A Potential Failure to Maintain Effective Internal Control Over Financial Reporting Could Adversely Impact Kairos

Overview Kairos is a clinical-stage biopharmaceutical company developing therapeutics to overcome key hurdles in immune suppression and drug resistance for cancer patients. Since inception, Kairos has focused on organizing the company, raising capital, developing its technology, and conducting preclinical and clinical studies. The company has not generated any revenue from product sales and has incurred significant operating losses.

Financial Performance

• Kairos reported a net loss of $2,603 in 2024 and $1,812 in 2023. The increase in net loss was primarily due to higher research and development expenses as the company advanced its clinical trials.
• Operating expenses consisted of $414 in research and development and $1,929 in general and administrative costs in 2024, compared to $82 and $1,632 respectively in 2023. The increase was driven by higher consulting, contract labor, and other professional service expenses.
• Kairos ended 2024 with $1,272 in cash after receiving $5,524 in net proceeds from its IPO. In January 2025, the company raised an additional $3,145 through a PIPE offering, which it expects will fund operations for at least the next 12 months.

Strengths and Weaknesses Strengths:

• Promising pipeline of novel cancer therapeutics targeting immune suppression and drug resistance
• Experienced management team and scientific founders
• Successful completion of IPO and PIPE financing to fund near-term operations

Weaknesses:

• Lack of public company experience for management team could impact compliance with reporting requirements
• Potential for securities class action litigation due to stock price volatility common in the biotech industry
• Indemnification agreements with directors and officers could reduce funds available to satisfy third-party claims

Outlook Kairos expects to continue incurring significant operating losses as it advances its product candidates through clinical development. The company will require additional financing, likely through a combination of equity, debt, and potential collaborations, to fund its operations and development programs. Maintaining effective internal control over financial reporting will be critical as Kairos transitions to being a public company. Failure to do so could lead to reputational damage, regulatory issues, and loss of investor confidence, which would significantly impact the business.