Law Professional Corporation from February 2018 to June 2022. Mr. Purdy's private practice is focused on the resource, life sciences, and technology sectors, where he has developed extensive experience with respect to public companies, capital markets, mergers and acquisitions, and other transactions fundamental to the junior equity markets. He also served as CEO and Director of Canadian GoldCamps Corp. from November 2020 to April 2024, and as CEO and Director of Musk Ventures Ltd. from November 2020 to September 2025. Mr. Purdy holds a J.D. from the University of Ottawa and a Bachelor of Management and Organizational Studies degree from the University of Western Ontario, where he majored in finance and administration. Mr. Purdy has served as a director and Audit Committee member of Red White & Bloom Brands Inc., a CSE-listed company, since July 2017, of NuRan Wireless Inc., a CSE-listed company, since October 2020, of i3 Interactive Inc. since March 2021, and of Slam Exploration Ltd., a CSE-listed company, since July 2021. He previously served as a director of Canadian GoldCamps Corp., a CSE-listed company, from December 2016 to April 2024, of DGTL Holdings Inc., a TSXV-listed company, from April 2022 to October 2024, of Musk Ventures Ltd., a CSE-listed company, from November 2020 to September 2025, of Wellbeing Digital Sciences Inc. from January 2021 to January 2024, of Powertap Hydrogen Capital Corp., a CSE-listed company, from March 2019 to February 2023, and of Talent Infinity Resource Developments Inc., a CSE-listed company, from December 2016 to April 2024. Mr. Purdy's qualifications to serve on the Board include his legal expertise in securities law and capital markets, his experience as a CEO of public companies, and his extensive public company board service.
111
Table of Contents
Director Selection; Arrangements and Understandings
As required by Item 401(a) of Regulation S-K, we note the following arrangements or understandings with other persons pursuant to which certain individuals on our Board were selected as directors.
Mr. Minkowitz, Mr. Posen, Mr. Berger, Mr. Colman and Mr. Purdy were each selected to serve on our Board pursuant to an arrangement or understanding with AK Holdings in connection with the transactions described in the “Certain Relationships and Related Transactions, and Director Independence” of this Annual Report on Form 10-K.
Family Relationships
There are no family relationships among our directors or executive officers.
Involvement in Certain Legal Proceedings
Except as described below, none of our directors or executive officers has been involved in any of the legal proceedings required to be disclosed pursuant to Item 401(f) of Regulation S-K during the past ten years.
On May 3, 2019, Mr. Purdy was the subject of a hearing by the Law Society of Ontario relating to a failure to provide a timely response to a client complaint and to meet certain related deadlines; the matter was disposed of in May 2019 and resulted in a reprimand, and Mr. Purdy remains a member of the Law Society of Ontario.
In addition, Mr. Minkowitz, in his capacity as a director of International Star Inc., is among the directors named in litigation in Ontario arising from a dispute relating to the termination of a former officer of International Star Inc. International Star Inc. previously initiated litigation in Delaware against that former officer alleging material breach of contract.
Audit Committee and Audit Committee Financial Expert
The members of our Audit Committee of the Board are Mr. Posen, Mr. Colman and Mr. Berger. Mr. Berger is the chair of the Audit Committee. Our Board has determined that Mr. Berger is an “audit committee financial expert” as defined in applicable SEC rules. Our Board has determined that each member of our Audit Committee is “independent” as defined under applicable Nasdaq rules and satisfies the independence criteria set forth in Rule 10A-3 under the Exchange Act.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics (the “Code”) that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. A copy of the Code is available on the “Investors-Corporate Governance” section of our website, which is located at www.kalarx.com. Our Board is responsible for overseeing the Code and must approve any waivers of the Code. If we make any substantive amendments to, or grant any waivers from, the Code for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any reference to our website address is intended to be an inactive textual reference only.
Insider Trading Policy
We have adopted an Insider Trading Policy governing the purchase, sale and/or other dispositions of our securities by our directors, officers, employees and other covered persons. We believe the Insider Trading Policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and Nasdaq listing standards. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K. It is also our policy that we do not engage in transactions in our securities while in possession of material nonpublic information concerning the company or our securities.
112
Table of Contents
Item 11. Executive Compensation
Executive and Director Compensation Processes
Our executive compensation program is administered by the compensation committee of our board of directors, subject to the oversight and approval of our board of directors. Our compensation committee reviews our executive compensation practices on an annual basis and based on this review approves, or, as appropriate, makes recommendations to our board of directors for approval of our executive compensation program. In designing our executive compensation program, our compensation committee considers publicly available compensation data for national and regional companies in the biotechnology/pharmaceutical industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. Our director compensation program is administered by our board of directors with the assistance of the compensation committee. The compensation committee conducts an annual review of director compensation and makes recommendations to the board of directors with respect thereto.
Since January 2023, our compensation committee has retained Pearl Meyer & Partners, LLC, or Pearl Meyer, as our independent compensation consultant for compensation matters. During the year ended December 31, 2024, our compensation committee directly engaged Pearl Meyer to provide comparative data on executive compensation practices in our industry and to advise on our executive and director compensation programs generally. Although our compensation committee considers the advice and guidelines of Pearl Meyer, our compensation committee ultimately makes its own decisions about these matters and recommendations to our board about these matters.
In the future, we expect that our compensation committee will continue to engage independent compensation consultants to provide additional guidance on our executive compensation programs, our director compensation programs and to conduct further competitive industry benchmarking against a peer group of publicly traded companies.
The compensation committee reviewed information regarding the independence and potential conflicts of interest of Pearl Meyer, taking into account, among other things, the factors set forth in the Nasdaq listing standards. Based on such review, the compensation committee concluded that the engagement of Pearl Meyer did not raise any conflict of interest.
Under its charter, the compensation committee may form, and delegate authority to, subcommittees, consisting of independent directors, as it deems appropriate. During fiscal year 2024, the compensation committee did not form or delegate authority to such subcommittees. In addition, under its charter, the compensation committee may delegate to one or more executive officers the power to grant options, restricted stock units, or RSUs, or other stock awards pursuant to our Amended and Restated 2017 Equity Incentive Plan to employees who are not directors or executive officers. During fiscal year 2024, the compensation committee delegated authority to our Chief Executive Officer to grant certain options and RSUs to non-executive employees with respect to annual equity awards and high performance awards throughout the year.
Executive Compensation
The following discussion relates to the compensation of: Mark Iwicki, former CEO and principal executive officer (who served until February 2025); Todd Bazemore, former CEO and principal executive officer (who served from February 2025 until November 2025); Kim Brazzell, Ph.D., former Head of Research and Development and Chief Medical Officer; and Mary Reumuth, former Chief Financial Officer.
David Lazar, who served as CEO of the Company from November 2025 until February 2, 2026 (subsequent to the reporting period) did not receive any compensation in connection with his role as CEO.
Summary Compensation Table
The following table sets forth information regarding the compensation awarded to or earned by the current and former executive officers listed below during the years ended December 31, 2025, and 2024. We have opted to comply with the reduced executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act, which require compensation disclosure for only (i) principal executive
113
Table of Contents
officer, (ii) two most highly compensated executive officers other than our principal executive officer and (iii) if applicable, up to two individuals who would have qualified as our two most highly compensated executive officers other than the principal executive officer but for the fact that the individual was not serving as an executive officer of the Company at the end of the last completed fiscal year. Throughout this document, the officers below are referred to as our “named executive officers” or “NEOs”.
Stock
Option
All other
Salary
Bonus
Awards
Awards
Compensation
Total
Name and Principal Position
Year
($)
($)(1)
($)(2)
($)(3)
($)(4)
($)
Mark Iwicki
2025
111,866
—
166,413
627,467
896
906,642
Former Chief Executive Officer
2024
709,394
297,945
100,100
377,628
6,120
1,491,187
Todd Bazemore
2025
489,112
585,450
76,053
2,262,211
64,146
3,476,972
Former Interim Chief Executive Officer, President and Chief Operating Officer
2024
535,600
187,460
45,500
171,543
9,447
949,550
Kim Brazzell, Ph.D.
2025
420,000
522,000
76,053
285,040
55,081
1,358,174
Former Head of Research and Development and Chief Medical Officer
2024
520,000
163,800
45,500
171,543
19,844
920,687
Mary Reumuth
2025
438,962
475,550
76,053
285,040
47,002
1,322,608
Former Chief Financial Officer
2024
468,000
147,420
32,200
120,021
10,627
778,269
(1) The amounts reported in the “Bonus” column reflect discretionary annual cash bonuses and retention bonuses earned by our named executive officers for their performance in the years ended December 31, 2025 and 2024.
(2) The amounts reported in the “Stock Awards” column reflect the aggregate grant date fair value of RSUs granted during the periods presented, computed in accordance with the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718. For the assumptions underlying the valuation of such RSUs, see Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K.
(3) The amounts reported in the “Option Awards” column reflect the aggregate grant date fair value of stock options awarded during the periods presented, computed in accordance with the provisions of FASB ASC Topic 718 using a Black-Scholes option pricing model. For the assumptions underlying the valuation of the stock option grants, see Note 11, “Stock-based Compensation” to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K.
114
Table of Contents
(4) The following table describes the elements that are represented in the “All Other Compensation” column above:
Severance, Company-Paid Life
401(k) Savings Plan
and Disability
Name
Year
Company Match
Insurance Premiums (1)
Mark Iwicki
2025
$
—
$
896
2024
$
—
$
6,120
Todd Bazemore
2025
$
7,000
$
57,146
2024
$
5,007
$
4,440
Kim Brazzell, Ph.D.
2025
$
7,000
$
48,081
2024
$
6,748
$
13,096
Mary Reumuth
2025
$
7,000
$
40,002
2024
$
6,859
$
3,768
(1) Other compensation for the year ended December 31, 2025 included a settlement of severance amount of $52,400, $37,700 and $36,613 to Mr. Bazemore, Dr. Brazzell and Ms. Reumuth, respectively.
Narrative Disclosure to Summary Compensation Table
Base Salary. We use base salaries to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our named executive officers. None of our named executive officers is currently party to an employment agreement or other agreement or arrangement that provides for automatic or scheduled increases in base salary.
Annual Bonus. Performance-based bonuses, which are calculated as a percentage of base salary, are designed to motivate our employees to achieve annual goals based on our strategic, financial and operating performance objectives. Historically, our board of directors or our compensation committee has approved discretionary annual cash bonuses to our named executive officers with respect to their prior year performance.
With respect to 2024 performance, our compensation committee awarded bonuses of $297,945, $187,460, $163,800 and $147,420 to Mr. Iwicki, Mr. Bazemore, Dr. Brazzell, and Ms. Reumuth, respectively, which represented payments at 70% of each individual’s target bonus opportunity (which target bonus opportunities, expressed as a percentage of 2024 annual base salary, were 60%, 50% and 45%, respectively). Mr. Bazemore’s individual performance-based target bonus amount for 2025, expressed as a percentage of his 2025 base salary, was 50%. Dr. Brazzell’s individual performance-based target bonus amount for 2025, expressed as a percentage of his 2025 base salary, was 45%.
Retention Bonus . In addition to the performance-based annual bonuses described above, in April 2025, our Compensation Committee awarded one-time cash retention bonuses of $281,190 and $260,000 to Mr. Bazemore and Dr. Brazzell, respectively, in recognition of their critical roles during leadership transitions. Such retention bonuses were conditioned upon each officer's continued service subject to certain conditions.
Equity Incentives. Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders. In addition, we believe that equity grants with time-based or performance-based vesting features promote executive retention because this feature incentivizes our executive officers to remain in our employment during the vesting period. Accordingly, our compensation committee annually reviews the equity incentive compensation of our named executive officers and from time to time may grant equity incentive awards to them in the form of stock options and/or RSUs with time-based and/or performance-based vesting conditions.
115
Table of Contents
In January 2024, we granted options to purchase 64,500, 29,300, 29,300 and 20,500 shares of our Common Stock to Mr. Iwicki, Mr. Bazemore, Dr. Brazzell and Ms. Reumuth, respectively. Such options vest as to 1/48th of the shares underlying the option at the end of each successive one-month period over a four-year period following January 4, 2024, subject to continued service. In January 2024, we granted RSUs with respect to 14,300, 6,500, 6,500 and 4,600 shares of our Common Stock to Mr. Iwicki, Mr. Bazemore, Dr. Brazzell and Ms. Reumuth, respectively. Such awards vested as to 1/3 of the shares on each of January 4, 2025 and January 4, 2026. Mr. Iwicki, Mr. Bazemore, Dr. Brazzell and Ms. Reumuth each left the Company prior to the vesting of their remaining shares.
In January 2025, we granted options to purchase 99,500, 45,200, 45,200 and 45,200 shares of our Common Stock to Mr. Iwicki, Mr. Bazemore, Dr. Brazzell and Ms. Reumuth, respectively. Such options vest as to 1/48th of the shares underlying the option at the end of each successive one-month period over a four-year period following January 6, 2025, subject to continued service. In January 2025, we granted RSUs with respect to 22,100, 10,100. 10,100 and 10,100 shares of our Common Stock to Mr. Iwicki, Mr. Bazemore, Dr. Brazzell and Ms. Reumuth, respectively. Such awards vested as to 1/3 of the shares on January 6, 2026. Mr. Iwicki, Mr. Bazemore, Dr. Brazzell and Ms. Reumuth each left the Company prior to the vesting of their remaining shares.
In March 2025, in connection with Mr. Bazemore’s appointment as our interim Chief Executive Officer, we granted to Mr. Bazemore options to purchase 45,200 shares of our Common Stock. Such options vest as to 1/12th of the shares underlying the option at the end of each successive one-month period over a one-year period following February 11, 2025, subject to continued service.
Prior to our IPO, our executives were eligible to participate in our 2009 Employee, Director and Consultant Equity Incentive Plan, as amended to date, or the 2009 Plan. Following the closing of our IPO, our employees and executives are eligible to receive stock options, RSUs and other stock-based awards pursuant to the Amended and Restated 2017 Equity Incentive Plan. For a description of our 2009 Plan and our Amended and Restated 2017 Equity Incentive Plan, see “— Stock Option and Other Compensation Plans”.
Historically, we have used stock options to compensate our executive officers in the form of initial grants in connection with the commencement of employment and also at various times, often but not necessarily annually. The award of stock options to our executive officers, including our Chief Executive Officer, generally have been and going forward are expected to be made by our board of directors. Such options have been granted with time-based and/or performance-based vesting conditions. Vesting and exercise rights cease shortly after termination of employment except in the case of death or disability and, in certain circumstances, including, upon a change in control. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including no voting rights and no right to receive dividends or dividend equivalents. In addition, prior to our IPO, we have granted stock options with exercise prices equal to the fair market value of our Common Stock on the date of grant as determined by our board of directors or compensation committee, based on a number of objective and subjective factors. The exercise price of all stock options granted after our IPO has been and will be equal to the fair market value of shares of our Common Stock on the date of grant, which will be determined by reference to the closing market price of our Common Stock on The Nasdaq Capital Market on the date of grant.
116
Table of Contents
Outstanding Equity Awards at December 31, 2025
The following table sets forth information regarding all outstanding equity awards held by each of our named executive officers as of December 31, 2025.
Option Awards
Stock Awards
Equity
Incentive
Plan
Market
Awards:
Value of
Number of
Number of
Number of
Number of
Shares or
Securities
Securities
Securities
Shares or
Units of
Underlying
Underlying
Underlying
Units of
Stock That
Unexercised
Unexercised
Unexercised
Option
Option
Stock That
Have Not
Options (#)
Options (#)
Unearned
Exercise
Expiration
Have Not
Vested ($)
Name
Exercisable
Unexercisable
Options (#)
Price ($)
Date
Vested (#)
(1)
Mark Iwicki
—
—
—
—
—
13,903
(2)
$
7,730
—
—
—
—
—
2,584
(3)
$
1,437
—
—
—
—
—
52,969
(4)
$
29,451
—
—
—
—
—
9,534
(5)
$
5,301
—
—
—
—
—
22,100
(6)
$
12,288
—
—
—
—
—
2,450
(7)
$
1,362
132,394
79,437
(9)
—
14.56
6/21/2033
—
—
30,906
33,594
(10)
—
7.00
1/3/2034
—
—
22,802
76,698
(11)
—
7.53
1/5/2035
—
—
—
5,450
(12)
—
4.30
6/14/2035
—
—
Todd Bazemore
—
—
—
—
—
4,268
(2)
$
2,373
—
—
—
—
—
794
(8)
$
441
—
—
—
—
—
16,236
(4)
$
9,027
—
—
—
—
—
4,334
(5)
$
2,410
—
—
—
—
—
10,100
(6)
$
5,616
40,582
24,349
(9)
—
14.56
6/21/2033
—
—
14,040
15,260
(10)
—
7
1/3/2034
—
—
10,358
34,842
(11)
—
7.53
1/5/2035
—
—
37,667
7,533
(13)
—
7.05
3/6/2035
—
—
15,000
165,000
(14)
—
11.22
8/28/2035
—
—
Kim Brazzell, Ph.D.
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
38,388
—
—
14.56
6/21/2033
—
—
12,819
—
—
7.00
1/3/2034
—
—
8,475
—
—
7.53
1/5/2035
—
—
Mary Reumuth
—
—
—
—
—
3,176
(2)
$
1,766
—
—
—
—
—
512
(8)
$
285
—
—
—
—
—
12,051
(4)
$
6,700
—
—
—
—
—
3,067
(5)
$
1,705
—
—
—
—
—
10,100
(6)
$
5,616
30,120
18,072
(9)
—
14.56
6/21/2033
—
—
9,823
10,677
(10)
—
7.00
1/3/2034
—
—
10,358
34,842
(11)
—
7.53
1/5/2035
—
—
(1) Amounts shown are based on a price of $0.56 per share, which was the closing price of our Common Stock as reported on the Nasdaq Capital Market on December 31, 2025, the last trading day of the year.
(2) The RSUs vest over three years, with 1/3 of such RSUs having vested on each of January 4, 2024, January 4, 2025 and January 4, 2026 and 1/3 of such RSUs vested on January 4, 2026.
(3) Represents replacement RSUs granted pursuant to the Option Exchange Program, which vest over three years, with 83% of such RSUs vested on May 31, 2025. Mr. Iwicki left the Company prior to the vesting of the remaining 17% of such RSUs.
(4) The RSUs vest over three years, with 1/3 of such RSUs having vested on June 22, 2024 and 1/3 of such RSUs vested on each of June 22, 2025 and June 22, 2026. Mr. Iwicki and Mr. Bazemore each left the Company prior to the vesting of their remaining RSUs.
117
Table of Contents
(5) The RSUs vest over three years, with 1/3 of such RSUs having vested on January 4, 2025 and 1/3 of such RSUs vested on each of January 4, 2026. Mr. Iwicki and Mr. Bazemore each left the Company prior to the vesting of their remaining RSUs.
(6) The RSUs vest over three years, with 1/3 of such RSUs having vested on January 6, 2026. Mr. Iwicki and Mr. Bazemore each left the Company prior to the vesting of their remaining RSUs.
(7) The RSUs vest over one year on June 15, 2026. Mr. Iwicki left the Company prior to the vesting of the remaining RSUs.
(8) Represents replacement RSUs granted pursuant to the 2023 Option Exchange Program, which vest over three years, with 85% of such RSUs vested on May 31, 2025. Mr. Bazemore left the Company prior to the vesting of his remaining RSUs.
(9) The option vests over four years, with 25% of the shares underlying the option vested on June 22, 2024 and 2.0833% of the shares vesting monthly thereafter. Mr. Iwicki and Mr. Bazemore each left the Company prior to the vesting of their remaining shares.
(10) The option vests over four years, with 2.0833% of the shares vested on February 4, 2024 and 2.0833% of the shares vesting monthly thereafter. Mr. Iwicki and Mr. Bazemore each left the Company prior to the vesting of their remaining shares.
(11) The option vests over four years, with 2.0833% of the shares vested on February 6, 2025 and 2.0833% of the shares vesting monthly thereafter. Mr. Iwicki and Mr. Bazemore each left the Company prior to the vesting of their remaining shares.
(12) The option vest over one year on June 15, 2026. Mr. Iwicki left the Company prior to the vesting of his remaining shares.
(13) The option vests over one year, with 8.33% of the shares vested on March 11, 2025 and 8.33% of the shares vesting monthly thereafter. Mr. Bazemore left the Company prior to the vesting of his remaining shares.
(14) The option vests over four years, with 2.0833% of the shares vested on September 29, 2025 and 2.0833% of the shares vesting monthly thereafter, subject to continued service. Mr. Bazemore each left the Company prior to the vesting of his remaining shares.
Policies and Practices Related to the Grant of Certain Equity Awards
We generally grant stock options and restricted stock units to our employees and directors on an annual basis. We also grant stock options and/or restricted stock units to individuals upon hire or promotion or for retention purposes. We currently do not grant stock appreciation rights or similar option-like instruments. During the last fiscal year, neither the board of directors nor the compensation committee took material nonpublic information into account when determining the timing or terms of stock options. Stock options are not granted in anticipation of the release of material nonpublic information, and the release of material nonpublic information is not timed on the grant dates of such stock options. We have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
Annual stock option grants to executive officers are typically approved by our board of directors or our compensation committee in December of each year and are effective on a specified date in the first or second week of January of the next year. In December of each year, our compensation committee has generally delegated authority to our Chief Executive Officer under our stock incentive plan to grant annual stock options to non-executive employees on a specified date in the first or second week of January of each year. Stock option grants to new hires are generally approved by our board of directors or compensation committee mid-month. Under our non-employee director compensation policy, the grants of our annual stock options to directors are effective on the date of the first board meeting held after each annual meeting of stockholders.
118
Table of Contents
During fiscal year ended December 31, 2025, we did not grant stock options to any named executive officer during any period beginning four business days before and ending one business day after the filing of any Form 10-Q or 10-K, or the filing or furnishing of a Form 8-K that discloses material nonpublic information.
Employment Agreements with Named Executive Officers
Letter Agreement with Mr. Iwicki
Mr. Iwicki was appointed as our Chief Executive Officer and Chair of our board of directors pursuant to a letter agreement with us dated September 10, 2015, which amended and restated a prior letter agreement. Mr. Iwicki resigned as our Chief Executive Officer, effective February 11, 2025.
Letter Agreement with Mr. Bazemore
Mr. Bazemore was appointed as our Chief Operating Officer pursuant to a letter agreement with us dated November 6, 2017, and was appointed as our President commencing December 16, 2021 and our interim Chief Executive Officer commencing February 11, 2025. Mr. Bazemore resigned as our Chief Operating Officer on December 19, 2025.
Mr. Bazemore’s base salary was subject to annual review and adjustment by our compensation committee. Mr. Bazemore’s annual base salary was $535,600, effective January 1, 2025. In addition, Mr. Bazemore was eligible to receive a discretionary bonus in a target amount of 50% of his annual base salary, as determined by our board of directors in its sole discretion.
On March 11, 2019, Mr. Bazemore’s employment letter agreement was amended to revise the severance benefits he is entitled to receive upon termination in connection with certain events. Subject to his execution and non-revocation of a release of claims in our favor, in the event of the termination of Mr. Bazemore’s employment by us without cause or by him for good reason, each as defined in his employment letter agreement, and such termination is not within the twenty-four month period following a change of control, as defined in his employment letter agreement, Mr. Bazemore was entitled to a lump sum payment in an amount equal to (i) twelve months of his then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) an amount equal to 100% of his target bonus for the year of termination. In addition, Mr. Bazemore was entitled to twelve months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for the twelve-month period.
Further, in the event of the termination of Mr. Bazemore’s employment by us without cause or by him for good reason within the twenty-four month period following a change of control, Mr. Bazemore was entitled to a lump sum payment in an amount equal to (i) eighteen months of his then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) 150% of the greater of (A) the average bonus Mr. Bazemore received during the two years prior to termination or resignation, or (B) the target bonus for the year of termination or resignation. In addition, Mr. Bazemore was entitled to eighteen months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for the eighteen-month period.
In addition, in the event we terminate his employment without cause or he terminates his employment for good reason, Mr. Bazemore was entitled to the automatic vesting and exercisability of any options and other equity awards granted to him that vest solely based on his continued employment that would have vested if his employment had continued for twelve months following such termination, and any performance-based grants with the performance period ending within one year after the termination shall be treated as having satisfied any service requirement with respect thereto and shall vest subject to, and only to the extent of, the satisfaction of the applicable performance goals at the end of the applicable performance period.
In the event we terminate his employment without cause or he terminates his employment for good reason in contemplation of a change of control, as defined in the letter agreement, or within the twenty-four-month period
119
Table of Contents
following a change of control, Mr. Bazemore was entitled to the automatic vesting and exercisability of 100% of any options and other equity awards granted to him that vest solely based on his continued employment, and any performance based grants with a performance period ending within one year after the termination was treated as having satisfied any service requirement with respect such grant, and will vest subject to, and only to the extent of, the satisfaction of the applicable performance goals at the end of the applicable performance period.
Letter Agreement with Dr. Brazzell
Dr. Brazzell was appointed to serve on a full-time basis as our Chief Medical Officer pursuant to a letter agreement with us dated May 10, 2016, which amended and restated a prior letter agreement. Dr. Brazzell was an at-will employee, and his employment with us could be terminated by him or us at any time and for any reason. Dr. Brazzell resigned as our Chief Medical Officer on October 27, 2025
Brazzell’s base salary was subject to annual review and adjustment by our compensation committee. Dr. Brazzell’s annual base salary was $520,000, effective January 1, 2025. In addition, Dr. Brazzell is eligible to receive a discretionary bonus in a target amount of 45% of his annual base salary, as determined by our compensation committee in its sole discretion.
On March 11, 2019, Dr. Brazzell’s employment letter agreement was amended to revise the severance benefits he was entitled to receive upon termination in connection with the following events. Subject to his execution and nonrevocation of a release of claims in our favor, in the event of the termination of Dr. Brazzell’s employment by us without cause or by him for good reason, each as defined in his employment letter agreement, and such termination is not within the twenty-four month period following a change of control, as defined in his employment letter agreement, Dr. Brazzell will be entitled to a lump sum payment in an amount equal to (i) twelve months of his then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) an amount equal to 100% of his target bonus for the year of termination. In addition, Dr. Brazzell is entitled to twelve months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for the twelve-month period.
Further, in the event of the termination of Dr. Brazzell’s employment by us without cause or by him for good reason within the twenty-four month period following a change of control, Dr. Brazzell was entitled to a lump sum payment in an amount equal to (i) eighteen months of his then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) 150% of the greater of (A) the average bonus Dr. Brazzell received during the two years prior to termination or resignation, or (B) the target bonus for the year of termination or resignation. In addition, Dr. Brazzell is entitled to eighteen months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for the eighteen-month period.
In addition, in the event we terminate his employment without cause or he terminates his employment for good reason, Dr. Brazzell was entitled to the automatic vesting and exercisability of any options and shares granted to him that vest solely based on his continued employment that would have vested if his employment had continued for twelve months following such termination. In the event of a change of control, as defined in his employment letter agreement, during his employment, Dr. Brazzell was entitled to the automatic vesting and exercisability of 100% of any options and restricted shares granted to him that vest solely based on his continued employment, and certain options are exercisable for a period of up to six months following his termination date.
In addition, in the event we terminate his employment without cause or he terminates his employment for good reason within the twenty-four-month period following a change of control, Dr. Brazzell was entitled to the automatic vesting and exercisability of any options and shares granted to him following a change of control that vest solely based on his continued employment and have not vested.
120
Table of Contents
Letter Agreement with Ms. Reumuth
Ms. Reumuth was appointed to serve on a full-time basis as our Senior Director, Finance and Corporate Controller pursuant to a letter agreement with us dated August 18, 2014. Ms. Reumuth was appointed as Chief Financial Officer in July 2017. Ms. Reumuth was an at-will employee, and her employment with us could be terminated by him or us at any time and for any reason. Ms. Reumuth left the Company on November 21, 2025.
Ms. Reumuth base salary was subject to annual review and adjustment by our compensation committee. Ms. Reumuth annual base salary was $510,000, effective January 1, 2025. In addition, Ms. Reumuth was eligible to receive a discretionary bonus in a target amount of 25% of her annual base salary, as determined by our compensation committee in its sole discretion.
On March 11, 2019, Ms. Reumuth’s employment letter agreement was amended to revise the severance benefits she was entitled to receive upon termination in connection with the following events. Subject to her execution and nonrevocation of a release of claims in our favor, in the event of the termination of Ms. Reumuth’s employment by us without cause or by her for good reason, each as defined in her employment letter agreement, and such termination is not within the twenty-four month period following a change of control, as defined in her employment letter agreement, Ms. Reumuth would be entitled to a lump sum payment in an amount equal to (i) twelve months of her then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) an amount equal to 100% of her target bonus for the year of termination. In addition, Ms. Reumuth is entitled to twelve months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to her prior to her termination and outplacement services for the twelve-month period. Further, if Ms. Reumuth's employment was terminated by the Company without Cause or by her for Good Reason within twelve (12) months following a Change of Control, she was entitled to receive: (i) 18 months of her then‑current base salary; (ii) any earned but unpaid bonus for the year prior to the year of termination; (iii) an amount equal to 1.5 times the greater of (A) her target bonus for the year of termination or (B) the average of the bonuses she received during the two years prior to the year of termination; (iv) a pro‑rated portion of any bonus attributable to the year of termination, payable when active employees are paid for that year (and in any event by March 15 of the following year) based on Company (but not individual) milestones; (v) COBRA continuation medical benefits for the 18‑month severance period subsidized by the Company at active employee rates on the same terms as before termination; and (vi) Company‑paid outplacement services for the 18‑month severance period. All payments other than the pro‑rated bonus and the COBRA/outplacement benefits were payable in a lump sum on the Payment Date.
Retention Agreements
On April 10, 2025, we entered into a retention agreements with each of Mr. Bazemore, Ms. Reumuth, and Dr. Brazzell pursuant to which each was eligible to receive a 30% increase in their 2024 base salary plus retention bonuses of $281,190, $234,000 and $260,000, respectively. Under the retention agreement, the retention bonus was subject to repayment if, prior to the earlier of September 30, 2025 or the date of our public announcement of topline results from our Phase 2a clinical trial, (i) each of Mr. Bazemore, Ms. Reumuth, and Dr. Brazzell’s employment is terminated by us for cause, or (ii) each of Mr. Bazemore, Ms. Reumuth, and Dr. Brazzell voluntarily resigns other than for good reason.
On October 2, 2025, the Company entered into additional retention agreements with Mr. Bazemore, Ms. Reumuth, and Dr. Brazzell. The second retention agreements entitled each of Mr. Bazemore, Ms. Reumuth and Dr. Brazzell to receive retention payment of $183,750, $136,250, and $145,000, respectively. Each of the retention agreements provided that if, prior to December 31, 2025, such executive’s employment is terminated voluntarily by such executive or by the Company for cause (as defined in the applicable executive’s employment agreement), then, pursuant to the terms of the Retention Agreement, such executive shall, upon request, repay the gross amount of the Retention Payment to the Company. Each of Mr. Bazemore, Ms. Reumuth and Dr. Brazzell entered into Settlement Agreement and General and Mutual Release agreements in the fourth quarter of 2025 upon their departure from the Company.
Employee Non-Competition, Non-Solicitation, Confidentiality, and Assignment of Inventions Agreements
Each of our named executive officers has entered into a standard form agreement with respect to non-competition, non-solicitation, confidential information and assignment of inventions. Under this agreement, each
121
Table of Contents
executive officer has agreed not to compete with us during his or her employment and for a period of one year after the termination of his or her employment and to protect our confidential and proprietary information indefinitely. Under this agreement, each of Mr. Iwicki, Dr. Brazzell and Ms. Reumuth has agreed not to solicit our employees or consultants during his employment and for a period of twelve months after the termination of his employment, and Mr. Bazemore has agreed not to solicit our employees or consultants during his employment and for a period of eighteen months after the termination of his employment, and each executive officer has agreed to protect our confidential and proprietary information indefinitely. In addition, under this agreement, each executive officer has agreed that we own all inventions, as defined in the agreement, that are developed during such executive officer’s employment and for a period of one year after the termination of his or her employment, to the extent such invention is our field of interest, as defined in the agreement. Each executive officer also agreed to assign to us any inventions which were not prepared or originated in the performance of employment but that were provided to us or incorporated into any of our products or systems.
Stock Option and Other Compensation Plans
In this section we describe our 2009 Plan, our Amended and Restated 2017 Equity Incentive Plan and our Amended and Restated 2017 Employee Stock Purchase Plan, or 2017 ESPP. Prior to our IPO, which closed on July 25, 2017, we granted awards to eligible participants under the 2009 Plan. Following the closing of our IPO, we ceased granting awards under the 2009 Plan and started granting awards to eligible participants under the 2017 Plan.
2009 Plan
Our 2009 Plan was adopted by our board of directors and approved by our stockholders on December 11, 2009 and subsequently amended by our board in 2012, 2013, 2014 and 2015. The 2009 Plan provided for the grant of incentive stock options, non-qualified options, shares, restricted or otherwise, of our Common Stock , and other stock-based awards. We refer to awards granted under our 2009 Plan as stock rights. Our employees, directors and consultants were eligible to receive stock rights under our 2009 Plan; however incentive stock options could only be granted to our employees who are deemed to be residents of the United States.
The type of stock right granted under our 2009 Plan and the terms of such stock right are set forth in the applicable stock right award agreement. Our board of directors (or a committee to which our board delegates its authority) administers the 2009 Plan. Subject to the provisions of the 2009 Plan, our board of directors is authorized to:
● interpret the provisions of the 2009 Plan and all stock rights and make all rules and determinations that it deems necessary or advisable for the administration of the 2009 Plan;
● amend any term or condition of an outstanding stock right, including, without limitation, to reduce or increase the exercise price or purchase price, accelerate the vesting or extend the expiration date, provided that no such change will impair a participant’s rights under any prior grant unless we obtain the participant’s consent;
● purchase and/or cancel a stock right previously granted and grant other stock rights in substitution, which may cover the same or a different number of shares and which may have a lower or higher exercise or purchase price per share, based on such terms and conditions as the board of directors establishes and the participant accepts; and
● adopt any sub-plans applicable to residents of any specified jurisdiction as it deems necessary or appropriate to facilitate the 2009 Plan or to comply with or take advantage of any tax or other laws applicable to us, any of our affiliates, or to participants, which sub-plans may include additional restrictions or conditions applicable to stock rights or shares issuable pursuant to a stock right.
Effect of certain changes in capitalization
If our shares of common stock are subdivided or combined into a greater or smaller number of shares, if we issue shares of common stock as a stock dividend, or if we make any distribution of additional, new or different shares or
122
Table of Contents
securities of ours or any distribution of non-cash assets with respect to our shares of common stock, then, subject to the terms of the 2009 Plan, our board of directors shall proportionately and appropriately adjust:
● the number of shares of our Common Stock deliverable upon the exercise of an option or acceptance of a stock grant;
● the exercise or purchase price per share; and
● any other term or condition of a stock right.
Effect of certain corporate transactions
In the event that we are consolidated with or acquired by another entity in a merger, consolidation, or sale of all or substantially all of our assets (other than a transaction to merely change the state of incorporation), which we refer to as corporate transactions, our board of directors, or the board of directors of any entity assuming our obligations under the 2009 Plan, must take one of the following actions pursuant to the 2009 Plan as to outstanding options, subject to the terms of the 2009 Plan:
● provide for the continuation of the outstanding options by equitably substituting for the shares of our Common Stock then underlying such options either with securities of any successor or acquiring entity or the consideration payable with respect to the outstanding shares of our Common Stock in connection with the corporate transaction;
● provide by written notice to the participants that the outstanding options will terminate unless exercised (to the extent then exercisable or made partially or fully exercisable by our board of directors for purposes of the corporate transaction) within a specified period following the date of the notice; or
● terminate each outstanding option in exchange for a payment equal to the consideration payable upon consummation of the corporate transaction to a holder of the number of shares of our Common Stock into which such option would have been exercisable (to the extent then exercisable or made partially or fully exercisable by our board of directors for purposes of the corporate transaction), minus the aggregate exercise price of such option.
If there is a corporate transaction, our board of directors, or the board of directors of any entity assuming our obligations under the 2009 Plan, must take one of the following actions pursuant to the 2009 Plan as to outstanding stock grants, restricted or otherwise, subject to the terms of the 2009 plan:
● provide for the continuation of the outstanding stock grants on the same terms and conditions by equitably substituting for the shares of our Common Stock then subject to such stock grants either with securities of any successor or acquiring entity or the consideration payable with respect to the outstanding shares of our Common Stock in connection with the corporate transaction; or
● provide that each outstanding stock grant will terminate in exchange for a payment equal to the consideration payable upon consummation of the corporate transaction to a holder of the number of shares of our Common Stock comprising such stock grant (to the extent such stock grant is no longer subject to any forfeiture or repurchase rights or our board of directors waives all forfeiture and repurchase rights upon the corporate transaction).
In taking any of the above actions with respect to stock rights, our board of directors will not be obligated to treat all stock rights, all stock rights held by a participant, or all stock rights of the same type, identically.
As of March 31, 2026, options to purchase 26 shares of common stock were outstanding under the 2009 Plan at a weighted average exercise price of $193.00 per share.
We no longer grant awards under our 2009 Plan; however, awards outstanding under our 2009 Plan continue to be governed by their existing terms.
123
Table of Contents
Amended and Restated 2017 Equity Incentive Plan
Our 2017 Equity Incentive Plan, which became effective on July 19, 2017, was adopted by our board of directors and approved by our stockholders in July 2017, and an amendment to our 2017 Equity Incentive Plan was adopted by our board of directors in April 2020 and approved by our stockholders at the 2020 annual meeting of stockholders. Our Amended and Restated 2017 Equity Incentive Plan, or the 2017 Plan, which became effective on June 22, 2023, was adopted by our board of directors in May 2023 and by our stockholders in June 2023, and amends and restates our 2017 Equity Incentive Plan, as amended.
The 2017 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, RSUs and other stock-based awards. The number of shares of our Common Stock reserved for issuance under the 2017 Plan is the sum of: (1) 1,569,136; plus (2) such additional number of shares (up to 70,675) that remained available for grant under the 2009 Plan at the time of our IPO and the number of shares of our Common Stock subject to outstanding awards under the 2009 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2024 and continuing until, and including, the fiscal year ending December 31, 2033, equal to the lower of (i) 4% of the sum of (I) the number of shares of our Common Stock outstanding on the first day of such fiscal year and (II) the number of shares of Common Stock issuable upon any conversion of any outstanding shares of our convertible preferred stock (without giving effect to any restrictions or limitations on conversion) on such date and (ii) an amount determined by our board of directors. The number of shares authorized for issuance under the 2017 Plan further increased, pursuant to the terms of the 2017 Plan, by an additional 554,663 shares, effective as of January 1, 2025.
Our employees, officers, directors, consultants and advisors are eligible to receive awards under the 2017 Plan. Incentive stock options, however, may only be granted to our employees. Subject to certain adjustments, awards with respect to no more than 7,738,761 shares of Common Stock may be granted in the form of incentive stock options during the term of the 2017 Plan. For a description of the limitations on non-employee director compensation under our 2017 Plan, see “Director Compensation” below.
Pursuant to the terms of the 2017 Plan, our board of directors (or a committee delegated by our board of directors or, subject to certain limitations, officers delegated by our board of directors) administers the plan and, subject to any limitations in the plan, selects the recipients of awards and determines:
● the number of shares of our Common Stock covered by options and the dates upon which the options become exercisable;
● the type of options to be granted;
● the duration of options, which may not be in excess of ten years;
● the exercise price of options, which must be at least equal to the fair market value of our Common Stock on the date of grant; and
● the number of shares of our Common Stock subject to and the terms of any stock appreciation rights, restricted stock awards, RSUs or other stock-based awards and the terms and conditions of such awards, including conditions for repurchase, issue price and repurchase price (though the measurement price of stock appreciation rights must be at least equal to the fair market value of our Common Stock on the date of grant and the duration of such awards may not be in excess of ten years).
If our board of directors delegates authority to an executive officer to grant awards under the 2017 Plan, the executive officer will have the power to make awards to all of our employees, except executive officers. Our board of directors will fix the terms of the awards to be granted by such executive officer, including the exercise price of such awards (which may include a formula by which the exercise price will be determined), and the maximum number of shares subject to awards that such executive officer may make.
124
Table of Contents
Effect of certain changes in capitalization
Upon the occurrence of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of our Common Stock other than an ordinary cash dividend, our board of directors shall equitably adjust:
● the number and class of securities available under the 2017 Plan and the number of awards that may be granted as incentive stock options;
● the share counting rules under the 2017 Plan;
● the number and class of securities and exercise price per share of each outstanding option;
● the share and per-share provisions and the measurement price of each outstanding stock appreciation right;
● the number of shares subject to, and the repurchase price per share subject to, each outstanding restricted stock award; and
● the share and per-share related provisions and the purchase price, if any, of each other stock-based award.
Effect of certain corporate transactions
Upon a merger or other reorganization event (as defined in our 2017 Plan), our board of directors may, on such terms as our board determines (except to the extent specifically provided otherwise in an applicable award agreement or other agreement between the participant and us), take any one or more of, or a combination of, the following actions pursuant to the 2017 Plan as to some or all outstanding awards, other than restricted stock awards:
● provide that all outstanding awards shall be assumed, or substantially equivalent awards shall be substituted, by the acquiring or successor corporation (or an affiliate thereof);
● upon written notice to a participant, provide that all of the participant’s unvested awards will be forfeited, and/or vested but unexercised awards will terminate, immediately prior to the consummation of such reorganization event unless exercised by the participant (to the extent then exercisable) within a specified period following the date of the notice;
● provide that outstanding awards shall become exercisable, realizable or deliverable, or restrictions applicable to an award shall lapse, in whole or in part, prior to or upon such reorganization event;
● in the event of a reorganization event pursuant to which holders of shares of our Common Stock will receive a cash payment for each share surrendered in the reorganization event, make or provide for a cash payment to participants with respect to each award held by a participant equal to (1) the number of shares of our Common Stock subject to the vested portion of the award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such reorganization event) multiplied by (2) the excess, if any, of the cash payment for each share surrendered in the reorganization event over the exercise, measurement or purchase price of such award and any applicable tax withholdings, in exchange for the termination of such award; and/or
● provide that, in connection with a liquidation or dissolution, awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings).
Our board of directors does not need to take the same action with respect to all awards, all awards held by a participant or all awards of the same type.
125
Table of Contents
In the case of certain RSUs, no assumption or substitution is permitted, and the restricted stock units will instead be settled in accordance with the terms of the applicable RSU agreement.
Upon the occurrence of a reorganization event other than a liquidation or dissolution, the repurchase and other rights with respect to outstanding restricted stock awards will continue for the benefit of the successor company and will, unless our board of directors may otherwise determine, apply to the cash, securities or other property into which shares of our Common Stock are converted or exchanged pursuant to the reorganization event. Upon the occurrence of a reorganization event involving a liquidation or dissolution, all restrictions and conditions on each outstanding restricted stock award will automatically be deemed terminated or satisfied, unless otherwise provided in the agreement evidencing the restricted stock award or any other agreement between the participant and us.
At any time, our board of directors may, in its sole discretion, provide that any award under the 2017 Plan will become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in whole or in part as the case may be.
No awards may be granted under the 2017 Plan on or after June 22, 2033. Our board of directors may amend, suspend or terminate the 2017 Plan at any time, except that stockholder approval may be required to comply with applicable law or stock market requirements.
As of December 31, 2025, options to purchase 643,354 shares of common stock were exercisable under the 2017 Plan at a weighted average exercise price of $12.19 per share. As of March 1, 2025, RSUs with respect to 186,463 shares of common stock were outstanding under the 2017 Plan.
As of December 31, 2025, 527,508 shares of common stock were available for future issuance under our 2017 Plan.
Amended and Restated 2017 Employee Stock Purchase Plan
Our 2017 ESPP, which became effective on July 19, 2017, was adopted by our board of directors and approved by our stockholders in July 2017 and amended and restated by our board of directors in December 2018. The 2017 ESPP is administered by our board of directors or by a committee appointed by our board of directors. The 2017 ESPP initially provides participating employees with the opportunity to purchase an aggregate of 4,466 shares of our Common Stock. The number of shares of our Common Stock reserved for issuance under the 2017 ESPP will automatically increase on the first day of each fiscal year, beginning on January 1, 2019 and ending on December 31, 2029, in an amount equal to the lowest of: (1) 17,868 shares of our Common Stock ; (2) 1% of the total number of shares of our Common Stock outstanding on the first day of the applicable fiscal year; and (3) an amount determined by our board of directors. The number of shares authorized for issuance under the 2017 ESPP has increased each year, pursuant to the foregoing evergreen provision, on the first of January beginning in 2019.
All of our employees and employees of any of our designated subsidiaries, as defined in the 2017 ESPP, are eligible to participate in the 2017 ESPP, provided that:
● such person is customarily employed by us or a designated subsidiary for more than 20 hours a week and for more than five months in a calendar year; and
● such person was our employee or an employee of a designated subsidiary on the first day of the applicable offering period under the 2017 ESPP.
We retain the discretion to determine which eligible employees may participate in an offering under applicable Treasury regulations.
We may make one or more offerings to our eligible employees to purchase stock under the 2017 ESPP beginning at such time and on such dates as our board of directors may determine, or the first business day thereafter. Each offering will consist of a six-month offering period during which payroll deductions will be made and held for the purchase of our Common Stock at the end of the offering period. Our board of directors or a committee appointed by our
126
Table of Contents
board, may, at its discretion, choose a different period of not more than 12 months for offerings. Offering periods under our 2017 ESPP commenced on each January 1 and July beginning with January 1, 2019.
On each offering commencement date, each participant will be granted the right to purchase, on the last business day of the offering period, up to 500 shares of our Common Stock. No employee may be granted an option under the 2017 ESPP that permits the employee’s rights to purchase shares under the 2017 ESPP and any other employee stock purchase plan of ours or of any of our subsidiaries to accrue at a rate that exceeds $25,000 of the fair market value of our Common Stock (determined as of the first day of each offering period) for each calendar year in which the option is outstanding. In addition, no employee may purchase shares of our Common Stock under the 2017 ESPP that would result in the employee owning 5% or more of the total combined voting power or value of our stock or the stock of any of our subsidiaries.
On the commencement date of each offering period, each eligible employee may authorize up to a maximum of 15% of such employee’s compensation to be deducted by us during the offering period. Each employee who continues to be a participant in the 2017 ESPP on the last business day of the offering period will be deemed to have exercised an option to purchase from us the number of whole shares of our Common Stock that such employee accumulated payroll deductions on such date will buy, not in excess of the maximum numbers set forth above. Under the terms of the 2017 ESPP, the purchase price shall be determined by our board of directors for each offering period and will be at least 85% of the applicable closing price of our Common Stock. If our board of directors does not make a determination of the purchase price, the purchase price will be 85% of the lesser of the closing price of our Common Stock on the first business day of the offering period or on the last business day of the offering period.
An employee may at any time prior to the close of business on the fifteenth business day prior to the end of an offering period, and for any reason, permanently withdraw from participation in an offering prior to the end of an offering period and permanently withdraw the balance accumulated in the employee’s account. Any balance remaining in an employee’s payroll deduction account at the end of an offering period will be automatically refunded to the employee. If a participating employee’s employment ends before the last business day of an offering period, no additional payroll deductions will be taken and the balance in the employee’s account will be paid to the employee.
We are required to make equitable adjustments to the extent determined by our board of directors or a committee of our board of directors to the number and class of securities available under the 2017 ESPP, the share limitations under the 2017 ESPP and the purchase price for an offering period under the 2017 ESPP to reflect stock splits, reverse stock splits, stock dividends, recapitalizations, combinations of shares, reclassifications of shares, spin-offs and other similar changes in capitalization or events or any dividends or distributions to holders of our Common Stock other than ordinary cash dividends.
In connection with a merger or other reorganization event (as defined in the 2017 ESPP), our board of directors or a committee of our board of directors may take any one or more of the following actions as to outstanding options to purchase shares of our Common Stock under the 2017 ESPP on such terms as our board of directors or committee determines:
● provide that options shall be assumed, or substantially equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof);
● upon written notice to employees, provide that all outstanding options will be terminated immediately prior to the consummation of such reorganization event and that all such outstanding options will become exercisable to the extent of accumulated payroll deductions as of a date specified by our board of directors or committee in such notice, which date shall not be less than ten days preceding the effective date of the reorganization event;
● upon written notice to employees, provide that all outstanding options will be cancelled as of a date prior to the effective date of the reorganization event and that all accumulated payroll deductions will be returned to participating employees on such date;
● in the event of a reorganization event under the terms of which holders of our Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the reorganization event, change the last day of the offering period to be the date of the consummation of the reorganization event and make or provide
127
Table of Contents
for a cash payment to each employee equal to (1) the cash payment for each share surrendered in the reorganization event times the number of shares of our Common Stock that the employee’s accumulated payroll deductions as of immediately prior to the reorganization event could purchase at the applicable purchase price, where the cash payment for each share surrendered in the reorganization event is treated as the fair market value of our Common Stock on the last day of the applicable offering period for purposes of determining the purchase price and where the number of shares that could be purchased is subject to the applicable limitations under the 2017 ESPP minus (2) the result of multiplying such number of shares by the purchase price; and/or
● provide that, in connection with our liquidation or dissolution, options shall convert into the right to receive liquidation proceeds (net of the purchase price thereof).
Our board of directors may at any time, and from time to time, amend or suspend the 2017 ESPP, or any portion of the 2017 ESPP. We will obtain stockholder approval for any amendment if such approval is required by Section 423 of the Internal Revenue Code of 1986, as amended, or the Code. Further, our board of directors may not make any amendment that would cause the 2017 ESPP to fail to comply with Section 423 of the Code. The 2017 ESPP may be terminated at any time by our board of directors. Upon termination, we will refund all amounts in the accounts of participating employees.
401(k) Plan
We maintain a defined contribution employee retirement plan for our employees. Our 401(k) plan is intended to qualify as a tax-qualified plan under Section 401 of the Code so that contributions to our 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the 401(k) plan. Our 401(k) plan provides that each participant may contribute up to 90% of such employee’s pre-tax compensation, up to a statutory limit, which was $23,500 for 2025. Participants who are at least 50 years old can also make “catch-up” contributions, which in 2024 was up to an additional $7,500 above the statutory limit and in 2025 is up to an additional $7,500 above the statutory limit. We also make discretionary matching contributions to our 401(k) plan equal to 50% of the employee contributions up to 4% of the employee’s salary, subject to the statutorily prescribed limit, which was equal to $23,000 in 2024 and $23,500 in 2025. The discretionary matching contributions were capped at $7,000 in 2025. Under our 401(k) plan, each employee is fully vested in their deferred salary contributions and our discretionary match. Employee contributions are held and invested by the plan’s trustee, subject to participants’ ability to give investment directions by following certain procedures.
Rule 10b5-1 Sales Plans
Our directors and executive officers have adopted and may in the future adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our Common Stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from the director or officer. It also is possible that the director or officer could amend or terminate the plan when not in possession of material, nonpublic information. In addition, our directors and executive officers may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.
Anti-Hedging Policies
Our Insider Trading Policy expressly prohibits all of our employees, including our executive officers, and our directors from engaging in any purchases of financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) or other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our securities.
Dodd-Frank Compensation Recovery Policy or “Clawback” Policy
Effective October 2, 2023, we adopted a compensation recovery policy in accordance with Nasdaq Listing Rule 5608, which implements Rule 10D-1 under the Exchange Act. The policy provides that, in the event that we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under U.S. federal securities laws, including any required accounting restatement to correct an error in previously issued
128
Table of Contents
financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, we will attempt to recover, reasonably promptly from each covered executive, any erroneously awarded incentive-based compensation received by our covered executives during the recovery period under the policy. The policy is administered by our compensation committee.
For purposes of this policy, covered executives means any person who served as an executive officer (as defined in Rule 16a-1(f) under the Exchange Act) at any time during the performance period for the applicable incentive-based compensation. Incentive-based compensation means any compensation that is granted, earned or vested based wholly or in part upon the attainment of (i) measures that are determined and presented in accordance with the accounting principles used in preparing our financial statements, and any measures that are derived wholly or in part from such measures, (ii) stock price and (iii) total shareholder return. Erroneously awarded incentive-based compensation means the amount of incentive-based compensation that was received that exceeds the amount of incentive-based compensation that otherwise would have been received had it been determined based on the restated amounts, computed without regard to any taxes paid by the covered executives (or by us on their behalf). If the incentive-based compensation is based on our stock price or total shareholder return and the amount of the erroneously awarded incentive-based compensation is not subject to recalculation directly from the information in an accounting restatement, the amount to be recovered shall be based on a reasonable estimate by the compensation committee of the effect of the accounting restatement on the stock price or total shareholder return upon which the incentive-based compensation was received. The policy does not apply to incentive-based compensation received prior to October 2, 2023 or to incentive-based compensation that was received by a covered executive before beginning service as an executive officer.
Director Compensation
The table below shows all compensation to our non-employee directors during 2025.
Fees
Earned or
Paid in
Option
Stock
Cash
Awards
Awards
Total
Name
($)
($) (1)(2)
($) (1)(3)(4)
($)
Mark Iwicki (4)
68,139
19,595
10,535
98,269
Marjan Farid
67,500
19,595
10,535
97,630
Andrew I. Koven
96,298
24,628
13,115
134,041
C. Daniel Myers
67,500
19,595
10,535
97,630
Gregory D. Perry
44,837
19,595
10,535
74,967
Howard B. Rosen
75,000
19,595
10,535
105,130
(1) The aggregate number of outstanding options and RSUs held by each non-employee director as of December 31, 2025 were as follows:
Aggregate
Aggregate
Restricted
Options
Stock Units
Outstanding
Outstanding
Name
(#)
(#)
Mark Iwicki (4)
381,281
103,540
Marjan Farid
16,022
10,242
Andrew I. Koven
23,920
16,972
C. Daniel Myers
16,146
10,374
Gregory D. Perry
10,367
8,941
Howard B. Rosen
21,751
16,240
129
Table of Contents
(2) The amounts reported in the “Option Awards” column reflect the aggregate grant date fair value of options awarded during 2025 computed in accordance with the provisions of FASB ASC Topic 718. For the assumptions underlying the valuation of the stock option grants, see Note 11, “Stock-based Compensation” to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K. For additional information regarding the options granted to our directors in 2025 see “— Narrative Disclosure to Director Compensation Table — Director Compensation Policy” below.
(3) The amounts reported in the “Stock Awards” column reflect the aggregate grant date fair value of RSUs granted during 2025. For the assumptions underlying the valuation of the RSUs, see Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K. For additional information regarding the RSUs granted to our directors during 2025, see Narrative Disclosure to Director Compensation Table — Director Compensation Policy” below.
(4) Mr. Iwicki resigned as our Chief Executive Officer on February 11, 2025.
Narrative Disclosure to Director Compensation Table
Director Compensation Policy
During the year ended December 31, 2025, our non-employee directors were entitled to compensation for their services on our board of directors as follows:
● each non-employee director was entitled to receive an option to purchase 8,750 shares of our Common Stock , upon his or her initial election or appointment to our board of directors, which option vests with respect to one third of the shares on the first anniversary of the grant and with respect to an additional 1/36th of the shares on each monthly anniversary thereafter and vest automatically as to 100% of the unvested portion of such option upon specified change in control events;
● each non-employee director who has then served on our board of directors for at least six months was entitled to receive, on the date of the first board meeting held after each annual meeting of stockholders, an option to purchase 3,150 shares of our Common Stock and RSUs for 1,400 shares of our Common Stock , and if then serving as the Lead Independent Director, an option to purchase 3,900 shares of our Common Stock and RSUs for 1,750 shares of our Common Stock , which options and RSUs will vest (A) on the earlier of (i) the first anniversary date of the previous year’s annual meeting or (ii) the date of the first annual meeting following the grant date, and (B) automatically as to 100% of the unvested portion of such options upon specified change in control events;
● each non-employee director was entitled to receive an annual fee of $50,000;
● each non-employee director who served as member of a committee of our board of directors was entitled to receive additional compensation as follows:
o audit committee-an annual non-chair retainer of $10,000; chair annual retainer of $20,000;
o compensation committee-an annual non-chair retainer of $7,500; chair annual retainer of $15,000; and
o nominating and corporate governance committee-an annual non-chair retainer of $5,000; chair annual retainer of $10,000.
Each member of our board of directors also is entitled to be reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of our board of directors and any committee of our board of directors on which he or she serves.
Effective June 2023, pursuant to the terms of the 2017 Plan, the maximum aggregate amount of cash and value of awards (calculated based on grant date fair value for financial reporting purposes) granted in any calendar year to any
130
Table of Contents
individual non-employee director for services as a director shall not exceed $750,000 in the case of an incumbent director; provided, however, that such maximum aggregate amount shall not exceed $1 million in any calendar year for any individual non-employee director for services as a director in such non-employee director’s initial year of election or appointment. Fees paid by us on behalf of any non-employee director in connection with regulatory compliance, amounts paid and the value of equity awards granted pursuant to a bona fide consulting agreement for services other than as a director and any amounts paid to a non-employee director as reimbursement of an expense will not count against the foregoing limit. Our board of directors may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as our board of directors may determine in its discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management
Unless otherwise provided below, the following table sets forth information regarding beneficial ownership of our Common Stock as of March 31, 2026 by:
● each person, or group of affiliated persons, known to us to be the beneficial owner of 5% or more of the outstanding shares of our Common Stock;
● each of our current directors;
● our principal executive officer and other most highly compensated executive officers who served during the year ended December 31, 2025, named in the Summary Compensation table above, whom, collectively, we refer to as our named executive officers; and
● all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our Common Stock. Percentage of beneficial ownership is based on 929,491,578 shares of our Common Stock outstanding as of March 31, 2026. In addition, shares of common stock subject to options or other rights currently exercisable, or exercisable within 60 days of March 31, 2026, are deemed outstanding and beneficially owned for the purpose of computing the percentage beneficially owned by (i) the individual holding such options, warrants or other rights (but not any other individual) and (ii) the directors and executive officers as a group. Except as otherwise noted, the persons and entities in this table have sole voting and investing power with respect to all of the shares of our Common Stock beneficially owned by them, subject to community property laws, where applicable. Except as otherwise set forth below, the address of the beneficial owner is c/o KALA BIO, Inc., 1167 Massachusetts Avenue, Arlington, Massachusetts 02476.
131
Table of Contents
Shares of
Common Stock
Percentage of
Beneficially
Common
Name and Address of Beneficial Owner
Owned
Stock
5% Stockholders:
David Lazar (1)
49,500,000
5.33
%
Directors and Named Executive Officers:
Avi Minkowitz
-
-
%
Hillel Posen
-
-
Chaim (Dovi) Berger
-
-
Yonatan Colman
-
-
Brendan Purdy
-
-
Mark Iwicki
-
-
Todd Bazemore
-
-
Kim Brazzell, Ph.D.
-
-
Mary Reumuth
-
-
All current directors and officers as a group (5 persons)
-
-
%
(1) Represents (i) 12,000,010 of Common Stock and 218,182 of Series AA Preferred Stock convertible to 55 Common Stock for each Preferred Stock.
Securities Authorized for Issuance under Equity Compensation Plans
The following table contains information about our equity compensation plans as of December 31, 2025. As of December 31, 2025, we had three equity compensation plans, our 2009 Plan, our 2017 Plan and our 2017 ESPP, each of which was approved by our stockholders. We have also made inducement awards to certain new hires, which awards were not approved by our stockholders.
Number of
securities
remaining
Number of
available for
securities to be
future issuance
issued upon
Weighted ‑ Average
under equity
exercise of
exercise price
compensation
outstanding
of outstanding
plans (excluding
options
options
securities
warrants and
warrants and
reflected in
rights
rights
column (a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
1,418,006
(1)
$
11.24
(2)
565,096
(3)
Equity compensation plans not approved by security holders
1,981
(4)
$
10.35
—
Total
1,419,987
$
11.24
565,096
(1) Includes shares of our Common Stock issuable upon exercise of options to purchase Common Stock awarded under our 2009 Plan and 2017 Plan and shares of our common subject to outstanding RSUs awarded under our 2017 Plan.
(2) The calculation does not take into account the 230,947 shares of Common Stock subject to outstanding RSUs under the 2017 Plan. Such shares will be issued at the time such awards vest (or upon the earlier of the director’s cessation of service or certain “change in control events”, if a non-employee director elects to defer the receipt of such RSUs), without any cash consideration payable for those shares.
(3) Includes 527,508 shares of our Common Stock available for issuance under our 2017 Plan and 37,588 shares of common stock available for issuance under our 2017 ESPP.
132
Table of Contents
(4) Represents inducement option awards granted to employees in accordance with Nasdaq Listing Rule 5635(c)(4). Each inducement option award has an exercise price equal to closing price of our Common Stock on the date of grant and vests over four years with 25% of the shares underlying each option vesting on the first anniversary of the applicable employee’s new hire date and 2.0833% vesting monthly thereafter.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions
Policies and Procedures for Related Person Transactions
Our board of directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which our company is a participant, the amount involved exceeds $120,000 or 1% of the average of the Company’s total assets as of the end of the last two completed fiscal years, and one of our executive officers, directors, director nominees or 5% stockholders, or their immediate family members, each of whom we refer to as a “related person,” has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our general counsel or, if none, to our chief financial officer, or individual performing a similar function. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chair of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the audit committee will review and consider:
● the related person’s interest in the related person transaction;
● the approximate dollar value of the amount involved in the related person transaction;
● the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
● whether the transaction was undertaken in the ordinary course of our business;
● whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;
● the purpose of, and the potential benefits to us of, the transaction; and
● any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.
Our audit committee may approve or ratify the transaction only if it determines that, under all of the circumstances, the transaction is in our best interests. Our audit committee may impose any conditions on the related person transaction that it deems appropriate.
133
Table of Contents
In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
● interests arising solely from the related person’s position as an executive officer of another entity, whether or not the person is also a director of the entity, that is a participant in the transaction where the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, the related person and such person’s immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction and the amount involved in the transaction is less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; and
● a transaction that is specifically contemplated by provisions of our certificate of incorporation or by-laws.
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by our compensation committee in the manner specified in the compensation committee’s charter.
With respect to related person transactions, it is the practice of our board of directors to consider the nature of and business reasons for such transactions, how the terms of such transactions compared to those which might be obtained from unaffiliated third parties and whether such transactions were otherwise fair to and in the best interests of, or not contrary to, our best interests.
Related Person Transactions
SEC rules require us to disclose any transaction or currently proposed transaction in which we are a participant and in which any related person has or will have a direct or indirect material interest involving an amount that exceeds the lesser of $120,000 or 1% of the average of the Company’s total assets as of the end of the last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s Common Stock, or an immediate family member of any of those persons.
2024 Private Placement
On December 29, 2024, we entered into a securities purchase agreement with certain purchasers, or the Series I Purchasers, pursuant to which we issued and sold to the Series I Purchasers, (i) 1,340,603 shares of our Common Stock , at a price per share equal to $6.44 and (ii) 3,286 shares of our Series I Convertible Non-Redeemable Preferred Stock, or the Series I Preferred Stock, at a price per share equal to $644.00, for aggregate gross proceeds of approximately $10.75 million, which we refer to collectively as the Series I Private Placement. The following holders of more than 5% of our voting securities and their affiliates purchased securities in the Series I Private Placement and paid the aggregate purchase prices are set forth: 667, L.P. purchased 30,620 shares of common stock for an aggregate purchase price of $197,192.80; Baker Brothers Life Sciences, L.P. purchased 279,939 shares of common stock for an aggregate purchase price of $1,802,807.16; SR One Capital Fund II Aggregator, LP purchased 155,279 shares of common stock for an aggregate purchase price of $999,996.76; and Cormorant Global Healthcare Master Fund, LP purchased 603,027 shares of common stock and 3,286 shares of Series I Preferred Stock for an aggregate purchase price of $5,999,677.88. We agreed that we will not without the prior approval of the requisite Series I Purchasers issue or authorize the issuance of any equity security that is senior or pari passu to the Series I Preferred Stock with respect to liquidation preference.
November 2025 Securities Purchase Agreement
On November 23, 2025, we entered into a Securities Purchase Agreement with David Lazar, pursuant to which, in a private placement, we agreed to issue and sell (in two closings) shares of our preferred stock for aggregate gross proceeds of up to $6.0 million. At the first closing on November 24, 2025, we issued and sold 900,000 shares of our Series AA Convertible Non-Redeemable Preferred Stock (“Series AA Preferred Stock”) at a price per share of $2.00, for aggregate gross proceeds of $1.8 million. The second closing is expected to occur promptly following the receipt of stockholder approval and prior to 31 March 2026, subject to (i) the approval by our stockholders of (A) an increase in the number of authorized shares of our Common Stock to enable the issuance of the shares of common stock issuable
134
Table of Contents
upon conversion of the preferred shares and (B) the conversion of the preferred shares into shares of common stock in accordance with Nasdaq listing rules, (ii) the filing of a charter amendment effecting such share increase, (iii) the filing of a Certificate of Designations for the Series AAA Convertible Non-Redeemable Preferred Stock, and (iv) other customary closing conditions. At the second closing, we have agreed to issue and sell 2,100,000 shares of our Series AAA Convertible Non-Redeemable Preferred Stock (“Series AAA Preferred Stock”) at a price per share of $2.00, for aggregate gross proceeds of $4.2 million, $1.0 million of which was paid to Oxford as partial consideration for Oxford’s entry into the loan settlement described below.
In connection with the Securities Purchase Agreement, on November 21, 2025, our board appointed Mr. Lazar as our Chief Executive Officer (effective immediately following the first closing) and principal financial officer (effective the business day following the first closing) and elected him as a Class II director (effective immediately prior to the execution and effectiveness of the Securities Purchase Agreement). The Securities Purchase Agreement also grants Mr. Lazar participation rights to purchase up to 25% of new equity securities in firm-commitment underwritten offerings during the participation period, and, subject to Nasdaq Listing Rule 5640 and stockholder approval, the right to recommend up to eight individuals to be nominated for election at the stockholder meeting.
On November 23, 2025, we entered into a Voting Agreement with David Lazar and Oxford in connection with the private placement and the settlement of our outstanding loan obligations with Oxford.
Convertible Loan Agreement
On November 9, 2025, we entered into a Convertible Loan Agreement with David Lazar for an aggregate principal amount of $375,000 with an annual interest rate of 15%. A portion of the proceeds was permitted to be used to facilitate negotiation and finalization of the additional investment transaction with Mr. Lazar and to prepare and file our Form 10-Q for the quarter ended September 30, 2025. The loan was due on November 9, 2026, and subject to extension until November 9, 2027 under certain conditions. The loan was repaid on December 18, 2025.
Oxford Loan Settlement
As a condition to the first closing, on November 23, 2025, we and our subsidiary Combangio, Inc. entered into a loan settlement agreement with Oxford, pursuant to which Oxford agreed to settle all of our payment obligations under the Loan and Security Agreement in consideration for (i) a $2.0 million cash payment and (ii) our issuance to Oxford of 1,620,000 shares of our Common Stock. On November 23, 2025, we also entered into a Voting Agreement with Oxford and Mr. Lazar, pursuant to which, for four months following that date, Oxford agreed to vote 1,620,000 settlement shares (and any additional shares it acquired during the term) in favor of all proposals recommended by our board at the stockholder meeting.
On December 11, 2025, following Mr. Lazar’s sale of his rights and obligations under the Securities Purchase Agreement solely with respect to the Series AAA Preferred Shares to AK Holdings Group Inc., a Panamanian company, we engaged Nissim Amram as a consultant to advise the Company on potential strategic alternatives. Mr. Lazar retained his holdings of the Series AA Preferred Shares and the Convertible Loan Agreement which we repaid in full on December 18, 2025.
Board Determination of Independence
Applicable Nasdaq rules require a majority of a listed company’s board of directors to be comprised of independent directors. In addition, the Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act and compensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act. Under applicable Nasdaq rules, a director will only qualify as an “independent director” if, in the opinion of the listed company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an
135
Table of Contents
affiliated person of the listed company or any of its subsidiaries. In order to be considered independent for purposes of Rule 10C-1, the board must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (1) the source of compensation of the director, including any consulting advisory or other compensatory fee paid by such company to the director; and (2) whether the director is affiliated with the company or any of its subsidiaries or affiliates.
Our Board has reviewed the independence of our directors based on the listing standards of Nasdaq. Based on this review, the Board determined that Mr. Berger, Mr. Posen, Mr. Colman and Mr. Purdy are independent, as defined in Rule 5605(a)(2) of the Nasdaq rules, as well as the applicable independence standards for committee members under the Exchange Act. In making this determination, our Board considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our Board deemed relevant in determining their independence.
Item 14. Principal Accountant Fees and Services
Audit Fees and Services
HTL International, LLC (“HTL”), was our independent registered public accounting firm for the year ended December 31, 2025. Deloitte & Touche LLP, or Deloitte, was our independent registered public accounting firm for the year ended December 31, 2024. The following table summarizes the fees billed to us for the last two fiscal years. All such services and fees were pre-approved by our audit committee in accordance with the “Pre-Approval Policies and Procedures” described below.
Years Ended December 31,
Fee Category
2025
2024
Audit Fees(1)
$
472,775
$
778,587
All Other Fees(2)
1,895
1,895
Total Fees
$
474,670
$
780,482
(1) Audit fees consist of fees billed for professional services rendered for the audits of our annual consolidated financial statements, the reviews of our interim consolidated financial statements, and related services that are normally provided in connection with statutory and regulatory filings or engagements, including, our registration statements.
(2) All other fees include fees and expenses for services which do not fall within the categories described above. All other fees consisted of a subscription to Accounting and Research Tool.
Pre-approval Policies and Procedures
The audit committee of our board of directors has adopted policies and procedures for the pre-approval of audit and non-audit services for the purpose of maintaining the independence of our independent auditor. We may not engage our independent auditor to render any audit or non-audit service unless either the service is approved in advance by the audit committee, or the engagement to render the service is entered into pursuant to the audit committee’s pre-approval policies and procedures. In 2020, the audit committee delegated to its chair the authority to pre-approve any audit or non-audit services to be provided to us by our independent registered public accounting firm. By the terms of this delegated authority, the chair must report on any such approval of services pursuant to such authority at the first regularly scheduled meeting of the audit committee following such approval. The audit committee does not delegate its responsibility to approve services performed by the independent auditor to any member of management.
The standard applied by the audit committee, or the chair of the audit committee, in determining whether to grant approval of any type of non-audit service, or of any specific engagement to perform a non-audit service, is whether the services to be performed, the compensation to be paid therefore and other related factors are consistent with the independent registered public accounting firm’s independence under guidelines of the SEC and applicable professional
136
Table of Contents
standards. Relevant considerations include whether the work product is likely to be subject to, or implicated in, audit procedures during the audit of our financial statements, whether the independent registered public accounting firm would be functioning in the role of management or in an advocacy role, whether the independent registered public accounting firm’s performance of the service would enhance our ability to manage or control risk or improve audit quality, whether such performance would increase efficiency because of the independent registered public accounting firm’s familiarity with our business, personnel, culture, systems, risk profile and other factors, and whether the amount of fees involved, or the non-audit services portion of the total fees payable to the independent registered public accounting firm in the period would tend to reduce the independent registered public accounting firm’s ability to exercise independent judgment in performing the audit.
Part I V
Item 15. Exhibits and Financial Statement Schedules
(1) Financial Statements.
The following documents are included beginning on page F-1 attached hereto and are filed as part of this Annual Report on Form 10-K.
KALA BIO, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 7000 )
F-1
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
F-3
Consolidated Balance Sheets as of December 31, 2025 and 2024
F-4
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 and 2024
F-5
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2025 and 2024
F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024
F-7
Notes to Consolidated Financial Statements
F-8
(2) Financial Statement Schedules.
No financial statement schedules have been filed as part of this Annual Report on Form 10-K because they are not applicable, not required or because the information is otherwise included in our financial statements or notes thereto.
(3) Exhibits .
The following is a list of exhibits filed or furnished as part of this Annual Report on Form 10-K.
Exhibit
Number
Description of Exhibit
2.1#
Agreement and Plan of Merger, dated as of November 15, 2021, by and among the Registrant, Ceres Merger Sub, Inc., Combangio, Inc. and, solely in its capacity as Combangio Equityholder Representative, Fortis Advisors LLC. (incorporated by reference to Exhibit 2.1 of the Registrant’s current report on Form 8-K (File No. 001-38150) filed on November 15, 2021)
2.2#
Asset Purchase Agreement, by and between the Registrant, Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC (incorporated by reference to Exhibit 2.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on May 23, 2022)
137
Table of Contents
Exhibit
Number
Description of Exhibit
3.1
Restated Certificate of Incorporation of the Registrant, as amended, including Certificate of Designation of the Series D Preferred Stock of the Registrant, Certificate of Elimination of Number of Shares of Preferred Stock Designated as Series D Preferred Stock of the Registrant, Certificate of Designations, Preferences and Rights of Series E Convertible Non-Redeemable Preferred Stock of the Registrant, Certificate of Designations, Preferences and Rights of Series F Convertible Non-Redeemable Preferred Stock of the Registrant, Certificate of Designations, Preferences and Rights of Series G Convertible Non-Redeemable Preferred Stock of the Registrant, Certificate of Designations, Preferences and Rights of Series H Convertible Non-Redeemable Preferred Stock of the Registrant and Certificate of Designations, Preferences and Rights of Series I Convertible Non-Redeemable Preferred Stock of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant’s registration statement on Form S-8 (File No. 333-284117) filed on January 3, 2025)
3.1.1
Certificate of Amendment to Restated Certificate of Incorporation, as amended, of KALA BIO, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on February 2, 2026)
3.2
Third Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on August 2, 2023 )
3.3
Certificate of Designations, Preferences and Rights of Series AA Convertible Non-Redeemable Preferred Stock of KALA BIO, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on November 25, 2025)
3.4
Certificate of Designations, Preferences and Rights of Series AA Convertible Non-Redeemable Preferred Stock of KALA BIO, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on February 2, 2026)
4.1
Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1 to the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on March 3, 2023)
4.2
Registration Rights Agreement, dated March 2, 2023, by and among the Registrant and the persons party thereto (incorporated by reference to Exhibit 4.5 to the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on March 3, 2023)
4.3*
Description of the Registrant’s Securities Registered under Section 12 of the Exchange Act
4.4
Registration Rights Agreement, dated June 26, 2024, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on June 27, 2024)
4.5
Form of Series AA Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on November 25, 2025)
4.6
Form of Pre-Funded Warrant issued on December 5, 2025 (incorporated by reference to Exhibit 4.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on December 5, 2025)
10.1+
2009 Employee, Director and Consultant Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s registration statement on Form S-1 (File No. 333-218936) filed on June 23, 2017)
10.2+
Form of Stock Option Agreement under the 2009 Employee, Director and Consultant Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s registration statement on Form S-1 (File No. 333-218936) filed on June 23, 2017)
10.3+
Amended and Restated 2017 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on May 9, 2019)
10.4+
2017 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38150) filed on June 26, 2020)
10.5+
Amended and Restated 2017 Equity Incentive Plan of the Registrant (incorporated by reference to Exhibit 99.1 to the Registrant’s registration statement on Form S-8 (File No. 333-272834) filed on June 22, 2023)
10.6+
Form of Incentive Stock Option Agreement under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s registration statement on Form S-1/A (File No. 333-218936) filed on July 10, 2017)
138
Table of Contents
Exhibit
Number
Description of Exhibit
10.7+
Forms of Non-Qualified Option Agreement under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s registration statement on Form S-1/A (File No. 333-218936) filed on July 10, 2017)
10.8+
Form of Non-Employee Director Restricted Stock Unit Award under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on May 7, 2020)
10.9+
Form of Non-Employee Director Deferred Restricted Stock Unit Award under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on May 7, 2020)
10.10+
Form of Employee Restricted Stock Unit Award under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 6, 2020)
10.11+
Form of Incentive Stock Option Agreement under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.12+
Forms of Non-Qualified Option Agreement under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.13+
Form of Non-Employee Director Restricted Stock Unit Award under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.14+
Form of Non-Employee Director Deferred Restricted Stock Unit Award under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.15+
Form of Employee Restricted Stock Unit Award under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.16+
Form of Inducement Stock Option Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on November 8, 2018)
10.17+
Form of Inducement Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s quarterly report on Form 10-Q (File No. 333-218936) filed on August 4, 2023)
10.18#
Exclusive License Agreement, dated October 11, 2019, by and between Combangio, Inc. and The Board of Trustees of the Leland Stanford Junior University (incorporated by reference to Exhibit 10.18 to the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on March 29, 2022)
10.19
Second Amendment to Offer Letter, dated August 29, 2025, between the Company and Todd Bazemore (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on September 2, 2025)
10.20+
Form of Amendment to Offer Letters (incorporated by reference to Exhibit 10.30 to the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on March 12, 2019)
10.21+
Form of Indemnification Agreement between the Registrant and each of its Executive Officers and Directors (incorporated by reference to Exhibit 10.14 to the Registrant’s registration statement on Form S-1/A (File No. 333-218936) filed on July 10, 2017)
10.22
Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.4 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on October 2, 2018)
10.23
#
Loan and Security Agreement, dated May 4, 2021, by and among the Registrant and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38150) filed on May 5, 2021)
10.24#
First Amendment to Loan and Security Agreement, dated November 15, 2021, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.1 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 11, 2022)
139
Table of Contents
Exhibit
Number
Description of Exhibit
10.25
Second Amendment to Loan and Security Agreement, dated May 21, 2022, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.2 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 11, 2022)
10.26
Third Amendment to Loan and Security Agreement, dated December 27, 2022, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on December 27, 2022)
10.27
Fourth Amendment to Loan and Security Agreement, dated August 1, 2023, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.8 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.28
Fifth Amendment to Loan and Security Agreement, dated August 2, 2023, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.9 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.29
Securities Purchase Agreement, dated November 28, 2022, by and among the Registrant and the purchasers party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38150) filed on November 28, 2022)
10.30
Securities Purchase Agreement, dated December 21, 2023, by and among the Registrant and the purchasers party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on December 22, 2023)
10.31
Securities Purchase Agreement, dated March 25, 2024, by and among the Registrant and the purchasers party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on March 26, 2024)
10.32
Securities Purchase Agreement, dated June 26, 2024, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on June 27, 2024)
10.33
Securities Purchase Agreement, dated December 29, 2024, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on December 30, 2024)
10.34
Form of Retention Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on April 11, 2025)
Form of Retention Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on October 2, 2025)
10.35
Convertible Loan Agreement, dated November 9, 2025, by and between the Registrant and David Lazar (incorporated by reference to Exhibit 10.2 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on November 19, 2025)
10.36
Securities Purchase Agreement, dated November 23, 2025, by and among KALA BIO, Inc. and David Lazar (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on November 25, 2025)
10.37
Loan Settlement Agreement, dated November 23, 2025, by and among KALA BIO, Inc., Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.2 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on November 25, 2025)
10.38
Voting Agreement, dated November 23, 2025, by and among KALA BIO, Inc., David Lazar and Oxford Finance LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on November 25, 2025)
10.39
Form of Officer Settlement Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on November 25, 2025)
140
Table of Contents
Exhibit
Number
Description of Exhibit
10.40
Securities Purchase Agreement, dated December 4, 2025, by and among KALA BIO, Inc. and the investor named therein (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on December 5, 2025)
10.41
Settlement Agreement and Mutual Release, dated December 30, 2025, by and between KALA BIO Inc. and Baker Bros. Advisors LP (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on January 6, 2026)
10.42
Voting Agreement, dated December 30, 2025, by and between KALA BIO Inc. and Baker Bros. Advisors LP (incorporated by reference to Exhibit 10.2 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on January 6, 2026)
10.43
Settlement Agreement and Mutual Release, dated December 30, 2025, by and between KALA BIO Inc. and LifeSci Capital LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on January 6, 2026)
10.44
Settlement Agreement, dated December 30, 2025, by and between KALA BIO Inc. and Delaware IR LLC. (incorporated by reference to Exhibit 10.4 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on January 6, 2026)
10.45
At the Market Offering Agreement, dated as of January 8, 2026, by and between the Company and H.C. Wainwright & Co., LLC (incorporated by reference to Exhibit 1.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on January 8, 2026)
10.46
Form of Securities Purchase Agreement, dated as of January 30, 2026, by and among the Company and each of the Series AAA Investors signatory thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on February 2, 2026)
10.47
Platform Development and Exclusive License Agreement, dated March 3, 2026 (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on March 4, 2026).
10.48*
Secured Promissory Note, dated as of February 9, 2026, by and between the Company and Minglemint Solutions LLC
10.49*
Security Agreement, dated February 9, 2026, by and between the Company and Minglemint Solutions LLC
16.1
Letter from Deloitte & Touche LLP to the U.S. Securities and Exchange Commission, dated December 16, 2025 (incorporated by reference to Exhibit 16.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on December 16, 2025).
19.1
Amended and Restated Insider Trading Policy (incorporated by reference to Exhibit 19.1 to the Registrant’s Annual Report on Form 10-K (001-38150) filed on March 31, 2025)
21.1
Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K (001-38150) filed on March 31, 2025)
23.1*
Consent of HTL International, LLC
23.2*
Consent of Deloitte & Touche LLP
31.1*
Rule 13a-14(a) Certification of Principal Executive Officer
31.2*
Rule 13a-14(a) Certification of Principal Financial Officer
32.1**
Certification of Principal Executive Officer pursuant to 18 U.S.C. §1350
32.2**
Certification of Principal Financial Officer pursuant to 18 U.S.C. §1350
97.1+
Dodd-Frank Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to the Registrant’s annual report on Form 10-K (file No. 001-38150) filed on March 29, 2024).
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)
141
Table of Contents
* Filed herewith.
** Furnished herewith.
# Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
+ Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of the Instructions to the Annual Report on Form 10-K.
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KALA BIO, INC.
Dated: April 15, 2026
By:
/s/ Avi Minkowitz
Avi Minkowitz
Chief Executive Officer, Chief Financial Officer and Director
142
Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Avi Minkowitz
Chief Executive Officer, Chief Financial Officer and Director
April 15, 2026
Avi Minkowitz
(Principal Executive Officer and Principal Financial Officer)
/s/ Hillel Posen
Director
April 15, 2026
Hillel Posen
/s/ Chaim (Dovi) Berger
Director
April 15, 2026
Chaim (Dovi) Berger
/s/ Yonatan Colman
Director
April 15, 2026
Yonatan Colman
/s/ Brendan Purdy
Director
April 15, 2026
Brendan Purdy
143
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of KALA BIO, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of KALA BIO, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2025, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of Management’s Assessment of the Company’s Ability to Continue as a Going Concern
Critical Audit Matter Description
As described in Note 2 to the consolidated financial statements, the Company has incurred recurring losses from operations and negative cash flows from operations since inception, had an accumulated deficit of $694.9 million as of December 31, 2025, and disclosed going concern uncertainty during the first, second and third quarters of 2025. During the fourth quarter of 2025, the Company also experienced significant liquidity constraints in connection with its debt arrangement with Oxford Finance LLC. Management concluded that, after considering its plans and recent developments,
F-1
Table of Contents
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.
We determined this matter to be a critical audit matter because evaluating management’s conclusion required especially challenging auditor judgment, particularly with respect to the impact of the Company’s historical losses and negative cash flows, the Oxford default and related liquidity constraints, the effect of the Company’s debt and other obligation settlements, the sufficiency of unrestricted cash and working capital at year end, and the reasonableness of management’s forecasted cash requirements.
How the Critical Audit Matter Was Addressed in the Audit
The primary procedures we performed to address this matter included evaluating the Company’s historical operating results and prior interim going concern disclosures; inspecting the Oxford default, settlement, and release documentation; testing the settlement of significant obligations; testing year-end cash and working capital balances; evaluating management’s forecasted cash requirements; and evaluating the related disclosures in Note 2 to the consolidated financial statements.
/s/ HTL International, LLC
We have served as the Company’s auditor since December 2025.
Houston, Texas
April 15, 2026
F-2
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of KALA BIO, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of KALA BIO, Inc. and subsidiaries (formerly Kala Pharmaceuticals, Inc.) (the "Company") as of December 31, 2024, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 31, 2025
We began serving as the Company's auditor in 2013. In 2025 we became the predecessor auditor.
F-3
Table of Contents
KALA BIO, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
December 31,
2025
2024
Assets
Current assets:
Cash and cash equivalents
$
7,557
$
51,181
Prepaid expenses and other current assets
1,933
1,616
Total current assets
9,490
52,797
Non-current assets:
Property and equipment, net
—
749
Right-of-use assets
—
1,691
Other long-term assets
—
246
Total assets
$
9,490
$
55,483
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
986
$
628
Accrued expenses and other current liabilities
1,508
4,975
Deferred grant income
—
637
Current portion of lease liabilities
—
380
Current portion of long-term debt
—
10,336
Total current liabilities
2,494
16,956
Long-term liabilities:
Long-term lease liabilities
—
1,434
Long-term debt, net of current portion
—
20,102
Long-term contingent consideration
—
4,659
Total long-term liabilities
—
26,195
Total liabilities
2,494
43,151
Commitments and Contingencies (Note 14)
Stockholders' equity:
Preferred stock, $ 0.001 par value; 5,000,000 shares authorized as of December 31, 2025 and 2024; 9,278 and 51,246 shares of Series E Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2025 and 2024, 2,928 shares of Series F Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2025 and 2024, 10,901 shares of Series G Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2025 and 2024, 2,299 and 9,393 shares of Series H Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2025 and 2024, 0 and 3,286 shares of Series I Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2025 and 2024, 900,000 and 0 shares of Series AA Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2025 and 2024, respectively
1
—
Common stock, $ 0.001 par value; 120,000,000 shares authorized as of December 31, 2025 and December 31, 2024; 27,849,725 and 6,091,182 shares issued and outstanding as of December 31, 2025 and December 31, 2024 , respectively
28
6
Additional paid-in capital
701,867
680,246
Accumulated deficit
( 694,900 )
( 667,920 )
Total stockholders' equity
6,996
12,332
Total liabilities and stockholders' equity
$
9,490
$
55,483
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
KALA BIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
Year Ended
December 31,
2025
2024
Costs and expenses:
General and administrative
$
23,629
$
18,340
Research and development
18,780
22,094
(Gain) loss on fair value remeasurement of contingent consideration
( 4,659 )
549
Impairment of right-of-use assets
1,411
—
Total costs and expenses
39,161
40,983
Loss from operations
( 39,161 )
( 40,983 )
Other income (expense):
Interest income
1,140
2,056
Interest expense
( 3,276 )
( 5,783 )
Grant income
3,377
6,199
Gain on extinguishment of debt
5,793
—
Other income (expense), net
5,147
—
Total other income (expense)
12,181
2,472
Net loss
$
( 26,980 )
$
( 38,511 )
Net loss per share attributable to common stockholders—basic and diluted
$
( 3.31 )
$
( 10.15 )
Weighted average shares outstanding—basic and diluted
8,148,275
3,796,047
Net loss
$
( 26,980 )
$
( 38,511 )
Other comprehensive loss:
Change in fair value of investments
—
—
Total other comprehensive loss
—
—
Total comprehensive loss
$
( 26,980 )
$
( 38,511 )
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
KALA BIO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
Year Ended December 31, 2025
Series E
Series F
Series G
Series H
Series I
Series AA
Convertible
Convertible
Convertible
Convertible
Convertible
Convertible
Non-Redeemable
Non-Redeemable
Non-Redeemable
Non-Redeemable
Non-Redeemable
Non-Redeemable
Preferred Stock
Preferred Stock
Preferred Stock
Preferred Stock
Preferred Stock
Preferred Stock
Common Stock
Additional
Total
$0.001 Par Value
$0.001 Par Value
$0.001 Par Value
$0.001 Par Value
$0.001 Par Value
$0.001 Par Value
$0.001 Par Value
Paid-In
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Equity
Balance as of December 31, 2023
51,246
$
—
2,928
$
—
—
$
—
—
$
—
—
$
—
—
$
—
2,759,372
$
3
$
636,910
( 629,409 )
$
7,504
At the market offering, net of offering costs of $ 69
—
—
—
—
—
—
—
—
—
—
—
—
527,940
1
3,393
—
3,394
Exercise of stock options
—
—
—
—
—
—
—
—
—
—
—
—
1,281
—
9
—
9
Issuance of common stock for vested restricted stock units
—
—
—
—
—
—
—
—
—
—
—
—
249,224
—
—
—
—
Issuance of common stock under employee stock purchase plan
—
—
—
—
—
—
—
—
—
—
—
—
11,448
—
68
—
68
Issuance of common stock to satisfy service contract
—
—
—
—
—
—
—
—
—
—
—
—
4,000
—
29
—
29
Common stock offering, net of offering costs of $ 218
—
—
—
—
—
—
—
—
—
—
—
—
2,537,917
2
15,418
—
15,420
Issuance of convertible Series G preferred stock, net of issuance cost of $ 62
—
—
—
—
10,901
—
—
—
—
—
—
—
—
—
8,538
—
8,538
Issuance of convertible Series H preferred stock, net of issuance cost of $ 96
—
—
—
—
—
—
9,393
—
—
—
—
—
—
—
5,399
—
5,399
Issuance of convertible Series I preferred stock, net of issuance cost of $ 24
—
—
—
—
—
—
—
—
3,286
—
—
—
—
—
2,093
—
2,093
Stock-based compensation expense
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,389
—
8,389
Net loss
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
( 38,511 )
( 38,511 )
Balance as of December 31, 2024
51,246
$
—
2,928
$
—
10,901
$
—
9,393
$
—
3,286
$
—
—
$
—
6,091,182
$
6
$
680,246
( 667,920 )
$
12,332
Issuance of common stock for vested restricted stock units
—
—
—
—
—
—
—
—
—
—
—
—
287,231
—
—
—
—
Exercise of stock options
—
—
—
—
—
—
—
—
—
—
—
—
885
—
6
—
6
Issuance of common stock under employee stock purchase plan
—
—
—
—
—
—
—
—
—
—
—
—
15,627
—
67
—
67
Issuance of Preferred Stock
—
—
—
—
—
—
—
—
—
—
900,000
1
—
—
1,799
—
1,800
Conversion of Preferred Stock
( 41,968 )
—
—
—
—
—
( 7,094 )
—
( 3,286 )
—
—
—
5,234,800
5
( 5 )
—
—
Issuance of Common Stock, net of $ 866 issuance cost
—
—
—
—
—
—
—
—
—
—
—
—
10,000,000
10
9,124
—
9,134
Issuance of Common Stock _ Service Rendered
—
—
—
—
—
—
—
—
—
—
—
—
3,400,000
3
1,550
—
1,553
Issuance of Common Stock - Oxford Settlement Agreements
—
—
—
—
—
—
—
—
—
—
—
—
1,620,000
2
1,563
—
1,565
Issuance of Common Stock - Settlement Agreements
—
—
—
—
—
—
—
—
—
—
—
—
900,000
2
522
—
524
Stock-based compensation expense
—
—
—
—
—
—
—
—
—
—
—
—
300,000
—
6,995
—
6,995
Net loss
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
( 26,980 )
( 26,980 )
Balance as of December 31, 2025
9,278
$
—
2,928
$
—
10,901
$
—
2,299
$
—
—
$
—
900,000
$
1
27,849,725
$
28
$
701,867
$
( 694,900 )
$
6,996
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
KALA BIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
December 31,
2025
2024
Cash flows from operating activities:
Net loss
$
( 26,980 )
$
( 38,511 )
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization
317
259
Non-cash operating lease cost
280
334
Impairment of right-of-use assets
1,411
—
Gain on extinguishment of debt
( 5,793 )
—
(Gain) loss on fair value remeasurement of contingent consideration
( 4,659 )
549
Amortization of debt discount and other non-cash interest
( 667 )
1,248
Stock-based compensation
6,995
8,389
Issuance of Common Stock for service rendered
1,553
—
Issuance of Common Stock for Settlement Agreements
524
—
Loss on sale or disposal of property and equipment
549
—
Other non-cash losses
—
129
Change in operating assets and liabilities:
Prepaid expenses and other current assets
( 317 )
359
Other long-term assets
144
—
Accounts payable
358
( 291 )
Accrued expenses and other current liabilities
( 3,893 )
( 1,528 )
Lease liabilities and other long-term liabilities
( 1,813 )
( 319 )
Net cash used in operating activities
( 31,991 )
( 29,382 )
Cash flows from investing activities:
Purchases of property and equipment and other assets
( 15 )
( 208 )
Net cash used in investing activities
( 15 )
( 208 )
Cash flows from financing activities:
Payment of principal and payment fee on debt
( 22,413 )
( 5,000 )
Payment of issuance costs from issuance of common stock and Series I preferred stock
( 120 )
—
Proceeds from issuance of Series AA preferred stock
1,800
—
Proceeds from issuance of Series G preferred stock, net of issuance costs of $ 62
—
8,538
Proceeds from issuance of common stock and Series H preferred stock, net of issuance costs of $ 218
—
12,281
Proceeds from common stock offerings, net of offering costs of $ 866
9,134
3,394
Proceeds from issuance of common stock and Series I preferred stock
—
10,750
Contingent consideration related to Combangio acquisition
—
( 119 )
Payment of principal on finance lease
( 92 )
( 45 )
Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan
73
77
Net cash (used in) provided by financing activities
( 11,618 )
29,876
Net (decrease) increase in cash and cash equivalents:
( 43,624 )
286
Cash and cash equivalents at beginning of period
51,181
50,895
Cash and cash equivalents at end of period
$
7,557
$
51,181
Non-cash investing and financing activities:
Issuance of common stock to satisfy service contract in additional paid-in capital
$
1,553
$
29
Issuance costs included in accrued expenses
—
120
Supplemental disclosure:
Cash paid for interest
$
2,701
$
4,610
Right-of-use assets obtained in exchange of finance lease obligations
—
160
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Note 1: Nature of Business
Nature of Business — KALA BIO, Inc. (the “Company”) was incorporated on July 7, 2009, and is a clinical-stage biopharmaceutical company dedicated to the research, development and commercialization of innovative therapies for rare and severe diseases of the front and back of the eye.
On September 29, 2025, the Company announced that the CHASE trial of KPI-012 for the treatment of PCED did not meet the primary endpoint of complete healing of PCED as measured by corneal fluorescein staining. The CHASE trial also failed to achieve statistical significance for key secondary efficacy endpoints and did not show any meaningful difference between either KPI-012 treatment arm and the placebo arm. Based on the CHASE trial results, the Company determined to cease development of KPI-012 and our MSC-S platform.
Following the discontinuation of KPI-012 development in September 2025 after the CHASE Phase 2b clinical trial failed to meet its primary endpoints, the Company strategically repositioned ourselves to capitalize on the substantial intellectual property and research data generated during its mesenchymal stem cell secretome (MSC-S) platform development. the Company identified a significant market opportunity to transform our proprietary biological research assets into a next-generation artificial intelligence or AI platform specifically designed for biotechnology research applications.
This strategic pivot represents a fundamental transformation from a traditional clinical-stage biopharmaceutical company to an AI-powered biotechnology research intelligence platform provider, targeting the rapidly expanding artificial intelligence in the drug discovery market.
Strategic Initiative - On March 3, 2026, the Company and 2624465 Ontario Inc. o/a Younet AI, an Ontario corporation (“Younet”) entered into a Platform Development and Exclusive License Agreement (the “Agreement”) pursuant to which the Company obtained a worldwide exclusive license (the “Exclusive License”) of Younet’s proprietary, custom biomedical artificial intelligence research platform (the “Researgency Platform”), together with associated trademarks and intellectual property. See Note 16-Subsequent events for more details.
On November 15, 2021, the Company acquired Combangio, Inc. (“Combangio”), including its mesenchymal stem cell secretomes (“MSC-S”) platform and product candidate, which the Company refers to as KPI-012, for the treatment of persistent corneal epithelial defects (“PCED”)(collectively, the “Combangio Acquisition”). For accounting purposes, the transaction was accounted for as an asset acquisition , as substantially all of the fair value of the gross assets acquired was concentrated in a single asset, KPI-012.
LifeSci and Baker Settlement Agreements - On December 30, 2025, the Company entered into the Baker Settlement Agreement with Baker Bros. Advisors LP, pursuant to which the Company agreed to issue the Baker Shares to resolve certain claims relating to participation rights under prior financing arrangements (the “Baker Settlement”). In connection with the Baker Settlement, the Company and Baker Bros. Advisors LP also entered into a voting agreement pursuant to which Baker Bros. Advisors LP granted an irrevocable proxy in favor of us to vote the settlement shares and other specified shares in line with our Board of Directors’ recommendations for a period of six months . On December 30, 2025, the Company also entered into the LifeSci Settlement Agreement pursuant to which we agreed to issue the LifeSci Shares to settle certain payment obligations for financial advisory services.
Recent Equity Financings - Private Placements — On March 25, 2024, the Company entered into a Securities Purchase Agreement (the “March 2024 Securities Purchase Agreement”) with certain institutional investors named therein, pursuant to which the Company agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, shares of Series G Convertible Non-Redeemable Preferred Stock, par value $ 0.001 per share, of the Company (the “Series G Preferred Stock”), for aggregate gross proceeds of approximately $ 8,600 (the “March 2024 Private Placement”). Pursuant to the March 2024 Securities Purchase Agreement, the Company issued and sold to the purchasers at the closing
F-8
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
of the March 2024 Private Placement, 10,901 shares of Series G Preferred Stock, at a price per preferred share equal to $ 788.90 . Costs incurred in connection with the March 2024 Private Placement were $ 62 , which were recorded as a reduction to additional paid-in capital.
On June 26, 2024, the Company entered into a Securities Purchase Agreement (the “June 2024 Securities Purchase Agreement”) with certain institutional investors named therein, pursuant to which the Company agreed to issue and sell, in a private placement, shares of common stock and shares of Series H Convertible Non-Redeemable Preferred Stock, par value $ 0.001 per share, of the Company (the “Series H Preferred Stock”), for aggregate gross proceeds of approximately $ 12,499 (the “June 2024 Private Placement”). Pursuant to the June 2024 Securities Purchase Agreement, the Company issued and sold to the purchasers at the closing of the June 2024 Private Placement, 1,197,314 shares of common stock, at a price per common share equal to $ 5.85 , and 9,393 shares of Series H Preferred Stock, at a price per preferred share equal to $ 585.00 . Costs incurred in connection with the June 2024 Private Placement were $ 218 , which were recorded as a reduction to additional paid-in capital.
On December 29, 2024, the Company entered into a Securities Purchase Agreement (the “December 2024 Securities Purchase Agreement”) with certain institutional investors named therein, pursuant to which the Company agreed to issue and sell, in a private placement, shares of common stock and shares of Series I Convertible Non-Redeemable Preferred Stock, par value $ 0.001 per share, of the Company (the “Series I Preferred Stock”), for aggregate gross proceeds of approximately $ 10,750 (the “December 2024 Private Placement”). Pursuant to the December 2024 Securities Purchase Agreement, the Company issued and sold to the purchasers at the closing of the December 2024 Private Placement, 1,340,603 shares of common stock, at a price per common share equal to $ 6.44 , and 3,286 shares of Series I Preferred Stock, at a price per preferred share equal to $ 644.00 . Costs incurred in connection with the December 2024 Private Placement were $ 120 , which were recorded as a reduction to additional paid-in capital.
On November 23, 2025 (the “SPA Effective Date”), we entered into a Securities Purchase Agreement (the “November 2025 Purchase Agreement”) with David Lazar, pursuant to which we agreed to issue and sell, in a private placement, shares of our Series AA Preferred Convertible Preferred Stock, par value $ 0.001 per share (the “Series AA Preferred Stock”) and our Series AAA Preferred Stock in two closings for aggregate gross proceeds of up to $ 6,000 , subject to the terms and conditions set forth in the Securities Purchase Agreement (collectively, the “Private Placement”).
The first closing of the Private Placement occurred on November 24, 2025, pursuant to which we issued and sold to David Lazar an aggregate of 900,000 shares of Series AA Preferred Stock at a price per share equal to $ 2.00 , for aggregate gross proceeds of $ 1,800 . Each share of Series AA Preferred Stock is convertible into 55 shares of Common Stock for an aggregate total of 49,500,000 shares of Common Stock issuable upon conversion of the Series AA Preferred Stock. As of the date of this Annual Report on Form 10-K, there are 681,818 shares of Series AA Preferred Stock outstanding, which are convertible into 37,499,900 shares of Common Stock.
On December 11, 2025, David Lazar transferred his rights and obligations under the November 2025 Purchase Agreement solely with respect to the shares of Series AAA Preferred and the director nomination rights, to AK Holdings Group Inc., a Panamanian company (“AK Holdings”). On January 29, 2026, pursuant to the terms of that certain Rights Purchase Agreement by and among AK Holdings and each signatory thereto (the “Series AAA Investors”), AK Holdings sold its rights to purchase the Series AAA Preferred Stock (but not its director nomination rights under the November 2025 Purchase Agreement) to the Series AAA Investors.
F-9
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
On January 30, 2026, pursuant to the terms of a Securities Purchase Agreement (the “January 2026 Purchase Agreement” and together with the November 2025 Purchase Agreement, the “Purchase Agreements”), we issued and sold to the Series AAA Investors in a second closing of the Private Placement (the “Second Closing”), an aggregate of 2,100,000 shares of Series AAA Preferred Stock at a price per share of Series AAA Preferred Stock equal to $ 2.00 , for aggregate gross proceeds of $ 4,200 . The Second Closing occurred on January 30, 2026. The terms of the Series AAA Preferred Stock are substantially similar to the terms of the Series AA Preferred Stock. Each share of Series AAA Preferred Stock was convertible into 420 shares of common stock for an aggregate total of 882,000,000 shares of Common Stock issuable upon conversion of the Series AAA Preferred Stock. As of the date of this annual report, all of the shares of Series AAA Preferred Stock have been converted into common stock.
On January 8, 2026, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”) providing for the sale and issuance by the Company of shares of its Common Stock from time to time, through or to Wainwright as the Company’s sales agent or principal in an “at the market offering” program and as set forth in the ATM Agreement (the “ATM Offering”). The aggregate market value of the shares of Common Stock eligible for sale under the prospectus supplement is currently $ 15,000 .
Note 2: Summary of Significant Accounting Policies
Principles of Consolidation— The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Kala Pharmaceuticals Security Corporation, which is a Massachusetts subsidiary created to buy, sell and hold securities, and Combangio . All intercompany transactions and balances have been eliminated.
Basis of Presentation —The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated only limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of the Commercial Business to Alcon in July 2022 and has incurred recurring losses and negative cash flows from operations, including a net loss of $ 26,980 and $ 38,511 , for the years ended December 31, 2025 and 2024, respectively, and used cash in operations of $ 31,991 and $ 29,382 , in the years ended December 31, 2025 and 2024, respectively. The Company has financed its operations to date primarily through proceeds from the sale of the Commercial Business to Alcon, its initial public offering of common stock, follow-on public offerings of common stock and sales of its common stock under its at-the-market offering facility, private placements of common stock and preferred stock, borrowings under credit facilities and the Loan and Security Agreement with Oxford Finance LLC (the “Loan Agreement”), disbursements under a grant from California Institute for Regenerative Medicine (“CIRM”) upon achievement of specified milestones, convertible promissory notes and warrants.
Liquidity and Ability to Continue as a Going Concern — Since inception, the Company has incurred significant losses from operations and negative cash flows from operations including a net loss of $ 26,980 and $ 38,511 for the years ended December 31, 2025 and 2024, respectively, and cash used in operating activities of $ 31,991 and $ 29,382 in the years ended December 31, 2025 and 2024, respectively . As of December 31, 2025, the Company had an accumulated deficit of $ 694,900 .
Prior to the recent cessation of our research and development activities, the Company had devoted substantially all of its financial resources and efforts to research and development, including preclinical studies and clinical trials, and, prior to the sale of the Commercial Business to Alcon in July 2022, engaging in activities to launch and commercialize EYSUVIS and INVELTYS. The Company devoted substantially all of its financial resources to the research and development of KPI-012 for PCED and any other indications the Company determined to pursue, including Limbal Stem Cell Deficiency. The Company may never achieve or maintain profitability. Net losses may fluctuate significantly from quarter-to-quarter and year-to-year.
F-10
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
During the first, second and third quarters of 2025, the Company concluded there was substantial doubt regarding the Company’s ability to continue as a going concern. However, on September 29, 2025, the Company announced that it was determined to cease development of KPI-012 and its MSC-S platform and to take steps to preserve cash as the Company explores its strategic options. In connection with such decisions, the Company stopped all spending on the KPI-012 project and approved a major reduction in the Company’s workforce. During the fourth quarter of 2025, the Company entered into purchase agreement with certain institutional investors, raised capital and changed management. The Company also recently shifted its focus to develop an on-premises Artificial Intelligence (“AI”) infrastructure platform for the biotech industry. Based on these recent developments and as a result, the Company has concluded that management’s plans do alleviate substantial doubt about the Company’s ability to continue as a going concern for the twelve months after the date these consolidated financial statements are issued.
Use of Estimates— The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expense, and related disclosures. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. Estimates and assumptions relied upon in preparing these consolidated financial statements relate to, but are not limited to, the present value of lease liabilities and the corresponding right-of-use assets, the fair value of warrants, stock-based compensation, accrued expenses, contingent consideration, grant income and deferred grant income, the valuation of embedded derivatives and the recoverability of the Company’s net deferred tax assets and related valuation allowance. Actual results may differ from these estimates under different assumptions or conditions.
Grant Income — Grant income consists of amounts earned from incurring costs to support the CHASE Phase 2b clinical trial of KPI-012 for PCED, as well as product process characterization and analytical development from the program due to the receipt of the CIRM Award. The grant between the Company and CIRM is subject to a co-funding requirement and generally provides for the Company to meet certain milestones in order for funds to be provided. The Company accounts for grants received to perform research and development activities in accordance with Accounting Standards Codification (“ASC”) Topic 730-20, Research and Development Arrangements , which requires an assessment, at the inception of the grant, of whether the grant is a liability or a contract to perform research and development activities. If the Company is obligated to repay the grant funds to the grantor regardless of the outcome of the research and development activities, then the Company is required to estimate and recognize that liability. Alternatively, if the Company is not required to repay, or if it is required to repay the grant funds to the grantor only if the research and development activities are successful, then the grant agreement is accounted for as a contract to perform research and development activities, in which case, grant income is recognized as the related research and development expenses are incurred. Costs of grant income are recorded as a component of research and development expenses in the Company’s consolidated statements of operations and comprehensive loss.
Grant funds received in advance were recorded as deferred grant income on the consolidated balance sheets. Management had determined that the Company was the principal participant under the Company’s CIRM Award, and accordingly, the Company recorded amounts earned under this arrangement as grant income on the consolidated statements of operations and comprehensive loss.
Contingent Consideration— In addition to upfront consideration and Deferred Purchase Consideration (as defined below) (see Note 3), the Company’s asset acquisitions may also include contingent consideration payments to be made for future milestone events. The Company assesses whether such contingent consideration is required to be recorded at fair value on the date of the acquisition and subsequently remeasured to fair value at each reporting date. Contingent consideration payments in an asset acquisition not required to be accounted for at fair value are recognized when the contingency is resolved, and the consideration is paid or becomes payable. Changes to contingent consideration obligations can result from changes to discount rates, accretion of the liability due to the passage of time,
F-11
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
changes in the Company’s estimates of the likelihood or timing of achieving certain milestones. Any changes in the fair value of these contingent consideration liabilities are included in loss from operations in the consolidated statements of operations and comprehensive loss.
Derivative Instruments— ASC 815, Derivatives and Hedging , (“ASC 815”) requires companies to bifurcate certain conversion options and redemption features from their host instruments and account for them as free-standing derivative financial instruments should certain criteria be met. The Company evaluates its financial instruments, including its debt arrangements, to determine whether such instruments are derivatives or contain features that qualify as embedded derivatives. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract and the features of the derivatives. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the consolidated statement of operations and comprehensive income each period. Bifurcated embedded derivatives are classified with the related host contract in the Company’s consolidated balance sheet.
Cash and Concentration of Credit Risk —Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, short-term investments, if any, and accounts receivable, if any. Periodically, the Company maintains cash, cash equivalents, short-term investments in accredited financial institutions in excess of federally insured limits. The Company deposits its cash, cash equivalents, short-term investments, if any, in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company had no revenue during the years ended December 31, 2025 and 2024. The Company has no financial instruments with off-balance sheet risk of loss.
Cash Equivalents —The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents.
Investments— The Company determines the appropriate classification of its investments at the time of purchase. The Company’s investments are classified as available-for-sale in accordance with ASC Topic 320 , Investments—Debt and Equity Securities . The Company classifies investments available to fund current operations as current assets on its consolidated balance sheets. Investments are classified as long-term assets on the consolidated balance sheets if (i) the Company has the intent and ability to hold the investments for a period of at least one year and (ii) the contractual maturity date of the investments is greater than one year.
Available-for-sale investments are recorded at fair value, with unrealized gains or losses included in comprehensive loss on the consolidated statements of operations and comprehensive loss and in accumulated other comprehensive income or loss on the consolidated balance sheets. Realized gains and losses, interest income earned on the Company’s cash, cash equivalents and investments, and amortization or accretion of discounts and premiums on investments are included within other income (expense).
The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. The Company did not record any such impairments during the years ended December 31, 2025 or 2024.
F-12
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Leases —At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one-year or less. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.
The components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although separation of lease and non-lease components is required, certain practical expedients are available to entities. Entities electing the practical expedient would not separate lease and non-lease components. Rather, they would account for each lease component and the related non-lease component together as a single component. The Company’s facilities operating leases had lease and non-lease components which the Company has elected to use the practical expedient and account for each lease component and related non-lease component as one single component. The lease component resulted in a right-of-use asset being recorded on the consolidated balance sheets and amortized as lease expense on a straight-line basis to the consolidated statements of operations and comprehensive loss.
Property and Equipment, net —Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets. Depreciation expense is included in loss from operations on the consolidated statements of operations and comprehensive loss. Laboratory equipment and office and computer equipment is depreciated over three to five years . Leasehold improvements are depreciated over the shorter of their useful life or the life of the lease. Major additions and upgrades are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations on the consolidated statements of operations and comprehensive loss.
Patent Costs —Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss.
Advertising Costs —Advertising costs are expensed as incurred. The Company incurred no advertising costs for the years ended December 31, 2025 and 2024.
Impairment of Long-Lived Assets —Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the undiscounted cash flows are insufficient to recover the carrying value, the assets are recorded at the lesser of the carrying value or fair value. As a result of the recent decision to cease development of KPI-012 and our MSC-S platform, the Company recorded $ 549 impairment charges for the year ended December 31, 2025. No impairment charges were recorded for the year ended December 31, 2024.
F-13
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Segment Information —Operating segments are identified as components of an enterprise about which separate discrete financial information is made available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The CODM is the Company’s Chief Executive Officer. The Company manages its operations as one operating and reportable segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is on the development and commercialization of innovative therapies for rare and severe diseases of the front and back of the eye. All of the Company’s tangible assets are held in the United States.
The CODM uses net loss as reported on the consolidated statements of operations and comprehensive loss to analyze cash flows in assessing performance of the segment and deciding how to allocate resources. The measure of segment assets is reported on the consolidated balance sheet as total assets.
The table below provides information about the Company’s segment, including significant segment expenses, other segment items and a reconciliation to net loss:
Year Ended
December 31,
2025
2024
Costs and expenses:
Research and development:
KPI‑012 development costs
$
8,156
$
10,170
Employee‑related costs for research and development personnel
8,928
10,757
Other research and development costs (1)
1,696
1,167
General and administrative
23,629
18,340
Other segment expense (income), net (2)
( 15,429 )
( 1,923 )
Net loss
$
( 26,980 )
$
( 38,511 )
(1) Includes facility related costs and depreciation.
(2) Includes Impairment of right-of-use assets, (Gain) loss on fair value remeasurement of contingent consideration, Interest income, Interest expense, Grant income, gain on settlements, Gain on extinguishment of debt and Other income, net.
Research and Development Costs —Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for full-time research and development employees, an allocation of facilities expenses, overhead expenses and other outside expenses. Research and development costs are expensed as incurred. The Company expenses costs relating to the production of inventory for its product candidates as research and development expenses within its consolidated statements of operations and comprehensive loss in the period incurred, until the point the Company believes regulatory approval and subsequent commercialization of the product candidate is probable and it expects the future economic benefit from sales of the drug to be realized. Research and development costs that are paid in advance of performance, including nonrefundable prepayments for goods or services, are deferred and capitalized as a prepaid expense. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.
Accrued Expenses —The Company accrues for variable consideration related to rebates, sales incentives and allowances, and returns. Such estimates are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of the accrued expense. The Company also accrues expenses related to development activities performed by third parties based on an evaluation of services received and efforts expended pursuant to the terms of the contractual arrangements. Payments under some of these contracts depend on clinical trial milestones. There may be instances in which payments made to the Company’s vendors will exceed the level of services
F-14
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
provided and result in a prepayment of expenses. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual or prepaid expense accordingly.
Stock-Based Compensation —The Company accounts for all stock-based awards granted as compensation expense at fair value. The Company generally issues stock-based awards with the measurement date for awards as the date of grant. Stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is the vesting period, on a straight-line basis. For performance awards whose vesting is contingent upon a specified event, the Company recognizes stock-based compensation expense over the derived service period, based on the probability of achievement of the specified event. The Company recognizes compensation expense for the portion of awards that have vested. Forfeitures are recorded as they occur. Stock-based compensation is classified in the accompanying consolidated statements of operations and comprehensive loss based on the function to which the related services are provided, or until related expense is recognized.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates. The Company previously lacked sufficient company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies in addition to its own historical volatility. Beginning in the second half of 2023, the Company determined it had adequate historical data regarding the volatility of its own traded stock price and began exclusively using its own historical volatility. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future. The fair value of restricted stock units (“RSUs”) are equal to the closing sale price of the Company’s common stock on the date of grant.
Income Taxes —Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements and tax returns. Deferred tax assets and liabilities are determined based upon the differences between the consolidated financial statement carrying amounts and the tax basis of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.
The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As a result, reserves are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present.
Net Loss per Share Attributable to Common Stockholders —The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been
F-15
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
distributed. The two-class method is not applicable during periods with a net loss, as the holders of the convertible preferred stock have no contractual obligation to share in losses. For all periods presented, the two-class method was not applicable.
Basic net loss per share attributable to common stockholders is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per share attributable to common stockholders is computed using the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options and warrants, the issuance of unvested RSUs and convertible preferred stock using the if-converted method.
The weighted average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, warrants, unvested RSUs and convertible preferred stock using the if-converted method. Common stock equivalent shares are excluded from the computation of diluted net loss per share attributable to common stockholders if their effect is antidilutive. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the years ended December 31, 2025 and 2024. See Note 12, “Loss Per Share”, for further information.
Recently Issued and adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for the Company’s annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. As of December 31, 2024, the Company adopted ASU 2023-07. Other than additional disclosure, the adoption of ASU 2023-07 had no impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which focuses on the rate reconciliation and income taxes paid. ASU 2023-09 requires public business entities to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose further information about income taxes paid. The standard is effective for annual periods beginning after December 15, 2024, and may be applied prospectively or retrospectively. The Company adopted ASU 2023-09 prospectively for the year ended December 31, 2025, and it affects only the Company's disclosures and does not impact its results of operations or financial condition.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires disaggregated expense information in the notes to the financial statements related to purchases of inventory, employee compensation, depreciation, intangible asset amortization and selling expenses for each statement of earnings line item that contains those expenses. ASU No. 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The guidance is to be applied on a prospective basis with the option to apply the standard retrospectively and early adoption is permitted. During the year ended December 31, 2025, the Company retrospectively adopted this ASU and it did not have a material impact on the Company’s consolidated financial statements and related disclosures.
F-16
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on our company’s consolidated financial statements.
Note 3: Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and Disclosures , establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and its own assumptions (unobservable inputs). The hierarchy consists of three levels:
● Level 1—Quoted prices in active markets for identical assets or liabilities.
● Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
● Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company’s financial instruments as of December 31, 2025 and 2024 consisted primarily of cash equivalents and contingent consideration. Cash equivalents and contingent consideration are reported at their respective fair values on the Company’s consolidated balance sheets.
T he Company acquired Combangio in November 2021 and in connection with the closing of the Combangio Acquisition, the Company agreed to issue an aggregate of 155,664 shares (the “Deferred Purchase Consideration”) of the Company’s common stock to former Combangio stockholders and other equityholders (the “Combangio Equityholders”) consisting of (i) an aggregate of 136,314 shares of common stock issued on January 3, 2022 and (ii) an aggregate of 19,350 shares of common stock that were held back as partial security for the satisfaction of indemnification obligations and other payment obligations of the Combangio Equityholders and were issued on March 10, 2023 (the “Holdback Shares”). The Company established liabilities for these considerations.
Additionally, the purchase price in connection with the Combangio Acquisition included potential future payments of up to $ 105,000 that are contingent upon the achievement of specified development, regulatory and commercialization milestones and are required to be recorded at fair value.
As of December 31, 2025, of the $ 105,000 in contingent milestone payments, the Company has paid to the Combangio Equityholders an aggregate of $ 2,646 in cash and $ 2,354 in shares of the Company’s common stock (representing an aggregate of 105,038 shares of the Company’s common stock) following dosing of the first patient in the Company’s CHASE Phase 2b clinical trial of KPI-012 for PCED in the United States in February 2023 (the “First Dosing Milestone”). Contingent consideration liabilities related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The fair values of the contingent consideration liabilities were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements. Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities. Any changes in the fair value of these contingent consideration liabilities are included in loss from operations in the consolidated statements of operations and comprehensive loss.
On September 29, 2025, the Company announced that the CHASE trial of KPI-012 for the treatment of PCED did not meet the primary endpoint of complete healing of PCED as measured by corneal fluorescein staining. The CHASE trial also failed to achieve statistical significance for key secondary efficacy endpoints and did not show any
F-17
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
meaningful difference between either KPI-012 treatment arm and the placebo arm. Based on the CHASE trial results, we determined to cease development of KPI-012 and our MSC-S platform. Therefore, the contingent consideration was fully remeasured to zero with no potential possibilities for any milestone payments.
During the years ended December 31, 2025 and 2024, the change in the fair value of the contingent consideration liabilities was a gain of $ 4,659 and a loss of $ 549 , respectively, primarily due to changes in discount rates, the passage of time and changes in the expected timing and probability of payment, and were recognized as a (gain)/loss on fair value remeasurement of contingent consideration in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2025 and 2024.
The following tables set forth the fair value of the Company’s financial instruments by level within the fair value hierarchy as of December 31, 2025 and 2024:
December 31, 2025
Fair Value
Level 1
Level 2
Level 3
Assets:
Cash equivalents
$
-
$
-
$
—
$
—
Total Assets
$
-
$
-
$
—
$
—
December 31, 2024
Fair Value
Level 1
Level 2
Level 3
Assets:
Cash equivalents
$
39,707
$
39,707
$
—
$
—
Total Assets
$
39,707
$
39,707
$
—
$
—
Liabilities:
Contingent consideration - Non-Current
$
4,659
$
—
$
—
$
4,659
Total Liabilities
$
4,659
$
—
$
—
$
4,659
The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of the Level 3 inputs as of December 31, 2025 and 2024:
Fair Value at
December 31,
Range
Financial Instrument
2025
Valuation Technique
Unobservable Input
(Average)
Contingent consideration
$
-
Probability-adjusted
Period of expected milestone achievement
2026 - 2028 (2028)
discounted cash flow model
Probabilities of achievement
16.6 % - 35.5 % ( 23.4 %)
Discount rate
15.5 %
Fair Value at
December 31,
Range
Financial Instrument
2024
Valuation Technique
Unobservable Input
(Average)
Contingent consideration
$
4,659
Probability-adjusted
Period of expected milestone achievement
2026 - 2028 (2028)
discounted cash flow model
Probabilities of achievement
16.6 % - 35.5 % ( 23.4 %)
Discount rate
14.3 %
F-18
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
The following table summarizes the changes in the Deferred Purchase Consideration and contingent consideration liabilities measured at fair value using Level 3 inputs for the years ended December 31, 2025 and 2024:
Contingent consideration
Balance at January 1, 2024
$
4,110
Fair value adjustments
549
Balance at December 31, 2024
$
4,659
Fair value adjustments
( 4,659 )
Balance at December 31, 2025
$
—
During the years ended December 31, 2025 and 2024, there were no transfers between Level 1, Level 2, and Level 3.
The carrying value reported on the accompanying consolidated balance sheets of cash, accounts payable and accrued expenses approximate their fair value due to their short-term nature.
Note 4: Grant Income
CIRM Award
On August 2, 2023, Combangio, a wholly owned subsidiary of the Company, entered into an award agreement with CIRM for a $ 15,000 grant (as amended from time to time, the “CIRM Award”) to support Combangio’s KPI-012 program for the treatment of PCED. The CIRM Award includes funding for the CHASE Phase 2b clinical trial of KPI-012 for 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. Upon entry into the CIRM Award, Combangio received an initial $ 5,900 disbursement from CIRM. In August 2024 and December 2024, Combangio received disbursements of $ 3,240 and $ 2,520 , respectively, from CIRM upon the achievement of specified milestones. The balance of the award is payable to Combangio upon the achievement of other specified milestones that are primarily related to Combangio’s progress in conducting the CHASE Phase 2b clinical trial. CIRM may permanently cease disbursements if the milestones are not met within four months of the scheduled completion dates or if the delay is not addressed to CIRM’s satisfaction, as determined by CIRM in its sole discretion. 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. 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 $ 1,000 of funds utilized by the Company until the earlier of ten 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 (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 $ 500,000 per year until the last to expire patent covering such invention expires.
On September 29, 2025, the Company announced that the CHASE trial of KPI-012 for the treatment of PCED did not meet the primary endpoint of complete healing of PCED as measured by corneal fluorescein staining. The CHASE trial also failed to achieve statistical significance for key secondary efficacy endpoints and did not show any meaningful difference between either KPI-012 treatment arm and the placebo arm. Based on the CHASE trial results, we determined to cease development of KPI-012 and our MSC-S platform. During the years ended December 31, 2025 and 2024, the Company recognized $ 3,377 and $ 6,199 , respectively, of grant income related to the CIRM Award on its consolidated statement of operations. As of December 31, 2025, the Company had $ 0 deferred grant income on its consolidated balance sheet.
F-19
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Note 5: Property and Equipment, Net
Property and equipment, net, consisted of the following:
December 31,
December 31,
2025
2024
Equipment
$
—
$
1,194
Computer hardware and software
869
869
Property and equipment — at cost
869
2,063
Less: Accumulated depreciation
( 869 )
( 1,314 )
Property and equipment—net
$
—
$
749
Depreciation expense for the years ended December 31, 2025 and 2024 was $ 216 and $ 204 , respectively.
Note 6: Accrued Expenses
Accrued expenses and other current liabilities consisted of the following:
December 31,
December 31,
2025
2024
Professional services
$
800
$
414
Development costs
269
736
Compensation and benefits
180
2,390
Accrued revenue reserves (1)
155
350
Contract manufacturing
—
672
Other
104
413
Accrued expenses and other current liabilities
$
1,508
$
4,975
(1) These amounts represent estimated provisions for product returns, rebates and discounts, prior to the sale of the Commercial Business to Alcon. Estimated provisions were deducted from gross revenues at the time revenues were recognized and are included in accrued expenses and other current liabilities on the Company’s consolidated balance sheets. These provisions reflected the Company’s best estimates of the amount of consideration to which it was entitled based on the terms of the contract.
Note 7: Lease
Operating leases
Menlo Park, California Office Lease
In April 2023, Combangio entered into a lease agreement with Menlo Prepi I, LLC, pursuant to which Combangio leases approximately 6,135 square feet of office, laboratory and research and development space in Menlo Park, California. The Company entered into a guaranty of lease agreement guarantying the obligations of Combangio under the lease agreement. The initial term of the lease is for 62 months which commenced on the lease commencement date of July 1, 2023, unless earlier terminated pursuant to the terms of the lease. The lease provides Combangio with an option to extend the lease for an additional five-year term. Combangio was required to make a payment in the amount of $ 144 , as a security deposit pursuant to the lease during the year ended December 31, 2023, which is included in other long-term assets on the consolidated balance sheet as of December 31, 2024. Upon the lease commencement, the Company recorded a right-of-use asset of $ 2,154 and corresponding $ 2,133 of lease liability.
F-20
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
As a result of the CHASE trial of KPI-012 decision to cease development, o n November 21, 2025, the Company terminated the lease with the landlord and signed a settlement to return the space and release the Company from its obligations and liabilities. The settlement was paid prior to December 31, 2025.
The components of lease expense and related cash flows were as follows:
Year Ended
December 31,
2025
2024
Lease cost
Operating lease cost
$
546
$
596
Short-term lease cost
37
34
Variable lease cost
179
209
Total lease cost
$
762
$
839
Operating cash outflows from operating leases
$
550
$
581
The weighted average remaining lease term and weighted average discount rate of operating leases were as follows:
December 31,
December 31,
2025
2024
Weighted average remaining lease term
-
3.7 years
Weighted average discount rate
-
13.1 %
Note 8: Debt
Loan and Security Agreement
On May 4, 2021, the Company entered into the Loan Agreement with Oxford Finance, in its capacity as lender (in such capacity, the “Lender”), and in its capacity as collateral agent (in such capacity, the “Agent”), pursuant to which a term loan of up to an aggregate principal amount of $ 125,000 was available to the Company, consisting of a tranche A term loan that was disbursed on the closing date in the aggregate principal amount of $ 80,000 and additional tranches that are no longer available to the Company. The Company utilized substantially all of the proceeds from the tranche A term loan to repay a prior credit facility.
Through June 30, 2023, the term loan bore interest at a floating rate equal to the greater of (i) 30-day LIBOR and (ii) 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 %. The Loan Agreement, prior to the Second Loan Amendment and Third Loan Amendment (as defined below), provided for interest-only payments until December 1, 2024 if neither the tranche B term loan nor the tranche C term loan are made, and until June 1, 2025 if either the tranche B term loan or the tranche C term loan is made (the “Amortization Date”). The aggregate outstanding principal balance of the term loans were required to be repaid in monthly installments starting on the Amortization Date based on a repayment schedule equal to (i) 18 months if neither the tranche B term loan nor the tranche C term loan is made and (ii) 12 months if either the tranche B term loan or the tranche C term loan is made. All unpaid principal and accrued and unpaid interest with respect to each term loan was due and payable in full on May 1, 2026 (the “Maturity Date”).
The Company paid a facility fee of $ 400 on the closing date of the Loan Agreement and agreed to pay a facility fee of $ 100 upon closing of the tranche B term loan and a $ 125 facility fee upon the closing of the tranche C term loan.
F-21
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
The Company will be required to make a final payment fee of 7.00 % of the original principal amount of any funded term loan payable on the earlier of (i) the prepayment of the term loan in full or (ii) the Maturity Date. At the Company’s option, the Company may elect to make partial repayments 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.
In connection with its entry into the Loan Agreement, the Company granted the Agent a security interest in substantially all of the Company’s personal property owned or later acquired, including intellectual property and the Commercial Business. The Company also agreed to maintain its cash balance in one or more controlled accounts in favor of the Agent, subject to specified exceptions. The Loan Agreement also contains customary representations and warranties and affirmative and negative covenants, as well as customary events of default. Certain of the customary negative covenants limit the ability of the Company and certain of its subsidiaries, among other things, to incur future debt, grant liens, make investments, make acquisitions, distribute dividends, make certain restricted payments and sell assets, subject in each case to certain exceptions. Certain of the affirmative covenants include, but are not limited to, a failure to pay principal or interest on its due date or any other obligations within three business days of such obligations’ due date, and a delisting from the Nasdaq Stock Market because of failure to comply with the continued listing standards of the listing tier of the Nasdaq Stock Market on which the Company’s common stock is listed. Events of default under the Loan Agreement include: (i) a material impairment in the perfection or priority of lien in the collateral or in the value of such collateral; (ii) a material adverse change in the business, operations or condition (financial or otherwise) of the Company; or (iii) a material impairment of the prospect of repayment of any portion of the obligations under the Loan Agreement (each, a “Material Adverse Change”).
The Loan Agreement includes features requiring (i) additional interest rate upon an event of default accrued at an additional 5 % , and (ii) the Lender’s right to declare all outstanding principal and interest immediately payable upon an event of default.
On May 21, 2022, in connection with its entry into the Asset Purchase Agreement with Alcon, the Company entered into an amendment to the Loan Agreement (the “Second Loan Amendment”). Pursuant to the Second Loan Amendment, the Lender and Agent consented to the entry by the Company into the Asset Purchase Agreement and the sale of the Commercial Business to Alcon and agreed to release its liens on the Commercial Business in consideration for the payment by the Company at the closing of the Alcon Transaction of an aggregate amount of $ 40,000 (the “Second Amendment Prepayment”) to the Lender and Agent, representing a partial prepayment of principal in the amount of $ 36,697 of the $ 80,000 principal amount outstanding under the term loan advanced by the Lender under the Loan Agreement, plus a prepayment fee of $ 734 and a final payment fee of $ 2,569 . In addition, the Company was required to pay all accrued and unpaid interest on the principal amount of the term loan being repaid.
In addition, under the Second Loan Amendment, the Lender and Agent agreed that, following the closing of the Alcon Transaction and the Second Amendment Prepayment, the Amortization Date would be extended from December 1, 2024 to January 1, 2026, at which time the aggregate principal balance of the term loan then outstanding under the Loan Agreement is required to be repaid in five monthly installments. Pursuant to the Second Loan Amendment, the Company 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.
On July 8, 2022, the Second Amendment Prepayment was paid in connection with the closing of Alcon Transaction, and as such, the Amortization Date was extended to January 1, 2026. The transaction resulted in a loss on extinguishment of debt of $ 2,583 for the year ended December 31, 2022, consisting of the prepayment premium, a pro-rata portion of the unamortized debt discount and issuance costs and the unaccreted exit fee due upon the Second Amendment Prepayment.
F-22
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
On December 27, 2022, the Company entered into an amendment to the Loan Agreement (the “Third Loan Amendment”). Pursuant to the Third Loan Amendment, the Lender and Agent agreed to amend certain provisions of the Loan Agreement to permit the transfer of the listing of the Company’s common stock from The Nasdaq Global Select Market to The Nasdaq Capital Market. Pursuant to the Third Loan Amendment, the Company agreed (A) to make partial prepayments of the principal amount of the term loan outstanding under the Loan Agreement as follows (the “Third Amendment Prepayments”): (1) a payment of $ 5,000 on or before June 30, 2023, representing a partial prepayment of principal in the amount of $ 4,673 , plus a final payment fee of $ 327 and (2) a payment of $ 5,000 on or before January 31, 2024, representing a partial prepayment of principal in the amount of $ 4,673 , plus a final payment fee of $ 327 and (B) that the Amortization Date under the Loan Agreement shall be changed from January 1, 2026 to January 1, 2025. The Company paid the Third Amendment Prepayments on January 25, 2023, following which the Company became required to repay the Loan Agreement in monthly installments from January 1, 2025 through May 1, 2026. The principal loan balance under the Loan Agreement following the Third Amendment Prepayments was $ 33,957 .
Pursuant to the Third Loan Amendment, in addition to the Third Amendment Prepayments, if the Company made an additional prepayment under the Loan Agreement equal to $ 5,000 (inclusive of the final payment fee) on or prior to December 31, 2024 (the “First Extension Prepayment”), the Amortization Date would be automatically changed to July 1, 2025, and the maturity date of the Loan Agreement would be automatically changed from May 1, 2026 to November 1, 2026. On December 26, 2024, the Company paid the First Extension Prepayment of $ 5,000 (inclusive of the final payment fee), and as a result, the Amortization Data was changed to July 1, 2025 and the maturity date was changed to November 1, 2026 .
If the Company made an additional prepayment under the Loan Agreement equal to $ 2,500 (inclusive of the final payment fee) on or prior to June 30, 2025 (the “Second Extension Prepayment”), the Amortization Date would be automatically changed to January 1, 2026, and the maturity date of the Loan Agreement would be automatically changed to May 1, 2027. On June 26, 2025, the Company paid the Second Extension Prepayment, and as a result, the Amortization Data was automatically changed to January 1, 2026 and the maturity date was automatically changed to May 1, 2027.
Under the Third Loan Amendment, the Lender and Agent also agreed to waive the prepayment fees for the Third Amendment Prepayments, the First Extension Prepayment, the Second Extension Prepayment and any other prepayments under the Loan Agreement. Pursuant to the Loan Agreement, the Company also will be required to pay all accrued and unpaid interest on the principal amounts of the term loan being repaid at the time of repayment.
On August 1, 2023, the Company entered into an amendment to the Loan Agreement with Combangio and Oxford Finance (the “Fourth Loan Amendment”). Pursuant to the Fourth Loan Amendment, certain provisions of the Loan Agreement were amended in connection with the change of the Company’s name and the cessation of the U.S. Dollar LIBOR rate. On August 2, 2023, the Company entered into an amendment to the Loan Agreement with Combangio and Oxford Finance (the “Fifth Loan Amendment”). Pursuant to the Fifth Loan Amendment, Oxford Finance consented to the Company’s entry into the CIRM Award and certain provisions of the Loan Agreement were amended in connection therewith.
F-23
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
In addition, in connection with the Loan Agreement, the Company paid certain fees to the Lender and other third-party service providers. The fees paid to the Lender were recorded as a debt discount while the fees paid to other third-party service providers were recorded as debt issuance cost. These costs are being amortized using the effective interest method over the term of the Loan Agreement. The amortization of debt discount and debt issuance cost is included in interest expense within the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2025, the effective interest rate was 19.0 %, which takes into consideration the additional 5.0 % interest rate as a result of the Event of Default, the non-cash accretion of the exit fee and the amortization of the debt discount and issuance costs.
On September 29, 2025, the Company received the Default Notice from Oxford Finance under the Loan Agreement, which asserted that an Event of Default had occurred and was continuing under Section 8.3 (Material Adverse Change) of the Loan Agreement and alleged that other events of default under the Loan Agreement may exist.
In the Default Notice, Oxford Finance declared, by reason of the Event of Default, that all obligations of the Company under the Loan Agreement were immediately due and payable. In addition, the Default Notice indicated that the Company’s obligations under the Loan Agreement began accruing interest at the Default Rate (as defined in the Loan Agreement) effective immediately upon occurrence of the Event of Default. The total amount of the Company’s obligations under the Loan Agreement as of September 29, 2025 that were accelerated and declared payable by Oxford was $ 29.1 million plus any additional interest due upon final payment and any expenses that become payable by the Company under the Loan Agreement.
On October 18, 2025, pursuant to the terms of the Loan Agreement, Oxford Finance informed the Company that it intended to foreclose on all of the Company’s remaining assets and that Oxford Finance would not consent to the Company’s use of cash for any reason other than for minimal payroll expenses pending Oxford Finance’s foreclosure of the Company’s assets. In addition, Oxford swept substantially all of the Company’s cash resources from its bank accounts. As a result, on October 19, 2025, the board of directors of the Company terminated all remaining employees not deemed necessary by Oxford to execute a foreclosure of the Company’s assets.
On November 3, 2025, Oxford Finance informed the Company that it intended to pause its foreclosure of the Company’s assets and permitted the Company to use $ 125.0 of cash it previously swept to fund the negotiation execution of the Convertible Loan Agreement (as defined below) and to fund essential work only.
On November 9, 2025, the Company entered into a Convertible Loan Agreement (the “Convertible Loan Agreement”) with David Lazar (the “Individual Lender”), pursuant to which the Individual Lender agreed to provide the Company a convertible loan in the aggregate amount of up to $ 375.0 (the “Loan Principal”), which was received in November 2025 and repaid in December 2025.
During the year ended December 31, 2025, the Company recognized interest expense of $ 3,276 for the Loan Agreement. This consisted of amortization of debt discount of $ 120 , accretion of the final payment fee of $ 354 and the contractual coupon interest expense of $ 2,802 . During the year ended December 31, 2024, the Company recognized interest expense of $ 5,766 for the Loan Agreement. This consisted of amortization of debt discount of $ 306 , accretion of the final payment fee of $ 942 and the contractual coupon interest expense of $ 4,518 .
F-24
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
On November 25, 2025, the Company entered into a Loan Settlement Agreement (the “Settlement Agreement”) with Oxford pursuant to which the Company owed Oxford $ 2,000 to be paid pursuant to the terms of the Settlement Agreement. The Settlement Agreement was entered into in connection with events of default by the Company, under the Loan and Security Agreement dated May 4, 2021 (the “Loan Agreement”). On December 26, 2025, the Company paid Oxford the settlement agreement amount of $ 2,000 . As a result of such payment, all of its obligations under the Settlement Agreement and the Loan Agreement have been satisfied and the aggregate liability due Oxford of approximately $ 10,600 has been settled and released.
The components of the carrying value of the debt as of December 31, 2025 and 2024 are detailed below:
December 31,
December 31,
2025
2024
Principal loan balance
$
—
$
29,284
Unamortized debt discount and issuance cost
—
( 225 )
Cumulative accretion of exit fee
—
1,379
Total debt
$
—
$
30,438
Less: current portion of long-term debt
—
( 10,336 )
Long-term debt, net
$
—
$
20,102
Note 9: Warrants
The Company has issued warrants in connection with debt transactions that were completed in 2018 and prior.
The following table summarizes the common stock warrants outstanding as of December 31, 2025 and 2024, each exercisable into the number of shares of common stock set forth below as of the specified dates:
Shares Exercisable at
Exercise
Expiration
Exercisable
December 31,
December 31,
Issued
Price Per Share
Date
From
2025
2024
2016
$
413.50
October 2026
September 2017
290
290
2018
$
609.23
October 2025
October 2018
—
3,693
290
3,983
Note 10: Common and Preferred Stock
Preferred Stock
The Company was authorized to issue up to 5,000,000 shares of preferred stock as of December 31, 2025 and 2024. As of December 31, 2025, the Company had designated 54,000 shares of preferred stock as Series E Preferred Stock, 2,928 shares of preferred stock as Series F Preferred Stock, 10,901 shares of preferred stock as Series G Preferred Stock, 9,393 shares of preferred stock as Series H Preferred Stock, 3,286 shares of preferred stock as Series I Preferred Stock, and 900,000 shares of preferred stock as Series AA Preferred Stock, of which 9,278 shares of Series E Preferred Stock, 2,928 shares of Series F Preferred Stock, 10,901 shares of Series G Preferred Stock, 2,299 shares of Series H Preferred Stock, 0 shares of Series I Preferred Stock and 900,000 shares of Series AA Preferred Stock were outstanding as of December 31, 2025. On January 20, 2026, all of the Series E Preferred Stock, Series F Preferred Stock, Series H Preferred Stock were converted to common stock. On January 30, 2026, the Company designated 2,100,000 shares of preferred stock as Series AAA Preferred Stock. All of the shares of Series AAA Preferred Stock have been converted to common stock.
F-25
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Series AA Private Placement
On November 23, 2025, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with David Lazar (“Investor”), pursuant to which the Company agreed to issue and sell, in a private placement, shares of Series AA Convertible Non-Redeemable Preferred stock (the “Series AA Preferred Shares”), par value $ 0.001 per share, of the Company and shares of Series AAA Convertible Non-Redeemable Preferred Stock (the “Series AAA Preferred Shares”, and together with the Series AA Preferred Shares, the “Placement Shares”), par value $ 0.001 per share, of the Company, in two closings for aggregate gross proceeds of up to $ 6.0 million. Pursuant to the Securities Purchase Agreement, Company agreed to issue and sell to the Investor at a first closing 900,000 Series AA Preferred Shares, at a price per Series AA Preferred Share equal to $ 2.00 , for aggregate gross proceeds of $ 1.8 million. The closing for the Series AA Preferred Shares occurred on November 24, 2025 (the “Series AA Preferred Share Closing”). The closing for the Series AAA Preferred Shares occurred on January 30, 2026 (the “Series AA Preferred Share Closing”).
Series AA Preferred Stock
Conversion
Each outstanding share of Series AA Preferred Stock is initially convertible into 55 shares of the Company’s common stock, subject to adjustment as provided in the applicable Certificate of Designations, at any time at the option of the holder.
Voting
Shares of Series AA Preferred Stock generally have no voting rights, except to the extent provided by applicable law, and except that the consent of the holders of Series AA Preferred Stock will be required to alter, repeal or change the powers, preferences or rights of the Series AA Preferred Stock.
Dividends
Shares of Series AA Preferred Stock are entitled to receive dividends equal to (on an as-if-converted-to-common stock basis), and in the same form and manner as, dividends actually paid on shares of common stock.
Liquidation Rights
The Series AA Preferred Stock ranks on parity with the Series AAA Preferred Stock. Upon any dissolution, liquidation or winding up of the Company, whether voluntary or involuntary (“Dissolution”), subject to any superior rights of holders of senior securities, if any, holders of Series AA Preferred Stock will be entitled to receive, on a pari passu basis as applicable (A) an amount per share of Series AA Preferred Stock equal to the greater of (i) $ 2.00 (as adjusted for stock splits, combinations, reorganizations and the like) plus any dividends declared but unpaid thereon or (ii) such amount per share as would have been payable had all shares of the Series AA Preferred Stock or Series AAA Preferred Stock, as applicable, been converted into common stock immediately prior to such Dissolution, before any distributions shall be made to holders of common stock.
If, upon any such Dissolution, the assets of the Company are insufficient to pay the holders of shares of the Series AA Preferred Stock, the holders of shares of Series AA Preferred Stock will share in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series AA Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares of were paid in full.
F-26
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Common Stock
The Company was authorized to issue up to 120,000,000 shares of common stock with a $ 0.001 par value per share as of December 31, 2025 and 2024. The Company had 27,849,725 and 6,091,182 shares of common stock issued and outstanding as of December 31, 2025 and 2024, respectively.
Holders of the Company’s common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Each election of directors by the Company’s stockholders will be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by the Company’s Board of Directors, subject to any preferential dividend rights of any preferred stock that the Company may issue in the future.
In the event of the Company’s dissolution, whether voluntary or involuntary, the holders of its common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of the Series AA Preferred Stock, and any preferred stock that the Company may issue in the future. Holders of the Company’s common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of the Company’s common stock are subject to and may be adversely affected by the rights of the holders of the Series AA Preferred Stock and shares of any series of its preferred stock that the Company may designate and issue in the future.
Reserved Shares
As of December 31, 2025 and 2024, the Company has reserved the following shares of common stock for issuance upon exercise of rights under warrants, under the Amended and Restated 2017 Employee Stock Purchase Plan (the “ESPP”), upon the exercise of stock options, upon the vesting of RSUs, and upon conversion of the Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series AA Preferred Stock:
December 31,
December 31,
2025
2024
Warrant rights to acquire common stock
290
3,983
ESPP
37,588
35,347
Outstanding inducement stock option awards
1,981
10,496
2009 Plan
26
26
2017 Plan
1,945,488
1,675,807
Convertible preferred stock (as converted to common stock)
52,040,600
7,775,400
Total
54,025,973
9,501,059
ASC 480 - Distinguishing Liabilities from Equity determination
The Series F Preferred Stock issued pursuant to the 2023 Securities Purchase Agreement, the Series G Preferred Stock issued pursuant to the March 2024 Securities Purchase Agreement, the Series H Preferred Stock issued pursuant to the June 2024 Securities Purchase Agreement, the Series I Preferred Stock issued pursuant to the December 2024 Securities Purchase Agreement, and the Series AA Preferred Stock issued pursuant to the Series A Securities Purchase Agreement were not within the scope of ASC 480. These instruments did not contain any embedded derivatives required to be bifurcated from the Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and Series AA Preferred Stock and these instruments were equity classified within permanent equity.
F-27
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Note 11: Stock-based Compensation
Stock Incentive Plans
On June 22, 2023, the Company’s stockholders approved the Company’s Amended and Restated 2017 Equity Incentive Plan (the “2017 Plan”), which amended and restated the Company’s 2017 Equity Incentive Plan, as amended, to (i) increase the number of shares of common stock authorized for issuance thereunder by 1,250,000 shares; (ii) limit the number of incentive stock options that can be granted under the plan to 7,738,761 shares of common stock; (iii) add an annual limit on non-employee director compensation, including cash and the value of equity awards, of $ 750,000 for incumbent directors and $ 1,000,000 in a director’s first year of service; and (iv) extend the term of the plan (including the duration of the evergreen) to 10 years from June 22, 2023, the date that stockholders approved the plan. In addition, the 2017 Plan provides for an annual increase to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2024 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2033, equal to the lower of (i) 4 % of the sum of (I) the number of outstanding shares of common stock on such date and (II) the number of shares of common stock issuable upon conversion of any outstanding shares of convertible preferred stock of the Company on such date (without giving effect to any restrictions or limitations on conversion) and (ii) an amount determined by the Company’s board of directors.
As of December 31, 2025, there were 527,508 shares of common stock available for grant under the 2017 Plan.
Under the plans, the Board or the compensation committee determines the number of shares of common stock to be granted pursuant to the awards, as well as the exercise price and terms of such awards. The exercise price of incentive stock options cannot be less than the fair value of the common stock on the date of grant. Stock options awarded under the plans expire 10 years after the grant date, unless the Board or the compensation committee sets a shorter term. Options granted under the plans generally vest over a four-year period. A portion of the unvested stock options will vest upon the sale of all or substantially all of the stock or assets of the Company.
Stock Option Awards
During the years ended December 31, 2025 and 2024, the Company granted options for the purchase of 689,525 and 317,139 shares, respectively, of common stock.
F-28
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
A summary of option activity is as follows:
Weighted
Weighted
Average
Average
Remaining
Aggregate
Number of
Exercise
Contractual
Intrinsic
Shares
Price
Term
Value
(Years)
(in thousands)
Outstanding as of January 1, 2025
878,003
$
13.22
8.6
$
23
Granted
689,525
8.30
Exercised
( 885 )
7.23
Forfeited
( 377,603 )
10.49
Outstanding as of December 31, 2025
1,189,040
$
—
6.7
$
—
Vested or expected to vest as of December 31, 2025
1,189,040
$
—
6.7
$
—
Options exercisable as of December 31, 2025
643,354
$
12.19
5.0
$
—
The Company records stock-based compensation related to stock options granted at fair value. The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of stock option grants and to determine the related compensation expense. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates. The assumptions used in determining fair value of the stock options granted during the years ended December 31, 2025 and 2024 are as follows:
2025
2024
Expected volatility
107.8 %
–
114.1 %
107.9 %
–
110.3 %
Risk-free interest rate
3.80 %
–
4.47 %
3.46 %
–
4.41 %
Expected dividend yield
0 %
0 %
Expected term (in years)
5.24
–
6.02
5.50
–
6.07
The Company derived the risk-free interest rate assumption from the U.S. Treasury rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the awards being valued. The Company based the expected dividend yield on its expectation of not paying dividends in the foreseeable future. The Company calculated the expected term of options using the simplified method, as the Company lacks relevant historical data due to the Company’s limited operating experience. The expected volatility is based upon the historical volatility of the Company. The impact of forfeitures on compensation expense is recorded as they occur.
The weighted average grant-date fair value of options granted during the years ended December 31, 2025 and 2024, was $ 7.42 and $ 5.79 , respectively. The fair value is being expensed over the vesting period of the options on a straight-line basis as the services are being provided.
Stock-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows:
Year Ended
December 31,
2025
2024
Research and development
$
1,292
$
2,635
General and administrative
5,703
5,754
Total
$
6,995
$
8,389
During the years ended December 31, 2025 and 2024, 885 and 1,281 options, respectively, were exercised.
F-29
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Restricted Stock Units —During the years ended December 31, 2025 and 2024, the Company issued 106,725 and 71,830 RSUs, respectively, to certain executives and other employees which will vest no sooner than one-third per year over three years on the anniversary of the date of grant.
As of December 31, 2025, a total of 230,947 RSUs were outstanding, consisting of 186,463 unvested shares and 44,484 vested and deferred shares by directors.
A summary of activity for RSUs for the year ended December 31, 2025 is as follows:
Weighted Average
Grant Date
Shares
Fair Value
Unvested and outstanding balance as of January 1, 2025
544,117
$
21.67
Changes during the period:
Granted
106,725
7.07
Vested
( 311,509 )
24.64
Forfeited
( 152,870 )
15.36
Unvested and outstanding balance as of December 31, 2025
186,463
Vested and deferred balance as of December 31, 2025
44,484
Employee Stock Purchase Plan —In 2017, the Company approved the 2017 Employee Stock Purchase Plan, which was amended and restated in December 2018 (as amended, the “ESPP”). The ESPP reserved an aggregate of 4,466 shares of common stock and provides for an annual increase on the first day of each fiscal year, beginning on January 1, 2019 and ending on December 31, 2029, in an amount equal to the lowest of: (1) 17,868 shares of the Company’s common stock; (2) 1 % of the total number of shares of the Company’s common stock outstanding on the first day of the applicable fiscal year; and (3) an amount determined by the Company’s board of directors. On January 1, 2025, 17,868 shares of common stock were added and were available for grant under the ESPP.
The ESPP provides for two six-month offering periods each year: the first offering period begins on the first trading day on or after each January 1 and the second offering period begins on the first trading day on or after each July 1. Under the ESPP, participating employees can authorize the Company to withhold a portion of their base pay during consecutive six-month payment periods for the purchase of shares of the Company’s common stock. At the conclusion of the period, participating employees can purchase shares of the Company’s common stock at 85 % of the lesser of the closing price of the common stock on (i) the first business day of the plan period or (ii) the exercise date. The fair value of the purchase rights granted under the ESPP was estimated on the date of grant, using the Black-Scholes option-pricing model. During the years ended December 31, 2025 and 2024, employees of the Company purchased an aggregate of 15,627 and 11,448 shares, respectively, under the ESPP.
F-30
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Note 12: Loss Per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows for the years ended December 31, 2025 and 2024:
Year Ended
December 31,
2025
2024
Numerator:
Net loss attributable to common stockholders
$
( 26,980 )
$
( 38,511 )
Denominator:
Weighted-average common shares outstanding, basic and diluted (1)
8,148,275
3,796,047
Net loss per share attributable to common stockholders, basic and diluted
$
( 3.31 )
$
( 10.15 )
(1) Included in the weighted-average common shares outstanding, basic and diluted are vested but deferred shares for which all contingencies have been satisfied.
The following potential common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect. The share amounts presented below represent the average of the number of incremental shares included in each quarterly calculation:
Year Ended
December 31,
2025
2024
Options to purchase shares of common stock
1,373,291
905,645
Unvested RSUs
360,039
621,886
Unexercised warrants
3,060
4,223
Convertible preferred stock (as converted to common stock)
18,433,000
7,294,125
20,169,390
8,825,879
Note 13: Income Taxes
The Company has had no income tax expense due to operating losses incurred for the years ended December 31, 2025 and 2024. The Company has also not recorded any income tax benefits for the net operating losses incurred in each period due to its uncertainty of realizing a benefit from those items. All of the Company’s losses before income taxes were generated in the United States.
F-31
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Beginning in 2025 annual reporting, the Company has adopted ASU 2023-09 prospectively. The difference between the Company's effective income tax rate and the U.S. federal statutory rate of 21 % was primarily driven by the change in the valuation allowance. A reconciliation of the federal statutory income tax rate to the Company's effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:
Year Ended December 31, 2025
Federal statutory income tax rate
$
( 5,733 )
21.0
%
Effect of:
State income taxes, net of federal benefit
—
—
Change in Valuation Allowance
7,449
( 27.3 )
Nontaxable or Nondeductible Items:
Stock Based Compensation Permanent
2,139
( 7.8 )
Mark to Market
( 978 )
3.6
Other Nontaxable or Nondeductible Items
82
( 0.3 )
Tax Credits:
Federal R&D and Orphan Drug Credits
( 2,945 )
10.8
Other
( 14 )
0.1
$
—
—
%
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the year ended December 31, 2024 is as follows:
Year Ended December 31, 2024
Federal statutory income tax rate
21.0
%
Effect of:
State income taxes, net of federal benefit
6.5
Research and development tax credits
3.0
Stock-based compensation
( 3.9 )
Change in valuation allowance
( 26.3 )
Other
( 0.3 )
Effective income tax rate
—
%
F-32
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Net deferred tax assets as of December 31, 2025 and 2024 consisted of the following:
December 31,
2025
2024
Deferred tax assets:
Net operating loss carryforwards
$
131,286
$
121,135
Capitalized research and development and start-up expenditures
9,865
13,878
Research and development tax credit carryforwards
5,492
2,476
Stock-based compensation
—
1,203
Lease liabilities
—
535
Rebates, incentives, trade discounts and allowances
43
103
Other
177
676
Total deferred tax assets
$
146,863
$
140,006
Deferred tax liabilities:
Right-of-use assets
—
( 499 )
Total deferred tax liabilities
$
—
$
( 499 )
Valuation allowance
$
( 146,863 )
$
( 139,507 )
Net deferred tax assets
$
—
$
—
The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2025 and 2024. The valuation allowance increased by $ 7,356 and $ 10,776 during the years ended December 31, 2025 and 2024, respectively. The current year and prior year increase is largely the result of an increase to federal net operating losses and generation of federal and state research and development tax credits. Management reevaluates the positive and negative evidence at each reporting period.
As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the "change in valuation allowance" line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance:
Year Ended
December 31,
2025
Beginning Balance
$
139,507
Change charged to income tax expense
7,356
Changes charged to OCI
—
Changed charged to goodwill
—
Ending Balance
$
146,863
As of December 31, 2025 and 2024, the Company had federal net operating loss carryforwards of $ 561,353 and $ 405,544 , respectively, which may be available to offset future federal tax liabilities and expire at various dates beginning in 2030. As of December 31, 2025 and 2024, the Company had state net operating loss carryforwards of $ 491,801 and $ 469,053 , respectively, which may be available to offset future state income tax liabilities and expire at various dates beginning in 2025. As of December 31, 2025 and 2024, the Company had federal and state research and development credit carryforwards of $ 5,492 and $ 2,476 , respectively.
F-33
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of Section 382 of the Internal Revenue Code of 1986, certain substantial changes in the Company’s ownership, including a sale of the Company, or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards, which could be used annually to offset future taxable income. The Company has completed an analysis as of December 31, 2022 and determined that an additional ownership change occurred during December 2022 as a result of the issuance of Series E Preferred Stock, further limiting the net operating loss carryforwards and research and development tax credits due to the expiration of those attributes. As a result, the utilization of the Company’s net operating loss carryforwards is subject to an annual limitation of $ 222 , which is reflected in the numbers presented above.
The Tax Cuts and Jobs Act resulted in significant changes to the treatment of research and developmental expenditures under Section 174 of the Internal Revenue Code. For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all research and development expenditures that are paid or incurred in connection with their trade or business. Per the One Big Beautiful Bill Act, effective July 4, 2025, taxpayers are still required to capitalize foreign research and development expenditures over 15 years, but now have the opportunity to deduct domestic research and development expenditures under IRC 174A. The Company has elected to continue to amortize prior year domestic capitalized costs until the amortization of such costs is complete.
The Company files its corporate income tax returns in the United States and various states. All tax years since the date of incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (‘‘IRS’’) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax year.
As of December 31, 2025 and 2024 the Company had no uncertain tax positions. The Company’s policy is to recognize interest and penalties related to income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the years ended December 31, 2025 and 2024.
Note 14: Commitments and Contingencies
Stanford License Agreement — In October 2019, Combangio entered into a license agreement with The Board of Trustees of The Leland Stanford Junior University (“Stanford”), which was amended in February 2020 and subsequently transferred to the Company by operation of law upon the Combangio Acquisition. Pursuant to the license agreement with Stanford (the “Stanford Agreement”), the Company has a worldwide, exclusive, sublicensable license under certain patent rights (“licensed patents”), directed to methods to promote eye wound healing, to make, have made, use, import, offer to sell and sell products (“licensed products”) that are covered by the licensed patents for use in all fields. Under the Stanford Agreement, the Company is required to pay Stanford annual license maintenance fees in the low-to-mid five figures which are creditable against earned royalties owed to Stanford for the same year, an aggregate of up to $ 1,075 for the achievement of specified development and regulatory milestones, and an aggregate of up to $ 1,100 for the achievement of specified sales milestones. Stanford is also entitled to receive tiered royalties in a low single digit percentage range on net sales of licensed products that are covered by a valid claim of a licensed patent. During the years ended December 31, 2025 and 2024, amounts paid to Stanford were de minimis . On September 29, 2025, the Company announced that the CHASE trial of KPI-012 for the treatment of PCED did not meet the primary endpoint of complete healing of PCED as measured by corneal fluorescein staining. The CHASE trial also failed to achieve statistical significance for key secondary efficacy endpoints and did not show any meaningful difference between either KPI-012 treatment arm and the placebo arm. Based on the CHASE trial results, we determined to cease development of KPI-012 and our MSC-S platform.
F-34
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Contingencies related to the Merger Agreement — In connection with the Combangio Acquisition, the Company agreed to make additional payments based on the achievement of certain milestone events related to KPI-012. The Company recognized certain contingent consideration liabilities at fair value on the acquisition date, and revalues the remaining obligations each reporting period. The total potential maximum payout for the milestone payments, which have been recorded as liabilities at fair value, is $ 40,000 and the milestone payments are contingent upon the achievement of specified development, regulatory and commercialization milestones. Following the achievement of the First Dosing Milestone in February 2023, the Company paid an aggregate of $ 2,500 in cash and $ 2,354 in shares of the Company’s common stock (representing an aggregate of 105,038 shares of the Company’s common stock) to the former Combangio Equityholders in March 2023. The Company paid the remaining amount due in connection with the First Dosing Milestone of $ 146 in cash in January 2024. Additionally, pursuant to the merger agreement for the Combangio Acquisition, the Company could trigger potential future sales-based milestone payments of up to $ 65,000 and cash royalty payment obligations in the mid-to-high single digits. Because the achievement of these sales-based milestones related to KPI-012 was not considered probable as of December 31, 2025 or December 31, 2024, such contingencies have not been recorded in the Company’s consolidated financial statements. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory or commercial milestones.
Litigation —The Company is not currently subject to any material legal proceedings.
Guarantees and Indemnifications —The Company’s Certificate of Incorporation authorizes the Company to indemnify and advance expenses to its officers and directors and agents to the fullest extent permitted by law.
The Company’s equity agreements and certain other arrangements include standard indemnifications against claims, actions, or other matters that may arise in connection with these arrangements.
As of December 31, 2025 and 2024, the Company had not experienced any losses related to these indemnification obligations, and no claims with respect thereto were outstanding. The Company does not expect significant claims related to these indemnification obligations and has no amount accrued related to these contingencies. The Company does not expect these indemnifications to have a material adverse effect on these consolidated financial statements.
Note 15: Defined Contribution Plan
The Company has a 401(k) defined contribution plan (the “401(k) Plan”) for substantially all of its employees. Eligible employees may make pretax contributions to the 401(k) Plan up to statutory limits.
The Company made discretionary matching contributions of $ 134 and $ 160 to the 401(k) Plan during the years ended December 31, 2025 and 2024, respectively.
Note 16: Subsequent Events
Series AAA Private Placement
As disclosed in Note 10, on November 25, 2025, the Company entered into a Securities Purchase Agreement, with the Series AA Investor, pursuant to which the Company agreed to issue and sell, in a private placement, shares of the Series AA Preferred Stock and the Series AAA Preferred Stock of the Company in two closings for aggregate gross proceeds of up to $ 6.0 million.
On December 11, 2025, the Series AA Investor transferred his rights and obligations under the Securities Purchase Agreement solely with respect to the shares of Series AAA Preferred and the director nomination right to AK Holdings Group Inc., a Panamanian company (“AK Holdings”). On January 29, 2026, pursuant to the terms of that certain Rights Purchase Agreement by and among AK Holdings and each signatory thereto (the “Series AAA
F-35
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Investors”), AK Holdings sold its rights to purchase the Series AAA Preferred Stock (but not its director nomination rights under the November 2025 Purchase Agreement) to the Series AAA Investors.
On January 30, 2026, the Company entered into that certain Securities Purchase Agreement (the “Series AAA Purchase Agreement”) with each of the Series AAA Investors pursuant to which the Company agreed to issue and sell to the Series AAA Investors at second closing of the Private Placement, an aggregate of 2,100,000 shares of Series AAA Preferred Stock at a price per share of Series AAA Preferred Stock equal to $ 2.00 , for aggregate gross proceeds of $ 4,200 . The Closing occurred on January 30, 2026, following (A) the approval at the Annual Meeting of the Issuance Proposal and the Share Increase Proposal (each as defined herein), (B) the filing with the Secretary of State of the State of Delaware of the (i) Certificate of Amendment (as defined herein) and (ii) Certificate of Designations, Preferences and Rights of Series AAA Convertible Non-Redeemable Preferred Stock (the “Certificate of Designations”), and (C) the satisfaction of other customary closing conditions. The terms of the Series AAA Preferred Stock are substantially similar to the terms of the Series AA Preferred Stock. Each share of Series AAA Preferred Stock was convertible into 420 shares of Common Stock for an aggregate total of 882,000,000 shares of Common Stock issuable upon conversion of the Series AAA Preferred Stock. The Purchase Agreement contains customary representations, warranties and agreements by the Company and customary closing conditions. The representations, warranties and covenants contained in the Purchase Agreement were made solely for the benefit of the parties thereto and as of specific dates and may be subject to limitations agreed upon by the contracting parties. All of the shares of Series AAA Preferred Stock have been converted to common stock.
License Agreement
On March 3, 2026 (the “Effective Date”), the Company and 2624465 Ontario Inc. o/a Younet AI, an Ontario corporation (“Younet”) entered into a Platform Development and Exclusive License Agreement (the “Agreement”) pursuant to which the Company obtained a worldwide exclusive license (the “Exclusive License”) of Younet’s proprietary, custom biomedical artificial intelligence research platform (the “Researgency Platform”), together with associated trademarks and intellectual property. The term of the Agreement is for 12 months following the Effective Date (the “Initial Term”), with the option by the Company to renew the agreement for successive 12 months terms (each, a “Renewal Term”), in each case by providing notice to Younet pursuant to the terms of the Agreement (the “Extension Notice”). Pursuant to the Agreement, Younet shall also provide to the Company certain deliverables and services related to the Researgency Platform, with certain additional deliverables to be provided by Younet in the event of a Renewal Term, in each case with all operating costs relating to the Researgency Platform to be paid by the Company.
In consideration of the services to be performed by Younet under the Agreement, the Company has agreed to pay to Younet for the Initial Term a cash fee of up to $ 530 consisting of (i) $ 80 in cash, which was paid by the Company on the Effective Date, and (ii) in the event the Company delivers to Younet a written notice electing to engage Younet for the continued development of Researgency, $ 450 in cash, payable in 9 monthly installments of $ 50 , pursuant to the terms of the Agreement. Such notice may be provided at any time on or after the first business day of the third month following the Effective Date and such continued development may be terminated upon 30 days notice by the Company. In addition, the Company has agreed to issue to Younet 5,000,000 shares of the Company’s common stock, par value $ 0.001 per share (the “Common Stock”), within 10 business days of the Effective Date. In addition, each time the Agreement is extended for a Renewal Term, the Company shall (i) pay to Younet $ 250 in cash and (ii) issue to Younet 5,000,000 shares of Common Stock within 10 business days of the Extension Notice. Any shares of Common Stock issuable to Younet pursuant to the Agreement shall herein be referred to as the “Younet Shares.” Except for certain block trades, during the Term (as defined in the Agreement) and for the twelve months thereafter, Younet shall not sell any Younet Shares on any Trading Day (as defined in the Agreement) in an amount that exceeds 3 % of the Daily Trading Volume (as defined in the Agreement) for such Trading Day.
In addition, Younet has granted to the Company an irrevocable option, exercisable at any time during the Initial Term or any Renewal Terms, to acquire all of the issued and outstanding equity interests of Younet, or, at the Company’s election, substantially all of the assets of Younet, for a total purchase price of $ 55,000 , subject to the terms of the Agreement.
F-36
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
If the Company does not deliver an Extension Notice prior to the expiration of the Initial Term or any Renewal Term, the Agreement shall expire automatically at the end of the applicable term. In addition, the Agreement may be terminated by either party (i) for uncured material breach or (ii) due to the insolvency of the other party. Upon termination or expiration, (a) the Exclusive License will terminated, (b) all licenses granted to Younet with respect to KALA Data (as defined in the Agreement) will immediately terminate, (c) all licenses granted to the Company with respect to Younet Background IP (as defined in the Agreement) will survive in accordance with their terms, and (d) all Work Product (as defined in the Agreement) completed as of the date of termination shall be delivered to and owned by the Company.
The License Agreement additionally includes customary representations and warranties, covenants, and indemnification obligations for a transaction of this nature.
Loan and Security Agreement
On February 9, 2026, the Company made a loan (the “Loan”) in the principal amount of $ 7,000 , evidenced by a secured promissory note (the “Note”) to Minglemint Solutions LLC (“Borrower”) in connection with the Company’s determination that a portion of its cash on hand was in excess of its near-term working capital requirements and operational needs. In order to optimize the return on such excess cash, rather than holding the full balance in a bank deposit account, which offered a materially lower yield, the Company elected to deploy that portion into the Loan, which bears interest at a rate of 8.0 % per annum. The Company believes that the interest rate obtained under the Loan, together with the security interest granted to the Company over all fixtures and personal property of the Borrower, provides a more favorable risk-adjusted return on idle cash than the return available through conventional bank deposit arrangements, while preserving the Company’s ability to meet its anticipated working capital and operational obligations. The Loan bears interest at a rate of 8.0 % per annum, and is due and payable on February 9, 2027.
The Note includes customary event of default provisions, including, but not limited to, for a breach of any representations and warranties or covenants, any bankruptcy or insolvency proceedings of the Borrower, and the failure of the Borrower to pay, upon 15 days ’ written notice of default, any principal amount of the Loan or interest due. The Note provides for a default interest rate of 13.0 %. As described in the Note, upon the occurrence of certain events of default, the Company may, among other remedies, declare the outstanding balance of the Note including all accrued interest thereon immediately due and payable.
Additionally, the Note is secured by a continuing first priority lien and security interest in all fixtures and personal property of the Borrower (the “Collateral”), pursuant to the security agreement with the Borrower dated February 9, 2026 (the “Security Agreement”). The Collateral includes, but is not limited to, all accounts, goods, documents, instruments, securities and investment properties, money, accounts and rights to payment of the Borrower, and any proceeds, records and obligations relating to the foregoing, as more fully detailed in the Security Agreement.
F-37