Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024. The term “disclosure controls and
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procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment, our management concluded that, as of December 31, 2024, our internal control over financial reporting was effective.
As a non-accelerated filer and a “smaller reporting company”, as defined in Rule 12-b-2 under the Exchange Act, our independent registered public accounting firm is not required to issue an attestation report on the internal control over financial reporting.
Changes in internal control over financial reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fourth quarter ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Item 9B. Other Information
(b) None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the three months ended December 31, 2024.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers and Directors
Set forth below are the names 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.
Name
Age
Position
Executive Officers
Todd Bazemore
54
Interim Chief Executive Officer, President and Chief Operating Officer
Kim Brazzell, Ph.D.
72
Head of Research and Development and Chief Medical Officer
Darius Kharabi
46
Chief Business Officer
Mary Reumuth, C.P.A.
49
Chief Financial Officer, Treasurer and Secretary
Non-Employee Directors
Mark Iwicki
58
Chair of the Board
Marjan Farid, M.D.(2)(3)
51
Director
Andrew I. Koven(1)(2)
67
Director
C. Daniel Myers(1)(2)
70
Director
Gregory D. Perry
64
Director
Howard B. Rosen(1)(3)
67
Director
(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. At Dyax, Mr. 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.
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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. Dr. 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. Dr. 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. Dr. Brazzell also served as Vice President, R&D at Ciba Vision Ophthalmics, Inc. and as Associate Director, R&D, at Alcon Laboratories, Inc. Dr. 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. Mr. 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. and M.B.A. 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. Ms. 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. Mr. Iwicki has served as the Chief Executive Officer of Inhibikase Therapeutics, Inc., a pharmaceutical company, since February 2025. Mr. 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. Mr. 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. Mr. Iwicki holds a B.S. in Business Administration from Ball State
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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. Dr. Farid’s research interests focus on corneal surgery, specifically the use of the femtosecond laser for corneal transplantation. Dr. 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. Dr. Farid also serves as the Chair of the Corneal Clinic Committee of the American Society of Cataract and Refractive Surgery. Dr. 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.
Andrew I. Koven has served as a member of our board of directors since September 2017 and as our Lead Independent Director since December 2018. Mr. 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. Mr. 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. Mr. 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. Mr. 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. Mr. 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. Mr. 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.
C. Daniel Myers has served as a member of our board of directors since October 2021. Mr. 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. Mr. 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. Mr. 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.
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Gregory D. 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. Mr. 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. Mr. 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. Mr. 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.
Howard B. 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. Mr. 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. Mr. 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. Mr. 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. Mr. 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. Mr. 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.
Bankruptcies
Mr. 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
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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. Koven, Mr. Myers and Mr. Rosen. 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.
Item 11. Executive Compensation
Executive and Director Compensation Processes
Our executive compensation program is administered by the compensation committee of our board of directors, subject to the oversight and approval of our board of directors. Our compensation committee reviews our executive compensation practices on an annual basis and based on this review approves, or, as appropriate, makes recommendations to our board of directors for approval of our executive compensation program. In designing our executive compensation program, our compensation committee considers publicly available compensation data for national and regional companies in the biotechnology/pharmaceutical industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. Our director compensation program is administered by our board of directors with the assistance of the compensation committee. The compensation committee conducts an annual review of director compensation and makes recommendations to the board of directors with respect thereto.
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
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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.
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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.
Stock
Option
All other
Salary
Bonus
Awards
Awards
Compensation
Total
Name and Principal Position
Year
($)
($)(1)
($)(2)
($)(3)
($)(4)
($)
Mark Iwicki
2024
709,394
297,945
100,100
377,628
6,120
1,491,187
Former Chief Executive Officer
2023
709,394
297,945
4,615,426
2,713,852
6,097
8,342,714
Todd Bazemore
2024
535,600
187,460
45,500
171,543
9,447
949,550
Interim Chief Executive Officer, President and Chief Operating Officer
2023
535,600
187,460
1,378,219
831,857
10,520
2,943,656
Kim Brazzell, Ph.D.
2024
520,000
163,800
45,500
171,543
19,844
920,687
Head of Research and Development and Chief Medical Officer
2023
520,000
163,800
1,370,495
843,093
25,685
2,923,073
(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
Name
Year
Company Match
Insurance Premiums
Mark Iwicki
2024
$
—
$
6,120
2023
$
—
$
6,097
Todd Bazemore
2024
$
5,007
$
4,440
2023
$
6,100
$
4,420
Kim Brazzell, Ph.D.
2024
$
6,748
$
13,096
2023
$
6,100
$
19,585
Narrative Disclosure to Summary Compensation Table
Base Salary. We use base salaries to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our named executive officers. None of our named executive officers is currently party to an
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employment agreement or other agreement or arrangement that provides for automatic or scheduled increases in base salary.
Mr. 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. Iwicki, 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). Mr. Bazemore’s individual performance-based target bonus amount for 2025, expressed as a percentage of his 2025 base salary, is 50%. Dr. 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. Iwicki, 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. Iwicki, 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. Iwicki, 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. Iwicki, 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
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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
Stock Awards
Equity
Incentive
Plan
Market
Awards:
Value of
Number of
Number of
Number of
Number of
Shares or
Securities
Securities
Securities
Shares or
Units of
Underlying
Underlying
Underlying
Units of
Stock That
Unexercised
Unexercised
Unexercised
Option
Option
Stock That
Have Not
Options (#)
Options (#)
Unearned
Exercise
Expiration
Have Not
Vested ($)
Name
Exercisable
Unexercisable
Options (#)
Price ($)
Date
Vested (#)
(1)
Mark Iwicki
—
—
—
—
—
27,802
(2)
$
192,946
—
—
—
—
—
28,439
(3)
$
197,367
—
—
—
—
—
14,842
(4)
$
103,003
—
—
—
—
—
105,921
(5)
$
735,092
—
—
—
—
—
14,300
(6)
$
99,242
79,436
132,395
(8)
—
14.56
6/21/2033
—
—
14,781
49,719
(9)
—
7.00
1/3/2034
—
—
Todd Bazemore
—
—
—
—
—
8,534
(2)
$
59,226
—
—
—
—
—
8,008
(3)
$
55,576
—
—
—
—
—
5,147
(7)
$
35,720
—
—
—
—
—
32,467
(5)
$
225,321
—
—
—
—
—
6,500
(6)
$
45,110
24,349
40,582
(8)
—
14.56
6/21/2033
—
—
6,715
22,585
(9)
—
7.00
1/3/2034
—
—
Kim Brazzell, Ph.D.
—
—
—
—
—
8,534
(2)
$
59,226
—
—
—
—
—
6,567
(3)
$
45,575
—
—
—
—
—
4,786
(4)
$
33,215
—
—
—
—
—
32,906
(5)
$
228,368
—
—
—
—
—
6,500
(6)
$
45,110
24,678
41,130
(8)
—
14.56
6/21/2033
—
—
6,715
22,585
(9)
—
7.00
1/3/2034
—
—
(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.
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(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.
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Employment Agreements with Named Executive Officers
Letter Agreement with Mr. Iwicki
Mr. Iwicki was appointed as our Chief Executive Officer and Chair of our board of directors pursuant to a letter agreement with us dated September 10, 2015, which amended and restated a prior letter agreement. Mr. Iwicki resigned as our Chief Executive Officer, effective February 11, 2025. Mr. Iwicki continues to serve as the Chair of our board of directors.
Letter Agreement with Mr. Bazemore
Mr. Bazemore was appointed as our Chief Operating Officer pursuant to a letter agreement with us dated November 6, 2017, and was appointed as our President commencing December 16, 2021 and our interim Chief Executive Officer commencing February 11, 2025. Mr. Bazemore is an at-will employee, and his employment with us can be terminated by him or us at any time and for any reason.
Mr. Bazemore’s base salary is subject to annual review and adjustment by our compensation committee. Mr. Bazemore’s annual base salary was $535,600, effective January 1, 2025. In addition, Mr. Bazemore 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
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having satisfied any service requirement with respect such grant, and will vest subject to, and only to the extent of, the satisfaction of the applicable performance goals at the end of the applicable performance period.
Letter Agreement with Dr. Brazzell
Dr. Brazzell was appointed to serve on a full-time basis as our Chief Medical Officer pursuant to a letter agreement with us dated May 10, 2016, which amended and restated a prior letter agreement. Dr. Brazzell 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. Dr. Brazzell’s annual base salary was $520,000, effective January 1, 2025. In addition, Dr. Brazzell is eligible to receive a discretionary bonus in a target amount of 45% of his annual base salary, as determined by our compensation committee in its sole discretion.
On March 11, 2019, Dr. Brazzell’s employment letter agreement was amended to revise the severance benefits he 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
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employment and for a period of twelve months after the termination of his employment, and Mr. Bazemore has agreed not to solicit our employees or consultants during his employment and for a period of eighteen months after the termination of his employment, and each executive officer has agreed to protect our confidential and proprietary information indefinitely. In addition, under this agreement, each executive officer has agreed that we own all inventions, as defined in the agreement, that are developed during such executive officer’s employment and for a period of one year after the termination of his or her employment, to the extent such invention is our field of interest, as defined in the agreement. Each executive officer also agreed to assign to us any inventions which were not prepared or originated in the performance of employment but that were provided to us or incorporated into any of our products or systems.
Stock Option and Other Compensation Plans
In this section we describe our 2009 Plan, our Amended and Restated 2017 Equity Incentive Plan and our Amended and Restated 2017 Employee Stock Purchase Plan, or 2017 ESPP. Prior to our IPO, which closed on July 25, 2017, we granted awards to eligible participants under the 2009 Plan. Following the closing of our IPO, we ceased granting awards under the 2009 Plan and started granting awards to eligible participants under the 2017 Plan.
2009 Plan
Our 2009 Plan was adopted by our board of directors and approved by our stockholders on December 11, 2009 and subsequently amended by our board in 2012, 2013, 2014 and 2015. The 2009 Plan provided for the grant of incentive stock options, non-qualified options, shares, restricted or otherwise, of our common stock, and other stock-based awards. We refer to awards granted under our 2009 Plan as stock rights. Our employees, directors and consultants were eligible to receive stock rights under our 2009 Plan; however incentive stock options could only be granted to our employees who are deemed to be residents of the United States.
The type of stock right granted under our 2009 Plan and the terms of such stock right are set forth in the applicable stock right award agreement. Our board of directors (or a committee to which our board delegates its authority) administers the 2009 Plan. Subject to the provisions of the 2009 Plan, our board of directors is authorized to:
● interpret the provisions of the 2009 Plan and all stock rights and make all rules and determinations that it deems necessary or advisable for the administration of the 2009 Plan;
● amend any term or condition of an outstanding stock right, including, without limitation, to reduce or increase the exercise price or purchase price, accelerate the vesting or extend the expiration date, provided that no such change will impair a participant’s rights under any prior grant unless we obtain the participant’s consent;
● purchase and/or cancel a stock right previously granted and grant other stock rights in substitution, which may cover the same or a different number of shares and which may have a lower or higher exercise or purchase price per share, based on such terms and conditions as the board of directors establishes and the participant accepts; and
● adopt any sub-plans applicable to residents of any specified jurisdiction as it deems necessary or appropriate to facilitate the 2009 Plan or to comply with or take advantage of any tax or other laws applicable to us, any of our affiliates, or to participants, which sub-plans may include additional restrictions or conditions applicable to stock rights or shares issuable pursuant to a stock right.
Effect of certain changes in capitalization
If our shares of common stock are subdivided or combined into a greater or smaller number of shares, if we issue shares of common stock as a stock dividend, or if we make any distribution of additional, new or different shares or 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;
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● the exercise or purchase price per share; and
● any other term or condition of a stock right.
Effect of certain corporate transactions
In the event that we are consolidated with or acquired by another entity in a merger, consolidation, or sale of all or substantially all of our assets (other than a transaction to merely change the state of incorporation), which we refer to as corporate transactions, our board of directors, or the board of directors of any entity assuming our obligations under the 2009 Plan, must take one of the following actions pursuant to the 2009 Plan as to outstanding options, subject to the terms of the 2009 Plan:
● provide for the continuation of the outstanding options by equitably substituting for the shares of our common stock then underlying such options either with securities of any successor or acquiring entity or the consideration payable with respect to the outstanding shares of our common stock in connection with the corporate transaction;
● provide by written notice to the participants that the outstanding options will terminate unless exercised (to the extent then exercisable or made partially or fully exercisable by our board of directors for purposes of the corporate transaction) within a specified period following the date of the notice; or
● terminate each outstanding option in exchange for a payment equal to the consideration payable upon consummation of the corporate transaction to a holder of the number of shares of our common stock into which such option would have been exercisable (to the extent then exercisable or made partially or fully exercisable by our board of directors for purposes of the corporate transaction), minus the aggregate exercise price of such option.
If there is a corporate transaction, our board of directors, or the board of directors of any entity assuming our obligations under the 2009 Plan, must take one of the following actions pursuant to the 2009 Plan as to outstanding stock grants, restricted or otherwise, subject to the terms of the 2009 plan:
● provide for the continuation of the outstanding stock grants on the same terms and conditions by equitably substituting for the shares of our common stock then subject to such stock grants either with securities of any successor or acquiring entity or the consideration payable with respect to the outstanding shares of our common stock in connection with the corporate transaction; or
● provide that each outstanding stock grant will terminate in exchange for a payment equal to the consideration payable upon consummation of the corporate transaction to a holder of the number of shares of our common stock comprising such stock grant (to the extent such stock grant is no longer subject to any forfeiture or repurchase rights or our board of directors waives all forfeiture and repurchase rights upon the corporate transaction).
In taking any of the above actions with respect to stock rights, our board of directors will not be obligated to treat all stock rights, all stock rights held by a participant, or all stock rights of the same type, identically.
As of March 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
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adopted by our board of directors in April 2020 and approved by our stockholders at the 2020 annual meeting of stockholders. Our Amended and Restated 2017 Equity Incentive Plan, or the 2017 Plan, which became effective on June 22, 2023, was adopted by our board of directors in May 2023 and by our stockholders in June 2023, and amends and restates our 2017 Equity Incentive Plan, as amended.
The 2017 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, RSUs and other stock-based awards. The number of shares of our common stock reserved for issuance under the 2017 Plan is the sum of: (1) 1,569,136; plus (2) such additional number of shares (up to 70,675) that remained available for grant under the 2009 Plan at the time of our IPO and the number of shares of our common stock subject to outstanding awards under the 2009 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2024 and continuing until, and including, the fiscal year ending December 31, 2033, equal to the lower of (i) 4% of the sum of (I) the number of shares of our common stock outstanding on the first day of such fiscal year and (II) the number of shares of common stock issuable upon any conversion of any outstanding shares of our convertible preferred stock (without giving effect to any restrictions or limitations on conversion) on such date and (ii) an amount determined by our board of directors. The number of shares authorized for issuance under the 2017 Plan further increased, pursuant to the terms of the 2017 Plan, by an additional 554,663 shares, effective as of January 1, 2025.
Our employees, officers, directors, consultants and advisors are eligible to receive awards under the 2017 Plan. Incentive stock options, however, may only be granted to our employees. Subject to certain adjustments, awards with respect to no more than 7,738,761 shares of common stock may be granted in the form of incentive stock options during the term of the 2017 Plan. For a description of the limitations on non-employee director compensation under our 2017 Plan, see “Director Compensation” below.
Pursuant to the terms of the 2017 Plan, our board of directors (or a committee delegated by our board of directors or, subject to certain limitations, officers delegated by our board of directors) administers the plan and, subject to any limitations in the plan, selects the recipients of awards and determines:
● the number of shares of our common stock covered by options and the dates upon which the options become exercisable;
● the type of options to be granted;
● the duration of options, which may not be in excess of ten years;
● the exercise price of options, which must be at least equal to the fair market value of our common stock on the date of grant; and
● the number of shares of our common stock subject to and the terms of any stock appreciation rights, restricted stock awards, RSUs or other stock-based awards and the terms and conditions of such awards, including conditions for repurchase, issue price and repurchase price (though the measurement price of stock appreciation rights must be at least equal to the fair market value of our common stock on the date of grant and the duration of such awards may not be in excess of ten years).
If our board of directors delegates authority to an executive officer to grant awards under the 2017 Plan, the executive officer will have the power to make awards to all of our employees, except executive officers. Our board of directors will fix the terms of the awards to be granted by such executive officer, including the exercise price of such awards (which may include a formula by which the exercise price will be determined), and the maximum number of shares subject to awards that such executive officer may make.
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
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distribution to holders of our common stock other than an ordinary cash dividend, our board of directors shall equitably adjust:
● the number and class of securities available under the 2017 Plan and the number of awards that may be granted as incentive stock options;
● the share counting rules under the 2017 Plan;
● the number and class of securities and exercise price per share of each outstanding option;
● the share and per-share provisions and the measurement price of each outstanding stock appreciation right;
● the number of shares subject to, and the repurchase price per share subject to, each outstanding restricted stock award; and
● the share and per-share related provisions and the purchase price, if any, of each other stock-based award.
Effect of certain corporate transactions
Upon a merger or other reorganization event (as defined in our 2017 Plan), our board of directors may, on such terms as our board determines (except to the extent specifically provided otherwise in an applicable award agreement or other agreement between the participant and us), take any one or more of, or a combination of, the following actions pursuant to the 2017 Plan as to some or all outstanding awards, other than restricted stock awards:
● provide that all outstanding awards shall be assumed, or substantially equivalent awards shall be substituted, by the acquiring or successor corporation (or an affiliate thereof);
● upon written notice to a participant, provide that all of the participant’s unvested awards will be forfeited, and/or vested but unexercised awards will terminate, immediately prior to the consummation of such reorganization event unless exercised by the participant (to the extent then exercisable) within a specified period following the date of the notice;
● provide that outstanding awards shall become exercisable, realizable or deliverable, or restrictions applicable to an award shall lapse, in whole or in part, prior to or upon such reorganization event;
● in the event of a reorganization event pursuant to which holders of shares of our common stock will receive a cash payment for each share surrendered in the reorganization event, make or provide for a cash payment to participants with respect to each award held by a participant equal to (1) the number of shares of our common stock subject to the vested portion of the award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such reorganization event) multiplied by (2) the excess, if any, of the cash payment for each share surrendered in the reorganization event over the exercise, measurement or purchase price of such award and any applicable tax withholdings, in exchange for the termination of such award; and/or
● provide that, in connection with a liquidation or dissolution, awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings).
Our board of directors does not need to take the same action with respect to all awards, all awards held by a participant or all awards of the same type.
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.
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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; and
● such person was our employee or an employee of a designated subsidiary on the first day of the applicable offering period under the 2017 ESPP.
We retain the discretion to determine which eligible employees may participate in an offering under applicable Treasury regulations.
We may make one or more offerings to our eligible employees to purchase stock under the 2017 ESPP beginning at such time and on such dates as our board of directors may determine, or the first business day thereafter. Each offering will consist of a six-month offering period during which payroll deductions will be made and held for the purchase of our common stock at the end of the offering period. Our board of directors or a committee appointed by our 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
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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
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price and where the number of shares that could be purchased is subject to the applicable limitations under the 2017 ESPP minus (2) the result of multiplying such number of shares by the purchase price; and/or
● provide that, in connection with our liquidation or dissolution, options shall convert into the right to receive liquidation proceeds (net of the purchase price thereof).
Our board of directors may at any time, and from time to time, amend or suspend the 2017 ESPP, or any portion of the 2017 ESPP. We will obtain stockholder approval for any amendment if such approval is required by Section 423 of the Internal Revenue Code of 1986, as amended, or the Code. Further, our board of directors may not make any amendment that would cause the 2017 ESPP to fail to comply with Section 423 of the Code. The 2017 ESPP may be terminated at any time by our board of directors. Upon termination, we will refund all amounts in the accounts of participating employees.
401(k) Plan
We maintain a defined contribution employee retirement plan for our employees. Our 401(k) plan is intended to qualify as a tax-qualified plan under Section 401 of the Code so that contributions to our 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the 401(k) plan. Our 401(k) plan provides that each participant may contribute up to 90% of such employee’s pre-tax compensation, up to a statutory limit, which was $23,000 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.
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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.
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Director Compensation
The table below shows all compensation to our non-employee directors during 2024.
Fees
Earned or
Paid in
Option
Stock
Cash
Awards
Awards
Total
Name
($)
($) (1)(2)
($) (1)(3)(4)
($)
Mark S. Blumenkranz (4)
47,514
8,652
16,092
72,258
Marjan Farid
60,109
8,652
16,092
84,853
Andrew I. Koven
98,750
10,815
19,924
129,489
C. Daniel Myers
67,500
8,652
16,092
92,244
Gregory D. Perry
50,000
8,652
16,092
74,744
Howard B. Rosen
75,000
8,652
16,092
99,744
(1) The aggregate amount of outstanding options and RSUs held by each non-employee director as of December 31, 2024 were as follows:
Aggregate
Aggregate
Restricted
Options
Stock Units
Outstanding
Outstanding
Name
(#)
(#)
Mark S. Blumenkranz (4)
—
—
Marjan Farid
10,572
7,792
Andrew I. Koven
17,070
13,922
C. Daniel Myers
10,696
7,924
Gregory D. Perry
13,458
10,894
Howard B. Rosen
16,301
13,790
(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 the assumptions underlying the valuation of the stock option grants, see Note 11, “Stock-based Compensation” to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K. For additional information regarding the options granted to our directors in 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.
(4) Dr. Blumenkranz resigned from our board of directors on September 23, 2024.
Mr. 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. Mr. 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.”
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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; and
● each non-employee director who served as member of a committee of our board of directors was entitled to receive additional compensation as follows:
o audit committee-an annual non-chair retainer of $10,000; chair annual retainer of $20,000;
o compensation committee-an annual non-chair retainer of $7,500; chair annual retainer of $15,000; and
o nominating and corporate governance committee-an annual non-chair retainer of $5,000; chair annual retainer of $10,000.
Each member of our board of directors also is entitled to be reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of our board of directors and any committee of our board of directors on which he or she serves.
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.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management
Unless otherwise provided below, the following table sets forth information regarding beneficial ownership of our common stock as of March 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; and
● all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock. Percentage of beneficial ownership is based on 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.
Shares of
Common Stock
Percentage of
Beneficially
Common
Name and Address of Beneficial Owner
Owned
Stock
5% Stockholders:
Entities affiliated with Baker Bros. Advisors LP(1)
1,201,894
18.63
%
Affiliates of SR One Capital Management, LP(2)
649,640
9.99
%
Cormorant Global Healthcare Master Fund, LP(3)
649,127
9.99
%
Directors and Named Executive Officers:
Mark Iwicki(4)
208,801
3.18
%
Todd Bazemore(5)
68,565
1.06
%
Kim Brazzell, Ph.D.(6)
70,818
1.09
%
Marjan Farid, M.D.(7)
4,756
*
Andrew I. Koven(7)
7,743
*
C. Daniel Myers(7)
4,812
*
Gregory D. Perry(7)
6,079
*
Howard B. Rosen(8)
7,643
*
All current executive officers and directors as a group (10 persons)(9)
486,183
7.2
%
* 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
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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. Baker. Baker Bros. 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. Baker Bros. Advisors (GP) LLC, or Advisor GP, is the sole general partner of Advisor. Julian C. 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. Julian C. 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. Ms. 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.
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(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
Number of
securities
remaining
Number of
available for
securities to be
future issuance
issued upon
Weighted ‑ Average
under equity
exercise of
exercise price
compensation
outstanding
of outstanding
plans (excluding
options
options
securities
warrants and
warrants and
reflected in
rights
rights
column (a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
1,431,830
(1)
$
13.23
(2)
279,350
(3)(4)(5)
Equity compensation plans not approved by security holders
10,496
(6)
$
9.72
(2)
—
Total
1,442,326
$
13.22
279,350
(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
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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.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions
Policies and Procedures for Related Person Transactions
Our board of directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which our company is a participant, the amount involved exceeds $120,000, 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;
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● the approximate dollar value of the amount involved in the related person transaction;
● the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
● whether the transaction was undertaken in the ordinary course of our business;
● whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;
● the purpose of, and the potential benefits to us of, the transaction; and
● any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.
Our audit committee may approve or ratify the transaction only if it determines that, under all of the circumstances, the transaction is in our best interests. Our audit committee may impose any conditions on the related person transaction that it deems appropriate.
In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
● interests arising solely from the related person’s position as an executive officer of another entity, whether or not the person is also a director of the entity, that is a participant in the transaction where the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, the related person and such person’s immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction and the amount involved in the transaction is less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; and
● a transaction that is specifically contemplated by provisions of our certificate of incorporation or by-laws.
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by our compensation committee in the manner specified in the compensation committee’s charter.
With respect to related person transactions, it is the practice of our board of directors to consider the nature of and business reasons for such transactions, how the terms of such transactions compared to those which might be obtained from unaffiliated third parties and whether such transactions were otherwise fair to and in the best interests of, or not contrary to, our best interests.
Related Person Transactions
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.
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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.
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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
Common Stock
Number of Shares of
Series H Preferred Stock
Aggregate Purchase Price
Name (1)
667, L.P.
61,602
226
$492,580.97
Baker Brothers Life Sciences, L.P.
563,120
2,073
$4,506,957.73
SR One Capital Fund II Aggregator, LP (2)
443,661
4,110
$4,999,766.85
ADAR1 Partners, LP (2)
112,170
2,597
$2,175,439.32
Spearhead Insurance Solutions IDF, LLC – Series ADAR1 (2)
16,761
387
$324,447.03
(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.
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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
Common Stock
Number of Shares of
Series I Preferred Stock
Aggregate Purchase Price
Name (1)
667, L.P.
30,620
—
$197,192.80
Baker Brothers Life Sciences, L.P.
279,939
—
$1,802,807.16
SR One Capital Fund II Aggregator, LP
155,279
—
$999,996.76
Cormorant Global Healthcare Master Fund, LP(2)
603,027
3,286
$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.
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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:
Number of
Number of
Options
Replacement
Name
Surrendered
RSUs Granted*
Mark Iwicki(1)
56,873 (Vested)
56,873
14,842 (Unvested)
14,842
Todd Bazemore
16,011 (Vested)
16,011
5,147 (Unvested)
5,147
Kim Brazzell
13,130 (Vested)
13,130
4,786 (Unvested)
4,786
Darius Kharabi
1,182 (Vested)
1,182
1,466 (Unvested)
1,466
Mary Reumuth
11,313 (Vested)
11,313
3,423 (Unvested)
3,423
(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:
Number of
Number of
Replacement
Options
RSUs Received
Name
Surrendered
in Option Exchange
Mark S. Blumenkranz(1)
419 (Vested)
419
1,221 (Unvested)
1,221
Marjan Farid
1,600 (Unvested)
1,600
Andrew I. Koven
1,197 (Vested)
1,197
1,000 (Unvested)
1,000
C. Daniel Myers
443 (Vested)
443
1,197 (Unvested)
1,197
Gregory D. Perry
938 (Vested)
938
800 (Unvested)
800
Howard B. Rosen
1,702 (Vested)
1,702
800 (Unvested)
800
(1) Resigned from our board of directors on September 23, 2024.
Modification of Equity Awards
Mr. 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.
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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. Dr. 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.
Cash
Holdback Shares
Consideration
Initial Shares Issued
Issued on
Name
at Closing
on January 3, 2022
March 10, 2023
Mark S. Blumenkranz
$
29,675
2,783
(1)
371
(1)
Darius Kharabi
$
437,703
4,620
(2)
1,285
(2)
Lagunita Biosciences, LLC (3)
$
967,638
90,721
(4)
12,099
(4)
Garland Investments, L.P.
$
7,329
688
(5)
91
(5)
(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.
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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.
Cash
Cash
Consideration Paid
Shares Issued
Consideration Paid
Name
in March 2023
in March 2023
In January 2024
Mark S. Blumenkranz
$
44,529
2,013
$
2,703
Darius Kharabi
$
154,347
6,977
$
9,368
Lagunita Biosciences, LLC
$
1,451,980
65,634
$
88,125
Garland Investments, L.P.
$
10,998
497
$
668
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
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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. Mr. Iwicki is not an independent director under these rules because he was employed as our Chief Executive Officer within the last three years. Mr. Perry ceased to be an independent director under applicable Nasdaq rules in June 2023, when he was appointed Chief Financial Officer of Merus. Mr. 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.
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Item 14. Principal Accountant Fees and Services
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,
Fee Category
2024
2023
Audit Fees(1)
$
778,587
$
821,024
Audit-Related Fees
—
—
Tax Fees(2)
—
50,500
All Other Fees(3)
1,895
1,895
Total Fees
$
780,482
$
873,419
(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.
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Part I V
Item 15. Exhibits and Financial Statement Schedules
(1) Financial Statements.
The following documents are included beginning on page F-1 attached hereto and are filed as part of this Annual Report on Form 10-K.
KALA BIO, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 )
F-1
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-3
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023
F-4
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024 and 2023
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023
F-6
Notes to Consolidated Financial Statements
F-7
(2) Financial Statement Schedules.
No financial statement schedules have been filed as part of this Annual Report on Form 10-K because they are not applicable, not required or because the information is otherwise included in our financial statements or notes thereto.
(3) Exhibits .
The following is a list of exhibits filed or furnished as part of this Annual Report on Form 10-K.
Exhibit
Number
Description of Exhibit
2.1#
Agreement and Plan of Merger, dated as of November 15, 2021, by and among the Registrant, Ceres Merger Sub, Inc., Combangio, Inc. and, solely in its capacity as Combangio Equityholder Representative, Fortis Advisors LLC. (incorporated by reference to Exhibit 2.1 of the Registrant’s current report on Form 8-K (File No. 001-38150) filed on November 15, 2021)
2.2#
Asset Purchase Agreement, by and between the Registrant, Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC (incorporated by reference to Exhibit 2.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on May 23, 2022)
3.1
Restated Certificate of Incorporation of the Registrant, as amended, including Certificate of Designation of the Series D Preferred Stock of the Registrant, Certificate of Elimination of Number of Shares of Preferred Stock Designated as Series D Preferred Stock of the Registrant, Certificate of Designations, Preferences and Rights of Series E Convertible Non-Redeemable Preferred Stock of the Registrant, Certificate of Designations, Preferences and Rights of Series F Convertible Non-Redeemable Preferred Stock of the Registrant, Certificate of Designations, Preferences and Rights of Series G Convertible Non-Redeemable Preferred Stock of the Registrant, Certificate of Designations, Preferences and Rights of Series H Convertible Non-Redeemable Preferred Stock of the Registrant and Certificate of Designations, Preferences and Rights of Series I Convertible Non-Redeemable Preferred Stock of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant’s registration statement on Form S-8 (File No. 333-284117) filed on January 3, 2025)
3.2
Third Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on August 2, 2023 )
4.1
Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1 to the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on March 3, 2023)
160
Table of Contents
Exhibit
Number
Description of Exhibit
4.2
Third Amended and Restated Registration Rights Agreement of the Registrant dated April 6, 2016, as amended by Amendment No. 1 dated December 13, 2017, of the Registrant (incorporated by reference to Exhibit 4.2 to the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on February 25, 2021)
4.3*
Description of the Registrant’s Securities Registered under Section 12 of the Exchange Act
4.4
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. 001-38150) filed on November 28, 2022)
4.5
Form of Series F 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 22, 2023)
4.6
Form of Series G 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 March 26, 2024)
4.7
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)
4.8
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)
4.9
Registration Rights Agreement, dated March 2, 2023, by and among the Registrant and the persons party thereto (incorporated by reference to Exhibit 4.5 to the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on March 3, 2023)
4.10
Registration Rights Agreement, dated June 26, 2024, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on June 27, 2024)
4.11
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)
10.1+
2009 Employee, Director and Consultant Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s registration statement on Form S-1 (File No. 333-218936) filed on June 23, 2017)
10.2+
Form of Stock Option Agreement under the 2009 Employee, Director and Consultant Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s registration statement on Form S-1 (File No. 333-218936) filed on June 23, 2017)
10.3+
Amended and Restated 2017 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on May 9, 2019)
10.4+
2017 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38150) filed on June 26, 2020)
10.5+
Amended and Restated 2017 Equity Incentive Plan of the Registrant (incorporated by reference to Exhibit 99.1 to the Registrant’s registration statement on Form S-8 (File No. 333-272834) filed on June 22, 2023)
10.6+
Form of Incentive Stock Option Agreement under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s registration statement on Form S-1/A (File No. 333-218936) filed on July 10, 2017)
10.7+
Forms of Non-Qualified Option Agreement under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s registration statement on Form S-1/A (File No. 333-218936) filed on July 10, 2017)
10.8+
Form of Non-Employee Director Restricted Stock Unit Award under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on May 7, 2020)
10.9+
Form of Non-Employee Director Deferred Restricted Stock Unit Award under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on May 7, 2020)
10.10+
Form of Employee Restricted Stock Unit Award under 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 6, 2020)
10.11+
Form of Incentive Stock Option Agreement under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
161
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Exhibit
Number
Description of Exhibit
10.12+
Forms of Non-Qualified Option Agreement under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.13+
Form of Non-Employee Director Restricted Stock Unit Award under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.14+
Form of Non-Employee Director Deferred Restricted Stock Unit Award under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.15+
Form of Employee Restricted Stock Unit Award under Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.16+
Form of Inducement Stock Option Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on November 8, 2018)
10.17+
Form of Inducement Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s quarterly report on Form 10-Q (File No. 333-218936) filed on August 4, 2023)
10.18#
Exclusive License Agreement, dated October 11, 2019, by and between Combangio, Inc. and The Board of Trustees of the Leland Stanford Junior University (incorporated by reference to Exhibit 10.18 to the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on March 29, 2022)
10.19+
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. 001-38150) filed on November 7, 2017)
10.20+
Letter Agreement, dated November 6, 2017, by and between the Registrant and Todd Bazemore (incorporated by reference to Exhibit 10.12 of the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on April 2, 2018)
10.21+
Amended and Restated Letter Agreement, dated May 10, 2016, by and between the Registrant and Kim Brazzell (incorporated by reference to Exhibit 10.13 to the Registrant’s registration statement on Form S-1 (File No. 333-218936) filed on June 23, 2017)
10.22+
Form of Amendment to Offer Letters (incorporated by reference to Exhibit 10.30 to the Registrant’s annual report on Form 10-K (File No. 001-38150) filed on March 12, 2019)
10.23+
Form of Indemnification Agreement between the Registrant and each of its Executive Officers and Directors (incorporated by reference to Exhibit 10.14 to the Registrant’s registration statement on Form S-1/A (File No. 333-218936) filed on July 10, 2017)
10.24
Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.4 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on October 2, 2018)
10.25
#
Loan and Security Agreement, dated May 4, 2021, by and among the Registrant and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38150) filed on May 5, 2021)
10.26#
First Amendment to Loan and Security Agreement, dated November 15, 2021, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.1 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 11, 2022)
10.27
Second Amendment to Loan and Security Agreement, dated May 21, 2022, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.2 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 11, 2022)
10.28
Third Amendment to Loan and Security Agreement, dated December 27, 2022, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on December 27, 2022)
10.29
Fourth Amendment to Loan and Security Agreement, dated August 1, 2023, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.8 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
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Table of Contents
Exhibit
Number
Description of Exhibit
10.30
Fifth Amendment to Loan and Security Agreement, dated August 2, 2023, by and among the Registrant, Combangio, Inc. and Oxford Finance LLC, as collateral agent and lender (incorporated by reference to Exhibit 10.9 to the Registrant’s quarterly report on Form 10-Q (File No. 001-38150) filed on August 4, 2023)
10.31
Securities Purchase Agreement, dated November 28, 2022, by and among the Registrant and the purchasers party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38150) filed on November 28, 2022)
10.32
Securities Purchase Agreement, dated December 21, 2023, by and among the Registrant and the purchasers party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on December 22, 2023)
10.33
Securities Purchase Agreement, dated March 25, 2024, by and among the Registrant and the purchasers party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on March 26, 2024)
10.34
Securities Purchase Agreement, dated June 26, 2024, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on June 27, 2024)
10.35
Securities Purchase Agreement, dated December 29, 2024, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K (File No. 001-38150) filed on December 30, 2024)
10.36
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)
19.1*
Amended and Restated Insider Trading Policy
21.1*
Subsidiaries of the Registrant
23.1*
Consent of Deloitte & Touche LLP
31.1*
Rule 13a-14(a) Certification of Principal Executive Officer
31.2*
Rule 13a-14(a) Certification of Principal Financial Officer
32.1**
Certification of Principal Executive Officer pursuant to 18 U.S.C. §1350
32.2**
Certification of Principal Financial Officer pursuant to 18 U.S.C. §1350
97.1+
Dodd-Frank Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to the Registrant’s annual report on Form 10-K (file No. 001-38150) filed on March 29, 2024).
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)
* Filed herewith.
** Furnished herewith.
# Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
+ Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of the Instructions to the Annual Report on Form 10-K.
Item 16. Form 10-K Summary
None.
163
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KALA BIO, INC.
Dated: March 31, 2025
By:
/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/ Todd Bazemore
Todd Bazemore
Interim Chief Executive Officer, President and Chief Operating Officer
(Principal Executive Officer)
March 31, 2025
/s/ Mary Reumuth
Mary Reumuth
Chief Financial Officer (Principal Financial and Accounting Officer)
March 31, 2025
/s/ Mark Iwicki
Mark Iwicki
Director
March 31, 2025
/s/ Marjan Farid
Marjan Farid, M.D.
Director
March 31, 2025
/s/ Andrew I. Koven
Andrew I. Koven
Director
March 31, 2025
/s/ C. Daniel Myers
C. Daniel Myers
Director
March 31, 2025
/s/ Gregory Perry
Gregory Perry
Director
March 31, 2025
/s/ Howard B. Rosen
Howard B. Rosen
Director
March 31, 2025
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of KALA BIO, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of KALA BIO, Inc. and 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.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Grant Income - Refer to Notes 2 and 4 to the financial statements
Critical Audit Matter Description
On August 2, 2023, Combangio, a wholly owned subsidiary of the Company, entered into an award agreement with the California Institute for Regenerative Medicine (“CIRM”) for a $15 million grant (the “CIRM Award”) to support Combangio’s KPI-012 program for the treatment of persistent corneal epithelial defects (“PCED”). The award includes funding for the Company’s 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
F-1
Table of Contents
under which Combangio is obligated to spend a specified minimum amount on the development of KPI-012 to obtain the full award amount. 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 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.
● We evaluated the accuracy and completeness of management’s disclosure for the CIRM Award.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 31, 2025
We have served as the Company's auditor since 2013.
F-2
Table of Contents
KALA BIO, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
51,181
$
50,895
Prepaid expenses and other current assets
1,616
1,975
Total current assets
52,797
52,870
Non-current assets:
Property and equipment, net
749
753
Right-of-use assets
1,691
2,025
Other long-term assets
246
301
Total assets
$
55,483
$
55,949
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
628
$
919
Accrued expenses and other current liabilities
4,975
6,018
Deferred grant income
637
1,075
Current portion of lease liabilities
380
334
Current portion of long-term debt
10,336
—
Total current liabilities
16,956
8,346
Long-term liabilities:
Long-term lease liabilities
1,434
1,799
Long-term debt, net of current portion
20,102
34,190
Long-term contingent consideration
4,659
4,110
Total long-term liabilities
26,195
40,099
Total liabilities
43,151
48,445
Commitments and Contingencies (Note 14)
Stockholders' equity:
Preferred stock, $ 0.001 par value; 5,000,000 shares authorized as of December 31, 2024 and 2023; 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; 120,000,000 shares authorized as of December 31, 2024 and 2023; 6,091,182 and 2,759,372 shares issued and outstanding as of December 31, 2024 and 2023 , respectively
6
3
Additional paid-in capital
680,246
636,910
Accumulated deficit
( 667,920 )
( 629,409 )
Total stockholders' equity
12,332
7,504
Total liabilities and stockholders' equity
$
55,483
$
55,949
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Table of Contents
KALA BIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
Year Ended
December 31,
2024
2023
Costs and expenses:
General and administrative
$
18,340
$
20,567
Research and development
22,094
18,586
Gain on fair value remeasurement of deferred purchase consideration
—
( 230 )
Loss on fair value remeasurement of contingent consideration
549
740
Total costs and expenses
40,983
39,663
Loss from operations
( 40,983 )
( 39,663 )
Other income (expense):
Interest income
2,056
2,711
Interest expense
( 5,783 )
( 5,814 )
Grant income
6,199
4,825
Other expense, net
—
( 4,258 )
Total other income (expense)
2,472
( 2,536 )
Net loss
$
( 38,511 )
$
( 42,199 )
Net loss per share attributable to common stockholders—basic and diluted
$
( 10.15 )
$
( 17.35 )
Weighted average shares outstanding—basic and diluted
3,796,047
2,432,008
Net loss
$
( 38,511 )
$
( 42,199 )
Other comprehensive income:
Change in fair value of investments
—
—
Total other comprehensive income
—
—
Total comprehensive loss
$
( 38,511 )
$
( 42,199 )
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
KALA BIO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
Series E
Series F
Series G
Series H
Series I
Convertible
Convertible
Convertible
Convertible
Convertible
Non-Redeemable
Non-Redeemable
Non-Redeemable
Non-Redeemable
Non-Redeemable
Preferred Stock
Preferred Stock
Preferred Stock
Preferred Stock
Preferred Stock
Common Stock
Additional
Total
$0.001 Par Value
$0.001 Par Value
$0.001 Par Value
$0.001 Par Value
$0.001 Par Value
$0.001 Par Value
Paid-In
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Equity
Balance as of December 31, 2022
53,144
$
—
—
$
—
—
$
—
—
$
—
—
$
—
1,706,971
$
2
$
606,182
$
( 587,210 )
$
18,974
At the market offering, net of offering costs of $ 458
—
—
—
—
—
—
—
—
—
—
731,521
1
18,535
—
18,536
Issuance of common stock for vested restricted stock units
—
—
—
—
—
—
—
—
—
—
3,002
—
—
—
—
Issuance of common stock under employee stock purchase plan
—
—
—
—
—
—
—
—
—
—
3,690
—
46
—
46
Issuance of common stock to satisfy deferred purchase consideration
—
—
—
—
—
—
—
—
—
—
19,350
—
365
—
365
Issuance of common stock to satisfy contingent consideration
—
—
—
—
—
—
—
—
—
—
105,038
—
2,354
—
2,354
Issuance of common stock upon conversion of Series E Preferred Stock
( 1,898 )
—
—
—
—
—
—
—
—
—
189,800
—
—
—
—
Issuance of convertible Series F preferred stock, net of issuance cost of $ 35
—
—
2,928
—
—
—
—
—
—
—
—
—
1,965
—
1,965
Stock-based compensation expense
—
—
—
—
—
—
—
—
—
—
—
—
7,463
—
7,463
Net loss
—
—
—
—
—
—
—
—
—
—
—
—
—
( 42,199 )
( 42,199 )
Balance as of December 31, 2023
51,246
$
—
2,928
$
—
—
$
—
—
$
—
—
$
—
2,759,372
$
3
$
636,910
$
( 629,409 )
$
7,504
At the market offering, net of offering costs of $ 69
—
—
—
—
—
—
—
—
—
—
527,940
1
3,393
—
3,394
Exercise of stock options
—
—
—
—
—
—
—
—
—
—
1,281
—
9
—
9
Issuance of common stock for vested restricted stock units
—
—
—
—
—
—
—
—
—
—
249,224
—
—
—
—
Issuance of common stock under employee stock purchase plan
—
—
—
—
—
—
—
—
—
—
11,448
—
68
—
68
Issuance of common stock to satisfy service contract
—
—
—
—
—
—
—
—
—
—
4,000
—
29
—
29
Issuance of common stock, net of issuance costs of $ 218
—
—
—
—
—
—
—
—
—
—
2,537,917
2
15,418
—
15,420
Issuance of convertible Series G preferred stock, net of issuance cost of $ 62
—
—
—
—
10,901
—
—
—
—
—
—
—
8,538
—
8,538
Issuance of convertible Series H preferred stock, net of issuance cost of $ 96
—
—
—
—
—
—
9,393
—
—
—
—
—
5,399
—
5,399
Issuance of convertible Series I preferred stock, net of issuance cost of $ 24
—
—
—
—
—
—
—
—
3,286
—
—
—
2,093
—
2,093
Stock-based compensation expense
—
—
—
—
—
—
—
—
—
—
—
—
8,389
—
8,389
Net loss
—
—
—
—
—
—
—
—
—
—
—
—
—
( 38,511 )
( 38,511 )
Balance as of December 31, 2024
51,246
$
—
2,928
$
—
10,901
$
—
9,393
$
—
3,286
$
—
6,091,182
$
6
$
680,246
$
( 667,920 )
$
12,332
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
KALA BIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
December 31,
2024
2023
Cash flows from operating activities:
Net loss
$
( 38,511 )
$
( 42,199 )
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization
259
303
Non-cash operating lease cost
334
171
Gain on fair value remeasurement of deferred purchase consideration
—
( 230 )
Loss on fair value remeasurement of contingent consideration
549
740
Amortization of debt discount and other non-cash interest
1,248
1,253
Stock-based compensation
8,389
7,463
Other non-cash losses (gains)
129
( 4,323 )
Change in operating assets and liabilities:
Prepaid expenses and other current assets
359
5,834
Inventory and assets held for sale
—
7,544
Other long-term assets
—
( 144 )
Accounts payable
( 291 )
( 1,904 )
Accrued expenses and other current liabilities
( 1,528 )
( 2,422 )
Lease liabilities and other long-term liabilities
( 319 )
( 13 )
Net cash used in operating activities
( 29,382 )
( 27,927 )
Cash flows from investing activities:
Purchases of property and equipment and other assets
( 208 )
( 610 )
Proceeds from sale of property and equipment
—
47
Purchases of short-term investments
—
( 9,866 )
Proceeds from sales or maturities of short-term investments
—
10,000
Net cash used in investing activities
( 208 )
( 429 )
Cash flows from financing activities:
Payment of principal, prepayment premium and payment fee on debt
( 5,000 )
( 10,000 )
Proceeds from issuance of Series F preferred stock, net of issuance costs of $ 35
—
1,965
Proceeds from issuance of Series G preferred stock, net of issuance costs of $ 62
8,538
—
Proceeds from issuance of common stock and Series H preferred stock, net of issuance costs of $ 218
12,281
—
Proceeds from issuance of common stock and Series I preferred stock
10,750
—
Proceeds from common stock offerings, net of offering costs
3,394
18,536
Contingent consideration related to Combangio acquisition
( 119 )
( 2,041 )
Payment of principal on finance lease
( 45 )
—
Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan
77
46
Net cash provided by financing activities
29,876
8,506
Net increase (decrease) in cash and cash equivalents:
286
( 19,850 )
Cash and cash equivalents at beginning of period
50,895
70,745
Cash and cash equivalents at end of period
$
51,181
$
50,895
Non-cash investing and financing activities:
Issuance of common stock to satisfy deferred purchase consideration in additional paid-in capital
$
—
$
365
Issuance of common stock to satisfy contingent consideration in additional paid-in capital
—
2,354
Issuance of common stock to satisfy service contract in additional paid-in capital
29
—
Issuance costs included in accrued expenses
120
—
Supplemental disclosure:
Cash paid for interest
$
4,610
$
4,620
Right-of-use assets obtained in exchange of operating lease obligations
—
2,180
Right-of-use assets obtained in exchange of finance lease obligations
160
—
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Note 1: Nature of Business
Nature of Business — KALA BIO, Inc. (the “Company”) was incorporated on July 7, 2009, and is a clinical-stage biopharmaceutical company dedicated to the research, development and commercialization of innovative therapies for rare and severe diseases of the front and back of the eye. On August 2, 2023, the Company changed its name from Kala Pharmaceuticals, Inc. to Kala Bio , Inc.
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. 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. KPI-012 has received both Orphan Drug and Fast Track designations from the FDA for the treatment of PCED. The Company expects to commercialize in the United States any of its product candidates that receive marketing approval.
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. Both products applied a proprietary mucus-penetrating particle drug delivery technology, which the Company referred to as the AMPPLIFY ® Drug Delivery Technology. On July 8, 2022, the Company closed the transaction (the “Alcon Transaction”), contemplated by the asset purchase agreement, dated as of May 21, 2022 (the “Asset Purchase Agreement”), by and between the Company, Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC (together referred to as “Alcon”), pursuant to which Alcon purchased the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the Company’s AMPPLIFY Drug Delivery Technology (collectively, the “Commercial Business”). Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the Alcon Transaction. 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.
F-7
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
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. 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 . On January 10, 2023, the Amended and Restated Sales Agreement terminated in accordance with its terms when the Company completed the sale of $ 75,000 of its shares of common stock thereunder. As of the date of termination of the Amended and Restated Sales Agreement, the Company had sold an aggregate of 565,974 shares of its common stock under such agreement for aggregate gross proceeds of $ 75,000 .
On January 19, 2023, the Company entered into an Open Market Sale Agreement with Jefferies (the “Open Market Sale Agreement”), pursuant to which the Company may issue and sell, from time to time, shares its common stock under an at-the-market equity offering. The Company filed a prospectus supplement relating to the Open Market Sale Agreement under its 2020 Shelf Registration (the “2020 Shelf ATM Prospectus Supplement”), pursuant to which the Company could offer and sell shares of common stock having an aggregate offering price of up to $ 40,000 under the Open Market Sale Agreement. From January 19, 2023 to May 11, 2023, the Company sold 229,378 shares of its common stock under its at-the-market offering pursuant to the Open Market Sale Agreement under the 2020 Shelf ATM Prospectus Supplement, resulting in net proceeds of $ 4,899 .
On March 3, 2023, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on May 11, 2023 (the “2023 Shelf Registration”). Under the 2023 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, subscription rights or units after such time as the shelf registration statement is declared effective by the SEC. In accordance with the terms of the Open Market Sale Agreement, the Company may issue and sell, from time to time, up to $ 40,000 of its common stock in an at-the-market equity offering through Jefferies, as sales agent. Upon effectiveness of the 2023 Shelf Registration, the Company ceased any further offers or sales of its common stock pursuant to the 2020 Shelf ATM Prospectus Supplement and the 2020 Shelf Registration. 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, 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 .
F-8
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
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 “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.
Note 2: Summary of Significant Accounting Policies
Principles of Consolidation— The accompanying consolidated financial statements include the accounts of KALA BIO, Inc. and its wholly owned subsidiaries, Kala Pharmaceuticals Security Corporation, which is a Massachusetts subsidiary created to buy, sell and hold securities, and Combangio, Inc . All intercompany transactions and balances have been eliminated.
F-9
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Basis of Presentation —The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated only limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of the Commercial Business to Alcon in July 2022 and has incurred recurring losses and negative cash flows from operations, including a net loss of $ 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. 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. 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. The Company may never achieve or maintain profitability. 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, 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.
F-10
Table of Contents
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. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expense, and related disclosures. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. Estimates and assumptions relied upon in preparing these consolidated financial statements relate to, but are not limited to, the present value of lease liabilities and the corresponding right-of-use assets, the fair value of warrants, stock-based compensation, accrued expenses, contingent consideration, grant income and deferred grant income, the valuation of embedded derivatives and the recoverability of the Company’s net deferred tax assets and related valuation allowance. Actual results may differ from these estimates under different assumptions or conditions.
Grant Income — Grant income consists of amounts earned from incurring costs to support the CHASE Phase 2b clinical trial of KPI-012 for PCED, as well as product process characterization and analytical development from the program due to the receipt of the CIRM Award. The grant between the Company and CIRM is subject to a co-funding requirement and generally provides for the Company to meet certain milestones in order for funds to be provided. The Company accounts for grants received to perform research and development activities in accordance with Accounting Standards Codification (“ASC”) Topic 730-20, Research and Development Arrangements , which requires an assessment, at the inception of the grant, of whether the grant is a liability or a contract to perform research and development activities. If the Company is obligated to repay the grant funds to the grantor regardless of the outcome of the research and development activities, then the Company is required to estimate and recognize that liability. Alternatively, if the Company is not required to repay, or if it is required to repay the grant funds to the grantor only if the research and development activities are successful, then the grant agreement is accounted for as a contract to perform research and development activities, in which case, grant income is recognized as the related research and development expenses are incurred. Costs of grant income are recorded as a component of research and development expenses in the Company’s consolidated statements of operations and comprehensive loss.
Grant funds received in advance 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.
Contingent Consideration— In addition to upfront consideration and Deferred Purchase Consideration (as defined below) (see Note 3), the Company’s asset acquisitions may also include contingent consideration payments to be made for future milestone events. The Company assesses whether such contingent consideration is required to be recorded at fair value on the date of the acquisition and subsequently remeasured to fair value at each reporting date. Contingent consideration payments in an asset acquisition not required to be accounted for at fair value are recognized when the contingency is resolved, and the consideration is paid or becomes payable. Changes to contingent consideration obligations can result from changes to discount rates, accretion of the liability due to the passage of time, changes in the Company’s estimates of the likelihood or timing of achieving certain milestones. Any changes in the fair value of these contingent consideration liabilities are included in loss from operations in the consolidated statements of operations and comprehensive loss.
Derivative Instruments— ASC 815, Derivatives and Hedging , (“ASC 815”) requires companies to bifurcate certain conversion options and redemption features from their host instruments and account for them as free-standing derivative financial instruments should certain criteria be met. The Company evaluates its financial instruments, including its debt arrangements, to determine whether such instruments are derivatives or contain features that qualify as embedded derivatives. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract and the features of the derivatives. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the consolidated statement of operations and comprehensive income
F-11
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
each period. Bifurcated embedded derivatives are classified with the related host contract in the Company’s consolidated balance sheet.
Cash and Concentration of Credit Risk —Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, short-term investments, if any, and accounts receivable, if any. Periodically, the Company maintains cash, cash equivalents, short-term investments in accredited financial institutions in excess of federally insured limits. The Company deposits its cash, cash equivalents, short-term investments, if any, in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company’s accounts receivable balance as of December 31, 2024 and 2023 were de minimis . 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.
Investments— The Company determines the appropriate classification of its investments at the time of purchase. The Company’s investments are classified as available-for-sale in accordance with ASC Topic 320 , Investments—Debt and Equity Securities . The Company classifies investments available to fund current operations as current assets on its consolidated balance sheets. Investments are classified as long-term assets on the consolidated balance sheets if (i) the Company has the intent and ability to hold the investments for a period of at least one year and (ii) the contractual maturity date of the investments is greater than one year.
Available-for-sale investments are recorded at fair value, with unrealized gains or losses included in comprehensive loss on the consolidated statements of operations and comprehensive loss and in accumulated other comprehensive income or loss on the consolidated balance sheets. Realized gains and losses, interest income earned on the Company’s cash, cash equivalents and investments, and amortization or accretion of discounts and premiums on investments are included within other income (expense).
The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. The Company did not record any such impairments during the years ended December 31, 2024 or 2023.
Leases —At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one-year or less. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.
The components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although
F-12
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
separation of lease and non-lease components is required, certain practical expedients are available to entities. Entities electing the practical expedient would not separate lease and non-lease components. Rather, they would account for each lease component and the related non-lease component together as a single component. The Company’s facilities operating leases had lease and non-lease components which the Company has elected to use the practical expedient and account for each lease component and related non-lease component as one single component. The lease component resulted in a right-of-use asset being recorded on the consolidated balance sheets and amortized as lease expense on a straight-line basis to the consolidated statements of operations and comprehensive loss.
Property and Equipment, net —Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets. Depreciation expense is included in loss from operations on the consolidated statements of operations and comprehensive loss. Laboratory equipment and office and computer equipment is depreciated over three to five years . Leasehold improvements are depreciated over the shorter of their useful life or the life of the lease. Major additions and upgrades are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations on the consolidated statements of operations and comprehensive loss.
Patent Costs —Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss.
Advertising Costs —Advertising costs are expensed as incurred. The Company incurred no advertising costs for the years ended December 31, 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. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the undiscounted cash flows are insufficient to recover the carrying value, the assets are recorded at the lesser of the carrying value or fair value. 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 one operating and reportable segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is on the development and commercialization of innovative therapies for rare and severe diseases of the front and back of the eye. All of the Company’s tangible assets are held in the United States.
The CODM uses net loss as reported on the consolidated statements of operations and comprehensive loss to analyze cash flows in assessing performance of the segment and deciding how to allocate resources. The measure of segment assets is reported on the consolidated balance sheet as total assets.
F-13
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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:
Year Ended
December 31,
2024
2023
Costs and expenses:
Research and development:
KPI‑012 development costs
$
10,170
$
7,678
Employee‑related costs for research and development personnel
10,757
9,710
Other research and development costs (1)
1,167
1,198
General and administrative
18,340
20,567
Other segment (income) expense, net (2)
( 1,923 )
3,046
Net loss
$
( 38,511 )
$
( 42,199 )
(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. Research and development costs are expensed as incurred. The Company expenses costs relating to the production of inventory for its product candidates as research and development expenses within its consolidated statements of operations and comprehensive loss in the period incurred, until the point the Company believes regulatory approval and subsequent commercialization of the product candidate is probable and it expects the future economic benefit from sales of the drug to be realized. Research and development costs that are paid in advance of performance, including nonrefundable prepayments for goods or services, are deferred and capitalized as a prepaid expense. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.
Accrued Expenses —The Company accrues for variable consideration related to rebates, sales incentives and allowances, and returns. Such estimates are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of the accrued expense. The Company also accrues expenses related to development activities performed by third parties based on an evaluation of services received and efforts expended pursuant to the terms of the contractual arrangements. Payments under some of these contracts depend on clinical trial milestones. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of expenses. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual or prepaid expense accordingly.
Stock-Based Compensation —The Company accounts for all stock-based awards granted as compensation expense at fair value. The Company generally issues stock-based awards with the measurement date for awards as the date of grant. Stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is the vesting period, on a straight-line basis. For performance awards whose vesting is contingent upon a specified event, the Company recognizes stock-based compensation expense over the derived service period, based on the probability of achievement of the specified event. The Company recognizes compensation expense for the portion of awards that have vested. Forfeitures are recorded as they occur. Stock-based compensation is classified in the
F-14
Table of Contents
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. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates. The Company previously lacked sufficient company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies in addition to its own historical volatility. Beginning in the second half of 2023, the Company determined it had adequate historical data regarding the volatility of its own traded stock price and began exclusively using its own historical volatility. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future. The fair value of restricted stock units (“RSUs”) are equal to the closing sale price of the Company’s common stock on the date of grant.
Income Taxes —Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements and tax returns. Deferred tax assets and liabilities are determined based upon the differences between the consolidated financial statement carrying amounts and the tax basis of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.
The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As a result, reserves are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present.
Net Loss per Share Attributable to Common Stockholders —The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The two-class method is not applicable during periods with a net loss, as the holders of the convertible preferred stock have no contractual obligation to share in losses. For all periods presented, the two-class method was not applicable.
Basic net loss per share attributable to common stockholders is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per share attributable to common stockholders is computed using the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options and warrants, the issuance of unvested RSUs and convertible preferred stock using the if-converted method.
The weighted average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, warrants, unvested RSUs and
F-15
Table of Contents
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. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the years ended December 31, 2024 and 2023. 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.
Note 3: Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and Disclosures , establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and its own assumptions (unobservable inputs). The hierarchy consists of three levels:
● Level 1—Quoted prices in active markets for identical assets or liabilities.
● Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
● Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company’s financial instruments as of December 31, 2024 and 2023 consisted primarily of cash equivalents and contingent consideration. Cash equivalents and contingent consideration are reported at their respective fair values on the Company’s consolidated balance sheets.
T he Company acquired Combangio in November 2021 and in connection with the closing of the Combangio Acquisition, the Company agreed to issue an aggregate of 155,664 shares (the “Deferred Purchase Consideration”) of the Company’s common stock to former Combangio stockholders and other equityholders (the “Combangio Equityholders”)
F-16
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
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.
Additionally, the purchase price in connection with the Combangio Acquisition included potential future payments of up to $ 105,000 that are contingent upon the achievement of specified development, regulatory and commercialization milestones and are required to be recorded at fair value. As of December 31, 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. The fair values of the contingent consideration liabilities were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements. Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities. Any changes in the fair value of these contingent consideration liabilities are included in loss from operations in the consolidated statements of operations and comprehensive loss. 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.
F-17
Table of Contents
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:
December 31, 2024
Fair Value
Level 1
Level 2
Level 3
Assets:
Cash equivalents
$
39,707
$
39,707
$
—
$
—
Total Assets
$
39,707
$
39,707
$
—
$
—
Liabilities:
Contingent consideration
$
4,659
$
—
$
—
$
4,659
Total Liabilities
$
4,659
$
—
$
—
$
4,659
December 31, 2023
Fair Value
Level 1
Level 2
Level 3
Assets:
Cash equivalents
$
44,639
$
44,639
$
—
$
—
Total Assets
$
44,639
$
44,639
$
—
$
—
Liabilities:
Contingent consideration
$
4,110
$
—
$
—
$
4,110
Total Liabilities
$
4,110
$
—
$
—
$
4,110
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:
Fair Value at
December 31,
Range
Financial Instrument
2024
Valuation Technique
Unobservable Input
(Average)
Contingent consideration
$
4,659
Probability-adjusted
Period of expected milestone achievement
2026 - 2028 (2028)
discounted cash flow model
Probabilities of achievement
16.6 % - 35.5 % ( 23.4 %)
Discount rate
14.3 %
Fair Value at
December 31,
Range
Financial Instrument
2023
Valuation Technique
Unobservable Input
(Average)
Contingent consideration
$
4,110
Probability-adjusted
Period of expected milestone achievement
2025 - 2028 (2027)
discounted cash flow model
Probabilities of achievement
16.6 % - 35.5 % ( 23.4 %)
Discount rate
16.3 %
F-18
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
The following table summarizes the changes in the Deferred Purchase Consideration and contingent consideration liabilities measured at fair value using Level 3 inputs for the years ended December 31, 2024 and 2023:
Contingent consideration
Balance at January 1, 2023
$
8,370
Fair value adjustments
740
Settlements
( 4,854 )
Reclassification to accrued expenses and other current liabilities
( 146 )
Balance at January 1, 2024
$
4,110
Fair value adjustments
549
Balance at December 31, 2024
$
4,659
Deferred purchase consideration
Balance at January 1, 2023
$
595
Fair value adjustments
( 230 )
Settlements
( 365 )
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, 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.
Note 4: Grant Income
CIRM Award
On August 2, 2023, Combangio, a wholly owned subsidiary of the Company, entered into an award agreement with CIRM for a $ 15,000 grant (as amended from time to time, the “CIRM Award”) to support Combangio’s KPI-012 program for the treatment of PCED. The CIRM Award includes funding for the CHASE Phase 2b clinical trial of KPI-012 for PCED, as well as product and process characterization and analytical development for the program. The CIRM Award is subject to a co-funding requirement under which Combangio is obligated to spend a specified minimum amount on the development of KPI-012 to obtain the full award amount. Upon entry into the CIRM Award, Combangio received an initial $ 5,900 disbursement from CIRM. In August 2024 and December 2024, Combangio received disbursements of $ 3,240 and $ 2,520 , respectively, from CIRM upon the achievement of specified milestones. The balance of the award is payable to Combangio upon the achievement of other specified milestones that are primarily related to Combangio’s progress in conducting the CHASE Phase 2b clinical trial. CIRM may permanently cease disbursements if the milestones are not met within four months of the scheduled completion dates or if the delay is not addressed to CIRM’s satisfaction, as determined by CIRM in its sole discretion. Additionally, if CIRM determines, in its sole discretion, that Combangio has not complied with the terms and conditions of the CIRM Award, CIRM may suspend or permanently cease disbursements. Under the terms of the CIRM Award, Combangio is obligated to pay a royalty on net sales of any product, service or approved drug resulting in whole or in part from the CIRM Award in the amount of 0.1 % per $ 1,000 of funds utilized by the Company until the earlier of ten years from the date of first commercial sale of such product, service or approved drug and such time as nine times the amount of funds awarded by CIRM has been paid in royalties (the “Base Royalty”). In addition, following the satisfaction of the Base Royalty,
F-19
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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.
Note 5: Property and Equipment, Net
Property and equipment, net, consisted of the following:
December 31,
December 31,
2024
2023
Equipment
$
1,194
$
894
Computer hardware and software
869
869
Construction in progress
—
100
Property and equipment — at cost
2,063
1,863
Less: Accumulated depreciation
( 1,314 )
( 1,110 )
Property and equipment—net
$
749
$
753
Depreciation expense for the years ended December 31, 2024 and 2023 was $ 204 and $ 248 , respectively.
Note 6: Accrued Expenses
Accrued expenses and other current liabilities consisted of the following:
December 31,
2024
2023
Compensation and benefits
$
2,390
$
2,616
Development costs
736
837
Contract manufacturing
672
11
Professional services
414
515
Accrued revenue reserves (1)
350
1,659
Other
413
380
Accrued expenses and other current liabilities
$
4,975
$
6,018
(1) These amounts represent estimated provisions for product returns, rebates and discounts, prior to the sale of the Commercial Business to Alcon. Estimated provisions were deducted from gross revenues at the time revenues were recognized and are included in accrued expenses and other current liabilities on the Company’s consolidated balance sheets. These provisions reflected the Company’s best estimates of the amount of consideration to which it was entitled based on the terms of the contract.
Note 7: Lease
Operating leases
Menlo Park, California Office Lease
In April 2023, Combangio entered into a lease agreement with Menlo Prepi I, LLC, pursuant to which Combangio leases approximately 6,135 square feet of office, laboratory and research and development space in Menlo
F-20
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Park, California. The Company entered into a guaranty of lease agreement guarantying the obligations of Combangio under the lease agreement. The initial term of the lease is for 62 months which commenced on the lease commencement date of July 1, 2023, unless earlier terminated pursuant to the terms of the lease. The lease provides Combangio with an option to extend the lease for an additional five-year term. Combangio was required to make a payment in the amount of $ 144 , as a security deposit pursuant to the lease during the year ended December 31, 2023, which is included in other long-term assets on the consolidated balance sheet as of December 31, 2024. Upon the lease commencement, the Company recorded a right-of-use asset of $ 2,154 and corresponding $ 2,133 of lease liability.
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.
The components of lease expense and related cash flows were as follows:
Year Ended
December 31,
2024
2023
Lease cost
Operating lease cost
$
596
$
314
Short-term lease cost
34
161
Variable lease cost
209
98
Total lease cost
$
839
$
573
Operating cash outflows from operating leases
$
581
$
203
The weighted average remaining lease term and weighted average discount rate of operating leases were as follows:
December 31,
2024
2023
Weighted average remaining lease term
3.7 years
4.7 years
Weighted average discount rate
13.1 %
13.1 %
F-21
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
As of December 31, 2024, the Company’s future minimum lease payments will become due and payable as follows:
Years Ending December 31,
2025
$
601
2026
622
2027
644
2028
440
Less: interest
( 493 )
Total
$
1,814
Note 8: Debt
Loan and Security Agreement
On May 4, 2021, the Company entered into the Loan Agreement with Oxford Finance, in its capacity as lender (in such capacity, the “Lender”), and in its capacity as collateral agent (in such capacity, the “Agent”), pursuant to which a term loan of up to an aggregate principal amount of $ 125,000 was available to the Company, consisting of a tranche A term loan that was disbursed on the closing date in the aggregate principal amount of $ 80,000 and additional tranches that are no longer available to the Company. The Company utilized substantially all of the proceeds from the tranche A term loan to repay a prior credit facility.
Through June 30, 2023, the term loan bore interest at a floating rate equal to the greater of (i) 30-day LIBOR and (ii) 0.11 %, plus 7.89 %. Effective July 1, 2023, the term loan bears interest at a floating rate equal to the greater of (i) 8.00 % and (ii) the sum of (a) the 1-Month CME Term Secured Overnight Financing Rate, (b) 0.10 % and (c) 7.89 %. The Loan Agreement, prior to the Second Loan Amendment and Third Loan Amendment (as defined below), provided for interest-only payments until December 1, 2024 if neither the tranche B term loan nor the tranche C term loan are made, and until June 1, 2025 if either the tranche B term loan or the tranche C term loan is made (the “Amortization Date”). The aggregate outstanding principal balance of the term loans were required to be repaid in monthly installments starting on the Amortization Date based on a repayment schedule equal to (i) 18 months if neither the tranche B term loan nor the tranche C term loan is made and (ii) 12 months if either the tranche B term loan or the tranche C term loan is made. All unpaid principal and accrued and unpaid interest with respect to each term loan was due and payable in full on May 1, 2026 (the “Maturity Date”).
The Company paid a facility fee of $ 400 on the closing date of the Loan Agreement and agreed to pay a facility fee of $ 100 upon closing of the tranche B term loan and a $ 125 facility fee upon the closing of the tranche C term loan. The Company will be required to make a final payment fee of 7.00 % of the original principal amount of any funded term loan payable on the earlier of (i) the prepayment of the term loan in full or (ii) the Maturity Date. At the Company’s option, the Company may elect to make partial repayments of the term loan to the Lender, subject to specified conditions, including the payment of applicable fees and accrued and unpaid interest on the principal amount of the term loan being repaid.
In connection with its entry into the Loan Agreement, the Company granted the Agent a security interest in substantially all of the Company’s personal property owned or later acquired, including intellectual property and the Commercial Business. The Company also agreed to maintain its cash balance in one or more controlled accounts in favor of the Agent, subject to specified exceptions. The Loan Agreement also contains customary representations and warranties and affirmative and negative covenants, as well as customary events of default. Certain of the customary negative covenants limit the ability of the Company and certain of its subsidiaries, among other things, to incur future debt, grant liens, make investments, make acquisitions, distribute dividends, make certain restricted payments and sell assets, subject in each case to certain exceptions. Certain of the affirmative covenants include, but are not limited to, a
F-22
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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. These two features were analyzed and determined to be embedded derivatives to be valued as separate financial instruments. 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 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.
On May 21, 2022, in connection with its entry into the Asset Purchase Agreement with Alcon, the Company entered into an amendment to the Loan Agreement (the “Second Loan Amendment”). Pursuant to the Second Loan Amendment, the Lender and Agent consented to the entry by the Company into the Asset Purchase Agreement and the sale of the Commercial Business to Alcon and agreed to release its liens on the Commercial Business in consideration for the payment by the Company at the closing of the Alcon Transaction of an aggregate amount of $ 40,000 (the “Second Amendment Prepayment”) to the Lender and Agent, representing a partial prepayment of principal in the amount of $ 36,697 of the $ 80,000 principal amount outstanding under the term loan advanced by the Lender under the Loan Agreement, plus a prepayment fee of $ 734 and a final payment fee of $ 2,569 . In addition, the Company was required to pay all accrued and unpaid interest on the principal amount of the term loan being repaid.
In addition, under the Second Loan Amendment, the Lender and Agent agreed that, following the closing of the Alcon Transaction and the Second Amendment Prepayment, the Amortization Date would be extended from December 1, 2024 to January 1, 2026, at which time the aggregate principal balance of the term loan then outstanding under the Loan Agreement is required to be repaid in five monthly installments. Pursuant to the Second Loan Amendment, the Company may also make partial prepayments of the term loan to the Lender, subject to specified conditions, including the payment of applicable fees and accrued and unpaid interest on the principal amount of the term loan being repaid.
On July 8, 2022, the Second Amendment Prepayment was paid in connection with the closing of Alcon Transaction, and as such, the Amortization Date was extended to January 1, 2026. The transaction resulted in a loss on extinguishment of debt of $ 2,583 for the year ended December 31, 2022, consisting of the prepayment premium, a pro-rata portion of the unamortized debt discount and issuance costs and the unaccreted exit fee due upon the Second Amendment Prepayment.
On December 27, 2022, the Company entered into an amendment to the Loan Agreement (the “Third Loan Amendment”). Pursuant to the Third Loan Amendment, the Lender and Agent agreed to amend certain provisions of the Loan Agreement to permit the transfer of the listing of the Company’s common stock from The Nasdaq Global Select Market to The Nasdaq Capital Market. Pursuant to the Third Loan Amendment, the Company agreed (A) to make partial prepayments of the principal amount of the term loan outstanding under the Loan Agreement as follows (the “Third Amendment Prepayments”): (1) a payment of $ 5,000 on or before June 30, 2023, representing a partial prepayment of principal in the amount of $ 4,673 , plus a final payment fee of $ 327 and (2) a payment of $ 5,000 on or before January 31, 2024, representing a partial prepayment of principal in the amount of $ 4,673 , plus a final payment fee of $ 327 and (B) that the Amortization Date under the Loan Agreement shall be changed from January 1, 2026 to January 1, 2025. The Company paid the Third Amendment Prepayments on January 25, 2023, following which the Company became required to repay the Loan Agreement in monthly installments from January 1, 2025 through May 1, 2026. The principal loan balance under the Loan Agreement following the Third Amendment Prepayments was $ 33,957 .
F-23
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
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.
On August 1, 2023, the Company entered into an amendment to the Loan Agreement with Combangio and Oxford Finance (the “Fourth Loan Amendment”). Pursuant to the Fourth Loan Amendment, certain provisions of the Loan Agreement were amended in connection with the change of the Company’s name and the cessation of the U.S. Dollar LIBOR rate. On August 2, 2023, the Company entered into an amendment to the Loan Agreement with Combangio and Oxford Finance (the “Fifth Loan Amendment”). Pursuant to the Fifth Loan Amendment, Oxford Finance consented to the Company’s entry into the CIRM Award and certain provisions of the Loan Agreement were amended in connection therewith.
In addition, in connection with the Loan Agreement, the Company paid certain fees to the Lender and other third-party service providers. The fees paid to the Lender were recorded as a debt discount while the fees paid to other third-party service providers were recorded as debt issuance cost. These costs are being amortized using the effective interest method over the term of the Loan Agreement. The amortization of debt discount and debt issuance cost is included in interest expense within the consolidated statements of operations and comprehensive loss. As of December 31, 2024, the effective interest rate was 15.18 %, which takes into consideration the non-cash accretion of the exit fee and the amortization of the debt discount and issuance costs.
During the year ended December 31, 2024, the Company recognized interest expense of $ 5,766 for the Loan Agreement. This consisted of amortization of debt discount of $ 306 , accretion of the final payment fee of $ 942 and the contractual coupon interest expense of $ 4,518 . During the year ended December 31, 2023, the Company recognized interest expense of $ 5,814 for the Loan Agreement. This consisted of amortization of debt discount of $ 274 , accretion of the final payment fee of $ 979 and the contractual coupon interest expense of $ 4,561 .
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Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
The components of the carrying value of the debt as of December 31, 2024 and 2023 are detailed below:
December 31,
2024
2023
Principal loan balance
$
29,284
$
33,957
Unamortized debt discount and issuance cost
( 225 )
( 532 )
Cumulative accretion of exit fee
1,379
765
Total debt
$
30,438
$
34,190
Less: current portion of long-term debt
( 10,336 )
—
Long-term debt, net
$
20,102
$
34,190
The annual principal payments due under the Loan Agreement as of December 31, 2024 were as follows:
Years Ending December 31,
2025
$
10,336
2026
18,948
Total
$
29,284
Note 9: Warrants
The Company has issued warrants in connection with debt transactions that were completed in 2018 and prior.
The following table summarizes the common stock warrants outstanding as of December 31, 2024 and 2023, each exercisable into the number of shares of common stock set forth below as of the specified dates:
Shares Exercisable at
Exercise
Expiration
Exercisable
December 31,
Issued
Price Per Share
Date
From
2024
2023
2014
$
375.00
November 2024
July 2017
—
320
2016
$
413.50
October 2026
September 2017
290
290
2018
$
609.23
October 2025
October 2018
3,693
3,693
3,983
4,303
Note 10: Common and Preferred Stock
Preferred Stock
The Company was authorized to issue up to 5,000,000 shares of preferred stock as of December 31, 2024 and 2023. 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
F-25
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
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, 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
Conversion
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”).
Voting
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
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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.
Dividends
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
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.
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Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Common Stock
The Company was authorized to issue up to 120,000,000 shares of common stock with a $ 0.001 par value per share as of December 31, 2024 and 2023. The Company had 6,091,182 and 2,759,372 shares of common stock issued and outstanding as of December 31, 2024 and 2023, respectively.
Holders of the Company’s common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Each election of directors by the Company’s stockholders will be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by the Company’s Board of Directors, subject to any preferential dividend rights of any preferred stock that the Company may issue in the future.
In the event of the Company’s Dissolution, whether voluntary or involuntary, the holders of its common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of the Series 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 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, 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:
December 31,
December 31,
2024
2023
Warrant rights to acquire common stock
3,983
4,303
ESPP
35,347
28,927
Outstanding inducement stock option awards
10,496
14,180
2009 Plan
26
26
2017 Plan
1,675,807
1,596,113
Convertible preferred stock (as converted to common stock)
7,775,400
5,417,400
Total
9,501,059
7,060,949
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.
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Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Note 11: Stock-based Compensation
Stock Incentive Plans
On June 22, 2023, the Company’s stockholders approved the Company’s Amended and Restated 2017 Equity Incentive Plan (the “2017 Plan”), which amended and restated the Company’s 2017 Equity Incentive Plan, as amended, to (i) increase the number of shares of common stock authorized for issuance thereunder by 1,250,000 shares; (ii) limit the number of incentive stock options that can be granted under the plan to 7,738,761 shares of common stock; (iii) add an annual limit on non-employee director compensation, including cash and the value of equity awards, of $ 750,000 for incumbent directors and $ 1,000,000 in a director’s first year of service; and (iv) extend the term of the plan (including the duration of the evergreen) to 10 years from June 22, 2023, the date that stockholders approved the plan. In addition, the 2017 Plan provides for an annual increase to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2024 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2033, equal to the lower of (i) 4 % of the sum of (I) the number of outstanding shares of common stock on such date and (II) the number of shares of common stock issuable upon conversion of any outstanding shares of convertible preferred stock of the Company on such date (without giving effect to any restrictions or limitations on conversion) and (ii) an amount determined by the Company’s board of directors.
As of December 31, 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 or the compensation committee sets a shorter term. Options granted under the plans generally vest over a four-year period. A portion of the unvested stock options will vest upon the sale of all or substantially all of the stock or assets of the Company.
Stock Option Awards
On May 1, 2023, the Company commenced a one-time stock option exchange program (the “Option Exchange Program”), under which the Company’s eligible executive officers, other employees and non-employee directors (collectively, “Eligible Holders”) were given the opportunity to exchange outstanding options to purchase shares of the Company’s common stock held by them for an equal number of RSUs that are subject to vesting conditions. The Option Exchange Program expired on May 30, 2023. 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 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. A de minimis number of eligible options were not surrendered for exchange and remain outstanding. 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) .
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Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
A summary of option activity is as follows:
Weighted
Weighted
Average
Average
Remaining
Aggregate
Number of
Exercise
Contractual
Intrinsic
Shares
Price
Term
Value
(Years)
(in thousands)
Outstanding as of January 1, 2024
670,064
$
15.93
9.4
$
—
Granted
317,139
6.92
Exercised
( 1,281 )
7.00
Forfeited
( 107,919 )
11.67
Outstanding as of December 31, 2024
878,003
$
13.22
8.6
$
23
Vested or expected to vest as of December 31, 2024
878,003
$
13.22
8.6
$
23
Options exercisable as of December 31, 2024
292,670
$
16.24
8.5
$
—
The Company records stock-based compensation related to stock options granted at fair value. The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of stock option grants and to determine the related compensation expense. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates. The assumptions used in determining fair value of the stock options granted during the years ended December 31, 2024 and 2023 are as follows:
Year Ended December 31,
2024
2023
Expected volatility
107.9 %
–
110.3 %
108.4 %
–
123.1 %
Risk-free interest rate
3.46 %
–
4.41 %
3.55 %
–
4.43 %
Expected dividend yield
0 %
0 %
Expected term (in years)
5.50
–
6.07
5.50
–
6.10
The Company derived the risk-free interest rate assumption from the U.S. Treasury rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the awards being valued. The Company based the expected dividend yield on its expectation of not paying dividends in the foreseeable future. The Company calculated the expected term of options using the simplified method, as the Company lacks relevant historical data due to the Company’s limited operating experience. The expected volatility is based upon the historical volatility of the Company. The impact of forfeitures on compensation expense is recorded as they occur.
The weighted average grant-date fair value of options granted during the years ended December 31, 2024 and 2023, was $ 5.79 and $ 12.82 , respectively. The fair value is being expensed over the vesting period of the options on a straight-line basis as the services are being provided. As of December 31, 2024, there was $ 5,828 of unrecognized compensation cost related to the stock options granted, which is expected to be expensed over a weighted-average period of 2.57 years. Stock-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows:
Year Ended
December 31,
2024
2023
Research and development
$
2,635
$
2,110
General and administrative
5,754
5,353
Total
$
8,389
$
7,463
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.
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Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Restricted Stock Units —During the years ended December 31, 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:
Weighted Average
Grant Date
Shares
Fair Value
Unvested and outstanding balance as of January 1, 2024
824,998
$
22.31
Changes during the period:
Granted
71,830
6.90
Vested
( 266,770 )
19.90
Forfeited
( 85,941 )
21.01
Unvested and outstanding balance as of December 31, 2024
544,117
$
21.67
Vested and deferred balance as of December 31, 2024
20,206
Employee Stock Purchase Plan —In 2017, the Company approved the 2017 Employee Stock Purchase Plan, which was amended and restated in December 2018 (as amended, the “ESPP”). The ESPP reserved an aggregate of 4,466 shares of common stock and provides for an annual increase on the first day of each fiscal year, beginning on January 1, 2019 and ending on December 31, 2029, in an amount equal to the lowest of: (1) 17,868 shares of the Company’s common stock; (2) 1 % of the total number of shares of the Company’s common stock outstanding on the first day of the applicable fiscal year; and (3) an amount determined by the Company’s board of directors. On January 1, 2025, 17,868 shares of common stock were added and were available for grant under the ESPP.
The ESPP provides for two six-month offering periods each year: the first offering period begins on the first trading day on or after each January 1 and the second offering period begins on the first trading day on or after each July 1. Under the ESPP, participating employees can authorize the Company to withhold a portion of their base pay during consecutive six-month payment periods for the purchase of shares of the Company’s common stock. At the conclusion of the period, participating employees can purchase shares of the Company’s common stock at 85 % of the lesser of the closing price of the common stock on (i) the first business day of the plan period or (ii) the exercise date. The fair value of the purchase rights granted under the ESPP was estimated on the date of grant, using the Black-Scholes option-pricing model. During the years ended December 31, 2024 and 2023, employees of the Company purchased an aggregate of 11,448 and 3,690 shares, respectively, under the ESPP.
F-31
Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Note 12: Loss Per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows for the years ended December 31, 2024 and 2023:
Year Ended
December 31,
2024
2023
Numerator:
Net loss attributable to common stockholders
$
( 38,511 )
$
( 42,199 )
Denominator:
Weighted-average common shares outstanding, basic and diluted (1)
3,796,047
2,432,008
Net loss per share attributable to common stockholders, basic and diluted
$
( 10.15 )
$
( 17.35 )
(1) Included in the weighted-average common shares outstanding, basic and diluted are vested but deferred shares for which all contingencies have been satisfied.
The following potential common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect. The share amounts presented below represent the average of the number of incremental shares included in each quarterly calculation:
Year Ended
December 31,
2024
2023
Options to purchase shares of common stock
905,645
549,952
Unvested RSUs
621,886
654,907
Unexercised warrants
4,223
4,303
Convertible preferred stock (as converted to common stock)
7,294,125
5,282,850
8,825,879
6,492,012
Note 13: Income Taxes
The Company has had no income tax expense due to operating losses incurred for the years ended December 31, 2024 and 2023. The Company has also not recorded any income tax benefits for the net operating losses incurred in each period due to its uncertainty of realizing a benefit from those items. All of the Company’s losses before income taxes were generated in the United States.
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Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:
Year Ended
December 31,
2024
2023
Federal statutory income tax rate
21.0
%
21.0
%
Effect of:
State income taxes, net of federal benefit
6.5
7.6
Research and development tax credits
3.0
2.4
Stock-based compensation
( 3.9 )
( 15.0 )
Change in valuation allowance
( 26.3 )
( 15.3 )
Other
( 0.3 )
( 0.7 )
Effective income tax rate
—
%
—
%
Net deferred tax assets as of December 31, 2024 and 2023 consisted of the following:
December 31,
2024
2023
Deferred tax assets:
Net operating loss carryforwards
$
121,135
$
108,919
Capitalized research and development and start-up expenditures
13,878
12,153
Research and development tax credit carryforwards
2,476
1,154
Stock-based compensation
1,203
1,195
Lease liabilities
535
672
Rebates, incentives, trade discounts and allowances
103
522
Other
676
4,754
Total deferred tax assets
$
140,006
$
129,369
Deferred tax liabilities:
Right-of-use assets
( 499 )
( 638 )
Total deferred tax liabilities
$
( 499 )
$
( 638 )
Valuation allowance
$
( 139,507 )
$
( 128,731 )
Net deferred tax assets
$
—
$
—
The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2024 and 2023. The valuation allowance increased by $ 10,776 and $ 7,325 during the years ended December 31, 2024 and 2023, respectively. The current year and prior year increase is largely the result of an increase to federal net operating losses and generation of federal and state research and development tax credits. Management reevaluates the positive and negative evidence at each reporting period.
As of December 31, 2024 and 2023, the Company had federal net operating loss carryforwards of $ 405,544 and $ 369,337 , respectively, which may be available to offset future federal tax liabilities and expire at various dates beginning in 2030. As of December 31, 2024 and 2023, the Company had state net operating loss carryforwards of $ 469,053 and $ 413,711 , respectively, which may be available to offset future state income tax liabilities and expire at various dates beginning in 2025. As of December 31, 2024 and 2023, the Company had federal and state research and development credit carryforwards of $ 2,476 and $ 1,154 , respectively.
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Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of Section 382 of the Internal Revenue Code of 1986, certain substantial changes in the Company’s ownership, including a sale of the Company, or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards, which could be used annually to offset future taxable income. The Company has completed an analysis as of December 31, 2022 and determined that an additional ownership change occurred during December 2022 as a result of the issuance of Series E Preferred Stock, further limiting the net operating loss carryforwards and research and development tax credits due to the expiration of those attributes. As a result, the utilization of the Company’s net operating loss carryforwards is subject to an annual limitation of $ 222 , which is reflected in the numbers presented above.
The Company files its corporate income tax returns in the United States and various states. All tax years since the date of incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (‘‘IRS’’) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax year.
As of December 31, 2024 and 2023 the Company had no uncertain tax positions. The Company’s policy is to recognize interest and penalties related to income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the years ended December 31, 2024 and 2023.
Note 14: Commitments and Contingencies
Stanford License Agreement — In October 2019, Combangio entered into a license agreement with The Board of Trustees of The Leland Stanford Junior University (“Stanford”), which was amended in February 2020 and subsequently transferred to the Company by operation of law upon the Combangio Acquisition. Pursuant to the license agreement with Stanford (the “Stanford Agreement”), the Company has a worldwide, exclusive, sublicensable license under certain patent rights (“licensed patents”), directed to methods to promote eye wound healing, to make, have made, use, import, offer to sell and sell products (“licensed products”) that are covered by the licensed patents for use in all fields. Under the Stanford Agreement, the Company is required to pay Stanford annual license maintenance fees in the low-to-mid five figures which are creditable against earned royalties owed to Stanford for the same year, an aggregate of up to $ 1,075 for the achievement of specified development and regulatory milestones, and an aggregate of up to $ 1,100 for the achievement of specified sales milestones. Stanford is also entitled to receive tiered royalties in a low single digit percentage range on net sales of licensed products that are covered by a valid claim of a licensed patent. During the 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 .
The Company’s minimum obligations due under the Stanford License Agreement as of December 31, 2024, are as follows:
Years Ending December 31,
2025
$
65
2026
65
2027
65
2028
65
2029
65
Thereafter
260
Total minimum license payments
$
585
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Table of Contents
KALA BIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
Contingencies related to the Merger Agreement — In connection with the Combangio Acquisition, the Company agreed to make additional payments based on the achievement of certain milestone events related to KPI-012. The Company recognized certain contingent consideration liabilities at fair value on the acquisition date, and revalues the remaining obligations each reporting period. The total potential maximum payout for the milestone payments, which have been recorded as liabilities at fair value, is $ 40,000 and the milestone payments are contingent upon the achievement of specified development, regulatory and commercialization milestones. Following the achievement of the First Dosing Milestone in February 2023, the Company paid an aggregate of $ 2,500 in cash and $ 2,354 in shares of the Company’s common stock (representing an aggregate of 105,038 shares of the Company’s common stock) to the former Combangio Equityholders in March 2023. The Company paid the remaining amount due in connection with the First Dosing Milestone of $ 146 in cash in January 2024. Additionally, pursuant to the merger agreement for the Combangio Acquisition, the Company could trigger potential future sales-based milestone payments of up to $ 65,000 and cash royalty payment obligations in the mid-to-high single digits. Because the achievement of these sales-based milestones related to KPI-012 was not considered probable as of December 31, 2024 or December 31, 2023, such contingencies have not been recorded in the Company’s consolidated financial statements. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory or commercial milestones.
Litigation —The Company is not currently subject to any material legal proceedings.
Guarantees and Indemnifications —The Company’s Certificate of Incorporation authorizes the Company to indemnify and advance expenses to its officers and directors and agents to the fullest extent permitted by law.
The Company’s equity agreements and certain other arrangements include standard indemnifications against claims, actions, or other matters that may arise in connection with these arrangements.
As of December 31, 2024 and 2023, the Company had not experienced any losses related to these indemnification obligations, and no claims with respect thereto were outstanding. The Company does not expect significant claims related to these indemnification obligations and has no amount accrued related to these contingencies. The Company does not expect these indemnifications to have a material adverse effect on these consolidated financial statements.
Note 15: Defined Contribution Plan
The Company has a 401(k) defined contribution plan (the “401(k) Plan”) for substantially all of its employees. Eligible employees may make pretax contributions to the 401(k) Plan up to statutory limits.
The Company made discretionary matching contributions of $ 160 and $ 142 to the 401(k) Plan during the years ended December 31, 2024 and 2023, respectively.
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