0001558370-24-015302 | 10-Q | XBRL Viewer

DEBT

9 Months Ended

Sep. 30, 2024

7. DEBT

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.

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 is not material as of September 30, 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 condensed 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.

Pursuant to the Third Loan Amendment, in addition to the Third Amendment Prepayments, if the Company makes an additional prepayment under the Loan Agreement equal to $5,000 (inclusive of the final payment fee) on or prior to December 31, 2024 (the “First Extension Prepayment”), the Amortization Date will be automatically changed to July 1, 2025, and the maturity date of the Loan Agreement will be automatically changed from May 1, 2026 to November 1, 2026. If, in addition to the Third Amendment Prepayments and the First Extension Prepayment, the Company makes an additional prepayment under the Loan Agreement equal to $2,500 (inclusive of the final payment fee) on or prior to June 30, 2025 (the “Second Extension Prepayment”), the Amortization Date will be automatically changed to January 1, 2026, and the maturity date of the Loan Agreement will be automatically changed to May 1, 2027.

Under the Third Loan Amendment, the Lender and Agent also agreed to waive the prepayment fees for the Third Amendment Prepayments, the First Extension Prepayment, the Second Extension Prepayment and any other prepayments under the Loan Agreement. Pursuant to the Loan Agreement, the Company also will be required to pay all accrued and unpaid interest on the principal amounts of the term loan being repaid at the time of repayment. The 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.

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 condensed consolidated statements of operations and comprehensive loss. As of September 30, 2024, the effective interest rate was 17.07%, which takes into consideration the non-cash accretion of the exit fee and the amortization of the debt discount and issuance costs.

During the three months ended September 30, 2024 and 2023, the Company recognized interest expense of $1,462 and $1,459, respectively, for the Loan Agreement. This consisted of amortization of debt discount of $79 and $68 for the three months ended September 30, 2024 and 2023, respectively, accretion of the final payment fee of $243 and $241 for the three months ended September 30, 2024 and 2023, respectively, and the contractual coupon interest expense of $1,140 and $1,150 for the three months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized interest expense of $4,388 and $4,346, respectively, for the Loan Agreement. This consisted of amortization of debt discount of $226 and $204 for the nine months ended September 30, 2024 and 2023, respectively, accretion of the final payment fee of $723 and $737 for the nine months ended September 30, 2024 and 2023, respectively, and the contractual coupon interest expense of $3,439 and $3,405 for the nine months ended September 30, 2024 and 2023, respectively.

The components of the carrying value of the debt as of September 30, 2024 and December 31, 2023 are detailed below:


	September 30,		December 31,
	2024		2023
Principal loan balance	$	33,957	$	33,957
Unamortized debt discount and issuance cost		(306)		(532)
Cumulative accretion of exit fee		1,488		765
Total debt	$	35,139	$	34,190
Less: current portion of long-term debt		(17,977)		—
Long-term debt, net	$	17,162	$	34,190

The annual principal payments due under the Loan Agreement as of September 30, 2024 were as follows:


Years Ending December 31,
2024 (remaining three months)	$	—
2025		23,970
2026		9,987
Total	$	33,957

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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+ Details

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
Sep. 30, 2024
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements	Recent Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance includes the requirements that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, the title and position of the chief operating decision maker, and an explanation of how the chief operating decision maker uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The guidance also requires that a public entity that has a single reportable segment provide all the disclosures required by the guidance and all existing segment disclosures in ASC 280, Segment Reporting. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in the guidance retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact that this guidance may have on its consolidated financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2024

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance includes the requirements that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, the title and position of the chief operating decision maker, and an explanation of how the chief operating decision maker uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The guidance also requires that a public entity that has a single reportable segment provide all the disclosures required by the guidance and all existing segment disclosures in ASC 280, Segment Reporting. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in the guidance retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact that this guidance may have on its consolidated financial statements.

LOSS PER SHARE - Antidilutive Securities (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Outstanding securities excluded from the computation of diluted weighted average shares outstanding
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	8,880,650	6,623,965	8,700,671	6,350,427
Options to purchase shares of common stock
Outstanding securities excluded from the computation of diluted weighted average shares outstanding
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	885,430	670,064	914,859	509,914
Unvested RSUs and PSUs
Outstanding securities excluded from the computation of diluted weighted average shares outstanding
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	544,117	824,998	647,809	598,210
Unexercised warrants
Outstanding securities excluded from the computation of diluted weighted average shares outstanding
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	4,303	4,303	4,303	4,303
Convertible preferred stock (as converted to common stock)
Outstanding securities excluded from the computation of diluted weighted average shares outstanding
Outstanding securities excluded from the computation of diluted weighted average shares outstanding (in shares)	7,446,800	5,124,600	7,133,700	5,238,000

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
ATM
Offering costs	$ 50	$ 446
Private Placement
Offering costs	122
Series G preferred shares
Issuance of preferred stock-net of issuance costs	62
Series H preferred shares
Issuance of preferred stock-net of issuance costs	$ 96

COMMITMENTS AND CONTINGENCIES	9 Months Ended
Sep. 30, 2024
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES.	13. 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 nine months ended September 30, 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 three and nine months ended September 30, 2024 and 2023 were de minimis. Litigation— The Company is not currently subject to any material legal proceedings. 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 September 30, 2024 or December 31, 2023, such contingencies have not been recorded in the Company’s condensed 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.

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2024

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES.

13. 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 nine months ended September 30, 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 three and nine months ended September 30, 2024 and 2023 were de minimis.

Litigation— The Company is not currently subject to any material legal proceedings.

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 September 30, 2024 or December 31, 2023, such contingencies have not been recorded in the Company’s condensed 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.

INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
INCOME TAXES (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023	Dec. 31, 2022
INCOME TAXES
Annual limitation amount of tax credit carryforward						$ 222
Uncertain tax positions	$ 0		$ 0		$ 0
Interest or penalties recorded	$ 0	$ 0	$ 0	$ 0

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended			9 Months Ended
	Nov. 15, 2021	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023	Jan. 31, 2024
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Settled liability					$ 365
Gain on fair value remeasurement of deferred purchase consideration							$ (230)
Contingent milestone consideration paid in shares value							2,354
Loss (gain) on fair value remeasurement of contingent consideration			$ (420)	$ 1,744		$ (549)	(462)
Change in fair value of deferred purchase consideration			0	$ 0		0
Deferred purchase consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Settled liability							365
Change in fair value							$ (230)
Combangio, Inc.
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Number of shares	155,664
Combangio, Inc. \| Shares Issued on January 3, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Number of shares	136,314
Combangio, Inc. \| Shares not issued until escrow release date of March 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Number of shares	19,350
Combangio, Inc. \| First patient dosed with any product in phase 2 clinical trial, dosing milestone
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Contingent milestone consideration								$ 146
Contingent milestone consideration paid		$ 2,500				2,646
Contingent milestone consideration paid in shares value		$ 2,354				$ 2,354
Contingent milestone consideration paid in shares		105,038				105,038
Combangio, Inc. \| Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Contingent milestone consideration	$ 105,000		$ 105,000			$ 105,000

STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2024

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

10. STOCK‑BASED COMPENSATION

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 (the “2017 Plan”), 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 September 30, 2024, there were 236,576 shares of common stock available for grant under the 2017 Plan.

During the nine months ended September 30, 2024, the Company granted options for the purchase of 317,139 shares of common stock, including 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), and 71,830 RSUs. During the nine months ended September 30, 2024, employees of the Company purchased an aggregate of 11,448 shares under the Employee Stock Purchase Plan.

The assumptions used in determining fair value of the stock options granted during the nine months ended September 30, 2024 are as follows:


	Nine Months Ended September 30,
	2024
Expected volatility	107.9%	–	110.3%
Risk-free interest rate	3.46%	–	4.41%
Expected dividend yield		0%
Expected term (in years)	5.50	–	6.07

During the nine months ended September 30, 2024, the weighted average grant-date fair value of options granted was $5.79.

As of September 30, 2024, a total of 564,323 RSUs were outstanding, consisting of 544,117 unvested RSUs and 20,206 vested and deferred shares by directors.

Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Research and development	$	657	$	657	$	1,975	$	1,454
General and administrative		1,379		1,746		4,320		3,635
Total	$	2,036	$	2,403	$	6,295	$	5,089

LEASES - Operating leases - Menlo Park, CA Office Lease (Details) $ in Thousands	1 Months Ended	9 Months Ended
	Apr. 30, 2023 USD ($) ft²	Sep. 30, 2024 USD ($)	Dec. 31, 2023 USD ($)
Leases
Long-term lease liabilities		$ 1,532	$ 1,799
Menlo Park, California Office Lease
Leases
Leased square footage \| ft²	6,135
Lease term	62 months
Existence of option to extend	true
Renewal term	5 years
Estimated incremental borrowing rate		13.10%
Remaining lease term		3 years 10 months 24 days
Menlo Park, California Office Lease \| Restricted cash and other long-term assets
Leases
Security deposit	$ 144

LEASES

9 Months Ended

Sep. 30, 2024

LEASES

LEASES

6. LEASES

Operating leases

Menlo Park, California Office Lease

In April 2023, Combangio entered into a lease agreement with Menlo Prepi I, LLC, pursuant to which Combangio leases approximately 6,135 square feet of office, laboratory and research and development space in Menlo Park, California. The Company entered into a guaranty of lease agreement guarantying the obligations of Combangio under the lease agreement. The initial term of the lease is for 62 months which commenced on the lease commencement date of July 1, 2023, unless earlier terminated pursuant to the terms of the lease. The lease provides Combangio with an option to extend the lease for an additional five-year term. Combangio was required to make a payment in the amount of $144, as a security deposit pursuant to the lease during the year ended December 31, 2023, which is included in other long-term assets on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023. Upon the lease commencement, the Company recorded a right-of-use asset of $2,154 and corresponding $2,133 of lease liability.

As of September 30, 2024, the Company recognized $1,778 of right-of-use asset and a corresponding $1,900 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 September 30, 2024, the remaining lease term on the lease was 3.9 years. Variable lease expense for the lease, includes real estate taxes, common area maintenance, and management fees.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Lease cost
Operating lease cost	$	149	$	149	$	447	$	165
Short-term lease cost		9		20		26		132
Variable lease cost		49		46		159		52
Total lease cost	$	207	$	215	$	632	$	349

Operating cash outflows from operating leases	$	148	$	48	$	433	$	61

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


	September 30,	December 31,
	2024	2023
Weighted average remaining lease term	3.9 years	4.7 years
Weighted average discount rate	13.1%	13.1%

As of September 30, 2024, the Company expects that its future minimum lease payments will become due and payable as follows:


Years Ending December 31,
2024 (remaining three months)	$	148
2025		601
2026		622
2027		644
2028		440
Less: interest		(555)
Total	$	1,900

LOSS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Numerator:
Net loss attributable to common stockholders	$ (8,950)	$ (8,704)	$ (30,336)	$ (33,572)
Denominator:
Weighted average common shares outstanding - basic (in shares)	4,627,578	2,550,210	3,494,339	2,337,492
Weighted average common shares outstanding -diluted (in shares)	4,627,578	2,550,210	3,494,339	2,337,492
Net loss per share attributable to common stockholders, basic	$ (1.93)	$ (3.41)	$ (8.68)	$ (14.36)
Net loss per share attributable to common stockholders, diluted	$ (1.93)	$ (3.41)	$ (8.68)	$ (14.36)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References

+ Details

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

+ References

+ Details

- Definition

Amount, after deduction of tax, noncontrolling interests, dividends on preferred stock and participating securities; of income (loss) available to common shareholders.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 805
-SubTopic 60
-Name Accounting Standards Codification
-Section 65
-Paragraph 1
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147476176/805-60-65-1

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483443/250-10-50-3

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 11
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483443/250-10-50-11

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 11
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483443/250-10-50-11

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 4
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483443/250-10-50-4

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 220
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 5
-Subparagraph (SAB Topic 6.B)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483621/220-10-S99-5

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482662/260-10-50-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482689/260-10-45-10

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 11
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482689/260-10-45-11

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 60B
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482689/260-10-45-60B

+ Details

STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2024

STOCK-BASED COMPENSATION

Schedule of assumptions used in determining fair value of the stock options granted


	Nine Months Ended September 30,
	2024
Expected volatility	107.9%	–	110.3%
Risk-free interest rate	3.46%	–	4.41%
Expected dividend yield		0%
Expected term (in years)	5.50	–	6.07

Schedule of stock based compensation expense


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Research and development	$	657	$	657	$	1,975	$	1,454
General and administrative		1,379		1,746		4,320		3,635
Total	$	2,036	$	2,403	$	6,295	$	5,089

LEASES (Tables)

9 Months Ended

Sep. 30, 2024

LEASES

Schedule of lease cost


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Lease cost
Operating lease cost	$	149	$	149	$	447	$	165
Short-term lease cost		9		20		26		132
Variable lease cost		49		46		159		52
Total lease cost	$	207	$	215	$	632	$	349

Operating cash outflows from operating leases	$	148	$	48	$	433	$	61

Schedule of weighted average remaining lease term and weighted average discount rate of operating leases


	September 30,	December 31,
	2024	2023
Weighted average remaining lease term	3.9 years	4.7 years
Weighted average discount rate	13.1%	13.1%

Schedule of future minimum lease payments


Years Ending December 31,
2024 (remaining three months)	$	148
2025		601
2026		622
2027		644
2028		440
Less: interest		(555)
Total	$	1,900

NATURE OF BUSINESS AND BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2024

NATURE OF BUSINESS AND BASIS OF PRESENTATION

NATURE OF BUSINESS AND BASIS OF PRESENTATION

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

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

The Company previously developed and commercialized two marketed products, EYSUVIS^® (loteprednol etabonate ophthalmic suspension) 0.25%, for the short-term (up to two weeks) treatment of the signs and symptoms of dry eye disease, and INVELTYS^® (loteprednol etabonate ophthalmic suspension) 1%, a topical twice-a-day ocular steroid for the treatment of post-operative inflammation and pain following ocular surgery. 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, whether it receives any commercial-based sales milestone payments from Alcon, its ability to raise additional capital when needed and, ultimately, attain profitable operations.

Liquidity— Since inception, the Company has incurred significant losses from operations and negative cash flows from operations including a net loss of $8,950 and $30,336 for the three and nine months ended September 30, 2024, respectively, a net loss of $8,704 and $33,572 for the three and nine months ended September 30, 2023, respectively, and cash used in operating activities of $24,784 and $20,231 in the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Company had an accumulated deficit of $659,745. 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. 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 and June 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 disbursement of $3,240 in August 2024 from CIRM upon achievement of a specified milestone), convertible promissory notes and warrants.

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 $5,860 under the award (see Note 4, “Grant Income” for further information about the CIRM 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 September 30, 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 condensed 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 condensed 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.

Use of Estimates— The preparation of condensed 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 condensed 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.

Net Loss per Share Attributable to Common Stockholders—The Company follows the two-class method when computing net loss per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net 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 restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) and convertible preferred stock using the if-converted method.

The weighted average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, warrants, unvested RSUs and PSUs and convertible preferred stock using the if-converted method. 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 three and nine months ended September 30, 2024 and 2023. (See Note 11, “Loss Per Share”).

Unaudited Interim Financial Information—The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. The accompanying condensed consolidated financial statements reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations, statement of stockholders’ equity and cash flows for the interim periods presented. Interim results are not necessarily indicative of results for a full year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”).

The unaudited condensed consolidated financial statements include the accounts of KALA BIO, Inc. and its wholly owned subsidiaries, Kala Pharmaceuticals Security Corporation and Combangio, Inc. All intercompany transactions and balances have been eliminated in consolidation.

DEBT - Oxford Finance Loan and Security Agreement (Details) $ in Thousands						3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 01, 2023	Jun. 30, 2023	Dec. 27, 2022 USD ($)	May 21, 2022 USD ($) installment	May 04, 2021 USD ($) item	Sep. 30, 2024 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2024 USD ($)	Sep. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2023 USD ($)
Debt instruments
Effective interest rate						17.07%		17.07%
Amount of principal outstanding						$ 33,957		$ 33,957			$ 33,957
Interest expense						1,478	$ 1,459	4,391	$ 4,346
Athyrium Credit Facility
Debt instruments
Amount of principal outstanding						33,957		33,957
Accretion of final prepayment fee						243	241	723	737
Interest expense						1,462	1,459
Amortization of debt discount						79	68	226	204
Contractual coupon interest						$ 1,140	$ 1,150	3,439	3,405
Athyrium
Debt instruments
Interest expense								$ 4,388	$ 4,346
Number of derivatives \| item					1
Athyrium \| Athyrium Credit Facility
Debt instruments
Additional interest rate upon an event of default accrued (as a percent)					5.00%
Loan Agreement
Debt instruments
Aggregate principal amount					$ 125,000
Floating interest rate (as a percent)		0.11%
Facility fees paid					$ 400
Percentage of final payment fees					7.00%
Debt repayments				$ 40,000
Partial prepayment				36,697
Amount of principal outstanding				80,000						$ 33,957
Prepayment fees paid				734
Final prepayment fee				$ 2,569
Number of monthly installments \| installment				5
Loss on extinguishment of debt										$ (2,583)
Loan Agreement \| Neither the tranche B term loan nor the tranche C term loan is made
Debt instruments
Duration of periodic monthly payment installments under a scenario					18 months
Loan Agreement \| Either tranche B term loan nor tranche C term loan is made
Debt instruments
Duration of periodic monthly payment installments under a scenario					12 months
Loan Agreement \| Payment on or before June 30, 2023
Debt instruments
Debt repayments			$ 5,000
Partial prepayment			4,673
Final prepayment fee			327
Loan Agreement \| Payment on or before January 31, 2024.
Debt instruments
Debt repayments			5,000
Partial prepayment			4,673
Final prepayment fee			327
Loan Agreement \| Payment on or prior to December 31, 2024
Debt instruments
Debt repayments			5,000
Loan Agreement \| Payment on or prior to June 30, 2025
Debt instruments
Debt repayments			$ 2,500
Loan Agreement \| Minimum
Debt instruments
Floating interest rate (as a percent)	8.00%
Loan Agreement \| 30-day LIBOR
Debt instruments
Spread on variable rate		7.89%
Loan Agreement \| 1- Month CME Term SOFR
Debt instruments
Floating interest rate (as a percent)	0.10%
Spread on variable rate	7.89%
Tranche A term loan
Debt instruments
Aggregate principal amount					$ 80,000
Tranche B term loan
Debt instruments
Facility fees paid					100
Tranche C term loan
Debt instruments
Facility fees paid					$ 125

FAIR VALUE OF FINANCIAL INSTRUMENTS - Recurring and Nonrecurring Fair value Measurements Within Hierarchy (Details) - Fair Value - Recurring - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	$ 39,272	$ 44,639
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	4,659	4,110
Contingent consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	4,659	4,110
Cash equivalents
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	39,272	44,639
Level 1
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	39,272	44,639
Level 1 \| Cash equivalents
Fair Value Assets Measured on Recurring and Non recurring Basis
Financial assets by level within fair value hierarchy	39,272	44,639
Level 3
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	4,659	4,110
Level 3 \| Contingent consideration
Fair Value Liabilities Measured on Recurring and Non recurring Basis
Financial liabilities by level within fair value hierarchy	$ 4,659	$ 4,110

LEASES - Operating leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023	Apr. 30, 2023
Leases
Right-of-use assets	$ 1,778		$ 1,778		$ 2,025
Lease liability	1,900		1,900
Lease cost
Operating lease cost	149	$ 149	447	$ 165
Short-term lease cost	9	20	26	132
Variable lease cost	49	46	159	52
Total lease cost	207	215	632	349
Operating cash outflows from operating leases	$ 148	$ 48	$ 433	$ 61
Weighted average remaining lease term	3 years 10 months 24 days		3 years 10 months 24 days		4 years 8 months 12 days
Weighted average discount rate	13.10%		13.10%		13.10%
Menlo Park, California Office Lease
Leases
Right-of-use assets	$ 1,778		$ 1,778			$ 2,154
Lease liability	$ 1,900		$ 1,900			$ 2,133
Lease cost
Remaining lease term	3 years 10 months 24 days		3 years 10 months 24 days

DEBT (Tables)

9 Months Ended

Sep. 30, 2024

DEBT

Schedule of carrying value of debt


	September 30,		December 31,
	2024		2023
Principal loan balance	$	33,957	$	33,957
Unamortized debt discount and issuance cost		(306)		(532)
Cumulative accretion of exit fee		1,488		765
Total debt	$	35,139	$	34,190
Less: current portion of long-term debt		(17,977)		—
Long-term debt, net	$	17,162	$	34,190

Schedule of maturities of long-term debt


Years Ending December 31,
2024 (remaining three months)	$	—
2025		23,970
2026		9,987
Total	$	33,957

GRANT INCOME

9 Months Ended

Sep. 30, 2024

GRANT INCOME

GRANT INCOME

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, and in August 2024, Combangio received a second disbursement of $3,240 from CIRM upon the achievement of a specified milestone. The balance of the award is payable to Combangio upon the achievement of other specified milestones that are primarily related to Combangio’s progress in conducting the

CHASE Phase 2b clinical trial. CIRM may permanently cease disbursements if the milestones are not met within four months of the scheduled completion dates or if the delay is not addressed to CIRM’s satisfaction, as determined by CIRM in its sole discretion. Additionally, if CIRM determines, in its sole discretion, that Combangio has not complied with the terms and conditions of the CIRM Award, CIRM may suspend or permanently cease disbursements. Under the terms of the CIRM Award, Combangio is obligated to pay a royalty on net sales of any product, service or approved drug resulting in whole or in part from the CIRM Award in the amount of 0.1% per $1,000 of funds utilized by the Company until the earlier of ten years from the date of first commercial sale of such product, service or approved drug and such time as nine times the amount of funds awarded by CIRM has been paid in royalties (the “Base Royalty”). In addition, following the satisfaction of the Base Royalty, Combangio is obligated to pay a 1.0% royalty on net sales of any CIRM-funded invention in excess of $500,000 per year until the last to expire patent covering such invention expires.

During the three and nine months ended September 30, 2024, the Company recognized $1,946 and $4,001 of grant income, respectively, and recognized $2,970 of grant income during each of the three and nine months ended September 30, 2023, related to the CIRM Award on its condensed consolidated statement of operations. As of September 30, 2024 and December 31, 2023, the Company had deferred grant income of $314 and $1,075 on its condensed consolidated balance sheet, respectively.

LOSS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2024

LOSS PER SHARE

Schedule of computation of basic and diluted net loss per share


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Numerator:
Net loss attributable to common stockholders	$	(8,950)	$	(8,704)	$	(30,336)	$	(33,572)
Denominator:
Weighted-average common shares outstanding, basic and diluted (1)		4,627,578		2,550,210		3,494,339		2,337,492

Net loss per share attributable to common stockholders, basic and diluted	$	(1.93)	$	(3.41)	$	(8.68)	$	(14.36)

(1)

Included in the weighted-average common shares outstanding, basic and diluted are vested but deferred shares for which all contingencies have been satisfied.

Schedule of outstanding securities excluded from the computation of diluted weighted average shares outstanding as they would have been anti-dilutive


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Options to purchase shares of common stock		885,430		670,064		914,859		509,914
Unvested RSUs and PSUs		544,117		824,998		647,809		598,210
Unexercised warrants		4,303		4,303		4,303		4,303
Convertible preferred stock (as converted to common stock)		7,446,800		5,124,600		7,133,700		5,238,000
		8,880,650		6,623,965		8,700,671		6,350,427

EQUITY FINANCINGS (Details) - USD ($) $ / shares in Units, $ in Thousands								4 Months Ended	9 Months Ended
	Jun. 26, 2024	Mar. 25, 2024	Dec. 21, 2023	Mar. 03, 2023	Jan. 10, 2023	Jan. 10, 2023	May 07, 2020	May 11, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023	Jan. 19, 2023
Equity Offerings
Preferred stock, par value									$ 0.001		$ 0.001
Series G preferred shares
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)									10,901
Stock offering, net of issuance cost and underwriting fees									$ 8,538
Series H preferred shares
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)									9,393
Stock offering, net of issuance cost and underwriting fees									$ 5,399
Shelf Registration
Equity Offerings
Registration period							3 years
Shelf Registration \| Maximum
Equity Offerings
Additional authorized value of securities							$ 350,000
2020 Shelf Registration \| Maximum
Equity Offerings
Additional authorized value of securities												$ 40,000
2023 Shelf Registration
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)									387,500	190,000
Stock offering, net of issuance cost and underwriting fees									$ 2,471	$ 3,073
2023 Shelf Registration \| Maximum
Equity Offerings
Additional authorized value of securities				$ 350,000
Share authorized value (ATM)				$ 40,000
ATM
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)					245,887	565,974
Stock offering, net of issuance cost and underwriting fees					$ 9,994	$ 75,000
ATM \| Maximum
Equity Offerings
Additional authorized value of securities							$ 75,000
Open Market Sale Agreement
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)								229,378
Stock offering, net of issuance cost and underwriting fees								$ 4,899
Amended and Restated Sales Agreement and the Open Market Sale Agreement in aggregate
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)										665,265
Stock offering, net of issuance cost and underwriting fees										$ 17,966
Securities Purchase Agreement 2023 \| Series F preferred shares
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)			2,928
Aggregate gross proceeds of convertible preferred stock			$ 2,000
Share price (in dollars per share)			$ 683.00
Preferred stock, par value			$ 0.001
Offering costs			$ 35
2024 Securities Purchase Agreement \| Series G preferred shares
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)		10,901
Aggregate gross proceeds of convertible preferred stock		$ 8,600
Share price (in dollars per share)		$ 788.90
Preferred stock, par value		$ 0.001
Offering costs		$ 62
Second 2024 Securities Purchase Agreement \| Common Stock
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)	1,197,314
Share price (in dollars per share)	$ 5.85
Second 2024 Securities Purchase Agreement \| Series H preferred shares
Equity Offerings
Stock offering, net of issuance cost and underwriting fees (in shares)	9,393
Aggregate gross proceeds of convertible preferred stock	$ 12,499
Share price (in dollars per share)	$ 585.00
Preferred stock, par value	$ 0.001
Offering costs	$ 218

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (8,950)	$ (8,704)	$ (30,336)	$ (33,572)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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+ Details

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized	5,000,000	5,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized	120,000,000	120,000,000
Common stock, shares issued	4,610,139	2,759,372
Common stock, shares outstanding	4,610,139	2,759,372
Series E Convertible Non-Redeemable Preferred Stock
Preferred stock, shares issued	51,246	51,246
Preferred stock, shares outstanding	51,246	51,246
Series F Convertible Non-Redeemable Preferred Stock
Preferred stock, shares issued	2,928	2,928
Preferred stock, shares outstanding	2,928	2,928
Series G Convertible Non-Redeemable Preferred Stock
Preferred stock, shares issued	10,901	0
Preferred stock, shares outstanding	10,901	0
Series H Convertible Non-Redeemable Preferred Stock
Preferred stock, shares issued	9,393	0
Preferred stock, shares outstanding	9,393	0

STOCK-BASED COMPENSATION - RSUs and PSUs (Details) - RSU	9 Months Ended
	Sep. 30, 2024 USD ($) shares
Stock-based compensation
Granted, other than options (in shares)	71,830
Outstanding balance at end of period (in shares)	564,323
Unvested outstanding balance at end of period (in shares) \| $	544,117
Vested and deferred (in shares)	20,206

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

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+ Details

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Costs and expenses:
General and administrative	$ 4,400	$ 4,952	$ 14,139	$ 15,944
Research and development	5,168	5,554	16,836	13,868
Gain on fair value remeasurement of deferred purchase consideration				(230)
Loss (gain) on fair value remeasurement of contingent consideration	420	(1,744)	549	462
Total costs and expenses	9,988	8,762	31,524	30,044
Loss from operations	(9,988)	(8,762)	(31,524)	(30,044)
Other income (expense):
Interest income	570	708	1,578	2,101
Interest expense	(1,478)	(1,459)	(4,391)	(4,346)
Grant income	1,946	2,970	4,001	2,970
Other expense, net		(2,161)		(4,253)
Total other income (expense)	1,038	58	1,188	(3,528)
Net loss	$ (8,950)	$ (8,704)	$ (30,336)	$ (33,572)
Net loss per share attributable to common stockholders-basic (in dollar per share)	$ (1.93)	$ (3.41)	$ (8.68)	$ (14.36)
Net loss per share attributable to common stockholders-diluted (in dollar per share)	$ (1.93)	$ (3.41)	$ (8.68)	$ (14.36)
Weighted average shares outstanding-basic (in shares)	4,627,578	2,550,210	3,494,339	2,337,492
Weighted average common shares outstanding -diluted (in shares)	4,627,578	2,550,210	3,494,339	2,337,492
Statement of Comprehensive Loss
Net loss	$ (8,950)	$ (8,704)	$ (30,336)	$ (33,572)
Other comprehensive (loss) income:
Change in fair value of investments		(8)		1
Total other comprehensive (loss) income		(8)		1
Total comprehensive loss	$ (8,950)	$ (8,712)	$ (30,336)	$ (33,571)

WARRANTS (Details) - $ / shares	9 Months Ended	12 Months Ended
WARRANTS (Details) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
Warrants
Shares Exercisable	4,303	4,303
Warrants 2014
Warrants
Exercise Price Per Share	$ 375.00
Shares Exercisable	320	320
Warrants 2016
Warrants
Exercise Price Per Share	$ 413.50
Shares Exercisable	290	290
Warrants 2018
Warrants
Exercise Price Per Share	$ 609.23
Shares Exercisable	3,693	3,693

NATURE OF BUSINESS AND BASIS OF PRESENTATION (Details) $ in Thousands	Jul. 08, 2022 USD ($) payment	Jul. 07, 2022 product
Collaborative Arrangement
Number of developed and commercialized marketed products \| product		2
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Collaborative Arrangement
Upfront payment	$ 60,000
Number of commercial-based sales milestone payments \| payment	4
Amount receivable upon the achievement of specified commercial sales-based milestones	$ 325,000
Number of milestone payments \| payment	1
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $50,000 or more in aggregate worldwide net sales
Collaborative Arrangement
Sales based milestone achievement	$ 50,000
Amount receivable upon the achievement of specified commercial sales-based milestones	25,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $100,000 or more in aggregate worldwide net sales
Collaborative Arrangement
Sales based milestone achievement	100,000
Amount receivable upon the achievement of specified commercial sales-based milestones	65,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $175,000 or more in aggregate worldwide net sales
Collaborative Arrangement
Sales based milestone achievement	175,000
Amount receivable upon the achievement of specified commercial sales-based milestones	75,000
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations \| Achievement of $250,000 or more in aggregate worldwide net sales
Collaborative Arrangement
Sales based milestone achievement	250,000
Amount receivable upon the achievement of specified commercial sales-based milestones	$ 160,000

FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair Value Measurement Levels (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
Settlements						$ (365)
Deferred purchase consideration
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
Beginning balance						595		$ 595
Fair value adjustments								(230)
Settlements								(365)
Level 3 \| Deferred purchase consideration
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
Beginning balance						595		595
Fair value adjustments								(230)
Settlements								(365)
Level 3 \| Contingent consideration
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
Beginning balance	$ 4,239	$ 4,268	$ 4,110	$ 5,588	$ 5,234	8,370	$ 4,110	8,370
Fair value adjustments	420	(29)	158	(1,744)	359	1,847	549	462
Settlements						(4,854)
Reclassification to accrued expenses and other current liabilities				(6)	(5)	(129)
Ending balance	$ 4,659	$ 4,239	$ 4,268	$ (3,838)	$ 5,588	$ 5,234	$ 4,659	$ (3,838)

STOCK-BASED COMPENSATION - Fair Value Assumptions (Details)	9 Months Ended
	Sep. 30, 2024
Assumptions used in determining fair value of the stock options granted
Expected volatility (minimum)	107.90%
Expected volatility (maximum)	110.30%
Risk-free interest rate (minimum)	3.46%
Risk-free interest rate (maximum)	4.41%
Expected dividend yield	0.00%
Minimum
Assumptions used in determining fair value of the stock options granted
Expected term (in years)	5 years 6 months
Maximum
Assumptions used in determining fair value of the stock options granted
Expected term (in years)	6 years 25 days

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2024	Nov. 11, 2024
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2024
Document Transition Report	false
Securities Act File Number	001-38150
Entity Registrant Name	KALA BIO, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-0604595
Entity Address, Address Line One	1167 Massachusetts Avenue
Entity Address, City or Town	Arlington
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02476
City Area Code	781
Local Phone Number	996-5252
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	KALA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,610,139
Entity Central Index Key	0001479419
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3
Amendment Flag	false

INCOME TAXES

9 Months Ended

Sep. 30, 2024

INCOME TAXES

INCOME TAXES

12. INCOME TAXES

The Company did not record a provision or benefit for income taxes during the three and nine months ended September 30, 2024 and 2023. The Company continues to maintain a full valuation allowance for its U.S. federal and state 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 its generation of limited revenue from product sales 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. Management reevaluates the positive and negative evidence at each reporting period.

Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of Section 382 of the Internal Revenue Code of 1986, certain substantial changes in the Company’s ownership, including a sale of the Company, or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards, which could be used annually to offset future taxable income. The Company completed an analysis as of December 31, 2022 and determined that an ownership change occurred during December 2022 which materially limited the net operating loss carryforwards and research and development tax credits. As a result of this most recent ownership change, the utilization of the Company’s net operating loss carryforwards is subject to an annual limitation of $222. The Company has not completed an analysis as of December 31, 2023 but does not expect any change would further limit the net operating loss carryforwards.

The Company 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 September 30, 2024 and December 31, 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 three and nine months ended September 30, 2024 and 2023.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

WARRANTS

9 Months Ended

Sep. 30, 2024

WARRANTS.

WARRANTS

8. WARRANTS

The following table summarizes the common stock warrants outstanding as of September 30, 2024 and December 31, 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	September 30,	December 31,
Issued	Price Per Share		Date	From	2024	2023
2014	$	375.00	November 2024	July 2017	320	320
2016	$	413.50	October 2026	September 2017	290	290
2018	$	609.23	October 2025	October 2018	3,693	3,693
					4,303	4,303

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

COMMITMENTS AND CONTINGENCIES - Contingencies Related to Stanford and Merger Agreement (Details) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended
	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023	Jan. 31, 2024	Nov. 15, 2021
Other Commitments
Contingent milestone consideration paid in shares value			$ 2,354
Achievement of specified development and regulatory milestones relating to KPI-012 product
Other Commitments
Annual license maintenance fees owed to Stanford for specific regulatory milestones		$ 1,075
Achievement of sales based milestone relating to KPI-012 product
Other Commitments
Annual license maintenance fees owed to Stanford for specific regulatory milestones		1,100
CHASE Phase 2b clinical trial of KPI-012
Other Commitments
Contingent upon specified development, regulatory and commercialization milestones			$ 175
Combangio, Inc.
Other Commitments
Contingent upon specified development, regulatory and commercialization milestones					$ 40,000
Combangio, Inc. \| Maximum
Other Commitments
Contingent milestone consideration		105,000			105,000
Combangio, Inc. \| First patient dosed with any product in phase 2 clinical trial, dosing milestone
Other Commitments
Contingent milestone consideration paid	$ 2,500	2,646
Contingent milestone consideration paid in shares value	$ 2,354	$ 2,354
Contingent milestone consideration paid in shares	105,038	105,038
Contingent milestone consideration				$ 146
Potential maximum payout for contingent consideration					$ 65,000

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash flows from operating activities:
Net loss	$ (30,336)	$ (33,572)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	190	233
Non-cash operating lease cost	247	94
Gain on fair value remeasurement of deferred purchase consideration		(230)
Loss (gain) on fair value remeasurement of contingent consideration	549	462
Amortization of debt discount and other non-cash interest	949	941
Stock-based compensation	6,295	5,089
Other non-cash losses (gains)	129	(4,322)
Change in operating assets and liabilities:
Prepaid expenses and other current assets	(102)	5,970
Inventory and assets held for sale		7,544
Other long-term assets		(143)
Accounts payable	(208)	(2,036)
Accrued expenses and other current liabilities	(2,264)	(319)
Lease liabilities and other long-term liabilities	(233)	58
Net cash used in operating activities	(24,784)	(20,231)
Cash flows from investing activities:
Purchases of property and equipment and other assets	(139)	(603)
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	(139)	(422)
Cash flows from financing activities:
Proceeds from issuance of Series G preferred stock, net of issuance costs of $62	8,538
Proceeds from issuance of common stock and Series H preferred stock, net of issuance costs of $218	12,281
Proceeds from common stock offerings, net of offering costs	2,471	17,966
Payment of principal, prepayment premium and final payment fee on debt		(10,000)
Contingent consideration related to Combangio acquisition	(119)	(2,041)
Payment of principal on finance lease	(18)
Proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan	77	46
Net cash provided by financing activities	23,230	5,971
Net decrease in cash and cash equivalents:	(1,693)	(14,682)
Cash and cash equivalents at beginning of period	50,895	70,745
Cash and cash equivalents at end of period	49,202	56,063
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
Supplemental disclosure:
Cash paid for interest	3,459	3,477
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

STOCK-BASED COMPENSATION - Stock Incentive Plans (Details) - USD ($)		9 Months Ended
	Jun. 22, 2023	Sep. 30, 2024
Stock-based compensation
Weighted average grant date fair value of options granted		$ 5.79
2017 Plan
Stock-based compensation
Number of additional shares authorized for issuance under share-based payment arrangement	1,250,000
Shares authorized	7,738,761
Annual limit on non-employee director compensation for incumbent directors	$ 750,000
Options expiry term	10 years
Annual increase in the number of shares (as a percent)		4.00%
Number of shares available for future issuance		236,576
New Employee Inducement Grant Stock Options
Stock-based compensation
Granted, options (in shares)		3,125
Employee Stock Option
Stock-based compensation
Granted, options (in shares)		317,139
2017 Equity Incentive Plan \| 2017 Plan
Stock-based compensation
Annual limit on non-employee director compensation for director's first year of service	$ 1,000,000
ESPP
Stock-based compensation
Issuance of common stock under employee stock purchase plan (in shares)		11,448

DEBT - Carrying Value (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023	Dec. 31, 2022	May 21, 2022
Debt instruments
Principal loan balance	$ 33,957	$ 33,957
Unamortized debt discount and issuance cost	(306)	(532)
Cumulative accretion of exit fee	1,488	765
Total debt	35,139	34,190
Less: current portion of long-term debt	17,977
Long-term debt, net	$ 17,162	$ 34,190
Loan Agreement
Debt instruments
Principal loan balance			$ 33,957	$ 80,000

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

Reference 1: http://www.xbrl.org/2003/role/exampleRef
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+ Details

- Definition

Amount, after deduction of unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

FAIR VALUE OF FINANCIAL INSTRUMENTS - Quantitative Information and Assumptions (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)	Sep. 30, 2024 USD ($)	Dec. 31, 2023 USD ($)
Fair Value Measurements
Gain on fair value remeasurement of deferred purchase consideration	$ (230)
Level 3 \| Contingent consideration
Fair Value Measurements
Financial liabilities by level within fair value hierarchy		$ 4,659	$ 4,110
Level 3 \| Contingent consideration \| Discounted cash flow model \| Probabilities of achievement \| Minimum
Fair Value Measurements
Measurement input		0.166	0.166
Level 3 \| Contingent consideration \| Discounted cash flow model \| Probabilities of achievement \| Maximum
Fair Value Measurements
Measurement input		0.355	0.355
Level 3 \| Contingent consideration \| Discounted cash flow model \| Probabilities of achievement \| Average
Fair Value Measurements
Measurement input		0.234	0.234
Level 3 \| Contingent consideration \| Discounted cash flow model \| Discount rate
Fair Value Measurements
Measurement input		0.143	0.163

NATURE OF BUSINESS AND BASIS OF PRESENTATION - Liquidity (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended		9 Months Ended
	Aug. 02, 2023	Aug. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023	Aug. 31, 2023	Jul. 08, 2022
Acquisition of Combangio, Inc
Net loss			$ (8,950)	$ (8,704)	$ (30,336)	$ (33,572)
Cash used in operations					(24,784)	$ (20,231)
Accumulated deficit			$ 659,745		$ 659,745		$ 629,409
Award agreement \| California Institute for Regenerative Medicine (CIRM)
Acquisition of Combangio, Inc
Amount that may not be received if specific milestones are not met								$ 5,860
Combangio, Inc. \| Award agreement \| California Institute for Regenerative Medicine (CIRM)
Acquisition of Combangio, Inc
Restricted grant	$ 15,000
Grant disbursement	$ 5,900	$ 3,240
Commercial Business Sale to Alcon \| Disposed of by sale not discontinued operations
Acquisition of Combangio, Inc
Amount receivable upon the achievement of specified commercial sales-based milestones									$ 325,000

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 49,202	$ 50,895
Prepaid expenses and other current assets	2,077	1,975
Total current assets	51,279	52,870
Non-current assets:
Property and equipment, net	762	753
Right-of-use assets	1,778	2,025
Other long-term assets	260	301
Total assets	54,079	55,949
Current liabilities:
Accounts payable	711	919
Accrued expenses and other current liabilities	4,497	6,018
Deferred grant income	314	1,075
Current portion of lease liabilities	368	334
Current portion of long-term debt	17,977
Total current liabilities	23,867	8,346
Long-term liabilities:
Long-term lease liabilities	1,532	1,799
Long-term debt, net of current portion	17,162	34,190
Long-term contingent consideration	4,659	4,110
Total long-term liabilities	23,353	40,099
Total liabilities	47,220	48,445
Commitments and Contingencies (Note 13)
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized as of September 30, 2024 and December 31, 2023
Common stock, $0.001 par value; 120,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 4,610,139 and 2,759,372 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	5	3
Additional paid-in capital	666,599	636,910
Accumulated deficit	(659,745)	(629,409)
Total stockholders' equity	6,859	7,504
Total liabilities and stockholders' equity	$ 54,079	$ 55,949

LEASES - Operating leases - Future minimum payments (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Future minimum commitments due
2024 (remaining three months)	$ 148
2025	601
2026	622
2027	644
2028	440
Less: interest	(555)
Total	$ 1,900

FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair Value Measurement Transfer Levels (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2024	Sep. 30, 2024	Dec. 31, 2023
FAIR VALUE OF FINANCIAL INSTRUMENTS
Transfer from level 1 to level 2, Assets	$ 0	$ 0	$ 0
Transfer from level 2 to level 1, Assets	0	0	0
Transfer from level 1 to level 2, Liability	0	0	0
Transfer from level 2 to level 1, Liability	0	0	0
Transfer into level 3, Assets	0	0	0
Transfer out of level 3, Assets	0	0	0
Transfer into level 3, Liability	0	0	0
Transfer out of level 3, Liability	$ 0	$ 0	$ 0

DEBT - Future Annual Principal Payments (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Maturities of long-term debt
Total	$ 33,957	$ 33,957
Athyrium Credit Facility
Maturities of long-term debt
2025	23,970
2026	9,987
Total	$ 33,957

- Definition

Amount, after deduction of unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2024

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:


	September 30,		December 31,
	2024		2023

Compensation and benefits	$	2,533	$	2,616
Development costs		775		837
Accrued revenue reserves		408		1,659
Professional services		364		515
Contract manufacturing		222		11
Other		195		380
Accrued expenses and other current liabilities	$	4,497	$	6,018

STOCK-BASED COMPENSATION - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Stock-based compensation
Stock based compensation expense	$ 2,036	$ 2,403	$ 6,295	$ 5,089
Research and development
Stock-based compensation
Stock based compensation expense	657	657	1,975	1,454
General and administrative
Stock-based compensation
Stock based compensation expense	$ 1,379	$ 1,746	$ 4,320	$ 3,635

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

+ Details

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2024

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Schedule of accrued expenses and other current liabilities


	September 30,		December 31,
	2024		2023

Compensation and benefits	$	2,533	$	2,616
Development costs		775		837
Accrued revenue reserves		408		1,659
Professional services		364		515
Contract manufacturing		222		11
Other		195		380
Accrued expenses and other current liabilities	$	4,497	$	6,018

GRANT INCOME (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended		9 Months Ended
GRANT INCOME (Details) - USD ($) $ in Thousands	Aug. 02, 2023	Aug. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Grant Income
Grant income			$ 1,946	$ 2,970	$ 4,001	$ 2,970
Deferred grant income			314		314		$ 1,075
Award agreement \| California Institute for Regenerative Medicine (CIRM)
Grant Income
Grant income				$ 2,970		$ 2,970
Combangio, Inc. \| Award agreement
Grant Income
Royalty on net sales based on of funds utilized by the Company	$ 1,000
Combangio, Inc. \| Award agreement \| California Institute for Regenerative Medicine (CIRM)
Grant Income
Restricted grant	15,000
Grant disbursement	$ 5,900	$ 3,240
Threshold period for achievement of specified milestones'	4 months
Royalty on net sales (as a percent)	0.10%
Term of royalty from the date of first commercial sale of such product, service or approved drug	10 years
Royalty on net sales of any CIRM-funded invention	1.00%
Threshold sales after which royalty on net sales of funded invention is payable	$ 500,000
Grant income			1,946		4,001
Deferred grant income			$ 314		$ 314		$ 1,075

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Compensation and benefits	$ 775	$ 837
Development costs	408	1,659
Professional services	364	515
Accrued revenue reserves	2,533	2,616
Contract manufacturing	222	11
Other	195	380
Accrued expenses and other current liabilities	$ 4,497	$ 6,018

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) $ in Thousands	9 Months Ended
	Sep. 30, 2024 USD ($)
Series G preferred shares
Preferred stock issuance costs	$ 62
Series H preferred shares
Preferred stock issuance costs	$ 218

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2024

FAIR VALUE OF FINANCIAL INSTRUMENTS

Schedule of assets and liabilities measured at fair value on a recurring basis


	September 30, 2024
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	39,272	$	39,272	$	—	$	—
Total Assets	$	39,272	$	39,272	$	—	$	—
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

Schedule of fair values of warrants, using the Black Scholes option pricing model


	Fair Value at
	September 30,				Range
Financial Instrument	2024		Valuation Technique	Unobservable Input	(Average)
Contingent consideration	$	4,659	Probability-adjusted	Period of expected milestone achievement	2025 - 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%

Schedule of changes in Level 3 fair value measurements


Contingent consideration
Balance at January 1, 2024	$	4,110
Fair value adjustments		158
Balance at March 31, 2024	$	4,268
Fair value adjustments		(29)
Balance at June 30, 2024	$	4,239
Fair value adjustments		420
Balance at September 30, 2024	$	4,659

Contingent consideration
Balance at January 1, 2023	$	8,370
Fair value adjustments		1,847
Settlements		(4,854)
Reclassification to accrued expenses and other current liabilities		(129)
Balance at March 31, 2023	$	5,234
Fair value adjustments		359
Reclassification to accrued expenses and other current liabilities		(5)
Balance at June 30, 2023	$	5,588
Fair value adjustments		(1,744)
Reclassification to accrued expenses and other current liabilities		(6)
Balance at September 30, 2023	$	3,838

Deferred purchase consideration
Balance at January 1, 2023	$	595
Fair value adjustments		(230)
Settlements		(365)
Balance at March 31, 2023, June 30, 2023 and September 30, 2023	$	—

LOSS PER SHARE

9 Months Ended

Sep. 30, 2024

LOSS PER SHARE

LOSS PER SHARE

11. LOSS PER SHARE

Basic and diluted net loss per share attributable to common stockholders was calculated as follows for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Numerator:
Net loss attributable to common stockholders	$	(8,950)	$	(8,704)	$	(30,336)	$	(33,572)
Denominator:
Weighted-average common shares outstanding, basic and diluted (1)		4,627,578		2,550,210		3,494,339		2,337,492

Net loss per share attributable to common stockholders, basic and diluted	$	(1.93)	$	(3.41)	$	(8.68)	$	(14.36)

(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, presented based on amounts outstanding at each period end, 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:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Options to purchase shares of common stock		885,430		670,064		914,859		509,914
Unvested RSUs and PSUs		544,117		824,998		647,809		598,210
Unexercised warrants		4,303		4,303		4,303		4,303
Convertible preferred stock (as converted to common stock)		7,446,800		5,124,600		7,133,700		5,238,000
		8,880,650		6,623,965		8,700,671		6,350,427

WARRANTS (Tables)

9 Months Ended

Sep. 30, 2024

WARRANTS.

Schedule of outstanding warrants


					Shares Exercisable at
	Exercise		Expiration	Exercisable	September 30,	December 31,
Issued	Price Per Share		Date	From	2024	2023
2014	$	375.00	November 2024	July 2017	320	320
2016	$	413.50	October 2026	September 2017	290	290
2018	$	609.23	October 2025	October 2018	3,693	3,693
					4,303	4,303

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital Series G preferred shares	Additional Paid-in Capital Series H preferred shares	Additional Paid-in Capital	Accumulated Other Comprehensive Income	Accumulated Deficit	Series E preferred shares	Series F preferred shares	Series G preferred shares	Series H preferred shares	Total
Balance as of beginning of period at Dec. 31, 2022	$ 2			$ 606,182		$ (587,210)					$ 18,974
Balance as of beginning of period (in shares) at Dec. 31, 2022	1,706,971						53,144
Stockholders' Equity
At the market offering, net of offering costs	$ 1			17,965							17,966
At the market offering, net of offering costs (in shares)	665,265
Issuance of common stock for vested restricted stock units (in shares)	3,002
Issuance of common stock under employee stock purchase plan				46							46
Issuance of common stock under employee stock purchase plan (in shares)	3,690
Issuance of common stock to satisfy deferred purchase consideration				365							365
Issuance of common stock to satisfy deferred purchase consideration (in shares)	19,350
Issuance of common stock to satisfy contingent consideration				2,354							2,354
Issuance of common stock to satisfy contingent consideration (in shares)	105,038
Issuance of common stock upon conversion of Series E preferred stock (in shares)	189,800						(1,898)
Change in fair value of investments					$ 1						1
Stock-based compensation expense				5,089							5,089
Net Income (Loss)						(33,572)					(33,572)
Balance as of end of period at Sep. 30, 2023	$ 3			632,001	1	(620,782)					11,223
Balance as of end of period (in shares) at Sep. 30, 2023	2,693,116						51,246
Balance as of beginning of period at Jun. 30, 2023	$ 3			629,558	9	(612,078)					17,492
Balance as of beginning of period (in shares) at Jun. 30, 2023	2,538,687						52,750
Stockholders' Equity
Issuance of common stock for vested restricted stock units (in shares)	800
Issuance of common stock under employee stock purchase plan				40							40
Issuance of common stock under employee stock purchase plan (in shares)	3,229
Issuance of common stock upon conversion of Series E preferred stock (in shares)	150,400						(1,504)
Change in fair value of investments					(8)						(8)
Stock-based compensation expense				2,403							2,403
Net Income (Loss)						(8,704)					(8,704)
Balance as of end of period at Sep. 30, 2023	$ 3			632,001	$ 1	(620,782)					11,223
Balance as of end of period (in shares) at Sep. 30, 2023	2,693,116						51,246
Balance as of beginning of period at Dec. 31, 2023	$ 3			636,910		(629,409)					7,504
Balance as of beginning of period (in shares) at Dec. 31, 2023	2,759,372						51,246	2,928
Stockholders' Equity
At the market offering, net of offering costs	$ 1			2,470							2,471
At the market offering, net of offering costs (in shares)	387,500
Exercise of stock options				9							9
Exercise of stock options (in shares)	1,281
Issuance of common stock for vested restricted stock units (in shares)	249,224
Issuance of common stock under employee stock purchase plan				68							68
Issuance of common stock under employee stock purchase plan (in shares)	11,448
Issuance of common stock to satisfy service contract				29							29
Issuance of common stock to satisfy service contract (in shares)	4,000
Common stock offering, net of offering costs	$ 1			6,881							6,882
Common stock offering, net of offering costs (in shares)	1,197,314
Stock offering, net of issuance cost and underwriting fees		$ 8,538	$ 5,399						$ 8,538	$ 5,399
Stock offering, net of issuance cost and underwriting fees (in shares)									10,901	9,393
Stock-based compensation expense				6,295							6,295
Net Income (Loss)						(30,336)					(30,336)
Balance as of end of period at Sep. 30, 2024	$ 5			666,599		(659,745)					6,859
Balance as of end of period (in shares) at Sep. 30, 2024	4,610,139						51,246	2,928	10,901	9,393
Balance as of beginning of period at Jun. 30, 2024	$ 5			664,507		(650,795)					13,717
Balance as of beginning of period (in shares) at Jun. 30, 2024	4,598,419						51,246	2,928	10,901	9,393
Stockholders' Equity
Exercise of stock options				9							9
Exercise of stock options (in shares)	1,281
Issuance of common stock for vested restricted stock units (in shares)	2,570
Issuance of common stock under employee stock purchase plan				47							47
Issuance of common stock under employee stock purchase plan (in shares)	7,869
Stock-based compensation expense				2,036							2,036
Net Income (Loss)						(8,950)					(8,950)
Balance as of end of period at Sep. 30, 2024	$ 5			$ 666,599		$ (659,745)					$ 6,859
Balance as of end of period (in shares) at Sep. 30, 2024	4,610,139						51,246	2,928	10,901	9,393

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2024

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included in the Annual Report. There have been no material changes to the significant accounting policies during the three months ended September 30, 2024.

Recent Accounting Pronouncements

EQUITY FINANCINGS

9 Months Ended

Sep. 30, 2024

EQUITY FINANCINGS

EQUITY FINANCINGS

9. 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 nine months ended September 30, 2023, the Company sold an aggregate of 190,000 shares of its common stock under the Open Market Sale Agreement under the 2023 Shelf Registration for total net proceeds of $3,073, none of which were sold during the three months ended September 30, 2023. During the nine months ended September 30, 2023, the Company sold an aggregate of 665,265 shares of its common stock pursuant to (1) the Amended and Restated Sales Agreement and the Open Market Sale Agreement under the 2020 Shelf Registration and (2) the Open Market Sale Agreement under the 2023 Shelf Registration, for total net proceeds of $17,966.

During the nine months ended September 30, 2024, the Company sold an aggregate of 387,500 shares of its common stock under the Open Market Sale Agreement under the 2023 Shelf Registration for total net proceeds of $2,471, none of which were sold during the three months ended September 30, 2024.

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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2024

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

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 September 30, 2024 and December 31, 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 condensed consolidated balance sheets.

The Company acquired Combangio in November 2021 and in connection with the closing of the Combangio Acquisition, the Company agreed to issue an aggregate of 155,664 shares (the “Deferred Purchase Consideration”) of the Company’s common stock to former Combangio stockholders and other equityholders (the “Combangio Equityholders”) consisting of (i) an aggregate of 136,314 shares of common stock issued on January 3, 2022 and (ii) an aggregate of 19,350 shares of common stock that were held back as partial security for the satisfaction of indemnification obligations and other payment obligations of the Combangio Equityholders and were issued on March 10, 2023 (the “Holdback Shares”). The Company established liabilities for these considerations. The Deferred Purchase Consideration

related to the Combangio Acquisition was measured at fair value each reporting period using Level 3 unobservable inputs. The fair value of the Deferred Purchase Consideration was based on the fair value of the underlying stock and a discount for lack of marketability. Any change in the fair value of the Deferred Purchase Consideration was included in loss from operations in the condensed consolidated statements of operations and comprehensive loss. During the three months ended March 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 three or nine months ended September 30, 2024 or the three months ended September 30, 2023. The change in the fair value of the Deferred Purchase Consideration was a gain of $230 during the nine months ended September 30, 2023, 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 condensed 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 September 30, 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 condensed consolidated statements of operations and comprehensive loss. During the three months ended September 30, 2024, the change in fair value of the contingent consideration liabilities was a loss of $420 as compared to a gain of $1,744 during the three months ended September 30, 2023, and during the nine months ended September 30, 2024 and 2023, the change in the fair value of the contingent consideration liabilities was a loss of $549 and $462, respectively, primarily due to changes in discount rates, the passage of time and changes in the expected timing and probability of payment, and were recognized as a gain or loss on fair value remeasurement of contingent consideration in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023.

The following tables set forth the fair value of the Company’s financial instruments by level within the fair value hierarchy as of September 30, 2024 and December 31, 2023:


	September 30, 2024
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	39,272	$	39,272	$	—	$	—
Total Assets	$	39,272	$	39,272	$	—	$	—
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 September 30, 2024 and December 31, 2023:


	Fair Value at
	September 30,				Range
Financial Instrument	2024		Valuation Technique	Unobservable Input	(Average)
Contingent consideration	$	4,659	Probability-adjusted	Period of expected milestone achievement	2025 - 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%

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 three and nine months ended September 30, 2024 and 2023:


Contingent consideration
Balance at January 1, 2024	$	4,110
Fair value adjustments		158
Balance at March 31, 2024	$	4,268
Fair value adjustments		(29)
Balance at June 30, 2024	$	4,239
Fair value adjustments		420
Balance at September 30, 2024	$	4,659

Contingent consideration
Balance at January 1, 2023	$	8,370
Fair value adjustments		1,847
Settlements		(4,854)
Reclassification to accrued expenses and other current liabilities		(129)
Balance at March 31, 2023	$	5,234
Fair value adjustments		359
Reclassification to accrued expenses and other current liabilities		(5)
Balance at June 30, 2023	$	5,588
Fair value adjustments		(1,744)
Reclassification to accrued expenses and other current liabilities		(6)
Balance at September 30, 2023	$	3,838

Deferred purchase consideration
Balance at January 1, 2023	$	595
Fair value adjustments		(230)
Settlements		(365)
Balance at March 31, 2023, June 30, 2023 and September 30, 2023	$	—

During the three and nine months ended September 30, 2024 and the year ended December 31, 2023, there were no transfers between Level 1, Level 2, and Level 3.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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+ Details