8-K: KALA BIO Secures $6M Investment, Settles Debt, Appoints New CEO

KALA BIO, Inc. announced a $6.0 million private placement, a debt settlement with Oxford Finance, and significant management changes, including the appointment of David Lazar as CEO, amidst severe financial distress.

Summary

• KALA BIO, Inc. (the Company) received a default notice from Oxford Finance, LLC (Oxford) on September 29, 2025, declaring all obligations under the Loan Agreement immediately due.
• On October 19, 2025, Oxford informed the Company of its intent to foreclose on assets and swept substantially all cash resources, leading to the termination of most employees.
• Oxford paused foreclosure on November 3, 2025, allowing the Company to use $125,000 for negotiation and execution of a Convertible Loan Agreement.
• On November 9, 2025, the Company entered into a Convertible Loan Agreement with David Lazar (the Investor) for $375,000.
• On November 23, 2025, the Company entered into a Securities Purchase Agreement with the Investor for a private placement of Series AA and Series AAA Convertible Non-Redeemable Preferred Stock, totaling up to $6.0 million.
• The First Closing occurred on November 24, 2025, with the issuance of 900,000 Series AA Preferred Shares for $1.8 million.
• The Second Closing, for 2,100,000 Series AAA Preferred Shares for $4.2 million, is contingent on stockholder approvals (share increase and conversion approval) and is expected before March 31, 2026.
• Net proceeds from the Private Placement, excluding $1.0 million for Oxford, will fund current operations, liabilities, and expenses.
• The Company entered into a Loan Settlement Agreement with Oxford on November 23, 2025, agreeing to pay $2.0 million in cash and issue 1,620,000 shares of Common Stock (Settlement Stock) to settle outstanding loan obligations.
• An initial cash payment of $1.0 million to Oxford is due by January 15, 2026, or the shareholder meeting date.
• Upon initial cash payment and Settlement Stock issuance, the outstanding loan amount will be reduced by $7.0 million, and related interest/fees waived.
• Oxford will release control over the Company's cash accounts upon Settlement Stock issuance.
• The Company will pay Oxford 10% of future equity proceeds (up to an additional $1.0 million), with each payment reducing the loan by three times the payment amount.
• The Company committed to concluding a material strategic alternative transaction within one year, at which point any remaining cash settlement balance to Oxford is due.
• A Voting Agreement was signed on November 23, 2025, where Oxford agreed to vote its Proxy Shares (including the 1,620,000 Settlement Stock shares) in favor of Board-recommended proposals for four months and abide by a four-month standstill provision.
• Officer Settlement Agreements were made on November 20, 2025, with Todd Bazemore ($52,400), Mary Reumuth ($37,700), and Kim Brazzell ($36,613), payable upon stockholder meeting, in exchange for waiving contractual severance.
• Mary Reumuth was terminated as CFO and Secretary on November 21, 2025.
• David Lazar was appointed CEO (principal executive officer) and principal financial officer, and elected Class II director and Chair of the Board on November 21, 2025. Todd Bazemore ceased to be principal executive officer.
• Gregory Perry resigned as a director on November 23, 2025.
• The Series AA Preferred Stock is convertible into 55 shares of Common Stock (after stockholder approvals) and ranks senior to Common Stock but junior to existing Series E, F, G, H, I Preferred Stock.
• The Series AAA Preferred Stock is convertible into 420 shares of Common Stock (after stockholder approvals) and has substantially similar terms to Series AA.

Sentiment

Score: 2

Explanation: While new funding and debt settlement provide a lifeline, the company is in severe financial distress, has terminated most employees, and faces significant dilution. The capital raised is explicitly stated as insufficient to cover all existing obligations, indicating a highly precarious situation despite the immediate relief.

Positives

• Secured a $6.0 million private placement from David Lazar, providing much-needed capital.
• Reached a settlement agreement with Oxford Finance, LLC, reducing the outstanding loan by $7.0 million and potentially more, and releasing control over the Company's cash.
• New management (David Lazar as CEO and Chairman) brings experience in public biopharmaceutical companies.
• Oxford Finance has agreed to a four-month voting agreement and standstill, providing stability during a critical transition.
• The Company has a path to resolve its default status and continue operations, albeit in a significantly restructured form.

Negatives

• The Company was in severe financial distress, having received a default notice, faced foreclosure, and had substantially all cash swept by Oxford Finance.
• Mass employee terminations occurred on October 19, 2025, indicating a significant operational shutdown.
• The new preferred stock issuances will result in substantial dilution for existing common stockholders.
• The Company acknowledges it has 'few remaining employees whose knowledge of the Company is limited' and 'has liabilities that likely far exceed the value of its assets.'
• The California Facility landlord has locked the Company out and delivered a notice of default and termination for the lease.
• The $6.0 million capital raise is explicitly stated as 'not sufficient to satisfy in full all obligations of the Company existing as of the Effective Date or at the time of any Closing.'

Risks

• Failure to obtain Stockholder Approvals for the share increase and conversion of preferred stock, which would prevent the Second Closing and full capital raise.
• The risk that the Settlement Payment to Oxford is not fully made or is avoided/reduced in bankruptcy proceedings.
• Uncertainties regarding the timing of the consummation of the First and Second Closings.
• The Company's ability to maintain its listing on The Nasdaq Capital Market.
• The Company's ability to identify and consummate a strategic alternative transaction within the anticipated timeline or at all.
• General risks discussed in the Company's Annual Report on Form 10-K and Quarterly Report on Form 10-Q.
• The Company's severe financial distress, limited employee knowledge, and liabilities exceeding assets.
• Potential claims from the California Facility landlord and other creditors.

Future Outlook

The Company expects to use the net proceeds from the private placement to fund current operations, liabilities, and expenses. It aims to hold a stockholder meeting before March 31, 2026, to approve the necessary share increase and conversion of preferred stock. The Company also undertakes to conclude a material strategic alternative transaction within one year.

Management Comments

• The Company has few remaining employees whose knowledge of the Company is limited, is in severe financial distress, has no unencumbered cash, has liabilities that likely far exceed the value of its assets, has incurred and continued to incur liabilities in the course of its wind-down, and is facing the imminent threat of foreclosure by Oxford on its remaining assets.
• The Purchase Price will not be sufficient to satisfy in full all obligations of the Company existing as of the Effective Date or at the time of any Closing.

Industry Context

This announcement reflects a distressed biopharmaceutical company undergoing a significant restructuring and capital injection to avoid complete collapse. The entry of a new investor and CEO with experience in public biopharmaceutical companies suggests an attempt to pivot or revitalize the company, common in the highly capital-intensive and risk-prone biotech sector where companies often face 'cash crunch' situations and seek strategic alternatives or new funding to survive. The substantial dilution and debt settlement indicate a last-resort effort to maintain operations and Nasdaq listing.

Management Changes

Corporate Governance

Related Party Transactions

• David Lazar (the Investor) is providing a $375,000 convertible loan and is the purchaser in the $6.0 million private placement.
• David Lazar has been appointed as the new CEO, principal financial officer, Class II director, and Chair of the Board.
• Oxford Finance, LLC is a party to the Loan and Security Agreement, the Loan Settlement Agreement, and the Voting Agreement. It will receive cash and common stock as part of the settlement.

Stakeholder Impact

• Shareholders: Existing common shareholders face significant dilution from the issuance of preferred stock and settlement stock. Their voting power will be substantially reduced. The company's survival might be positive, but at a high cost to current equity.
• Employees: Most employees were terminated on October 19, 2025. The remaining employees will operate under new management and a highly restructured company.
• Creditors (Oxford Finance, LLC): Oxford Finance, LLC has settled a significant portion of its debt and will receive cash and equity, along with a voting agreement and standstill, providing a structured exit or continued influence.
• Customers/Suppliers: The severe financial distress and operational changes could impact the company's ability to serve customers or maintain supplier relationships, though the new funding aims to stabilize operations.

Next Steps

• Hold a Stockholder Meeting before March 31, 2026, to vote on increasing authorized common stock and approving the conversion of preferred shares.
• File an amendment to the Restated Certificate of Incorporation (Charter Amendment) effecting the share increase.
• File a Certificate of Designations for Series AAA Preferred Stock in connection with the Second Closing.
• Issue Settlement Stock to Oxford within five days of the Oxford Loan Settlement Agreement.
• Pay the Initial Cash Payment of $1.0 million to Oxford by January 15, 2026, or the Stockholder Meeting date.
• Conclude a material strategic alternative transaction within one year after the Oxford Loan Settlement Agreement date.
• Pay any remaining balance of the Cash Settlement to Oxford upon the closing of a strategic alternative transaction.
• David Lazar to assume roles of CEO, principal financial officer, and Chair of the Board.

Key Dates

Recommendation

Despite securing new funding and settling a portion of its debt, KALA BIO is in severe financial distress, with liabilities likely exceeding assets and most employees terminated. The new capital is explicitly stated as insufficient to cover all existing obligations. The significant dilution from preferred stock issuance and settlement stock, coupled with the precarious financial position and reliance on future stockholder approvals, makes this a highly speculative and risky investment. The company's long-term viability remains highly uncertain, and existing common shareholders face substantial value erosion.

Keywords

KALA BIO, KALA, SEC filing, 8-K, private placement, preferred stock, convertible loan, debt settlement, Oxford Finance, David Lazar, CEO appointment, corporate governance, financial distress, dilution, Nasdaq listing, strategic alternative, biopharmaceutical