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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2023

OR

o			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.)

332 Encinitas Blvd.

Suite 102

Encinitas, CA 92024

(Address of Principal Executive Offices, including zip code)

(858) 224-9600

(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. x Yes o 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). x Yes o 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

o

Accelerated filer

o

Non-accelerated filer

x

Smaller reporting company

x

Emerging growth company

o

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. o

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

o Yes x No

On November 6, 2023, there were 7,689,240 shares of the registrant’s common stock outstanding.

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KIORA PHARMACEUTICALS, INC.

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QUARTERLY REPORT ON FORM 10-Q

For the Period Ended September 30, 2023

INDEX

						Page
PART I - FINANCIAL INFORMATION
Item 1.			Financial Statements			4
			Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022			4
			Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022			5
			Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022			6
			Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2023 and 2022			10
			Notes to Condensed Consolidated Financial Statements (unaudited)			11
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3.			Quantitative and Qualitative Disclosures about Market Risk			29
Item 4.			Controls and Procedures			29
PART II - OTHER INFORMATION
Item 1.			Legal Proceedings			31
Item 1A.			Risk Factors			31
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			31
Item 3.			Defaults Upon Senior Securities			32
Item 4.			Mine Safety Disclosures			32
Item 5.			Other Information			32
Item 6.			Exhibits			32
SIGNATURES						33

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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 effects of global pandemics such as the COVID-19 pandemic and the global response thereto.

We discuss many of these risks in detail under the heading “Item 1A. Risk Factors” beginning on page 23 of our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, or the SEC, on March 23, 2023, or the Annual Report. You should carefully review all 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.

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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.”

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

KIORA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

			September 30, 2023 (unaudited)						December 31, 2022
ASSETS
Current Assets:
Cash and Cash Equivalents			$	5,400,498					$	5,964,556
Prepaid Expenses and Other Current Assets			239,391						343,069
Tax Receivables			1,343,087						1,373,041
Total Current Assets			6,982,976						7,680,666
Non-Current Assets:
Property and Equipment, Net			38,616						55,177
Restricted Cash			4,031						49,260
Intangible Assets and In-Process R&D, Net			8,820,100						10,743,164
Operating Lease Assets with Right-of-Use			18,725						116,992
Other Assets			31,995						33,000
Total Assets			$	15,896,443					$	18,678,259
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable			$	125,412					$	1,008,262
Accrued Expenses			1,461,711						1,835,934
Operating Lease Liabilities			18,725						105,782
Contingent Consideration, short-term			495,000						322,385
Total Current Liabilities			2,100,848						3,272,363
Non-Current Liabilities:
Contingent Consideration			5,002,505						3,309,175
Deferred Tax Liability			689,121						689,121
Total Non-Current Liabilities			5,691,626						3,998,296
Total Liabilities			7,792,474						7,270,659
Commitments and Contingencies (Notes 9 and 10)
Stockholders’ Equity:
Preferred Stock, $0.01 Par Value: 10,000,000 shares authorized at September 30, 2023 and December 31, 2022; 3,750 designated Series A, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022; 10,000 designated Series B, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022; 10,000 shares designated Series C, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022; 20,000 shares designated Series D, 7 shares issued and outstanding at September 30, 2023 and December 31, 2022; 1,280 shares designated Series E, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022; 3,908 shares designated Series F, 420 and 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			5						—
Common Stock, $0.01 Par Value: 50,000,000 shares authorized; 7,689,240 and 1,796,472 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			76,915						17,986
Additional Paid-In Capital			153,001,469						146,035,314
Accumulated Deficit			(144,708,249)						(134,462,959)
Accumulated Other Comprehensive Loss			(266,171)						(182,741)
Total Stockholders’ Equity			8,103,969						11,407,600
Total Liabilities and Stockholders’ Equity			$	15,896,443					$	18,678,259

See Accompanying Notes to Condensed Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

			Three Months Ended September 30,												Nine Months ended September 30,
			2023						2022						2023						2022
Operating Expenses:
General and Administrative			$	1,415,844					$	2,033,367					$	3,782,596					$	5,500,036
Research and Development			1,085,010						1,332,153						2,915,392						2,607,308
In-Process R&D Impairment			1,904,314						—						1,904,314						—
Executive Severance			—						—						—						962,833
Change in Fair Value of Contingent Consideration			1,513,400						337,515						1,865,945						604,348
Total Operating Expenses			5,918,568						3,703,035						10,468,247						9,674,525
Operating Loss			(5,918,568)						(3,703,035)						(10,468,247)						(9,674,525)
Other Income (Expense), Net:
Change in Fair Value of Warranty Liability			—						(1,425,102)						—						(1,425,102)
Interest Income, Net			49,912						7,861						128,464						9,315
Other Income, Net			105,715						937						94,493						5,148
Total Other Income (Expense), Net			155,627						(1,416,304)						222,957						(1,410,639)
Net Loss			$	(5,762,941)					$	(5,119,339)					$	(10,245,290)					$	(11,085,164)
Deemed Dividends from Warrant Reset Provision			(530,985)						—						(530,985)						—
Net Loss Attributable to Common Shareholders			$	(6,293,926)					$	(5,119,339)					$	(10,776,275)					$	(11,085,164)
Net Loss per Common Share - Basic and Diluted			$	(0.89)					$	(6.03)					$	(2.73)					$	(22.06)
Weighted Average Shares Outstanding - Basic and Diluted			7,106,900						848,534						3,948,181						502,436
Other Comprehensive Loss:
Net Loss			$	(5,762,941)					$	(5,119,339)					$	(10,245,290)					$	(11,085,164)
Foreign Currency Translation Adjustments			(40,310)						(38,537)						(83,430)						(176,967)
Comprehensive Loss			$	(5,803,251)					$	(5,157,876)					$	(10,328,720)					$	(11,262,131)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended September 30, 2023 and 2022

(unaudited)

			Preferred Stock												Common Stock												Additional Paid-In Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Total Stockholders’ Equity
			Shares						Amount						Shares						Amount
Balance at June 30, 2023			957						$	10					6,910,720						$	69,129					$	152,744,385					$	(138,945,308)					$	(225,861)					$	13,642,355
Stock-Based Compensation			—						—						—						—						264,865						—						—						264,865
Conversion of Series F Preferred Stock into Common Stock			(530)						(5)						481,770						4,818						(4,813)						—						—						—
Issuance of Common Stock from Restricted Stock Awards			—						—						296,750						2,968						(2,968)						—						—						—
Foreign Currency Translation Adjustment			—						—						—						—						—						—						(40,310)						(40,310)
Net Loss			—						—						—						—						—						(5,762,941)						—						(5,762,941)
Balance at September 30, 2023			427						$	5					7,689,240						$	76,915					$	153,001,469					$	(144,708,249)					$	(266,171)					$	8,103,969

See Accompanying Notes to Condensed Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

Three Months Ended September 30, 2023 and 2022

(unaudited)

			Preferred Stock												Common Stock												Additional Paid-In Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Total Stockholders’ Equity
			Shares						Amount						Shares						Amount
Balance at June 30, 2022			7						$	—					326,686						$	3,266					$	135,828,737					$	(126,845,174)					$	(224,861)					$	8,761,968
Stock-Based Compensation			—						—						—						—						130,153						—						—						130,153
Issuance of Stock from Public Offering, Net of Offering Costs of $505,020			—						—						592,392						5,924						2,456,914						—						—						2,462,838
Issuance of Series E Preferred Stock from Public Offering, Net of Offering Costs of $136,401			1,280						13						—						—						665,178						—						—						665,191
Conversion of Series E Preferred Stock into Common Stock			(1,280)						(13)						160,000						1,600						(1,587)						—						—						—
Reclassification of Warrant Liability			—						—						—						—						3,674,791						—						—						3,674,791
Adjustments Due to the Rounding Impact from the Reverse Stock Split for Fractional Shares			—						—						(33)						—						(15,629)						—						—						(15,629)
Foreign Currency Translation Adjustment			—						—						—						—						—						—						(38,537)						(38,537)
Net Loss			—						—						—						—						—						(5,119,339)						—						(5,119,339)
Balance at September 30, 2022			7						$	—					1,079,045						$	10,790					$	142,738,557					$	(131,964,513)					$	(263,398)					$	10,521,436

See Accompanying Notes to Condensed Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2023 and 2022

(unaudited)

			Preferred Stock												Common Stock												Additional Paid-In Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Total Stockholders’ Equity
			Shares						Amount						Shares						Amount
Balance at December 31, 2022			7						$	—					1,796,472						$	17,986					$	146,035,314					$	(134,462,959)					$	(182,741)					$	11,407,600
Stock-Based Compensation			—						—						—						—						572,600						—						—						572,600
Issuance of Stock from Public Offering, Net of Offering Costs of $729,038			3,908						39						2,197,628						21,976						5,573,947						—						—						5,595,962
Issuance of Common Stock from Private Placement, Net of Offering Costs of $84,285			—						—						52,798						528						115,187						—						—						115,715
Issuance of Common Stock from ELOC Purchases			—						—						125,000						1,250						441,060						—						—						442,310
Issuance of Common Stock from Warrant Exercises			—						—						50,000						500						298,000						—						—						298,500
Conversion of Series F Preferred Stock into Common Stock			(3,488)						(34)						3,170,592						31,707						(31,673)						—						—						—
Issuance of Common Stock from Restricted Stock Awards			—						—						296,750						2,968						(2,968)						—						—						—
Foreign Currency Translation Adjustment			—						—						—						—						—						—						(83,430)						(83,430)
Net Loss			—						—						—						—						—						(10,245,290)						—						(10,245,290)
Balance at September 30, 2023			427						$	5					7,689,240						$	76,915					$	153,001,469					$	(144,708,249)					$	(266,171)					$	8,103,969

See Accompanying Notes to Condensed Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

Nine Months Ended September 30, 2023 and 2022

(unaudited)

			Preferred Stock												Common Stock												Additional Paid-In Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Total Stockholders’ Equity
			Shares						Amount						Shares						Amount
Balance at December 31, 2021			7						$	—					316,599						$	3,166					$	135,541,662					$	(120,879,349)					$	(86,431)					$	14,579,048
Stock-Based Compensation			—						—						—						—						417,328						—						—						417,328
Issuance of Common Stock from Panoptes Holdback Shares			—						—						10,087						100						(100)						—						—						—
Issuance of Stock from Public Offering, Net of Offering Costs of $505,020			—						—						592,392						5,924						2,456,914						—						—						2,462,838
Issuance of Series E Preferred Stock from Public Offering , Net of Offering Costs of $136,401			1,280						13						—						—						665,178						—						—						665,191
Conversion of Series E Preferred Stock into Common Stock			(1,280)						(13)						160,000						1,600						(1,587)						—						—						—
Reclassification of Warrant Liability			—						—						—						—						3,674,791						—						—						3,674,791
Adjustments Due to the Rounding Impact from the Reverse Stock Split for Fractional Shares			—						—						(33)						—						(15,629)						—						—						(15,629)
Foreign Currency Translation Adjustment			—						—						—						—						—						—						(176,967)						(176,967)
Net Loss			—						—						—						—						—						(11,085,164)						—						(11,085,164)
Balance at September 30, 2022			7						$	—					1,079,045						$	10,790					$	142,738,557					$	(131,964,513)					$	(263,398)					$	10,521,436

See Accompanying Notes to Condensed Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

			Nine Months ended September 30,
			2023						2022
Operating Activities:
Net Loss			$	(10,245,290)					$	(11,085,164)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Depreciation and Amortization of Intangible Assets			43,863						31,324
Reduction of Right-of-Use Assets			98,073						113,574
Stock-Based Compensation			572,600						417,328
Impairment of In-process R&D			1,904,314						—
Change in Fair Value of Contingent Consideration			1,865,945						604,348
Change in Fair Value of Warrant Liability			—						1,425,102
Gain on Disposal of Equipment			—						(4,211)
Changes in Operating Assets and Liabilities:
Prepaid Expenses and Other Current Assets			98,854						342,029
Tax Receivables			(18,996)						(1,174,109)
Other Assets			939						2,596
Accounts Payable			(848,651)						635,153
Operating Lease Liabilities			(86,863)						(124,784)
Accrued Expenses			(360,398)						517,681
Net Cash Used in Operating Activities			(6,975,610)						(8,299,133)
Investing Activities:
Proceeds on Sale of Equipment			—						6,375
Net Cash Provided by Investing Activities			—						6,375
Financing Activities:
Proceeds from Public Offering			6,325,000						5,882,739
Public Offering Costs			(729,038)						(505,020)
Proceeds from Private Placement, Net of Offering Costs			200,000						—
Private Placement Offering Costs			(84,285)						—
Proceeds from ELOC Purchases			442,310						—
Exercise of Warrants			298,500						—
Net Cash Provided by Financing Activities			6,452,487						5,377,719
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash			(86,164)						(133,998)
Net Change in Cash, Cash Equivalents and Restricted Cash			(609,287)						(3,049,037)
Cash, Cash Equivalents and Restricted Cash, Beginning of Period			6,013,816						7,899,690
Cash, Cash Equivalents and Restricted Cash, End of Period			$	5,404,529					$	4,850,653
Supplemental Disclosures of Noncash Operating and Financing Activities
Recognition of Right-of-Use Assets and Related Lease Liabilities			$	—					$	55,415
Conversion of Preferred Stock into Common Stock			$	31,707					$	1,600
Grant of Restricted Stock Awards			$	2,968					—
Amounts Owed for Fractional Shares Related to the Reverse Stock Split in Accounts Payable			$	—					15,629

See Accompanying Notes to Condensed Consolidated Financial Statements.

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

1. Business, Presentation and Recent Accounting Pronouncements

Overview

Kiora Pharmaceuticals, Inc. (“Kiora” or the “Company”) was formed as a Delaware corporation on December 28, 2004. Kiora is a clinical-stage specialty pharmaceutical company developing and commercializing therapies for the treatment of orphan retinal diseases.

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

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, they do not include all information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company’s consolidated financial condition and results of operations have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited consolidated financial statements and notes previously distributed in the Company’s 2022 Annual Report on Form 10-K dated March 23, 2023. The balance sheet as of December 31, 2022 was derived from audited consolidated financial statements of the Company but does not include all the disclosures required by U.S. GAAP.

Reverse Stock Split

On September 23, 2022, the Company filed a Certificate of Amendment to its Restated Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to effect a one-for-forty ("1-for-40") reverse stock split of its outstanding common stock. The Amendment was approved by the Company’s stockholders at the Company’s 2022 Annual Meeting of Stockholders held on September 23, 2022, and by the Company’s board of directors. The amendment became effective on September 27, 2022.

The reverse stock split affected all shares of the Company’s common stock outstanding immediately prior to the effective time of the Amendment. As a result of the reverse stock split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, and restricted stock awards issued by the Company and outstanding immediately prior to the effective time of the Amendment, which resulted in a proportionate decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, and restricted stock awards, and, in the case of stock options, a proportionate increase in the exercise price of all such stock options. In addition, the number of shares reserved for issuance under the Company’s equity compensation plans immediately prior to the effective time of the Amendment was reduced proportionately. The reverse stock split did not affect the number of shares or par value of common stock authorized for issuance under the Company’s Amended and Restated Certificate of Incorporation, which remained at 50,000,000 shares.

No fractional shares were issued as a result of the reverse stock split. Stockholders of record who would otherwise have been entitled to receive a fractional share received a cash payment in lieu thereof. The reverse stock split affected all stockholders proportionately and did not affect any stockholder’s percentage ownership of the Company’s common stock (except to the extent that the reverse stock split results in any stockholder owning only a fractional share). As a result of the reverse stock split, the number of the Company’s outstanding shares of common stock as of September 27, 2022 decreased from 43,163,123 (pre-split) shares to 1,079,045 (post-split) shares.

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

All share and per share amounts in the accompanying condensed consolidated financial statements, related footnotes, and management’s discussion and analysis have been adjusted retroactively to reflect the reverse stock split as if it had occurred at the beginning of the earliest period presented. While the number of warrants outstanding did not change, the underlying shares did and are presented reflecting the split. The Company’s common stock began trading on The Nasdaq Capital Market on a split-adjusted basis when the market opened on September 27, 2022.

Going Concern

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. As of September 30, 2023, Kiora had unrestricted Cash and Cash Equivalents of $5.4 million, and an Accumulated Deficit of $144.7 million. Kiora has incurred losses and negative cash flows since inception, and future losses are anticipated. Based on the cash on hand as of September 30, 2023, the Company anticipates having sufficient cash to fund planned operations into May 2024, 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 grants. Although historically the Company has been successful at raising capital, most recently raising net proceeds of approximately $5.6 million in a public offering that closed on June 6, 2023, as well as an equity line of credit that provides an additional $9.6 million (subject to certain limitations), additional capital may not be available on terms favorable to Kiora, if at all. The Company does not know if any future offerings will succeed. Accordingly, no assurances can be given that Company management will succeed in these endeavors. The factors described above have caused management to determine there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying 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.

Significant Accounting Policies

Refunds for Research and Development

Kiora, through its Kiora Pharmaceuticals GmbH and Kiora Pharmaceuticals Pty Ltd subsidiaries, is entitled to receive certain refundable tax incentives associated with eligible research and development expenses in Austria and Australia, respectively. These refunds are realized in the form of a cash payment in the year following the incurred research and development expenses. The Company records estimates of the refundable payment as a tax receivable and a reduction in expense in the period in which the research and development expenses are incurred.

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 as an indefinite-lived intangible asset and evaluates this asset annually 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. The Company performed an annual evaluation of its indefinite-lived intangible assets for impairment as of August 31, 2023 with a quantitative analysis using the Income Approach. As of September 30, 2023, the estimated fair value of the KIO-101 and KIO-201 assets was less than their carrying value due to the strategic decision to stop development leading to commercialization and seek partnership for all future development. Accordingly, the Company recognized an impairment loss of $1.9 million which is shown in the Condensed Consolidated Statement of Operations and Comprehensive Loss in the line In-process R&D Impairment. At September 30, 2023 and 2022, there was $8.7 million and $10.6 million, respectively, of in-process R&D as part of intangible assets and in-process R&D, net on the Condensed Consolidated Balance Sheets.

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

Related-Party Transactions

For the nine months ended September 30, 2023, the Company made payments totaling approximately $0.13 million for services to a related party vendor, Ora, Inc., who is providing the Company with clinical study services for KIO-301. One of the Company’s directors is an executive at Ora, Inc.

2. Balance Sheet Information

Cash, Cash Equivalents and Restricted Cash

A summary of cash and cash equivalents and restricted cash is as follows:

			September 30, 2023						December 31, 2022
Cash and Cash Equivalents			$	5,400,498					$	5,964,556
Restricted Cash, Non-current			4,031						49,260
Total Cash, Cash Equivalents and Restricted Cash			$	5,404,529					$	6,013,816

Non-current restricted cash consists of deposits with financial institutions for corporate credit cards, and such amounts are included in prepaid expenses and other current assets.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

			September 30, 2023						December 31, 2022
Prepaid Insurance			$	116,853					$	117,315
Prepaid Research and Development			49,377						128,429
Other			73,161						97,325
Total Prepaid Expenses and Other Current Assets			$	239,391					$	343,069

Accrued Expenses

Accrued expenses consist of the following:

			September 30, 2023						December 31, 2022
Payroll and Benefits			$	828,694					$	1,312,443
Professional Fees			68,819						282,721
Clinical Trials			424,026						57,020
Other			140,172						183,750
Total Accrued Expenses			$	1,461,711					$	1,835,934

3. Fair Value Disclosures

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction to a third party under current market conditions at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

used in measuring fair value. In connection with historical acquisitions, additional consideration may be paid related to the achievement of certain milestones and such contingent consideration is required by U.S. GAAP to be presented at fair value. The following table provides information for liabilities measured at fair value on a recurring basis using Level 3 inputs:

			September 30, 2023						December 31, 2022
Contingent Consideration:
Current			$	495,000					$	322,385
Non-current			5,002,505						3,309,175
Total Contingent Consideration			$	5,497,505					$	3,631,560

The Company initially values contingent consideration related to business combinations using a probability-weighted calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows for certain milestones. Key assumptions used to estimate the fair value of contingent consideration include projected financial information, market data and the probability and timing of achieving the specific milestones.

After the initial valuation, the Company generally uses its best estimate to measure contingent consideration at each subsequent reporting period using the following unobservable Level 3 inputs:

			Valuation Technique						Unobservable Inputs						September 30, 2023						December 31, 2022
			Discounted cash flow						Payment discount rate						13.6		%				14.7		%
Bayon									Payment period						2023 - 2028						2023 - 2028
Panoptes									Payment period						2025 - 2028						2024 - 2028
Jade									Payment period						2027						2026
Bayon									Probability of success for payment						42% - 100%						17% - 67%
Panoptes									Probability of success for payment						30% - 33%						17% - 36%
Jade									Probability of success for payment						56		%				56		%

Significant changes in these assumptions could result in a significantly higher or lower fair value. The contingent consideration reported in the above table is adjusted quarterly based upon the passage of time or the anticipated success or failure of achieving certain milestones. The change in fair value of contingent consideration of $1.5 million for the three months ended September 30, 2023, was primarily driven by an increase in the estimated probability of success for the Bayon milestones due to the addition of two new disease indications for KIO-301, specifically Choroideremia and Stargardt disease and the increased probability of the Panoptes milestone due to the addition of KIO-104 in Posterior Non-infectious Uveitis. The change in fair value of contingent consideration of $1.9 million for the nine months ended September 30, 2022 was primarily driven by these same factors. The change in fair value of contingent consideration is recorded within operating expenses on the accompanying condensed consolidated statements of operation and comprehensive loss.

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 as an indefinite-lived intangible asset and evaluates this asset annually 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.

ASC 350 allows an entity to first assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired. If it is more likely than not that the asset is impaired, the entity must calculate the fair value of the asset and record an impairment charge if the carrying amount exceeds fair value. If an entity concludes that it is not more likely than not that the asset is impaired, no further action is required. An indefinite-

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

lived intangible asset should be tested for impairment if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If such events or changes have occurred, a quantitative assessment is required.

If an entity bypasses the qualitative assessment or determines from its qualitative assessment that an indefinite-lived intangible asset is more likely than not impaired, a quantitative impairment test should be performed. The quantitative impairment test compares the fair value of an indefinite-lived intangible asset with the asset’s carrying amount. If the fair value of the indefinite-lived intangible asset is less than the carrying amount, an impairment loss should be recognized in an amount equal to the difference in accordance with ASC 350-30-35-19.

The Company values in-process R&D related to asset acquisitions using the Income Approach which measures the value of an asset by the present value of its future economic benefits. These benefits can include interest and principal payments, earnings, cost savings, tax deductions, or proceeds from its disposition. Value indications are developed by discounting expected cash flows at a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of inflation, and risks associated with the particular investment. The selected discount rate is generally based on rates of return available from alternative investments of similar type and quality.

The Company engaged a third-party valuation firm to complete a quantitative assessment of in-process R&D as of August 31, 2023 which includes the following unobservable Level 3 inputs:

Valuation Technique

Unobservable Inputs

Input

Discount Rate

KIO-101

Relief from Royalty Method

Probability of success for next development phase

17

%

30

%

KIO-104

Multi-Period Excess Earnings Method

Probability of success for next development phase

17% to 36%

25

%

KIO-201

Relief from Royalty Method

Probability of success for next development phase

17% to 46%

30

%

KIO-301

Multi-Period Excess Earnings Method

Probability of success for next development phase

17% to 67%

25

%

4. Capital Stock

In connection with the Company’s acquisition of Panoptes Pharma GmbH (“Panoptes”) in December 2020, on June 18, 2022, the Company issued an aggregate of 10,086 shares of common stock to former shareholders of Panoptes, which had been held back for a period of eighteen months following the closing of the Panoptes acquisition to satisfy post-closing adjustment and indemnification obligations pursuant to the terms of the Share Purchase Agreement between the Company and the former shareholders of Panoptes.

On July 22, 2022, the Company entered into an underwriting agreement to issue and sell stock and warrants in a public offering. On July 25, 2022, the underwriter fully exercised the over-allotment option granted by the Company to purchase stock and warrants. On July 26, 2022, the public offering closed, and the Company issued and sold (i) 592,392 shares of common stock (including 98,138 shares of common stock sold pursuant to the exercise of the over-allotment option), (ii) 1,280 shares of Series E Convertible Preferred Stock convertible into up to 160,000 shares of common stock, (iii) 30,095,697 Class A Warrants (including 3,925,525 Class A Warrants sold pursuant to the exercise of the over-allotment option), and (iv) 30,095,697 Class B Warrants (including 3,925,525 Class B Warrants sold pursuant to the exercise of the over-allotment option). Upon exercise, the warrants will convert on a 40 for 1 basis into a total of 1,504,785 common shares. The public offering price of $8.00 per share of common stock, Class A Warrant and Class B Warrant or $1,000 per share of Series E Convertible Preferred Stock, 5,000 Class A Warrants and 5,000 Class B Warrants resulted in net proceeds to the Company of approximately $5.3 million net of underwriting discount and commissions of $0.4 million and expense of $0.3 million.

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

Each warrant is exercisable at a price per share of common stock of $8.00. The Class A Warrants expired on September 23, 2023 and the Class B Warrants will expire on September 23, 2027. The exercise prices of the warrants are subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock.

During August 2022, all holders of the Series E Preferred Shares issued in the July 2022 public offering elected to convert their Series E Preferred Shares into 160,000 shares of common stock.

On November 17, 2022, the Company entered into warrant exercise inducement offer letters with some of the Class A Warrant holders who agreed to exercise for cash all of their Class A Warrants to purchase 654,609 shares of common stock originally issued in the July 2022 public offering in exchange for the Company's agreement to issue new warrants (the “Inducement Warrants”) on substantially the same terms as the Class A Warrants to purchase up to 654,609 shares of common stock. Each Inducement Warrant is exercisable at a price per share of common stock of $5.97. Each Inducement Warrant became initially exercisable six months following its date of issuance, and will expire on the eighteen month anniversary of their initial exercise date. The Company received aggregate gross proceeds of approximately $3.1 million from the exercise of the Class A Warrants by the selling stockholders and the sale of the Inducement Warrants. The Company paid its placement agent in connection with the inducement transactions a fee equal to 8% of gross proceeds from the exercise of the Class A Warrants.

On February 3, 2023, the Company completed a private placement with Lincoln Park Capital, LLC ("Lincoln Park") for 52,798 shares of common stock and warrants to purchase up to 105,596 shares of common stock. The total net proceeds from the private placement were approximately $0.1 million. The warrants have an exercise price of $3.538 per share, subject to adjustments as provided under the terms of the warrants, and will be exercisable on the six-month anniversary of the closing date. The warrants are exercisable for five years from the issuance date.

On February 3, 2023, the Company also entered into a purchase agreement with Lincoln Park, pursuant to which Lincoln Park has agreed to purchase from the Company up to an aggregate of $10.0 million of common stock (subject to certain limitations), from time to time and at the Company's sole discretion over the term of the purchase agreement. On February 22, 2023, the Company completed its first issuance under this agreement for a total of 20,000 shares sold to Lincoln Park for proceeds of $0.1 million. In April 2023, the Company completed additional issuances for a total of 105,000 shares sold to Lincoln Park for proceeds of $0.3 million.

On March 30, 2023, the Company entered into an underwriting agreement to issue and sell stock and warrants in a public offering. On June 6, 2023, the public offering closed, and the Company issued and sold (i) 2,197,628 shares of common stock (including 750,000 shares of common stock sold pursuant to the exercise of the over-allotment option), (ii) 3,908 shares of Series F Convertible Preferred Stock convertible into up to 3,552,372 shares of common stock, (iii) 5,750,000 Class C Warrants (including 750,000 Class C Warrants sold pursuant to the exercise of the over-allotment option), and (iv) 5,750,000 Class D Warrants (including 750,000 Class D Warrants sold pursuant to the exercise of the over-allotment option). The public offering price of $1.10 per share of common stock, Class C Warrant and Class D Warrant, and $999.90 per share of Series F Convertible Preferred Stock, 909 Class C Warrants and 909 Class D Warrants, resulted in net proceeds to the Company of approximately $5.6 million net of underwriting discount and commissions of $0.5 million and other expenses of $0.2 million. On June 6, 2023, the underwriter fully exercised the over-allotment option granted by the Company to purchase stock and warrants.

Each Warrant is exercisable at a price per share of common stock of $1.10. The Class C Warrants will expire on June 6, 2028 and the Class D Warrants will expire on June 6, 2024. The exercise prices of the warrants are subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock. In addition, on August 5th, the 60th calendar day immediately following the initial exercise day, the exercise price of the warrants were reduced to $0.5231 per share pursuant to the reset provision which stated that the warrants would be reduced to the lesser of (i) the exercise price then in effect and (ii) 90% of the average of the volume weighted average price of the Company's common stock for the five (5) trading day period immediately

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

prior to the reset date. In accordance with ASU 2021-04, the warrant reset of the exercise price was evaluated as a modification of equity-classified written call options. Modifications or exchanges that are not related to debt or equity financings, compensation for goods or services, or other exchange transactions within the scope of other guidance should be recognized as a dividend consistent with ASC 815-40-35-17(d). The dividend amount is measured as the excess, if any, of the fair value of the modified or exchanged instrument over the fair value of that instrument immediately before it is modified or exchanged in accordance with ASC 815-40-35-16. The Company considered the guidance in paragraphs 815-40-35-14 through 35-17 and determined that the circumstances of the warrant modification indicate that the modification is executed separate from a new equity offering, debt origination or debt modification. As such, on August 7, 2023, the date on which the modification became effective, the incremental change in the fair value of the 11,500,000 outstanding warrants was recognized as a deemed dividend totaling $0.5 million that increases net loss attributable to common stockholders in accordance with paragraph 815-40-35- 17(d) and ASC 260-10-45-15.

During June 2023, 2,958 shares of Series F Convertible Preferred Stock were converted into 2,688,822 shares of common stock. During July and August 2023, 530 shares of Series F Convertible Preferred Stock were converted into 481,770 shares of common stock.

5. Intangible Assets and In-Process R&D

Intangible assets at September 30, 2023 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 $0.3 million, representing the upfront payment paid to SentrX. The Company’s intangible assets are amortized on a straight-line basis over the estimated useful lives. Additionally, in-process R&D as of September 30, 2023 and 2022 consists of projects acquired from the acquisitions of Jade, Bayon 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 consists of the following:

			Estimated Useful Life (Years)						September 30, 2023						December 31, 2022
Trade Secrets			10						$	250,000					$	250,000
Less: Accumulated Amortization									(125,000)						(106,250)
Intangible Assets, Net									125,000						143,750
In-Process R&D									8,695,100						10,599,414
Total Intangible Assets and In-Process R&D, Net									$	8,820,100					$	10,743,164

As of September 30, 2023, the estimated fair value of the Jade assets was less than their carrying value. Accordingly, the Company recognized an impairment of $1.9 million. See Note 1 for additional discussion of IPR&D and impairment loss.

6. Warrants

The following is a summary of warrant activity for the Company’s equity-classified warrants for the nine months ended September 30, 2023 and 2022:

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

			Number of Common Shares Issuable Upon Exercise of Outstanding Warrants						Weighted Average Exercise Price						Weighted Average Remaining Term in Years
Outstanding at December 31, 2022			1,597,606						$	21.22					3.07
Issued			11,605,596						$	0.55					2.40
Exercised			(50,000)						$	5.97
Expired			(72,503)						$	108.80
Outstanding at September 30, 2023			13,080,699						$	2.45					2.70
Outstanding at December 31, 2021			168,932						$	199.65					3.42
Issued			1,504,786						$	8.00					2.72
Expired			(11,112)						$	900.00
Outstanding at September 30, 2022			1,662,606						$	150.40					3.14

7. Net Loss per Share - Basic and Diluted

Basic and diluted net loss per share is computed by dividing net loss available to common shareholders as adjusted for deemed dividends by the weighted-average number of common shares outstanding for the time period, which for basic net loss per share, does not include the weighted-average unvested restricted common stock that has been issued and is subject to forfeiture totaling 172,125 and 0 shares for the three months ended September 30, 2023 and 2022, respectively, and 212,675 and 0 for the nine months ended September 30, 2023 and 2022, respectively.

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. The following is a summary of potential common shares excluded from the calculation of net loss per share as of September 30:

			2023						2022
Common Stock Warrants			13,080,699						1,662,606
Employee Stock Options			831,253						12,650
Restricted Stock			237,916						2
Preferred Stock			381,832						52
Common Stock Reserved for Future Issuance			165,491						—
Total Shares of Common Stock Issuable			14,697,191						1,675,310

8. Stock-Based Compensation

Equity Incentive Plans

In 2005, the Company approved the 2005 Equity Incentive Plan (the “2005 Plan”). The 2005 Plan provides for the granting of stock options (incentive and nonqualified), restricted stock or other stock-based awards to employees, officers, directors, consultants, and advisors. During 2010, the maximum number of shares of Common Stock that may be issued pursuant to the 2005 Plan was increased to 59,414 shares. The Board of Directors (the “Board”) is responsible for administration of the 2005 Plan. The Company’s Board determines the term of each option, the option exercise price, the number of shares for which each option is granted and the rate at which each option is exercisable. Incentive stock options may be granted to any officer or employee at

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

an exercise price per share of not less than the fair value per common share on the date of the grant (not less than 110% of fair value in the case of holders of more than 10% of the Company’s voting stock) and with a term not to exceed ten years from the date of the grant (five years for incentive stock options granted to holders of more than 10% of the Company’s voting stock). Nonqualified stock options may be granted to any officer, employee, consultant, or director at an exercise price per share of not less than the par value per share. Following adoption of the 2014 Equity Incentive Plan (the “2014 Plan”), no further grants were made under the 2005 Plan. General terms of the 2014 Plan remain the same as that of the 2005 plan.

The Company’s Board adopted the 2014 Plan and the Employee Stock Purchase Plan (the “ESPP”), and the Company’s Stockholders approved the 2014 Plan and the ESPP Plan in February 2015. In January 2023, the number of shares of common stock issuable under the 2014 Plan automatically increased by 76,632 shares pursuant to the terms of the 2014 Plan. Additionally, pursuant to a shareholder vote on September 27, 2023, the 2014 Plan was increased by 1,000,000 shares. As of September 30, 2023, the maximum number of shares of Common Stock that may be issued pursuant to the ESPP was 284, of which 191 shares were available for future issuance. As of September 30, 2023, the maximum number of shares of Common Stock that may be issued pursuant to the 2014 Plan was 1,297,363 of which 165,300 shares were available for awards.

Stock-based compensation expense is presented in the same expense line items as cash compensation earned and for the three and nine months ended September 30 is as follows:

			Three months ended September 30												Nine months ended September 30
			2023						2022						2023						2022
Research and Development			$	118,439					$	19,625					$	249,352					$	78,786
General and Administrative			146,426						110,528						323,248						338,542
Total Stock-Based Compensation Expense			$	264,865					$	130,153					$	572,600					$	417,328

Stock Options

The Company grants time-based stock options which generally vest one-third of the underlying shares on the one-year anniversary of the grant date and the remainder vest ratably over a 24-month period. The Company has also issued grants with a four year vesting term, of which one-fourth of the underlying shares vested immediately, one-fourth on the one-year anniversary of the grant date and the remainder vest ratably over a 24-month period.The fair value of time-based stock options is determined using the Black-Scholes Option Pricing Model, with such value recognized as expense over the service period, which is typically three years, net of actual forfeitures. A summary of the Company’s assumptions used in determining the fair value of the stock options granted during the nine months ended September 30, 2023 and 2022 is shown in the following table.

			Nine months ended September 30
			2023						2022
Risk-Free Interest Rate			4.54		%				2.42		%
Expected Life (years)			5.52						5.00
Expected Stock Price Volatility			141		%				140		%
Expected Dividend Yield			—		%				—		%

The weighted average grant date fair value of options granted during the nine months ended September 30, 2023 and 2022 was $1.01 and $27.02, respectively. The expected term of the options granted is calculated in accordance with the simplified method, whereby for service-based awards the expected life is calculated as a midpoint between the vest and expiry period. The Company uses the simplified method as there is not a sufficient history of share option exercises. Expected volatility is based on the historical volatility of the Company’s common stock. The risk-free interest rate is determined based upon a constant U.S. Treasury security rate with a contractual life that approximates the expected term of the option. Unamortized compensation expense related to the options amounted to $1.0 million as of September 30, 2023 and is expected to be recognized over a weighted average period of approximately 2.33 years.

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

Following is a summary of stock option activity for the nine months ended September 30, 2023:

			Number of Options						Weighted Average Exercise Price						Weighted Average Remaining Term in Years
Outstanding at December 31, 2022			84,722						$	36.90					9.59
Granted			764,400						$	1.11
Expired			(417)						$	86.42
Forfeited			(17,452)						$	6.05
Outstanding at September 30, 2023			831,253						$	4.61					9.60
Exercisable and vested at September 30, 2023			149,764						$	16.58					9.78

The stock options outstanding and exercisable as of September 30, 2023 had an aggregate intrinsic value of $1,184. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for options that had exercise prices lower than $0.57, the closing price of the Company’s stock on September 30, 2023.

Restricted Stock Awards

Restricted stock compensation expense is recognized over the vesting period, which is typically one-third of the underlying shares on the one-year anniversary of the grant date and the remainder vest ratably over a 24-month period. Unamortized compensation expense related to the restricted stock awards amounted to $0.4 million as of September 30, 2023 and is expected to be recognized over a weighted average period of approximately 2.79 years. The following is a summary of restricted stock activity for the nine months ended September 30, 2023:

			Number of Units						Weighted Average Grant Date Fair Value						Weighted Average Remaining Term in Years
Non-vested Outstanding at December 31, 2022			30,000						$	6.78					2.79
Awarded			270,050						$	1.06
Released			(58,834)						$	0.72
Forfeited			(3,300)						$	3.83
Non-vested Outstanding at September 30, 2023			237,916						$	1.82					2.79

Employee Stock Purchase Plan

The Company has a non-qualified Employee Stock Purchase Plan ("ESPP"), which provides for the issuance of shares of the Company’s common stock to eligible employees of the Company that elect to participate in the plan and purchase shares of common stock through payroll deductions at a discounted price. Six month offering periods are made at the Board’s discretion. The ESPP provides for 284 aggregate shares of the Company’s common stock for participants to purchase. As of September 30, 2023 and 2022, the remaining shares reserved for future offerings was 191.

9. Commitments and Contingencies

Leases

The Company leases its office facilities as well as other property under operating leases. In February 2022, the Company entered a lease for an office facility in Encinitas, California (the Encinitas Lease"). The Encinitas Lease commenced in May, 2022 for a term of 18 months. The Company recorded a right-of-use asset asset and lease liability upon lease commencement in May 2022. In October 2019, the Company through its subsidiary Kiora Pharmaceuticals GmbH, entered into a lease in Austria commencing in November 2019 for a term of a 4

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

years. The Company recorded a right-of-use asset and lease liability upon lease commencement. On May 16, 2022, a nominal short-term lease commenced in Australia. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The remaining lease terms range from less than 1 month to 2 months. The Company’s Waltham, Massachusetts lease ended March 31, 2022. The Company has subsequently extended the Encinitas and Austria leases, see Note 10.

Total operating lease cost for the three months ended September 30, 2023 and 2022 was $50,482 and $39,511, respectively. Total operating costs for the nine months ended September 30, 2023 and 2022 was $121,159 and $120,274, respectively. Operating lease costs include a nominal short-term and variable lease cost.

Maturities of operating lease liabilities as of September 30, 2023 are as follows:

Years Ending December 31,
2023 (remaining months)						$	18,725
Total Lease Liabilities						18,725
Less Current Portion						(18,725)
						$	—

License and Exclusive Rights Agreements

The Company is a party to seven license agreements as described below. These license agreements require the Company to pay or receive royalties or fees to or from the counterparties based on revenue or milestones related to the licensed technology.

On July 2, 2013, the Company (through its subsidiary, Kiora Pharmaceuticals, GmbH) entered into a patent and know-how assignment agreement with 4SC Discovery GmbH (“4SC”) transferring to the Company all patent rights and know-how to the compound KIO-101. The Company is responsible for paying royalties of 3.25% on net sales of KIO-101.

On July 2, 2013, the Company (through its subsidiary, Kiora Pharmaceuticals, GmbH) entered into an out-license agreement with 4SC granting 4SC the exclusive worldwide right to commercialize the compound KIO-101 for rheumatoid arthritis and inflammatory bowel disease, including Crohn’s Disease and Ulcerative Colitis. The Company is eligible to receive milestone payments totaling up to €155 million, upon and subject to the achievement of certain specified developmental and commercial milestones. The Company has not received any milestones payments from 4SC. In addition, the Company is eligible to receive royalties of 3.25% on net sales of KIO-101.

On September 12, 2013, the Company (through its subsidiary, Jade Therapeutics, Inc.) entered into an agreement with Lineage Cell Therapeutics, Inc. (“Lineage”), formerly known as BioTime, Inc. granting to the Company the exclusive worldwide right to commercialize cross-linked thiolated carboxymethyl hyaluronic acid (“modified HA”) for ophthalmic treatments in humans. The agreement requires the Company to pay an annual fee of $30,000 and a royalty of 6% on net sales of KIO-201 to Lineage based on revenue relating to any product incorporating the modified HA technology. The agreement expires when patent protection for the modified HA technology lapses in August 2027.

On November 17, 2014, the Company (through its subsidiary Kiora Pharmaceuticals GmbH) entered into an intellectual property and know-how licensing agreement with Laboratoires Leurquin Mediolanum S.A.S. (“Mediolanum”) for the commercialization of KIO-101 (the “Mediolanum Agreement”) in specific territories. Under the Mediolanum agreement, the Company out-licensed rights to commercialize KIO-101 for uveitis, dry eye and viral conjunctivitis in Italy, and France. This Agreement was amended on December 10, 2015 to also include Belgium and Netherlands. Under the Mediolanum Agreement, Mediolanum is obligated to pay up to approximately €20 million in development and commercial milestones and a 7% royalty on net sales of KIO-101 in the territories through the longer of the expiry of the valid patents covering KIO-101 or 10 years from the first commercial sale. The royalty is reduced to 5% after patent expiry. On September 7, 2023, the Company

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

(through its subsidiary Kiora Pharmaceuticals GmbH) agreed to a settlement agreement with Mediolanum to terminate the existing out-licensing rights by Mediolanum to commercialize KIO-101 for uveitis, dry eye and viral conjunctivitis in Italy, France, Belgium and Netherlands including all related commercial milestone payments and royalty obligations. The Company agreed to pay a termination fee of $0.1 million, of which $50,000 was paid upon execution of the agreement, and $50,000 is payable on the one year anniversary of the termination and is accrued for in the accompanying condensed consolidated financial statements.

On September 26, 2018, the Company entered into an intellectual property licensing agreement (the “SentrX Agreement”) with SentrX, a veterinary medical device company that develops and manufactures veterinary wound care products. Under the SentrX Agreement, the Company in-licensed the rights to trade secrets and know-how related to the manufacturing of KIO-201. The SentrX Agreement enables the Company to pursue a different vendor with a larger capacity for manufacturing and an FDA-inspected facility for commercialization of a product for human use. Under the SentrX Agreement, SentrX is eligible to receive milestone payments totaling up to $4.75 million, upon and subject to the achievement of certain specified developmental and commercial milestones. On June 7, 2023, the Company entered into an amendment agreement (the "SentrX First Amendment") whereby SentrX removed the Company's obligation to make any further payments, milestone or otherwise.The term of the amendment agreement remains unchanged, which is until the product is no longer in the commercial marketplace. In addition, on June 7, 2023, the Company entered into a new exclusive license agreement (the "New SentrX Agreement") with SentrX, whereby the Company out-licensed certain KIO-201 patents for use in animal health and veterinary medicine. Under the New SentrX Agreement, SentrX is obligated to pay the Company a flat low single-digit royalty on net sales, and is effective until the last licensed patent terminates.

On May 1, 2020, the Company (through its subsidiary, Bayon Therapeutics, Inc.) entered into an agreement with the University of California (“UC”) granting to the Company the exclusive rights to its pipeline of photoswitch molecules. The agreement requires the Company to pay an annual fee to UC of $5,000, as well as payments to UC upon the achievement of certain development milestone and royalties based on revenue relating to any product incorporating KIO-301. The Company is obligated to pay royalties on net sales of two percent (2%) of the first $250 million of net sales, one and a quarter percent (1.25%) of net sales between $250 million and $500 million, and one half of one percent (0.5%) of net sales over $500 million. The agreement expires on the date of the last-to-expire patent included in the licensed patent portfolio which is January 2030.

On May 1, 2020, the Company (through our subsidiary, Bayon Therapeutics, Inc.) entered into an agreement with Photoswitch Therapeutics, Inc. (“Photoswitch”) granting to the Company access to certain patent applications and IP rights with last-to-expire patent terms of January 2030. The agreement calls for payments to Photoswitch upon the achievement of certain development milestones and upon first commercial sale of the product.

Contingent Consideration

The purchase price of various acquisitions in prior periods included contingent consideration, which consisted of various cash earn-out payments upon the achievement of certain milestones. Below are the maximum obligation payments per the respective agreements and estimated fair value of contingent consideration payments remaining as of September 30, 2023.

			Maximum Obligation per Agreements						Current Fair Value Estimated
Bayon			$	7,135,000					$	2,709,945
Panoptes			9,500,000						2,043,169
Jade			2,164,451						744,391
			$	18,799,451					$	5,497,505

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KIORA PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2023

Other

In the normal course of business, the Company periodically becomes involved in various claims and lawsuits, as well as governmental proceedings and investigations that are incidental to the business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and amount of the claim, and an estimate of the possible loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. With respect to governmental proceedings and investigations, like other companies in the industry, the Company is subject to extensive regulation by national, state and local governmental agencies in the U.S. and in other jurisdictions in which the Company and its affiliates operate. As a result, interaction with governmental agencies is ongoing. The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries.

The Company currently maintains insurance for risks associated with the operation of its business, provision of professional services and ownership of property. These policies provide coverage for a variety of potential losses, including loss or damage to property, bodily injury, general commercial liability, professional errors and omissions and medical malpractice.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law. As guidance is released the Company is continually evaluating the impact of the recently enacted law. However, the Company does not expect the impact to be material to its accompanying condensed consolidated financial statements.

10. Subsequent Events

On September 27, 2023, the Company, through its subsidiary Kiora Pharmaceuticals GmbH, entered into a new office lease agreement for its office in Vienna, Austria which will commence on October 15, 2023 for a term of 60 months, expiring on October 14, 2028. The prior office lease ended October 31, 2023.

On October 10. 2023, the Company entered into an agreement to extend the office facility lease in Encinitas, California for an additional 18 months, extending the lease expiration to April 30, 2025.

On October 30, 2023, the Company, through its subsidiary, Bayon Therapeutics, Inc., entered into an agreement with the University of California (“UC”) to amend its licensing agreement dated May 1, 2020 effective November 5, 2023, granting the Company exclusive rights to a patent application covering specific formulations of KIO-301, which was previously jointly owned by UC and Bayon. Further, Bayon has the ability to assign or transfer the agreement providing written notice is given within at least 15 days prior to any such assignment, providing written assignment agreement by successor within 30 days, and by paying an assignment fee of $30,000 within thirty days of the assignment. Per the terms of the agreement, upon execution of the amendment the Company was required to pay UC $15,000.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following section of this Quarterly Report on Form 10-Q entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains statements that are not statements of historical fact and are forward-looking statements within the meaning of federal securities laws. 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. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Factors that may cause our actual results to differ materially from those in the forward-looking statements include those factors described in “Item 1A. Risk Factors” beginning on page 23 of our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 23, 2023. You should carefully review all of these factors, as well as the comprehensive discussion of forward-looking statements on page 1 of this Quarterly Report on Form 10-Q.

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

Executive Summary

We are a specialty clinical-stage pharmaceutical company developing and commercializing products for the treatment of orphan retinal diseases.

Our lead product is KIO-301 with an initial focus on patients with later stages of disease progression due to Retinitis Pigmentosa (any and all sub-forms). KIO-301 is a potential vision-restoring small molecule that acts as a “photoswitch” specifically designed to restore vision in patients with inherited and age-related degenerative retinal diseases. The molecule is specifically designed to restore the eyes’ ability to perceive and interpret light in visually impaired patients. It selectively enters viable downstream retinal ganglion cells (no longer receiving electrical input due to degenerated rods and cones) and is intended to turn them into light sensing cells, capable of signaling the brain as to the presence or absence of light. On March 17, 2022, we were granted Orphan Drug Designation by the United States (“U.S.”) Food and Drug Administration (“FDA”) for the Active Pharmaceutical Ingredient (“API”) in KIO-301. KIO-301 (formerly known as B-203) was acquired through the Bayon transaction which closed October 21, 2021. We initiated a Phase 1b clinical trial in the third quarter of 2022.

Based on initial results of the Phase 1b trial, we plan to expand development of KIO-301 to treat patients with late stages of Choroideremia and Stargardt disease. These diseases have a similar underlying late-stage pathology as retinitis pigmentosa, hence the mechanism of action of KIO-301 could potentially provide a similar benefit to these patients.

We are also planning to develop KIO-104 for the treatment of Posterior Non-Infectious Uveitis, a rare T cell-mediated, intraocular inflammatory disease. KIO-104, which uses the same active compound in KIO-101, but formulated for intravitreal delivery, is ideally suited to suppress overactive T-cell activity to treat the underlying condition. KIO-101 is an ophthalmic topical eyedrop formulation of a novel and potent inhibitor of dihydroorotate dehydrogenase (DHODH). Data from a previous Phase 1b/2a study, reported in October 2022, showed that a single injection of KIO-104 decreased intraocular inflammation and improved visual acuity significantly for the duration of the study. Further, there is evidence of reduced Cystoid Macular Edema from baseline.

We have two additional assets, KIO-101 and KIO-201, that the Company is currently seeking to partner. KIO-101 is a next generation, non-steroidal, immuno-modulatory, small-molecule inhibitor of Dihydroorotate Dehydrogenase (“DHODH”) with what we believe to be best-in-class picomolar potency and a validated immune modulating mechanism designed to overcome the off-target side effects and safety issues associated with commercially available DHODH inhibitors. KIO-201 is a modified form of the natural polymer hyaluronic acid, designed to protect the ocular surface to permit re-epithelialization of the cornea and improve and maintain ocular surface integrity. KIO-201 has unique properties that help hydrate and protect the ocular surface. We completed a Phase 2 clinical trial in patients with Persistent Corneal Epithelial Defects ("PCEDs").

Throughout our history, we have not generated significant revenue. We have never been profitable and from inception through September 30, 2023, our losses from operations have aggregated $144.7 million. Our net loss was $10.2 million and $11.1 million for the nine months ended September 30, 2023 and 2022, respectively. We expect to incur significant expenses and increasing operating losses for the foreseeable future as we continue

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the development and clinical trials of and seek regulatory approval for our product candidates. If we obtain regulatory approval for our product candidates, we expect to incur significant expenses in order to create an infrastructure to support their commercialization including sales, marketing, and distribution functions.

We will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity, debt financings, license and development agreements, or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. These conditions raise substantial doubt about our ability to continue as a going concern. We will need to generate significant revenue to achieve profitability, and we may never do so.

Recent Developments

We recently made a strategic decision to stop development leading to commercialization of KIO-101 and KIO-201 and are seeking partnership to continue future development. As such, as of September 30, 2023, the estimated fair value of the KIO-101 and KIO-201 assets was less than their carrying value resulting in the realization of an impairment loss of $1.9 million.

We also recently expanded our 301 program into two new diseases, Choroideremia and Stargardt disease.

New Components of Results of Operations

None noted.

New Critical Accounting Estimates

Note noted.

Results of Operations

Comparison of Three Months ended September 30, 2023, and 2022

The following table summarizes the results of our operations for the three months ended September 30, 2023 and 2022:

			2023						2022						Change
Operating Expenses:
General and Administrative			$	1,415,844					$	2,033,367					$	(617,523)
Research and Development			1,085,010						1,332,153						(247,143)
In-Process R&D Impairment			1,904,314						—						1,904,314
Change in Fair Value of Contingent Consideration			1,513,400						337,515						1,175,885
Total Operating Expenses			5,918,568						3,703,035						2,215,533
Other Income (Expense), Net			155,627						(1,416,304)						1,571,931
Net Loss			$	(5,762,941)					$	(5,119,339)					$	(643,602)

General and Administrative Expenses. The decrease of $0.6 million was primarily due to a decrease in professional fees of $0.4 million for consultants used during the three months ended September 30, 2022 for interim accounting services during the transition of accounting staff, SEC filing services and legal fees, a net decrease in expenses of $0.1 million related to the settlement of an insurance claim and $0.1 million in costs related to the issuance of warrants expensed in 2022.

Research and Development Expenses. The decrease of $0.2 million was primarily due to lower preclinical expenses for KIO-101 as well as drug manufacturing and fill & finish costs for KIO-301 during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, together comprising a decrease of approximately $1.4 million. This decrease was partially offset by an increase in clinical development expenses for KIO-101 and KIO-301 clinical trial activities during the three months ended

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September 30, 2023 totaling approximately $0.4 million, as well as an increase of $0.1 million in costs to terminate the Mediolanum licensing agreement and an increase of $0.1 million in salaries and other corporate expenses primarily related to scientific advisory fees. Additionally, there was a decrease of the offsetting R&D expense credit by approximately $0.5 million in 2023 due to reduced development spend.

In-Process R&D Impairment. The increase of $1.9 million was primarily due to a change in the estimated fair value of KIO-101 and KIO-201 that resulted in impairment. This was caused by a strategic decision to stop internal development activities leading to commercialization. Continued development will be dependent on a partnership.

Change in Fair Value of Contingent Consideration. The increase of $1.2 million was primarily due to a change in the probability of success related to new indications that were added for KIO-301 to include Choroideremia (CHM), and Stargardt disease which increased the probability of success for the Bayon milestone payment.

Other Income (Expense), Net. The increase of $1.6 million was primarily due to a change in fair value of warrant liability in 2022. The change in fair value of the warrant liability between issuance and reclassification to equity was $1.4 million and was primarily due to a decrease in our stock price over this period. In addition, there was an increase in net interest income of $0.2 million due to increased interest rates.

Comparison of Nine Months ended September 30, 2023, and 2022

The following table summarizes the results of our operations for the nine months ended September 30, 2023 and 2022:

			2023						2022						Change
Operating Expenses:
General and Administrative			$	3,782,596					$	5,500,036					$	(1,717,440)
Research and Development			2,915,392						2,607,308						308,084
In-Process R&D Impairment			1,904,314						—						1,904,314
Executive Severance			—						962,833						(962,833)
Change in Fair Value of Contingent Consideration			1,865,945						604,348						1,261,597
Total Operating Expenses			10,468,247						9,674,525						793,722
Other Income (Expense), Net			222,957						(1,410,639)						1,633,596
Net Loss			$	(10,245,290)					$	(11,085,164)					$	839,874

General and Administrative Expenses. The decrease of $1.7 million was primarily due to a decrease in professional fees of $1.4 million for consultants used during the nine months ended September 30, 2022 for interim accounting services and SEC filing services during the transition of accounting staff. Additionally, there was a net decrease in expenses of $0.1 million related to a settlement of an insurance claim, $0.1 million of facilities and IT costs related to the allocation of expenses to R&D, and stock compensation related expense of $0.1 million.

Research and Development Expenses. The increase of $0.3 million was primarily due to increases of $1.1 million in clinical expenses related to KIO-301 and KIO-101 clinical trial activities and $0.2 million in salaries and personnel costs resulting from non-executive severance expenses related to staffing changes in the clinical team. Additionally, other corporate expenses increased by approximately $0.1 million primarily related to scientific advisory fees and an increase of $0.1 million in facilities and IT related to allocated R&D expenses which were previously unallocated and included entirely in general and administrative expenses. These increases were partially offset by a decrease in preclinical work related to KIO-100 and drug manufacturing fill and finish for KIO-300 in 2022 of $1.3 million.

In-Process R&D Impairment. The increase of $1.9 million was primarily due to a change in the fair value of KIO-101 and KIO-201 resulting from a strategic decision to pursue a partnership for continued development of these programs.

Executive Severance. The decrease of $1.0 million was due to severance pay expensed at the time of termination in March 2022, but paid over the 18 month term of the agreement.

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Change in Fair Value of Contingent Consideration. The increase of $1.3 million was primarily due to a change in the probability of success related to new indications that were added for KIO-301 to include Choroideremia (CHM), and Stargardt disease which increased the probability of success for the Bayon milestone payment.

Other Income (Expense), Net. The increase of $1.6 million was primarily due to a change in fair value of Warrant liability in 2022. The change in fair value of the warrant liability between issuance and reclassification to equity was $1.4 million in expense and was primarily due to a change in our stock price. In addition, there was an increase in net interest income of $0.2 million due to increased interest rates.

Liquidity and Capital Resources

Our principal liquidity needs have historically been for acquisitions, working capital, research and development, and capital expenditures. We expect these needs to continue as we develop and work toward commercialization of new products. We will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity, debt financings, license and development agreements, or other sources, which may include collaborations with third parties.

If we raise additional funds by issuing equity securities or convertible debt, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, or making capital expenditures. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our products, future revenue streams or product candidates, or to grant licenses on terms that may not be favorable to us. Although historically we have been successful at raising capital, most recently raising net proceeds of approximately $5.6 million in a public offering that closed on June 6, 2023, and have approximately $9.6 million available from an equity line of credit (subject to certain limitations), additional capital may not be available on terms favorable to us, if at all. We do not know if any future offerings will succeed. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. These conditions raise substantial doubt about our ability to continue as a going concern. We will need to generate significant revenue to achieve profitability, and we may never do so.

Information Regarding Cash Flows

As of September 30, 2023, we had unrestricted cash and cash equivalents totaling $5.4 million and restricted cash totaling $4.0 thousand for a total of $5.4 million compared to $6.0 million at December 31, 2022. The following table sets forth the primary uses of cash for the nine months ended September 30,:

			2023						2022
Net Cash Used in Operating Activities			$	(6,975,610)					$	(8,299,133)
Net Cash Provided by Investing Activities			$	—					$	6,375
Net Cash Provided by Financing Activities			$	6,452,487					$	5,377,719

Operating Activities. Net cash used in operating activities decreased $1.3 million primarily due to a net decrease in changes in assets and liabilities of $1.4 million due primarily to timing of payments and receipt of approximately $1.2 million in R&D tax credits during 2023.

Investing Activities. The decrease in cash from investing activities is due to a sale of an asset in 2022.

Financing Activities. The increase in cash from financing activities is primarily due to receiving net proceeds of approximately $0.4 million from equity line of credit share purchases, $0.3 million from warrant exercises and $5.6 million in net proceeds from a public offering that closed on June 6, 2023, compared to $5.3 million in net proceeds from a public offering in 2022 that closed on July 26, 2022.

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Funding Requirements and Other Liquidity Matters

Our product pipeline is still in various stages of preclinical and clinical development. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

•seek partnership for our KIO-101 and KIO-201 products to continue their development activities;

•seek marketing approval for our KIO-301 or KIO-104 products or any other products that we successfully develop;

•establish a sales and marketing infrastructure to commercialize our KIO-301 or KIO-104 products in the United States, if approved; and

•add operational, financial and management information systems and personnel, including personnel to support our product development and future commercialization efforts.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, including our KIO-301, KIO-101, KIO-104 and KIO-201 products, on terms that may not be favorable to us. We have currently stopped development work on KIO-101 and KIO-201 and are seeking partnership for any further development of those programs. For our active programs, if we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market KIO-301 and KIO-104 products, or any other products that we would otherwise prefer to develop and market ourselves.

In June 2023, we raised net proceeds of approximately $5.6 million in a public offering closed on June 6, 2023. Based on our cash on hand at September 30, 2023, we believe that we will have sufficient cash to fund planned operations into May 2024 with the ability to extend cash runway by drawing on the remaining $9.6 million available through the equity line of credit, subject to certain limitations on the timing and amount of shares that may be sold pursuant to that arrangement. However, the acceleration or reduction of cash outflows by management can significantly impact the timing for raising additional capital to complete development of its products. To continue development, we will need to raise additional capital through debt and/or equity financing, or access additional funding through grants. Although historically we have been successful at raising capital, additional capital may not be available on terms favorable to us, if at all. We do not know if any future offerings will succeed. Accordingly, no assurances can be given that management will be successful in these endeavors. Our recurring losses from operations have caused management to determine there is substantial doubt about our ability to continue as a going concern. Our Unaudited 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 we be unable to continue as a going concern.

Other

For information regarding Commitments and Contingencies and Subsequent Events, refer to Note 9, Commitments and Contingencies and Note 10, Subsequent Events to the Notes to the Condensed Consolidated Financial Statements of Part 1, Item 1. Financial Statements of this Form 10-Q.

Critical Accounting Estimates

Our discussion of operating results is based upon the Unaudited Condensed Consolidated Financial Statements and accompanying notes. The preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

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date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our critical accounting estimates are detailed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and we have no material changes from such disclosures.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

This Report includes the certifications of our Chief Executive Officer (who is our principal executive officer) and our Executive Vice President of Finance (who serves as our principal financial / accounting officer) required by Rule 13a-14 of the Exchange Act. See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Executive Vice President of Finance, to allow timely decisions regarding required disclosures.

In connection with the preparation of this Quarterly Report on the Form 10-Q, the Company’s Management, under the supervision of, and with the participation of, our Chief Executive Officer and Executive Vice President of Finance, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and our management necessarily was required to apply its judgment in evaluating and implementing our disclosure controls and procedures. Based upon the evaluation described above and material weaknesses identified in our Form 10-K as of December 31, 2022, our Chief Executive Officer and Executive Vice President of Finance have concluded that they believe that our disclosure controls and procedures were not effective as of the end of the period covered by this report and have made changes to address the material weaknesses identified.

Changes in Internal Control over Financial Accounting and Reporting

Our management, with the participation of the Chief Executive Officer and Executive Vice President of Finance, have evaluated whether any change in our internal control over financial accounting and reporting occurred during the three months ended September 30, 2023 and concluded that changes did occur. These changes were made to address the material weaknesses identified in the Form 10-K for the fiscal year ended December 31, 2022. We have identified and implemented and continue to implement, certain remediation efforts to improve the effectiveness of our internal control over financial reporting and disclosure controls and procedures. The following remediation efforts are underway:

•We have implemented a new accounting software platform and through that process have designed role-specific permissions ensuring that there are appropriate access controls by function. Additionally, we have designed automated system workflows for journal entry approval, new vendor creation and modification, and procurement related approvals for purchase orders and related invoices to ensure proper segregation of duties and appropriate evidence of approval.

•We have established and maintained accounting policies, procedures and controls to account for and disclose significant unusual transactions. Additionally, we engaged technical resources for technical advisory services and will continue to consult with technical resources to ensure that proper expertise is consulted as needed on complex accounting applications. This will be an ongoing area of remediation to ensure that significant transactions are appropriately analyzed and the accounting treatment is documented.

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•Management is working toward a greater level of precision over the completeness and accuracy of information through the implementation of a new accounting software, as discussed above, which provides for greater automation related to previously manual tasks. Specifically, the new accounting software is being used to generate purchase orders for all material contracts and purchase commitments. The finance team has created reporting on all open contract commitments, which is being shared with management to verify the completeness and ensure accuracy of financial reporting.

While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing, documenting and testing these processes, procedures and controls. Additional time is required to complete implementation and to assess and ensure the effectiveness and sustainability of these procedures. We will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

While we are not currently a party to any legal proceedings as of September 30, 2023, from time to time we may be a party to a variety of legal proceedings that arise in the normal course of our business.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, each of which is incorporated herein by reference and which could materially affect our business, financial condition or future results. The risks described herein and in those filings are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Except as set forth below, we do not believe that there have been any material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

We have received a notice from Nasdaq of non-compliance with its minimum bid price rules.

On July 18, 2023, we received a written notification (the “Notice Letter”) from Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5550(a)(2), as the closing bid price for our common stock was below the $1.00 per share requirement for the last 30 consecutive business days. The Notice Letter stated that we have 180 calendar days, or until January 15, 2024 (the “Initial Compliance Period”), to regain compliance with the minimum bid price requirement. To regain compliance with the minimum bid price requirement, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive trading days during this 180-day compliance period, unless the Nasdaq staff exercises its discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).

In the event that we do not regain compliance within the 180-day compliance period, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq, with the exception of the minimum bid price requirement, and provide written notice to the Nasdaq staff of our intention to cure the deficiency during the second compliance period. However, if it appears to the Nasdaq staff that we will not be able to cure the deficiency, or if we do not meet the other listing standards, Nasdaq could provide notice that our common stock will become subject to delisting. In the event we receive notice that our common stock is being delisted, the Nasdaq Listing Rules permit us to appeal any such delisting determination by the Nasdaq staff to a Hearings Panel.

We intend to actively monitor the closing bid price of our common stock and are evaluating available options to regain compliance with the minimum bid price requirement. There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or that we will otherwise remain in compliance with the other listing standards for The Nasdaq Capital Market. A delisting of our common stock would have an adverse effect on the market liquidity of our common stock and, as a result, the market price for our common stock could become more volatile. Further, a delisting also could make it more difficult for us to raise additional capital.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

None.

Purchase of Equity Securities

We did not purchase any of our registered equity securities during the period covered by this Quarterly Report on Form 10-Q.

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Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosure.

Not applicable.

Item 5. Other Information.

On July 21, 2023, we entered into a Memorandum of Understanding with the Choroideremia Research Foundation ("CRF") to support strategic development of KIO-301 in Choroideremia ("CHM"). CHM is a rare, inherited retinal disease that causes blindness. This collaboration will accelerate our development of KIO-301, a small molecule designed to restore vision in patients with later-stage retinal degeneration. Under the collaboration, CRF will assist us with access to clinical and scientific thought leaders to assist in further development of KIO-301 for CHM. They will also provide aid in enrollment of patients for any future trials of KIO-301 for CHM.

During the three months ended September 30, 2023, no directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

On September 27, 2023, we, through our subsidiary Kiora Pharmaceuticals GmbH, entered into a new office lease agreement for the office in Vienna, Austria which will commence on October 15, 2023 for a term of 60 months, expiring on October 14, 2028. The prior office lease ended October 31, 2023.

On October 10. 2023, we entered into an agreement to extend the office facility lease in Encinitas, California for an additional 18 months, extending the lease expiration to April 30, 2025.

On October 30, 2023, we, through our subsidiary, Bayon Therapeutics, Inc., entered into an agreement with the University of California (“UC”) to amend it's licensing agreement dated May 1, 2020 effective November 5, 2023, granting us exclusive rights to a patent application covering specific formulations of KIO-301, which was previously jointly owned by UC and Bayon. Further, Bayon has the ability to assign or transfer the agreement providing written notice is given within at least 15 days prior to any such assignment, providing written assignment agreement by successor within 30 days, and by paying an assignment fee of $30,000 within thirty days of the assignment. Per the terms of the agreement, upon execution of the amendment we were required to pay UC $15,000.

Item 6. Exhibits

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index immediately preceding such exhibits and are incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 9, 2023			By:			/s/ Brian M. Strem, Ph.D.
						President and Chief Executive Officer (Principal executive officer)
Date: November 9, 2023			By:			/s/ Melissa Tosca
						Executive Vice President of Finance (Principal financial and accounting officer)

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EXHIBIT INDEX

The following exhibits are filed as part of this Quarterly Report on Form 10-Q. Where such filing is made by incorporation by reference to a previously filed document, such document is identified.

Exhibit Number						Description of Exhibit
10.1*						Kiora Pharmaceuticals, Inc. 2014 Equity Incentive Plan, as amended (incorporated by reference to Appendix A to the Registrant's Definitive Proxy Statement on Schedule 14A filed with the SEC on July 21, 2023).
10.2***†						License Agreement, dated as of May 1, 2020, between Bayon Therapeutics, Inc. and the Regents of the University of California.
10.3***						First Amendment to Licensed Agreement, dated as of November 5, 2023, between Bayon Therapeutics, Inc. and the Regents of the University of California.
31.1						Certification of principal executive officer pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of principal financial and accounting officer pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of principal financial and accounting officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						XBRL Instance Document (embedded within the Inline XBRL document)
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Labels Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

______________________________

*    Management contract or compensatory plan or arrangement.

**    This certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act.

***    Certain confidential portions of this exhibit were omitted because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

†    Schedules and exhibits have been omitted from this exhibit pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission.

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