KALA BIO Inc

Previous wording

The CHASE trial is comprised of two patient cohorts. On March 27, 2023, we announced positive safety data from the first cohort of the CHASE trial, which is an open-label study to evaluate the safety of the high dose of KPI-012 ophthalmic solution (3 U/mL) dosed topically four times per day, or QID, in two patients. Both patients in the first cohort successfully completed at least one week of dosing with no safety issues observed. We have initiated the second and final patient cohort of the CHASE trial in the United States, which is a multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial to evaluate the safety and tolerability of two doses of KPI-012 ophthalmic solution (3 U/mL and 1 U/mL) versus vehicle dosed topically QID for 56 days in approximately 90 patients. We plan to add trial sites in Latin America, subject to regulatory approval.

Current wording

The CHASE trial is comprised of two patient cohorts. On March 27, 2023, we announced positive safety data from the first cohort of the CHASE trial, which is an open-label study to evaluate the safety of the high dose of KPI-012 ophthalmic solution (3 U/mL) dosed topically four times per day, or QID, in two patients. Both patients in the first cohort successfully completed at least one week of dosing with no safety issues observed. We have initiated the second and final patient cohort of the CHASE trial in the United States, which is a multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial to evaluate the safety and tolerability of two doses of KPI-012 ophthalmic solution (3 U/mL and 1 U/mL) versus vehicle dosed topically QID for 56 days in approximately 90 patients. We have opened approximately 35 to 40 trial sites for the CHASE trial in the United States and are in the process of initiating trial sites for the CHASE trial in Latin America, subject to regulatory approval.

Previous wording

The primary endpoint of the trial is the complete healing of the PCED as measured by corneal fluorescein staining. We are targeting reporting topline safety and efficacy data from the CHASE trial by the end of 2024. If the results are positive, and subject to discussion with regulatory authorities, we believe this trial could serve as the first of two pivotal trials required to support the submission of a Biologics License Application, or BLA, for KPI-012 to the FDA.

Current wording

The primary endpoint of the CHASE trial is the complete healing of the PCED as measured by corneal fluorescein staining. We are targeting reporting topline safety and efficacy data from the CHASE trial in the first quarter of 2025. If the results are positive, and subject to discussion with regulatory authorities, we believe this trial could serve as the first of two pivotal trials required to support the submission of a Biologics License Application, or BLA, for KPI-012 to the FDA.

Previous wording

On July 8, 2022, Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC, which we refer to collectively as Alcon, purchased from us the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the AMPPLIFY Drug Delivery Technology, which we collectively refer to as the Commercial Business. We refer to this transaction as the Alcon Transaction. Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the Alcon Transaction. For a further description of the Alcon Transaction, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and Note 1, “Nature of Business and Basis of Presentation” of our condensed consolidated financial statements, included herein.

Current wording

On July 8, 2022, we sold to Alcon Pharmaceuticals Ltd. and Alcon Vision, LLC, which we refer to collectively as Alcon, the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the AMPPLIFY Drug Delivery Technology, which we collectively refer to as the Commercial Business. We refer to this transaction as the Alcon Transaction. Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the Alcon Transaction. For a further description of the Alcon Transaction, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and Note 1, “Nature of Business and Basis of Presentation” of our condensed consolidated financial statements, included herein.

Previous wording

Since inception, we have incurred significant losses from operations and negative cash flows from operations. Our net loss was $11.8 million for the three months ended March 31, 2024, and $42.2 million for the year ended December 31, 2023. As of March 31, 2024, we had an accumulated deficit of $641.2 million. We generated only limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of the Commercial Business to Alcon in July 2022. We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon, our initial public offering, or IPO, follow-on public common stock offerings and sales of our common stock under our sales agreement with Jefferies, LLC, or Jefferies, in at-the-market offerings, private placements of common stock and/or preferred stock (including our private placement of preferred stock for gross proceeds of approximately $2.0 million in December 2023, or our 2023 Private Placement, and $8.6 million in March 2024, or our 2024 Private Placement), borrowings under credit facilities and our Loan Agreement with Oxford Finance, or the Loan Agreement, a grant from California Institute for Regenerative Medicine, or CIRM, convertible promissory notes and warrants.

Current wording

Since inception, we have incurred significant losses from operations and negative cash flows from operations. Our net loss was $9.6 million and $21.4 million for the three and six months ended June 30, 2024, respectively, and $42.2 million for the year ended December 31, 2023. As of June 30, 2024, we had an accumulated deficit of $650.8 million. We generated only limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of the Commercial Business to Alcon in July 2022. We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon, our initial public offering, or IPO, follow-on public common stock offerings and sales of our common stock under our sales agreement with Jefferies, LLC, or Jefferies, in at-the-market offerings, private placements of common stock and/or preferred stock (including our most recent private placements resulting in gross proceeds of approximately $8.6 million in March 2024 and $12.5 million in June 2024), borrowings under credit facilities and our Loan Agreement with Oxford Finance, or the Loan Agreement, disbursements under a grant from California Institute for Regenerative Medicine, or CIRM (including our most recent disbursement of $3.2 million from CIRM in August 2024 upon the achievement of a specified milestone), convertible promissory notes and warrants.

Previous wording

milestone payments or of the amount of milestone payments we may receive, if any. We cannot be certain that we will achieve the milestones within the timeframe required by the CIRM award, or at all, and as such we may never receive the remaining $9.1 million under the award. We expect to continue to incur significant expenses and operating losses for the foreseeable future, including in connection with our continued development, regulatory approval efforts and commercialization, if any, of KPI-012. We may never achieve or maintain profitability. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

Current wording

milestone payments or of the amount of milestone payments we may receive, if any. Additionally, we cannot be certain that we will achieve the remaining milestones under CIRM award within the required timeframes, or at all, and as such we may never receive the remaining $5.9 million under the award. We expect to continue to incur significant expenses and operating losses for the foreseeable future, including in connection with our continued development, regulatory approval efforts and commercialization, if any, of KPI-012. We may never achieve or maintain profitability. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

Previous wording

We expect that our research and development costs will increase in 2024 as compared to such expenses for the year ended December 31, 2023 as we advance the clinical development of KPI-012 and as we conduct any necessary preclinical studies and clinical trials and other development activities for any other product candidate we may develop in the future, including our planned preclinical studies under our KPI-014 program. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. We may never succeed

Current wording

We expect that our research and development costs for 2024 will be higher than such expenses for the year ended December 31, 2023 as we continue to advance the clinical development of KPI-012 and as we conduct any necessary preclinical studies and clinical trials and other development activities for any other product candidate we may develop in the future, including our planned preclinical studies under our KPI-014 program. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. We may

Previous wording

in obtaining marketing approval for any of our product candidates. The probability of success for each product candidate may be affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability.

Current wording

never succeed in obtaining marketing approval for any of our product candidates. The probability of success for each product candidate may be affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability.

Previous wording

In addition to the Deferred Purchase Consideration, consideration payable to the Combangio Equityholders includes potential payments of up to $105.0 million that are contingent upon the achievement of specified development, regulatory and commercialization milestones. As of March 31, 2024, of the up to $105.0 million in contingent milestone payments, we paid to the Combangio Equityholders an aggregate of $2.5 million in cash and $2.4 million in shares of common stock (representing an aggregate of 105,038 shares of our common stock) as a result of our dosing the first patient in our CHASE trial in February 2023, or the First Dosing Milestone. The remaining amount of $0.1 million due in connection with the First Dosing Milestone was paid in cash in January 2024. All potential milestone payments to the Combangio Equityholders are payable in cash going forward.

Current wording

In addition to the Deferred Purchase Consideration, consideration payable to the Combangio Equityholders includes potential payments of up to $105.0 million that are contingent upon the achievement of specified development, regulatory and commercialization milestones. As of June 30, 2024, of the up to $105.0 million in contingent milestone payments, we paid to the Combangio Equityholders an aggregate of $2.6 million in cash and $2.4 million in shares of common stock (representing an aggregate of 105,038 shares of our common stock) as a result of our dosing the first patient in our CHASE trial in February 2023, or the First Dosing Milestone. All potential milestone payments to the Combangio Equityholders are payable in cash going forward.

Previous wording

On April 28, 2023, CIRM awarded Combangio a $15.0 million grant, or the CIRM Award, subject to entering into a final award agreement, to support Combangio’s ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program. On August 2, 2023, Combangio entered into the CIRM Award and became entitled to receive an initial $5.9 million disbursement from CIRM.

Current wording

On April 28, 2023, CIRM awarded Combangio a $15.0 million grant, or the CIRM Award, subject to entering into a final award agreement, to support Combangio’s ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program. On August 2, 2023, Combangio entered into the CIRM Award and received an initial $5.9 million disbursement from CIRM. On May 17, 2024, Combangio became entitled to receive a disbursement of $3.2 million from CIRM upon the achievement of a specified milestone, which disbursement was received in August 2024.

Previous wording

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. The remaining $9.1 million available under the award is payable to Combangio only upon the achievement of specified milestones that are primarily related to Combangio’s progress in conducting the CHASE clinical trial. CIRM may permanently cease disbursements if the milestones are not met within four months of the scheduled completion dates. 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 $1.0 million of funds utilized by us 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, or 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 million per year until the last to expire patent covering such invention expires.

Current wording

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. The remaining $5.9 million available under the CIRM Award is payable to Combangio only upon the achievement of specified milestones that are primarily related to Combangio’s progress in conducting the CHASE 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 $1.0 million of funds utilized by us 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, or 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 million per year until the last to expire patent covering such invention expires.

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies ascritical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies ascritical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making

Previous wording

General and administrative expenses were $5.4 million for the three months ended March 31, 2024, compared to $6.0 million for the three months ended March 31, 2023, which was a decrease of $0.6 million. The decrease in general and administrative expenses for the three months ended March 31, 2024 was primarily due to a $1.3 million decrease in administrative and professional service fees, partially offset by a $0.7 million increase in stock-based compensation costs and employee related costs.

Current wording

General and administrative expenses were $4.3 million for the three months ended June 30, 2024, compared to $5.0 million for the three months ended June 30, 2023, which was a decrease of $0.6 million. The decrease in general and administrative expenses for the three months ended June 30, 2024 was due to a decrease of $0.7 million in administrative and professional service fees and a decrease of $0.2 million in employee-related costs, partially offset by an increase of $0.3 million in stock-based compensation costs.

Previous wording

Research and development expenses were $6.4 million for the three months ended March 31, 2024, compared to $4.0 million for the three months ended March 31, 2023, an increase of $2.3 million. The increase was primarily related to a$1.2 million increase in KPI-012 development costs and a$0.7 million increasein employee-related costs, as

Current wording

Research and development expenses were $5.3 million for the three months ended June 30, 2024, compared to $4.3 million for the three months ended June 30, 2023, an increase of $1.0 million. The increase was primarily related to a$0.6 million increase in KPI-012 development costs, as we advance the clinical development of KPI-012, a$0.3 million increasein employee-related costs and a $0.1 million increase in other research and development costs, which primarily included facility costs.

Previous wording

Grant income for the three months ended March 31, 2024 was $1.1 million related to the CIRM Award. There was no grant income recognized during the three months ended March 31, 2023.

Current wording

Grant income for the three months ended June 30, 2024 was $1.0 million related to the CIRM Award. There was no grant income recognized during the three months ended June 30, 2023.

Previous wording

There was no gain or loss on fair value remeasurement of Deferred Purchase Consideration for the three months ended March 31, 2024 due to the final settlement of the liability in March 2023. The gain on fair value remeasurement of Deferred Purchase Consideration for the three months ended March 31, 2023 was $0.2 million, which was primarily due to a change in the fair value of our underlying stock price.

Current wording

There was no gain or loss on fair value remeasurement of Deferred Purchase Consideration for the six months ended June 30, 2024 due to the final settlement of the liability in March 2023. The gain on fair value remeasurement of Deferred Purchase Consideration for the six months ended June 30, 2023 was $0.2 million, which was primarily due to a change in the fair value of our underlying stock price.

Previous wording

Loss on fair value remeasurement of contingent consideration for the three months ended March 31, 2024 and 2023 was $0.2 million and $1.8 million, respectively, primarily due tochanges in discount rates, the passage of time and changes in the expected timing and probability of payment.

Current wording

Loss on fair value remeasurement of contingent consideration for the six months ended June 30, 2024 and 2023 was $0.1 million and $2.2 million, respectively, primarily due tochanges in discount rates, the passage of time and changes in the expected timing and probability of payment.

Previous wording

We incurred interest expense of $1.5 million for each of the three months ended March 31, 2024 and 2023. Interest expense for the three months ended March 31, 2024 and 2023 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 three months ended March 31, 2024, $34.0 million of indebtedness was outstanding under our Loan Agreement. During the three months ended March 31, 2023, $43.3 million of indebtedness was outstanding under our Loan Agreement until $9.3 million was repaid on January 25, 2023 resulting in an outstanding indebtedness of $34.0 million.

Current wording

We incurred interest expense of $2.9 million for both the six months ended June 30, 2024 and 2023. Interest expense for the six months ended June 30, 2024 and 2023 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, 2024, $34.0 million of indebtedness was outstanding under our Loan Agreement. During the six months ended June 30, 2023, $43.3 million of indebtedness was outstanding under our Loan Agreement until $9.3 million was repaid on January 25, 2023 resulting in an outstanding indebtedness of $34.0 million.

Previous wording

There was no other income (expense), net for the three months ended March 31, 2024. Other expense, net was $2.0 million for the three months ended March 31, 2023 andrepresenteda $2.2 million expense recorded to assets held for sale for expiring inventory, partially offset by $0.2 million of reimbursable transition related services we provided to Alcon following the sale of the Commercial Business.

Current wording

There was no other (expense) income, net for thesix months ended June 30, 2024. Other expense, net was $2.1 million for the six months ended June 30, 2023 andrepresenteda $2.3 million expense recorded to assets held for sale for expiring inventory, partially offset by $0.2 million of reimbursable transition related services we provided to Alcon following the sale of the Commercial Business.

Previous wording

Since our inception, we have incurred significant operating losses. We only generated limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of our Commercial Business to Alcon in July 2022. We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon in July 2022, our IPO, follow-on public common stock offerings and sales of our common stock under our at-the-market equity offerings, private placements of common stock and/or preferred stock, borrowings under credit facilities andour Loan

Current wording

Since our inception, we have incurred significant operating losses. We only generated limited revenues from product sales of EYSUVIS and INVELTYS prior to the sale of our Commercial Business to Alcon in July 2022. We have financed our operations primarily through proceeds from the sale of our Commercial Business to Alcon in July 2022, our IPO, follow-on public common stock offerings and sales of our common stock under our at-the-market equity offerings, private placements of common stock and/or preferred stock, borrowings under credit facilities andour Loan and Security Agreement, orthe Loan Agreement, with Oxford Finance LLC, or Oxford Finance, disbursements under a grant from CIRM, convertible promissory notes and warrants.

Previous wording

In July 2022, we sold our Commercial Business to Alcon. In addition to the upfront cash payment of $60.0 million we received from Alcon, we are also eligible to receive from Alcon up to four commercial-based sales milestone payments as follows: (1) $25.0 million upon the achievement of $50.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $65.0 million upon the achievement of $100.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $75.0 million upon the achievement of $175.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160.0 million upon the achievement of $250.0 million 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. To date, we have not received any such milestone payments. We now have no revenue-generating commercial products, and although we are eligible to receive up to $325.0 million in milestone-based payments from Alcon, there can be no assurance as to when we may receive such milestone payments or the amount of milestone payments we may receive, if any.

Current wording

(3) $75.0 million upon the achievement of $175.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160.0 million upon the achievement of $250.0 million 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. To date, we have not received any such milestone payments. We now have no revenue-generating commercial products, and although we are eligible to receive up to $325.0 million in milestone-based payments from Alcon, there can be no assurance as to when we may receive such milestone payments or the amount of milestone payments we may receive, if any.

Previous wording

During the three months ended March 31, 2023, the Company sold an aggregate of 475,265 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 2020 Shelf ATM Prospectus Supplement, for total net proceeds of $14.9 million.

Current wording

During the six months ended June 30, 2023, we sold an aggregate of 190,000 shares of our common stock under the Open Market Sale Agreement under the 2023 Shelf Registration for total net proceeds of $3.1 million, all of which were sold during the three months ended June 30, 2023. During the six months ended June 30, 2023, we sold an aggregate of 665,265 shares of our common stock pursuant to (1) the Amended and Restated Sales Agreement and the Open Market Sale Agreement under the 2020 Shelf Registration and (2) the Open Market Sale Agreement under the 2023 Shelf Registration, for total net proceeds of $18.0 million.

Previous wording

We 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 our option, we may elect to make partial repayments of the term loan to the Lender, subject to specified conditions, including the payment of

Current wording

We 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 our option, we 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. For further information about the Loan Agreement, see Note 8, “Debt”, of our condensed consolidated financial statements.

Previous wording

On April 28, 2023, CIRM awarded Combangio a $15 million grant, subject to entering into a final award agreement, to support its ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program. On August 2, 2023, Combangio entered into the CIRM Award and became entitled to receive $5.9 million. For a further description of the CIRM Award and the potential milestone payments we may receive, see “Financial Operations Overview – Grant Income” above.

Current wording

On April 28, 2023, CIRM awarded Combangio a $15 million grant, subject to entering into a final award agreement, to support its ongoing KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program. On August 2, 2023, Combangio entered into the CIRM Award and received a $5.9 million disbursement from CIRM, and in August 2024, Combangio received an additional $3.2 million disbursement from CIRM upon achievement of a specified milestone under the CIRM Award in May 2024. For a further description of the CIRM Award and the potential milestone payments we may receive, see “Financial Operations Overview – Grant Income” above.

Previous wording

As a result of the acquisition of Combangio, we may be required to pay additional contingent consideration to the former Combangio Equityholders. Former Combangio Equityholders are entitled to receive from us, subject to the terms and conditions of the merger agreement, contingent consideration, which would become payable upon our achievement of various development, regulatory and sales milestones and as a result of certain cash royalty payment obligations which are in the mid-to-high single digits. The total potential maximum payout for the milestone payments which are contingent upon the achievement of specified development, regulatory and commercialization milestones is $40.0 million and the total potential maximum payout for future sales-based milestone payments is an additional $65.0 million. To date, of the $40.0 million of contingent consideration payable upon achievement of specified development, regulatory and commercialization milestones, in March 2023 we paid to the former Combangio Equityholders an aggregate of $2.5 million in cash and $2.4 million in shares of our common stock (representing an aggregate of 105,038

Current wording

As a result of the acquisition of Combangio, we may be required to pay additional contingent consideration to the former Combangio Equityholders. Former Combangio Equityholders are entitled to receive from us, subject to the terms and conditions of the merger agreement, contingent consideration, which would become payable upon our achievement of various development, regulatory and sales milestones and as a result of certain cash royalty payment obligations which are in the mid-to-high single digits. The total potential maximum payout for the milestone payments

Previous wording

shares of our common stock) following dosing of the first patient in our CHASE trial in February 2023. The remaining amount of $0.1 million for this milestone was paid in cash in January 2024. For a full description of the consideration payable as a result of the Combangio Acquisition, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and Note 3, “Fair Value of Financial Instruments”, of our condensed consolidated financial statements.

Current wording

which are contingent upon the achievement of specified development, regulatory and commercialization milestones is $40.0 million and the total potential maximum payout for future sales-based milestone payments is an additional $65.0 million. To date, of the $40.0 million of contingent consideration payable upon achievement of specified development, regulatory and commercialization milestones, in March 2023 we paid to the former Combangio Equityholders an aggregate of $2.5 million in cash and $2.4 million in shares of our common stock (representing an aggregate of 105,038 shares of our common stock) following dosing of the first patient in our CHASE trial in February 2023. The remaining amount of $0.1 million for this milestone was paid in cash in January 2024. For a full description of the consideration payable as a result of the Combangio Acquisition, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and Note 3, “Fair Value of Financial Instruments”, of our condensed consolidated financial statements.

Previous wording

As of March 31, 2024 and December 31, 2023, we had $48.5 million and $50.9 million in cash and cash equivalents, respectively. As of March 31, 2024 and December 31, 2023, we had $34.0 million in indebtedness, which represented the aggregate principal amount that was outstanding under the Loan Agreement with Oxford Finance.

Current wording

As of June 30, 2024 and December 31, 2023, we had $54.2 million and $50.9 million in cash and cash equivalents, respectively. As of June 30, 2024 and December 31, 2023, we had $34.0 million in indebtedness, which represented the aggregate principal amount that was outstanding under the Loan Agreement with Oxford Finance.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was $10.8 million, compared to $9.7 million for the three months ended March 31, 2023, an increase of $1.1 million, primarily due to a $3.4 million increase due to the timing of working capital fluctuations, partially offset by the decrease in the net loss adjusted for non-cash charges of $2.3 million. Notable working capital fluctuations included a $0.4 million decrease in prepaid expenses and other current assets during the three months ended March 31, 2024, as compared to a $5.5 million decrease during the three months ended March 31, 2023, as a result of the collection of receivables due from Alcon and third parties in connection with transition-related services. Inventory and assets held for sale decreased by $2.2 million during the three months ended March 31, 2023, as a result of the expense recorded to assets held for sale to write-off the remaining inventory balance, whereas there was no fluctuation related to inventory for the three months ended March 31, 2024. These changes in working capital from the three months ended March 31, 2023 to the three months ended March 31, 2024 were partially offset by a decrease of $4.0 million in accounts payable and accrued expenses and other current liabilities fluctuations due to the timing of payables.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was $20.1 million, compared to $17.3 million for the six months ended June 30, 2023, an increase of $2.8 million, primarily due to a $6.3 million increase due to the timing of working capital fluctuations, partially offset by the decrease in the net loss adjusted for non-cash charges of $3.5 million. Notable working capital fluctuations included a $2.7 million increase in prepaid expenses and other current assets during the six months ended June 30, 2024, primarily as a result of a second disbursement of $3.2 million from CIRM in August 2024, which was included in prepaid expenses and other current assets as of June 30, 2024, as compared to a $6.7 million decrease during the six months ended June 30, 2023, as a result of the collection of receivables due from Alcon and third parties in connection with transition-related services. Inventory and assets held for sale decreased by $2.3 million during the six months ended June 30, 2023, as a result of the expense recorded to assets held for sale to write-off the remaining inventory balance, whereas there was no fluctuation related to inventory for the six months ended June 30, 2024. These changes in working capital from the six months ended June 30, 2023 as compared to the six months ended June 30, 2024 were partially offset by a decrease of $5.4 million in accounts payable and accrued expenses and other current liabilities fluctuations primarily due to the timing of payables.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 was less than $0.1 million compared to $0.1 million for the three months ended March 31, 2023, a decrease of $0.1 million. Net cash used in investing activities for the three months ended March 31, 2024 related to purchases of property and equipment and other assets of less than $0.1 million. Net cash used in investing activities for the three months ended March 31, 2023 related to purchases of property and equipment and other assets of $0.1 million.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 was less than $0.1 million compared to $10.1 million for the six months ended June 30, 2023, a decrease of $10.1 million. Net cash used in investing activities for the six months ended June 30, 2024 related to purchases of property and equipment and other assets. Net cash used in investing activities for the six months ended June 30, 2023 related to purchases of short-term investments of $9.9 million and purchases of property and equipment and other assets of $0.3 million, partially offset by proceeds from the sale of property and equipment of less than $0.1 million.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2024 was $8.4 million, compared to $2.9 million for the three months ended March 31, 2023, an increase of $5.5 million. Net cash provided by financing activities for the three months ended March 31, 2024 largely consisted of $8.5 million of netproceeds from the sale of shares of our Series G Preferred Stock in our 2024 Private Placement, partially offset by a $0.1 million payment for the First Dosing Milestone reflected in financing activities. Net cash provided by financing activities for the three months ended March 31, 2023 largely consisted of $14.9 million ofnet proceeds from the sale of shares of our common stock through Jefferies under our at-the market equity offering, partially offset by$10.0 million of repayment of principal and final payment fee on our Loan Agreement and a $2.0 million payment for the First Dosing Milestone reflected in financing activities.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2024 was $23.4 million, compared to $5.9 million for the six months ended June 30, 2023, an increase of $17.5 million. Net cash provided by financing activities for the six months ended June 30, 2024 largely consisted of $12.5 million of gross proceeds fromthe sale of common stock and shares of our Series H Preferred Stock in our June 2024 private placement,$8.5 million of netproceeds from the sale of shares of our Series G Preferred Stock in our March 2024 private placement and$2.5 million ofnet proceeds from the sale of shares of our common stock through Jefferies under our at-the-market equity offering, partially offset by a $0.1 million payment for the First Dosing Milestone reflected in financing activities. Net cash provided by financing activities for the six months ended June 30, 2023 largely consisted of $18.0 million of net proceeds from the sale of shares of our common stock through Jefferies under our at-the-market equity offering, partially offset by $10.0 million of repayment of principal and final payment fee on our Loan Agreement and a $2.0 million payment for the First Dosing Milestone reflected in financing activities.

Previous wording

together with the $9.1 million of remaining funding anticipated under the CIRM Award, will enable us to fund our operations, lease and debt service obligations, and capital expenditure requirements into the third quarter of 2025. We expect that our existing cash resources will be sufficient to enable us to obtain safety and efficacy data from our ongoing CHASE trial of KPI-012 in PCED. However, we do not expect that our existing cash resources will be sufficient to enable us to complete the clinical development of KPI-012 for PCED or for any other indication. We have based our estimates on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. For example, we may not receive all of the funds awarded under the CIRM Award. As a result, we could deplete our available capital resources sooner or later than we currently expect.

Current wording

We expect to continue to incur significant expenses and operating losses. Net losses may fluctuate significantly from quarter-to-quarter and year-to-year. We anticipate that our cash and cash equivalents as of June 30, 2024, together with the $3.2 million of funds received under the CIRM Award in August 2024 and the $5.9 million of remaining funding anticipated under the CIRM Award, will enable us to fund our operations, lease and debt service obligations, and capital expenditure requirements into the fourth quarter of 2025. We expect that our existing cash resources will be sufficient to enable us to obtain safety and efficacy data from our ongoing CHASE trial of KPI-012 in PCED. However, we do not expect that our existing cash resources will be sufficient to enable us to complete the clinical development of KPI-012 for PCED or for any other indication. We have based our estimates on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. For example, we may not receive all of the remaining funds under the CIRM Award. As a result, we could deplete our available capital resources sooner or later than we currently expect.

Previous wording

As a company, we have limited experience commercializing products, and we may not be able to commercialize a product successfully in the future. There are numerous examples of unsuccessful product launches and failures to meet expectations of market potential, including by pharmaceutical companies with more experience and resources than us. We may never succeed in the foregoing activities and we may never generate revenue that is sufficient to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a

Current wording

As a company, we have limited experience commercializing products, and we may not be able to commercialize a product successfully in the future. There are numerous examples of unsuccessful product launches and failures to meet expectations of market potential, including by pharmaceutical companies with more experience and resources than us. We may never succeed in the foregoing activities and we may never generate revenue that is sufficient to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

Previous wording

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, royalty agreements, and marketing and distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include pledging of assets as collateral, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our pledge of our assets as collateral to secure our obligations under our Loan Agreement may limit our ability to obtain additional debt financing. Under our Loan Agreement, we are also restricted from incurring future debt, granting liens, making investments, making acquisitions, distributing dividends on our common stock, making certain restricted payments and selling assets and making certain other uses of our cash, without the lenders’ consent, subject in each case to certain exceptions. In addition, under the securities purchase agreements for our 2022, 2023 and 2024 Private Placements, we also agreed that we will not, without the prior approval of the requisite purchasers, (i) issue or authorize the issuance of any equity security that is senior orpari passu to the Series E Preferred Stock, the Series F Preferred Stock or the Series G Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1.0 million, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions.

Current wording

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, royalty agreements, and marketing and distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include pledging of assets as collateral, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our pledge of our assets as collateral to secure our obligations under our Loan Agreement may limit our ability to obtain additional debt financing. Under our Loan Agreement, we are also restricted from incurring future debt, granting liens, making investments, making acquisitions, distributing dividends on our common stock, making certain restricted payments and selling assets and making certain other uses of our cash, without the lenders’ consent, subject in each case to certain exceptions. In addition, under the securities purchase agreements for our 2022, 2023 and March 2024 private placements, we also agreed that we will not, without the prior approval of the requisite purchasers, (i) issue or authorize the issuance of any equity security that is senior orpari passu to the Series E Preferred Stock, the Series F Preferred Stock, or the Series G Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1.0 million, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions. Under the securities purchase agreement for our June 2024 private placement, we agreed that we will not without the prior