KALA 10-K & 10-Q changes, risk factors and insider trading

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

The Company has a history of recurring losses and negative cash flows from operations, and experienced significant liquidity constraints in 2025, including in connection with its debt arrangement with Oxford Finance LLC, which required management to evaluate the Company’s ability to continue as a going concern. Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. As described in Note 2 to the consolidated financial statements, the Company had an accumulated deficit of $694.9 million as of December 31, 2025 and had previously disclosed going concern uncertainty during the first, second, and third quarters of 2025. As of the date of this annual report, management concluded that, after considering its plans and recent developments, substantial doubt about the Company’s ability to continue as a going concern was alleviated for the twelve months following the date the consolidated financial statements were issued.

There can be no assurance, however, that management’s plans will be successfully implemented or that the Company will be able to generate sufficient cash flows to meet its obligations as they become due. If the Company is unable to maintain sufficient unrestricted cash and working capital, satisfy or refinance existing obligations, or otherwise obtain additional capital when needed on acceptable terms (or at all), it may be required to delay, reduce or terminate planned activities, pursue strategic alternatives on unfavorable terms, or seek protection under applicable insolvency laws. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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

In addition, we do not have experience developing, validating, deploying or supporting a commercial AI platform. Our strategy depends in part on third-party licensed technology and will require new competencies that we have not previously demonstrated, including data-engineering, model evaluation and monitoring, security-by-design, on-premises or private-cloud deployment, service-level support and customer success functions. We may face delays and unanticipated costs as we hire or contract for specialized technical talent, build processes appropriate for regulated life-sciences environments, integrate licensed components, and establish and document controls over data governance, privacy and cybersecurity. Even if we are able to develop the platform as planned, customers may be slow to adopt on-premises AI solutions, require features we do not have or cannot build on our expected timelines, or require validation packages and audit trails that increase our costs and lengthen sales cycles. Our lack of experience in these areas increases the risk that we will not achieve technical milestones, product-market fit, or commercialization on the schedule or at the cost levels currently contemplated deployment.

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

We have ceased active clinical development of our KPI-012 and KPI-014 product candidates following the failure of the CHASE Phase 2b clinical trial of KPI-012 to meet its primary or key secondary endpoints. We are actively evaluating strategic options with respect to our MSC-S platform intellectual property, which may include licensing arrangements, out-licensing, collaborations, sale transactions, or other monetization strategies. However, we may be unable to identify a suitable counterparty for any such arrangement on terms that are acceptable to us, or at all. The value that any third party may be willing to ascribe to our biologics intellectual property is inherently uncertain and may be significantly diminished by the negative results of the CHASE trial. Even if we enter into a licensing or collaboration arrangement, there can be no assurance that any such arrangement will generate revenue or value for our stockholders at the level we anticipate, or at all. Any such transactions are also subject to complex negotiations, extensive due diligence processes, and may be subject to third-party consents or conditions that we cannot control. If we are unable to execute on our monetization strategy for our biologics assets, our business, financial condition, and results of operations could be materially harmed.

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

While we have suspended active clinical development, we continue to evaluate the potential to resume preclinical and clinical development activities for our MSC-S platform, including for potential additional indications for KPI-012 such as limbal stem cell deficiency, or LSCD, and for KPI-014 for inherited retinal degenerative diseases. Any resumption of research and development activities would be subject to the availability of additional financing, the identification of a suitable development or co-development partner, and the successful completion of additional preclinical studies and regulatory filings to support a new IND or amendment to our existing IND. There can be no assurance that we will be able to resume development activities or that, if resumed, any future clinical trials will achieve their primary or secondary endpoints. The negative results of the CHASE trial may make it more difficult for us to raise the financing required to resume development or to attract a suitable development partner. If we are unable to resume development activities on acceptable terms or at all, the value of our biologics intellectual property may continue to decline.

We are shifting our business to focus on developing an AI infrastructure platform for the biotech industry that may present risks to our business. We may not be successful in driving the global deployment and customer adoption of digital offerings, including AI-enabled software solutions.

Our increasing focus on and investment in AI and software offerings present risks to our business. We may not be successful in driving the global deployment and customer adoption of an AI platform.

A growing part of our business involves cloud, edge computing, AI (including generative AI), and software solutions, and we are devoting significant resources to developing and deploying such strategies. Our success with these solutions will depend on the level of adoption of our offerings. We may incur costs to develop AI solutions and to build and maintain infrastructure to support cloud and edge computing offerings. Success with these solutions depends on execution in many areas, including:

It is uncertain whether our strategies will attract customers or generate revenue required to succeed in this highly competitive and rapidly changing global market. We plan to commit substantial efforts, funds, and other resources to R&D and IT infrastructure for AI platform, and the risk of failure is inherent. Even where our digital offerings satisfy applicable regulations and reimbursement policies, customers may not adopt them due to concerns about the security of personal data or the customers’ absence of digital infrastructure to support and effectively use the offerings, a hesitancy to embrace new technology, or for other reasons. We also may not effectively execute organizational and technical changes to accelerate innovation and execution. In a number of countries, some AI and software solutions are restricted areas of foreign investment. Collaborating with a domestic, qualified third party will increase costs and may create uncertainties in such jurisdictions. The legality or validity of any collaboration may be challenged or subjected to scrutiny in such jurisdictions and the relevant governmental authorities have broad discretion in addressing such arrangements. Any of these risks could have a material adverse effect on our business, results of operations, cash flows, financial condition, or prospects.

AI solutions in the biotech and pharmaceutical industry must comply with stringent regulations, including certification requirements, in many of the countries in which our customers are located, particularly in relation to obtaining, using, storing, and transferring personal data. Our platform must be compliant with applicable regulations in the country in question before we can launch our offerings. In some jurisdictions, we must obtain marketing authorizations before commercializing software solutions. Such regulatory compliance may take longer or cost more than expected or require that design changes be incorporated into our offerings. In addition, changes to reimbursement policies for digital healthcare offerings could potentially lead to delays and additional expense. The inability of customers to obtain adequate reimbursement from private and governmental third-party payers could adversely affect purchasing decisions and prices and cause our revenue and profitability to suffer.

Additionally, we are making significant investments in AI initiatives and are building AI into our digital offerings. We are planning to use AI, including generative AI, throughout our portfolios to build differentiated products and solutions and deploy those solutions through various modalities for our customers, including on the device, via edge computing or data centers, and/or via the cloud. Using AI in this manner presents risks and challenges that could affect its adoption, acceptance, and effectiveness, including flawed AI algorithms; insufficient, overly-broad, or biased datasets; unauthorized use or access to personal data; lack of acceptance from our customers; difficulties in obtaining or maintaining the necessary regulatory approvals or clearances; or failure to deliver positive outcomes. As we seek to build clinical applications that leverage AI models built by third parties, we may have limited rights to access the underlying intellectual property used to create these models, and, if requested, this may limit or impair our ability to independently verify the explainability, transparency, and reliability of the underlying model. The use of AI in healthcare offerings also poses clinical risks resulting from potential misdiagnosis or misinformation provided from AI applications, diminishing critical judgment, or loss of interpersonal care from clinicians. These deficiencies could undermine the decisions, predictions, or analysis AI applications produce, as well as their adoption, subjecting us to competitive harm; legal liability, including under new legislation regulating AI in jurisdictions such as the EU or ongoing evolution in how data protection, privacy, IP, and other laws are interpreted; regulatory actions; and reputational harm. Additionally, our obligations to comply with the evolving legal and regulatory landscape could entail significant costs or limit our ability to incorporate some AI capabilities into our offerings. In addition, some AI scenarios present ethical, privacy, or other social issues, risking reputational harm and/or reduced market demand or acceptance of AI solutions. The safeguards we have designed to promote the ethical implementation of AI may not be sufficient to protect us against negative outcomes. Furthermore, we contract with numerous third parties to offer our digital content to customers as well as to assist with the development of their own software applications and services, and our reliance on access to these third parties’ healthcare digital applications, which may not continue to be available to us on commercially reasonable terms or at all, could impact our ability to offer a wide variety of our own digital offerings at reasonable prices with acceptable usage tools or continue to expand our geographic reach. These risks are amplified by the critical nature of healthcare decisions and the sensitivity of health-related information, and the occurrence of any of the above could have a material adverse effect on our business, results of operations, cash flows, financial condition, or prospects.

We have invested and expect to continue to invest in research and development efforts that further enhance our computational platform. Such investments may affect our operating results, and, if the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer

We have invested and expect to continue to invest in research and development efforts that further enhance our computational platform, often in response to our customers’ requirements. These investments may involve significant time, risks, and uncertainties, including the risk that the expenses associated with these investments may affect our margins and operating results and that such investments may not generate sufficient revenues to offset liabilities assumed and expenses associated with these new investments. The software industry changes rapidly as a result of technological and product developments, which may render our solutions less desirable. For example, in recent years, a number of companies have entered the drug discovery industry utilizing different AI approaches. While we believe we compete favorably and are meaningfully differentiated from such approaches with the combination of our physics-based computational platform and machine learning capabilities, the success of other such AI approaches to drug discovery could impact the demand for our solutions. We believe that we must continue to invest a significant amount of time and resources in our platform and software solutions to maintain and improve our competitive position. If we do not achieve the benefits anticipated from these investments, if the achievement of these benefits is delayed, if technological developments render our solutions less desirable, or if a slowdown in general computing power impacts the rate at which we expect our physics-based simulations to increase in power and domain applicability, our revenue and operating results may be adversely affected.

We are in the process of evaluating and transitioning from historical biologics research and development (R&D) activities to an “AI platform-as-a-service” model intended to provide dedicated, on-premises artificial intelligence infrastructure solutions to biotechnology and pharmaceutical customers. Following the discontinuation of the CHASE Phase 2b clinical trial of KPI-012 in September 2025 and the subsequent resolution of our obligations to Oxford Finance, our current operating focus is (i) the monetization or out-licensing of remaining biologics-related assets and (ii) development and commercialization planning for our licensed Researgency AI platform. This transition is expected to impact our operating expenses, capital requirements, and sources and uses of cash as described further below.

We have refocused our business on two complementary strategic priorities. First, we are preserving and seeking to maximize the value of our MSC-S biologics asset portfolio, including the KPI-012 and KPI-014 product candidates and related intellectual property, through potential licensing, collaboration, and other strategic arrangements with third parties, as well as through evaluation of opportunities to resume preclinical development activities subject to the availability of additional capital. Second, we are building our Researgency business through our exclusive license for Researgency, which we intend to deploy as a dedicated, on-premises AI infrastructure solution for biotechnology and pharmaceutical companies. We believe this dual-track strategy preserves and creates optionality with respect to our biologics assets while simultaneously pursuing a potential business opportunity in the rapidly growing AI platform market for the biotechnology industry.

Material Fourth Quarter 2025 Developments

Oxford Foreclosure and Workforce Terminations

On September 29, 2025, we received a written notice (the “Default Notice”) of event of default from Oxford Finance LLC (“Oxford Finance”), with respect to the Loan and Security Agreement, dated as of May 4, 2021, by and among us, Combangio and Oxford Finance, as lender and collateral agent (as amended, the “Loan Agreement”). The Default Notice asserted that an event of default had occurred under the Loan Agreement and that the Company’s obligations under the Loan Agreement were immediately due and payable. The total amount of our obligations under the Loan Agreement as of the date of the Default Notice that were accelerated and declared payable by Oxford Finance was $29.1 million, plus any additional interest due upon final payment and any expenses that become payable by us under the Loan Agreement.

On October 18, 2025, Oxford Finance informed us that it intended to foreclose on all of our remaining assets and that Oxford Finance would not consent to our use of cash for any reason other than for minimal payroll expenses pending Oxford Finance’s foreclosure of our assets. In addition, Oxford swept substantially all of our cash resources from our bank accounts. As a result, on October 19, 2025, we terminated all remaining employees not deemed necessary by Oxford Finance to execute a foreclosure of our assets.

On November 3, 2025, Oxford Finance informed us that it intended to pause its foreclosure of our assets and permitted us to use $125,000 of cash it previously swept to fund the negotiation and execution of the Convertible Loan Agreement (as defined below).

On November 25, 2025, we entered into a Loan Settlement Agreement (the “Settlement Agreement”) with Oxford Finance pursuant to which the Company owed Oxford Finance $2.0 million to be paid pursuant to the terms of the Settlement Agreement. The Settlement Agreement was entered into in connection with events of default by the Company, under the Loan Agreement. On December 26, 2025, the Company paid Oxford Finance $2.0 million, resulting in the Company’s obligations under the Settlement Agreement and the Loan Agreement being satisfied and the aggregate liability due to Oxford Finance of approximately $10,600 being settled and released.

Convertible Loan Agreement

On November 9, 2025, we entered into a Convertible Loan Agreement (the “Convertible Loan Agreement”) with David Lazar, an individual lender, pursuant to which David Lazar provided us a convertible loan in the aggregate amount of $375,000 (the “Loan Principal”).

Pursuant to the terms of the Convertible Loan Agreement, the Loan Principal bore simple interest at a rate equal to 15% per annum, commencing on the date we receive the applicable portion of the Loan Principal and until full repayment thereof in accordance with the terms of the Convertible Loan Agreement. The Loan Principal was due and payable by us to David Lazar on the first anniversary of receiving the Loan Principal. Subject to compliance with the rules and regulations of The Nasdaq Stock Market, at any time prior to the full repayment of the Loan Amount to David Lazar, David Lazar had the right, upon prior written notice to us, to convert all or any of the then outstanding and unpaid portion of the Loan Amount into shares of our Common Stock at the conversion prices specified in the Convertible Loan Agreement. In addition, if we had entered into a definitive agreement to consummate an M&A Transaction (as defined in the Convertible Loan Agreement) or an underwritten public offering, and if the Loan Amount had not previously converted or been repaid pursuant to the Convertible Loan Agreement, David Lazar had the right to elect to (i) convert the entire Loan Amount into the most senior class of shares issued us immediately prior to such events or (ii) have the entire Loan Amount repaid in cash. We repaid the Loan Principal in full to David Lazar on December 18, 2025.

Private Placement of Series AA Preferred Stock

On November 23, 2025, the Company entered into a Securities Purchase Agreement (the “November 2025 Purchase Agreement”) with David Lazar, pursuant to which the Company agreed to issue and sell, in a private placement, shares of our Series AA Preferred Convertible Preferred Stock, par value $0.001 per share (the “Series AA Preferred Stock”) and our Series AAA Preferred Stock, par value $0.001 per share (the “Series AAA Preferred Stock”), in two closings for aggregate gross proceeds of up to $6.0 million, subject to the terms and conditions set forth in the November 2025 Securities Purchase Agreement (the “Series AA Private Placement”).

The closing of the Series AA Private Placement occurred on November 24, 2025, on which date we issued and sold to David Lazar an aggregate of 900,000 shares of Series AA Preferred Stock at a price per share equal to $2.00, for aggregate gross proceeds of $1.8 million. Each share of Series AA Preferred Stock was convertible into 55 shares of Common Stock for an aggregate total of 49,500,000 shares of Common Stock issuable upon conversion of the Series AA Preferred Stock. As of March 31, 2026, all of the shares of Series AA Preferred Stock have been converted to shares of Common Stock, and there are no Series AA Preferred Shares of the Company outstanding. As of March 31, 2026, there were 681,818 shares of Series AA Preferred Stock outstanding.

Pursuant to the November 2025 Purchase Agreement, the Company also agreed to issue and sell to David Lazar 2,100,000 Series AAA Preferred Shares, at a price per Series AAA Preferred Share equal to $2.00, for aggregate gross proceeds of $4.2 million. The closing of the Series AAA Preferred Stock was subject to (i) the approval by the Company’s stockholders at a meeting of stockholders (the “Stockholder Meeting”) of (A) an increase in the number of authorized shares of Common Stock to enable the Company to issue all of the shares of Common Stock that are issuable upon the conversion of the Series AA Preferred Stock and Series AAA Preferred Stock into Common Stock (the “Share Increase”) and (B) the conversion of the Series AA Preferred Stock and Series AAA Preferred Stock into shares of Common Stock in accordance with the listing rules of Nasdaq (collectively, the “Stockholder Approvals”), (ii) the filing of an amendment to the Company’s Restated Certificate of Incorporation, as amended (the “Restated Certificate of Incorporation), with the Secretary of State of the State of Delaware (the “Charter Amendment”) effecting the Share Increase, (iii) the filing of a Certificate of Designations, Preferences and Rights of Series AAA Convertible Non-Redeemable Preferred Stock (the “Series AAA Certificate of Designations”), with the Secretary of State of the State of Delaware creating the Series AAA Preferred Stock, and (iv) the satisfaction of other customary closing conditions.

Pursuant to the Securities Purchase Agreement, if at any time during the six-month period following the date of the closing of the Series AAA Preferred Stock (the “Participation Period”), the Company proposes to offer and sell new equity securities in an offering that is conducted pursuant to an exemption from registration under the Securities Act, or in an offering that is registered under the Securities Act that is not conducted as a firm-commitment underwritten offering, then, subject to compliance with securities laws and regulations, the Company has agreed to offer David Lazar the right to purchase, on the same terms, including the price per security, and subject to the same conditions, as are applicable to the other investors in such offering, that amount of new equity securities equal to up to 25% of the total amount of new equity securities being offered for sale in such offering. In addition, if during the Participation Period, the Company proposes to offer and sell new equity securities in a firm-commitment underwritten offering registered under the Securities Act, then subject to compliance with securities laws and regulations, the Company has agreed to use its commercially reasonable efforts to cause the managing underwriters of such offering to contact the Investor about potentially participating in such offering and to provide to the Investor the opportunity to purchase up to 25% of the total new equity securities, subject to certain conditions and limitations.

Pursuant to the November 2025 Purchase Agreement, subject to obtaining Stockholder Approvals and the consummation of the Second Closing, David Lazar has the right to recommend to the Company up to eight individuals to be nominated for election at the Stockholder Meeting (the “Investor Nominees”), provided that such right shall at all times be subject to, and in compliance with, Nasdaq Listing Rule 5640.

On December 11, 2025, David Lazar transferred his rights and obligations under the November 2025 Purchase Agreement solely with respect to the shares of Series AAA Preferred Stock and the director nomination rights, to AK Holdings Group Inc., a Panamanian company (“AK Holdings”).

December 2025 Registered Direct Offering

On December 4, 2025, we entered into a securities purchase agreement (the “December 2025 Purchase Agreement”) with a certain institutional investor (the “RD Investor”), pursuant to which the Company agreed to issue and sell in a registered direct offering (the “RD Offering”) (i) 900,000 shares of the Company’s Common Stock and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 9,100,000 shares of Common Stock (the “Pre-Funded Warrant Shares”), at a purchase price of $1.00 per Pre-Funded Warrant Share (less $0.0001 per Pre-Funded Warrant). The gross proceeds to the Company from the RD Offering was approximately $10.0 million before deducting placement agent fees and other offering expenses payable by the Company.

The shares of Common Stock, Pre-Funded Warrants and Pre-Funded Warrant Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-270263) which was filed with the Securities and Exchange Commission (the “SEC”) on March 3, 2023, as amended, and declared effective by the SEC on May 11, 2023, and related base prospectus and a prospectus supplement dated December 4, 2025, thereunder.

The Pre-Funded Warrants have an initial exercise price per share of $0.0001, subject to certain adjustments. The Pre-Funded Warrants may be exercised at any time until exercised in full, except that a holder (together with its affiliates) will not be entitled to exercise any portion of any Pre-Funded Warrant, which, upon giving effect to such exercise would cause the aggregate number of shares of the Company’s Common Stock beneficially owned by the holder (together with its affiliates) to exceed 4.99% (or, upon election of the holder, 9.99%) of the number of shares of Common Stock outstanding immediately prior to or after giving effect to the exercise, subject to such holder’s rights under the Pre-Funded Warrants to increase or decrease such percentage to another percentage not in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded warrants, provided that any increase shall only be effective upon at least 61 days’ prior notice from such holder to the Company. The Offering closed on December 5, 2025.

Pursuant to the terms of the Purchase Agreement, the Company has agreed to certain restrictions on the issuance and sale of its Common Stock or Common Stock Equivalents (as defined in the December 2025 Purchase Agreement) until 30 days following the closing date, and not to issue any Common Stock or Common Stock Equivalents in a Variable Rate Transaction (as defined in the December 2025 Purchase Agreement) for one year from the closing date, subject to an exception as contained therein.

ATM Facility

On January 8, 2026, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”) providing for the sale and issuance by the Company of shares of its Common Stock from time to time, through or to Wainwright as the Company’s sales agent or principal in an “at the market offering” program and as set forth in the ATM Agreement (the “ATM Offering”).

The Company filed a prospectus supplement, dated January 8, 2026, including an accompanying base prospectus, dated May 11, 2023, contained therein (the “ATM Prospectus Supplement”), which together form a part of the Company’s shelf registration statement on Form S-3, as amended (File No. 333-270263), initially filed by the Company with the SEC on March 3, 2023 and declared effective by the SEC on May 11, 2023 in connection with the offer and sale of shares of Common Stock pursuant to the ATM Agreement. The aggregate market value of the shares of Common Stock eligible for sale under the prospectus supplement is currently $15.0 million.

Pursuant to the terms of the ATM Agreement, Wainwright agreed to use its commercially reasonable efforts, consistent with applicable state and federal law, rules and regulations, and the rules of the Nasdaq Capital Market, to sell the shares of Common Stock from time to time. Under the ATM Agreement, the Company may designate the parameters for the sale of shares of Common Stock, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number of shares that may be sold on any trading day and any minimum price below which sales may not be made. Subject to the terms and conditions of the ATM Agreement, Wainwright may sell the shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including without limitation, sales made directly on Nasdaq or on any other existing trading market for the Common Stock or to or through a market maker. In addition, with the Company’s prior written approval, Wainwright may also sell shares in privately negotiated transactions or block transactions. The gross sales price of the shares of Common Stock sold by Wainwright under the ATM Agreement as sales agent is the market price for the shares of Common Stock on Nasdaq at the time of sale.

Private Placement of Series AAA Preferred Stock

On January 29, 2026, pursuant to the terms of a certain Rights Purchase Agreement, by and among AK Holdings and each signatory thereto (the “Series AAA Investors”), AK Holdings sold its rights to purchase the Series AAA Preferred Stock (but not its director nomination rights under the November 2025 Purchase Agreement) to the Series AAA Investors.

On January 30, 2026, the Company entered into a Securities Purchase Agreement (the “January 2026 Purchase Agreement”), pursuant to which we issued and sold to the “Series AAA Investors” in a private placement (the “January 2026 Private Placement”), an aggregate of 2,100,000 shares of Series AAA Preferred Stock at a price per share equal to $2.00, for aggregate gross proceeds of $4.2 million. The closing of the January 2026 Private Placement occurred on January 30, 2026. Each share of Series AAA Preferred Stock was convertible into 420 shares of Common Stock for an aggregate total of 882,000,000 shares of Common Stock issuable upon conversion of the Series AAA Preferred Stock. As of the date of this Annual Report on Form 10-K, all of the shares of Series AAA Preferred Stock have been converted into shares of Common Stock and there are no Series AAA Preferred Shares of the Company outstanding.

Loan and Security Agreement

On February 9, 2026, the Company made a loan (the “Loan”) in the principal amount of $7.0 million evidenced by a secured promissory note (the “Note”) to Minglemint Solutions LLC (“Borrower”). The Loan bears interest at a rate of 8.0% per annum, and is due and payable on February 9, 2027.

The Note includes customary event of default provisions, including, but not limited to, for a breach of any representations and warranties or covenants, any bankruptcy or insolvency proceedings of the Borrower, and the failure of the Borrower to pay, upon 15 days’ written notice of default, any principal amount of the Loan or interest due. The Note provides for a default interest rate of 13.0%. As described in the Note, upon the occurrence of certain events of default, the Company may, among other remedies, declare the outstanding balance of the Note including all accrued interest thereon immediately due and payable.

Additionally, the Note is secured by a continuing first priority lien and security interest in all fixtures and personal property of the Borrower (the “Collateral”), pursuant to the security agreement with the Borrower dated February 9, 2026 (the “Security Agreement”). The Collateral includes, but is not limited to, all accounts, goods, documents, instruments, securities and investment properties, money, accounts and rights to payment of the Borrower, and any proceeds, records and obligations relating to the foregoing, as more fully detailed in the Security Agreement.

Platform Development and Exclusive License Agreement

On March 3, 2026, the Company entered into a Platform Development and Exclusive License Agreement (the “Younet License Agreement”) pursuant to which the Company obtained a worldwide exclusive license of Younet’s Researgency Platform, together with associated trademarks and intellectual property. The term of the Younet License Agreement is for 12 months following the Effective Date (the “Initial Term”), with the option by the Company to renew the agreement for successive 12 months terms (each, a “Renewal Term”), in each case by providing notice to Younet pursuant to the terms of the Agreement (the “Extension Notice”). Pursuant to the Agreement, Younet agreed to provide to the Company certain deliverables and services related to the Researgency Platform, with certain additional deliverables to be provided by Younet in the event of a Renewal Term, in each case with all operating costs relating to the Researgency Platform to be paid by the Company.

In consideration of the services to be performed by Younet under the Agreement, the Company paid to Younet for the Initial Term a cash fee of up to $530,000 consisting of (i) $80,000 in cash, which was paid by the Company on the Effective Date, and (ii) in the event the Company delivers to Younet a written notice electing to engage Younet for the continued development of Researgency, $450,000 in cash, payable in 9 monthly installments of $50,000, pursuant to the terms of the Agreement. Such notice may be provided at any time on or after the first business day of the third month following the Effective Date and such continued development may be terminated upon 30 days notice by the Company. In addition, the Company has to issued to Younet 5,000,000 shares of Common Stock, within 10 business days of the Effective Date. In addition, each time the Agreement is extended for a Renewal Term, the Company shall (i) pay to Younet $250,000 in cash and (ii) issue to Younet 5,000,000 shares of Common Stock within 10 business days of the Extension Notice. Any shares of Common Stock issuable to Younet pursuant to the Agreement shall herein be referred to as the “Younet Shares.” Except for certain block trades, during the Term (as defined in the Agreement) and for the twelve months thereafter, Younet shall not sell any Younet Shares on any Trading Day (as defined in the Agreement) in an amount that exceeds 3% of the Daily Trading Volume (as defined in the Agreement) for such Trading Day.

In addition, Younet has granted to the Company an irrevocable option, exercisable at any time during the Initial Term or any Renewal Terms, to acquire all of the issued and outstanding equity interests of Younet, or, at the Company’s election, substantially all of the assets of Younet, for a total purchase price of $55,000,000, subject to the terms of the Agreement.

If the Company does not deliver an Extension Notice prior to the expiration of the Initial Term or any Renewal Term, the Agreement shall expire automatically at the end of the applicable term. In addition, the Agreement may be terminated by either party (i) for uncured material breach or (ii) due to the insolvency of the other party. Upon termination or expiration, (a) the Exclusive License will terminated, (b) all licenses granted to Younet with respect to KALA Data (as defined in the Agreement) will immediately terminate, (c) all licenses granted to the Company with respect to Younet Background IP (as defined in the Agreement) will survive in accordance with their terms, and (d) all Work Product (as defined in the Agreement) completed as of the date of termination shall be delivered to and owned by the Company.

Nasdaq Deficiencies

On November 10, 2025, we received a deficiency letter (the “MVLS Letter”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market notifying us that the listing of our Common Stock was not in compliance with Nasdaq Listing Rule 5550(b)(2) (the “Minimum MVLS Requirement”) for continued listing on Nasdaq, as the market value of our listed securities was less than $35 million for the previous 30 consecutive business days.

In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have been provided a period of 180 calendar days, or until May 11, 2026 (the “MVLS Compliance Date”), to regain compliance with the Minimum MVLS Requirement. If, at any time before the MVLS Compliance Date, the market value of our listed securities closes at $35 million or more for a minimum of 10 consecutive business days, the Staff will provide written notification to us that we have regained compliance with the Minimum MVLS Requirement.

If we do not regain compliance with the Minimum MVLS Requirement by the MVLS Compliance Date, we will receive written notification that our securities are subject to delisting. At that time, we may appeal the Staff’s delisting determination to a Nasdaq Listing Qualifications Panel (the “Panel”) pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if we receive a delisting notice and appeal the delisting determination by the Staff to the Panel, such appeal would be successful.

In addition, on January 20, 2026, we received a letter from the Staff indicating that, based upon the closing bid price of the Company’s Common Stock for the 30 consecutive business days between December 3, 2025, to January 16, 2026, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”). The letter also indicated that we will be provided with a compliance period of 180 calendar days, or until July 20, 2026 (the “Minimum Bid Price Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

In order to regain compliance with the Minimum Bid Price Rule, our Common Stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Minimum Bid Price Compliance Period. In the event we do not regain compliance by the end of the Minimum Bid Price Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. However, if it appears to Nasdaq that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, Nasdaq will provide notice that our Common Stock will be subject to delisting. There can be no assurance that we will be eligible for the additional 180 calendar day compliance period, if applicable, or that the Nasdaq staff would grant our request for continued listing subsequent to any delisting notification. In the event of such a notification, we may appeal the Staff’s determination to delist its securities.

Business and Operations Update

Notwithstanding our streamlined cost structure, we have continued to actively operate and develop our business during the period and through the date of this Quarterly Report.

We have devoted significant time and resources, together with our intellectual property counsel, to maintaining and protecting our intellectual property portfolio. During the period, we strategically renewed, or continued the prosecution and maintenance of, our patent estate across much of the territory in which it is protected, keeping the portfolio in good standing. In connection with this review, which has included consultations with members of prior management and operating personnel, we identified potential additional regulatory designations and molecular characteristics of our intellectual property that we believe may support additional avenues for developing the underlying science, and we are evaluating those opportunities.

In addition, using the Researgency Platform under our exclusive license, we have processed and analyzed proprietary data sets and other information to train and operate models directed at potential commercial applications. This work remains in development. We have also engaged with industry participants, including at biotechnology industry conferences, to develop further insight into the market for artificial intelligence applications in biotechnology and to inform our commercialization strategy. There can be no assurance that these initiatives will result in commercially viable products or services.

Strategic Growth and Acquisition Initiatives

As part of our forward corporate development strategy, we are actively evaluating, and from time to time engaging in preliminary discussions regarding, potential acquisitions, investments, joint ventures and other strategic transactions that we believe may be accretive to our business and synergistic with our data-sovereign biomedical and computing initiatives, including opportunities that may be enabled by the acquisition or development of artificial intelligence data center infrastructure intended to serve this vertical. Having devoted substantial time and resources to administrative matters and to establishing an operational, governance and capital markets foundation for the Company, we believe we are now positioned to pursue growth-oriented transactions consistent with this strategy. In addition, we are exploring a range of opportunities involving companies operating at the intersection of space technology and biotechnology, blockchain-based data and asset management, and the tokenization of assets, with potential applications in biotechnology, intellectual property and other sectors. We have not entered into any definitive agreement, and are not currently a party to any binding commitment, with respect to any such transaction, and there can be no assurance that any of these evaluations or discussions will result in a completed transaction or that any completed transaction will achieve its anticipated benefits. Any such transaction, if pursued, may be funded in whole or in part with net proceeds from this offering, cash on hand, the issuance of equity, equity-linked or debt securities, or a combination of the foregoing.

Recent Developments

Reverse Stock Split

On May 7, 2026, we effected a 1-for-50 reverse stock split of its Common Stock, pursuant to which each fifty (50) shares of Common Stock were converted into one share of common stock. No fractional shares were issued in connection with the Reverse Stock Split, and stockholders who otherwise would have been entitled to receive fractional shares are entitled to receive a cash payment in lieu of such fractional shares. All share and per share amounts in these condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

ATM

On July 22, 2026, we filed an additional prospectus supplement to our Shelf Registration Statement. See “Note 17 - Subsequent Events” for additional information.

Comparison of the Six Months Ended June 30, 2026 and 2025

The following table summarizes the results of our operations for the six months ended June 30, 2026 and 2025:

General and administrative expenses

General and administrative expenses were $3.4 million for the six months ended June 30, 2026, comparable to $9.2 million for the six months ended June 30, 2025, which was a decrease of $5.8 million. The decrease in general and administrative expenses for the six months ended June 30, 2026 was primarily due to a $6.3 million decrease in employee-related costs and stock-based compensation, primarily a result of our decision to cease development of KPI-012 and our MSC-S platform, including costs related to restructuring and wind-down activities, partially offset by a $0.4 million increase in legal and professional services support in connection with those activities.

Research and development expenses

The following table summarizes the research and development expenses incurred during the six months ended June 30, 2026 and 2025:

Research and development expenses were $0.1 million for the six months ended June 30, 2026, compared to $12.3 million for the six months ended June 30, 2025, which was a decrease of $12.2 million. The decrease was primarily driven by a decrease in KPI-012 clinical development costs following our discontinuation of our MSC-S platform and the decrease in personnel and facilities expenses after workforce reductions.

Loss on fair value remeasurement of contingent consideration for the six months ended June 30, 2026 and 2025 was $0 and $0.2 million, respectively. The decrease was primarily due to our decision to cease development of KPI-012 and our MSC-S platform.

We incurred interest expense of $0 for the six months ended June 30, 2026 and $2.2 million for the six months ended June 30, 2025. Interest expense for the six months ended June 30, 2025 was comprised of the contractual coupon interest expense, the amortization of the debt discount and the accretion of the final payment fee associated with our Loan Agreement with Oxford Finance. During the six months ended June 30, 2025, $29.3 million of indebtedness was outstanding under our Loan Agreement until $2.3 million was repaid on June 26, 2025 resulting in an outstanding indebtedness of $26.9 million as of June 30, 2025.

Grant income for the six months ended June 30, 2026 and 2025 was $0 and $2.9 million, respectively, related to an award agreement with the California Institute for Regenerative Medicine for a $15.0 million grant (as amended from time to time, the “CIRM Award”). On September 29, 2025, we announced that the CHASE trial of KPI-012 for the treatment of PCED did not meet the primary endpoint of complete healing of PCED as measured by corneal fluorescein staining. The CHASE trial also failed to achieve statistical significance for key secondary efficacy endpoints and did not show any meaningful difference between either KPI-012 treatment arm and the placebo arm. Based on the CHASE trial results, we determined to cease development of KPI-012 and our MSC-S platform, and as such, we do not expect to receive grant income relating to the CIRM Award in the near future.

Other expense, net

Other expense, net for the six months ended June 30, 2026 was a $0.1 million as compared to $0 for the six months ended June 30, 2025. Other expense, net for the six months ended June 30, 2026 was related to a write-off of receivables we determined to be uncollectible.

As of the date of this quarterly report, we had cash and cash equivalents of less than $0.1 million. In addition, the outstanding principal amount of the Note with Minglemint Solutions LLC (“Minglemint” or “Borrower”) was $7.0 million, and accrued and unpaid interest thereon was approximately $0.2 million, for an aggregate outstanding balance of approximately $7.2 million. On July 21, 2026, the Borrower repaid $44,000 under the Note. Pursuant to the Note amendment, we are entitled, at any time and from time to time, to demand repayment of all or any portion of the outstanding principal amount of the Note, together with accrued and unpaid interest thereon, upon no less than 45 days’ notice. We view our cash and cash equivalents, together with amounts collectible under the Note, as our principal sources of near-term liquidity.

We manage our capital resources first to fund the continued operation and development of our business, as described under “Business and Operations Update” above, within a disciplined operating budget. Secondarily, we seek to preserve financial flexibility to pursue attractive growth opportunities, including potential acquisitions. Over the past several months, we have evaluated and discussed several such opportunities, and the most attractive of them typically require cash availability at or after closing to fund the operations and growth of the acquired or combined business, a consideration we take into account in our spending decisions, including capacity to provide interim or bridge financing if a transaction is pursued. We have not entered into any definitive agreement with respect to any such transaction, and there can be no assurance that we will pursue or consummate any transaction. Consistent with these objectives, during the second quarter of 2026 and through the date of this Quarterly Report on Form 10-Q, we have taken the following measures:

Based on our current operating plan and the operating budget described above, we believe our existing cash and cash equivalents, together with amounts demanded under the Call Notice and additional expected collections under the Note, will be sufficient to fund our operating expenses and capital expenditure requirements through the third quarter of 2027. We are also evaluating additional financing alternatives, including potential sales under our ATM program (as defined below), private placements, and asset monetization opportunities. If these actions are unsuccessful or not timely, we will need to further reduce or defer planned expenditures, which could materially affect our strategy.

On May 11, 2026, the Company and the Borrower entered into a Note Amending Agreement (the “Loan Amendment”) which added a provision that the Company has the right at any time and from time to time, on no less than 45 days’ notice to demand repayment of all or any portion of the outstanding principal amount of the Loan, including all accrued and unpaid interest thereon and any other amounts owing under the Note by delivering written notice to the Borrower (a “Call Notice”). The Borrower agrees to repay the amount in the Call Notice, and any amount not timely repaid will accrue interest at the default interest rate of 13.0%.

We are working with Younet and our scientific advisors on a commercial plan for the Researgency Platform, and we continue to assess the scope and pace of further development as part of its commercialization strategy. We retain the exclusive license to the Researgency Platform under the Younet License Agreement. However, there can be no assurance that these efforts will be successful.

Funding Requirements and Going Concern