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Item 9A. Controls and Procedures

2025-03-31 compared with 2024-03-29 · 1217 added, 465 removed, 820 unchanged (67% of the section changed)

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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, 2024.

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.

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.

21 unchanged sentences

Directors, Executive Officers and Corporate Governance

The information required by this Item 10 is incorporated by reference from the information that will be contained in our Proxy Statement for our 2024 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to General Instruction G(3) of Form 10-K.

Executive Officers and Directors

Set forth below are the names of, ages as of March 1, 2025, and certain other information for, each executive officer and member of our board of directors.

There are no family relationships among any of our directors or executive officers.

Executive Officers

Todd Bazemore

Interim Chief Executive Officer, President and Chief Operating Officer

Kim Brazzell, Ph.D.

Head of Research and Development and Chief Medical Officer

Darius Kharabi

Chief Business Officer

Mary Reumuth, C.P.A.

Chief Financial Officer, Treasurer and Secretary

Non-Employee Directors

Chair of the Board

Marjan Farid, M.D.(2)(3)

Daniel Myers(1)(2)

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

(3) Member of the Nominating and Corporate Governance Committee.

Executive Officers

Todd Bazemore has served as our interim Chief Executive Officer since February 2025, as our President since December 2021 and as our Chief Operating Officer since November 2017.

Previously, he served as Executive Vice President and Chief Operating Officer of Santhera Pharmaceuticals (USA) Inc., or Santhera, a pharmaceutical company and subsidiary of Santhera Pharmaceuticals Holdings AG, from September 2016 until November 2017.

Prior to joining Santhera, Mr.

Bazemore served as Executive Vice President and Chief Commercial Officer of Dyax Corp., or Dyax, a biopharmaceutical company focused on orphan diseases, between April 2014 and January 2016, when Dyax was acquired by Shire plc.

Bazemore oversaw all aspects of Dyax’s commercial department including sales, marketing, commercial analytics, market access and patient services.

Between April 2012 and September 2013, he served as Vice President, Managed Markets at Sunovion Pharmaceuticals, Inc., or Sunovion (a subsidiary of Dainippon Sumitomo Pharma Co.

Ltd.), a global biopharmaceutical company focused on serious medical conditions.

Prior to that, Mr.

Bazemore held several roles of increasing responsibility at Sunovion, including Vice President of Sales and Vice President of Respiratory Business Unit.

Since October 2020, Mr.

Bazemore has served on the board of directors of Pulmatrix Inc., a clinical stage publicly traded biopharmaceutical company.

He received his Bachelor of Science from the University of Massachusetts, Lowell.

Kim Brazzell, Ph.D.

has served as our Chief Medical Officer since February 2013 and as our Head of Research and Development since December 2021.

Brazzell served as Chief Medical Officer of Mimetogen Pharmaceuticals, Inc., or Mimetogen, a clinical stage biotechnology company, from January 2012 until December 2015 and has served on the board of directors of Mimetogen since January 2024.

Brazzell also held several executive positions at Inspire Pharmaceuticals, Inc., or Inspire, a specialty pharmaceutical company focusing on ophthalmic and respiratory products, including Executive Vice President of Medical and Scientific Affairs from 2010 to 2011, Executive Vice President and Head of Ophthalmology Business from 2009 to 2010, and Senior Vice President of Ophthalmic Research and Development from 2004 to 2008.

Prior to joining Inspire, Dr.

Brazzell served as Global Head of Clinical R&D and Senior Vice President, U.S.

R&D, of Novartis Ophthalmics AG from 2000 to 2004.

Brazzell also served as Vice President, R&D at Ciba Vision Ophthalmics, Inc.

and as Associate Director, R&D, at Alcon Laboratories, Inc.

Brazzell received a B.S.

in Pharmacy and a Ph.D.

in Pharmaceutical Sciences from the University of Kentucky.

Darius Kharabi has served as our Chief Business Officer since November 2021.

From August 2018 to November 2021, Mr.

Kharabi was co-founder and Chief Executive Officer of Combangio Inc., or Combangio, a clinical stage ophthalmology mesenchymal stem cell secretome company that we acquired in November 2021.

He is the co-founder of Lagunita Biosciences, LLC, an early-stage medical investment company.

Since 2015, Mr.

Kharabi has served as the Chief Operating Officer of Lagunita Biosciences, LLC.

From October 2015 to August 2018 he helped create and manage multiple Lagunita portfolio life-science companies, including xCella Biosciences, acquired by Ligand, Kedalion Therapeutics, acquired by Novartis AG, and Combangio.

From October 2015 through August 2019 he served as the Chief Operating Officer of xCella Biosciences and from October 2015 through November 2017 he served as the President of Kedalion.

Prior to Lagunita, he served as Vice President, Corporate Development and International Sales at OrthAlign, a commercial stage orthopedic surgery navigation company, where his responsibilities included the launch of the KneeAlign® total knee arthroplasty navigation product line in the United States and global markets.

Kharabi started his career as a biotechnology licensing attorney at Wilson, Sonsini, Goodrich & Rosati, PC.

He received his B.S.

in Biochemistry from Georgetown University and his J.D.

degrees from Stanford University.

Mary Reumuth, C.P.A.

has served as our Chief Financial Officer since July 2017, our Secretary since April 2024, our Senior Vice President, Finance from February 2017 to July 2017, our Vice President, Finance from December 2014 to February 2017, our Senior Director, Finance from February 2014 to December 2014, our Corporate Controller from February 2014 to July 2017 and as our Treasurer since February 2014.

Prior to joining us, Ms.

Reumuth acted as an independent financial consultant from November 2012 to January 2014 and, prior to that, served as Corporate Controller for Enobia Pharma Corp., or Enobia, a global biopharmaceutical company acquired by Alexion Pharmaceuticals, Inc., from May 2011 to June 2012.

Prior to Enobia, Ms.

Reumuth served as Director of Finance at Verenium Corporation, or Verenium, a biotechnology company, from December 2007 to March 2011.

From 2001 to 2007, Ms.

Reumuth held a variety of finance and accounting positions at Genzyme Corporation, or Genzyme, (now a Sanofi Company), and ILEX Oncology, Inc., or ILEX (acquired by Genzyme).

Prior to ILEX, Ms.

Reumuth was an auditor at Ernst & Young LLP.

From April 2022 to August 2024, Ms.

Reumuth served on the board of directors of Olink Holding AB, a publicly traded company.

Reumuth earned her Bachelor’s degree in Business Administration from Texas A&M University-Corpus Christi, and is a Certified Public Accountant.

Non- Employee Directors

Mark Iwicki has served as Chair of our board of directors since September 2015.

Iwicki has served as the Chief Executive Officer of Inhibikase Therapeutics, Inc., a pharmaceutical company, since February 2025.

Iwicki served as our Chief Executive Officer from September 2015 to February 2025, our President from August 2017 to December 2021 and as Executive Chair of our board of directors from April 2015 to September 2015.

Prior to joining us, Mr.

Iwicki served as President and Chief Executive Officer of Civitas Therapeutics, Inc., or Civitas, a biopharmaceutical company, from January 2014 to November 2014.

Prior to Civitas, Mr.

Iwicki served as President and Chief Executive Officer at Blend Therapeutics, Inc., or Blend, a biopharmaceutical company, from December 2012 to January 2014.

Prior to Blend, Mr.

Iwicki was President and Chief Executive Officer of Sunovion.

Iwicki was at Sepracor Inc./Sunovion from October 2007 to June 2012.

Prior to joining Sepracor Inc., Mr.

Iwicki was Vice President and Business Unit Head at Novartis Pharmaceuticals Corporation, a biopharmaceutical company.

He was at Novartis from March 1998 to October 2007.

Prior to that, Mr.

Iwicki held management positions at Astra Merck Inc.

and Merck & Co., Inc.

In addition to serving on our board of directors, Mr.

Iwicki also currently serves on the boards of Aerovate Therapeutics, Inc., Merus N.V., or Merus, a public clinical-stage immuno-oncology company, Akero Therapeutics, Inc., Third Harmonic Bio, Inc.

and Q32 Bio Inc.

and formerly served on the board of Aimmune Therapeutics, Inc.

and Pulmatrix Inc., all publicly-traded companies.

Iwicki holds a B.S.

in Business Administration from Ball State

University and an M.B.A.

from Loyola University.

We believe that Mr.

Iwicki’s extensive experience as a pharmaceutical industry leader managing all stages of drug development and commercialization in multiple therapeutic areas qualifies him to serve as a member of our board of directors.

Marjan Farid, M.D.

has served as a member of our board of directors since October 2022.

Since 2007, Dr.

Farid has served as Professor of Clinical Ophthalmology, Director of Cornea, Refractive & Cataract Surgery, and Vice Chair of Ophthalmic Faculty at the Gavin Herbert Eye Institute, University of California Irvine.

Her clinical practice is divided between patient care, teaching, and research.

Farid’s research interests focus on corneal surgery, specifically the use of the femtosecond laser for corneal transplantation.

Farid is also the founder of the Severe Ocular Surface Disease Center at the University of California Irvine, where she performs limbal stem cell transplants, as well as artificial corneal transplantation, for the treatment of patients with severe ocular surface disease.

Farid also serves as the Chair of the Corneal Clinic Committee of the American Society of Cataract and Refractive Surgery.

Farid received a B.S.

in Biology from the University of California - Los Angeles and M.D.

from the University of California - San Diego.

We believe that Dr.

Farid’s experience in the ophthalmology field qualifies her to serve as a member of our board of directors.

Koven has served as a member of our board of directors since September 2017 and as our Lead Independent Director since December 2018.

Koven was, until his retirement in January 2019, the President and Chief Business Officer of Aralez Pharmaceuticals Inc., or Aralez, a public specialty pharmaceutical company, and served in that role with the company’s predecessor, Pozen Inc., or Pozen, commencing in June 2015.

Prior to joining Pozen, Mr.

Koven served as Executive Vice President, Chief Administrative Officer and General Counsel of Auxilium Pharmaceuticals Inc., a public specialty biopharmaceutical company, from February 2012 until January 2015, when it was acquired by Endo International plc.

Koven served as President and Chief Administrative Officer and a member of the board of directors of Neurologix, Inc., a company focused on the development of multiple innovative gene therapy development programs, from September 2011 to November 2011.

Before Neurologix, Mr.

Koven served as Executive Vice President and Chief Administrative and Legal Officer of Inspire Pharmaceuticals, Inc., a public specialty pharmaceutical company, from July 2010 until May 2011 when it was acquired by Merck & Co., Inc.

Previously, Mr.

Koven served as Executive Vice President, General Counsel and Corporate Secretary of Sepracor Inc.

(now Sunovion), a public specialty pharmaceutical company, from March 2007 until February 2010 when it was acquired by Dainippon Sumitomo Pharma Co., Ltd.

Prior to joining Sepracor Inc., Mr.

Koven served as Executive Vice President, General Counsel and Corporate Secretary of Kos Pharmaceuticals, Inc., a public specialty pharmaceutical company, from August 2003 until its acquisition by Abbott Laboratories (now AbbVie) in December 2006.

Koven began his career in the pharmaceutical industry first as an Assistant General Counsel and then as Associate General Counsel at Warner-Lambert Company from 1993 to 2000, followed by his role as Senior Vice President and General Counsel at Lavipharm Corporation from 2000 to 2003.

Koven also currently serves on the board of MetaVia, Inc.

(formerly named NueroBo Pharmaceuticals Inc.), or MetaVia, a publicly-traded company, and has served as its Chair since January 2022.

Koven is also a member of MetaVia’s Audit Committee and Chair of its Nominating and Corporate Governance Committee.

From 1986 to 1992 he was a corporate associate at Cahill, Gordon & Reindel in New York.

From 1992 to 1993 he served as Counsel, Corporate and Investment Division, at The Equitable Life Assurance Society of the U.S.

Koven holds a Master of Laws (LL.M.) Degree from Columbia University School of Law and a Bachelor of Laws (LL.B.) Degree and Bachelor of Arts Degree in Political Science from Dalhousie University.

We believe that Mr.

Koven’s extensive experience in the pharmaceutical industry qualifies him to serve as a member of our board of directors.

Daniel Myers has served as a member of our board of directors since October 2021.

Myers served as the Chief Executive Officer of MediPrint Ophthalmics, Inc.

(formerly Leo Lens Pharma), a private eye-care company, from April 2020 to April 2022.

Previously, Mr.

Myers co-founded Alimera Sciences, Inc., or Alimera, a publicly traded pharmaceutical company, and served as its Chief Executive Officer from 2003 until January 2019.

Before co-founding Alimera, Mr.

Myers was an initial employee of Novartis Ophthalmics (formerly CIBA Vision Ophthalmics), a pharmaceutical company, and served as its Vice President of sales and marketing from 1991 to 1997 and as President from 1997 to 2003.

Myers served as a director of Alimera from 2003 to August 2023, and as chairman of its board of directors from January 2019 to August 2023.

In addition, Mr.

Myers served on the board of directors of Ocular Therapeutix, Inc., a publicly traded biopharmaceutical company, from 2009 to 2012.

Myers holds a B.S.

in Industrial Management from the Georgia Institute of Technology.

We believe that Mr.

Myers’ experience in the biopharmaceutical industry, including his specific experience with ophthalmology pharmaceutical companies, qualifies him to serve as a member of our board of directors.

Perry has served as a member of our board of directors since February 2018.

Since June 2023, Mr.

Perry has served as the Chief Financial Officer for Merus.

Perry served as Chief Financial Officer for Finch Therapeutics Group, Inc., a public therapeutics company focused on the microbiome, from May 2018 to April 2022.

Previously, he served as Chief Financial and Administrative Officer of Novelion Therapeutics Inc., or Novelion, a public biopharmaceutical company, from November 2016 to December 2017.

Prior to this, Mr.

Perry was Chief Financial Officer of Aegerion Pharmaceuticals, Inc., a public biopharmaceutical company, from July 2015 until its merger with Novelion in November 2016.

Prior to that, he served as Chief Financial and Business Officer of Eleven Biotherapeutics, Inc., a public company, from January 2014 to June 2015.

Before joining Eleven Biotherapeutics, Mr.

Perry served as the Interim Chief Financial Officer of InVivo Therapeutics, a public biotechnology company, from September 2013 to December 2013, and prior to that he served as the Senior Vice President and Chief Financial Officer of ImmunoGen, Inc., a public biotechnology company, from 2009 until he was promoted in 2011 to Executive Vice President and Chief Financial Officer, a role he held until 2013.

Before that, he was the Chief Financial Officer of Elixir Pharmaceuticals.

Perry previously was Senior Vice President and Chief Financial Officer of Transkaryotic Therapies.

He has also held various financial leadership roles within PerkinElmer Inc., Domantis Ltd., Honeywell and General Electric.

From May 2016 to June 2023, Mr.

Perry served on the board of directors of Merus, including as Chair of its Audit Committee.

From December 2011 to February 2016, Mr.

Perry served on the board of directors of Ocata Therapeutics, a public biotechnology company, including as Chair of its Audit Committee and a member of its Compensation Committee, until it was acquired by Astellas Pharma Inc.

Perry received a B.A.

in Economics and Political Science from Amherst College.

We believe that Mr.

Perry’s experience in the biopharmaceutical industry, including his specific experience in financial leadership roles in biopharmaceutical companies, qualifies him to serve as a member of our board of directors.

Rosen has served as a member of our board of directors since January 2014.

Since 2008, Mr.

Rosen has served as a consultant to several companies in the biotechnology industry.

He has served at Stanford University as an adjunct professor in Chemical Engineering since 2021 and as a lecturer in Management since 2011, and he previously served as a lecturer in Chemical Engineering from 2009 until 2021.

Rosen served as Chief Executive Officer of AcelRx Pharmaceuticals, Inc.

(now Talphera, Inc.), or Talphera, a public specialty pharmaceutical company developing products for pain relief, from April 2016 to March 2017, and Interim Chief Executive Officer from April 2015 to March 2016.

Rosen also served as Interim President and Chief Executive Officer of Pearl Therapeutics, Inc.

from June 2010 to March 2011.

From 2004 to 2008, Mr.

Rosen was Vice President of Commercial Strategy at Gilead Sciences, Inc., a biopharmaceutical company.

From 2003 until 2004, Mr.

Rosen was President of ALZA Corporation, a pharmaceutical and medical systems company that merged in 2001 with Johnson & Johnson, a global healthcare company.

Prior to that, from 1994 until 2003, Mr.

Rosen held various positions at ALZA Corporation.

Rosen served on the board of directors of Talphera until February 2024 and on the board of directors of Alcobra, Ltd., a public pharmaceutical company, until November 2017.

Rosen is currently a member of the board of directors of private companies, including Firecycte Therapeutics, Inc., Hammerton, Inc.

and Entrega, Inc., and was a member of the board of directors of Metera Pharmaceuticals, Inc.

from 2018 to 2020, Aria Pharmaceuticals, Inc.

from 2020 to 2023 and Hopewell Therapeutics, Inc.

from 2022 to 2024.

Rosen holds a B.S.

in Chemical Engineering from Stanford University, an M.S.

in Chemical Engineering from the Massachusetts Institute of Technology and an M.B.A.

from the Stanford Graduate School of Business where he was an Arjay Miller Scholar and a Henry Ford II Scholar.

We believe that Mr.

Rosen’s experience in the biopharmaceutical industry, including his specific experience with the development and commercialization of pharmaceutical products, qualifies him to serve as a member of our board of directors.

Koven was, until his retirement on January 30, 2019, the President and Chief Business Officer of Aralez and served in that role with the company’s predecessor, Pozen, commencing on June 1, 2015.

On August 10, 2018, Aralez and its affiliates each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

Composition of the Board of Directors

Our board of directors is authorized to have seven members, and currently consists of six members divided into three classes, with members of each class holding office for staggered three-year terms.

There are currently three Class I directors (Marjan Farid, M.D., Andrew I.

Koven and Gregory D.

Perry), whose terms expire at the 2027 annual meeting of stockholders;

one Class II director (Mark Iwicki), whose term expires at the 2025 annual meeting of stockholders;

and two Class III directors (C.

Daniel Myers and Howard B.

Rosen) 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).

Audit Committee and Audit Committee Financial Expert

The members of our audit committee are Mr.

Myers and Mr.

Rosen is the chair of the audit committee.

Prior to the reconstitution of our audit committee in September 2024, the members of our audit committee were Mark S.

Blumenkranz, M.D., a former director who served during part of the year ended December 31, 2024, Mr.

Myers and Mr.

Rosen, and Mr.

Rosen served as the chair of the audit committee.

Our board of directors has determined that Mr.

Rosen is an “audit committee financial expert” as defined in applicable SEC rules.

Our board of directors has determined that Mr.

Rosen is an “independent director” 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 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 of directors is responsible for overseeing the code of business conduct and ethics and must approve any waivers of the code for directors, officers and employees.

If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics 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.

Executive Compensation

The information required by this Item 11 is incorporated by reference from the information that will be contained in our Proxy Statement for our 2024 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to General Instruction G(3) of Form 10-K.

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.

From 2018 to 2022, our compensation committee retained Aon’s Human Capital Solutions practice, a division of Aon plc (formerly Radford), as its independent compensation consultant, to provide comparative data on executive compensation practices in our industry and to advise on our executive and director compensation programs generally.

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 our former Chief Executive Officer, Mark Iwicki, who resigned on February 11, 2025, our President and Chief Operating Officer, Todd Bazemore, who was appointed as our interim Chief Executive Officer on February 11, 2025, and our Head of Research and Development and Chief Medical Officer, Kim Brazzell, Ph.D.

for the periods presented.

These three individuals are collectively referred to herein as our named executive officers.

Each year, our compensation committee and board of directors review and determine the compensation of our named executive officers.

Summary Compensation Table

The following table sets forth information regarding compensation awarded to, earned by or paid to each of our named executive officers for the periods presented.

Name and Principal Position

Former Chief Executive Officer

Todd Bazemore

Interim Chief Executive Officer, President and Chief Operating Officer

Kim Brazzell, Ph.D.

Head of Research and Development and Chief Medical Officer

(1) The amounts reported in the “Bonus” column reflect discretionary annual cash bonuses earned by our named executive officers for their performance in the years ended December 31, 2024 and 2023.

(2) The amounts reported in the “Stock Awards” column reflect the aggregate grant date fair value of RSUs granted during 2024 and 2023 (including, for 2023, the incremental fair value of RSUs granted upon exchange of options pursuant to our option exchange program effected in 2023, or the 2023 Option Exchange Program), 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.

For more information about our 2023 Option Exchange Program, see Note 11, “Stock-based Compensation” 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.

(4) The following table describes the elements that are represented in the “All Other Compensation” column above:

Company-Paid Life

401(k) Savings Plan

and Disability

Company Match

Insurance Premiums

Todd Bazemore

Kim Brazzell, Ph.D.

Narrative Disclosure to Summary Compensation Table

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.

Iwicki’s, Mr.

Bazemore’s and Dr.

Brazzell’s annual base salaries were $709,394, $535,600 and $520,000, respectively, for 2024 and for 2023.

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 and $163,800 to Mr.

Bazemore and Dr.

Brazzell, 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).

Bazemore’s individual performance-based target bonus amount for 2025, expressed as a percentage of his 2025 base salary, is 50%.

Brazzell’s individual performance-based target bonus amount for 2025, expressed as a percentage of his 2025 base salary, is 45%.

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.

In January 2024, we granted options to purchase 64,500, 29,300 and 29,300 shares of our common stock to Mr.

Bazemore and Dr.

Brazzell, 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 and 6,500 shares of our common stock to Mr.

Bazemore and Dr.

Brazzell, respectively.

Such awards vest as to 1/3 of the shares on each of January 4, 2025, January 4, 2026 and January 4, 2027, subject to continued service.

In January 2025, we granted options to purchase 99,500, 45,200 and 45,200 shares of our common stock to Mr.

Bazemore and Dr.

Brazzell, 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 and 10,100 shares of our common stock to Mr.

Bazemore and Dr.

Brazzell, respectively.

Such awards vest as to 1/3 of the shares on each of January 6, 2026, January 6, 2027 and January 6, 2028, subject to continued service.

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 initial public offering, or 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.

At times, we have also used RSUs to compensate our executive officers, including in connection with our 2023 Option Exchange Program.

We have granted RSUs to our executive officers with time-based and/or performance-based vesting conditions.

RSUs with performance-based vesting conditions were all fully vested as of December 31, 2022.

Prior to settlement of the RSUs, the holder has no rights as a stockholder with respect to the shares subject to such RSUs, including no voting rights and no right to receive dividends or dividend equivalents.

None of our executive officers is currently party to an employment agreement that provides for guaranteed equity awards.

Outstanding Equity Awards at December 31, 2024

The following table sets forth information regarding all outstanding equity awards held by each of our named executive officers as of December 31, 2024.

Option Awards

Unexercisable

Todd Bazemore

Kim Brazzell, Ph.D.

(1) Amounts shown are based on a price of $6.94 per share, which was the closing price of our common stock as reported on the Nasdaq Capital Market on December 31, 2024, 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 and January 4, 2025 and 1/3 of such RSUs vesting on January 4, 2026, subject to continued service.

(3) Represents replacement RSUs granted pursuant to our 2023 Option Exchange Program, which vest over two years, with 50% of such RSUs having vested on May 31, 2024 and 50% of such RSUs vesting on May 31, 2025, subject to continued service.

(4) Represents replacement RSUs granted pursuant to the Option Exchange Program, which vest over three years, with 83% of such RSUs vesting on May 31, 2025 and 17% of such RSUs vesting on May 31, 2026, subject to continued service.

(5) The RSUs vest over three years, with 1/3 of such RSUs having vested on June 22, 2024 and 1/3 of such RSUs vesting on each of June 22, 2025 and June 22, 2026, subject to continued service .

(6) The RSUs vest over three years, with 1/3 of such RSUs having vested on January 4, 2025 and 1/3 of such RSUs vesting on each of January 4, 2026 and January 4, 2027, subject to continued service.

(7) Represents replacement RSUs granted pursuant to the 2023 Option Exchange Program, which vest over three years, with 85% of such RSUs vesting on May 31, 2025 and 15% of such RSUs vesting on May 31, 2026, subject to continued service.

(8) The option vests over four years, with 25% of the shares underlying the option having vested on June 22, 2024 and 2.0833% of the shares vesting monthly thereafter, subject to continued service.

(9) 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, subject to continued service.

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.

During fiscal year ended December 31, 2024, 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 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.

Iwicki resigned as our Chief Executive Officer, effective February 11, 2025.

Iwicki continues to serve as the Chair of our board of directors.

Letter Agreement with 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.

Bazemore is an at-will employee, and his employment with us can be terminated by him or us at any time and for any reason.

Bazemore’s base salary is subject to annual review and adjustment by our compensation committee.

Bazemore’s annual base salary was $535,600, effective January 1, 2025.

In addition, Mr.

Bazemore is 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 the following events.

Subject to his execution and nonrevocation 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 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, Mr.

Bazemore 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 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 will be 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 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, Mr.

Bazemore is 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 following a change of control, Mr.

Bazemore is 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 will be 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 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.

Brazzell is an at-will employee, and his employment with us can be terminated by him or us at any time and for any reason.

Brazzell’s base salary is subject to annual review and adjustment by our compensation committee.

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 is 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 will be 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 is 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 is 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 is 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.

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 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 and Dr.

Brazzell 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.

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;

● 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 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;

● 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;

● 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;

● 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 1, 2025, 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.

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;

● 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.

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;

● 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;

● 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.

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 March 1, 2025, options to purchase 1,303,977 shares of common stock were outstanding under the 2017 Plan at a weighted average exercise price of $11.35 per share.

As of March 1, 2025, RSUs with respect to 588,963 shares of common stock were outstanding under the 2017 Plan.

As of March 1, 2025, 277,016 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;

● 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 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 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;

● 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.

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 $23,000 for 2024 and is $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 $6,900 in 2024 and will be 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 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 2024.

($) (1)(3)(4)

Blumenkranz (4)

(1) The aggregate amount of outstanding options and RSUs held by each non-employee director as of December 31, 2024 were as follows:

Blumenkranz (4)

(2) The amounts reported in the “Option Awards” column reflect the aggregate grant date fair value of options awarded during 2024 computed in accordance with the provisions of FASB ASC Topic 718.

For additional information regarding the options granted to our directors in 2024 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 2024.

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 2024, see Narrative Disclosure to Director Compensation Table — Director Compensation Policy” below.

Blumenkranz resigned from our board of directors on September 23, 2024.

Iwicki, one of our directors who also served as our Chief Executive Officer during 2024, did not receive any additional compensation for his service as a director during 2024.

Iwicki resigned as our Chief Executive Officer on February 11, 2025.

The compensation that we paid to Mr.

Iwicki as our Chief Executive Officer during 2024 and 2023 is discussed under “-Summary Compensation Table” and “-Narrative Disclosure to Summary Compensation Table.”

Narrative Disclosure to Director Compensation Table

Director Compensation Policy

During the year ended December 31, 2024, 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;

● the Lead Independent Director was entitled to receive an additional annual fee of $23,750;

● 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;

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.

This non-employee director compensation policy remains in effect for the year ending December 31, 2025.

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 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.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item 12 is incorporated by reference from the information that will be contained in our Proxy Statement for our 2024 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to General Instruction G(3) of Form 10-K.

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 1, 2025 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 two other most highly compensated executive officers who served during the year ended December 31, 2024, named in the Summary Compensation table above, whom, collectively, we refer to as our named executive officers;

● 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 6,452,398 shares of our common stock outstanding as of March 1, 2025.

In addition, shares of common stock subject to options or other rights currently exercisable, or exercisable within 60 days of March 1, 2025, 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.

Percentage of

Name and Address of Beneficial Owner

5% Stockholders:

Entities affiliated with Baker Bros.

Advisors LP(1)

Affiliates of SR One Capital Management, LP (2)

Cormorant Global Healthcare Master Fund, LP (3)

Directors and Named Executive Officers:

Mark Iwicki(4)

Todd Bazemore(5)

Kim Brazzell, Ph.D.(6)

Marjan Farid, M.D.(7)

Daniel Myers(7)

All current executive officers and directors as a group (10 persons)(9)

* Less than one percent

(1) Based on a Schedule 13D/A filed with the SEC on December 31, 2024.

Consists of 1,083,398 shares of common stock held by Baker Brothers Life Sciences, L.P., or Life Sciences, and 118,496 shares of common stock held by 667, L.P., or 667.

We refer to Life Sciences and 667 collectively in this footnote as the Funds.

The Funds also hold 51,246 shares of Series E Preferred Stock, 2,928 shares of Series F Preferred Stock, 10,901 shares of Series G Preferred Stock, and 2,299 shares of Series H Preferred Stock each of which is convertible into 100 shares of common stock (subject to adjustment as provided in the Company’s Series E Certificate of

Designations, Series F Certificate of Designations, Series G Certificate of Designations and Series H Certificate of Designations, respectively) at any time at the option of the holder, provided that the holder is prohibited, subject to certain exceptions, from converting its Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock for shares of common stock to the extent that immediately prior to or following such conversion, the holder, together with its affiliates and other attribution parties, would own in excess of 9.99% of the total number of shares of common stock then issued and outstanding after giving effect to such conversion, which percentage may be changed at the holder’s election to a lower percentage at any time or to a higher percentage not to exceed 19.99% upon 61 days’ notice to us (collectively, the “Beneficial Ownership Limitation”).

Due to the Beneficial Ownership Limitation, as of March 1, 2025, the Funds cannot convert any shares of Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and/or Series H Preferred Stock into common stock.

The Schedule 13D/A was filed jointly by Baker Bros.

Advisors LP, Baker Bros.

Advisors (GP) LLC, Felix J.

Baker and Julian C.

Advisors LP, or Advisor, is the management company and investment adviser to the Funds and has sole voting and investment power with respect to the shares held by the Funds.

Advisors (GP) LLC, or Advisor GP, is the sole general partner of Advisor.

Baker and Felix J.

Baker are managing members of Advisor GP.

Advisor GP, Felix J.

Baker, Julian C.

Baker, and Advisor may be deemed to be beneficial owners of the securities directly held by the Funds.

Baker, Felix J.

Baker, Advisor GP and Advisor disclaim beneficial ownership of all shares held by the Baker Funds, except to the extent of their indirect pecuniary interest therein.

The address for each of the reporting persons is 860 Washington Street, 3rd Floor, New York, NY 10014.

(2) Based, in part, on a Schedule 13D filed with the SEC on July 8, 2024.

Consists of 598,940 shares of common stock and 50,700 shares of common stock issuable upon conversion of Series H Preferred Stock, each as directly held by SR One Capital Fund II Aggregator, LP, or SR One.

SR One holds a total of 4,110 shares of Series H Preferred Stock, each of which is convertible into 100 shares of common stock (subject to adjustment as provided in the Company’s Series H Certificate of Designations) at any time at the option of the holder subject to the Beneficial Ownership Limitation.

The percentage of common stock held by SR One is based on 6,452,398 shares of our common stock outstanding as of March 1, 2025, plus 50,700 shares of common stock issuable upon the conversion of the Series H Preferred Stock that are subject to the Beneficial Ownership Limitation.

As a result of the Beneficial Ownership Limitation, the shares reported in the table do not include 360,300 shares of common stock issuable upon conversion of shares of Series H Preferred Stock held by SR One.

SR One Capital Partners II, LP, is the general partner of SR One.

SR One Capital Management, LLC, is the general partner of SR One Capital Partners II, LP.

Simeon George, MD, is the Manager of SR One Capital Management, LLC.

SR One Capital Partners II, LP, SR One Capital Management, LLC and Simeon George, MD, share voting and investment power with respect to the shares directly held by SR One Capital Fund II Aggregator, LP.

All indirect holders of the above referenced shares disclaim beneficial ownership of all applicable shares except to the extent of their pecuniary interest therein.

The address for the above referenced entities and person is 985 Old Eagle School Road, Suite 511, Wayne, PA 19087.

(3) Based on a Schedule 13G filed with the SEC on February 14, 2025.

Consists of 603,027 shares of common stock and 46,100 shares of common stock issuable upon conversion of Series I Preferred Stock, each as directly held by Cormorant Global Healthcare Master Fund, LP, or Cormorant.

Cormorant holds a total of 3,286 shares of Series I Preferred Stock, each of which is convertible into 100 shares of common stock (subject to adjustment as provided in the Company’s Series I Certificate of Designations) at any time subject to the Beneficial Ownership Limitation.

The percentage of common stock held by Cormorant is based on 6,452,398 shares of our common stock outstanding as of March 1, 2025, plus 46,100 shares of common stock issuable upon the conversion of the Series I Preferred Stock that are subject to the Beneficial Ownership Limitation.

As a result of the Beneficial Ownership Limitation, the shares reported in the table do not include 282,500 shares of common stock issuable upon conversion of shares of Series I Preferred Stock held by Cormorant.

Cormorant Global Healthcare GP, LLC, or Global Healthcare GP, is the general partner of Cormorant.

Bihua Chen is the sole managing member of Global Healthcare GP and may be deemed to have voting and investment power over the securities held by Cormorant.

Chen disclaims beneficial ownership of such securities, except to the extent of any pecuniary interest therein.

The principal address for the Cormorant Asset Management LP entities is 200 Clarendon Street, 52nd Floor, Boston, MA 02116.

(4) Consists of (i) 85,337 shares of common stock beneficially owned by Mr.

Iwicki and (ii) 123,464 shares of common stock underlying options held by Mr.

Iwicki that are exercisable as of March 1, 2025 or will become exercisable within 60 days after such date.

(5) Consists of (i) 26,824 shares of common stock beneficially owned by Mr.

Bazemore and (ii) 41,741 shares of common stock underlying options held by Mr.

Bazemore that are exercisable as of March 1,2025 or will become exercisable within 60 days after such date.

(6) Consists of (i) 28,675 shares of common stock beneficially owned by Dr.

Brazzell and (ii) 42,143 shares of common stock underlying options held by Dr.

Brazzell that are exercisable as of March 1, 2025 or will become exercisable within 60 days after such date.

(7) Consists of shares of common stock underlying options held by the individual that are exercisable as of March 1, 2025 or will become exercisable within 60 days after such date.

(8) Consists of (i) 262 shares of common stock owned by the Rosen/Doherty Revocable Trust Dated June 11, 2001, of which Mr.

Rosen is a co-trustee, and (ii) 7,381 shares of common stock underlying options held by Mr.

Rosen that are exercisable as of March 1, 2025 or will become exercisable within 60 days after such date.

(9) Includes 301,186 shares of common stock underlying options that are exercisable as of March 1, 2025 or will become exercisable within 60 days after such date.

Securities Authorized for Issuance under Equity Compensation Plans

The following table contains information about our equity compensation plans as of December 31, 2024.

As of December 31, 2024, 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.

Equity Compensation Plan Information

available for

securities to be

future issuance

Weighted ‑ Average

exercise price

of outstanding

plans (excluding

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

(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 558,052 shares of common stock subject to outstanding RSUs under the 2017 Plan or the 6,271 shares of common stock subject to outstanding RSUs that were granted to employees outside of the 2017 Plan in accordance with Nasdaq Listing Rule 5635(c)(4).

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 244,003 shares of our common stock available for issuance under our 2017 Plan and 35,347 shares of common stock available for issuance under our 2017 ESPP.

(4) The number of shares of common stock reserved for issuance under the 2017 Plan will be increased on the first day of each fiscal year through January 1, 2033, in amount equal to the lowest of:

(i) 4% of the sum of the number of outstanding shares of common stock on the first day of the applicable fiscal year and the number of shares of common stock issuable upon conversion of any outstanding shares of 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.

On January 1, 2025, the shares under the 2017 Plan were increased by 554,663 shares pursuant to the annual increase described above.

(5) The number of shares of our common stock reserved for issuance under the 2017 ESPP will be increased on the first day of each fiscal year through January 1, 2029, in an amount equal to the lowest of:

(i) 17,868 shares of common stock, (ii) 1% of the total number of shares of our common stock outstanding on the first day of the applicable fiscal year or (iii) an amount determined by our board of directors.

On January 1, 2025, the shares under the 2017 ESPP were increased by 17,868 shares pursuant to the annual increase described above.

(6) Represents inducement option awards and inducement RSUs 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.

Each inducement RSU vests over three years, with one-third of such RSUs vesting on the first anniversary of the applicable employee’s new hire date and the remainder vesting in equal yearly installments over the following two years.

Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 is incorporated by reference from the information that will be contained in our Proxy Statement for our 2024 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to General Instruction G(3) of Form 10-K.

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, 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;

● 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.

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;

● 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

In addition to the compensation arrangements with directors and executive officers described elsewhere in this Amendment, since January 1, 2023, we have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our voting securities, and affiliates of our directors, executive officers and holders of more than 5% of our voting securities.

These transactions were approved in accordance with our Related Person Transaction Policy to the extent required, and we believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.

Private Placements

Series E Private Placement

On November 28, 2022, we entered into a securities purchase agreement, or the Series E Purchase Agreement, with 667, L.P.

and Bakers Brothers Life Sciences, L.P., or the Baker Purchasers, pursuant to which we agreed to issue and sell, in a private placement priced at-the-market under Nasdaq rules, shares of our common stock and shares of our Series E Convertible Non-Redeemable Preferred Stock, or the Series E Preferred Stock, in two tranches for aggregate gross proceeds of up to $31.0 million, which we refer to collectively as the Series E Private Placement.

At the first closing of the Series E Private Placement on December 1, 2022, we issued and sold to the Purchasers (i) 76,813 shares of common stock, at a price per share equal to $5.75 and (ii) 9,666 shares of Series E Preferred Stock, at a price per share equal to $575.00, for aggregate gross proceeds of approximately $6.0 million.

On December 27, 2022, following the certification by our then-Chief Executive Officer that the U.S.

Food and Drug Administration accepted our investigational new drug application for KPI-012, we issued and sold to the Purchasers at a second closing of the Series E Private Placement a total of 43,478 shares of Series E Preferred Stock, at a price per share equal to $575.00, for aggregate gross proceeds of approximately $25.0 million.

The Baker Purchasers have certain participation rights under the Series E Purchase Agreement.

If at any time during the four-year period following the date of the first tranche closing of the Series E Private Placement, or the Participation Period, we propose to offer and sell new equity securities in an offering that is conducted pursuant to an exemption from registration under the Securities Act of 1933, as amended, or the Securities Act, or in an offering that is registered under the Securities Act that is not conducted as a firm-commitment underwritten offering, then, subject to compliance with securities laws and regulations, we have agreed to offer each Baker Purchaser the right to purchase its pro rata share of the total amount of the new equity securities, subject to certain conditions and limitations.

In addition, if during the Participation Period, we propose to offer and sell new equity securities in a firm-commitment underwritten offering registered under the Securities Act, then subject to compliance with securities laws and regulations, we have agreed to use our commercially reasonable efforts to cause the managing underwriters of such offering to contact the Baker Purchasers about potentially participating in such offering and to provide to each Baker Purchaser the opportunity to purchase its pro rata share of such new equity securities, subject to certain conditions and limitations.

The participation rights will terminate if the Baker Purchasers are offered the opportunity to participate in an offering pursuant to the participation rights and do not purchase at least 50% of their aggregate pro rata share of the new equity securities offered for sale in such offering.

Under the Series E Purchase Agreement, the Baker Purchasers also have the right to have up to two non-voting observers attend and participate in all Board and committee meetings and, subject to the Baker Purchasers owning directly specified minimum amounts of our common stock, the right to have the Board nominate and recommend for election by the stockholders up to three Baker Purchaser designees to the Board (one designee at 9.9%, two designees at 15.0% and three designees at 25.0%) designated by the Purchasers, provided that at such time as the Baker Purchasers have designated three Board designees, at least one such designee must qualify as an “independent” director under Nasdaq rules and be acceptable to the members of the Board who are not Baker Purchaser designees.

The Baker Purchasers’ participation rights, observer rights and Board designation rights also will terminate at such time as the Baker Purchasers and their affiliates cease to own, in the aggregate, specified minimum amounts of the shares purchased in the Series E Private Placement.

We also agreed that we will not without the prior approval of the requisite Baker Purchasers (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series E Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1,000,000, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions.

Series F Private Placement

On December 21, 2023, we entered into a securities purchase agreement with the Baker Purchasers, pursuant to which we issued and sold to the Baker Purchasers, in a private placement priced at-the-market under Nasdaq rules, 2,928 shares of our Series F Convertible Non-Redeemable Preferred Stock, or the Series F Preferred Stock, at a price per share equal to $683.00 for aggregate gross proceeds of approximately $2.0 million, which we refer to collectively as the Series F Private Placement.

We agreed that we will not without the prior approval of the requisite Baker Purchasers (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series F Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1,000,000, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions.

Series G Private Placement

On March 25, 2024, we entered into a securities purchase agreement with the Baker Purchasers, pursuant to which we issued and sold to the Baker Purchasers, in a private placement priced at-the-market under Nasdaq rules, 10,901 shares of our Series G Convertible Non-Redeemable Preferred Stock, or the Series G Preferred Stock, at a price per share equal to $788.90 for aggregate gross proceeds of approximately $8.6 million, which we refer to collectively as the Series G Private Placement.

We agreed that we will not without the prior approval of the requisite Baker Purchasers (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series G Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1,000,000, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions.

Series H Private Placement

On June 26, 2024, we entered into a securities purchase agreement with certain purchasers, or the Series H Purchasers, pursuant to which we issued and sold to the Series H Purchasers (i) 1,197,314 shares of our common stock, at a price per share equal to $5.85 and (ii) 9,393 shares of our Series H Convertible Non-Redeemable Preferred Stock, or the Series H Preferred Stock, at a price per share equal to $585.00, for aggregate gross proceeds of approximately $12.5 million, which we refer to collectively as the Series H Private Placement.

The following table sets forth the number of shares of our common stock and Series H Preferred Stock purchased by holders of more than 5% of our voting securities at the time of the Series H Private Placement, and the aggregate purchase price paid for such shares.

Number of Shares of

Series H Preferred Stock

Aggregate Purchase Price

Baker Brothers Life Sciences, L.P.

$4,506,957.73

SR One Capital Fund II Aggregator, LP (2)

$4,999,766.85

ADAR1 Partners, LP (2)

$2,175,439.32

Spearhead Insurance Solutions IDF, LLC – Series ADAR1 (2)

(1) See Item 12, “Security Ownership of Certain Beneficial Owners and Management” for additional information about securities held by certain of these entities.

(2) Became a beneficial holder of more than 5% of our outstanding voting securities upon the closing of the Series H Private Placement.

We agreed that we will not without the prior approval of the requisite Series H Purchasers issue or authorize the issuance of any equity security that is senior or pari passu to the Series H Preferred Stock with respect to liquidation preference.

Series I 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 table sets forth the number of shares of our common stock and Series I Preferred Stock purchased by holders of more than 5% of our voting securities and their affiliates at the time of the Series I Private Placement, and the aggregate purchase price paid for such shares.

Number of Shares of

Series I Preferred Stock

Aggregate Purchase Price

Baker Brothers Life Sciences, L.P.

$1,802,807.16

SR One Capital Fund II Aggregator, LP

Cormorant Global Healthcare Master Fund, LP(2)

$5,999,677.88

(1) See Item 12, “Security Ownership of Certain Beneficial Owners and Management” for additional information about securities held by certain of these entities.

(2) Became a beneficial holder of more than 5% of our outstanding voting securities upon the closing of the Series I Private Placement.

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.

Option Exchange Program

In May 2023, we commenced the 2023 Option Exchange Program, under which our eligible executive officers, other employees and non-employee directors exchanged outstanding options to purchase shares of our common stock held by them for an equal number of restricted stock units that are subject to vesting conditions.

The 2023 Option Exchange Program expired on May 30, 2023.

Pursuant to the terms of the Option Exchange Program, we accepted for exchange options to purchase a total of 182,251 shares of our common stock from 36 eligible holders, including our named executive officers.

All surrendered options were cancelled effective as of the expiration of the 2023 Option Exchange Program, and immediately thereafter on May 31, 2023, or the Option Exchange Date, in exchange therefor, we granted a total of 182,251 replacement RSUs pursuant to the terms of the Option Exchange Program and under the 2017 Plan.

For options that were vested when surrendered, the replacement RSUs vest over two years, with 50% of the replacement RSUs vesting on the first anniversary of the Option Exchange Date, and 50% vesting on the second anniversary of the Option Exchange Date.

Unvested options that were surrendered for replacement RSUs are subject to a revised vesting schedule whereby no such replacement RSUs will vest until the second anniversary of the Option Exchange Date, at which time (i) a number of replacement RSUs will vest that are equal to the surrendered unvested option that would have vested during such two-year period following the Option Exchange Date and (ii) the remaining replacement RSUs will vest on the original vesting schedule of the unvested option that was surrendered, provided that the applicable vesting schedule will vest in annual installments rather than monthly installments.

Our then-current executive officers surrendered all of their then-outstanding options in exchange for replacement RSUs in the 2023 Option Exchange Program, as follows:

RSUs Granted*

Mark Iwicki(1)

56,873 (Vested)

14,842 (Unvested)

Todd Bazemore

16,011 (Vested)

5,147 (Unvested)

13,130 (Vested)

4,786 (Unvested)

Darius Kharabi

1,182 (Vested)

1,466 (Unvested)

11,313 (Vested)

3,423 (Unvested)

(1) Resigned as our Chief Executive Officer on February 11, 2025.

The following non-employee directors surrendered all of their then-outstanding options for replacement RSUs in the 2023 Option Exchange Program, as follows:

RSUs Received

in Option Exchange

Blumenkranz(1)

1,221 (Unvested)

1,600 (Unvested)

1,197 (Vested)

1,000 (Unvested)

1,197 (Unvested)

800 (Unvested)

1,702 (Vested)

800 (Unvested)

(1) Resigned from our board of directors on September 23, 2024.

Modification of Equity Awards

Paull, our former director who did not stand for re-election in June 2023, did not participate in the Option Exchange Program.

In August 2023, our board of directors approved the extension of the exercise period of his vested options for 1,738 shares of common stock to June 22, 2025.

Combangio Acquisition

On November 15, 2021, we and our newly formed, direct wholly owned subsidiary, Ceres Merger Sub, Inc., or the Merger Subsidiary, entered into an Agreement and Plan of Merger, or the Merger Agreement, with Combangio and Fortis Advisors LLC, solely in its capacity as Combangio Equityholder Representative in connection with the Merger Agreement, pursuant to which on November 15, 2021, the Merger Subsidiary merged with and into Combangio with Combangio surviving such merger and becoming a direct wholly owned subsidiary of ours, or the Combangio Acquisition.

In connection with the closing of the Combangio Acquisition, we made an upfront payment of an aggregate of $5.0 million in cash to former Combangio equityholders, subject to customary adjustments, and agreed to issue an aggregate of 155,664 shares of our common stock to the Combangio equityholders with an aggregate value of approximately $16.1 million, consisting of (i) an aggregate of 136,314 shares of common stock which were issued on January 3, 2022, or the Initial Shares, 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 former Combangio equityholders and that were issued on March 10, 2023, or the Holdback Shares.

The Combangio equityholders included Dr.

Blumenkranz, Mr.

Kharabi, Lagunita Biosciences, LLC, of which Dr.

Blumenkranz is a managing member and Mr.

Kharabi is the Chief Operating Officer, and Garland Investments, L.P., of which Dr.

Blumenkranz is a managing member.

In connection with the closing of the Combangio Acquisition, we appointed Dr.

Blumenkranz, a then-member of the board of directors of Combangio, to our board of directors, and we appointed Mr.

Kharabi, the then-President and Chief Executive Officer of Combangio, as our Chief Business Officer.

Blumenkranz resigned from our board of directors on September 23, 2024.

The following table sets forth the consideration paid by us to Dr.

Blumenkranz, Mr.

Kharabi, Lagunita Biosciences, LLC and Garland Investments, L.P.

pursuant to the Merger Agreement.

Holdback Shares

Consideration

Initial Shares Issued

on January 3, 2022

March 10, 2023

Darius Kharabi

Lagunita Biosciences, LLC (3)

Garland Investments, L.P.

(1) In exchange for 2,618,875 shares of Combangio’s common stock.

(2) In exchange for 323,415 shares of Combangio’s common stock and for an option to purchase 8,754,216 shares of Combangio’s common stock.

(3) Upon the issuance of the Initial Shares, Lagunita Biosciences, LLC became a holder of more than 5% of our outstanding voting securities.

(4) In exchange for 85,395,439 shares of Combangio’s common stock.

(5) In exchange for 646,830 shares of Combangio’s common stock.

In addition, as a result of the dosing of the first patient in our CHASE Phase 2b clinical trial of KPI-012 for the treatment of persistent corneal epithelial defect in the United States in February 2023, or the Dosing Milestone, we paid to the former Combangio equityholders on March 10, 2023 an aggregate of $2.5 million in cash and $2.4 million in shares of our common stock (representing an aggregate of 105,038 shares of our common stock).

We paid in cash the remaining amount of $0.1 million due in connection with the Dosing Milestone to the former Combangio equityholders in January 2024.

The following table sets forth the consideration paid by us as a result of the achievement of the Dosing Milestone to Dr.

Blumenkranz, Mr.

Kharabi, Lagunita Biosciences, LLC and Garland Investments, L.P.

pursuant to the Merger Agreement.

Consideration Paid

Shares Issued

Consideration Paid

in March 2023

In January 2024

Darius Kharabi

Lagunita Biosciences, LLC

Garland Investments, L.P.

In addition to the foregoing consideration, former equityholders of Combangio are entitled to receive from us contingent consideration in the form of cash upon the achievement of various milestones in the future.

Registration Rights

We are a party to a registration rights agreement with the Baker Purchasers, who are beneficial owners of more than 5% of our common stock.

This registration rights agreement provides the Baker Purchasers with certain resale registration rights with respect to the shares of common stock, shares of common stock issued or issuable upon conversion of their shares of Series E Preferred Stock, Series F Preferred Stock, the Series G Preferred Stock and Series H Preferred Stock, and any other shares of our common stock held by the Baker Purchasers.

We are also a party to a registration rights agreement with certain of the Series H Purchasers in our Series H Private Placement, certain of which are beneficial owners of more than 5% of our common stock, pursuant to which we agreed to file a registration statement with the SEC covering the resale of the shares of common stock and the shares of common stock issuable upon conversion of the shares of Series H Preferred Stock acquired by certain of the Series H Investors in the Series H Private Placement.

We are also a party to a registration rights agreement with certain of the Series I Purchasers in our Series I Private Placement, certain of which are beneficial owners of more than 5% of our common stock, pursuant to which we agreed to file a registration statement with the SEC covering the resale of the shares of common stock and the shares of common stock issuable upon conversion of the shares of Series I Preferred Stock acquired by certain of the Series I Investors in the Series I Private Placement.

We have filed resale registration statements on Form S-3 in accordance with the foregoing registration rights agreement.

Indemnification Agreements

Our certificate of incorporation provides that we will indemnify our directors and officers to the fullest extent permitted by Delaware law.

In addition, we have entered into indemnification agreements with all of our directors and officers.

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

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.

In March 2025, our board of directors undertook a review of the composition of our board of directors and its committees and the independence of each then-sitting director.

Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors determined that each of our directors, with the exception of Mark Iwicki and Gregory D.

Perry, is an “independent director” as defined under applicable Nasdaq rules.

In April 2024, our board of directors also previously determined that Dr.

Blumenkranz, a former director who resigned on September 23, 2024, was an “independent director” as defined under applicable Nasdaq rules.

In making such determinations, our board of directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances that our board of directors deemed relevant in determining his or her independence, including the beneficial ownership of our capital stock by each non-employee director.

Iwicki is not an independent director under these rules because he was employed as our Chief Executive Officer within the last three years.

Perry ceased to be an independent director under applicable Nasdaq rules in June 2023, when he was appointed Chief Financial Officer of Merus.

Iwicki serves as a member of the board of directors of Merus and on its compensation committee.

Under Nasdaq rules, a director shall not be considered independent if they are employed as an executive officer of another entity where at any time during the past three years any of our then-current executive officers served on the compensation committee of such other entity.

Principal Accountant Fees and Services

The information required by this Item 14 is incorporated by reference from the information that will be contained in our Proxy Statement for our 2024 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to General Instruction G(3) of Form 10-K.

Audit Fees and Services

Deloitte & Touche LLP, or Deloitte, was our independent registered public accounting firm for the years ended December 31, 2024 and December 31, 2023.

The following table summarizes the fees Deloitte 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,

Audit Fees(1)

Audit-Related Fees

All Other Fees(3)

(1) Audit fees consist of fees billed for professional services rendered by Deloitte 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) Tax fees consist of fees for professional services with respect to tax compliance, tax advice and tax planning.

(3) 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 Deloitte 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 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.

Exhibits and Financial Statement Schedules

6 unchanged sentences

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023

Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity for the years ended December 31, 2023 and 2022

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023

12 unchanged sentences

001-38150) filed on May 23, 2022)

Restated Certificate of Incorporation of the Registrant, as amended as of November 28, 2022, including Certificate of Designation of the Series D Preferred Stock of Registrant, Certificate of Elimination of Number of Shares of Preferred Stock Designated as Series D Preferred Stock of Registrant, Certificate of Designations, Preferences and Rights of Series E Convertible Non-Redeemable Preferred Stock of Registrant, Certificate of Designations, Preferences and Rights of Series F Convertible Non-Redeemable Preferred Stock of Registrant and Certificate of Designations, Preferences and Rights of Series G Convertible Non-Redeemable Preferred Stock of Registrant

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)

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.

2 unchanged sentences

001-38150) filed on March 3, 2023)

Description of Exhibit

Third Amended and Restated Registration Rights Agreement of the Registrant dated April 6, 2016, as amended by Amendment No.

2 unchanged sentences

Description of the Registrant’s Securities Registered under Section 12 of the Exchange Act

Description of Exhibit

Form of Series E Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s current report on Form 8-K (File No.

4 unchanged sentences

001-38150) filed on March 26, 2024)

Form of Series H 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 June 27, 2024)

Form of Series I 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 December 30, 2024)

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)

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)

Registration Rights Agreement, dated December 29, 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 December 30, 2024)

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.

20 unchanged sentences

001-38150) filed on August 4, 2023)

Description of Exhibit

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.

10 unchanged sentences

333-218936) filed on August 4, 2023)

Description of Exhibit

Exclusive License Agreement, dated October 11, 2019, by and between Combangio, Inc.

1 unchanged sentence

001-38150) filed on March 29, 2022)

Letter Agreement, dated March 25, 2018, by and between the Registrant and Eric L.

Trachtenberg (incorporated by reference to Exhibit 10.3 to the Registrant’s quarterly report on Form 10-Q (File No.

001-38150) filed on August 9, 2018)

Amended and Restated Letter Agreement, dated September 10, 2015, by and between the Registrant and Mark Iwicki, as amended by the First Amendment, dated September 28, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s quarterly report on Form 10-Q (File No.

24 unchanged sentences

001-38150) filed on August 4, 2023)

Description of Exhibit

Fifth Amendment to Loan and Security Agreement, dated August 2, 2023, by and among the Registrant, Combangio, Inc.

7 unchanged sentences

001-38150) filed on March 26, 2024)

Description of Exhibit

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)

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)

Open Market Sale Agreement SM , dated as of January 19, 2023, by and between Registrant and Jefferies 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 19, 2023)

Amended and Restated Insider Trading Policy

Subsidiaries of the Registrant

4 unchanged sentences

Certification of Principal Financial Officer pursuant to 18 U.S.C.

Dodd-Frank Compensation Recovery Policy

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).

Inline XBRL Instance Document

13 unchanged sentences

March 31, 2025

/s/ Mark Iwicki

Chief Executive Officer and

Chairman of the Board of Directors

/s/ Todd Bazemore

Todd Bazemore

Interim Chief Executive Officer, President and Chief Operating Officer

( principal executive officer)

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.

/s/ Mark Iwicki

Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

/s/ Todd Bazemore

Todd Bazemore

Interim Chief Executive Officer, President and Chief Operating Officer

(Principal Executive Officer)

March 31, 2025

2 unchanged sentences

March 31, 2025

Blumenkranz, M.D.

/s/ Mark Iwicki

March 31, 2025

14 unchanged sentences

We have audited the accompanying consolidated balance sheets of KALA BIO, Inc.

and subsidiaries (formerly Kala Pharmaceuticals, Inc.) (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in mezzanine equity and stockholders' equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (formerly Kala Pharmaceuticals, Inc.) (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows, for the years 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 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

22 unchanged sentences

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 disbursement from CIRM, and the balance of the award is payable to Combangio upon the achievement of specified milestones that are primarily related to Combangio’s progress in conducting the CHASE Phase 2b clinical trial.

We have identified the Company’s accounting for the CIRM Award, including the conclusion as to the appropriate accounting standards under which to record the funding received, as our critical audit matter given the increased extent of effort and high degree of auditor judgment.

Since entering into the CIRM Award, Combangio has received disbursements from CIRM, and the balance of the award is payable to Combangio upon the achievement of additional specified milestones that are primarily related to Combangio’s progress in conducting the CHASE Phase 2b clinical trial.

We have identified the Company’s accounting for the CIRM Award as our critical audit matter given the increased extent of effort and high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the accounting for the CIRM Award, including the recording of grant income, included the following, among others:

● We obtained and read the CIRM Award agreement, along with the Company’s accounting position paper, to evaluate the reasonableness of the accounting conclusions and methodology management used to record the transaction.

● We evaluated the reasonableness of management’s conclusion as to the appropriateness of the accounting standards followed.

● We tested the expenses recorded by the Company relating to work performed under the CIRM Award, which included corroboration of the work performed under the CIRM Award with those outside of finance.

● We obtained and read the CIRM Award agreement and amendment, along with the Company’s accounting position paper, to evaluate the reasonableness of the accounting conclusions and methodology management used to record the transaction.

● We tested the expenses recorded by the Company relating to work performed under the CIRM Award agreement, which included corroboration of the work performed under the CIRM Award with those outside of finance.

● We tested the mathematical accuracy of management's calculations and the related recording of grant income.

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Cash and cash equivalents

Prepaid expenses and other current assets (Note 7)

Current assets held for sale (Note 4)

Prepaid expenses and other current assets

Total current assets

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Right-of-use assets

Restricted cash and other long-term assets

Other long-term assets

Liabilities and Stockholders' Equity

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Accrued expenses and other current liabilities

Deferred gain on sale of commercial business

Deferred grant income

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Current portion of long-term debt

Current portion of contingent consideration

Current portion of deferred purchase consideration

Total current liabilities

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Long-term lease liabilities

Long-term debt

Long-term debt, net of current portion

Long-term contingent consideration

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5,000,000 shares authorized as of December 31, 2024 and 2023;

51,246 and 53,144 shares of Series E Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2023 and 2022 , respectively, and 2,928 and 0 shares of Series F Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2023 and 2022, respectively

51,246 shares of Series E Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2024 and 2023 , 2,928 shares of Series F Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2024 and 2023 , 10,901 and 0 shares of Series G Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2024 and 2023, 9,393 and 0 shares of Series H Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2024 and 2023, and 3,286 and 0 shares of Series I Convertible Non-Redeemable Preferred Stock issued and outstanding as of December 31, 2024 and 2023, respectively

Common stock, $ 0.001 par value;

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(In thousands, except share and per share amounts)

Product revenues, net

Costs and expenses:

Cost of product revenues

Selling, general and administrative

General and administrative

Research and development

(Gain) loss on fair value remeasurement of deferred purchase consideration

Loss (gain) on fair value remeasurement of contingent consideration

Gain on fair value remeasurement of deferred purchase consideration

Loss on fair value remeasurement of contingent consideration

Total costs and expenses

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Interest expense

Loss on extinguishment of debt

Gain on sale of commercial business

Other (expense) income, net

Total other (expense) income

Other expense, net

Total other income (expense)

Net loss per share attributable to common stockholders—basic and diluted

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Other comprehensive income:

Change in unrealized gain on investments

Change in fair value of investments

Total other comprehensive income

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KALA BIO, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

Mezzanine Equity

Stockholders' Equity

Series D Preferred Stock

Series E Preferred Stock

Series F Preferred Stock

Non-Redeemable

Preferred Stock

$0.001 Par Value

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$0.001 Par Value

Comprehensive

$0.001 Par Value

Stockholders'

Balance as of December 31, 2022

At the market offering, net of offering costs $ 29

Exercise of stock options

At the market offering, net of offering costs of $ 458

Issuance of common stock for vested restricted stock units

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Issuance of common stock to satisfy deferred purchase consideration

Issuance of redeemable Series D preferred stock

Redemption of redeemable Series D preferred stock

Issuance of common stock, net of issuance cost of $ 3

Issuance of convertible Series E preferred stock and Second Closing Right, net of issuance costs of $ 43

Issuance of convertible Series E preferred stock upon settlement of Second Closing Right, net of issuance costs of $ 194

Issuance of common stock to satisfy contingent consideration

Issuance of common stock upon conversion of Series E Preferred Stock

Issuance of convertible Series F preferred stock, net of issuance cost of $ 35

Stock-based compensation expense

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At the market offering, net of offering costs of $ 69

Exercise of stock options

Issuance of common stock for vested restricted stock units

Issuance of common stock under employee stock purchase plan

Issuance of common stock to satisfy deferred purchase consideration

Issuance of common stock to satisfy contingent consideration

Issuance of common stock upon conversion of Series E Preferred Stock

Issuance of convertible Series F preferred stock, net of issuance cost of $ 35

Issuance of common stock to satisfy service contract

Issuance of common stock, net of issuance costs of $ 218

Issuance of convertible Series G preferred stock, net of issuance cost of $ 62

Issuance of convertible Series H preferred stock, net of issuance cost of $ 96

Issuance of convertible Series I preferred stock, net of issuance cost of $ 24

Stock-based compensation expense

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Non-cash operating lease cost

Gain on sale of commercial business

Loss on extinguishment of debt

(Gain) loss on fair value remeasurement of deferred purchase consideration

Loss (gain) on fair value remeasurement of contingent consideration

Gain on fair value remeasurement of deferred purchase consideration

Loss on fair value remeasurement of contingent consideration

Amortization of debt discount and other non-cash interest

Stock-based compensation

Other non-cash (gains) losses, net

Other non-cash losses (gains)

Change in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other current assets

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Cash flows from investing activities:

Proceeds from sale of commercial business, net of transaction costs

Purchases of property and equipment and other assets

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Proceeds from sales or maturities of short-term investments

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities:

Payment of principal, prepayment premium and final payment fee on debt

Proceeds from issuance of common stock and Series E preferred stock, net of issuance costs of $ 240

Payment of principal, prepayment premium and payment fee on debt

Proceeds from issuance of Series F preferred stock, net of issuance costs of $ 35

Proceeds from issuance of Series G preferred stock, net of issuance costs of $ 62

Proceeds from issuance of common stock and Series H preferred stock, net of issuance costs of $ 218

Proceeds from issuance of common stock and Series I preferred stock

Proceeds from common stock offerings, net of offering costs

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Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan

Net cash provided by (used in) financing activities

Net decrease in cash, cash equivalents and restricted cash:

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Reconciliation of cash, cash equivalents and restricted cash:

Cash, cash equivalents, and restricted cash at end of period

Less restricted cash

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents:

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Non-cash investing and financing activities:

Purchases of property and equipment in accounts payable and accrued expenses

Issuance of common stock to satisfy deferred purchase consideration in additional paid-in capital

Issuance of common stock to satisfy contingent consideration in additional paid-in capital

Issuance of common stock to satisfy service contract in additional paid-in capital

Issuance costs included in accrued expenses

Supplemental disclosure:

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Right-of-use assets obtained in exchange of operating lease obligations

Right-of-use assets obtained in exchange of finance lease obligations

The accompanying notes are an integral part of these consolidated financial statements.

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to Kala Bio , Inc.

On November 15, 2021, the Company and its newly formed, direct wholly owned subsidiary, Ceres Merger Sub, Inc.

(the “Merger Subsidiary”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Combangio, Inc.

(“Combangio”) and Fortis Advisors LLC, solely in its capacity as Combangio Equityholder Representative in connection with the Merger Agreement, pursuant to which on November 15, 2021, the Merger Subsidiary merged with and into Combangio with Combangio surviving such merger and becoming a direct wholly owned subsidiary of the Company (the “Combangio Acquisition”).

In connection with the Combangio Acquisition, the Company acquired Combangio’s mesenchymal stem cell secretomes (“MSC-S”) platform, including its lead product candidate for the treatment of persistent corneal epithelial defects (“PCED”), which the Company refers to as KPI-012.

On November 15, 2021, the Company acquired Combangio, Inc.

(“Combangio”), including its mesenchymal stem cell secretomes platform and lead product candidate for the treatment of persistent corneal epithelial defects (“PCED”), which the Company refers to as KPI-012 (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.

PCED is a rare disease of impaired corneal healing.

The Company submitted an investigational new drug application, (“IND”) to the U.S.

Food and Drug Administration, (“FDA”), which was accepted in December 2022.

In February 2023, the Company dosed its first patient in the CHASE (“ C orneal H ealing A fter SE cretome therapy”) Phase 2b clinical trial of KPI-012 for PCED in the United States.

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The Company expects to commercialize in the United States any of its product candidates that receive marketing approval.

In connection with the determination to focus its research and development efforts on KPI-012, in 2022, the Company ceased the development of its preclinical pipeline programs that are unrelated to its MSC-S platform.

The Company previously developed and commercialized two marketed products, EYSUVIS ® (loteprednol etabonate ophthalmic suspension) 0.25%, for the short-term (up to two weeks) treatment of the signs and symptoms of dry eye disease, and INVELTYS ® (loteprednol etabonate ophthalmic suspension) 1%, a topical twice-a-day ocular steroid for the treatment of post-operative inflammation and pain following ocular surgery.

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Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the Alcon Transaction.

See Note 3, “Acquisitions and Divestitures” for additional information about the Alcon Transaction and the Combangio Acquisition.

The Company’s success is dependent upon its ability to develop, obtain regulatory approval for and commercialize KPI-012 and any other product candidate it may develop in the future, the success of its research and development efforts, whether it receives any commercial-based sales milestone payments from Alcon, its ability to raise additional capital when needed and, ultimately, attain profitable operations.

Reverse Stock Split— On October 20, 2022, the Company effected a 1 -for-50 reverse stock split of the Company’s shares of common stock either issued and outstanding or held by the Company as treasury stock (the “Reverse Stock Split”).

As a result of the Reverse Stock Split, every 50 shares of issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share.

No fractional shares were issued as a result of the Reverse Stock Split.

Any fractional shares that would otherwise have resulted from the Reverse Stock Split were rounded up to the next whole number.

The number of authorized shares of common stock under the Company’s Restated Certificate of Incorporation, as amended, remained

Alcon paid to the Company an upfront cash payment of $ 60,000 upon the closing of the Alcon Transaction.

In addition, pursuant to the Asset Purchase Agreement, the Company is eligible to receive from Alcon up to four commercial-based sales milestone payments as follows:

(1) $ 25,000 upon the achievement of $ 50,000 or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $ 65,000 upon the achievement of $ 100,000 or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $ 75,000 upon the achievement of $ 175,000 or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $ 160,000 upon the achievement of $ 250,000 or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029.

Each milestone payment will only become payable once, if at all, upon the first time such milestone is achieved, and only one milestone payment will be paid with respect to a calendar year.

In the event that more than one milestone is achieved in a calendar year, the higher milestone payment will become payable and the lower milestone payment will become payable only if the corresponding milestone is achieved again in a subsequent calendar year.

The Company has not been entitled to any milestone payment to date.

The Company’s success is dependent upon its ability to develop, obtain regulatory approval for and commercialize KPI-012 and any other product candidate it may develop in the future, the success of its research and development efforts, its ability to raise additional capital when needed and, ultimately, attain profitable operations.

KALA BIO, INC.

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(In thousands, except share and per share amounts)

unchanged at 120,000,000 shares.

All historical share and per share amounts reflected throughout these financial statements have been adjusted to reflect the Reverse Stock Split.

Proportionate adjustments were made to the per share exercise price and the number of shares of common stock that may be purchased upon exercise of outstanding stock options and warrants, and the number of shares of common stock reserved for future issuance under the Company’s 2017 Equity Incentive Plan and Employee Stock Purchase Plan.

Recent Equity Financings — On May 7, 2020, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on May 19, 2020 (the “2020 Shelf Registration”).

Recent Equity Financings - Registered Offerings — On May 7, 2020, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on May 19, 2020 (the “2020 Shelf Registration”).

Under the 2020 Shelf Registration, the Company may offer and sell up to $ 350,000 of a variety of securities including common stock, preferred stock, warrants, depositary shares, debt securities or units during the three-year period that commenced upon the 2020 Shelf Registration becoming effective.

In connection with the filing of the 2020 Shelf Registration, the Company entered into an amended and restated sales agreement (the “Amended and Restated Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which the Company could issue and sell, from time to time, up to an aggregate of $ 75,000 of its common stock in an at-the-market equity offering through Jefferies, as a sales agent.

During the year ended December 31, 2022, the Company issued and sold an additional 148,461 shares of its common stock under its at-the-market offering pursuant to the terms of the Amended and Restated Sales Agreement, resulting in net proceeds of $ 1,036 .

From January 1, 2023 to January 10, 2023, the Company sold 245,887 shares of its common stock pursuant to the terms of the Amended and Restated Sales Agreement, resulting in net proceeds of $ 9,994 .

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During the year ended December 31, 2023, the Company sold 256,256 shares of its common stock under its at-the-market offering pursuant to the 2023 Shelf Registration for total net proceeds of $ 3,642 .

During the year ended December 31, 2023, the Company sold an aggregate of 731,521 shares of its common stock pursuant to (1) the Amended and Restated Sales Agreement and the Open Market Sale Agreement under the 2020 Shelf Registration and (2) the Open Market Sale Agreement under the 2023 Shelf Registration, for total net proceeds of $ 18,536 .

On November 28, 2022, the Company entered into a Securities Purchase Agreement (the “2022 Securities Purchase Agreement”) with certain institutional investors named therein, pursuant to which the Company agreed to issue

During the year ended December 31, 2024, the Company sold an aggregate of 527,940 shares of its common stock under the Open Market Sale Agreement under the 2023 Shelf Registration for total net proceeds of $ 3,394 .

During the year ended December 31, 2023, the Company sold (1) an aggregate of 475,265 shares of its common stock pursuant to the Amended and Restated Sales Agreement and the Open Market Sale Agreement under the 2020 Shelf Registration, for total net proceeds of $ 14,894 and (2) an aggregate of 256,256 shares of its common stock pursuant to the Open Market Sale Agreement under the 2023 Shelf Registration, for total net proceeds of $ 3,642 .

KALA BIO, INC.

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(In thousands, except share and per share amounts)

and sell, in a private placement priced at-the-market under Nasdaq rules, shares of common stock and shares of Series E Convertible Non-Redeemable Preferred Stock, par value $ 0.001 per share, of the Company (the “Series E Preferred Stock”), in two tranches for aggregate gross proceeds of up to $ 31,000 (collectively, the “2022 Private Placement”).

Pursuant to the 2022 Securities Purchase Agreement, on December 1, 2022, the Company issued and sold to the purchasers at the first closing of the 2022 Private Placement, (i) 76,813 shares of common stock, at a price per common share equal to $ 5.75 and (ii) 9,666 shares of Series E Preferred Stock, at a price per share equal to $ 575.00 , for aggregate gross proceeds of approximately $ 6,000 .

On December 27, 2022, following the certification by the Chief Executive Officer of the Company that the FDA accepted the Company’s IND for KPI-012, the Company issued and sold to the purchasers at a second closing of the 2022 Private Placement a total of 43,478 shares of Series E Preferred Stock, at a price per share equal to $ 575.00 , for aggregate gross proceeds of approximately $ 25,000 .

Costs incurred in connection with the 2022 Private Placement were $ 240 , which were recorded as a reduction to additional paid-in capital.

On December 21, 2023, the Company entered into a Securities Purchase Agreement (the “2023 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 F Convertible Non-Redeemable Preferred Stock, par value $ 0.001 per share, of the Company (the “Series F Preferred Stock”), for aggregate gross proceeds of approximately $ 2,000 (the “2023 Private Placement”).

Recent Equity Financings - Private Placements —On December 21, 2023, the Company entered into a Securities Purchase Agreement (the “2023 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 F Convertible Non-Redeemable Preferred Stock, par value $ 0.001 per share, of the Company (the “Series F Preferred Stock”), for aggregate gross proceeds of approximately $ 2,000 (the “2023 Private Placement”).

Pursuant to the 2023 Securities Purchase Agreement, the Company issued and sold to the purchasers at the closing of the 2023 Private Placement, 2,928 shares of Series F Preferred Stock, at a price per preferred share equal to $ 683.00 .

Costs incurred in connection with the 2023 Private Placement were $ 35 , which were recorded as a reduction to additional paid-in capital.

On March 25, 2024, the Company entered into a Securities Purchase Agreement (the “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 “2024 Private Placement”).

Pursuant to the 2024 Securities Purchase Agreement, the Company issued and sold to the purchasers at the closing of the 2024 Private Placement, 10,901 shares of Series G Preferred Stock, at a price per preferred share equal to $ 788.90 .

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 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.

Refer to Note 8, “Debt”, for a discussion of debt financing activity.

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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 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 $ 42,199 and $ 44,822 , for the years ended December 31, 2023 and 2022, respectively, and used cash in operations of $ 27,927 and $ 78,908 , in the years ended December 31, 2023 and 2022, respectively.

In August 2023, following entry into the award agreement with the California Institute for Regenerative Medicine

KALA BIO, INC.

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(In thousands, except share and per share amounts)

(“CIRM”), Combangio received an initial $ 5,900 disbursement from CIRM, and the balance of the total $ 15,000 award is payable to Combangio upon the achievement of specified milestones (see Note 6, “Grant Income” for further information about the CIRM Award (as defined below)).

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 $ 38,511 and $ 42,199 , for the years ended December 31, 2024 and 2023, respectively, and used cash in operations of $ 29,382 and $ 27,927 , in the years ended December 31, 2024 and 2023, 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 (including the Company’s most recent private placements in March 2024, June 2024 and December 2024), 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”) (including the Company’s most recent disbursements of $ 3,240 and $ 2,520 in August 2024 and December 2024, respectively, from CIRM upon achievement of specified milestones), convertible promissory notes and warrants.

S ee Note 4, “Grant Income” for further information about the CIRM Award.

The Company has 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.

As a result of the Combangio Acquisition and the sale of the Commercial Business to Alcon, the Company is devoting substantial financial resources to the research and development and potential commercialization of KPI-012 for PCED and any other indications the Company determines to pursue, including Limbal Stem Cell Deficiency.

The Company is devoting substantial financial resources to the research and development and potential commercialization of KPI-012 for PCED and any other indications the Company determines to pursue, including Limbal Stem Cell Deficiency.

The Company has no revenue-generating commercial products and, as a result of the Combangio Acquisition, may be required to pay certain milestones and royalty payments to former equityholders of Combangio.

Although the Company is eligible to receive up to $ 325,000 in payments from Alcon based upon the achievement of specified commercial sales-based milestones with respect to EYSUVIS and INVELTYS, there can be no assurance when the Company may receive such milestone payments or of the amount of milestone payments the Company may receive, if any.

The Company cannot be certain that it will achieve the milestones within the timeframe required by the CIRM Award, or at all, and as such the Company may never receive the remaining $ 9,100 under the award.

Additionally, the Company cannot be certain that it will achieve the remaining milestones under the CIRM Award within the required timeframes, or at all, and as such the Company may never receive the remaining $ 3,340 under the award.

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

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

The Company expects that its cash and cash equivalents as of December 31, 2023, together with the $ 8,600 of gross proceeds received from the sale of shares of Series G Preferred Stock in March 2024, will enable it to fund its operating expenses, lease and debt service obligations and capital expenditure requirements for at least 12 months from the date these consolidated financial statements were issued.

The Company expects that its cash and cash equivalents as of December 31, 2024, will enable it to fund its operating expenses, lease and debt service obligations and capital expenditure requirements for at least twelve months from the date these consolidated financial statements were issued.

This evaluation is based on relevant conditions and events that are known and reasonably knowable at the date that the consolidated financial statements are issued.

To the extent these conditions or events change, the Company could deplete its available capital resources sooner than it currently expects.

This evaluation also assumes that the Company remains in compliance with the covenants and no event of default occurs under its Loan Agreement with Oxford Finance.

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

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Use of Estimates— The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.

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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

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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 as opposed to grant revenue.

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 are recorded as deferred grant income on the consolidated balance sheets.

Management has determined that the Company is the principal participant under the Company’s CIRM Award, and accordingly, the Company records amounts earned under this arrangement as grant income on the consolidated statements of operations and comprehensive loss.

Product Revenues, Net — Following the sale of its Commercial Business to Alcon in July 2022, the Company no longer has any commercial products in its portfolio.

The Company sold EYSUVIS for the short-term (up to two weeks) treatment of the signs and symptoms of dry eye disease, and INVELTYS, its topical twice-a-day ocular steroid for the treatment of post-operative inflammation and pain following ocular surgery, primarily to wholesalers in the United States (“Customers”).

These Customers subsequently resold the Company’s products to specialty and other retail pharmacies.

In addition to agreements with Customers, the Company entered into arrangements with third-party payors that provided for government-mandated and/or privately-negotiated rebates, chargebacks and discounts for the purchase of its products.

The Company accounted for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers .

Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods or services.

The Company performed the following five steps to recognize revenue under ASC Topic 606:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only recognized revenue when it was probable that it would collect the consideration to which it was entitled in exchange for the goods or services that would be transferred to the customer.

Performance Obligations

The Company determined that performance obligations were satisfied and revenue was recognized when a customer took control of the Company’s products, which occurred at a point in time.

This generally occurred upon delivery of the products to customers, at which point the Company recognized revenue and recorded accounts receivable.

Payment was typically received 70 to 90 days after satisfaction of the Company’s performance obligations.

Transaction Price and Variable Consideration

Revenue was measured as the amount of consideration the Company expected to receive in exchange for transferring products to a customer (“transaction price”).

The transaction price for product sales included variable consideration related to chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns.

The Company estimated the amount of variable consideration that should have been included in the transaction price.

These estimates took into consideration a range of possible outcomes that were probability-weighted for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

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.

The amount of variable consideration that was included in the transaction price may be constrained and was included in net sales only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized would not occur in a future period.

In general, performance obligations did not include any estimated amounts of variable consideration that were constrained.

Actual amounts of consideration ultimately received may differ from the Company’s estimates.

If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The following table summarizes activity in each of the Company’s product revenue provision and allowance categories for the years ended December 31, 2023 and 2022:

Trade Discounts,

Allowances and

Chargebacks (1)

Product Returns (2)

Incentives (3)

Balance as of January 1, 2022

Provision related to current period sales

Changes in estimate related to prior period sales

Credit/payments made

Balance as of December 31, 2022

Changes in estimate related to prior period sales

Credit/payments made

Balance as of December 31, 2023

(1) Trade discounts, allowances and chargebacks included fees for distribution service fees, prompt pay and other discounts, and chargebacks.

Estimated trade discounts, allowances and chargebacks were deducted from gross revenue at the time revenues were recognized and were recorded as a reduction to accounts receivable on the Company’s consolidated balance sheets.

(2) Estimated provisions for product returns were generally 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.

(3) Rebates and incentives included managed care rebates, government rebates, co-pay program incentives, and sales incentives and allowances.

Estimated provisions for rebates and discounts 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.

As of December 31, 2023 and 2022, the Company did not have any transaction price allocated to remaining performance obligations and any costs to obtain contracts with customers, including pre-contract costs and set up costs, were immaterial.

Accounts Receivable, net —Accounts receivable are reported on the consolidated balance sheets at outstanding amounts due from customers for product sales.

The Company deducts sales discounts for prompt payments and other discounts, contractual fees for service arrangements, and chargebacks from accounts receivable.

The Company evaluates the collectability of accounts receivable on a regular basis, by reviewing the financial condition and payment history of customers, an overall review of collections experience on other accounts, and economic factors or events expected to affect future collections experience.

An allowance for doubtful accounts is recorded when a receivable is deemed to be uncollectible.

The Company recorded no allowance for doubtful accounts as of December 31, 2023 and 2022.

The Company recorded an allowance of $ 11 for expected sales discounts, related to prompt pay discounts and other discounts, contractual fee for service arrangements and chargebacks, to wholesalers and distributors as of December 31, 2022 and did not record any allowance for expected sales discounts as of December 31, 2023.

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.

1 unchanged sentence

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,

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.

Changes to contingent consideration obligations can result from changes to discount rates, accretion of the liability due to the passage of time, 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.

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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 recognized at fair value, with changes in fair value recognized in the consolidated statement of operations and comprehensive income

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Bifurcated embedded derivatives are classified with the related host contract in the Company’s consolidated balance sheet.

Cost of Product Revenues— The cost of product revenues consists primarily of materials, third-party manufacturing costs, freight and distribution costs, royalty expense, allocation of labor, quality control and assurance, reserves for defective inventory as well as excess or obsolete inventory, and other manufacturing overhead costs.

The Company recorded the cost of product revenues related to INVELTYS as research and development expenses prior to regulatory approval and recorded the cost of product revenues related to EYSUVIS as research and development expenses prior to the determination that FDA approval was probable and before the future economic benefit of the drug was expected to be realized.

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.

Periodically, the Company maintains cash, cash equivalents, short-term investments in accredited financial institutions in excess of federally insured limits.

1 unchanged sentence

The Company’s accounts receivable balance as of December 31, 2024 and 2023 were de minimis .

The Company had no revenue during the year ended December 31, 2023.

Three customers comprised 10% or more of the Company’s revenue during the year ended December 31, 2022.

These Customers comprised 47 %, 28 % and 21 % of revenue, respectively.

The Company had no revenue during the years ended December 31, 2024 and 2023.

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.

Restricted Cash — As of December 31, 2023, the Company had no long-term restricted cash.

As of December 31, 2022, the Company had long-term restricted cash of $ 250 .

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Investments— The Company determines the appropriate classification of its investments at the time of purchase.

6 unchanged sentences

The Company did not record any such impairments during the years ended December 31, 2024 or 2023.

Assets Held for Sale — The Company classifies its long-lived assets to be sold as held for sale, as specified by ASC 360, Property, Plant, and Equipment , in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale.

Upon designation as an asset held for sale, the Company stops recording depreciation and amortization expense on long-lived assets.

The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.

There were no assets held for sale as of December 31, 2023.

As of December 31, 2022, certain assets, including EYSUVIS and INVELTYS inventory, met the criteria to be classified as held for sale.

Fair value was determined based on the estimated proceeds from the sale of the assets.

The Company reclassified the inventory and property and equipment, which had a combined net realizable value of $ 7,595 , to current assets held for sale on the consolidated balance sheet as of December 31, 2022.

See Note 4, “Assets Held for Sale”, for additional information.

Leases —At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease.

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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

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.

KALA BIO, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

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.

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.

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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 selling, general and administrative expenses in the Company’s 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 year ended December 31, 2023 and incurred $ 11,249 of advertising costs for the year ended December 31, 2022, which were included in selling, general and administrative expenses in the accompanying consolidated statement of operations and comprehensive loss.

The Company incurred no advertising costs for the years ended December 31, 2024 and 2023.

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.

1 unchanged sentence

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.

The Company recorded no impairment charges for the year ended December 31, 2023 and impairment charges recorded for the year ended December 31, 2022 were de minimis .

The Company recorded no impairment charges for the years ended December 31, 2024 and 2023.

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 a single 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 diseases of the eye.

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.

To date, all of the Company’s revenue has been generated 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.

KALA BIO, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

The table below provides information about the Company’s segment, including significant segment expenses, other segment items and a reconciliation to net loss:

Costs and expenses:

Research and development:

KPI‑012 development costs

Employee‑related costs for research and development personnel

Other research and development costs (1)

General and administrative

Other segment (income) expense, net (2)

(1) Includes facility related costs and depreciation.

(2) Includes Gain on fair value remeasurement of deferred purchase consideration, Loss on fair value remeasurement of contingent consideration, Interest income, Interest expense, Grant income and Other expense, 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.

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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 capitalized with inventory until related expense is recognized.

Stock-based compensation is classified in the

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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.

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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”) and performance stock units (“PSUs”) are equal to the closing sale price of the Company’s common stock on the date of grant.

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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.

11 unchanged sentences

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 PSUs 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 PSUs and convertible preferred stock using the if-converted method.

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.

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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.

1 unchanged sentence

The Company reported a net loss attributable to common stockholders for the years ended December 31, 2024 and 2023.

(See Note 15).

Recent Accounting Pronouncements

See Note 12, “Loss Per Share”, for further information.

Reclassifications — Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

Recently Adopted Accounting Pronouncement

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.

Recently Issued Accounting Pronouncements

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.

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Acquisitions and Divestitures

Sale of Commercial Business to Alcon

On July 8, 2022, the Company closed the Alcon Transaction contemplated by the Asset Purchase Agreement, pursuant to which Alcon purchased the Commercial Business and assumed certain liabilities with respect to the Commercial Business.

Alcon paid to the Company an upfront cash payment of $ 60,000 upon the closing of the Alcon Transaction.

In addition, pursuant to the Asset Purchase Agreement, the Company is eligible to receive from Alcon up to four commercial-based sales milestone payments as follows:

Each milestone payment will only become payable once, if at all, upon the first time such milestone is achieved, and only one milestone payment will be paid with respect to a calendar year.

Pursuant to the Asset Purchase Agreement, on July 8, 2022, the Company entered into supply and commercial agreements under which the Company agreed to supply EYSUVIS and INVELTYS to Alcon and distribute EYSUVIS and INVELTYS to third-party customers of the Commercial Business on behalf of Alcon for a period of six months following the closing of the Alcon Transaction.

In addition, the Company entered into a transition services agreement under which the Company provided certain transition services to Alcon on a cost-plus pricing arrangement for six months following the closing of the Alcon Transaction.

Pursuant to the supply agreement, Alcon purchased from the Company, at the closing of the Alcon Transaction, $ 5,027 of EYSUVIS and INVELTYS inventory on-hand at the Company.

Together, the supply, commercial and transition services agreements are referred to herein as the “Transition Agreement.”

The Company has determined that the disposition of these assets does not qualify for reporting as a discontinued operation as it was not considered a component of an entity that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company.

During the year ended December 31, 2022, the Company recognized a net gain on the sale of the Commercial Business as follows:

Gross consideration from the sale of the Commercial Business

Closing and transaction costs

Net proceeds from the sale of the Commercial Business

Book value of assets transferred

Prepaid expenses and other current assets

Property and equipment, net

Other long-term assets

Total book value of assets transferred

Gain on sale of Commercial Business

Deferred gain on sale of Commercial Business

Net gain on sale of Commercial Business

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The Company deferred a portion of the gross consideration related to the discounted pricing on any remaining inventory owned by the Company (the “Remaining Inventory”) that Alcon could have purchased.

The deferred gain on the sale of the Commercial Business of $ 4,189 was recorded on the consolidated balance sheet as of the transaction date as deferred gain on sale of Commercial Business.

The Remaining Inventory and deferred gain on the sale of the Commercial Business were written off during the year ended December 31, 2023, and the net impact of $ 3,355 is recorded in the other (expense) income, net line item in the consolidated statements of operations and comprehensive loss.

The Company collected cash on behalf of Alcon for revenue generated by sales of EYSUVIS and INVELTYS from July 8, 2022 through the transition period and the Company transferred all cash generated by such sales to Alcon as of December 31, 2022.

The Company recorded income from the Transition Agreement of $ 157 , which is presented in other income (expense), net on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2023 and which offset operating expenses related to the Transition Agreement captured within loss from operations.

Other than noted above, there was no other income from the Transition Agreement recorded in the year ended December 31, 2023.

There were no payables due to third parties related to amounts the Company is obligated to pay on Alcon’s behalf included on the Company’s consolidated balance sheet as of December 31, 2023 and there were no receivables due from Alcon or third parties in connection with the Transition Agreement.

As of December 31, 2022, the Company had total receivables due from Alcon and third parties of $ 5,394 and $ 26 , respectively, and total payables to third parties related to the Transition Agreement of $ 3,981 of which $ 1,737 was included in accounts payable and $ 2,244 within accrued expenses and other current liabilities related to invoices the Company was obligated to pay on Alcon’s behalf.

As of December 31, 2022, the Company had a net receivable due from Alcon and third parties in connection with the Transition Agreement of $ 1,439 .

Acquisition of Combangio, Inc.

In connection with the closing of the Combangio Acquisition on November 15, 2021 (the “Closing”), the Company made an upfront payment of an aggregate of $ 5,000 in cash to former Combangio stockholders and other equityholders (the “Combangio Equityholders”), subject to customary adjustments, and agreed to issue an aggregate of 155,664 shares (the “Deferred Purchase Consideration”) of the Company’s common stock to the Combangio Equityholders with an aggregate value of approximately $ 16,123 , consisting of (i) an aggregate of 136,314 shares of common stock which were issued on January 3, 2022 (the “Upfront Shares”) and (ii) an aggregate of 19,350 shares of common stock that were initially held back as partial security for the satisfaction of indemnification obligations and other payment obligations of the Combangio Equityholders (the “Holdback Shares”) and that were issued in March 2023 upon escrow release.

The aggregate value of the Deferred Purchase Consideration was calculated using the closing price of the Company’s common stock on The Nasdaq Global Select Market on November 12, 2021, the last trading day prior to the Closing.

In addition, pursuant to the Merger Agreement, the Combangio Equityholders are entitled to receive from the Company up to $ 105,000 in payments that are contingent upon the achievement of specified development, regulatory and commercialization milestones (the “Contingent Consideration”) and are payable in cash and shares of the Company’s common stock, subject to the Share Cap (as defined below).

If the issuance of the Deferred Purchase Consideration or any contingent consideration payable in shares of the Company’s common stock (the “Contingent Stock Consideration”) would result in the aggregate number of shares of common stock issued under the Merger Agreement equaling or exceeding 19.9 % of the total number of shares of the Company’s common stock issued and outstanding immediately prior to the closing (the “Share Cap”), then the Company will be required to pay the portion of such consideration in excess of the Share Cap in cash.

The portion of any payment of Contingent Consideration payable in cash is referred to as “Contingent Cash Consideration”.

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Upon dosing of the first patient in the CHASE Phase 2b clinical trial of KPI-012 for PCED in the United States in February 2023 (the “First Dosing Milestone”), in March 2023, the Company paid the former Combangio Equityholders an aggregate of $ 2,500 in cash and $ 2,354 in shares of our common stock (representing an aggregate of 105,038 shares of the Company’s common stock).

The remaining amount due for the First Dosing Milestone of $ 146 was paid in cash in January 2024.

Upon payment of the First Dosing Milestone, the Company reached the Share Cap and any Contingent Consideration payable under the Merger Agreement in the future will be paid only in cash.

Subject to the terms and conditions of the Merger Agreement, the former Combangio Equityholders, are entitled to receive from the Company the following remaining Contingent Consideration in cash:

● (i) $ 5,000 payable upon the first patient dosed with any product candidate whose active ingredient comprises one or more biological factors secreted by MSCs or their progenitors, including KPI-012 (the “Product Candidate”) in a pivotal clinical trial, (ii) $ 12,500 payable upon regulatory approval by the FDA of marketing and sale of a Product Candidate in the United States, subject to certain specified reductions;

(iii) $ 17,500 payable upon the first commercial sale of a Product Candidate in the United States, subject to certain specified reductions, and (iv) an aggregate of up to $ 65,000 payable upon the achievement of specified sales milestones;

● tiered cash royalties at percentage rates in the mid-to-high single digits payable on annual net sales of all Product Candidates;

● a cash payment at a percentage rate in the high single digits of all income, including earnout payments, received by the Company or any of its affiliates from a product license granted by the Company to a third party to sell or otherwise commercialize the Product Candidate in countries where neither the Company nor its affiliates conduct sales of such Product Candidate, subject to certain exceptions set forth in the Merger Agreement.

If the aggregate amount of Contingent Cash Consideration payable in any calendar year (after giving effect to the Share Cap) exceeds $ 2,500 (the “Excess Cash Cap”), such excess portion (“Carry Forward Contingent Cash Consideration”) will be carried forward and, subject to application of the Excess Cash Cap in the following calendar year, become payable on the first business day of the following calendar year.

Any Carry Forward Contingent Cash Consideration outstanding on June 1, 2026 is payable in full on June 1, 2026.

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.

Assets Held for Sale

No assets held for sale remained on the consolidated balance sheet as of December 31, 2023.

The Remaining Inventory and deferred gain on the sale of the Commercial Business were written off and recognized during the year ended December 31, 2023 and included in other (expense) income, net on the consolidated statements of operations and comprehensive loss.

As of December 31, 2022, the Company presented assets to be disposed of that met the criteria as held for sale as a single asset in its consolidated financial statements.

The EYSUVIS and INVELTYS product inventory classified as held for sale represented the net realizable value of the Remaining Inventory which Alcon, and solely Alcon, had the right to purchase.

The Company deferred a portion of the gain on the sale of the Commercial Business related to the discounted pricing on the Remaining Inventory of $ 4,189 .

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The following is a summary of the major categories of assets that were reclassified to held for sale on the consolidated balance sheet as of December 31, 2022:

Property and equipment, net

Current assets held for sale

See Note 3, “Acquisitions and Divestitures”, for further information on the sale of the Commercial Business.

Fair Value of Financial Instruments

6 unchanged sentences

Cash equivalents and contingent consideration are reported at their respective fair values on the Company’s consolidated balance sheets.

As discussed in Note 3, “Acquisitions and Divestitures”, the Company acquired Combangio in November 2021 and in connection with the closing of the Combangio Acquisition, the Company agreed to issue Deferred Purchase Consideration for which the Company established liabilities for these considerations.

The Deferred Purchase Consideration related to the Combangio Acquisition was measured at fair value each reporting period using Level 3 unobservable inputs.

The fair value of the Deferred Purchase Consideration was based on the fair value of the underlying stock and a discount for lack of marketability.

Any change in the fair value of the Deferred Purchase Consideration was included in loss from operations in the consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2022, the Company settled $ 7,935 of the liability upon issuance of the Upfront Shares and during the year ended December 31, 2023, the Company settled the remaining liability of $ 365 upon the issuance of the Holdback Shares.

During the years ended December 31, 2023 and 2022, the change in the fair value of the Deferred Purchase Consideration was a gain of $ 230 and a loss of $ 638 , respectively, primarily due to the change in the fair value of the underlying stock price and was recognized as the (gain) loss on fair value remeasurement of deferred purchase consideration in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2023 and 2022.

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.

To date, of the $ 105,000 in contingent milestone payments, the Company has paid to the Combangio Equityholders 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) upon achieving the First Dosing Milestone in February 2023 and paid the remaining amount due in connection

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”)

KALA BIO, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

with the First Dosing Milestone of $ 146 in cash in January 2024, which was included within accrued expenses and other current liabilities on the consolidated balance sheet as of December 31, 2023.

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.

T he Deferred Purchase Consideration related to the Combangio Acquisition was measured at fair value each reporting period using Level 3 unobservable inputs.

The fair value of the Deferred Purchase Consideration was based on the fair value of the underlying stock and a discount for lack of marketability.

Any change in the fair value of the Deferred Purchase Consideration was included in loss from operations in the consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2023, the Company settled the remaining liability of $ 365 upon the issuance of the Holdback Shares and therefore there was no change in the fair value of the Deferred Purchase Consideration during the year ended December 31, 2024.

During the years ended December 31, 2023, the change in the fair value of the Deferred Purchase Consideration was a gain of $ 230 , primarily due to the change in the fair value of the underlying stock price and was recognized as the gain on fair value remeasurement of deferred purchase consideration in the consolidated statement of operations and comprehensive loss.

As of December 31, 2024, 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.

2 unchanged sentences

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.

During the year ended December 31, 2023, the change in the fair value of the contingent consideration liabilities was a loss of $ 740 , primarily due to changes in discount rates, as well as changes in the expected timing and probability of payment, partially offset by the passage of time, and was recognized as a loss on fair value remeasurement of contingent consideration in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

During the year ended December 31, 2022, the change in the fair value of the contingent consideration liabilities was a gain of $ 288 , primarily due to changes in discount rates, partially offset by the passage of time, and was recognized as a gain on fair value remeasurement of contingent consideration in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.

During the years ended December 31, 2024 and 2023, the change in the fair value of the contingent consideration liabilities was a loss of $ 549 and $ 740 , 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 loss on fair value remeasurement of contingent consideration in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2024 and 2023.

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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, 2024 and 2023:

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Cash equivalents

Deferred purchase consideration

Contingent consideration

Total Liabilities

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of the Level 3 inputs as of December 31, 2024 and 2023:

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Unobservable Input

Deferred purchase consideration

Option pricing model

Discount for lack of marketability

Contingent consideration

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Discount rate

Discount for lack of marketability

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 year ended December 31, 2023:

Deferred purchase consideration

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Contingent consideration

Balance at January 1, 2023

Fair value adjustments

Reclassification to accrued expenses and other current liabilities

Balance at January 1, 2024

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Balance at December 31, 2024

Contingent consideration

Balance at January 1, 2022

Fair value adjustments

Deferred purchase consideration

Balance at January 1, 2023

Fair value adjustments

Reclassification to accrued expenses and other current liabilities

Balance at December 31, 2023

During the years ended December 31, 2024 and 2023, there were no transfers between Level 1, Level 2, and Level 3.

The carrying value reported on the accompanying consolidated balance sheets of cash, restricted cash, accounts receivable, accounts payable and accrued expenses approximate their fair value due to their short-term nature.

Management believes that the Company’s long-term debt (see Note 11) bears interest at the prevailing market rate for instruments with similar characteristics and, accordingly, the carrying value of long-term debt, also approximates its fair value.

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

On August 2, 2023, Combangio, a wholly owned subsidiary of the Company, entered into an award agreement with CIRM for a $ 15,000 grant (the “CIRM Award”) to support Combangio’s KPI-012 program for the treatment of PCED.

The 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 carrying value reported on the accompanying consolidated balance sheets of cash, accounts receivable, accounts payable and accrued expenses approximate their fair value due to their short-term nature.

Management believes that the Company’s long-term debt (see Note 8, “Debt”) bears interest at the prevailing market rate for instruments with similar characteristics and, accordingly, the carrying value of long-term debt, also approximates its fair value.

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, and the balance of the award is payable to Combangio upon the achievement of 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.

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.

During the year ended December 31, 2023, the Company recognized $ 4,825 of grant income related to the CIRM Award on its consolidated statement of operations.

As of December 31, 2023, the Company had deferred grant income of $ 1,075 on its consolidated balance sheet.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets, consists of the following:

Prepaid research and development

Non-trade receivables

Trade receivables, net

Due from Alcon

Prepaid expenses and other current assets

In addition, following the satisfaction of the Base Royalty,

KALA BIO, INC.

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(In thousands, except share and per share amounts)

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.

During the years ended December 31, 2024 and 2023, the Company recognized $ 6,199 and $ 4,825 , respectively, of grant income related to the CIRM Award on its consolidated statement of operations.

As of December 31, 2024, the Company had deferred grant income of $ 637 on its consolidated balance sheet.

Property and Equipment, Net

Property and equipment, net, consists of the following:

Property and equipment, net, consisted of the following:

Computer hardware and software

Furniture and office equipment

Construction in progress

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Accrued Expenses

Accrued expenses and other current liabilities consist of the following:

Accrued expenses and other current liabilities consisted of the following:

Compensation and benefits

Accrued revenue reserves (1)

Development costs

Professional services

Commercial costs

Contract manufacturing

Due to third parties in connection with Transition Agreement (2)

Professional services

Accrued revenue reserves (1)

Accrued expenses and other current liabilities

(1) There were additional revenue reserves included in accounts payable of $ 483 as of December 31, 2022.

There were no such amounts included in accounts payable as of December 31, 2023.

(2) There were additional amounts due to third parties in connection with the Transition Agreement included in accounts payable of $ 1,737 as of December 31, 2022.

There were no such amounts included in accounts payable as of December 31, 2023 .

(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.

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

KALA BIO, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

option to extend the lease for an additional five-year term.

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 $ 2.2 million and corresponding $ 2.1 million of lease liability.

As of December 31, 2023, the Company recognized $ 2.0 million of right-of-use asset and a corresponding $ 2.1 million of lease liability (current and non-current) by calculating the present value of lease payments, discounted at 13.1 % , the Company’s estimated incremental borrowing rate, over the expected term of the lease.

Upon the lease commencement, the Company recorded a right-of-use asset of $ 2,154 and corresponding $ 2,133 of lease liability.

As of December 31, 2024, the Company recognized $ 1,691 of right-of-use asset and a corresponding $ 1,814 of lease liability (current and non-current) by calculating the present value of lease payments, discounted at 13.1 % , the Company’s estimated incremental borrowing rate, over the expected term of the lease.

As of December 31, 2024, the remaining lease term on the lease was 3.7 years.

Variable lease expense for the lease, includes real estate taxes, common area maintenance, and management fees.

Terminated Vehicle Fleet Lease

During the year ended December 31, 2019, the Company entered into a master fleet lease agreement (the “Vehicle Fleet Lease”), pursuant to which it leased vehicles.

The Vehicle Fleet Lease commenced upon the delivery of the initial vehicles in March 2019 and had been subject to modifications as the number of leased vehicles had increased or decreased.

During the year ended December 31, 2022, in connection with the closing of the Alcon Transaction, the Company terminated the Vehicle Fleet Lease and, as of December 31, 2022, there was no remaining right-of-use asset or corresponding lease liability.

In connection with the Vehicle Fleet Lease, the Company issued a letter of credit for $ 450 which was released in September 2022.

As of December 31, 2022, the Company had a receivable of $ 775 due from the vendor for the sale of used vehicles following the lease termination, which was included within prepaid expenses and other current assets on the consolidated balance sheet.

The remaining receivable from the vendor as of December 31, 2023 is de minimis.

The components of lease expense and related cash flows were as follows:

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Operating cash outflows from operating leases

The weighted average remaining lease term and weighted average discount rate of operating leases are as follows:

The weighted average remaining lease term and weighted average discount rate of operating leases were as follows:

Weighted average remaining lease term

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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

KALA BIO, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

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.

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.

1 unchanged sentence

These embedded derivatives were bundled and valued as one compound derivative in accordance with the applicable accounting guidance for derivatives and hedging transactions.

The Company determined that, due to the unlikely event of default, the embedded derivatives have a de minimis value as of December 31, 2023.

The Company determined that, due to the unlikely event of default, the value of the embedded derivatives have a de minimis value as of December 31, 2024.

The derivative liability will be remeasured at fair value at each reporting date, with changes in fair value being recorded as other income (expense) in the consolidated statements of operations and comprehensive loss.

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(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.

Pursuant to the Third Loan Amendment, in addition to the Third Amendment Prepayments, if the Company makes 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 will be automatically changed to July 1, 2025, and the maturity date of the Loan Agreement will be automatically changed from May 1, 2026 to November 1, 2026.

If, in addition to the Third Amendment Prepayments and the First Extension Prepayment, the Company makes an additional prepayment under the Loan Agreement equal to $ 2,500 (inclusive of the final payment

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 .

KALA BIO, INC.

1 unchanged sentence

(In thousands, except share and per share amounts)

fee) on or prior to June 30, 2025 (the “Second Extension Prepayment”), the Amortization Date will be automatically changed to January 1, 2026, and the maturity date of the Loan Agreement will be automatically changed to May 1, 2027.

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 makes 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 will be automatically changed to January 1, 2026, and the maturity date of the Loan Agreement will be 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.

The principal loan balance under the Loan Agreement following the Third Amendment Prepayments was $ 33,957 .

On August 1, 2023, the Company entered into an amendment to the Loan Agreement with Combangio and Oxford Finance (the “Fourth Loan Amendment”).

29 unchanged sentences

September 2017

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Common and Preferred Stock

1 unchanged sentence

The Company was authorized to issue up to 5,000,000 shares of preferred stock as of December 31, 2024 and 2023.

As of December 31, 2023, the Company designated 2,928 shares of preferred stock as Series F Preferred Stock, all of which were outstanding as of December 31, 2023.

As of December 31, 2022, the Company designated 54,000 shares of preferred stock as Series E Preferred Stock of which 51,246 and 53,144 shares were outstanding as of December 31, 2023 and 2022, respectively.

Series D Convertible Redeemable Preferred Stock

On August 18, 2022, the Board of Directors (the “Board”) declared a dividend of one one-thousandth of a share of the Company’s Series D Preferred Stock (“Series D Preferred Stock”), for each outstanding share of the Company’s common stock held of record as of 5:00 p.m.

Eastern Time on August 29, 2022.

The Certificate of Designation of Series D Preferred Stock was filed with the Delaware Secretary of State and became effective on August 19, 2022.

The dividend was based on the number of outstanding shares of common stock prior to the Reverse Stock Split.

The outstanding shares of Series D Preferred Stock were entitled to vote together with the outstanding shares of common stock, as a single class, exclusively with respect to a proposal giving the Board the authority, as it determined appropriate, to implement a reverse stock split within twelve months following the approval of such proposal by the Company’s stockholders (the “Reverse Stock Split Proposal”), as well as any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Reverse Stock Split Proposal (the “Adjournment Proposal”).

The Company held a special meeting of stockholders on October 19, 2022 (the “Special Meeting”) for the purpose of voting on the Reverse Stock Split Proposal and an Adjournment Proposal.

All shares of Series D Preferred Stock that were not present in person or by proxy at the Special Meeting were automatically redeemed by the Company immediately prior to the opening of the polls at Special Meeting (the “Initial Redemption”).

All shares that were not redeemed pursuant to the Initial Redemption were redeemed automatically upon the approval by the Company’s stockholders of the Reverse Stock Split Proposal at the Special Meeting (the “Subsequent Redemption” and, together with the Initial Redemption, the “Redemption”).

Each share of Series D Preferred Stock was entitled to receive $ 0.10 in cash for each 100 whole shares of Series D Preferred Stock immediately prior to the Redemption.

As of September 30, 2022, there were 73,208 shares of Series D Preferred Stock issued and outstanding .

As of December 31, 2022, both the Initial Redemption and the Subsequent Redemption have occurred.

As a result, no shares of Series D Preferred Stock remain outstanding.

On November 28, 2022, the Company filed a Certificate of Elimination of Number of Shares of Preferred Stock Designated as Series D Preferred Stock with the Secretary of State of the State of Delaware which, effective upon filing, eliminated all matters set forth in the Certificate of Designation of Series D Preferred Stock previously filed by the Company and all shares of Preferred Stock previously designated as Series D Preferred Stock resumed their status as undesignated shares of preferred stock of the Company.

Series E and Series F Convertible Non-Redeemable Preferred Stock

Pursuant to the Company’s Certificate of Designations, Preferences and Rights of Series E Convertible Non-Redeemable Preferred Stock and the Company’s Certificate of Designations, Preferences and Rights of Series F Convertible Non-Redeemable Preferred Stock, each filed with the Secretary of State of the State of Delaware, the Company designated 54,000 and 2,928 shares of its authorized and unissued preferred stock as Series E Preferred Stock and Series F Preferred Stock, respectively, and established the rights, preferences and privileges of the Series E Preferred Stock and Series F Preferred Stock.

As discussed more fully in Note 1, “Nature of Business,” on December 21, 2023, t he Company entered into the 2023 Securities Purchase Agreement pursuant to which it issued 2,928 shares of Series F

As of December 31, 2024, the Company designated 54,000 shares of preferred stock as Series E Preferred Stock, of which 51,246 shares were outstanding as of December 31, 2024.

As of December 31, 2024, the Company designated 2,928 , 10,901 , 9,393 and 3,286 shares of preferred stock as Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock, respectively, all of which were outstanding as of December 31, 2024.

Series E, Series F, Series G, Series H and Series I Convertible Non-Redeemable Preferred Stock

Pursuant to the Company’s Certificate of Designations, Preferences and Rights of Series E Convertible Non-Redeemable Preferred Stock, filed with the Secretary of State of the State of Delaware, the Company designated 54,000 shares of its authorized and unissued preferred stock as Series E Preferred Stock and established the rights, preferences and privileges of the Series E Preferred Stock.

Pursuant to the Company’s Certificate of Designations, Preferences and Rights of Series F Convertible Non-Redeemable Preferred Stock, filed with the Secretary of State of the State of

KALA BIO, INC.

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(In thousands, except share and per share amounts)

Preferred Stock at a per share price of $ 683.00 .

Delaware, the Company designated 2,928 shares of its authorized and unissued preferred stock as Series F Preferred Stock and established the rights, preferences and privileges of the Series F Preferred Stock.

Pursuant to the Company’s Certificate of Designations, Preferences and Rights of Series G Convertible Non-Redeemable Preferred Stock, filed with the Secretary of State of the State of Delaware, the Company designated 10,901 shares of its authorized and unissued preferred stock as Series G Preferred Stock and established the rights, preferences and privileges of the Series G Preferred Stock.

Pursuant to the Company’s Certificate of Designations, Preferences and Rights of Series H Convertible Non-Redeemable Preferred Stock, filed with the Secretary of State of the State of Delaware, the Company designated 9,393 shares of its authorized and unissued preferred stock as Series H Preferred Stock and established the rights, preferences and privileges of the Series H Preferred Stock.

Pursuant to the Company’s Certificate of Designations, Preferences and Rights of Series I Convertible Non-Redeemable Preferred Stock, filed with the Secretary of State of the State of Delaware, the Company designated 3,286 shares of its authorized and unissued preferred stock as Series I Preferred Stock and established the rights, preferences and privileges of the Series I Preferred Stock.

As discussed more fully in Note 1, “Nature of Business,” in December 2024, the Company entered into the December 2024 Securities Purchase Agreement pursuant to which it issued 3,286 shares of Series I Preferred Stock at a price per share of $ 644.00 .

In June 2024, the Company entered into the June 2024 Securities Purchase Agreement pursuant to which it issued 9,393 shares of Series H Preferred Stock at a price per share of $ 585.00 .

In March 2024, the Company entered into the March 2024 Securities Purchase Agreement pursuant to which it issued 10,901 shares of Series G Preferred Stock at a price per share of $ 788.90 .

In December 2023, t he Company entered into the 2023 Securities Purchase Agreement pursuant to which it issued 2,928 shares of Series F Preferred Stock at a per share price of $ 683.00 .

In December 2022, the Company entered into the 2022 Securities Purchase Agreement pursuant to which it issued 53,144 shares of Series E Preferred Stock at a per share price of $ 575.00 .

Each share of Series E Preferred Stock and Series F Preferred Stock has a par value of $ 0.001 .

Series E Preferred Stock and Series F Preferred Stock

Each share of Series E Preferred Stock and Series F Preferred Stock is initially convertible into 100 shares of common stock (subject to adjustment as provided in the applicable Certificate of Designations) at any time at the option of the holder, provided that the holder will be prohibited, subject to certain exceptions, from converting its shares of Series E Preferred Stock and/or Series F Preferred Stock for shares of common stock to the extent that immediately prior to or following such conversion, the holder, together with its affiliates and other attribution parties, would own in excess of 9.99 % of the total number of shares of common stock of the Company then issued and outstanding after giving effect to such conversion, which percentage may be changed at the holder’s election to a lower percentage at any time or to a higher percentage not to exceed 19.99 % upon 61 days ’ notice to the Company (collectively, the “Beneficial Ownership Limitation”).

Shares of Series E Preferred Stock and shares of Series F Preferred Stock will generally have no voting rights, except to the extent provided by applicable law, and except that (i) the consent of the holders of a majority of the outstanding Series E Preferred Stock will be required to waive any provisions of the Series E Certificate of Designations and (ii) the consent of the holders of a majority of the outstanding Series F Preferred Stock will be required to waive any provisions of the Series F Certificate of Designations.

Shares of Series E Preferred Stock and Series F Preferred Stock will be 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.

Each share of Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock has a par value of $ 0.001 .

Series E, Series F, Series G, Series H and Series I Preferred Stock

Each outstanding share of Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock is initially convertible into 100 shares of 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, provided that the holder will be prohibited, subject to certain exceptions, from converting such shares of preferred stock for shares of common stock to the extent that immediately prior to or following such conversion if the holder, together with its affiliates and other attribution parties, would own in excess of 9.99 % of the total number of shares of the Company’s common stock then issued and outstanding after giving effect to such conversion.

Such percentage may be changed at the holder’s election to a lower percentage at any time or to a higher percentage not to exceed 19.99 % upon 61 days ’ notice to the Company (collectively, the “Beneficial Ownership Limitation”).

Shares of Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock will generally have no voting rights, except to the extent provided by applicable law, and except that (i) the consent of the holders of a majority of the outstanding Series E Preferred Stock will be required to waive any provisions of the Series E Certificate of Designations, (ii) the consent of the holders of a majority of the outstanding Series F Preferred Stock will be required to waive any provisions of the Series F Certificate of Designations, (iii) the consent of the holders of a majority of the outstanding Series G Preferred Stock will be required to waive any provisions of the Series G Certificate of Designations, (iv) the consent of the holders of at least two-thirds of the outstanding Series H Preferred Stock will be required to waive any provisions of the Series H Certificate of Designations

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

and (v) the consent of the holders of at least two-thirds of the outstanding Series I Preferred Stock will be required to waive any provisions of the Series I Certificate of Designations.

Shares of Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock will be 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

If, upon any such Dissolution, the assets of the Company are insufficient to pay the holders of shares of the Series E Preferred Stock and the holders of shares of Series F Preferred Stock the full amount required under the preceding sentence, the holders of shares of Series E Preferred Stock and the holders of shares of Series F Preferred Stock will share in any distribution of the assets

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 E Preferred Stock, holders of Series F Preferred Stock, holders of Series G Preferred Stock, holders of Series H Preferred Stock and holders of Series I Preferred Stock will be entitled to receive, on a pari passu basis as applicable (A) an amount per share of Series E Preferred Stock equal to the greater of (i) $ 575.00 (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 Series E Preferred Stock been converted into common stock (without regard to any restrictions on conversion, including the Beneficial Ownership Limitation) immediately prior to such Dissolution, (B) an amount per share of Series F Preferred Stock equal to the greater of (i) $ 683.00 (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 Series F Preferred Stock been converted into common stock (without regard to any restrictions on conversion, including the Beneficial Ownership Limitation) immediately prior to such Dissolution, (C) an amount per share of Series G Preferred Stock equal to the greater of (i) $ 788.90 (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 Series G Preferred Stock been converted into common stock (without regard to any restrictions on conversion, including the Beneficial Ownership Limitation) immediately prior to such Dissolution, (D) an amount per share of Series H Preferred Stock equal to the greater of (i) $ 585.00 (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 Series H Preferred Stock been converted into common stock (without regard to any restrictions on conversion, including the Beneficial Ownership Limitation) immediately prior to such Dissolution, and (E) an amount per share of Series I Preferred Stock equal to the greater of (i) $ 644.00 (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 Series I Preferred Stock been converted into common stock (without regard to any restrictions on conversion, including the Beneficial Ownership Limitation) immediately prior to such Dissolution, in each case, 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 E Preferred Stock, the holders of shares of Series F Preferred Stock, the holders of Series G Preferred Stock, the holders of Series H Preferred Stock and the holders of Series I Preferred Stock the full amount required under the preceding sentence, the holders of shares of Series E Preferred Stock, the holders of shares of Series F Preferred Stock, the holders of Series G Preferred Stock, the holders of Series H Preferred Stock and the holders of Series I 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 E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares of were paid in full.

KALA BIO, INC.

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(In thousands, except share and per share amounts)

available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series E Preferred Stock and the Series F Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares of were paid in full.

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, 2024 and 2023.

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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 F Preferred Stock, the Series E Preferred Stock and 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 E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I 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 Series F Preferred Stock, the Series E Preferred Stock and shares of any series of its preferred stock that the Company may designate and issue in the future.

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 E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I 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, 2023 and 2022, 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 PSUs, upon the issuance of the Deferred Purchase Consideration in connection with the Combangio Acquisition (see Note 5), upon conversion of the Series E Preferred Stock and upon conversion of the Series F Preferred Stock:

As of December 31, 2024 and 2023, 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 I Preferred Stock:

Warrant rights to acquire common stock

Outstanding inducement stock option awards

Deferred Purchase Consideration

Series E Preferred Stock (as converted to common shares)

Series F Preferred Stock (as converted to common shares)

Convertible preferred stock (as converted to common stock)

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 and the Series I Preferred Stock issued pursuant to the December 2024 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 and Series I Preferred Stock and these instruments were equity classified within permanent equity.

KALA BIO, INC.

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(In thousands, except share and per share amounts)

Second Closing Right

The Company determined that the common stock and the Series E Preferred Stock issued on December 1, 2022 and the Series E Preferred Stock issued on December 27, 2022 (the “Second Closing Right”) pursuant to the 2022 Securities Purchase Agreement, each represented separate freestanding financial instruments and were not within the scope of ASC 480, Distinguishing Liabilities from Equity , (“ASC 480”).

The instruments did not contain any embedded derivatives required to be bifurcated from the Series E Preferred Stock and the instruments were each equity classified within permanent equity.

The Company determined that the relative fair value of the Second Closing Right was de minimis .

The Series F Preferred Stock issued on December 22, 2023 pursuant to the 2023 Securities Purchase Agreement was not within the scope of ASC 480, the instrument did not contain any embedded derivatives required to be bifurcated from the Series F Preferred Stock and the instrument was equity classified within permanent equity.

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, which amended and restated the Company’s 2017 Equity Incentive Plan, as amended (the “2017 Plan”), to (i) increase the number of shares of common stock authorized for issuance thereunder by 1,250,000 shares;

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;

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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.

As of December 31, 2023, there were 112,597 shares of common stock available for grant under the Amended and Restated 2017 Equity Incentive Plan.

In addition, the Amended and Restated 2017 Equity 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.

On January 1, 2024, 327,070 shares of common stock were added and were available for grant under the Amended and Restated 2017 Equity Incentive Plan.

Under the plans, the Board 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.

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, 2024, there were 244,003 shares of common stock available for grant under the 2017 Plan.

On January 1, 2025, 554,663 shares of common stock were added and were available for grant under the 2017 Plan.

Under the p lans, 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 sets a shorter term.

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.

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A total of 36 Eligible Holders participated in the Option Exchange Program.

Pursuant to the terms and conditions of the Option Exchange Program, the Company accepted for exchange

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

options to purchase a total of 182,251 shares of the Company’s common stock.

Pursuant to the terms and conditions of the Option Exchange Program, the Company accepted for exchange options to purchase a total of 182,251 shares of the Company’s common stock.

All surrendered options were cancelled effective as of the expiration of the Option Exchange Program, and immediately thereafter, in exchange therefor, the Company granted a total of 182,251 RSUs pursuant to the terms of the Option Exchange Program and the 2017 Plan.

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Based upon the modification guidance under ASC 718, the Company is required to record an incremental compensation expense of $ 1,210 , which will be recorded, along with the unrecognized compensation cost as of the date of the modification, over the remaining service period of the modified awards.

During the year ended December 31, 2024, the Company granted options for the purchase of 317,139 shares of common stock, including options to directors and inducement grant options to purchase 3,125 shares of common stock to a new employee made outside of the 2017 Plan in accordance with Nasdaq Listing Rule 5635(c)(4) .

During the year ended December 31, 2023, the Company granted options for the purchase of 666,962 shares of common stock, including options to directors and inducement grant options to purchase 13,920 shares of common stock to new employees made outside of the 2017 Plan in accordance with Nasdaq Listing Rule 5635(c)(4) .

During the year ended December 31, 2022, the Company granted options for the purchase of 83,221 shares of common stock, including options with performance criteria as described below, options to directors and inducement grant options to purchase 2,800 shares of common stock to new employees made outside of the 2017 Plan in accordance with Nasdaq Listing Rule 5635(c)(4) .

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

A summary of option activity is as follows:

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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 as well as the volatility of comparable companies with publicly available share prices.

The expected volatility is based upon the historical volatility of the Company.

The impact of forfeitures on compensation expense is recorded as they occur.

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The weighted average grant-date fair value of options granted during the years ended December 31, 2024 and 2023, was $ 5.79 and $ 12.82 , respectively.

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Stock-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows:

Cost of product revenues

Research and development

Selling, general and administrative

There were no stock-based compensation costs capitalized into inventory in the year ended December 31, 2023.

Stock-based compensation costs capitalized into inventory totaled $ 190 for the year ended December 31, 2022.

Capitalized stock-based compensation was recognized as an expense in cost of product revenues when the related product was sold or in selling, general and administrative expense when the related product was designated as a sample.

General and administrative

During the year ended December 31, 2024, 1,281 options were exercised.

There were no stock options exercised during the year ended December 31, 2023.

Cash proceeds received from the exercise of stock options were de minimis during the year ended December 31, 2022.

The total intrinsic value of options exercised for the year ended December 31, 2022, was de minimis .

In January 2022, the Company granted stock options to purchase up to 14,850 shares of common stock to certain executives tied to certain performance criteria.

On March 14, 2023, the Compensation Committee of the Company’s Board determined that certain of the performance conditions were achieved at specific levels of achievement, resulting in vesting of options to purchase an aggregate of 3,960 shares of common stock.

All outstanding stock options tied to performance criteria were surrendered in the Option Exchange Program and as such, there were none outstanding as of December 31, 2023.

Restricted Stock Units and Performance-Based Restricted Stock Units —In June 2020, the Company issued 13,854 PSUs to certain executives and other employees tied to certain performance criteria, which vested as to 50 % of the PSUs in October 2021 on the first anniversary of satisfying the performance criteria and the remaining 50 % vested in October 2022 upon the second anniversary of satisfying the performance criteria.

During the years ended December 31, 2023 and 2022, the Company issued 824,190 RSUs (which includes the RSUs issued in connection with the Option Exchange Program) and 6,910 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, 2023, a total of 827,658 RSUs were outstanding, consisting of 824,998 unvested shares and 2,660 vested and deferred shares by directors.

This results in unrecognized stock-based compensation of $ 13,343 to be recognized as stock-based compensation expense over the remaining weighted-average vesting period of 2.16 years.

KALA BIO, INC.

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(In thousands, except share and per share amounts)

Restricted Stock Units —During the years ended December 31, 2024 and 2023, the Company issued 71,830 RSUs and 824,190 RSUs (which includes the RSUs issued in connection with the Option Exchange Program in 2023), 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, 2024, a total of 564,323 RSUs were outstanding, consisting of 544,117 unvested shares and 20,206 vested and deferred shares by directors.

This results in unrecognized stock-based compensation of $ 6,284 to be recognized as stock-based compensation expense over the remaining weighted-average vesting period of 1.28 years.

A summary of activity for RSUs for the year ended December 31, 2024 is as follows:

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Net loss per share attributable to common stockholders, basic and diluted

(1) Included in the weighted-average common shares outstanding, basic and diluted for the year ended December 31, 2022 is an aggregate of 19,350 shares of common stock that were held back by the Company as partial security for the satisfaction of indemnification obligations and other payment obligations of the Combangio Equityholders and were issued in March 2023.

(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 quarters’ incremental shares:

The share amounts presented below represent the average of the number of incremental shares included in each quarterly calculation:

Options to purchase shares of common stock

Unvested RSUs and PSUs

Unvested RSUs

Unexercised warrants

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Change in valuation allowance

Losses and Credits Limited by Section 382 & Section 383

Effective income tax rate

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Capitalized research and development and start-up expenditures

Stock-based compensation

Research and development tax credit carryforwards

Stock-based compensation

Lease liabilities

Rebates, incentives, trade discounts and allowances

Deferred gain on sale of Commercial Business

Total deferred tax assets

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Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2024 and 2023.

The valuation allowance increased by $ 7,325 and decreased by $ 2,727 during the years ended December 31, 2023 and 2022, respectively.

The current year increase is primarily the result of an increase in federal net operating losses and the generation of federal and state research and development tax credits.

The prior year decrease is primarily the result of a material reduction to the net operating loss carryforward and the research and development tax credits deferred tax assets caused by limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986, thus lowering the valuation allowance required.

The valuation allowance increased by $ 10,776 and $ 7,325 during the years ended December 31, 2024 and 2023, respectively.

The current year and prior year increase is largely the result of an increase to federal net operating losses and generation of federal and state research and development tax credits.

Management reevaluates the positive and negative evidence at each reporting period.

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As of December 31, 2024 and 2023, the Company had state net operating loss carryforwards of $ 469,053 and $ 413,711 , respectively, which may be available to offset future state income tax liabilities and expire at various dates beginning in 2025.

As of December 31, 2023, the Company had $ 1,154 federal and state research and

As of December 31, 2024 and 2023, the Company had federal and state research and development credit carryforwards of $ 2,476 and $ 1,154 , respectively.

KALA BIO, INC.

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(In thousands, except share and per share amounts)

development credit carryforwards and as of December 31, 2022, the Company had no federal and state research and development credit carryforwards.

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 completed an analysis as of December 31, 2022 and determined that an ownership change occurred during December 2022 as a result of the Company’s entry into the 2022 Securities Purchase Agreement which materially limited the net operating loss carryforwards and research and development tax credits.

As a result of this most recent ownership change, the utilization of the Company’s net operating loss carryforwards is subject to an annual limitation of $ 222 , which is reflected in the numbers presented above.

The Company has not completed an analysis as of December 31, 2023 but does not expect any change would further limit the net operating loss carryforwards.

The Company has completed an analysis as of December 31, 2022 and determined that an additional ownership change occurred during December 2022 as a result of the issuance of Series E Preferred Stock, further limiting the net operating loss carryforwards and research and development tax credits due to the expiration of those attributes.

As a result, the utilization of the Company’s net operating loss carryforwards is subject to an annual limitation of $ 222 , which is reflected in the numbers presented above.

The Company files its corporate income tax returns in the United States and various states.

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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 and milestone payments upon the achievement of specified development, regulatory and sales milestones, as well as tiered royalties on net sales of licensed products that are covered by a valid claim of a licensed patent.

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 year ended December 31, 2023, the Company paid Stanford a $ 175 milestone payment which was triggered by the commencement of the CHASE Phase 2b clinical trial of KPI-012 for PCED in the United States .

Additional amounts paid to Stanford in the years ended December 31, 2024 and 2023 were de minimis .

KALA BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

The Company’s minimum obligations due under the Stanford License Agreement as of December 31, 2024, are as follows:

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Total minimum license payments

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.

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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, the Company could trigger potential future sales-based milestone payments of up to $ 65,000 .

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, 2024 or December 31, 2023, such contingencies have not been recorded in the Company’s consolidated financial statements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures