0001410578-21-000215.txt : 20211115 0001410578-21-000215.hdr.sgml : 20211115 20211115073048 ACCESSION NUMBER: 0001410578-21-000215 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 69 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20211115 DATE AS OF CHANGE: 20211115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIORA PHARMACEUTICALS INC CENTRAL INDEX KEY: 0001372514 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36672 FILM NUMBER: 211406335 BUSINESS ADDRESS: STREET 1: 1371 EAST 2100 SOUTH STREET 2: SUITE 200 CITY: SALT LAKE CITY STATE: UT ZIP: 84105 BUSINESS PHONE: (781) 788-8869 MAIL ADDRESS: STREET 1: 1371 EAST 2100 SOUTH STREET 2: SUITE 200 CITY: SALT LAKE CITY STATE: UT ZIP: 84105 FORMER COMPANY: FORMER CONFORMED NAME: EYEGATE PHARMACEUTICALS INC DATE OF NAME CHANGE: 20060811 10-Q 1 kprx-20210930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 001-36672

KIORA PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

    

98-0443284

(State or other jurisdiction of
Incorporation or organization)

(I.R.S. Employer
Identification No.)

1371 East 2100 South

Suite 200

Salt Lake City, UT 84105

(Address of Principal Executive Offices, including zip code)

(781) 788-8869

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbol(s)

    

Name of each exchange on which registered

Common Stock, $0.01 par value

KPRX

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes       No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit).       Yes       No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

  Yes       No

At November 10, 2021, there were 12,653,054 shares of the registrant’s common stock outstanding.

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

Table of Contents

QUARTERLY REPORT ON FORM 10-Q

For the Period Ended September 30, 2021

INDEX

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

4

Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020

4

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the Three and Nine Months Ended September 30, 2021 and 2020

5

Condensed Consolidated Statement of Stockholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2021 and 2020

6

Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2021 and 2020

8

Notes to Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

23

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

31

Item 4.

Controls and Procedures.

31

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

32

Item 1A.

Risk Factors.

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

32

Item 3.

Defaults Upon Senior Securities.

32

Item 4.

Mine Safety Disclosures.

32

Item 5.

Other Information.

32

Item 6.

Exhibits.

32

SIGNATURES

33

1

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The forward-looking statements are principally, but not exclusively, contained in “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about management’s confidence or expectations, and our plans, objectives, expectations, and intentions that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “goals,” “sees,” “estimates,” “projects,” “predicts,” “intends,” “think,” “potential,” “objectives,” “optimistic,” “strategy,” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

the timing and success of preclinical studies and clinical trials conducted by us and our development partners;
the ability to obtain and maintain regulatory approval of our product candidates, and the labeling for any approved products;
the scope, progress, expansion, and costs of developing and commercializing our product candidates;
the size and growth of the potential markets for our product candidates and the ability to serve those markets;
our expectations regarding our expenses and revenue, the sufficiency of our cash resources and needs for additional financing;
the rate and degree of market acceptance of any of our product candidates;
our expectations regarding competition;
our anticipated growth strategies;
our ability to attract or retain key personnel;
our ability to establish and maintain development partnerships;
our expectations regarding federal, state and foreign regulatory requirements;
regulatory developments in the U.S. and foreign countries;
our ability to obtain and maintain intellectual property protection for our product candidates;
the anticipated trends and challenges in our business and the market in which we operate; and
the impact of the evolving COVID-19 pandemic and the global response thereto.

2

We discuss many of these risks in detail under the heading “Item 1A. Risk Factors” beginning on page 24 of our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, or the SEC, on March 25, 2021, or the Annual Report. You should carefully review all of these factors, as well as other risks described in our public filings, and you should be aware that there may be other factors, including factors of which we are not currently aware, that could cause these differences.

Also, these forward-looking statements represent our estimates and assumptions only as of the date of this report. We may not update these forward-looking statements, even though our situation may change in the future, unless we have obligations under the federal securities laws to update and disclose material developments related to previously disclosed information.

Kiora Pharmaceuticals, Inc. is referred to herein as “we,” “our,” “us,” and “the Company.”

3

PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements.

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

    

September 30, 2021

    

(unaudited)

December 31, 2020

ASSETS

 

  

 

  

Current Assets:

 

  

 

  

Cash and Cash Equivalents

$

11,106,927

$

1,185,677

Prepaid Expenses and Other Current Assets

 

341,629

 

449,569

Other Receivables

421,463

90,975

Total Current Assets

 

11,870,019

 

1,726,221

Property and Equipment, Net

 

78,833

 

30,566

Restricted Cash

 

45,000

 

45,000

Goodwill

 

3,484,607

 

3,484,607

Intangible Assets and In-Process R&D, Net

 

9,711,414

 

9,730,164

Operating Lease Assets with Right-of-Use

259,217

83,928

Other Assets

 

44,249

 

57,073

Total Assets

$

25,493,339

$

15,157,559

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

  

Current Liabilities:

 

 

  

Accounts Payable

$

424,889

$

434,763

Accrued Expenses

 

1,389,311

 

1,289,261

Operating Lease Liabilities

 

144,742

 

48,303

Total Current Liabilities

 

1,958,942

 

1,772,327

Non-Current Liabilities:

 

 

Contingent Consideration

 

5,342,950

 

5,342,950

Deferred Tax Liability

 

728,926

 

728,926

Paycheck Protection Program Loan

278,190

Non-Current Operating Lease Liabilities

114,475

35,625

Total Non-Current Liabilities

 

6,186,351

 

6,385,691

Total Liabilities

 

8,145,293

 

8,158,018

Commitments and Contingencies (Note 10)

 

 

  

Stockholders’ Equity:

 

 

  

Preferred Stock, $0.01 Par Value: 10,000,000 shares authorized; 3,750 designated Series A, 0 shares issued and outstanding at September 30, 2021 and December 31, 2020; 10,000 designated Series B, 0 shares issued and outstanding at September 30, 2021 and December 31, 2020; 10,000 shares designated Series C, 0 and 4,092 shares issued and outstanding at September 30, 2021 and December 31, 2020; 20,000 shares designated Series D, 46 shares issued and outstanding at September 30, 2021 and December 31, 2020

 

 

41

Common Stock, $0.01 Par Value: 50,000,000 shares authorized; 12,619,256 and 5,556,394 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

 

126,193

 

55,564

Additional Paid-In Capital

 

133,637,500

 

115,283,572

Accumulated Deficit

 

(116,355,777)

 

(108,338,834)

Accumulated Other Comprehensive Loss

 

(59,870)

 

(802)

Total Stockholders’ Equity

 

17,348,046

 

6,999,541

Total Liabilities and Stockholders’ Equity

$

25,493,339

$

15,157,559

See Accompanying Notes to Condensed Consolidated Financial Statements.

4

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

Three Months Ended

    

Nine Months Ended

    

September 30, 

    

September 30, 

    

September 30, 

    

September 30, 

2021

2020

2021

2020

Operating Expenses:

 

  

 

  

 

  

  

Research and Development

$

1,628,467

$

985,880

$

4,348,631

$

2,555,035

General and Administrative

 

1,338,616

 

1,021,325

 

3,944,624

 

3,144,255

Total Operating Expenses

 

2,967,083

 

2,007,205

 

8,293,255

 

5,699,290

Operating Loss Before Other Expense

 

(2,967,083)

 

(2,007,205)

 

(8,293,255)

 

(5,699,290)

Other Income, Net:

 

 

 

Gain on Forgiveness of Loan

278,190

Interest Income

 

259

 

331

 

841

 

23,115

Interest Expense

 

 

 

(2,719)

 

Total Other Income, Net

 

259

 

331

 

276,312

 

23,115

Net Loss

$

(2,966,824)

$

(2,006,874)

$

(8,016,943)

$

(5,676,175)

Net Loss per Common Share - Basic and Diluted

$

(0.29)

$

(0.44)

$

(0.99)

$

(1.25)

Weighted Average Shares Outstanding - Basic and Diluted

10,265,108

4,547,524

8,101,004

4,536,014

Other Comprehensive Loss:

 

 

 

Net Loss

$

(2,966,824)

$

(2,006,874)

$

(8,016,943)

$

(5,676,175)

Foreign Currency Translation Adjustments

 

(44,734)

 

(17,110)

 

(59,068)

 

(16,944)

Comprehensive Loss

$

(3,011,558)

$

(2,023,984)

$

(8,076,011)

$

(5,693,119)

See Accompanying Notes to Condensed Consolidated Financial Statements.

5

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Three Months Ended September 30, 2021 and 2020

(unaudited)

Accumulated

Additional

Other

Total

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Equity

Balance at June 30, 2021

 

4,138

$

41

 

7,097,912

$

70,979

$

123,786,856

$

(15,136)

$

(113,388,953)

$

10,453,787

 

  

 

  

 

  

 

  

 

 

  

 

  

 

Stock-Based Compensation

 

 

 

 

 

149,469

 

 

 

149,469

Conversion of Series C Preferred Stock into Common Stock

(4,092)

(41)

852,500

8,525

(8,484)

Issuance of Common Stock from Registered Direct Offering, Net of Offering Costs of $993,666

4,668,844

46,689

9,709,659

9,756,348

Foreign Currency Translation Adjustment

(44,734)

(44,734)

Net Loss

 

 

 

 

 

 

 

(2,966,824)

 

(2,966,824)

 

  

 

  

 

 

  

 

  

 

  

 

  

 

  

Balance at September 30, 2021

 

46

$

12,619,256

$

126,193

$

133,637,500

$

(59,870)

$

(116,355,777)

$

17,348,046

Accumulated

Additional

Other

Total

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balance at June 30, 2020

 

4,092

$

41

 

4,626,755

$

46,268

$

111,527,859

$

139,631

$

(103,916,195)

$

7,797,604

 

  

 

  

 

 

 

 

  

 

  

 

Stock-Based Compensation

 

 

 

187,733

 

 

 

187,733

Foreign Currency Translation Adjustment

 

 

 

 

 

(17,110)

 

 

(17,110)

Net Loss

 

 

 

 

 

 

(2,006,874)

 

(2,006,874)

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Balance at September 30, 2020

 

4,092

$

41

 

4,626,755

$

46,268

$

111,715,592

$

122,521

$

(105,923,069)

$

5,961,353

See Accompanying Notes to Condensed Consolidated Financial Statements.

6

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2021 and 2020

(unaudited)

Accumulated

Additional

Other

Total

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Equity

Balance at December 31, 2020

 

4,138

 

$

41

 

5,556,394

$

55,564

$

115,283,572

$

(802)

$

(108,338,834)

$

6,999,541

Stock-Based Compensation

 

 

 

629,306

 

 

 

629,306

Issuance of Common Stock from Warrants, Net

10,417

104

49,897

50,001

Conversion of Series C Preferred Stock into Common Stock

(4,092)

(41)

852,500

8,525

(8,484)

Issuance of Common Stock from Private Placement, Net of Offering Costs of $11,142

1,531,101

15,311

7,973,550

7,988,861

Issuance of Common Stock from Registered Direct Offering, Net of Offering Costs of $993,666

4,668,844

46,689

9,709,659

9,756,348

Foreign Currency Translation Adjustment

 

 

 

(59,068)

 

 

(59,068)

Net Loss

 

 

 

 

(8,016,943)

 

(8,016,943)

Balance at September 30, 2021

 

46

$

 

12,619,256

$

126,193

$

133,637,500

$

(59,870)

$

(116,355,777)

$

17,348,046

Accumulated

Additional

Other

Total

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balance at December 31, 2019

 

4,092

 

$

41

 

4,077,775

$

40,778

$

106,689,065

$

139,465

$

(100,246,894)

$

6,622,455

Stock-Based Compensation

 

 

 

530,704

 

530,704

Issuance of Common Stock in Offerings, Net of Offering Costs of $498,687

500,000

5,000

4,496,313

4,501,313

Issuance of Common Stock from Restricted Stock Award Grants

49,000

490

(490)

Foreign Currency Translation Adjustment

 

 

(16,944)

 

(16,944)

Net Loss

 

 

 

(5,676,175)

(5,676,175)

Balance at September 30, 2020

 

4,092

$

41

 

4,626,755

$

46,268

$

111,715,592

$

122,521

$

(105,923,069)

$

5,961,353

See Accompanying Notes to Condensed Consolidated Financial Statements.

7

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Nine Months Ended September 30, 

    

2021

    

2020

Operating Activities:

 

  

 

  

Net Loss

$

(8,016,943)

$

(5,676,175)

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

 

 

Depreciation and Amortization of Intangible Assets

 

34,260

 

24,343

Reduction of Right-of-Use Assets

 

133,514

 

124,896

Stock-Based Compensation

 

629,306

 

530,704

Expiration of Prepaid Agreement

-

159,848

Changes in Operating Assets and Liabilities:

 

 

Prepaid Expenses and Other Current Assets

 

107,940

 

(202,909)

Refundable Tax Credit Receivable

 

(335,096)

 

2,303

Other Assets

 

12,826

 

16,369

Accounts Payable

 

(9,875)

 

(150,755)

Lease Liabilities

 

(133,514)

 

(124,896)

Accrued Expenses

 

100,050

 

(311,430)

Net Cash Used in Operating Activities

 

(7,477,532)

 

(5,607,702)

Investing Activities:

Purchases of Property, Plant and Equipment

(63,865)

Net Cash Used in Investing Activities

(63,865)

Financing Activities:

 

 

Proceeds from Stock Offerings, Net of Offering Costs

 

17,745,207

 

4,501,313

Paycheck Protection Program Loan Proceeds

278,190

Paycheck Protection Program Loan Forgiveness

(278,190)

Exercise of Warrants

50,001

Net Cash Provided by Financing Activities

 

17,517,018

 

4,779,503

Effect of Exchange Rate Changes on Cash

 

(54,371)

 

(17,164)

Net Increase (Decrease) in Cash

 

9,921,250

 

(845,363)

Cash, Including Restricted Cash, Beginning of Period

 

1,230,677

 

3,821,712

Cash, Including Restricted Cash, End of Period

$

11,151,927

$

2,976,349

Supplemental Disclosures of Noncash Operating and Financing Activities

 

 

Creation of Right-of-Use Assets and Related Lease Liabilities

$

313,312

$

102,579

Conversion of Series C Preferred Stock into Common Stock

$

8,525

$

Grant of Restricted Stock Awards

$

$

490

See Accompanying Notes to Condensed Consolidated Financial Statements.

8

Table of Contents

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

1. Organization, Business

On November 5, 2021, Kiora Pharmaceuticals, Inc. (formerly known as EyeGate Pharmaceuticals, Inc.) (“Kiora” or the “Company”) filed with the Secretary of State of the State of Delaware, a Certificate of Ownership and Merger, merging its wholly-owned Delaware subsidiary, Kiora Pharmaceuticals, Inc., (incorporated in October 2021) into the Company and amending the Company's certificate of incorporation to change its name to “Kiora Pharmaceuticals, Inc.” effective November 8, 2021 (the “Name Change”). The Company also amended and restated its bylaws to reflect the change to the Company's name (the “Bylaws Amendment”). The Name Change and the Bylaws Amendment each became effective on November 8, 2021. The Company’s common shares commenced trading on the Nasdaq Capital Market under the new ticker symbol "KPRX" and a new CUSIP number (49721T101) effective at the market open on November 8, 2021. Kiora is a clinical-stage specialty pharmaceutical company developing and commercializing products for treating ophthalmic diseases.

In the fourth quarter of 2020, Kiora acquired Panoptes Pharma Ges.m.b.H. (“Panoptes”) adding to its pipeline KIO-101(formerly known as PP-001), a next-generation, non-steroidal, immuno-modulatory and small-molecule inhibitor of Dihydroorotate Dehydrogenase (“DHODH”), with what Kiora believes to be a best-in-class picomolar potency and a validated immune modulating mechanism designed to overcome the off-target side effects and safety issues associated with DHODH inhibitors. KIO-101 has been developed in two clinical-stage ophthalmic formulations: an intravitreal injection for inflammatory diseases of the eye including posterior uveitis, and a novel nano carrier technology eye drop for ocular surface diseases such as dry eye disease. Other administration routes are also in development.

In addition, Kiora is developing KIO-201(formerly known as Ocular Bandage Gel or “OBG”), a modified form of the natural polymer hyaluronic acid, designed to protect the ocular surface to permit re-epithelialization of the cornea and improve ocular surface integrity. KIO-201, with unique properties that help hydrate and protect the ocular surface, is in clinical evaluation for patients undergoing photorefractive keratectomy (“PRK”) surgery for corneal wound repair after refractive surgery and patients with punctate epitheliopathies (“PE”) as a result of dry eye. A type-B meeting was held with the U.S. Food and Drug Administration’s (“FDA”) Center for Drug Evaluation and Research (“CDER”) division during the first quarter of 2021 to discuss eligibility of continuing KIO-201 clinical studies as a drug. As a result, development of KIO-201 has shifted from a medical device to a drug, which allows for reimbursement under Medicare Part D.

Since its inception, Kiora has devoted substantially all of its efforts to business planning, research and development, and raising capital.

The accompanying Condensed Consolidated Financial Statements have been prepared assuming that Kiora will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At September 30, 2021, Kiora had unrestricted Cash and Cash Equivalents of $11.107 million, and an Accumulated Deficit of $116.356 million. Kiora has incurred losses and negative cash flows since inception, and future losses are anticipated. Based on its cash on hand at September 30, 2021, the Company anticipates having sufficient cash to fund planned operations into the second half of 2022, however, the acceleration or reduction of cash outflows by Company management can significantly impact the timing for the need to raise additional capital to complete development of its products. To continue development, Kiora will need to raise additional capital through equity financing, license agreements, and/or additional U.S. government grants. Although historically the Company has been successful at raising capital, most recently raising net proceeds of approximately $9.8 million in a registered direct offering that closed on August 11, 2021, additional capital may not be available on terms favorable to Kiora, if at all. On May 13, 2019, the SEC declared effective Kiora’s registration statement on Form S-3, registering a total of $50,000,000 of its securities for sale to the public from time to time in what is known as a “shelf offering”. The Company does not know if any future offerings, including offerings pursuant to its shelf registration statement, will succeed. Accordingly, no assurances can be given that Company management will succeed in these endeavors. The Company’s recurring losses from operations have caused management to determine there is substantial doubt about the Company’s ability to continue as a going concern. The Condensed Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.

9

Table of Contents

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries, EyeGate Pharma S.A.S. (through its dissolution on December 30, 2020), Jade Therapeutics, Inc. (“Jade”) and Panoptes Pharma Ges.m.b.H. (“Panoptes”) (effective December 18, 2020 when the Company acquired all of the capital stock of Panoptes), collectively referred to as “the Company”.  All inter-company balances and transactions have been eliminated in consolidation. These Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Certain information and disclosures normally included in Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP have been condensed or eliminated. Accordingly, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the annual financial statements of the Company as of and for the year ended December 31, 2020. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial position, consolidated results of operations and other comprehensive loss and consolidated cash flows, for the periods indicated, have been made. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of operating results that may be achieved over the course of the full year.

Unaudited Interim Financial Information

The accompanying interim financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which consist of normal recurring adjustments, necessary for a fair presentation of the results of operations for the periods presented. The year-end balance sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for an interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of expenses during the reporting periods. The Company makes significant estimates and assumptions in recording the accruals for its clinical trial and research activities, establishing the useful lives of intangible assets and property and equipment, and conducting impairment reviews of long-lived assets. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Although the Company monitors and regularly assesses these estimates, actual results could differ significantly from these estimates. The Company records changes in estimates in the period that it becomes aware of the change.

Research and Development Expenses

The Company expenses research and development (“R&D”) expenditures as incurred. R&D expenses are comprised of costs incurred in performing R&D activities, including salaries, benefits, facilities, research-related overhead, sponsored research costs, contracted services, license fees, expenses related to generating, filing, and maintaining intellectual property, and other external costs. Because the Company believes that, under its current process for developing its products, the viability of the products is essentially concurrent with the establishment of technological feasibility, no costs have been capitalized to date.

10

Table of Contents

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

2. Summary of Significant Accounting Policies - (continued)

In-process Research and Development

The Company records in-process R&D projects acquired in asset acquisitions that have not reached technological feasibility and which have no alternative future use. For in-process R&D projects acquired in business combinations, the Company capitalizes the in-process R&D project and periodically evaluates this asset for impairment until the R&D process has been completed. Once the R&D process is complete, the Company amortizes the R&D asset over its remaining useful life. At September 30, 2021 and December 31, 2020, there was $9.536 million of in-process R&D, as part of intangible assets and in-process R&D on the Condensed Consolidated Balance Sheets.

Intangible Assets

The Company records intangible assets acquired in asset acquisitions of proprietary technology. The Company capitalizes intangible assets, amortizes them over the estimated useful life, and periodically evaluates the assets for impairment. At September 30, 2021 and December 31, 2020, there was $0.175 million and $0.194 million, respectively, of net intangible assets, as part of intangible assets and in-process R&D, net on the Condensed Consolidated Balance Sheets.

Accrued Clinical Expenses

As part of the Company’s process of preparing the Condensed Consolidated Financial Statements, the Company is required to estimate its accrued expenses. This process includes reviewing open contracts and purchase orders, communicating with its applicable personnel to identify services that have been performed on its behalf and estimating the level of service performed and the associated costs incurred for the service when the Company has not yet been invoiced or otherwise notified of actual costs. The majority of the Company’s service providers invoice monthly in arrears for services performed. The Company makes estimates of its accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known at the time. The Company periodically confirms the accuracy of these estimates with the service providers and makes adjustments if necessary.

Related Party Transactions

During the nine months ended September 30, 2021, the Company entered into certain related-party transactions, making payments for services to one vendor and four consultants, all of whom also are stockholders of the Company. These transactions generally involve a stockholder or option holder of the Company to whom the Company also makes payments during the year, typically as a consultant or a service provider. Additionally, on January 6, 2021, the Company completed a private placement of 1,531,101 shares of Common Stock and warrants to purchase up to 1,531,101 shares of Common Stock to an affiliate of Armistice Capital, LLC, with a combined purchase price per share and warrant of $5.225. Steven J. Boyd and Keith Maher, each of whom were members of the Company’s board of directors through August 3, 2021, are affiliates of Armistice Capital, LLC, and Mr. Boyd holds voting and investment power over such entity. The total net proceeds from the private placement were approximately $8.0 million. Except for the private placement described above, the transactions with related parties during the nine months ended September 30, 2021 are not material to the accompanying Condensed Consolidated Financial Statements.

During the nine months ended September 30, 2020, the Company entered into certain related-party transactions, making payments for services to two vendors, seven consultants and two public universities, all of whom were also stockholders of the Company. The amounts recorded or paid during the nine months ended September 30, 2020 are not material to the accompanying Condensed Consolidated Financial Statements

11

Table of Contents

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

2. Summary of Significant Accounting Policies - (continued)

Net Loss per Share – Basic and Diluted

Basic and diluted net loss per share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding for the period, which for basic net loss per share, does not include the weighted-average unvested restricted common stock that has been issued but is subject to forfeiture of 23,277 and 42,823 shares for the three and nine months ended September 30, 2021, respectively, and 79,231 and 79,223 shares for the three and nine months ended September 30, 2020.

Dilutive common equivalent shares consist of stock options, warrants, and preferred stock and are calculated using the treasury stock method, which assumes the repurchase of common shares at the average market price during the period. Under the treasury stock method, options and warrants will have a dilutive effect when the average price of common stock during the period exceeds the exercise price of options or warrants. Common equivalent shares do not qualify as participating securities. In periods where the Company records a net loss, unvested restricted common stock and potential common stock equivalents are not included in the calculation of diluted net loss per share as their effect would be anti-dilutive. All shares of Common Stock that may potentially be issued in the future are as follows:

    

September 30, 2021

    

September 30, 2020

(unaudited)

(unaudited)

Common Stock Warrants

 

6,815,248

 

2,772,117

Employee Stock Options

 

472,049

 

246,893

Preferred Stock

 

13,000

 

852,500

Total Shares of Common Stock Issuable

 

7,300,297

 

3,871,510

Fair Value of Financial Instruments

As of September 30, 2021 and December 31, 2020, the fair value of the Company’s contingent consideration, measured using Level 3 measurements, was $5.343 million. During the year ended December 31, 2020, the Company recorded earn-out payments of $9.500 million at their estimated fair value of $3.633 million as a result of the Panoptes acquisition. During the year ended December 31, 2016, the Company recorded earn-out payments of $2.164 million at their estimated fair value of $1.210 million as a result of the Jade acquisition. During the year ended December 31, 2019, taking into consideration discount factors and the probability of FDA approval of KIO-201, the Company recorded an increase of  $500,000 to the present value of contingent consideration related to the Jade acquisition bringing the estimated fair value to $1.710 million. The Company evaluates the fair value of these earn-out payments on a quarterly basis and there were no changes recorded during the three and nine months ended  September 30, 2021.

At September 30, 2021 and December 31, 2020, the Company had no other assets or liabilities that are subject to fair value methodology and estimation in accordance with U.S. GAAP.

Revenue Recognition

The Company’s revenues were generated primarily through arrangements that contained multiple elements, or deliverables, including licenses and R&D activities to be performed by the Company on behalf of the licensor or grantor. Payments to Kiora under these arrangements typically included one or more of the following: (1) nonrefundable, upfront license fees, (2) funding of discovery research efforts on a full-time equivalent basis, (3) reimbursement of research, development, and intellectual property costs, (4) milestone payments, and (5) royalties on future product sales.

12

Table of Contents

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

2. Summary of Significant Accounting Policies - (continued)

The Company recognizes revenue when its customer obtains control of promised services, in an amount that reflects the consideration which the Company expects to receive in exchange for those services. To determine whether arrangements are within the scope of this new guidance, the Company performs the following five steps: (i) identifies the contract with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when (or as) the Company satisfies its performance obligation. The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. The Company recognizes revenue from the transaction price applied to each single performance obligation over time as milestones are reached for each performance obligation. The Company only recognizes revenue on those milestones that are within the Company’s control and any constrained variable consideration that requires regulatory approval will only be included in the transaction price when performance is complete.

In addition, the Company may receive U.S. and/or foreign government grant funds for specified therapeutic research activities. Revenue under these grants will be recorded when the Company performs the activities specified by the terms of each grant and is entitled to the funds.

During the three and nine months ended September 30, 2021 and 2020, the Company did not recognize any revenue.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance is effective for smaller reporting companies in fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not expect the adoption of this standard to have a material effect on the Company’s Condensed Consolidated Financial Statements and related disclosures.

3. Property and Equipment

Property and equipment at September 30, 2021 and December 31, 2020 consists of the following:

Estimated Useful Life

September 30, 2021

    

(Years)

    

(unaudited)

    

December 31, 2020

Laboratory Equipment

 

3

$

88,400

$

82,653

Office Equipment

 

3

 

3,693

 

3,888

Office Furniture

5

72,549

14,430

Leasehold Improvements

 

2

 

22,569

 

22,569

Total Property and Equipment, Gross

 

187,211

 

123,540

Less Accumulated Depreciation

 

108,378

 

92,974

Total Property and Equipment, Net

$

78,833

$

30,566

Depreciation expense was $4,807 and $2,388 for the three months ended September 30, 2021 and 2020, respectively, and $15,510 and $5,593 for the nine months ended September 30, 2021 and 2020, respectively.

13

Table of Contents

KIORA PHARMACEUTICALS, INC.

(formerly EyeGate Pharmaceuticals, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

4. Accrued Expenses

Accrued expenses at September 30, 2021 and December 31, 2020 consist of the following:

September 30, 2021

    

(unaudited)

    

December 31, 2020

Payroll and Benefits

$

764,306

$

629,465

Professional Fees

 

138,273

 

328,420

Clinical Trials

 

485,733

 

203,646

Consulting

 

999

 

125,913

Interest

1,817

Total Accrued Expenses

$

1,389,311

$

1,289,261

5. Debt

In May 2020, the Company received loan funds (the “Loan”) from the Paycheck Protection Program (“PPP”) of $0.278 million. In April 2021, the Company was notified by the Small Business Administration (“SBA”) that this Loan was forgiven in full.

The Company has no additional indebtedness at September 30, 2021 and December 31, 2020.

6. Intangible Assets and In-Process R&D

Intangible assets at September 30, 2021 consist of the rights to trade-secrets and know-how related to the manufacturing of KIO-201. During the third quarter of 2018, the Company entered into an intellectual property license agreement with SentrX Animal Care, Inc. (“SentrX”) with respect to certain rights relating to the manufacturing of KIO-201. The intangible assets were recorded at $0.250 million, representing the upfront payment paid to SentrX. Additionally, SentrX is eligible to receive milestone payments totaling up to $4.750 million, upon and subject to the achievement of certain specified development and commercial milestones. These future milestone payments to SentrX will increase the carrying value of the intangible assets. The Company’s intangible assets are amortized on a straight-line basis over the estimated useful lives. Additionally, in-process R&D at September 30, 2021 and December 31, 2020 consists of projects acquired from the acquisitions of Jade and Panoptes that have not reached technological feasibility and which have no alternative future use. Once the R&D process is complete, the Company will amortize the R&D asset over its remaining useful life. The Company periodically evaluates these assets for impairment.

Intangible assets and in-process R&D at September 30, 2021 and December 31, 2020 consists of the following:

    

    

September 30, 

    

Estimated Useful

2021

Life (Years)

(unaudited)

December 31, 2020

Trade Secrets

 

10

$

250,000

$

250,000

Less: Accumulated Amortization

 

  

 

(75,000)